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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:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
EMULEX CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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EMULEX CORPORATION
3535 HARBOR BOULEVARD
COSTA MESA, CALIFORNIA 92626
(714) 662-5600
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 2000
------------------------
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 Sutton Place Hotel at 4500 MacArthur Boulevard, Newport Beach,
California, at 10:00 a.m., Pacific Standard Time, on Thursday, November 16,
2000, 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 six directors to serve until the next annual
meeting of the Company's stockholders and until their successors have been
elected and qualified;
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 120,000,000 to 240,000,000 shares, and (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 (the "Stock Split");
3. To consider and take action concerning approval of an amendment of
the Company's Employee Stock Option Plan which increases the number of
pre-Stock Split shares authorized for issuance under such plan by 1,775,000
shares, to 14,285,000 from 12,510,000;
4. To consider and take action concerning approval of an amendment of
the Company's 1997 Stock Option Plan for Non-Employee Directors which
increases the number of pre-Stock Split shares authorized for issuance
under such plan by 140,000 shares, to 740,000 from 600,000;
5. To consider and take action concerning the adoption of an Employee
Stock Purchase Plan, the form of which is included as Appendix B to the
accompanying Proxy Statement;
6. To ratify the selection of KPMG LLP as the Company's independent
public accountants for fiscal year 2001; and
7. 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 2, 2000, 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 16, 2000
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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 16, 2000
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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 Sutton Place Hotel at
4500 MacArthur Boulevard, Newport Beach, California, at 10:00 a.m., Pacific
Standard Time, on Thursday, November 16, 2000, 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 six 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, "FOR" the adoption of the
Company's Employee Stock Purchase Plan, and "FOR" the ratification of the
selection of KPMG LLP as the Company's independent public accountants for fiscal
year 2001, 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) or voted against a nominee 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 approve the amendment of
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, approve the adoption of the
Employee Stock Purchase Plan and ratify the selection of
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KPMG LLP as the Company's independent public accountants will have the same
effect as votes against such 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 (i) a later-dated proxy,
(ii) a written revocation sent to and received by the Secretary of the Company
prior to the Meeting, or (iii) attendance at the Meeting and voting in person.
VOTING SECURITIES AND STOCK OWNERSHIP
VOTING SECURITIES
The Company has outstanding only common stock, of which 36,493,484 shares
were outstanding as of the close of business on October 2, 2000 (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 Company knows of no contractual arrangements which may at a subsequent
date result in a change of control of the Company.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth, as of the Record Date, information as to
the beneficial ownership of the Company's common stock by all directors, by the
executive officers identified in the Summary Compensation Table, and by all
current directors and executive officers of the Company as a group.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
------------------------ ----------------------- -------------------
Fred B. Cox............................................ 850,000(3) 2.3%
Paul F. Folino......................................... 505,902(4) 1.4%
Michael P. Downey...................................... 101,000(5) *
Bruce C. Edwards....................................... 2,000(6) *
Robert H. Goon......................................... 40,000(5) *
Don M. Lyle............................................ 60,000(5) *
Ronald P. Quagliara.................................... 169,897(7) *
Kirk D. Roller......................................... 18,750(5) *
Michael J. Rockenbach.................................. 172,407(8) *
Michael E. Smith....................................... 25,997(5) *
All directors and executive officers as a group (14
persons)(9).......................................... 2,024,614(5) 5.4%
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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, 360,000 shares
held by a limited liability company of which Mr. Cox and his wife are the
sole owners, and 40,000 shares which are subject to options held by Mr. Cox
which are currently, or within the next 60 days will be, exercisable.
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(4) Consists of 120,468 shares held by Mr. Folino, 400 shares held by his
daughter and 385,034 shares which are subject to options held by Mr. Folino
which are currently, or within the next 60 days will be, exercisable.
(5) Includes shares which are purchasable pursuant to stock options which are
currently, or within the next 60 days will be, exercisable.
(6) Consists of 2,000 shares held in a family trust of which Mr. Edwards and his
wife are co-trustees and share voting and investment power.
(7) Consists of 58,560 shares held by Mr. Quagliara, 1,800 shares held by his
children and 109,537 shares which are subject to options held by Mr.
Quagliara which are currently, or within the next 60 days will be,
exercisable.
(8) Consists of 116,196 shares held by Mr. Rockenbach, 2,480 shares held by his
children and 53,731 shares which are subject to options held by Mr.
Rockenbach which are currently, or within the next 60 days will be,
exercisable.
(9) Includes persons who serve as executive officers of the Company's principal
subsidiaries.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding ownership of
outstanding shares of the Company's common stock by those individuals, entities,
or groups who have advised the Company that they own more than five percent (5%)
of the outstanding common stock of the Company.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
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FMR Corp. ................................................. (1)
82 Devonshire Street
Boston, MA 02109
Putnam Investments, Inc. .................................. (2)
Management, Inc.
One Post Office Square
Boston, MA 02109
Pilgrim Baxter & Associates, Ltd. ......................... (3)
825 Duportail Road
Wayne, PA 19087
Massachusetts Financial Services Company................... (4)
500 Boylston Street
Boston, MA 02116
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(1) Based on its Schedule 13G/A filed June 2, 2000 and subsequent conversations
with such owner, it is the Company's belief that FMR Corp., a parent holding
company of investment companies, Edward C. Johnson 3d, the Chairman of FMR
Corp., and Abigail P. Johnson, a Director of FMR Corp., beneficially owned
4,978,332 shares of common stock, including sole dispositive power over
4,615,032 shares and sole voting power over 1,766,032 shares, as of [May 25,
2000].
(2) Based on its Schedule 13G filed February 17, 2000 and subsequent
conversations with such owners, it is the Company's belief that Putnam
Investments, Inc., a holding company of investment companies that is owned
by Marsh & McLennan Companies, Inc., beneficially owned and had shared
dispositive power over 2,127,600 shares of common stock, including sole
voting power over 215,900 shares, as of [February 7, 2000].
(3) Based on its Schedule 13G filed January 7, 2000 and subsequent conversations
with such owner, it is the Company's belief that Pilgrim Baxter &
Associates, Ltd. beneficially owned and had sole dispositive power over
2,195,100 shares of common stock, including sole voting power over 1,959,100
shares, as of [January 7, 2000].
(4) Based on its Schedule 13G filed August 18, 2000 and conversations with such
owner, it is the Company's belief that Massachusetts Financial Services
Company beneficially owned and had sole dispositive power
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over 4,709,947 shares of common stock, including sole voting power over
4,562,847 shares, as of [August 18, 2000].
NOMINATION AND ELECTION OF DIRECTORS
The Company's directors are to be elected at each annual meeting of
stockholders. The six 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. Each of the nominated directors were elected as directors at the 1999
Annual Meeting of Stockholders of the Company, with the exception of Bruce
Edwards who was appointed by the Company's Board of Directors on May 18, 2000 to
fill a vacancy on the Board of Directors.
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 six nominee-directors receiving the highest number of votes cast at the
Meeting will be elected as the Company's directors to serve until the next
annual meeting of stockholders and until their successors are elected and
qualify. Subject to certain exceptions specified below, stockholders of record
on the Record Date are entitled to cumulate their votes in the election of the
Company's directors (i.e., they are entitled to the number of votes determined
by multiplying the number of shares held by them times the number of directors
to be elected) and may cast all of their votes so determined for one person, or
spread their votes among two or more persons as they see fit. No stockholder
shall be entitled to cumulate votes for a given candidate for director unless
such candidate's name has been placed in nomination prior to the vote and the
stockholder has given notice at the Meeting, prior to the voting, of the
stockholder's intention to cumulate his or her votes. If any one stockholder has
given such notice, all stockholders may cumulate their votes for candidates in
nomination. Discretionary authority to cumulate votes is hereby solicited by the
Board of Directors.
The Company's 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 (except for Bruce Edwards, all of such nominees being
continuing members of the Company's present Board of Directors):
NOMINEE(1) PRINCIPAL OCCUPATION AGE
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Fred B. Cox(2)....................... Chairman of the Company and Director of Continuus 66
Software Corporation
Paul F. Folino....................... President and Chief Executive Officer of the Company 55
Michael P. Downey(3)................. Chairman of the Board of Artisoft, Inc. 53
Bruce C. Edwards(3).................. President and Chief Executive Officer of Powerwave 46
Technologies, Inc.
Robert H. Goon(3).................... Attorney 59
Don M. Lyle(2)....................... Principal of Technology Management Co., a management 61
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 six meetings during the last fiscal year of the Company.
The audit committee reviews, acts on, and reports to the Board of Directors
with respect to various auditing and accounting matters, including the
selection of the Company's independent public accountants, the scope of the
annual audits, the nature of nonaudit services, the fees to be paid to the
independent public accountants, the performance of the Company's independent
public accountants and the accounting practices of the Company.
Mr. Cox is a founder of the Company and has served as a director since its
inception in 1979. Mr. Cox served as the Company's Chief Executive Officer from
its inception until he retired in October 1990. From November 1991 until
November 1994, Mr. Cox served as President of Continuus Software Corporation, a
developer and marketer of computer software products, and currently serves as a
member of its Board of Directors.
Mr. Folino was appointed in May 1993 to serve as the President and Chief
Executive Officer of the Company and as a director of the Company. From January
1991 to May 1993, Mr. Folino was President and Chief Operating Officer of
Thomas-Conrad Corporation, a manufacturer of local area networking products.
Mr. Downey has served as a director of the Company since February 1994 and
is Chairman of the Audit Committee. 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 Inc.,
developer of software-based phone systems, and served as its interim President
and Chief Executive Officer from 2000 to 2000.
Mr. Edwards was appointed as a director of the Company on May 18, 2000.
Since February 1996, he has served as President, Chief Executive Officer and as
a director of Powerwave Technologies, Inc., a developer of wireless
communications products. Mr. Edwards was Executive Vice President, Chief
Financial Officer and Director of AST Research, Inc., a personal computer
company, from July 1994 to December 1995 and Senior Vice President, Finance and
Chief Financial Officer of AST Research, Inc. from March 1988 to July 1994. Mr.
Edwards currently serves on the Board of Directors of HMT Technology
Corporation, a supplier of hard disk drive components, and Metawave
Communications Corporation, supplier of smart antenna systems to the wireless
communications industry.
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 35 years. From before 1995
until November 1999, he was a partner in the law firm of Jeffer, Mangels, Butler
& Marmaro LLP, counsel to the Company. Since November 1999, he has been a sole
practitioner and has been retained by the Company for certain legal services.
Mr. Goon is also a director of Coastcast Corporation, a manufacturer of
investment-cast golf clubheads and medical devices, and of Artisoft, Inc.
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
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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 ten 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. The Company does not have a standing nominating committee or other
committee performing a similar function.
COMPENSATION OF DIRECTORS
Directors' Fees. Directors who are not employees of the Company receive a
quarterly retainer of $5,000 and reimbursement for travel expenses. In addition,
the chairmen of the audit and compensation committees receive an additional
quarterly retainer of $500, while committee members receive an additional
quarterly retainer of $300. Directors who are employees of the Company receive
no additional compensation for serving on the Board of Directors. Directors are
entitled to reimbursement for out-of-pocket expenses in connection with
attendance at Board and committee meetings.
Stock Options. Pursuant to the terms of the Emulex Corporation Non-Employee
Director Stock Option Plan (the "Old Director Plan") a maximum of 500,000 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 and all of the options issued under this plan have
either expired or been canceled.
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 50,000 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.
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 400,000 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. An amendment to the Director Plan,
which increased the number of shares authorized for issuance under such plan to
600,000 shares, was approved by stockholders of the Company at the 1999 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
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Directors may receive options under the Director Plan. There are currently five
Plan Eligible Directors -- Messrs. Cox, Downey, Edwards, Goon and Lyle.
The Director Plan provides that an option to purchase 60,000 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
20,000 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 2000, the Company and/or its subsidiaries
obtained legal services from the law firm of Jeffer, Mangels, Butler & Marmaro
LLP, of which Mr. Goon was a partner until November 1999, and from Mr. Goon with
respect to various matters since such time, 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............... 2000 $337,096 $731,565 $25,338,430(4) 160,000 $ 8,575
President & CEO 1999 289,000 140,187 -0- 100,000 13,143
1998 286,370 24,092 134,079(4) 80,000 10,093
Ronald P. Quagliara.......... 2000 208,981 200,778 1,773,445(5) 40,000 5,021
Senior V.P., Research 1999 210,469 42,239 -0- 220,000(6) 2,267
& Development 1998 186,144 9,785 -0- -0- 471
Kirk D. Roller(7)............ 2000 164,801 218,172 2,162,390(8) 60,000 14,649
Senior V.P., Sales 1999 150,000 61,910 -0- 100,000(9) 7,730
and Marketing 1998 23,077 10,385 16,540(10) -0- 21
Michael J. Rockenbach........ 2000 161,853 145,342 2,045,794(11) 40,000 9,363
V.P. and CFO 1999 150,716 28,441 -0- 186,000(12) 8,877
1998 138,176 6,790 17,729 -0- 6,531
Michael E. Smith, V.P........ 2000 139,668 123,959 258,210(14) 20,000 4,019
V.P. Worldwide 1999 84,932 32,975 -0- 80,000 2,020
Marketing (13)
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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 $25,330,055 and $114,550 which represents the realized value of
options exercised in 2000 and 1998, respectively.
(5) Includes $1,765,375 which represents the realized value of options
exercised in 2000.
(6) Includes 170,000 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 are reduced by options which
were repriced in 1999.
(7) Mr. Roller became an officer of the Company in April 1998.
(8) Includes $2,078,609 which represents the realized value of options
exercised in 2000.
(9) 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.
(10) Includes $15,540 which represents a hiring bonus.
(11) Includes $2,038,194 which represents the realized value of options
exercised in 2000.
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(12) Includes 156,000 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 are reduced by options which were
repriced in 1999.
(13) Mr. Smith became an officer of the Company in June 1999.
(14) Includes $250,250 which represents the realized values of options exercised
in 2000.
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, Rockenbach and Smith, and with four other executives of the
Company. The key employee retention agreements for Messrs. Quagliara, Roller,
Rockenbach and Smith 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.
OPTION GRANTS DURING FISCAL 2000
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 July 2, 2000, to the officers identified in the Summary Compensation
Table:
OPTION GRANTS IN FISCAL YEAR 2000
POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION FOR
GRANTED TO OPTION TERM(4)
OPTIONS EMPLOYEES EXERCISE EXPIRATION -----------------------------
NAME GRANTED(1) IN 2000(2) PRICE(3) DATE 5% 10%
---- ---------- ----------- -------- ---------- ------------- -------------
Paul F. Folino............ 160,000 11.08 $28.1875 8/17/09 $2,835,333 $7,184,724
Ronald P. Quagliara....... 40,000 2.77 28.1875 8/17/09 708,833 1,796,181
Kirk D. Roller............ 40,000 2.77 28.1875 8/17/09 708,833 1,796,181
20,000 1.38 218.063 3/26/10 2,741,823 6,947,771
Michael J. Rockenbach..... 40,000 2.77 28.1875 8/17/09 708,833 1,796,181
Michael E. Smith.......... 20,000 1.38 28.1875 8/17/09 354,417 898,091
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(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.
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(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.
OPTION EXERCISES IN FISCAL 2000 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 2000 by the officers named
in the Summary Compensation Table:
OPTION EXERCISES AND YEAR-END VALUE TABLE
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Paul F. Folino.......... 398,905 $27,492,036 409,843 271,252 $25,383,091 $12,934,167
Ronald P. Quagliara..... 85,460 6,546,059 83,287 91,253 5,238,565 4,494,184
Kirk D. Roller.......... 43,750 2,078,609 6,250 90,000 401,175 4,709,420
Michael J. Rockenbach... 110,361 6,645,186 32,261 79,378 2,325,295 4,007,576
Michael E. Smith........ 15,625 1,082,619 10,625 73,750 536,373 3,708,553
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(1) Common Stock valued at $65.688 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 2000, 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
2000, 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
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and its subsidiaries, reviews the compensation programs for other key employees,
including salary and cash bonus levels, reviews and approves certain employee
benefit policies and programs, and reviews and makes recommendations to
management with respect to executive recruitment. In addition, the Compensation
Committee administers the Emulex Corporation Employee Stock Option Plan
("Employee Plan"), including review and approval of grants of options under the
plan to executive officers and other key employees of the Company and its
subsidiaries.
Compensation Policies and Philosophy. The Company's executive compensation
policies are designed to attract, retain and reward executive officers who
contribute to the Company's success, to provide economic incentives for
executive officers to achieve the Company's business objectives by linking the
executive officers' compensation to the performance of the Company, to
strengthen the relationship between executive pay and stockholder value and to
reward individual performance. The Company uses a combination of base salary,
cash bonuses and stock option awards to achieve the aforementioned objectives.
The Compensation Committee considers a number of factors which include the
level and types of compensation paid to executive officers in similar positions
by comparable companies. In addition, the Compensation Committee evaluates
corporate performance by looking at factors such as performance relative to
competitors, performance relative to business conditions, and the success of the
Company in meeting its financial objectives. The Compensation Committee also
reviews the individual performance of each executive officer, including a review
of the ability of a given executive to meet individual performance objectives,
demonstration of job knowledge and skills, and the ability to work with others
toward the achievement of the Company's goals.
Components of Compensation. Executive 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.
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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 2000, effective September 2000
the Compensation Committee elected to increase Mr. Folino's annual base salary
and bonus base to $425,000 and $ , respectively. He was awarded a stock
option grant of 200,000 shares under the Emulex Corporation Employee Stock
Option Plan at an exercise price of $86.938.
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 3, 1995 and ended July 2, 2000.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
EMULEX CORPORATION COMMON STOCK, S&P 500 INDEX AND
HAMBRECHT & QUIST COMPUTER HARDWARE SECTOR INDEX
[INSERT GRAPH]
* Assumes that the value of the investment in the Company's common stock and
each index was $100 on July 3, 1995.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
The Company's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), authorizes the issuance of 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. On October , 2000, 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 120,000,000 to 240,000,000,
and (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 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 120,000,000
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
120,000,000 additional authorized shares of common stock would be appropriate in
order to provide the Company with the flexibility to consider a combination of
possible actions that might require the issuance of additional shares of common
stock.
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The Company currently has 120,000,000 authorized shares of common stock. As
of October 2, 2000, the Company had shares issued and outstanding
and of the remaining authorized but unissued shares, the Company
has reserved approximately 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.
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 [135%] gain in the price per share of the Company's common stock
from October 4, 1999 to October 2, 2000, 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.
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 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.
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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 120,000,000 to 240,000,000, and (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 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
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 , 2000, options were outstanding in respect of
an aggregate of shares and an aggregate of shares were
available for future grants of options under the Employee Plan.
On October 5, 1999, the Board of Directors amended the Employee Plan to (i)
increase the number of shares covered by the plan by 1,450,000 shares, and (ii)
extend the expiration date of the plan by three years to September 30, 2003.
This amendment was approved by the stockholders of the Company at the 1999
Annual Meeting. (All share quantities have been restated to reflect the
Company's stock splits and stock dividends to date).
THE AMENDMENT TO THE EMPLOYEE PLAN
On , 2000, the Board of Directors amended the Employee Plan,
subject to approval of the stockholders, to (i) increase the number of shares
covered by the plan by an additional shares, and (ii) extend the
expiration date of the plan by [two] years to September 30, [2005].
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.
PURPOSE OF THE EMPLOYEE PLAN
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 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. 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.
REASONS FOR AMENDMENT OF THE EMPLOYEE PLAN
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.
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DESCRIPTION OF THE EMPLOYEE PLAN
Following is a summary of the Employee Plan, qualified by reference to the
complete text of the Employee Plan, as so amended, a copy of which will be
available at the Annual Meeting and can be obtained by writing to the Corporate
Secretary, Emulex Corporation, 3535 Harbor Boulevard, Costa Mesa, CA 92626:
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 , 2000, 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 shares (subject to adjustment pursuant to the
"anti-dilution" provisions of the Employee Plan). This represents an increase of
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 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.
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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 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. However, the Board has agreed not to reprice any options
granted under the Employee Plan without stockholder approval.
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, [2005].
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
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Act, the Section 16(b) restriction will be considered a substantial risk of
forfeiture for tax purposes. Under 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
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same tax basis and holding periods as the shares surrendered. The additional
shares of common stock received 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 , 2000, options were outstanding under the Employee Plan
held by approximately persons to purchase an aggregate of
shares of Company common stock at an average exercise price of
$ per share, and shares were available for future grants of
options under the Employee Plan. As of September , 2000, stock options under
the Employee Plan were held by executive officers as follows: Paul F.
Folino -- shares; Ronald P. Quagliara -- shares;
Michael J. Rockenbach -- shares; Kirk D.
Roller -- shares; all current executive officers as a group (six
persons) -- shares; all current employees as a group (excluding
executive officers)(approximately
persons) -- 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 , 2000 was
$ per share.
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 , 2000,
options were outstanding in respect of an aggregate of shares and
an aggregate of shares were available for future grants of
options under the Director Plan.
On October 5, 1999, the Board of Directors amended the Director Plan, to
increase the number of shares covered by the plan by 200,000 shares. This
amendment was approved by the stockholders of the Company at the 1999 Annual
Meeting. (All share quantities have been restated to reflect the Company's stock
splits and stock dividends to date).
THE AMENDMENT TO THE DIRECTOR PLAN
On , 2000, 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 an additional shares.
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
Director Plan and the options granted thereunder will be adjusted accordingly.
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PURPOSE OF THE DIRECTOR PLAN
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.
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.
DESCRIPTION OF THE DIRECTORS PLAN
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,
a copy of which will be available at the Annual Meeting and can be obtained by
writing to the Corporate Secretary, Emulex Corporation, 3535 Harbor Boulevard,
Costa Mesa, CA 92626:
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, Lyle and Edwards.
Shares Subject to the Director Plan. The aggregate number of shares of
common stock of the Company which may be issued after , 2000, the
date of amendment of the Director Plan subject to stockholder approval, pursuant
to exercise of options theretofore or thereafter granted under the Director Plan
shall not exceed shares (subject to adjustment pursuant to the
"anti-dilution" provisions of the Director Plan). This represents an increase of
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 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 60,000 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 20,000 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
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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 60,000 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 20,000 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 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
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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.
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.
APPROVAL OF ADOPTION OF EMPLOYEE STOCK PURCHASE PLAN
On , 2000 the Board of Directors adopted the Emulex Corporation
Employee Stock Purchase Plan (the "Purchase Plan"). Subject to approval by the
Company's stockholders, the Purchase Plan will be effective on January 1, 2001
(the "Effective Date"). The Purchase Plan authorizes the sale of up to 100,000
shares of the Company's common stock to participating employees
("Participants"). 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
Purchase Plan and the options granted thereunder will be adjusted accordingly.
PURPOSE OF THE PURCHASE PLAN
The purposes of the Purchase Plan are to provide to employees an incentive
to join and remain in the service of the Company and its subsidiaries, to
promote employee morale and to encourage employee ownership of the Company's
common stock by permitting them to purchase shares on favorable terms through
payroll deductions. The Purchase Plan is intended to qualify as an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code.
REASONS FOR ADOPTION OF THE PURCHASE PLAN
The Purchase Plan was adopted and is recommended for approval by the
Company's stockholders because the Board believes that enabling employees to
purchase shares of common stock under the Purchase Plan will play an important
role in the Company's efforts to both attract and retain employees of
outstanding ability and to promote employee morale by offering them a chance to
own an equity interest in the Company. The Board believes that the failure to
approve the Purchase Plan by the stockholders will adversely impact the
Company's future hiring and operating plans.
DESCRIPTION OF THE PURCHASE PLAN
The following description of the Purchase Plan is qualified in all respects
by reference to the Purchase Plan itself, the full text of which is attached as
Appendix B.
Eligibility. Every employee of the Company, including executive and other
officers who are employees and all employees of any participating subsidiaries,
who has completed 90 days of continuous employment
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with the Company and customarily works at least 20 hours per week will be
eligible to participate in offerings made under the Purchase Plan. Employees of
any present or future parent or subsidiary of the Company may also participate
in the Purchase Plan in the discretion of the Board of Directors. As the
Purchase Plan is not effective until January 1, 2001, no one is currently
eligible to participate in the Purchase Plan. However, as of , 2000,
approximately of our employees would have been eligible to participate
if the Purchase Plan was effective as of such date.
Under the Purchase Plan, no employee will be granted a right to purchase
any common stock under the Purchase Plan (i) if immediately after such purchase
the employee would own stock or hold outstanding options to purchase stock
possessing in the aggregate 5% or more of the total combined voting power of all
classes of stock of the Company, or (ii) if the grant would permit the employee
to purchase stock which, when aggregated with purchases under all other employee
stock purchase plans of the Company, would exceed $25,000 worth of common stock
of the Company (determined using the fair market value of such stock at the time
such right is granted) for any calendar year in which the right is outstanding
at any time. A maximum of 5,000 shares may be purchased by a Participant in the
Purchase Plan in any calendar year, subject to certain adjustment provisions
specified in the Purchase Plan.
Administration. The Purchase Plan will be administered by a committee of
the Board of Directors appointed to administer the Purchase Plan (the
"Administrator"), and if no such committee is appointed, the Administrator of
the Purchase Plan will be the Board of Directors. The Board of Directors has
appointed the Compensation Committee, which is comprised of two non-employee
directors who are not eligible to participate in the Purchase Plan, to be the
initial Administrator of the Purchase Plan. Subject to the provisions of the
Purchase Plan, the Administrator has full authority to implement, administer and
make all determinations necessary under the Purchase Plan. The Purchase Plan
will be administered in a manner designed to ensure that any Participant's
commencement or discontinuation of participation in the Purchase Plan or
increase or decrease of payroll deductions will be effected in compliance with
the exemptions from liability under Section 16(b) of the Securities Exchange Act
of 1934 as set forth in Rule 16b-3 promulgated thereunder.
Participation. An employee who has satisfied the eligibility requirements
of the Purchase Plan may become a Participant upon his or her completion and
delivery to the Company of an enrollment form authorizing payroll deductions.
Eligible employees who elect to participate in an offering will purchase shares
of common stock through regular payroll deductions in an amount of 0% to 10% of
their compensation, as designated by each employee. For this purpose,
"compensation" includes salary, annual bonus/incentive, annual profit sharing,
overtime, lead premium, commissions and shift differential, but expressly
excludes other forms of compensation such as relocation, housing, car
allowances, phone allowances, sign-on bonuses and referral bonuses. The
limitation to 10% of compensation may be increased or decreased from time to
time in the discretion of the Administrator, but in no event will the maximum
amount be increased to an amount in excess of 15% of compensation.
The Company will establish and maintain a separate account for each
Participant. All payroll deductions that are credited to a Participant's account
under the Purchase Plan do not accrue any interest or earnings and are deposited
with the general funds of the Company. All payroll deductions received or held
by the Company may be used by the Company for any corporate purpose.
On January 1 and July 1 of each calendar year ("Grant Date"), the Company
will grant to each eligible employee who has elected in writing to participate
in the Purchase Plan a right to purchase, at the Purchase Price described below,
that number of shares and partial shares of common stock that can be purchased
by the Company at the Purchase Price with the amounts held in such employee's
payroll deduction account. The common stock will be purchased on June 30 of each
calendar year, if the Grant Date is January 1, and December 31 of each calendar
year, if the Grant Date is July 1 (the "Purchase Date").
Purchase of Common Stock. Shares of common stock will be purchased
automatically on the Grant Date at a price equal to the purchase price
determined by the Plan Administrator at the Grant Date. The purchase price may
not be less than 85% of the fair market value of the shares on the Grant Date or
85% of the fair market value of the shares as of the Purchase Date, whichever is
lower (the "Purchase Price"). The fair
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market value of the common stock under the Purchase Plan will be the closing
sale price on the date of valuation on the Nasdaq National Market System or the
principal stock exchange on which the Company's common stock is then listed or
admitted to trading. If no closing sale price is quoted or no sale takes place
on such day, then the fair market value shall be the closing sale price of the
Company's common stock on the next preceding day on which a sale occurred. The
fair market value of the Company's common stock on was $ per
share.
A Participant may elect to have shares purchased under the Purchase Plan
and issued directly to him or her. Unless the Participant's participation is
terminated or the Participant directs the Company otherwise, shares will be
purchased automatically on his or her behalf with all amounts held in his or her
account on each Purchase Date at the Purchase Price. Any surplus cash remaining
in the Participant's account on the Purchase Date after shares are purchased
will be refunded to the Participant, without interest.
Changes in Election and Withdrawal; Termination of Employment. A
Participant may decrease the rate of payroll deductions one time during the
applicable offering period (which shall be January 1 through June 30, if the
Grant Date is January 1, and July 1 through December 31, if the Grant Date is
July 1) ("Offering Period"). A Participant may terminate his or her
participation in the Purchase Plan by signing and delivering to the Company a
notice of withdrawal. Such withdrawal may be elected at any time before the end
of the applicable Offering Period. As soon as practicable after such withdrawal,
the payroll deductions credited to the Participant's account will be returned to
the Participant, without interest. A participant's rights in the Purchase Plan
are nontransferable other than by will and the laws of descent and distribution.
Termination of a Participant's employment for any reason, including
retirement, disability or discharge, immediately cancels his or her
participation in the Purchase Plan. In such event, the payroll deductions
credited to the Participant's account will be returned to such Participant or,
in the case of death, to the Participant's beneficiary, without interest.
However, upon termination of employment because of death, the Participant's
beneficiary has certain rights to elect to exercise the option to purchase the
shares that the accumulated payroll deductions in the Participant's account
would purchase at the date of death. For purposes of determining the right to
exercise on the Purchase Date, a Participant's employment will not be considered
to terminate by reason of death or leave of absence taken in accordance with the
Company's leave of absence policy, provided the leave of absence does not exceed
five months or, if longer, during any period that a Participant's reemployment
rights are guaranteed by law or by contract.
Adjustment Upon Changes in Capitalization; Merger, Consolidation or
Reorganization. A proportionate adjustment shall be made by the Plan
Administrator in the number, Purchase Price, and kind of shares if the shares of
Company's common stock are increased, decreased, or exchanged for different
securities, through reorganization, merger, consolidation, recapitalization,
re-classification, stock split, stock dividends or similar capital adjustment.
Amendment and Termination of the Purchase Plan. Unless previously
terminated, the Purchase Plan will terminate on December 31, 2010, or when all
shares authorized for sale thereunder have been sold, whichever is earlier. The
Board of Directors at any time may amend or terminate the Purchase Plan with
respect to rights to purchase common stock under the Purchase Plan that have not
already been granted. No amendment may be made to the Purchase Plan without
prior approval of the stockholders of the Company if such amendment would
increase the number of shares reserved under the Purchase Plan, materially
modify the eligibility requirements of the Purchase Plan, materially increase
the benefits that may accrue to Participants under the Purchase Plan, extend the
term of the Purchase Plan, alter the option price formula or cause the Purchase
Plan to fail to meet the requirements to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code.
NEW PLAN BENEFITS
Because participation in the Purchase Plan is voluntary, we cannot now
determine the number of shares of Company common stock to be purchased by any of
the Company's current executive officers, by all of the Company's current
executive officers as a group or by the Company's non-executive employees as a
group.
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SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF PURCHASE PLAN
The following is a brief description of the federal income tax consequences
of participation in the Purchase Plan. State and local income taxes, which may
vary from locality to locality, are not discussed.
No taxable income is recognized by a Participant either at the time of
election to participate in an offering under the Purchase Plan or at the time
any shares of Company common stock are purchased thereunder.
If shares are disposed of at least two years after the Grant Date and at
least one year after the Purchase Date or in the event of a Participant's death
(whenever occurring) while owning such shares, then any excess of the fair
market value of the shares at the Grant Date over the Purchase Price of the
shares will be treated as ordinary income to the Participant. Any further gain
upon such disposition will be taxed as long-term capital gain at the rates then
in effect. If the shares are sold and the sale price is less than the Purchase
Price, there is no ordinary income and the Participant will have a capital loss
equal to the difference between the sale price and the Purchase Price. The
ability of a Participant to utilize such a capital loss will depend on the
Participant's other tax attributes and the statutory limitations on capital loss
deductions (not discussed herein).
If the shares are sold or disposed of (including any disposition by way of
gift) before the expiration of two-years after the Grant Date or within one year
after the shares are transferred to the Participant, then the excess of the fair
market value of the shares on the Purchase Date over the Purchase Price will be
treated as ordinary income to the Participant. This excess will constitute
ordinary income for the year of sale or other disposition even if no gain is
realized on the sale or a gratuitous transfer of shares is made. The balance of
the gain will be taxed as capital gain at the rates then in effect. If the
shares are sold for less than their fair market value on the Purchase Date, the
same amount of ordinary income will be attributed to the Participant and a
capital loss is recognized equal to the difference between the sale price and
the value of the shares on such Purchase Date. As indicated above, the ability
of the Participant to utilize such a capital loss will depend upon the
Participant's other tax attributes and the statutory limitation on capital
losses (not discussed herein).
The Company is entitled to a deduction for amounts taxed as ordinary income
to a Participant only to the extent that ordinary income must be reported upon
disposition of shares by the Participant before the expiration of the holding
periods described above.
VOTE REQUIRED FOR APPROVAL OF THE PURCHASE PLAN
Approval of this proposal to adopt the Purchase 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. If the
proposal to approve such amendments is not approved by the stockholders, the
Purchase Plan will not be implemented.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
ADOPT THE PURCHASE 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 2001. 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.
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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 2000 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 2001 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 May 15,
2001, 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
July 2, 2000, including audited consolidated financial statements, has been
mailed to the stockholders concurrently herewith, but such Report is not
incorporated in this Proxy Statement and is not deemed to be a part of the proxy
solicitation material.
OTHER MATTERS
The Management of the Company does not know of any other matters which are
to be presented for action at the Meeting. Should any other matters come before
the Meeting or any adjournment thereof, the persons named in the enclosed proxy
will have the discretionary authority to vote all proxies received with respect
to such matters in accordance with their collective judgment.
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29
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 16, 2000
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30
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, 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 241,000,000 shares, divided into
240,000,000 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 $0.10 per share, shall be split, converted and changed into two
shares of Common Stock, par value $0.10 per share. The effective date of
this Amendment shall be p.m. (Eastern Standard Time) on
, 2000.
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 16, 2000, 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.
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 day of , 2000.
By:
------------------------------------
Paul F. Folino,
President and Chief Executive
Officer
Attest:
- ---------------------------------------------------------
Michael J. Rockenbach, Vice President,
Chief Financial Officer, Secretary and Treasurer
31
APPENDIX B
EMULEX CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE AND TYPE OF OPTION
1.1 Purpose of Plan. The purpose of the Plan is to provide employment
incentives for, and to encourage stock ownership by, Employees of the Company in
order to increase their proprietary interest in the success of the Company.
1.2 Type of Option. The Options granted under the Plan are intended to
qualify for favorable tax treatment under Code Section 421(a) pursuant to the
terms of an employee stock purchase plan that satisfies the requirements of Code
Section 423(b).
2. DEFINITIONS
Whenever capitalized in the text, the following terms shall have the
meanings set forth below.
2.1 Account. The unfunded bookkeeping account established pursuant to
Section 3.5 hereof to record a Participant's contributions to the Plan.
2.2 Base Compensation. The total cash salary or wages paid by the Company
to an Employee during the calendar year with which or within which the Option
Period ends and which is reportable as earnings subject to income tax on Form
W-2, including salary, annual bonus and incentive payments, annual profit
sharing bonus, overtime, lead premium, commissions and shift differential pay.
Base Compensation does not include deferred compensation or Company
contributions to any Employee benefit plan, but shall include salary deferral
contributions under a Section 401(k) plan or salary reduction contributions to a
cafeteria plan meeting the requirements of Section 125 of the Code that the
Company maintains or in the future may maintain. Base Compensation shall also
exclude:
2.2.1 cash reimbursement of moving, relocation and temporary housing
expenses, automobile allowances, telephone allowances, sign on bonuses,
referral bonuses and educational reimbursements to the extent such
reimbursements and allowances are subject to income tax and reportable on
Form W-2;
2.2.2 the taxable portion of any other statutory or nonstatutory
fringe benefits (including any termination, severance or separation
allowance paid coincident with or immediately following an Employee's
termination of employment under a termination, severance or separation
allowance plan, program, policy or arrangement, whether written or oral,
sponsored, adopted or maintained by the Employer or under any agreement,
whether written or oral, with the Employer), including, without limitation,
group-term life insurance, to the extent such benefits are subject to
income tax and reportable on Form W-2;
2.2.3 income attributable to the exercise of any stock option or
vesting of any stock award to the extent such property transfers are
subject to income tax pursuant to Code Section 83 and reportable on Form
W-2.
2.3 Board. The Board of Directors of the Company.
2.4 Code. The Internal Revenue Code of 1986, as amended.
2.5 Common Stock. The shares of the $.10 par value per share common stock
of the Company.
2.6 Company. Emulex Corporation, a Delaware corporation, as well as any
Parent or Subsidiary corporations whose employees participate in the Plan with
the consent of the Board.
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2.7 Continuous Employment. An Employee's employment by the Company without
interruption. Employment shall not be considered interrupted because of:
2.7.1 Transfers of employment between the Company and its Subsidiary
or Parent corporations, or
2.7.2 Any leave of absence approved by the Company.
2.8 Employee. Any person, including officers and directors, employed by
the Company. This term shall not include directors unless they are employed by
the Company in a position in addition to their duties as a director.
2.9 Eligible Employee. Any Employee who has satisfied the eligibility
conditions of Section 3.1 below.
2.10 Exchange Act. The Securities Exchange Act of 1934, as amended.
2.11 Fair Market Value. For purposes of the Plan, the "fair market value"
per 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 or the NASDAQ
National Market System, the closing price per share on such date on the
principal exchange on which it is traded or as reported by NASDAQ, or (b) if the
Common Stock is not then listed on an exchange or the NASDAQ National Market
System, the closing price per share on such date reported by NASDAQ, or if
closing sales are not reported by NASDAQ, 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, the NASDAQ National Market System or quoted on NASDAQ, an amount
determined in good faith by the Plan Administrator.
2.12 Insider. A Participant who is an officer, director or more than ten
percent (10%) shareholder subject to the provisions of Section 16 of the
Exchange Act.
2.13 Non-Employee Director. A member of the Board who is not an Employee
of the Company, any Parent or Subsidiary, who satisfies the requirements of such
term as defined in Rule 16b-3(b)(3)(i) promulgated by the Securities and
Exchange Commission.
2.14 Option. A stock option granted pursuant to the Plan.
2.15 Option Period. Six-month periods from January through June 30 and
July 1 through December 31 of each calendar year, or such other periods as the
Plan Administrator may determine.
2.16 Outside Director. A member of the Board who is not an Employee of the
Company, any Parent or Subsidiary, who satisfies the requirements of such term
as defined in Treas. Regs. sec. 1.162-27(e)(3).
2.17 Plan. The Emulex Corporation Employee Stock Purchase Plan.
2.18 Plan Administrator. The Board or the Committee designated pursuant to
Section 6.2 hereof to administer, construe and interpret the terms of the Plan.
2.19 Participant. An Eligible Employee who has been granted an Option
under the Plan.
2.20 Parent. Any corporation (other than the Company) in an unbroken chain
of corporations ending with the Company if at the time in question, each of the
corporations (other than the Company) owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of the
other corporations in the chain.
2.21 Stockholders. The holders of outstanding shares of the Common Stock.
2.22 Subsidiary. Any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if at the time in question,
each of the corporations (other than the last corporation in the unbroken chain)
owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
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3. ELIGIBILITY AND PARTICIPATION
3.1 Eligibility.
3.1.1 All Employees of the Company:
(a) Who have completed a period of Continuous Employment of at
least 90 days prior to the date Options are granted under the Plan, and
(b) Whose customary employment exceeds twenty (20) hours per week,
shall be eligible to participate in the Plan.
3.1.2 No Employee may be granted an Option if the Employee would
immediately thereafter own, directly or indirectly, five percent (5%) or
more of the combined voting power or value of all classes of stock of the
Company or of a Parent or Subsidiary corporation.
3.1.3 For purposes of Section 3.1.2 above, an Employee's ownership
interest will be determined in accordance with the provisions of Section
424(d) of the Code.
3.2 Payroll Withholding.
3.2.1 Eligible Employees may enroll as Participants by executing,
prior to the commencement of each Option Period, a form to be provided by
the Plan Administrator on which they may designate:
(a) The portion of their Base Compensation, not to exceed 10%, to
be deducted each payroll period and contributed to their Accounts for
the purchase of shares of Common Stock (the "withholding credit"),
and/or
(b) The amount of funds, if any, which they will deposit at the
beginning of the Option Period for the purchase of shares of Common
Stock (the "initial deposit credit").
(c) The maximum amount that may be applied to the exercise of the
Option after being credited to a Participant's Account pursuant to
Section 3.2.1(a) and Section 3.2.1(b) shall not in the aggregate exceed
10% of Base Compensation. From time to time, in its sole discretion, the
Plan Administrator may increase or decrease the maximum percentage, but
not in excess of 15% of Base Compensation.
3.2.2 Except as provided herein or in Section 4.1.5 hereof, once a
payroll withholding amount is elected, the periodic payroll deduction
withholding credits for that Option Period cannot be decreased or increased
without terminating the Option. However, pursuant to rules and procedures
prescribed by the Plan Administrator, a Participant who is on an approved
unpaid leave of absence may make additional contributions to make up any
contributions that the Participant failed to make while on a
Company-approved unpaid leave of absence if the Participant returns to
active employment and contributes those amounts before the end of the
Option Period during which the leave of absence began. In addition, a
Participant who is an employee whose Base Compensation is primarily based
on commissions, who has one or more payroll periods in which the
Participant's commission income is less than the amount of the periodic
payroll deduction withholding credit elected by the Participant, may make
additional contributions to make up any shortfall, if the Participant
contributes those amounts before the end of the Option Period. A failure to
make up such a contributions shortfall by the end of the Option Period
shall be treated as an election, pursuant to Section 4.1.5 hereof, to cease
future contributions.
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3.3 Limitations.
3.3.1 Notwithstanding anything herein to the contrary, the maximum
limit on the right to purchase shares of Common Stock during any Option
Period shall not exceed the lesser of: (a) twelve thousand five hundred
dollars ($12,500) per Option Period, or (b) 250 shares of Common Stock per
Option Period, subject to adjustment pursuant to Section 5.2 hereof;
provided, however, that if the Option Period is a length of time other than
six months, the limitation set forth in this Section 3.3.1 shall be
adjusted such that on an annual basis (pro rated for the actual Option
Period) the maximum limit on the right to purchase shares of Common Stock
during any calendar year shall not exceed the lesser of: (a) twenty-five
thousand dollars ($25,000) per calendar year, or (b) 500 shares of Common
Stock per calendar year, subject to adjustment pursuant to Section 5.2
hereof.
3.3.2 This limitation shall apply to the Participant's right to
purchase Common Stock under the Plan and under all other employee stock
purchase plans described in Section 423 of the Code that are maintained by
the Company and its Subsidiary and Parent corporations.
3.3.3 This dollar limitation applies to the Fair Market Value of
Common Stock (determined at the time the Option is granted) for the Option
Period in which the Option is outstanding.
3.3.4 This limitation shall be applied in a manner consistent with
the provisions of Section 423(b)(8) of the Code.
3.4 Granting of Options.
3.4.1 Upon the Employee's completion and return of the enrollment
form, the Plan Administrator will, at the commencement of the Option
Period, grant an Option to allow the Participant to purchase the number of
whole shares of Common Stock specified by the administrator in the Option.
Each participant will be entitled to an Option to purchase the same number
of shares. However, the exercise of the of the Option by any Participant
will be limited to such number of whole shares of Common Stock that can be
purchased by the amount calculated pursuant to Section 4.2 hereof.
3.4.2 The price at which each share covered by an Option may be
purchased will in all instances be determined by the Plan Administrator,
but shall be no less than the lesser of
(a) Eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock on the first day of the applicable Option Period; or
(b) Eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock on the last day of the applicable Option Period (the
"Exercise Date").
3.4.3 Options shall be evidenced by an agreement between the
Participant and the Company in a form approved by the Plan Administrator.
3.5 Establishment of Accounts.
3.5.1 All amounts contributed by the Participant to the Plan (whether
by means of payroll withholding or a lump sum advance contribution) will be
credited to a separate Account maintained for the Participant.
(a) The Accounts will not bear interest and a Participant will not
be entitled to any interest on the Account when the Option is
terminated.
(b) The Plan Administrator shall prescribe the rules and
procedures, as it deems necessary or appropriate, regarding the handling
of Participant contributions and, in its sole discretion, may deposit
such contributions in a passbook account or other investment in the name
of the Company maintained at any institution.
3.5.2 A Participant may not withdraw any portion of the funds
accumulated in his or her Account without terminating his or her Option
pursuant to Section 4.1, below.
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4. OPTIONS
4.1 Termination of Options.
4.1.1 An Option shall terminate upon the Participant's voluntary
withdrawal from the Plan. A Participant may withdraw from the Plan at any
time prior to the last day of the Option Period by submitting written
notice to the Plan Administrator.
4.1.2 An Option also shall terminate automatically if the Participant
holding the Option ceases to be employed by the Company for any reason
(including disability or retirement) prior to the last day of the Option
Period.
4.1.3 For purposes of Section 4.1.2 above, a Participant's employment
will not be considered to have been terminated by reason of death or a
leave of absence taken in accordance with the Company's leave of absence
policy, provided the leave of absence does not exceed five (5) months or,
if longer, so long as the Participant's right to reemployment with the
Company is guaranteed either by statute or contract (the "Term Expiration
Period"). If the leave of absence exceeds the Term Expiration Period, the
Participant will be deemed to have ceased to be employed on the first day
following the end of the Term Expiration Period. In the event of death, the
Option shall be exercisable to the extent of the amounts credited to the
deceased Participant's Account. The Option may be exercised by the
representative of the Participant's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent the Option is exercisable based on the credits to the Participant's
Account.
4.1.4 Upon any termination of an Option, all amounts credited to the
Participant's Account shall be refunded to the Participant.
4.1.5 A Participant may make a single election during an Option
Period to cease future payroll withholding without terminating the Option
with respect to the number of whole shares equal to:
(a) the withheld amounts credited to the Participant's Account;
(b) divided by the Fair Market Value of one share of Common Stock
on the first day of the Option Period.
4.2 Exercise of Options.
4.2.1 Unless terminated prior to the last day of the Option Period,
Options granted at the commencement of an Option Period will be exercised
automatically on the last day of the Option Period for such number of whole
shares of Common Stock that can be purchased by the amount calculated by:
(a) The dollar amount of the periodic deductions credited to the
Participant's Account attributable to amounts withheld from the
Participant's Base Compensation for the payroll periods during the
Option Period (the "withholding credit"),
(b) Adding the withholding credit to the amount of funds (if any)
deposited by the Participant with the Plan at the beginning of the
Option Period (the "initial deposit credit"), and
(c) Dividing the sum of the withholding credit and the initial
deposit credit by the Fair Market Value of one share of Common Stock on
the first day of the Option Period.
4.2.2 As soon as practicable after the last day of the Option Period,
a Participant shall receive a certificate for the whole number of shares of
Common Stock purchased by the funds from the Participant's Account.
4.2.3 If the amount credited to the Participant's Account on the date
of purchase exceeds the total purchase price of the shares subject to the
Option, the surplus shall be refunded to a Participant as soon as
reasonably practicable after the end of the applicable Option Period.
4.2.4 If at any time during an Option Period a Participant ceases
receiving compensation from the Company without terminating employment
(e.g., while on a Company-approved leave of absence or
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during a period for which no commissions are paid), and, as a result, the
amount in the Participant's Account at the end of the Option Period is
insufficient to purchase all the shares covered by the Option granted to
the Participant, as many whole shares as can be purchased out of the
contributed funds will be acquired. The balance of the funds, if any, shall
be refunded to the Participant.
4.2.5 Except as provided in Section 3.2.2, payment for shares to be
purchased at the termination of the Option Period may only be made from
funds:
(a) Deposited at the beginning of an Option Period, and/or
(b) Accumulated through payroll deductions made throughout the
Option Period.
4.3 Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will and the laws of descent and distribution. During the lifetime of a
Participant, an Option may be exercised only by the Participant.
5. COMMON STOCK
5.1 Shares Subject to Plan.
5.1.1 The maximum number of shares of Common Stock which may be
issued under the Plan is 100,000 shares, subject to adjustment in certain
circumstances as provided in Section 5.2 below.
5.1.2 If any outstanding Option is terminated for any reason, the
shares allocated to the Option may again become subject to purchase under
the Plan.
5.1.3 The Common Stock issuable under the Plan may either be
previously unissued Common Stock or may have been reacquired by the Company
in the open market or otherwise.
5.1.4 If at any time the number of shares for which Options are to be
granted under the Plan pursuant to Participants' designation exceeds the
number of remaining shares then available under the Plan, the Plan
Administrator shall make pro rata adjustments to Participants' designations
in a uniform manner. Written notice of any the adjustments shall be given
to each affected Participant.
5.2 Adjustment Upon Changes in Capitalization. A proportionate adjustment
shall be made by the Plan Administrator in the number, price, and kind of shares
subject to outstanding Options if the outstanding shares of Common Stock are
increased, decreased, or exchanged for different securities, through
reorganization, merger, consolidation, recapitalization, reclassification, stock
split, stock dividends, or similar capital adjustment.
6. PLAN ADMINISTRATION
6.1 Administration by Board. Subject to Section 6.2, the Plan
Administrator shall be the Board of Directors of the Company (the "Board")
during such periods of time as all members of the Board are Outside Directors.
Subject to the provisions of the Plan, the Plan Administrator shall have
authority to construe and interpret the Plan, to promulgate, amend, and rescind
rules and regulations relating to its administration, 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 Stock Options, to
determine the duration and purpose of leaves of absence which may be granted to
Stock Option holders 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 Plan Administrator may, in its
absolute discretion, without amendment to the Plan, accelerate the date on which
any Option granted under the Plan becomes exercisable, waive or amend the
operation of Plan provisions respecting exercise after termination of employment
or otherwise adjust any of the terms of such Option. The interpretation and
construction by the Plan Administrator of any provision 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.
6.2 Administration by Committee. The Board may, in its sole discretion,
delegate any or all of its duties as Plan Administrator and, subject to the
provisions of Section 6.1 of the Plan, at any time the Board
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includes any person who is not an Outside Director, the Board shall delegate all
of its duties as Plan Administrator during such period of time to a compensation
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 Outside Directors and Non-Employee Directors, 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 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. 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.
6.3 Exceptions. Anything to the contrary notwithstanding, the requirements
in Sections 6.1 and 6.2 that all members of the Committee be Non-Employee
Directors and Outside Directors shall not apply for any period of time during
which the Company's Common Stock is not registered pursuant to Section 12 of the
Exchange Act. Those provisions of the Plan that make express reference to Rule
16b-3 under the Exchange Act shall apply only to reporting persons.
6.4 Indemnification of the Plan Administrator. To the extent permitted by
law, the Certificate of Incorporation of the Company, the Bylaws of the Company
and any indemnity agreements between the Company and its directors or employees,
the Company shall indemnify each member of the Board and of the Committee
comprising the Plan Administrator, and any other employee of the Company with
duties under the Plan, against expenses (including reasonable attorneys fees and
any amount paid in settlement) reasonably incurred in connection with any claims
against him or her by reason of conduct in the performance of duties under the
Plan.
7. MISCELLANEOUS MATTERS
7.1 Uniform Rights and Privileges. Except for the limitations of Section
3.3, the rights and privileges of all Participants under the Plan must be the
same.
7.2 Rights as a Stockholder.
7.2.1 No person shall have any stockholder rights with respect to
shares covered by an Option until a stock certificate for the shares is
issued and delivered to the person.
7.2.2 No adjustments will be made for cash dividends or other rights
for which the record date is prior to the date of the exercise of the
Option.
7.3 Application of Proceeds. The proceeds received by the Company from the
sale of Common Stock pursuant to Options shall be used for general corporate
purposes.
7.4 Amendment and Termination.
7.4.1 The Board may at any time alter, amend, suspend, or terminate
the Plan with respect to any shares not already subject to Options.
7.4.2 No amendment may be adopted without the approval of the
Stockholders that would:
(a) Materially increase the benefits accruing to Participants in
the Plan,
(b) Increase the number of shares that may be issued under the
Plan,
(c) Materially modify the requirements as to eligibility for
participation,
(d) Extend the term of the Plan,
(e) Alter the option price formula, or
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(f) Cause the Plan to fail to meet the requirements to qualify as
an "employee stock purchase plan" under Section 423 of the Code.
7.5 Interpretation.
7.5.1 If any provision of the Plan is held invalid or unenforceable,
its invalidity or unenforceability shall not affect any other provisions of
the Plan, and the Plan will be construed and enforced as if the provision
had not been included in it.
7.5.2 Unless the context clearly indicates otherwise, the masculine
gender shall include the feminine, the singular shall include the plural,
and the plural shall include the singular.
7.5.3 Section headings are for convenient reference only and shall
not be deemed to be part of the substance of this instrument or in any way
to enlarge or limit the contents of any Section.
7.6 Stockholder Approval.
7.6.1 No shares of Common Stock shall be issued under the Plan unless
it shall have been approved by the stockholders of the Company within 12
months of the date of adoption. If the Plan is not approved by the
Company's stockholders within that time period, the Plan and all Options
issued under the Plan will terminate and all contributions will be refunded
to the Participants together with any interest earned thereon.
7.6.2 This approval by the Company's stockholders must relate to both:
(a) The aggregate number of shares to be granted under the Plan,
and
(b) The corporations whose employees may be Participants in the
Plan.
7.7 No Right to Employment. Neither the adoption of the Plan nor the
granting of any Option shall confer upon any Employee any right to continued
employment, nor shall it interfere in any way with the right of the Company
terminate the employment of any Employee at any time, with or without cause.
7.8 Governing Law. The Plan and all actions taken under it shall be
governed by and construed in accordance with the laws of the state of
California.
8. EFFECTIVE DATE AND TERM OF PLAN
8.1 Effective Date. The effective date of this Plan shall be January 1,
2001, subject to the approval of Stockholders of the Company within 12 months of
the date of adoption. No options granted under the Plan will be effective until
the Stockholders of the Company have approved the Plan.
8.2 Term of Plan. Unless sooner terminated by the Board in its sole
discretion, the Plan will expire on December 31, 2010.
B-8
39
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 Paul F. Folino 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 2, 2000, at the Annual Meeting
of Stockholders to be held on November 16, 2000, or any adjournment thereof.
-- FOLD AND DETACH HERE --
40
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 WITHHOLD
listed to the right AUTHORITY [ ] Fred B. Cox [ ] Paul F. Folino
(except as marked to vote for all nominees [ ] Michael P. Downey [ ] Robert H. Goon
to the contrary) listed to the right [ ] Bruce C. Edwards [ ] Don M. Lyle
2. AMENDMENT OF THE CERTIFICATE OF INCORPORATION
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVAL OF AMENDMENT OF THE EMPLOYEE STOCK OPTION PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. APPROVAL OF AMENDMENT OF THE 1997 STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. APPROVAL OF ADOPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Dated: , 2000
------------------------------
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Signature
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Signature if held jointly
Please sign exactly as name appears
hereon. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee, or guardian, please give full
title as such. If a corporation, please
sign in full corporate name of the
President or other authorized officer. If
a partnership, please sign in partnership
name by authorized name.