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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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(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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EMULEX CORPORATION
3535 HARBOR BOULEVARD
COSTA MESA, CALIFORNIA 92626
(714) 662-5600
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 18, 1999
------------------------
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
18, 1999, 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 consider and take action concerning an amendment of the
Company's Certificate of Incorporation (the form of which is included as
Appendix A to the accompanying Proxy Statement), pursuant to which (i) the
authorized number of shares of common stock of the Company will be
increased from 20,000,000 to 120,000,000 shares, (ii) a stock split of
outstanding shares of common stock of the Company will be effected on the
basis of one new share of common stock for each outstanding share of common
stock, and (iii) the par value of the common stock of the Company will be
reduced from $0.20 per share to $0.10 per share;
3. To consider and take action concerning approval of an amendment of
the Company's Employee Stock Option Plan (a copy of which, as amended, is
included as Appendix B to the accompanying Proxy Statement) which increases
the number of shares authorized for issuance under such plan by 725,000
shares;
4. To consider and take action concerning approval of an amendment of
the Company's 1997 Stock Option Plan for Non-Employee Directors (a copy of
which, as amended, is included as Appendix C to the accompanying Proxy
Statement) which increases the number of shares authorized for issuance
under such plan by 100,000 shares;
5. To ratify the selection of KPMG LLP as the Company's independent
public accountants for fiscal year 2000; and
6. 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 4, 1999, 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 22, 1999
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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 22, 1999
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The following information is provided 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 18, 1999, 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, "FOR" the amendment of the Company's
Certificate of Incorporation, "FOR" approval of the amendment of the Company's
Employee Stock Option Plan, "FOR" approval of the amendment of the Company's
1997 Stock Option Plan for Non-Employee Directors, and "FOR" the ratification of
the selection of KPMG LLP as the Company's independent public accountants for
fiscal year 2000, 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 Bylaws 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 proposals to amend the Company's Certificate of
Incorporation, approve the amendment of the Company's Employee Stock Option
Plan, approve the amendment of the Company's 1997 Stock Option Plan for
Non-Employee Directors, and ratify the selection of KPMG LLP as the Company's
independent public accountants will have the same effect as votes against such
proposals. For purposes of the proposal to amend the Company's Certificate of
Incorporation, broker non-votes will have the
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same effect as votes against such proposal, but with respect to each of the
other proposals, broker non-votes will be treated as unvoted for purposes of
determining approval of such proposals and will not be counted as votes for or
against such proposals.
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 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 17,519,618 shares
were outstanding as of the close of business on October 4, 1999 (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
TITLE OF CLASS NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
-------------- ------------------------ ----------------------- -------------------
DIRECTORS:
Common Stock......................... Fred B. Cox 505,000(3) 2.9%
Common Stock......................... Paul F. Folino 366,772(4) 2.1%
Common Stock......................... Michael P. Downey 69,000(4) *
Common Stock......................... Robert H. Goon 15,552(5) *
Common Stock......................... Don M. Lyle 60,000(4) *
NON-DIRECTOR EMPLOYEES:
Common Stock......................... Ronald P. Quagliara 68,623(6) *
Common Stock......................... Kirk D. Roller 3,126(4) *
Common Stock......................... Michael J. Rockenbach 68,915(7) *
Common Stock......................... Teresa W. Blackledge(8) 45,281 *
Common Stock......................... All directors and 1,247,892(4) 6.9%
executive officers as a
group (11 persons)(9)
5% STOCKHOLDERS:
Common Stock......................... Fidelity Management &
Research 2,153,216(10) 12.3%
One Federal Street
Boston, MA 02109
Common Stock......................... Putnam Investment
Management, Inc. 1,349,320(10) 7.7%
One Post Office Square
Boston, MA 02109
Common Stock......................... Pilgrim Baxter &
Associates 1,076,600(10) 6.1%
825 Duportail Road
Wayne, PA 19087
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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.
(3) Consists of 450,000 shares held in a family trust of which Mr. Cox and his
wife are co-trustees and share voting and investment power and 55,000
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 552 shares held by Mr. Goon's wife and 15,000 shares which are
subject to options held by Mr. Goon which are currently, or within the next
60 days will be, exercisable.
(6) Consists of 9,280 shares held by Mr. Quagliara, 720 shares held by his
children and 58,623 shares which are subject to options held by Mr.
Quagliara which are currently, or within the next 60 days will be,
exercisable.
(7) Consists of 39,212 shares held by Mr. Rockenbach, 840 shares held by his
children and 28,863 shares which are subject to options held by Mr.
Rockenbach which are currently, or within the next 60 days will be,
exercisable.
(8) Ms. Blackledge resigned as an officer of the Company in October 1999.
(9) Includes persons who serve as executive officers of the Company's principal
subsidiaries.
(10) Based on conversations with the beneficial owner and/or public filings by
such 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 1998
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
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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 Bylaws provide that only persons who are nominated in
accordance with specified Bylaw 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 Bylaws. 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 Bylaws.
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 65
Software Corporation
Paul F. Folino......................... President and Chief Executive Officer of the Company 54
Michael P. Downey(3)................... Chairman of the Board of Artisoft, Inc. 52
Robert H. Goon(3)...................... Lawyer, Partner in the law firm of Jeffer, Mangels, 58
Butler & Marmaro LLP, counsel to the Company
Don M. Lyle(2)......................... Principal of Technology Management Co., a management 60
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.
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Mr. Downey has served as a director of the Company since February 1994 and
is Chairman of the Audit Committee. From 1986 to 1997, Mr. Downey served as the
senior financial executive of Nellcor Puritan Bennett and one of its
predecessors, a manufacturer of medical instruments. From 1984 to 1986, Mr.
Downey was Vice President of Finance with Shugart Corporation, a manufacturer of
disk drives. Mr. Downey serves as chairman of the board of Artisoft, a
networking software company.
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 34 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 Company, 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 communications company, and Datawatch
Corporation, an applications software company.
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 chairman 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 250,000 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 25,000 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.
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On October 9, 1997, the Board of Directors of the Company adopted the
Company's 1997 Stock Option Plan for Non-Employee Directors (the "Director
Plan") under which a maximum of 200,000 shares of common stock of the Company
may be issued pursuant to exercise of stock options granted under the Director
Plan to directors who are not employees of the Company or any of its
subsidiaries. The 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
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 Director Plan
or the Old Director Plan ("Plan Eligible Director"). Only Plan Eligible
Directors may receive options under the Director Plan. There are currently four
Plan Eligible Directors -- Messrs. Cox, Downey, Goon and Lyle.
The Director Plan provides that an option to purchase 30,000 shares of
common stock of the Company is granted automatically to each Plan Eligible
Director upon the later to occur of (i) the date of adoption of the Director
Plan by the stockholders, or (ii) the date on which such director first becomes
a Plan Eligible Director. In addition, on each yearly anniversary of the date of
grant of the initial option to each Plan Eligible Director, each such Plan
Eligible Director is automatically granted an additional option to purchase
10,000 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 Internal Revenue Code of 1986, as amended (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 1999, 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 four 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
ANNUAL COMPENSATION COMPENSATION
------------------------------- ----------------------
OTHER ALL
ANNUAL STOCK OTHER
COMPEN- OPTION COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) GRANTS(2) SATION(3)
--------------------------- ---- -------- -------- --------- --------- ---------
Paul F. Folino.................... 1999 $289,000 $140,187 $ -0- 50,000 $13,143
President & CEO 1998 286,370 24,092 134,079(4) 40,000 10,093
1997 303,119 -0- -0- 60,000 8,301
Ronald P. Quagliara............... 1999 210,469 42,239 -0- 110,000(5) 2,267
Senior V.P., Research & 1998 186,144 9,785 -0- -0- 471
Development 1997 170,814 25,138 -0- -0- 421
Kirk D. Roller(6)................. 1999 150,000 61,910 -0- 50,000(7) 7,730
V.P., Worldwide Sales 1998 23,077 10,385 16,540(8) -0- 21
Michael J. Rockenbach............. 1999 150,716 28,441 -0- 93,000(9) 8,877
V.P. and CFO 1998 138,176 6,790 17,729 -0- 6,531
1997 117,953 8,000 -0- -0- 8,075
Teresa W. Blackledge(10).......... 1999 131,303 24,728 70,226(11) 70,000(12) 5,026
V.P., Marketing 1998 126,123 6,630 17,729 -0- 4,402
1997 121,226 8,000 63,020(11) -0- 6,133
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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 which represents the realized value of options exercised
in 1998.
(5) Includes 85,000 shares subject to options which were granted in previous
years and repriced in fiscal year 1999. The shares subject to options shown
in this table as having been granted in 1998 and 1997 are reduced by
options which were repriced in 1999. See "Report of Executive Compensation
Committee -- Repricing of Stock Options."
(6) Mr. Roller became an officer of the Company in April 1998.
(7) Represents shares subject to options which were granted in 1998 and
repriced in 1999. The shares subject to options shown in this table as
having been granted in 1998 are reduced by options which were repriced in
1999. See "Report of Executive Compensation Committee -- Repricing of Stock
Options."
(8) Includes $15,540 which represents a hiring bonus.
(9) Includes 78,000 shares subject to options which were granted in previous
years and repriced in 1999. The shares subject to options shown in this
table as having been granted in 1998 and 1997 are reduced by options which
were repriced in 1999. See "Report of Executive Compensation Committee --
Repricing of Stock Options."
(10) Ms. Blackledge resigned as an officer of the Company in October 1999.
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(11) Includes $63,331 and $57,020 which represent the realized values of options
exercised in 1999 and 1997, respectively.
(12) Includes 55,000 shares subject to options which were granted in previous
years and repriced in 1999. The shares subject to options shown in this
table as having been granted in 1998 and 1997 are reduced by options which
were repriced in 1999. See "Report of Executive Compensation Committee --
Repricing of Stock Options."
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 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, Roller and Rockenbach and Ms. Blackledge, and with two other
executives of the Company. The key employee retention agreements for Messrs.
Quagliara, Roller 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.
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OPTION GRANTS DURING FISCAL 1999
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 27, 1999, to the officers identified in the Summary Compensation
Table:
OPTION GRANTS IN FISCAL YEAR 1999
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO OPTION TERM(4)
OPTIONS EMPLOYEES EXERCISE --------------------
NAME GRANTED(1) IN 1999(2) PRICE(3) EXPIRATION DATE 5% 10%
---- ---------- ---------- -------- --------------- -------- --------
Paul F. Folino........ 50,000 3.44 $5.375 8/18/08 $169,015 $428,318
Ronald P. Quagliara... 15,000 1.03 5.375 8/18/08 50,705 128,495
10,000 0.69 39.75 6/01/09 249,899 633,243
50,000(5) 3.44 3.00 4/02/05 58,402 135,146
20,000(5) 1.38 3.00 11/20/06 30,286 73,300
15,000(5) 1.03 3.00 8/12/07 25,156 62,138
Kirk D. Roller........ 50,000(5) 3.44 3.00 4/26/08 92,059 232,014
Michael Rockenbach.... 15,000 1.03 5.375 8/18/08 50,705 128,495
8,000(5) 0.55 3.00 2/22/05 9,171 21,161
15,000(5) 1.03 3.00 8/24/05 18,736 43,822
2,000(5) 0.14 3.00 2/20/06 2,705 6,413
3,000(5) 0.21 3.00 5/21/06 4,216 10,062
5,000(5) 0.34 3.00 8/20/06 7,296 17,534
20,000(5) 1.38 3.00 12/08/06 30,503 73,928
15,000(5) 1.03 3.00 8/12/07 25,156 62,138
10,000(5) 0.69 3.00 11/16/07 17,375 43,238
Teresa
Blackledge(6)....... 15,000 1.03 5.375 8/18/08 50,705 128,495
10,000(5) 0.69 3.00 11/16/04 10,924 25,025
20,000(5) 1.38 3.00 8/24/05 24,981 58,429
10,000(5) 0.69 3.00 11/20/06 15,143 36,650
15,000(5) 1.03 3.00 8/12/07 25,156 62,138
- ---------------
(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 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) Represents shares of common stock covered by options which were granted
under the Emulex Corporation Employee Stock Option Plan prior to 1999 and
repriced in July 1998, subject to the
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requirement that amended options could not be exercised prior to July 6,
1999. The exercise price of each option was decreased on July 6, 1998 to the
market price per share of common stock of the Company on that date.
(6) Ms. Blackledge resigned as an officer of the Company in October 1999.
OPTION EXERCISES IN FISCAL 1999 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 1999 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........... -0- $ -- 353,749 106,251 $13,860,342 $3,966,908
Ronald P. Quagliara...... -0- -- 66,561(2) 43,439(2) 2,745,641(2) 1,388,734(2)
Kirk D. Roller........... -0- -- 12,500(2) 37,500(2) 515,625(2) 1,546,875(2)
Michael J. Rockenbach.... 7,000 246,608 52,185(2) 40,815(2) 2,152,631(2) 1,647,994(2)
Teresa W.
Blackledge(3).......... 9,250 63,331 49,309(2) 29,691(2) 2,031,184(2) 1,189,129(2)
- ---------------
(1) Common Stock valued at $44.25 per share.
(2) On July 6, 1998, the Compensation Committee of the Company adopted a
resolution whereby -- at the option of the employee -- all outstanding
options granted under the Emulex Corporation Employee Stock Option Plan
having exercise prices higher than $3.00 per share and held by current
employees, other than Mr. Folino, were amended to provide for exercise
prices of $3.00 per share, subject to the requirement that amended options
could not be exercised prior to July 6, 1999.
(3) Ms. Blackledge resigned as an officer of the Company in October 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 1999, 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
1999, 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.
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
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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 officer 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
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 1998, effective September 1998
the
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Compensation Committee elected to maintain Mr. Folino's annual base salary and
bonus base at $289,000 and $144,500, respectively. He was awarded a stock option
grant of 50,000 shares under the Emulex Corporation Employee Stock Option Plan
at an exercise price of $5.375.
Repricing of Stock Options. On July 6, 1998, the exercise prices of certain
outstanding options under the Emulex Corporation Stock Option Plan were
reduced -- at the option of the employee -- with the approval of the
Compensation Committee. Specifically, the exercise price of each outstanding
option with an exercise price higher than $3.00, including options held by
executive officers of the Company (excluding Mr. Folino), was reduced to that
price, subject to the requirement that amended options could not be exercised
prior to July 6, 1999. The reduced price was based on and equal to the market
price per share of common stock of the Company on July 6, 1998. No other changes
were made in the repriced options. No other options granted by the Company have
been repriced in the last ten years.
The following table sets forth information concerning repriced options held
by executive officers of the Company, all of which were repriced at the option
of the officer on July 6, 1998:
TEN-YEAR OPTION REPRICING
NUMBER OF SHARES MARKET PRICE OF EXERCISE NEW LENGTH OF ORIGINAL
UNDERLYING STOCK AT TIME OF PRICE AT TIME EXERCISE TERM REMAINING AT
NAME AND POSITION REPRICED OPTIONS REPRICING OF REPRICING PRICE DATE OF REPRICING
----------------- ---------------- ---------------- ------------- -------- ------------------
Ronald P. Quagliara.......... 50,000 $3.00 $9.3125 $3.00 6.7years
Senior V.P., 20,000 3.00 8.125 3.00 8.4
Research & Development 15,000 3.00 8.0625 3.00 9.1
Kirk D. Roller............... 50,000 3.00 3.9375 3.00 9.8
V.P., Worldwide Sales
Michael J. Rockenbach........ 8,000 3.00 7.5313 3.00 6.6
V.P. and CFO 15,000 3.00 10.875 3.00 7.1
2,000 3.00 5.3125 3.00 7.6
3,000 3.00 10.375 3.00 7.9
5,000 3.00 6.75 3.00 8.1
20,000 3.00 9.00 3.00 8.4
15,000 3.00 8.0625 3.00 9.1
10,000 3.00 7.6565 3.00 9.4
Teresa W. Blackledge(1)...... 10,000 3.00 5.375 3.00 6.4
V.P., Marketing 20,000 3.00 10.875 3.00 7.1
10,000 3.00 8.125 3.00 8.4
15,000 3.00 8.0625 3.00 9.1
- ---------------
(1) Ms. Blackledge resigned as an officer of the Company in October 1999.
The Compensation Committee approved this repricing of options out of
concern that the affected options were not providing a meaningful incentive to
their holders since they had been granted when the prevailing market price of
the Company's stock was significantly higher.
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 July 4, 1994 and ended June 27, 1999.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
EMULEX CORPORATION COMMON STOCK, S&P 500 INDEX AND
HAMBRECHT & QUIST COMPUTER HARDWARE SECTOR INDEX
H&Q COMPUTER HARDWARE
EMULEX CORPORATION S&P 500 INDEX SECTOR
------------------ ------------- ---------------------
Jun-94 100.00 100.00 100.00
Sep-94 133.96 104.89 119.18
Dec-94 203.77 104.87 136.23
Mar-95 283.02 115.08 140.31
Jun-95 364.15 126.07 175.66
Sep-95 200.00 136.09 189.77
Dec-95 154.72 144.28 196.11
Mar-96 215.09 152.03 192.42
Jun-96 220.75 158.85 206.70
Sep-96 220.75 163.76 229.58
Dec-96 237.74 177.41 260.00
Mar-97 233.96 182.17 268.92
Jun-97 230.19 213.97 316.71
Sep-97 252.83 230.00 443.84
Dec-97 207.55 236.60 353.96
Mar-98 137.74 269.60 419.52
Jun-98 89.62 278.51 449.22
Sep-98 200.00 250.80 495.45
Dec-98 603.77 304.21 680.08
Mar-99 498.11 319.37 707.62
Jun-99 1678.30 341.88 763.43
* Assumes that the value of the investment in the Company's common stock and
each index was $100 on July 4, 1994.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation, as previously amended (the
"Certificate of Incorporation"), authorizes the issuance of 20,000,000 shares of
common stock, par value $0.20 per share, and 1,000,000 shares of preferred
stock, par value $0.01 per share. On October 5, 1999, the Board of Directors of
the Company approved a proposal to amend the Certificate of Incorporation to (i)
increase the authorized number of shares of common stock from 20,000,000 to
120,000,000, (ii) effect a stock split of outstanding shares of common stock of
the Company on the basis of one new share of common stock for each outstanding
share of common stock, and (iii) reduce the par value of the common stock of the
Company from $0.20 per share to $0.10 per share, and to submit the proposed
amendment to the stockholders at this Annual Meeting.
A copy of the form of Certificate of Amendment of Certificate of
Incorporation, as proposed to be amended by the Board subject to stockholder
approval, is set forth in full as Appendix A to this Proxy Statement.
REASONS FOR AMENDMENT OF THE CERTIFICATE OF INCORPORATION
The first general purpose and effect of the proposed amendment to the
Company's Certificate of Incorporation will be to authorize 100,000,000
additional shares of common stock. The Board of Directors believes that it is
prudent to have the additional shares of common stock available for general
corporate purposes, including payment of stock dividends, stock splits or other
recapitalizations, acquisitions, equity financings, and grants of stock options.
Accordingly, the Company has determined that securing stockholder approval of
100,000,000 additional authorized shares of common stock would be appropriate in
order to
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provide the Company with the flexibility to consider a combination of possible
actions that might require the issuance of additional shares of common stock.
On October 5, 1998, the record date for the 1998 Annual Meeting of
Stockholders, the Company had 6,141,976 shares of common stock outstanding.
Since that date, the Company has issued 2,315,000 shares in connection with a
follow-on public offering of common stock completed in June 1999, as well as
303,866 shares as a result of options being exercised to purchase shares under
its Employee Stock Option Plan and its 1997 Stock Option Plan for Non-Employee
Directors. Additionally, in August 1999, the Company performed a two-for-one
common stock split in the form of a dividend of one share of common stock for
each share outstanding, doubling the number of shares outstanding.
The Company currently has 20,000,000 authorized shares of common stock. As
of October 4, 1999, the Company had 17,519,618 shares issued and outstanding and
of the remaining 2,480,382 authorized but unissued shares, the Company has
reserved approximately 1,822,634 shares pursuant to the Company's option plans.
Except in connection with the reserved shares described above, the Company
currently has no arrangements or understandings for the issuance of additional
shares of common stock, although opportunities for acquisitions and equity
financings could arise at any time. While the intent of the amendment to the
Certificate of Incorporation is otherwise, the proposed increase in the number
of authorized shares, in addition to general corporate purposes, can be used to
make a change in control of the Company more difficult, as detailed below.
Except for the change in par value, the additional shares of common stock
for which authorization is sought would be identical to the shares of common
stock of the Company authorized prior to approval of the proposed amendment. If
the Board of Directors deems it to be in the best interest of the Company and
the stockholders to issue additional shares of common stock in the future, the
Board of Directors generally will not seek further authorization by vote of the
stockholders, unless such authorization is otherwise required by law or
regulations.
The second general purpose and effect of the proposed amendment to the
Certificate of Incorporation will be to complete a two-for-one common stock
split. The Board of Directors believes that by increasing the number of shares
outstanding, the proposed stock split will expand the base of stockholders and
increase the liquidity afforded the Company's stockholders. In addition, the
Board believes that the Company's shares become more attractive to individual
investors when it is possible to acquire a larger number of them for the same
total dollar amount. The Board of Directors considered a number of factors,
including the 1420% gain in the price per share of the Company's common stock
from October 5, 1998 to October 4, 1999, as well as general market conditions,
in deciding to effect the stock split. Accordingly, the Company has determined
that securing stockholder approval of an additional two-for-one stock split is
appropriate in order to increase the attractiveness of the common stock to
individual investors.
The third general purpose and effect of the proposed amendment to the
Certificate of Incorporation will be to decrease the par value of the common
stock of the Company from $0.20 per share to $0.10 per share to reflect the
above-mentioned stock split.
POTENTIAL ANTI-TAKEOVER EFFECT OF INCREASE IN AUTHORIZED SECURITIES
The increase in the authorized common stock may facilitate certain
anti-takeover devices that may be advantageous to management if management
attempts to prevent or delay a change of control. The Board of Directors could
create impediments to a takeover or transfer of control of the Company by
causing such additional authorized shares to be issued to a holder or holders
who might side with the Board of Directors in opposing a takeover bid. In this
connection, the Board of Directors could issue shares of common stock to a
holder that would thereby have sufficient voting power to assure that certain
types of proposals would not receive the requisite stockholder vote, including
any proposal to remove directors, to accomplish certain business combinations
opposed by the Board of Directors, or to alter, amend or repeal provisions in
the Company's Certificate of Incorporation or Bylaws relating to any such
action. Furthermore, the existence of
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such shares might have the effect of discouraging any attempt by a person or
entity, through the acquisition of a substantial number of shares of common
stock, to acquire control of the Company, since the issuance of such shares
could dilute the common stock ownership of such person or entity. Employing such
devices may adversely impact stockholders who desire a change in management or
who desire to participate in a tender offer or other sale transaction involving
the Company. By use of such anti-takeover devices, the Board of Directors may
thwart a merger or tender offer even though stockholders might be offered a
substantial premium over the then current market price of the common stock.
At the present time, the Company is not aware of any contemplated mergers,
tender offers or other plans by a third party to attempt to effect a change in
control of the Company, and the proposed amendment to the Certificate of
Incorporation is not being made in response to any such attempt. Moreover, the
Board of Directors does not currently intend to propose any additional
anti-takeover measures in the foreseeable future.
VOTE REQUIRED FOR AMENDMENT OF THE CERTIFICATE OF INCORPORATION
Amendment of the Certificate of Incorporation to (i) increase the number of
authorized shares of common stock from 20,000,000 to 120,000,000, (ii) effect a
stock split of outstanding shares of common stock of the Company on the basis of
one new share of common stock for each outstanding share of common stock, and
(iii) reduce the par value of the common stock of the Company from $0.20 per
share to $0.10 per share requires the affirmative vote of the holders of a
majority of the shares of common stock of the Company entitled to vote at the
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AMENDMENT OF THE CERTIFICATE
OF INCORPORATION.
APPROVAL OF AMENDMENT OF THE EMPLOYEE STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
In 1980, the Board of Directors of the Company adopted the Emulex
Corporation Employee Stock Option Plan (the "Employee Plan"). Under the Employee
Plan, as in effect on October 4, 1999, options were outstanding in respect of an
aggregate of 1,492,882 shares and an aggregate of 69,752 shares were available
for future grants of options under the Employee Plan.
On October 5, 1999, the Board of Directors amended the Employee Plan,
subject to approval of the stockholders, to increase the number of shares
covered by the plan by 725,000 shares, and (ii) extend the expiration date of
the plan by three years to September 30, 2003. The Employee Plan is intended to
provide additional compensation and incentives to eligible individuals whose
present and potential contributions are important to the continued success of
the Company, to afford such persons an opportunity to acquire a proprietary
interest in the Company and to enable the Company to continue to enlist and
retain the best available talent for the successful conduct of its business. The
amendment was adopted and is recommended for approval by the Company's
stockholders because the Board believes that option grants and the stock
issuances under the Employee Plan play an important role in the Company's
efforts to attract employees of outstanding ability and to reward employees for
outstanding performance. In the event the amendment to the Employee Plan is not
approved by the stockholders, the Board believes that the Company's inability to
grant additional options under the Employee Plan will adversely impact the
Company's future hiring, promotion and operating plans.
A copy of the Employee Plan, as amended by the Board subject to stockholder
approval, is set forth in full as Appendix B to this Proxy Statement. In the
event that the proposal to amend the Company's Certificate of Incorporation and
effect a two-for-one stock split is approved by the stockholders at this Annual
Meeting, the number of shares subject to the Employee Plan and the options
granted thereunder will be adjusted accordingly. Following is a summary of the
principal provisions of the Employee Plan, qualified by reference to the
complete text of the Employee Plan, as so amended:
Purpose. The purpose of the Employee Plan will continue to be to further
the growth and development of the Company and its subsidiaries by providing,
through an equity interest in the Company, an incentive to officers and other
key employees who are in a position to contribute materially to the prosperity
of the
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Company, to increase such persons' interests in the Company's welfare, to
encourage them to continue their services to the Company or its subsidiaries and
to attract individuals of outstanding ability to enter the employment of the
Company or its subsidiaries.
Types of Options. Two types of options may be granted under the Employee
Plan: options intended to qualify as incentive stock options under Section 422
of the Code and non-qualified stock options not specifically authorized or
qualified for favorable federal income tax consequences.
Administration. The Employee Plan is administered by the Board of
Directors, or in the discretion of the Board, by a Committee ("Committee")
consisting of two or more directors of the Company where each such director is a
"non-employee director" (within the meaning of amended Rule 16b-3 under the
Securities Exchange Act of 1934). The Employee Plan administrator shall have
exclusive authority to determine employees to whom options will be granted, the
timing and manner of the grant of options, the exercise price, the number of
shares covered by and all of the terms of options, the duration and purpose of
leaves of absence which may be granted to optionees without constituting
termination of employment for purposes of the Employee Plan and all other
determinations necessary or advisable for administration of the Employee Plan.
Members of the Committee are appointed by and serve at the pleasure of the Board
and may be removed by the Board at its discretion. The Company's stockholders
may elect to remove one or all of the members of the Board or of the Committee
by voting for the removal of such members as directors of the Company.
Eligibility. Any employee of the Company or any of its subsidiaries who
does not own stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any of its parent or subsidiary
corporations is eligible to receive an option under the Employee Plan.
Shares Subject to the Employee Plan. The aggregate number of shares of
common stock of the Company which may be issued after October 5, 1999, the date
of amendment of the Employee Plan subject to stockholder approval, pursuant to
exercise of options theretofore or thereafter granted under the Employee Plan
shall not exceed 2,287,634 shares (subject to adjustment pursuant to the
"anti-dilution" provisions of the Employee Plan). This represents an increase of
725,000 shares in the aggregate number of shares covered by the Employee Plan
prior to amendment. This amendment would allow the Company to issue in the
future a maximum of 2,287,634 shares upon exercise of options which are now
outstanding or which may be granted in the future. Subject to the provisions of
the Employee Plan, the Board or the Committee may determine, in its sole
discretion, the number of shares of common stock of the Company with respect to
which incentive stock options and non-qualified stock options may be granted.
Grant, Term and Conditions of Options. The purchase price for the shares
subject to any option granted under the Employee Plan shall not be less than
100% of the fair market value of the shares of common stock of the Company on
the date the option is granted.
The purchase price for any shares purchased pursuant to exercise of an
option granted under the Employee Plan must be paid in full upon exercise of the
option in cash or, at the discretion of the Board or Committee, upon such terms
and conditions as it may approve, by transferring to the Company for redemption
shares of common stock at their fair market value. Notwithstanding the
foregoing, the Company may extend and maintain, or arrange for the extension and
maintenance of, credit to any optionee to finance his or her purchase of shares
pursuant to exercise of an option on such terms as may be approved by the Board
or Committee, subject to applicable regulations of the Federal Reserve Board and
any other laws or regulations in effect at the time such credit is extended.
No option shall be exercisable during the lifetime of an optionee by any
other person. The Board or the Committee has the power to set the time(s) within
which each option shall be exercisable and to accelerate the time(s) of
exercise. Unless otherwise provided by the Board or the Committee, each option
shall become exercisable on a cumulative basis as to 25% of the total number of
shares covered by the option at any time after one year from the date the option
is granted and as to an additional 6 1/4% after the end of each consecutive
calendar quarter thereafter.
No option shall be exercisable after the earliest of the following: the
expiration of ten years after the date the option is granted; three months after
the date the optionee's employment with the Company and its
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subsidiaries terminates if termination is for any reason other than permanent
disability, death, or cause; the date the optionee's employment terminates if
termination is for cause; or one year after the date the optionee's employment
terminates if termination is a result of death or permanent disability.
The aggregate fair market value (determined as of the time the option is
granted) of stock with respect to which incentive stock options are exercisable
by any employee for the first time during any calendar year shall not exceed
$100,000.
Within certain limitations, the Board or Committee has the power to modify,
extend, or renew outstanding options granted under the Employee Plan, accept the
surrender of outstanding options and authorize the granting of new options in
substitution therefor.
Mergers, Reorganizations and Consolidations. In the event of a liquidation
of the Company or a merger, reorganization or consolidation of the Company with
any other corporation in which the Company is not the surviving corporation or
the Company becomes a subsidiary of another corporation, any unexercised options
previously granted under the Employee Plan shall be deemed canceled unless the
surviving corporation elects to assume the options or to use substitute options.
However, unless the surviving corporation elects to assume the options or to use
substitute options, the optionee shall have the right, exercisable during a ten
day period ending on the fifth day prior to such liquidation, merger or
consolidation, to fully exercise the optionee's option in whole or in part
without regard to any installment exercise provisions otherwise provided in the
Employee Plan.
Employee Plan Amendments. The Employee Plan may be terminated or amended by
the Board as it shall deem advisable. Without the authorization and approval of
the stockholders, however, the Board may not make any amendments which would (i)
increase the total number of shares covered by the Employee Plan, (ii) change
the class of persons eligible to participate, or (iii) extend the term of the
Employee Plan beyond ten years from the date of adoption.
Term of Employee Plan. Unless sooner terminated by the Board in its sole
discretion, the Employee Plan will expire on September 30, 2003. This represents
an extension of the prior expiration date by a period of three years.
FEDERAL INCOME TAX CONSEQUENCES
Both non-qualified stock options and incentive stock options may be granted
under the Employee Plan. The federal income tax consequences to the Company and
to any person granted an option under the Employee Plan, under the existing
applicable provisions of the Code and the regulations thereunder, are
substantially as set forth below.
Non-Qualified Options. Under current federal income tax law, the grant of a
non-qualified option under the Employee Plan will have no federal income tax
consequences to the Company or the optionee. Generally, upon exercise of a
non-qualified stock option granted under the Employee Plan, the excess of the
fair market value of the stock at the date of exercise over the option price
(the "Spread") is taxable to the optionee as ordinary income. All such amounts
taxable to an employee are deductible by the Company as compensation expense.
The deduction will be allowed for the taxable year of the Company which includes
the end of the taxable year in which the optionee includes an amount in income.
Code Section 162(m) generally denies a tax deduction to any publicly held
corporation for compensation that exceeds one million dollars paid to certain
senior executives in a taxable year, subject to an exception for "performance
based compensation" as defined in the Code and subject to certain transition
provisions. Section 162(m) could limit the deductibility of compensation related
to the exercise of options granted under the Employee Plan.
Generally, the shares received on exercise of an option under the Employee
Plan are not subject to restrictions on transfer or risks of forfeiture and,
therefore, the optionee will recognize income on the date of exercise of a
non-qualified stock option. However, if the optionee is subject to Section 16(b)
of the Exchange Act, the Section 16(b) restriction will be considered a
substantial risk of forfeiture for tax purposes. Under
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current law, employees who are either directors or officers of the Company will
be subject to restrictions under Section 16(b) of the Exchange Act during their
term of service and for up to six months after termination of such service. SEC
Rule 16b-3 provides an exemption from the restrictions of Section 16(b) for the
grant of derivative securities, such as stock options, under qualifying plans.
Because the Employee Plan satisfies the requirements for exemption under SEC
Rule 16b-3, the grant of options will not be considered a purchase and the
exercise of the options to acquire the underlying shares of the Company common
stock will not be considered a purchase or a sale. Thus, ordinary income will be
recognized and the Spread will be measured on the date of exercise.
The taxable income resulting from the exercise of a non-qualified stock
option will constitute wages subject to withholding and the Company will be
required to make whatever arrangements are necessary to ensure that funds
equaling the amount of tax required to be withheld are available for payment,
including the deduction of required withholding amounts from the optionee's
other compensation and requiring payment of withholding amounts as part of the
exercise price. The tax basis for the Company common stock acquired is the
option price plus the taxable income recognized. An optionee will recognize gain
or loss on the subsequent sale of shares acquired upon exercise of a
non-qualified stock option in an amount equal to the difference between the
amount realized and the tax basis of such shares. Such gain or loss will be
long-term or short-term capital gain or loss, depending upon whether the shares
have been held for more than one year.
Incentive Stock Options. There will be no federal income tax consequences
to the Company or the employee as a result of the grant of an incentive stock
option. The optionee also will not recognize income when the incentive stock
option is exercised (subject to the alternative minimum tax rules discussed
below). Generally, the Company receives no deduction at the time of exercise.
In the event of a disposition of shares acquired upon exercise of an
incentive stock option, the tax consequences depend upon how long the employee
has held the shares. If the employee does not dispose of the shares within two
years after the incentive stock option was granted, or within one year after the
incentive stock option was exercised and shares were purchased, then the
employee must recognize only a long-term capital gain or loss. The Company is
not entitled to any deduction under these circumstances.
If the optionee fails to satisfy either of the foregoing holding periods,
then he or she must recognize ordinary income in the year of disposition
(referred to as a "disqualifying disposition"). The amount of such ordinary
income generally is determined under the rules applicable to non-qualified
options (see above). However, such ordinary income will in no event exceed the
amount of the gain realized on the sale, provided that the disposition involves
an arm's-length sale or exchange with an unrelated party. Any gain in excess of
the amount taxed as ordinary income will be treated as capital gain. The
Company, in the year of the disqualifying disposition, is entitled to a
deduction equal to the amount of ordinary income recognized by the optionee.
The Spread under an incentive stock option is treated as an adjustment in
computing alternative minimum taxable income ("AMTI") for the year of exercise.
If a taxpayer's AMTI exceeds an exemption amount equal to $45,000 in the case of
a married individual filing a joint return ($33,750 in the case of a single
taxpayer), then the alternative minimum tax equals 26% of the first $175,000 of
the excess and 28% of the taxable excess that exceeds $175,000, reduced by the
amount of the regular federal income tax paid for the same taxable year. The
exemption amount is subject to reduction in an amount equal to 25% of the amount
by which AMTI exceeds $150,000 in the case of a married individual filing a
joint return ($112,500 in the case of a single taxpayer). A subsequent
disqualifying disposition of shares acquired upon exercise of an incentive stock
option will eliminate the AMTI adjustment if the disposition occurs in the same
taxable year as the exercise. A disqualifying disposition in a subsequent
taxable year will not affect the alternative minimum tax computation in the
earlier year.
Payment of Option Exercise Price in Shares. To the extent an optionee pays
all or part of the option exercise price of a non-qualified stock option by
tendering shares of common stock owned by the optionee, the tax consequences
described above apply except that the number of shares of common stock received
upon such exercise which is equal to the number of shares surrendered in payment
of the option price will have the same tax basis and holding periods as the
shares surrendered. The additional shares of common stock received
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upon such exercise will have a tax basis equal to the amount of ordinary income
recognized on such exercise and a holding period which commences on the day
following the date of recognition of such income. Under proposed Treasury
regulations, if an optionee exercises an incentive stock option by tendering
shares of Company common stock previously acquired by the exercise of an
incentive stock option that have not satisfied statutory holding period
requirements, a disqualifying disposition will occur and the optionee will
recognize income and be subject to other basis allocation and holding period
requirements.
OPTIONS OUTSTANDING UNDER THE EMPLOYEE PLAN
As of October 4, 1999, options were outstanding under the Employee Plan
held by approximately 127 persons to purchase an aggregate of 1,492,882 shares
of Company common stock at an average exercise price of $13.56 per share, and
69,752 shares were available for future grants of options under the Employee
Plan. Total options granted to date under the Employee Plan as of October 4,
1999, were as follows: Paul F. Folino -- 640,000 shares; Ronald P.
Quagliara -- 130,000 shares; Michael J. Rockenbach -- 120,000 shares; Kirk D.
Roller -- 70,000 shares; all current executive officers as a group (six
persons) -- 1,120,500 shares; all current employees as a group (excluding
executive officers)(approximately 121 persons) -- 1,085,960 shares. Directors or
nominees for director who are not employees of the Company have not been granted
any options under the Employee Plan. In addition, no associate of any director,
nominee for director or executive officer has been granted any options under the
Employee Plan.
The market price of the Company's common stock on October 4, 1999 was
$93.125 per share.
REASONS FOR AMENDMENT OF THE EMPLOYEE PLAN
The Board of Directors believes that amendment of the Employee Plan is
necessary because the option grants and stock issuances under the Employee Plan
play an important role in the Company's efforts to attract employees of
outstanding ability and to reward employees for outstanding performance.
VOTE REQUIRED FOR APPROVAL OF AMENDMENT OF THE EMPLOYEE PLAN
Approval of the amendment of the Employee Plan requires the affirmative
vote of the holders of a majority of the shares of common stock of the Company
present, or represented, and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF AMENDMENT OF THE
EMPLOYEE PLAN.
APPROVAL OF AMENDMENT OF THE 1997 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
In 1997, the Board of Directors adopted, and the stockholders approved, the
Emulex Corporation 1997 Stock Option Plan for Non-Employee Directors (the
"Director Plan"). Under the Director Plan, as in effect on October 4, 1999,
options were outstanding in respect of an aggregate of 145,000 shares and an
aggregate of 40,000 shares were available for future grants of options under the
Director Plan.
On October 5, 1999, the Board of Directors amended the Director Plan,
subject to approval of the stockholders, to increase the number of shares
covered by the plan by 100,000 shares. The Director Plan is intended to increase
the proprietary and vested interest of the non-employee directors of the Company
in the growth and performance of the Company and to help enable the Company to
continue to retain and attract highly qualified persons to serve as non-employee
directors. The amendment was adopted and is recommended for approval by the
Company's stockholders because the Board believes that option grants and the
stock issuances under the Director Plan play an important role in the Company's
efforts to attract and retain highly qualified persons to serve as non-employee
directors.
A copy of the Director Plan, as amended by the Board subject to stockholder
approval, is set forth in full as Appendix C to this Proxy Statement. In the
event that the proposal to amend the Company's Certificate of Incorporation and
effect a two-for-one stock split is approved by the stockholders at this Annual
Meeting, the
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number of shares subject to the Director Plan and the options granted thereunder
will be adjusted accordingly. Following is a summary of the principal provisions
of the Director Plan, qualified by reference to the complete text of the
Director Plan, as so amended:
Administration. The Board of Directors is authorized to administer the
Director Plan in accordance with its terms; however, the Board shall have no
discretion with respect to the selection of directors to receive options, the
number of shares of common stock of the Company subject to any such options, or
the exercise price thereof. The Board may, in its sole discretion, delegate any
or all of its administrative duties to a committee of not fewer than two members
of the Board.
Eligibility. Each director of the Company shall be eligible to receive an
option under the 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
Director Plan or the Old Director Plan ("Eligible Director"). Only Eligible
Directors may receive options under the Director Plan. There are currently four
Eligible Directors -- Messrs. Cox, Downey, Goon and Lyle.
Shares Subject to the Director Plan. The aggregate number of shares of
common stock of the Company which may be issued after October 5, 1999, the date
of amendment of the Director Plan subject to stockholder approval, pursuant to
exercise of options heretofore or thereafter granted under the Director Plan
shall not exceed 285,000 shares (subject to adjustment pursuant to the
"anti-dilution" provisions of the Director Plan). This represents an increase of
100,000 shares in the aggregate number of shares covered by the Director Plan
prior to amendment. This amendment would allow the Company to issue in the
future a maximum of 285,000 shares upon exercise of options which are now
outstanding or which may be granted in the future.
Grant, Term and Conditions of Options. The Director Plan provides that an
option to purchase 30,000 shares of common stock of the Company shall be granted
automatically to each Eligible Director upon the later to occur of (i) the date
of adoption of the Director Plan by the stockholders, or (ii) the date on which
such director first becomes an Eligible Director. In addition, on each yearly
anniversary of the date of grant of the initial option to each Eligible
Director, each such Eligible Director shall automatically be granted an
additional option to purchase 10,000 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 shall be 100% of the fair market value per share of such common stock.
Payment for shares purchased on exercise of an option shall 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.
No option granted under the Director Plan shall be exercisable 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.
The initial options to purchase 30,000 shares granted under the Director
Plan shall be exercisable as to one-third of the shares on each anniversary of
the date the option is granted if the director to whom the option is granted is
still a director of the Company on such anniversary. The subsequent options to
purchase 10,000 shares shall be exercisable as to one-half of the shares on the
six month anniversary of the date the option is granted and shall be exercisable
for an additional one quarter of the shares on the nine month and one year
anniversary of the grant date. No options may be granted under the Director Plan
prior to the approval of the Director Plan by the stockholders of the Company.
In the event of the death of an optionee, any option (or unexercised
portion thereof) held by the optionee, to the extent exercisable by him or her
on the date of death, may be exercised by the optionee's personal
representatives, heirs, or legatees in accordance with the Director Plan. No
option shall be transferable by an
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optionee otherwise than by will or the laws of descent and distribution, and
during the lifetime of the individual to whom an option is granted it may be
exercised only by such individual or such individual's guardian or legal
representative.
Mergers, Reorganizations and Changes in Control. In the event of a
liquidation of the Company or a merger, reorganization or consolidation of the
Company with any other corporation in which the Company is not the surviving
corporation or the Company becomes a subsidiary of another corporation, any
unexercised options previously granted under the Director Plan shall be deemed
canceled unless the surviving corporation elects to assume the options or to use
substitute options. However, if such options would otherwise be canceled, the
optionee shall have the right, exercisable during a ten day period ending on the
fifth day prior to such liquidation, merger or consolidation, to fully exercise
the optionee's option in whole or in part without regard to any installment
exercise provisions otherwise provided in the Director Plan. In the event of a
change in control of the Company, as defined in the Director Plan, any
unexercised option previously granted under the Director Plan which is not then
already exercisable as to all of the shares subject to the option shall become
exercisable upon such change in control as to all of the shares as to which the
option is not already exercisable in addition to the shares, if any, as to which
the option is already exercisable.
Director Plan Amendment. The Director Plan may be terminated or amended by
the Board as it shall deem advisable. Without the authorization and approval of
the stockholders, however, the Board may not increase the total number of shares
covered by the Director Plan, change the class of directors eligible to receive
options under the Director Plan or materially increase benefits accruing to
participants under the Director Plan.
Terms of Director Plan. Unless sooner terminated by the Board in its sole
discretion, the Director Plan will expire on October 31, 2007.
FEDERAL INCOME TAX CONSEQUENCES
Only non-qualified options which are not intended to meet the incentive
stock option requirements of Section 422A of the Code will be issued under the
Director Plan. Under current federal income tax law, the grant of an option
under the Director Plan will have no federal income tax consequences to the
Company or the Eligible Director to whom it is granted. Generally, upon exercise
of a non-qualified stock option granted under the Director Plan, the excess of
the fair market value of the stock at the date of exercise over the option price
(the "Spread") is taxable to the optionee as ordinary income. All such amounts
taxable to an optionee are deductible by the Company as compensation expense.
The deduction will be allowed for the taxable year of the Company in which the
optionee includes an amount in income.
Generally, the shares received on exercise of an option under the Director
Plan are not subject to restrictions on transfer or risks of forfeiture and,
therefore, the optionee will recognize income on the date of exercise. The
Company believes that the Director Plan will comply with the requirements of
Section Rule 16b-3 of the Act and, as a result, there will be no risk of
forfeiture. However, if the Director Plan were not to comply with Rule 16b-3 and
the optionee is subject to Section 16(b) of the Act, the Section 16(b)
restriction will be considered a substantial risk of forfeiture for tax
purposes. Under current law, optionees who are either directors or officers of
the Company will be subject to restrictions under Section 16(b) of the Act
during their term of service and for up to six months after termination of such
service. Thus, ordinary income will be recognized and the Spread will be
measured on the first day on which the sale of such shares at a profit is no
longer subject to restrictions under Section 16(b) of the Act. Income tax
regulations provide that such day is six months (less one day) from the transfer
date for such shares. However, the optionee is entitled to elect to recognize
income on the date of transfer. Such election must be made within 30 days of the
transfer of the shares to the optionee.
The foregoing discussion, based upon federal tax laws now in effect, is not
intended to cover all relevant tax aspects of the Director Plan.
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REASONS FOR AMENDMENT OF THE DIRECTOR PLAN
The Board of Directors believes that the amendment of the Director Plan is
necessary because the option grants and stock issuances under the Director Plan
increase the proprietary and vested interest of the non-employee directors of
the Company in the growth and performance of the Company and help enable the
Company to continue to attract highly qualified persons to serve as non-employee
directors.
VOTE REQUIRED FOR APPROVAL OF AMENDMENT OF THE DIRECTOR PLAN
Approval of the amendment of the Director Plan requires the affirmative
vote of the holders of a majority of the shares of common stock of the Company
present, or represented, and entitled to vote at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF AMENDMENT OF THE
DIRECTOR PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of KPMG 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 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 LLP as the independent public accountants for the Company for
fiscal year 2000. 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.
Notwithstanding the ratification by shareholders of the appointment of KPMG
LLP, the Board of Directors may, if the circumstances dictate, appoint other
independent accountants.
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 Nasdaq National Market 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 1999 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 2000 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,
2000, 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 27, 1999, 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.
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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.
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 22, 1999
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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APPENDIX A
EMULEX CORPORATION
FORM OF CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EMULEX CORPORATION
Emulex Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
FIRST: That at a meeting of the Board of Directors of the Corporation,
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation, as amended, of the Corporation, declaring said
amendment to be advisable and to be presented to the stockholders at the annual
meeting of stockholders of the Corporation for consideration thereof. The
resolution setting forth the proposed amendment is as follows:
RESOLVED, that, subject to obtaining the requisite approval of the
stockholders of the Corporation, Article IV of the Corporation's
Certificate of Incorporation, as previously amended, be further amended,
without effect upon any stock designation heretofore filed, to read as
follows:
"ARTICLE IV
AUTHORIZED CAPITAL STOCK
The corporation is authorized to issue two classes of capital stock,
designated Common Stock and Preferred Stock. The amount of total authorized
capital stock of the corporation is 121,000,000 shares, divided into
120,000,000 shares of Common Stock, par value $0.10 per share, and
1,000,000 shares of Preferred Stock, par value $0.01 per share. Upon the
effectiveness of this Amendment, each outstanding share of Common Stock,
par value $0.20 per share, shall be split, converted and changed into two
shares of Common Stock, par value $0.10 per share.
The shares of Preferred Stock may be issued from time to time in one or
more series. The board of directors is hereby authorized to fix by
resolution or resolutions the designations and the powers, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of any series of shares of
Preferred Stock, including without limitation the dividend rate, conversion
rights, redemption price and liquidation preference, of any such series,
and to fix the number of shares constituting such series, and to increase
or decrease the number of shares of any such series (but not below the
number of shares thereof then outstanding). In case the number of shares of
any such series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of
the resolution or resolutions originally fixing the number of shares of
such series."
SECOND: That thereafter, pursuant to resolutions of the Board of Directors,
the proposed amendment was presented to the stockholders at the annual meeting
of stockholders of the Corporation held on November 18, 1999, upon notice in
accordance with Section 222 of the General Corporation Law of the State of
Delaware, at which meeting the necessary number of shares as required by statute
were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
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27
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Paul F. Folino, its President and Chief Executive Officer, and Michael
J. Rockenbach, its Vice President, Chief Financial Officer, Secretary and
Treasurer, this 18th day of November, 1999.
By:
------------------------------------
Paul F. Folino,
President and Chief Executive
Officer
Attest:
- --------------------------------------
Michael J. Rockenbach,
Vice President, Chief Financial
Officer, Secretary and Treasurer
A-2
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APPENDIX B
EMULEX CORPORATION
EMPLOYEE STOCK OPTION PLAN
1. PURPOSE. The purpose of this Emulex Corporation Employee Stock Option
Plan ("Plan") is to further the growth and development of Emulex Corporation
("Company") and its subsidiaries by providing, through ownership of stock of the
Company, an incentive to officers and other key employees who are in a position
to contribute materially to the prosperity of the Company, to increase such
persons' interests in the Company's welfare, to encourage them to continue their
services to the Company or its subsidiaries, and to attract individuals of
outstanding ability to enter the employment of the Company or its subsidiaries.
2. INCENTIVE AND NON-QUALIFIED STOCK OPTIONS. Two types of options
(referred to herein as "options" without distinction between such two types) may
be granted under the Plan: Options intended to qualify as incentive stock
options ("incentive stock options") under Section 422 of the Internal Revenue
Code of 1986, as amended, and any successor statutes ("Code"); and other options
not specifically authorized or qualified for favorable income tax treatment by
the Code ("non-qualified stock options").
3. ADMINISTRATION.
3.1 Administration by Board. Subject to Section 3.2, the Plan may be
administered by the Board of Directors of the Company (the "Board"). Subject to
the provisions of the Plan, the Board shall have authority to construe and
interpret the Plan, to promulgate, amend, and rescind rules and regulations
relating to its administration, from time to time to select from among the
eligible employees (as determined pursuant to Section 4) of the Company and its
subsidiaries those employees to whom options will be granted, to determine the
timing and manner of the grant of the options, to determine the exercise price,
the number of shares covered by and all of the terms of the options, to
determine the duration and purpose of leaves of absence which may be granted to
optionees without constituting termination of their employment for purposes of
the Plan, and to make all of the determinations necessary or advisable for
administration of the Plan. The interpretation and construction by the Board of
any provisions of the Plan, or of any agreement issued and executed under the
Plan, shall be final and binding upon all parties. No member of the Board shall
be liable for any action or determination undertaken or made in good faith with
respect to the Plan or any agreement executed pursuant to the Plan.
3.2 Administration by Committee. The Board may, in its sole discretion,
delegate any or all of its administrative duties to a committee (the
"Committee") of not fewer than two (2) members of the Board, all of the members
of which Committee shall be persons who, in the opinion of counsel to the
Company, are "non-employee directors" as defined in Rule 16b-3(b)(3)(i)
promulgated by the Securities and Exchange Commission, as amended and in effect
on and after August 15, 1996, to be appointed by and serve at the pleasure of
the Board. From time to time, the Board may increase or decrease (to not less
than two members) the size of the Committee, and add additional members to, or
remove members from, the Committee. The Committee shall act pursuant to a
majority vote, or the written consent of a majority of its members, and minutes
shall be kept of all of its meetings and copies thereof shall be provided to the
Board. Subject to the provisions of the Plan and the directors of the Board, the
Committee may establish and follow such rules and regulations for the conduct of
its business as it may deem advisable. No member of the Committee shall be
liable for any action or determination undertaken or made in good faith with
respect to the Plan or any agreement executed pursuant to the Plan.
4. ELIGIBILITY. Any employee of the Company or any of its subsidiaries who
does not own stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any of its parent or subsidiary
corporations shall be eligible to receive an option under the Plan. A director
or employee may receive more than one option under the Plan. No director who is
not also an employee shall be eligible to receive an option under the Plan.
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5. SHARES SUBJECT TO OPTIONS. The stock available for grant of options
under the Plan shall be shares of the Company's authorized but unissued, or
reacquired, common stock. The aggregate number of shares which may be issued
after October 5, 1999 pursuant to exercise of options theretofore or thereafter
granted under the Plan shall not exceed 2,287,634 shares of common stock
(subject to adjustment as provided in Section 6.14). In the event that any
outstanding option under the Plan for any reason expires or is terminated, the
shares of common stock allocable to the unexercised portion of the option shall
again be available for options under the Plan as if no option had been granted
with respect to such shares.
6. TERMS AND CONDITIONS OF OPTIONS. Options granted under the Plan shall be
evidenced by agreements (which need not be identical) in such form and
containing such provisions which are consistent with the Plan as the Board or
Committee shall from time to time approve. Each agreement shall specify whether
the option granted thereby is an incentive stock option or a non-qualified stock
option. Such agreements may incorporate all or any of the terms hereof by
reference and shall comply with and be subject to the following terms and
conditions:
6.1 Number of Shares Subject to Option. Each option agreement shall
specify the number of shares subject to the option.
6.2 Option Price. The purchase price for the shares subject to any
option shall not be less than 100% of the fair market value of the shares
of common stock of the Company on the date the option is granted. For
purposes of the Plan, the "fair market value" of any share of common stock
of the Company at any date shall be (a) if the common stock is listed on an
established stock exchange or exchanges, the last reported sale price per
share on such date on the principal exchange on which it is traded, or if
no sale was made on such date on such principal exchange, at the closing
reported bid price on such date on such exchange, or (b) if the common
stock is not then listed on an exchange, the last reported sale price per
share on such date reported by NASDAQ, or if sales are not reported by
NASDAQ or no sale was made on such date, the average of the closing bid and
asked prices per share for the common stock in the over-the-counter market
as quoted on NASDAQ on such date, or (c) if the common stock is not then
listed on an exchange or quoted on NASDAQ, an amount determined in good
faith by the Board or the Committee.
6.3 Medium and Time of Payment. The purchase price for any shares
purchased pursuant to exercise of an option granted under the Plan shall be
paid in full upon exercise of the option in cash, or by check, or, at the
discretion of the Board or the Committee, upon such terms and conditions as
the Board or the Committee shall approve, by transferring to the Company
for redemption shares of common stock of the Company at their fair market
value (determined in the manner provided in Section 6.2 as of the date
provided in Section 6.5). Shares of common stock transferred to the Company
upon exercise of an option shall not increase the number of shares
available for issuance under the Plan. Notwithstanding the foregoing, the
Company may extend and maintain, or arrange for the extension and
maintenance of, credit to any optionee to finance the optionee's purchase
of shares pursuant to exercise of any option, on such terms as may be
approved by the Board or the Committee, subject to applicable regulations
of the Federal Reserve Board and any other laws or regulations in effect at
the time such credit is extended.
6.4 Term of Option. No option granted to an employee (including a
director who is an employee) shall be exercisable after the expiration of
the earliest of (i) ten years after the date the option is granted, (ii)
three months after the date the optionee's employment with the Company and
its subsidiaries terminates if such termination is for any reason other
than permanent disability, death, or cause, (iii) the date the optionee's
employment with the Company and its subsidiaries terminates if such
termination is for cause, as determined by the Board or by the Committee,
in its sole discretion, or (iv) one year after the date the optionee's
employment with the Company and its subsidiaries terminates if such
termination is a result of death or permanent disability, or death or
permanent disability results within not more than three months of the date
on which the optionee ceases to be an employee; provided, however, that the
option agreement for any option may provide for shorter periods in each of
the foregoing instances. For the purposes of this Section 6.4(a),
"permanent disability" shall mean a disability of the type defined in
Section 22(c)(3) of the Code.
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6.5 Exercise of Option. No option shall be exercisable during the
lifetime of an optionee by any person other than the optionee. The Board or
the Committee shall have the power to set the time or times within which
each option shall be exercisable and to accelerate the time or times of
exercise. Unless otherwise provided by the Board or the Committee, each
option granted under the Plan shall become exercisable on a cumulative
basis as to 25% of the total number of shares covered thereby at any time
after one year from the date the option is granted and an additional 6 1/4%
of such total number of shares at any time after the end of each
consecutive calendar quarter thereafter until the option has become
exercisable as to all of such total number of shares. To the extent that an
optionee has the right to exercise an option and purchase shares pursuant
thereto, the option may be exercised from time to time by written notice to
the Company, stating the number of shares being purchased and accompanied
by payment in full of the purchase price for such shares. If shares of
common stock of the Company are used in part or full payment for the shares
to be acquired upon exercise of the option, such shares shall be valued for
the purpose of such exchange as of the date of exercise of the option in
accordance with the provisions of Sections 6.2 and 6.3. Any certificate(s)
for shares of outstanding common stock of the Company used to pay the
purchase price shall be accompanied by stock power(s) duly endorsed in
blank by the registered holder of the certificate(s) (with the signature
thereon guaranteed). In the event the certificate(s) tendered by the
optionee in such payment cover more shares than are required for such
payment, the certificate(s) shall also be accompanied by instructions from
the optionee to the Company's transfer agent with respect to disposition of
the balance of the shares covered thereby.
6.6 No Transfer of Option. No option shall be transferable by an
optionee otherwise than by will or the laws of descent and distribution.
6.7 Prior Outstanding Incentive Stock Options. No incentive stock
option granted under the Plan prior to 1987 shall be exercisable to any
extent at any time while there is outstanding any incentive stock option
which was granted prior to the granting of such option to the optionee by
the Company or any subsidiary or parent corporation of the Company or any
predecessor corporation of the Company or any subsidiary or parent
corporation of the Company. For the purpose of this Section 6.7, an option
shall be outstanding until such time as the option is exercised in full or
expires by reason of lapse of time.
6.8 Limit on Incentive Stock Options.
(a) The aggregate fair market value (determined as of the time the
option is granted) of the stock for which any employee may be granted
incentive stock options in any calendar year commencing after December 31,
1980 and continuing before January 1, 1987 (under all option plans of the
Company and its parent and subsidiary corporations) shall not exceed
$100,000 plus any unused limit carryover to such year allowed under Section
422(c)(4) of the Code.
(b) The aggregate fair market value (determined at the time the option
is granted) of the stock with respect to which incentive stock options
granted after December 31, 1986 are exercisable for the first time by an
optionee during any calendar year (under all incentive stock option plans
of the Company and its subsidiaries) shall not exceed $100,000.
6.9 Restriction on Issuance of Shares. The issuance of options and
shares shall be subject to compliance with all of the applicable
requirements of law with respect to the issuance and sale of securities,
including, without limitation, any required qualification under the
California Corporate Securities Law of 1968, as amended.
6.10 Investment Representation. Any optionee may be required, as a
condition of issuance of shares covered by his or her option, to represent
that the shares to be acquired pursuant to exercise of the option will be
acquired for investment and without a view to distribution thereof, and in
such case, the Company may place a legend on the certificate evidencing the
shares reflecting the fact that they were acquired for investment and
cannot be sold or transferred unless registered under the Securities Act of
1933, as amended, or unless counsel for the Company is satisfied that the
circumstances of the proposed transfer do not require such registration.
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6.11 Rights as a Stockholder or Employee. An optionee or transferee
of an option shall have no rights as a stockholder of the Company with
respect to any shares covered by any option until the date of issuance of a
share certificate for such shares. No adjustment shall be made for
dividends (ordinary or extraordinary, whether cash, securities, or other
property) or distribution or other rights for which the record date is
prior to the date such share certificate is issued, except as provided in
Section 6.14. Nothing in the Plan or in any option agreement shall confer
upon any employee any right to continue in the employ of the Company or any
of its subsidiaries or interfere in any way with any right of the Company
or any subsidiary to terminate the optionee's employment at any time.
6.12 No Fractional Shares. In no event shall the Company be required
to issue fractional shares upon the exercise of an option.
6.13 Exercisability in the Event of Death. In the event of the death
of the optionee while he or she is an employee and/or director of the
Company or any of its subsidiaries or within not more than three months of
the date on which he or she ceased to be an employee and/or director, any
option or unexercised portion thereof granted to the optionee, to the
extent exercisable by him or her on the date of death, may be exercised by
the optionee's personal representatives, heirs, or legatees subject to the
provisions of Section 6.4 hereof.
6.14 Recapitalization or Reorganization of Company. Except as
otherwise provided herein, appropriate and proportionate adjustments shall
be made in the number and class of shares subject to the Plan and to the
option rights granted under the Plan, and the exercise price of such option
rights, in the event of a stock dividend (but only on common stock), stock
split, reverse stock split, recapitalization, reorganization, merger,
consolidation, separation, or like change in the capital structure of the
Company. In the event of a liquidation of the Company, or a merger,
reorganization, or consolidation of the Company with any other corporation
in which the Company is not the surviving corporation or the Company
becomes a wholly-owned subsidiary of another corporation, any unexercised
options theretofore granted under the Plan shall be deemed canceled unless
the surviving corporation in any such merger, reorganization, or
consolidation elects to assume the options under the Plan or to use
substitute options in place thereof; provided, however, that,
notwithstanding the foregoing, if such options would otherwise be canceled
in accordance with the foregoing, the optionee shall have the right,
exercisable during a ten-day period ending on the fifth day prior to such
liquidation, merger, or consolidation, to exercise the optionee's option in
whole or in part without regard to any installment exercise provisions in
the optionee's option agreement. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments
shall be made by the Board or the Committee, the determination of which in
that respect shall be final, binding, and conclusive, provided that each
option granted pursuant to the Plan shall not be adjusted in a manner that
causes the option to fail to continue to qualify as an incentive stock
option within the meaning of Section 422 of the Code.
6.15 Modification, Extension, and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Plan, the Board or
Committee may modify, extend, or renew outstanding options granted under
the Plan, accept the surrender of outstanding options (to the extent not
theretofore exercised), and authorize the granting of new options in
substitution therefor (to the extent not theretofore exercised). The Board
or Committee shall not, however, modify any outstanding incentive stock
option in any manner which would cause the option not to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
Notwithstanding the foregoing, no modification of an option shall, without
the consent of the optionee, alter or impair any rights of the optionee
under the option.
6.16 Other Provisions. Each option may contain such other terms,
provisions, and conditions not inconsistent with the Plan as may be
determined by the Board or Committee.
7. TERMINATION OR AMENDMENT OF PLAN. The Board may at any time terminate or
amend the Plan; provided that, without approval of the stockholders of the
Company, there shall be, except by operation of the provisions of Section 6.14,
no increase in the total number of shares covered by the Plan, no change in the
class of persons eligible to receive options granted under the Plan or other
material modification of the
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requirements as to eligibility for participation in the Plan, no material
increase in the benefits accruing to participants under the Plan, and no
extension of the latest date upon which options may be granted; and provided
further that, without the consent of the optionee, no amendment may adversely
affect any then outstanding option or any unexercised portion thereof.
8. INDEMNIFICATION. In addition to such other rights of indemnification as
they may have as members of the Board or the Committee, the members of the Board
or the Committee administering the Plan shall be indemnified by the Company
against reasonable expenses, including attorney's fees, actually and necessarily
incurred in connection with the defense of any action, suit, or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any option granted thereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any action, suit, or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit, or proceeding that such member
is liable for negligence or misconduct in the performance of his duties,
provided that within 60 days after institution of any such action, suit, or
proceeding, the member shall in writing offer the Company the opportunity, at
its own expense, to handle and defend the same.
9. NON-QUALIFIED STOCK OPTION PLAN. The Plan as set forth herein
constitutes an amendment and restatement of the Company's Non-Qualified Stock
Option Plan which was adopted in November 1980. The Board or the Committee may,
in its discretion, authorize the conversion, to the fullest extent permitted by
law, of non-qualified stock options granted under the Non-Qualified Stock Option
Plan prior to such amendment to incentive stock options under this Plan, as so
amended. Any such options converted to incentive stock options shall be treated
as incentive stock options for all purposes under the Plan; provided, however,
that none of the terms or conditions of any such options, including, but not
limited to, the exercise price, the term of the option, and the time(s) within
which the option may be exercised, shall be altered or amended by reason of such
conversion.
10. STOCKHOLDER APPROVAL AND TERM OF PLAN. The Plan shall not take effect
until approved by the stockholders of the Company. Unless sooner terminated by
the Board in its sole discretion, the Plan will expire on September 30, 2003.
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APPENDIX C
EMULEX CORPORATION
1997 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE.
(a) The purpose of the Emulex Corporation 1997 Stock Option Plan for
Non-Employee Directors (the "Plan") is to provide a means by which each director
of Emulex Corporation, a Delaware corporation (the "Company"), who is not an
employee of the Company or any of its subsidiaries (each such person being
hereafter referred to as a "Non-Employee Director") will be given an opportunity
to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the Company
(the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(b).
(b) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. The Committee shall act pursuant to a majority vote
or the written consent of a majority of its members, and minutes shall be kept
of all of its meetings and copies thereof shall be provided to the Board.
Subject to the provisions of the Plan and the directions of the Board, the
Committee may establish and follow such rules and regulations for the conduct of
its business as it may deem advisable.
(c) No member of the Board or the Committee shall be liable for any action
or determination undertaken or made in good faith with respect to the Plan or
any agreement executed pursuant to the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold after October 5, 1999 pursuant to
options theretofore or thereafter granted under the Plan shall not exceed in the
aggregate two hundred eighty-five thousand (285,000) shares of the Company's
common stock (the "Common Stock"). If any option granted under the Plan shall
for any reason expire or otherwise terminate without having been exercised in
full, the stock not purchased under such option shall again become available for
options under the Plan as if no option had been granted with respect to such
shares.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company who
are eligible directors at the time of grant. Each Non-Employee Director shall be
eligible to receive an option under the Plan if such director is not then an
employee of the Company or any of its subsidiaries. A director of the Company
shall not be deemed to be an employee of the Company or any of its subsidiaries
solely by reason of the existence of an agreement between such director and the
Company or any subsidiary thereof pursuant to which the director provides
services as a consultant to the Company or its subsidiaries on a regular or
occasional basis for compensation.
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5. AUTOMATIC GRANTS.
(a) Each person who is an eligible Non-Employee Director on the date this
Plan is first approved by the stockholders of the Company shall, upon such date,
automatically be granted an initial option to purchase thirty thousand (30,000)
shares of the Company's Common Stock (subject to adjustment as provided in
paragraph 10 hereof) upon the terms and conditions set forth herein.
(b) Each person who first becomes an eligible Non-Employee Director after
the date this Plan is first approved by the stockholders of the Company shall,
upon the date of his or her initial qualification as an eligible Non-Employee
Director, automatically be granted an initial option to purchase thirty thousand
(30,000) shares of the Company's Common Stock (subject to adjustment as provided
in paragraph 10 hereof) upon the terms and conditions set forth herein.
(c) Thereafter, on each anniversary of the date of grant of the initial
option to each eligible Non-Employee Director pursuant to subparagraph 5(a) or
5(b), each such eligible Non-Employee Director shall automatically be granted an
additional option to purchase ten thousand (10,000) shares of the Company's
Common Stock (subject to adjustment as provided in paragraph 10 hereof) upon the
terms and conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall contain the following terms and conditions:
(a) The term of each option commences on the date it is granted and, unless
sooner terminated as set forth herein, expires on the date ("Expiration Date")
ten years from the date of grant. The term of each option may terminate sooner
than such Expiration Date if the optionee's service as a director of the Company
terminates for any reason or for no reason. In the event of such termination of
service, the option shall terminate on the earlier of the Expiration Date or the
date one year following the date of termination of service. In any and all
circumstances, an option may be exercised following termination of the
optionee's service as a director of the Company only as to that number of shares
as to which it was exercisable on the date of termination of such service under
the provisions of subparagraph 6(e). Notwithstanding the foregoing, if exercise
within the foregoing periods is prohibited under paragraph 13 below, the term of
the option shall be extended to a date thirty (30) days following the first date
on which the condition of paragraph 13 of the Plan has been met, and the option
shall be exercisable as to that number of shares that could have been exercised
on the date of termination of service had the condition of paragraph 13 been
satisfied on that date.
(b) The exercise price of each option shall be one hundred percent (100%)
of the fair market value of the stock subject to such option on the date such
option is granted. For purposes of the Plan, the "fair market value" of any
share of Common Stock of the Company at any date shall be (i) if the Common
Stock is listed on an established stock exchange or exchanges, the last reported
sale price per share on such date on the principal exchange on which it is
traded, or if no sale was made on such day on such principal exchange, at the
closing reported bid price on such day on such exchange, (ii) if the Common
Stock is not then listed on an exchange, the last reported sale price per share
on such date reported by NASDAQ, or if sales are not reported by NASDAQ or no
sale was made on such day, the average of the closing bid and asked prices per
share for the Common Stock in the over-the-counter market as quoted on NASDAQ on
such day, or (iii) if the Common Stock is not then listed on an exchange or
quoted on NASDAQ, an amount determined in good faith by the Board or the
Committee.
(c) An option that is exercisable may be exercised by the delivery to the
Company of written notice of exercise on any business day, at the Company's
principal office, addressed to the attention of the Board or the Committee. Such
notice shall specify the number of shares of Common Stock with respect to which
the option is being exercised and shall be accompanied by payment in full of the
exercise price per share of the shares of Common Stock for which the option is
being exercised. Payment of the exercise price of each option is due in full in
cash upon any exercise when the number of shares being purchased upon such
exercise is less
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than 1,000 shares; but when the number of shares being purchased upon an
exercise is 1,000 or more shares, the optionee may elect to make payment of the
exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash at the time of
exercise; or
(ii) Provided that at the time of exercise the Company's Common Stock
is publicly traded and quoted regularly in The Wall Street Journal, payment
by delivery of already owned shares of Common Stock of the Company owned by
the optionee for at least six (6) months and owned free and clear of any
liens, claims, encumbrances or security interests, which Common Stock shall
be valued at fair market value on the date of exercise; or
(iii) Provided that at the time of exercise the Company's Common Stock
is publicly traded and quoted regularly in The Wall Street Journal, a copy
of instructions to a broker directing such broker to sell the Common Stock
for which such Option is exercised, and to remit to the Company the
aggregate exercise price of such Stock Option (a "cashless exercise").
Payment in full of the exercise price per share need not accompany the
written notice of exercise provided that the notice of exercise directs
that the certificate or certificates for the shares of Common Stock for
which the option is exercised be delivered to a licensed broker acceptable
to the Company as the agent for the individual exercising the option and,
at the time such certificate or certificates are delivered, the broker
tenders to the Company cash (or cash equivalents acceptable to the Company)
equal to the exercise price per share for the shares of Common Stock
purchased pursuant to the exercise of the option plus the amount (if any)
of federal and/or other taxes which the Company may, in its judgment, be
required to withhold with respect to the exercise of the option.
(iv) Payment by a combination of the methods of payment specified in
subparagraphs 6(c)(i), 6(c)(ii) and 6(c)(iii) above.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Internal Revenue Code of 1986, as amended (the "Code"), or Title
I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or the rules thereunder (a "QDRO"), and shall be exercisable during the lifetime
of the person to whom the option is granted only by such person or by his
guardian or legal representative or any transferee pursuant to a QDRO.
(e) The options shall become exercisable in installments as follows:
(i) Each of the options described in subparagraph 5(a) or 5(b) shall
become exercisable in installments as follows: one-third ( 1/3) of the
shares covered by the option (10,000 shares) on each of the first three
anniversaries of the date of grant, until all the shares have become
purchasable, provided that options shall become exercisable only during
periods that the optionee is a director of the Company.
(ii) Each of the options described in subparagraph 5(c) shall become
exercisable in installments as follows: one-half ( 1/2) of the shares
covered by the option (5,000 shares) on the date six (6) months after the
date of grant, one-fourth ( 1/4) of the shares covered by the option (2,500
shares) on the date nine (9) months after the date of grant, and one-fourth
( 1/4) of the shares covered by the option (2,500 shares) on the first
anniversary of the date of grant, until all the shares have become
purchasable; provided that options shall become exercisable only during
periods that the optionee is a director of the Company.
(iii) Subject to the limitations contained herein, including, without
limitation, those contained in subparagraph 13(b), each option shall be
exercisable with respect to each installment on or after the date of
exercisability applicable to such installment.
(f) Each option shall contain a representation and any optionee may be
required, as a condition of the grant of the option and the issuance of shares
covered by his or her option, to represent that the option and the shares to be
acquired pursuant to exercise of the option will be acquired for investment and
without a view to distribution thereof. In addition, the Company may require any
optionee or any person to whom an option is transferred under subparagraph 6(d),
as a condition of exercising any such option: (i) to give written assurances
satisfactory to the Company as to the optionee's knowledge and experience in
financial and
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business matters; and (ii) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (A) the issuance of the
shares upon the exercise of the option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (B) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.
(g) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan or any stock issued or issuable pursuant to any such option. If the Company
is unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms,
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or shall affect any right of the Company or its Board or
stockholders to terminate the service of any Non-Employee Director with or
without cause.
(c) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him or her, shall have
any right, title or interest in or to any option reserved for the purposes of
the Plan except as to such shares of Common Stock, if any, as shall have been
reserved for him or her pursuant to an option granted to him or her.
(d) In connection with each option made pursuant to the Plan, it shall be a
condition precedent to the Company's obligation to issue or transfer shares to a
Non-Employee Director or to evidence the removal of any restrictions on transfer
that such Non-Employee Director make arrangements satisfactory to the Company to
insure that the amount of any federal or other withholding tax required to be
withheld with respect to such sale or transfer, or such removal or lapse, is
made available to the Company for timely
C-4
37
payment of such tax. The Non-Employee Director may satisfy any federal, state or
local tax withholding obligation relating to the exercise of such option by any
of the following means or by a combination of such means: (i) tendering a cash
payment; (ii) authorizing the Company to withhold from the shares of Common
Stock otherwise issuable to the participant as a result of the exercise of the
stock option a number of shares having a fair market value less than or equal to
the amount of withholding tax obligation; or (iii) delivering to the Company
owned and unencumbered shares of Common Stock having a fair market value less
than or equal to the amount of the withholding tax obligation.
(e) In the event of the death of an optionee, any option (or unexercised
portion thereof) held by the optionee, to the extent exercisable by him or her
on the date of death, may be exercised by the optionee's personal
representatives, heirs, or legatees subject to the provisions of subparagraphs
6(a) and 6(e) hereof.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
options will be appropriately adjusted in the class(es) and maximum number of
shares subject to the Plan and the class(es) and number of shares and price per
share of stock subject to outstanding options.
(b) In the event of a liquidation of the Company, or a merger,
reorganization, or consolidation of the Company with any other corporation in
which the Company is not the surviving corporation or the Company becomes a
subsidiary of another corporation, any unexercised options theretofore granted
under the Plan shall be deemed canceled unless the surviving corporation in any
such merger, reorganization, or consolidation elects to assume the options under
the Plan or to use substitute options in place thereof; provided, however, that,
notwithstanding the foregoing, if such options would otherwise be canceled in
accordance with the foregoing, the optionee shall have the right, exercisable
during a ten-day period ending on the fifth day prior to such liquidation,
merger, or consolidation, to fully exercise the optionee's option in whole or in
part without regard to any installment exercise provisions otherwise provided by
subparagraph 6(e). In the event of a Change in Control of the Company, as
defined below, any unexercised option theretofore granted under the Plan which
is not then already exercisable as to all of the shares subject to the option
shall become exercisable upon such Change in Control in addition to the shares,
if any, as to which the option is already exercisable. To the extent that the
foregoing adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Board or the Committee, the determination of
which in that respect shall be final, binding, and conclusive. A "Change in
Control" shall be deemed to have occurred if:
(i) any person, or any two or more persons acting as a group, and all
affiliates of such person or persons, shall own beneficially one-third
( 1/3) or more of the common stock of the Company outstanding; or
(ii) if following:
(A) a tender or exchange offer for voting securities of the
Company (other than any such offer made by the Company), or
(B) a proxy contest for election of directors of the Company,
the persons who were directors of the Company immediately before the
initiation of such event (or directors who were appointed by such
directors) cease to constitute a majority of the Board of the Company upon
the completion of such tender or exchange offer or proxy contest or within
one year after such completion.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved
C-5
38
by the vote of the majority of the shares of the Company represented and voting
at a duly held meeting within twelve (12) months before or after the adoption of
the amendment, where the amendment will:
(i) Materially increase the number of shares which may be issued
under the Plan;
(ii) Materially modify the requirements as to eligibility for
participation in the Plan; or
(iii) Materially increase the benefits accruing to participants under
the Plan, whether by increasing the number of shares for which an option
may be granted to an optionee or otherwise.
(b) Rights and obligations under any option granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan except with
the consent of the person to whom the option was granted.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on October 31, 2007. No options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the Plan
except with the consent of the person to whom the option was granted.
(c) The Plan shall terminate upon the occurrence of any of the events
described in subparagraph 10(b) above.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
The Plan shall become effective on November 1, 1997, subject to the
condition subsequent that the Plan is approved by the vote or written consent of
the holders of a majority of the shares of the Company represented and voting at
the next special or annual meeting of stockholders of the Company. No option
shall be granted under the Plan unless and until the stockholder approval
condition of this paragraph 13 has been satisfied.
14. INDEMNIFICATION.
In addition to such other rights of indemnification as they may have as
members of the Board or the Committee, the members of the Board or the Committee
administering the Plan shall be indemnified by the Company against reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit, or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan or
any option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any action, suit, or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit, or proceeding that such member is liable
for negligence or misconduct in the performance of his or her duties, provided
that within 60 days after institution of any such action, suit, or proceeding,
the member shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
15. CAPTIONS.
The use of captions in this Plan or any related option agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such option agreement.
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39
16. OTHER PROVISIONS.
Each option granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board or
Committee, in its sole discretion.
17. NUMBER AND GENDER.
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
18. SEVERABILITY.
If any provision of the Plan or any option agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
19. GOVERNING LAW.
The validity and construction of this Plan and the instruments evidencing
the options granted hereunder shall be governed by and construed in accordance
with the laws of the State of California.
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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 4, 1999, at the Annual Meeting
of Stockholders to be held on November 18, 1999, or any adjournment thereof.
-- FOLD AND DETACH HERE --
41
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER, IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5.
Please mark you 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 WITHHHOLD
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 INDEPENDENT PUBLIC ACCOUNTANTS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. AMENDMENT OF THE CERTIFICATE OF INCORPORATION
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. APPROVAL OF AMENDMENT OF THE EMPLOYEE STOCK OPTION PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. APPROVAL OF AMENDMENT OF THE 1997 STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Dated: , 1999
------------------------------
------------------------------------------
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,
42
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--
43
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