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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
EMULEX CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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EMULEX CORPORATION
3535 HARBOR BOULEVARD
COSTA MESA, CALIFORNIA 92626
(714) 662-5600
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 1998
To the Stockholders of EMULEX CORPORATION:
You are cordially invited to attend the Annual Meeting of Stockholders of
Emulex Corporation, a Delaware corporation (the "Company"), which will be held
at the corporate headquarters of the Company at 3535 Harbor Boulevard, Costa
Mesa, California, at 10:00 a.m., Pacific Standard Time, on Thursday, November
19, 1998, to consider and act upon the following matters, all as more fully
described in the accompanying Proxy Statement which is incorporated herein by
this reference:
1. To elect a board of five directors to serve until the next annual
meeting of the Company's stockholders and until their successors have been
elected and qualify;
2. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent public accountants for fiscal year 1999; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record of the Company's common stock at the close of
business on October 5, 1998, the record date fixed by the Board of Directors,
are entitled to notice of, and to vote at, the meeting.
THOSE WHO CANNOT ATTEND ARE URGED TO SIGN, DATE, AND OTHERWISE COMPLETE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. ANY STOCKHOLDER GIVING A PROXY HAS THE RIGHT TO REVOKE IT AT ANY TIME
BEFORE IT IS VOTED.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MICHAEL J. ROCKENBACH
Michael J. Rockenbach
Vice President, Chief Financial
Officer,
Secretary and Treasurer
Costa Mesa, California
October 19, 1998
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EMULEX CORPORATION
3535 HARBOR BOULEVARD
COSTA MESA, CALIFORNIA 92626
(714) 662-5600
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PROXY STATEMENT
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APPROXIMATE DATE PROXY MATERIAL FIRST SENT
TO STOCKHOLDERS: OCTOBER 19, 1998
The following information is in connection with the solicitation of proxies
for the Annual Meeting of Stockholders of Emulex Corporation, a Delaware
corporation (the "Company"), to be held at the Company's headquarters at 3535
Harbor Boulevard, Costa Mesa, California, at 10:00 a.m., Pacific Standard Time,
on Thursday, November 19, 1998, and adjournments thereof (the "Meeting"), for
the purposes stated in the Notice of Annual Meeting of Stockholders preceding
this Proxy Statement.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is being furnished herewith by the Company to each
stockholder, and, in each case, is solicited on behalf of the Board of Directors
of the Company for use at the Meeting. The entire cost of soliciting these
proxies will be borne by the Company. The Company may pay persons holding shares
in their names or the names of their nominees for the benefit of others, such as
brokerage firms, banks, depositaries, and other fiduciaries, for costs incurred
in forwarding soliciting materials to their principals. In that connection, the
Company has retained ChaseMellon Shareholder Services, Los Angeles, California,
to deliver soliciting materials to such record holders for distribution by them
to their principals and to assist the Company in collecting proxies from such
holders. The cost of these services, excluding out-of-pocket expenses, is not
expected to exceed $4,000. Members of the management of the Company may also
solicit some stockholders in person, or by telephone, telegraph or facsimile,
following solicitation by this Proxy Statement, but will not be separately
compensated for such solicitation services.
Proxies duly executed and returned by stockholders and received by the
Company before the Meeting will be voted "FOR" the election of all five of the
nominee-directors specified herein and "FOR" the ratification of the selection
of KPMG Peat Marwick LLP as the Company's independent public accountants for
fiscal year 1999, unless a contrary choice is specified in the proxy. Where a
specification is indicated as provided in the proxy, the shares represented by
the proxy will be voted and cast in accordance with the specification made. As
to other matters, if any, to be voted upon, the persons designated as proxies
will take such actions as they, in their discretion, may deem advisable. The
persons named as proxies were selected by the Board of Directors of the Company
and each of them is a director of the Company.
Under the Company's By-laws and Delaware law, shares represented by proxies
that reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the Meeting, but with respect to which such
broker or nominee is not empowered to vote on a particular proposal) will be
counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Any shares not voted (whether by
abstention, broker non-vote or otherwise) will have no impact in the election of
directors, except to the extent that the failure to vote for an individual
results in another individual receiving a larger proportion of votes.
Abstentions as to the proposal to ratify the selection of KPMG Peat Marwick LLP
as the Company's independent public accountants will have the same effect as
votes against such proposal. Broker non-votes, however, will be treated as
unvoted for purposes of determining approval of such proposal and will not be
counted as votes for or against such proposal.
Your execution of the enclosed proxy will not affect your right as a
stockholder to attend the Meeting and to vote in person. Any stockholder giving
a proxy has a right to revoke it at any time by either (a) a later-dated
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proxy, (b) a written revocation sent to and received by the Secretary of the
Company prior to the Meeting, or (c) attendance at the Meeting and voting in
person.
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The Company has outstanding only common stock, of which 6,141,976 shares
were outstanding as of the close of business on October 5, 1998 (the "Record
Date"). Only stockholders of record on the books of the Company at the close of
business on the Record Date will be entitled to vote at the Meeting. Each share
of common stock is entitled to one vote.
Representation at the Meeting by the holders of a majority of the
outstanding common stock of the Company, either by personal attendance or by
proxy, will constitute a quorum.
The following table sets forth information as to the beneficial ownership
of the Company's common stock by all directors and the persons identified in the
Summary Compensation Table, as well as by current directors and executive
officers of the Company as a group and, to the best of the Company's knowledge,
beneficial owners of 5% or more of the Company's common stock. The information
in the following table is based on ownership of the Company's common stock as of
the Record Date.
AMOUNT AND NATURE OF PERCENT OF
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS(2)
-------------- ------------------------ ----------------------- ----------
DIRECTORS:
Common Stock................ Fred B. Cox 342,500(3) 5.6%
Common Stock................ Paul F. Folino 192,449(4) 3.1%
Common Stock................ Michael P. Downey 24,500(4) *
Common Stock................ Robert H. Goon 17,776(5) *
Common Stock................ Don M. Lyle 20,000(4) *
NON-DIRECTOR EMPLOYEES:
Common Stock................ Michael A. Peitler(6) 0 *
Common Stock................ Ronald P. Quagliara 0 *
Common Stock................ Charles N. Goff 5,000(4) *
Common Stock................ Michael J. Rockenbach 6,500(4) *
Common Stock................ Teresa W. Blackledge 9,525(4) *
Common Stock................ All directors and executive officers
as a group (12 persons)(7) 620,750(4) 9.7%
5% STOCKHOLDERS:
Common Stock................ Gruber & McBaine Capital Management.. 500,500(8) 8.1%
50 Osgood Place
San Francisco, CA 94133
Common Stock................ Emerging Growth Management Co. 353,800(8) 5.8%
One Embarcadero Center,
Suite 2410
San Francisco, CA 94111
Common Stock................ Dimensional Fund Advisors, Inc. 312,550(8) 5.1%
1299 Ocean Ave.
Santa Monica, CA 90401
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(1) Except as otherwise indicated and subject to applicable community property
and similar laws, the Company assumes that each named owner has the sole
voting and investment power with respect to their shares (other than shares
subject to options).
(2) Percent of class is based on the number of shares outstanding on the Record
Date plus, with respect to each named person, the number of shares of common
stock, if any, which the stockholder has the right to acquire within 60 days
of such date. Ownership of less than one percent is indicated by an
asterisk.
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(3) Consists of 325,000 shares held in a family trust of which Mr. Cox and his
wife are co-trustees and share voting and investment power and 17,500 shares
which are subject to options held by Mr. Cox which are currently, or within
the next 60 days will be, exercisable.
(4) Includes shares which are purchasable pursuant to stock options which are
currently, or within the next 60 days will be, exercisable.
(5) Consists of 276 shares held by Mr. Goon's wife and 17,500 shares which are
subject to options held by Mr. Goon which are currently, or within the next
60 days will be, exercisable.
(6) Mr. Peitler resigned as an officer of the Company in June 1998.
(7) Includes persons who serve as executive officers of the Company's principal
subsidiaries.
(8) Based on conversations with the beneficial owner, it is the Company's belief
that (i) these shares are beneficially owned in the capacity of an
investment adviser registered under the Investment Advisers Act of 1940,
(ii) voting power is exercised pursuant to investment management contracts,
and (iii) no single client of the adviser owns more than 5% of the Company's
common stock.
The Company knows of no contractual arrangements which may at a subsequent
date result in a change of control of the Company.
NOMINATION AND ELECTION OF DIRECTORS
The Company's directors are to be elected at each annual meeting of
stockholders. The five nominees for election as directors at this Meeting set
forth in the table below are all recommended by the Board of Directors of the
Company. All of the nominated directors were elected as directors at the 1997
Annual Meeting of Stockholders of the Company.
In the event that any of the nominees for director should become unable to
serve if elected, it is intended that shares represented by proxies which are
executed and returned will be voted for such substitute nominee(s) as may be
recommended by the Company's existing Board of Directors.
The five nominee-directors receiving the highest number of votes cast at
the Meeting will be elected as the Company's directors to serve until the next
annual meeting of stockholders and until their successors are elected and
qualify. Subject to certain exceptions specified below, stockholders of record
on the Record Date are entitled to cumulate their votes in the election of the
Company's directors (i.e., they are entitled to the number of votes determined
by multiplying the number of shares held by them times the number of directors
to be elected) and may cast all of their votes so determined for one person, or
spread their votes among two or more persons as they see fit. No stockholder
shall be entitled to cumulate votes for a given candidate for director unless
such candidate's name has been placed in nomination prior to the vote and the
stockholder has given notice at the Meeting, prior to the voting, of the
stockholder's intention to cumulate his or her votes. If any one stockholder has
given such notice, all stockholders may cumulate their votes for candidates in
nomination. Discretionary authority to cumulate votes is hereby solicited by the
Board of Directors.
The Company's By-laws provide that only persons who are nominated in
accordance with specified By-law procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors may be
made at a meeting of stockholders by, or at the direction of, the Board of
Directors or by any stockholder entitled to vote for the election of directors
who complies with certain notice procedures set forth in the By-laws. Such
nominations must be made by written notice to the Secretary of the Company and
must be delivered or mailed and received at the principal executive offices of
the Company not less than 60 days or more than 90 days prior to the date of the
meeting. In the event that the first public disclosure of the date of the
meeting is made less than 70 days prior to the date of the meeting, notice by
the stockholder will be timely if received not later than the close of business
on the tenth day following the day on which such disclosure was first made. The
stockholder's notice must set forth certain information concerning the proposed
nominee and the stockholder giving notice, as set forth in the By-laws.
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The following table sets forth certain information concerning the nominees
for election as directors (all of such nominees being continuing members of the
Company's present Board of Directors):
NOMINEE(1) PRINCIPAL OCCUPATION AGE
---------- -------------------- ---
Fred B. Cox(2).............. Chairman of the Company and Director of Continuus Software 64
Corporation
Paul F. Folino.............. President and Chief Executive Officer of the Company 53
Michael P. Downey(3)........ Chairman of the Board of Artisoft, Inc. 51
Robert H. Goon(3)........... Lawyer, Partner in the law firm of Jeffer, Mangels, Butler & 57
Marmaro LLP, counsel to the Company
Don M. Lyle(2).............. Principal of Technology Management Co., a management 59
consulting firm specializing in high technology companies
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(1) The Company does not have a nominating committee of the Board of Directors.
The nominees for election as directors at the Meeting were selected by the
Board of Directors of the Company.
(2) Member of the compensation committee of the Board of Directors of the
Company, currently consisting of two directors, neither of whom is an
employee of the Company, which held four meetings during the last fiscal
year of the Company. The compensation committee reviews the performance of
the executive officers of the Company and its subsidiaries and reviews the
compensation programs for other key employees, including salary and cash
bonus levels and option grants under the Emulex Corporation Employee Stock
Option Plan.
(3) Member of the audit committee of the Board of Directors of the Company,
currently consisting of two directors, neither of whom is an employee of the
Company, which held four meetings during the last fiscal year of the
Company. The audit committee reviews, acts on, and reports to the Board of
Directors with respect to various auditing and accounting matters, including
the selection of the Company's independent public accountants, the scope of
the annual audits, the nature of nonaudit services, the fees to be paid to
the independent public accountants, the performance of the Company's
independent public accountants and the accounting practices of the Company.
Mr. Cox is a founder of the Company and has served as a director since its
inception in 1979. Mr. Cox served as the Company's Chief Executive Officer from
its inception until he retired in October 1990. From November 1991 until
November 1994, Mr. Cox served as President of Continuus Software Corporation, a
developer and marketer of computer software products, and currently serves as a
member of its Board of Directors.
Mr. Folino was appointed in May 1993 to serve as the President and Chief
Executive Officer of the Company and as a director of the Company. From January
1991 to May 1993, Mr. Folino was President and Chief Operating Officer of
Thomas-Conrad Corporation, a manufacturer of local area networking products.
Mr. Downey has served as a director of the Company since February 1994 and
is Chairman of the Audit Committee. Mr. Downey was appointed in October 1998 to
serve as Chairman of the Board of Artisoft, Inc., a computer telephony and
networking software company. From 1986 to 1997, Mr. Downey served as a senior
financial executive with Nellcor and Nellcor Puritan Bennett, Incorporated, a
manufacturer of medical instruments, most recently as Executive Vice President
and Chief Financial Officer. From 1984 to 1986, Mr. Downey was Vice President,
Finance with Shugart Corporation, a manufacturer of disk drives.
Mr. Goon has served as a director of the Company since its inception in
1979. He has been engaged in the practice of law for 33 years. For more than the
last five years, he has been a partner in the law firm of Jeffer, Mangels,
Butler & Marmaro LLP, counsel to the Company.
Mr. Lyle has served as a director of the Company since February 1994 and is
Chairman of the Compensation Committee. Since 1983 he has served as an
independent consultant to various computer and venture capital companies and as
a principal of Technology Management Co., a management consulting firm
specializing in high technology companies. Mr. Lyle also serves as a member of
the board of directors of Axiohm Transaction Systems, a print head and specialty
printing company; Systech Corp., a data communica-
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tions company; Insync Systems, a supplier of ultra-clean gas-delivery systems to
semiconductor equipment manufacturers; The National Registry Inc., a biometrics
identification company; and Datawatch Corporation, a software company in the
help desk and report mining application areas.
There were five meetings of the Board of Directors of the Company during
the last fiscal year of the Company. Each of the directors of the Company
attended 75% or more of the aggregate of the total number of meetings of the
Board of Directors held during the last fiscal year and the total number of
meetings held by all committees of the Board of Directors on which he served
during the last fiscal year.
COMPENSATION OF DIRECTORS
Directors' Fees. Directors who are not employees of the Company receive a
quarterly retainer of $4,000 plus $1,000 for each meeting of the Board of
Directors in excess of five per year, and reimbursement for travel expenses. In
addition, the chairmen of the audit and compensation committees receive an
additional quarterly retainer of $500, while committee members receive an
additional quarterly retainer of $300. Directors who are employees of the
Company receive no additional compensation for serving on the Board of
Directors. Directors are entitled to reimbursement for out-of-pocket expenses in
connection with attendance at Board and committee meetings.
Stock Options. Pursuant to the terms of the Emulex Corporation Non-Employee
Director Stock Option Plan (the "Old Director Plan") a maximum of 125,000 shares
of common stock of the Company were authorized to be issued pursuant to exercise
of stock options granted under the plan to directors who are not employees of
the Company or any of its subsidiaries. The Old Director Plan expired by its
terms on December 31, 1996. However, upon such expiration, options granted under
the Old Director Plan continue to remain in effect in accordance with their
terms.
Under the Old Director Plan each director of the Company was eligible to
receive an option only if such director (i) was not then an employee of the
Company or any of its subsidiaries, and (ii) had not, within the period of three
years immediately preceding such time, received any stock option, stock bonus,
stock appreciation right, or other similar stock award from the Company or any
of its subsidiaries other than options granted to such director under the Old
Director Plan ("Eligible Director"). Only Eligible Directors were eligible to
receive options under the Old Director Plan.
The Old Director Plan provided that an option to purchase 12,500 shares of
common stock of the Company was to be granted automatically to each Eligible
Director upon the later to occur of (i) the date of adoption of the Old Director
Plan by the Board (October 24, 1990), or (ii) the date on which such director
first became an Eligible Director.
Payment for shares purchased on exercise of an option granted under the Old
Director Plan may be made in either cash or in common stock of the Company
having a fair market value (determined in the manner the exercise price of
options is determined) equal to the aggregate exercise price of the shares being
purchased. No option granted under the Old Director Plan may be exercised after
the expiration of the earlier of (i) ten years following the date the option is
granted or (ii) one year following the date the optionee ceases to be a director
of the Company for any reason.
On October 9, 1997, the Board of Directors of the Company adopted the
Company's 1997 Stock Option Plan for Non-Employee Directors (the "New Director
Plan") under which a maximum of 100,000 shares of common stock of the Company
may be issued pursuant to exercise of stock options granted under the New
Director Plan to directors who are not employees of the Company or any of its
subsidiaries. The New Director Plan was approved by stockholders of the Company
at the 1997 Annual Meeting of Stockholders.
Each director of the Company is eligible to receive an option under the New
Director Plan only if such director (i) is not then an employee of the Company
or any of its subsidiaries, and (ii) has not, within the period of three years
immediately preceding such time, received any stock option, stock bonus, stock
appreciation right or other similar stock award from the Company or any of its
subsidiaries other than options granted to such director under the New Director
Plan or the Old Director Plan ("New Plan Eligible
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Director"). Only New Plan Eligible Directors may receive options under the New
Director Plan. There are currently four New Plan Eligible Directors -- Messrs.
Cox, Downey, Goon and Lyle.
The New Director Plan provides that an option to purchase 15,000 shares of
common stock of the Company is granted automatically to each New Plan Eligible
Director upon the later to occur of (i) the date of adoption of the New Director
Plan by the stockholders, or (ii) the date on which such director first becomes
a New Plan Eligible Director. In addition, on each yearly anniversary of the
date of grant of the initial option to each New Plan Eligible Director, each
such New Plan Eligible Director is automatically granted an additional option to
purchase 5,000 shares of common stock. The options will be non-qualified stock
options not eligible for the favorable tax consequences given to incentive stock
options by Section 422A of the Code. The purchase price per share of the common
stock of the Company issuable upon exercise of the option is 100% of the fair
market value per share of such common stock at the date of grant.
Payment for shares purchased on exercise of an option may be made in
either, (i) cash, (ii) in common stock of the Company having a fair market value
(determined in the manner the exercise price of options is determined) equal to
the aggregate exercise price of the shares being purchased, or (iii) by cashless
exercise through the sale of the common stock underlying the option and
remission to the Company of the aggregate exercise price from the proceeds of
such sale. However, payment for exercises of less than 1,000 shares of common
stock must be made in cash.
Other Compensation. In fiscal 1998, the Company and/or its subsidiaries
obtained legal services from the law firm of Jeffer, Mangels, Butler & Marmaro
LLP, of which Mr. Goon is a partner, on terms which the Company believes were as
favorable as would have been obtained from unaffiliated parties.
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth information concerning compensation of the
principal executive officer of the Company and the five most highly compensated
other executive officers of the Company or its subsidiaries for each of the last
three completed fiscal years:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------------
------------------------------------ STOCK
OTHER ANNUAL OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTS(2) COMPENSATION(3)
--------------------------- ---- -------- ------- --------------- --------- ---------------
Paul F. Folino............... 1998 $286,370 $24,092 $134,079(4) 20,000 $10,093
President and CEO 1997 303,119 - 0 - - 0 - 30,000 8,301
1996 270,783 - 0 - 687,694(4) 30,000 7,970
Michael A. Peitler(5)........ 1998 217,499 10,138 119,155(6) 10,000 8,700(7)
Senior V.P., Worldwide
Sales 1997 185,381 10,000 246,512(6) 15,000 9,404
1996 183,172 - 0 - 135,939(6) 15,000 5,593
Ronald P. Quagliara.......... 1998 186,144 9,785 - 0 - 7,500 471
V.P., Research and 1997 170,814 25,138 - 0 - 10,000 421
Development 1996 167,213 - 0 - - 0 - - 0 - 1,352
Charles N. Goff.............. 1998 172,605 8,979 - 0 - 7,500 11,633
V.P., Manufacturing 1997 165,675 8,000 - 0 - 5,000 8,460
1996 165,267 - 0 - 17,952 10,000 9,548
Michael J. Rockenbach........ 1998 138,176 6,790 17,729 12,500 6,531
V.P. and CFO 1997 117,953 8,000 - 0 - 12,500 8,075
1996 106,382 5,000 - 0 - 4,000 4,986
Teresa W. Blackledge......... 1998 126,123 6,630 17,729 7,500 4,402
V.P., Marketing 1997 121,226 8,000 63,020(8) 5,000 6,133
1996 119,520 - 0 - - 0 - 10,000 5,417
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(1) Except where indicated in the Summary Compensation Table, perquisites and
other personal benefits did not in the aggregate equal or exceed the lesser
of $50,000 for any named individual or 10 percent of the total of annual
salary and bonus reported in this table for such person.
(2) The amounts in the table represent shares of the Company's common stock
covered by stock options granted to the named individual under the Emulex
Corporation Employee Stock Option Plan during the fiscal year in question.
(3) This column includes the Company's matching contributions to the Emulex
Retirement Savings Plan, group term life insurance premiums and health care
reimbursement paid with respect to the named executive.
(4) Includes $114,550 and $678,712 which represent the realized values of
options exercised in 1998 and 1996, respectively.
(5) Mr. Peitler resigned as an officer of the Company in June 1998.
(6) Includes $70,396, $240,047 and $127,366 which represent the realized values
of options exercised in 1998, 1997 and 1996, respectively.
(7) Includes $2,881 which represents severance payments made for the period from
the date of termination to June 28, 1998. See "Key Employee Retention
Agreements" below.
(8) Includes $57,020 which represents the realized value of options exercised in
1997.
KEY EMPLOYEE RETENTION AGREEMENTS
The Company has previously entered into an agreement with Mr. Folino under
which Mr. Folino would be entitled to receive the following payments and
benefits in the event of termination of his employment by the Company without
cause or by Mr. Folino because of a demotion within two years after a change in
control of
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the Company: (i) a severance payment equal to the present value of two times the
sum of Mr. Folino's annual salary plus the highest annual average of any two of
his last three annual bonuses; (ii) continuation for two years following
termination of employment of his health and life insurance, disability income,
tax assistance and executive automobile benefits (reduced to the extent similar
benefits are received by him from another employer); and (iii) acceleration of
vesting of his right to exercise his stock options based on the length of his
continued employment following the grant of the option by one year upon the
change in control of the Company and full acceleration of vesting of such
exercise right in the event of termination of his employment without cause or
because of a demotion as aforesaid within two years after the change in control.
The Company also has entered into similar agreements with Messrs. Quagliara,
Goff and Rockenbach and Ms. Blackledge, and with four other executives of the
Company. The key employee retention agreements for Messrs. Quagliara, Goff and
Rockenbach and Ms. Blackledge provide for payments and benefits similar to those
described above, except that the severance payment is equal to the present value
of one times the sum of the employee's annual salary plus the highest annual
average of any two of the employee's last three annual bonuses; and continuation
following termination of employment of the employee's health and life insurance,
disability income, tax assistance and executive automobile benefits (reduced to
the extent similar benefits are received by the employee from another employer)
is limited to one year.
Mr. Peitler resigned as an employee of the Company in June 1998. Pursuant
to the terms of a letter agreement dated March 18, 1998, effective upon his
resignation Mr. Peitler became entitled to receive bi-weekly consulting payments
for the one year period following the date of termination, in amounts equal to
the bi-weekly salary payments he received at the time of termination. During the
same one year period, Mr. Peitler is required to serve as an independent
contractor consultant to the Company, if and as requested by the President of
the Company. On the date of termination, Mr. Peitler received a gross payment of
$10,616 to cover executive medical reimbursement and to match his 401(k)
contributions. Lastly, Mr. Peitler is entitled to medical benefits for the one
year period following the date of termination.
OPTION GRANTS DURING FISCAL 1998
The following table sets forth information on grants of stock options
pursuant to the Emulex Corporation Employee Stock Option Plan during the fiscal
year ended June 28, 1998, to the officers identified in the Summary Compensation
Table:
OPTION GRANTS IN FISCAL YEAR 1998
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO OPTION TERM(4)
OPTIONS EMPLOYEES EXERCISE EXPIRATION -------------------
NAME GRANTED(1) IN 1998(2) PRICE(3) DATE 5% 10%
---- ---------- ---------- -------- ---------- -------- --------
Paul F. Folino................... 20,000 8.17 $16.125 8/12/07 $202,748 $513,764
Michael A. Peitler(5)............ 10,000 4.09 16.125 8/12/07 101,374 256,882
Ronald P. Quagliara.............. 7,500 3.07 16.125(6) 8/12/07 76,031 192,661
Charles N. Goff.................. 7,500 3.07 16.125(6) 8/12/07 76,031 192,661
Michael J. Rockenbach............ 7,500 3.07 16.125(6) 8/12/07 76,031 192,661
5,000 2.04 15.313(6) 11/16/07 48,135 121,973
Teresa W. Blackledge............. 7,500 3.07 16.125(6) 8/12/07 76,031 192,661
- ---------------
(1) The amounts in the table represent shares of the Company's common stock
covered by stock options granted to the named individual under the Emulex
Corporation Employee Stock Option Plan. Each option granted becomes
exercisable on a cumulative basis as to 25% of the option shares one year
after the date of grant and as to an additional 6.25% of the option shares
each three month interval thereafter.
(2) The number of shares of Company common stock covered by the options granted
to the named individual during the last completed fiscal year of the Company
equals the percentage set forth below of the total
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number of shares of the Company's common stock covered by all options
granted by the Company to employees of the Company during such year.
(3) The exercise price of each option is the market price of the common stock of
the Company on the date of grant.
(4) These columns present hypothetical future values of the stock obtainable
upon exercise of the options net of the option's exercise price, assuming
that the market price of the Company's common stock appreciates at a five
and ten percent compound annual rate over the ten year term of the options.
The five and ten percent rates of stock price appreciation are presented as
examples pursuant to the Securities and Exchange Commission rules governing
the preparation of proxy statements and do not necessarily reflect
management's assessment of the Company's future stock price performance. The
potential realizable values presented are not intended to indicate the value
of the options.
(5) Mr. Peitler resigned as an officer of the Company in June 1998.
(6) On July 6, 1998, the Compensation Committee of the Company adopted a
resolution whereby, at the option of employees, all outstanding options
granted under the Emulex Corporation Employee Stock Option Plan having
exercise prices higher than $6.00 per share and held by current employees,
other than Mr. Folino, were amended to provide for exercise prices of $6.00
per share, subject to the requirement that amended options may not be
exercised prior to July 6, 1999.
OPTION EXERCISES IN FISCAL 1998 AND YEAR-END OPTION VALUES
The following table sets forth information concerning stock options which
were exercised during, or held at the end of, fiscal 1998 by the officers named
in the Summary Compensation Table:
OPTION EXERCISES AND YEAR-END VALUE TABLE
NUMBER OF VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR END AT FISCAL YEAR END(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
Paul F. Folino.............. 10,000 $114,550 149,145 55,855 $112,875 $-0-
Michael A. Peitler(3)....... 7,188 70,396 17,187 -0- -0- -0-
Ronald P. Quagliara......... -0- -- 21,248(2) 21,252(2) -0-(2) -0-
Charles N. Goff............. -0- -- 22,187(2) 15,313(2) 8,425(2) -0-
Michael J. Rockenbach....... -0- -- 18,061(2) 24,439(2) 3,795(2) -0-
Teresa W. Blackledge........ -0- -- 21,000(2) 15,625(2) 847(2) -0-
- ---------------
(1) Common Stock valued at $5.625 per share.
(2) On July 6, 1998, the Compensation Committee of the Company adopted a
resolution whereby, at the option of employees, all outstanding options
granted under the Emulex Corporation Employee Stock Option Plan having
exercise prices higher than $6.00 per share and held by current employees,
other than Mr. Folino, were amended to provide for exercise prices of $6.00
per share, subject to the requirement that amended options may not be
exercised prior to July 6, 1999.
(3) Mr. Peitler resigned as an officer of the Company in June 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1998, Don M. Lyle and Fred B. Cox served as members of the
Compensation Committee of the Company. After the meeting, it is anticipated that
Messrs. Cox and Lyle will remain members of the Compensation Committee. Neither
Mr. Cox nor Mr. Lyle is now, nor was at any time during the last completed
fiscal year of the Company, an officer or employee of the Company. During fiscal
1998, no executive officer of the Company served as a member of the Compensation
Committee (or its equivalent) or as a director of any entity whose executive
officers served on either the Compensation Committee or the Board of Directors
of the Company.
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REPORT OF EXECUTIVE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors makes this report on
executive compensation pursuant to Item 402 of Regulation S-K. Notwithstanding
anything to the contrary set forth in any of the Company's previous filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that might incorporate future filings,
including this Proxy Statement, in whole or in part, this report and the graph
which follows this report shall not be incorporated by reference into any such
filings, and such information shall be entitled to the benefits provided in Item
402(a)(9).
The Compensation Committee reviews the performance of the executive
officers of the Company, makes recommendations to the Board of Directors as to
the compensation of the executive officers of the Company and its subsidiaries,
reviews the compensation programs for other key employees, including salary and
cash bonus levels, reviews and approves certain employee benefit policies and
programs, and reviews and makes recommendations to management with respect to
executive recruitment. In addition, the Compensation Committee administers the
Emulex Corporation Employee Stock Option Plan ("Employee Plan"), including
review and approval of grants of options under the plan to executive officers
and other key employees of the Company and its subsidiaries.
Compensation Policies and Philosophy. The Company's executive compensation
policies are designed to attract, retain and reward executive officers who
contribute to the Company's success, to provide economic incentives for
executive officers to achieve the Company's business objectives by linking the
executive officers' compensation to the performance of the Company, to
strengthen the relationship between executive pay and stockholder value and to
reward individual performance. The Company uses a combination of base salary,
cash bonuses and stock option awards to achieve the aforementioned objectives.
The Compensation Committee considers a number of factors which include the
level and types of compensation paid to executive officers in similar positions
by comparable companies. In addition, the Compensation Committee evaluates
corporate performance by looking at factors such as performance relative to
competitors, performance relative to business conditions, and the success of the
Company in meeting its financial objectives. The Compensation Committee also
reviews the individual performance of each executive officer, including a review
of the ability of a given executive to meet individual performance objectives,
demonstration of job knowledge and skills, and the ability to work with others
toward the achievement of the Company's goals.
Components of Compensation. Executive officers' salaries are established in
relation to a range of salaries for comparable positions among a peer group of
other computer companies of comparable size and complexity. The Company seeks to
pay its executive officers salaries that are commensurate with their
qualifications, duties and responsibilities and that are competitive in the
marketplace. In general, the Company attempts to set executive compensation
between the 50th and 75th percentile of salaries paid to executives of the
Company's peer group of corporations. In making its annual salary
recommendations, the Compensation Committee looks at the Company's financial
position and performance, the contribution of the individual executive officers
during the prior fiscal year in helping to meet the Company's financial and
business objectives, and the executive officers' performance of their individual
responsibilities.
Executive officer cash bonuses are used to provide executive officers with
financial incentives to meet performance targets of the Company. Performance
targets and bonus recommendations for executives, other than principal executive
officers, are proposed by the management of the Company based on the Company's
annual operating plan, reviewed and, when appropriate, revised by the
Compensation Committee and approved by the Board of Directors. Personal goals
and bonus recommendations for the principal executive officers are recommended
by the Compensation Committee based on the Company's achievement in comparison
to the annual operating plan, and approved by the Board.
The Compensation Committee believes that equity ownership by executive
officers provides incentives to build stockholder value and align the interests
of executive officers with the stockholders. Upon hiring executive officers, the
Compensation Committee typically recommends stock option grants to the officers
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under the Employee Plan, subject to applicable vesting periods. Thereafter, the
Compensation Committee considers awarding additional grants, usually on an
annual basis, under the Employee Plan. The Compensation Committee believes that
these additional annual grants provide incentives for executive officers to
remain with the Company. Options are granted at the current market price for the
Company's common stock and, consequently, have value only if the price of the
Company's common stock increases over the exercise price. The size of the
initial grant is usually based upon factors such as comparable equity
compensation offered by other computer companies, the seniority of the executive
officer and the contribution that the executive officer is expected to make to
the Company. In determining the size of the periodic grants, the Compensation
Committee considers prior grants to the executive officer, the executive's
performance during the current fiscal year and his or her expected contributions
during the succeeding fiscal year.
Compensation of the Principal Executive Officer. The Compensation Committee
reviews the performance of the principal executive officer, as well as other
executive officers of the Company and its subsidiaries, annually. Based upon the
Company's financial performance for fiscal year 1997 and in consideration and
review of other computer companies of similar size and complexity and the
current pay practices for their industry, effective September 1997 the
Compensation Committee awarded Mr. Folino an increase in his annual base salary
to $289,000, an increase in his bonus base to $144,500, and a stock option grant
of 20,000 shares under the Emulex Corporation Employee Stock Option Plan at an
exercise price of $16.125.
Respectfully submitted,
Compensation Committee:
Don M. Lyle, Chairman
Fred B. Cox
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STOCKHOLDER RETURN PERFORMANCE PRESENTATION
The graph below compares the cumulative total stockholder return on the
Company's common stock with the cumulative total return on the Standard & Poor's
500 Index and the Hambrecht & Quist Computer Hardware Sector Index for the
period of five fiscal years commencing June 29, 1993 and ended June 28, 1998.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
EMULEX CORPORATION COMMON STOCK, S&P 500 INDEX AND
HAMBRECHT & QUIST COMPUTER HARDWARE SECTOR INDEX
EMULEX H&Q COMPUTER
CORPORATION S&P 500 INDEX HARDWARE SECTOR
JUN-93 100.00 100.00 100.00
SEP-93 100.00 102.58 88.49
DEC-93 92.59 104.96 107.66
MAR-94 30.56 100.98 113.67
JUN-94 49.07 101.41 98.17
SEP-94 65.74 106.37 116.99
DEC-94 100.00 106.35 133.73
MAR-95 138.89 116.70 137.73
JUN-95 178.70 127.84 172.44
SEP-95 98.15 138.00 186.29
DEC-95 75.93 146.31 192.51
MAR-96 105.56 154.17 188.88
JUN-96 108.33 161.08 202.91
SEP-96 108.33 166.06 225.37
DEC-96 116.67 179.97 255.23
MAR-97 114.81 184.73 263.98
JUN-97 112.96 216.98 310.90
SEP-97 124.07 233.23 435.70
DEC-97 101.85 239.93 347.47
MAR-98 67.59 273.40 411.82
JUN-98 43.98 282.42 440.98
- ---------------
* Assumes that the value of the investment in the Company's common stock and
each index was $100 on June 29, 1993. For comparative purposes, effective
March 1994, the graph no longer reflects the value of QLogic Corporation,
shares of which were distributed to Emulex stockholders in February 1994.
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RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of KPMG Peat Marwick LLP serves the Company as its
independent public accountants at the direction of the Board of Directors of the
Company. One or more representatives of KPMG Peat Marwick LLP are expected to be
present at the Meeting and will have an opportunity to make a statement, if they
desire to do so, and to be available to respond to appropriate questions.
The Board of Directors recommends a vote "FOR" the ratification of the
selection of KPMG Peat Marwick LLP as the independent public accountants for the
Company for fiscal year 1999. This matter is not required to be submitted for
stockholder approval, but the Board of Directors has elected to seek
ratification of its selection of the independent public accountants by the
affirmative vote of a majority of the shares represented and voting at the
Meeting.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16 of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file various reports with the Securities and
Exchange Commission and the National Association of Securities Dealers
concerning their holdings of, and transactions in, securities of the Company.
Copies of these filings must be furnished to the Company.
Based on a review of the copies of such forms furnished to the Company and
written representations from the Company's executive officers and directors, the
Company believes that during the 1998 fiscal year its officers, directors and
greater than 10% stockholders complied with all applicable Section 16(a) filing
requirements.
STOCKHOLDER PROPOSALS
Stockholders who wish to present proposals for action at the 1999 Annual
Meeting should submit their proposals in writing to the Secretary of the Company
at the address of the Company set forth on the first page of this Proxy
Statement. Proposals must be received by the Secretary no later than April 15,
1999, for inclusion in next year's proxy statement and proxy card.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders of the Company for the fiscal year ended
June 28, 1998, including audited consolidated financial statements, has been
mailed to the stockholders concurrently herewith, but such Report is not
incorporated in this Proxy Statement and is not deemed to be a part of the proxy
solicitation material.
OTHER MATTERS
The Management of the Company does not know of any other matters which are
to be presented for action at the Meeting. Should any other matters come before
the Meeting or any adjournment thereof, the persons named in the enclosed proxy
will have the discretionary authority to vote all proxies received with respect
to such matters in accordance with their collective judgment.
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ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of Exhibits), will be furnished
without charge to any person from whom the accompanying proxy is solicited upon
written request to Investor Relations, Emulex Corporation, 3535 Harbor
Boulevard, Costa Mesa, California 92626. If Exhibit copies are requested, a
copying charge of $0.20 per page will be made.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MICHAEL J. ROCKENBACH
Michael J. Rockenbach
Vice President, Chief Financial
Officer,
Secretary and Treasurer
Costa Mesa, California
October 19, 1998
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND TO DATE, SIGN, AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR
COOPERATION WILL BE APPRECIATED.
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PROXY
EMULEX CORPORATION
3535 HARBOR BOULEVARD
COSTA MESA, CALIFORNIA 92626
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Fred B. Cox and Robert H. Goon as Proxies,
each with the power to appoint his substitute, and hereby authorizes them or
either of them to represent and to vote as designated on the reverse side, all
the shares of common stock of Emulex Corporation held of record by the
undersigned at the close of business on October 5, 1998, at the Annual Meeting
of Stockholders to be held on November 19, 1998, or any adjournment thereof.
-- FOLD AND DETACH HERE --
18
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED Please mark
STOCKHOLDER, IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2. your votes [X]
as indicated in
this example.
1. ELECTION OF DIRECTORS (INSTRUCTION: To withhold authority to vote for any individual nominees, mark
the box next to the nominee's name below):
FOR all nominees WITHHOLD
listed to the right AUTHORITY [ ] Fred B. Cox [ ] Robert H. Goon
(except as marked to vote for all nominees [ ] Michael P. Downey [ ] Don M. Lyle
to the contrary) listed to the right [ ] Paul F. Folino
2. RATIFICATION OF SELECTION OF 3. In their discretion, the Proxies are authorized to vote upon such
INDEPENDENT PUBLIC ACCOUNTANTS other business as may properly come before the meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ] Dated: _________________________________________, 1998
______________________________________________________
Signature
______________________________________________________
Signature if held jointly
Please sign exactly as name appears hereon. When shares
are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee,
or guardian, please give full title as such. If a
corporation, please sign in full corporate name of the
President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
PLEASE READ, SIGN, DATE, AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
-- FOLD AND DETACH HERE --
EMULEX CORPORATION
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THE SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE