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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
EMULEX CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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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.
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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 15, 2001
---------------------
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 Irvine Marriott Hotel at 18000 Von Karman Avenue, Irvine, California, at
10:00 a.m., Pacific Standard Time, on Thursday, November 15, 2001, 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 seven directors to serve until the next annual
meeting of the Company's stockholders and until their successors have been
elected and qualified;
2. To ratify the selection of KPMG LLP as the Company's independent
public accountants for fiscal year 2002; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record of the Company's common stock at the close of
business on October 1, 2001, 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
Executive Vice President, Chief
Financial Officer,
Secretary and Treasurer
Costa Mesa, California
October 15, 2001
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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 15, 2001
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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 Irvine Marriott Hotel at
18000 Von Karman Avenue, Irvine, California, at 10:00 a.m., Pacific Standard
Time, on Thursday, November 15, 2001, 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 Mellon Investor 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 seven of the
nominee-directors specified herein, and "FOR" the ratification of the selection
of KPMG LLP as the Company's independent public accountants for fiscal year
2002, 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 proposal to ratify the selection of
KPMG LLP as the Company's independent public accountants will have the same
effect as votes against such proposal. Broker non-votes will be treated as
unvoted for purposes of determining approval of such proposal and will not be
counted as votes for or against such proposal.
Your execution of the enclosed proxy will not affect your right as a
stockholder to attend the Meeting and to vote in person. Any stockholder giving
a proxy has a right to revoke it at any time by either (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.
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VOTING SECURITIES AND STOCK OWNERSHIP
VOTING SECURITIES
The Company has outstanding only common stock, of which 80,924,669 shares
were outstanding as of the close of business on October 1, 2001 (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.
<Table>
<Caption>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
------------------------ ----------------------- -------------------
Fred B. Cox............................................. 1,339,000(3) 1.7%
Paul F. Folino.......................................... 779,297(4) *
Michael P. Downey....................................... 122,000(5) *
Bruce C. Edwards........................................ 62,000(6) *
Cornelius A. Ferris..................................... 226,148(7) *
Robert H. Goon.......................................... 40,000(8) *
Don M. Lyle............................................. 60,000(8) *
Kirk D. Roller.......................................... 57,500(8) *
Ronald P. Quagliara..................................... 360,950(9) *
Karen Mulvany........................................... 78,600(10) *
Michael J. Rockenbach................................... 426,070(11) *
All directors and executive officers as a group (14
persons)(12).......................................... 3,829,443(13) 4.7%
</Table>
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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 739,000 shares held in a family trust of which Mr. Cox and his
wife are co-trustees and share voting and investment power, 520,000 shares
held by a limited liability company of which Mr. Cox and his wife are the
managing members, and 80,000 shares which are subject to options held by
Mr. Cox which are currently, or within 60 days following the Record Date
will be, exercisable.
(4) Consists of 433,079 shares held by Mr. Folino, 800 shares held by his
daughter and 345,418 shares which are subject to options held by Mr. Folino
which are currently, or within 60 days following the Record Date will be,
exercisable.
(5) Consists of 2,000 shares held by Mr. Downey and 120,000 shares which are
subject to options held by Mr. Downey which are currently, or within 60
days following the Record Date will be, exercisable.
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(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, and 60,000
shares which are subject to options held by Mr. Edwards which are
currently, or within 60 days following the Record Date will be,
exercisable.
(7) Consists of 212,404 shares held by Mr. Ferris and 13,744 held in a trust
for his children.
(8) Consists of shares which are purchasable pursuant to stock options which
are currently, or within 60 days following the Record Date will be,
exercisable.
(9) Consists of 107,120 shares held by Mr. Quagliara, 5,200 shares held by his
children and 248,630 shares which are subject to options held by Mr.
Quagliara which are currently, or within 60 days following the Record Date
will be, exercisable.
(10) Consists of 1,000 shares held by Ms. Mulvany, 600 shares held in a trust
for her daughter of which Ms. Mulvany and her husband share voting and
investment power, 2,000 shares held in a family trust of which Ms. Mulvany
and her husband are co-trustees and share voting and investment power, and
75,000 shares which are subject to options held by Ms. Mulvany which are
currently, or within 60 days following the Record Date will be,
exercisable.
(11) Consists of 267,264 shares held by Mr. Rockenbach, 4,960 shares held by his
children and 153,846 shares which are subject to options held by Mr.
Rockenbach which are currently, or within 60 days following the Record Date
will be, exercisable.
(12) Includes persons who serve as executive officers of the Company's principal
subsidiary.
(13) Includes shares which are subject to options that are currently, or within
the next 60 days following the Record Date will be, exercisable.
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.
<Table>
<Caption>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------------ -------------------- ----------------
Fidelity Investments........................................ 10,740,214(1) 13.3%
82 Devonshire Street
Boston, MA 02109
Putnam Investments, LLC..................................... 7,547,739(2) 9.3%
One Post Office Square
Boston, MA 02110
Massachusetts Financial Services Company.................... 4,515,772(3) 5.6%
500 Boylston Street
Boston, MA 02116
</Table>
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(1) Based on correspondence with the beneficial owner, it is the Company's
belief that as of the Record Date (i) 3,654,200 shares were beneficially
owned by Fidelity Management Research Company and FMR Co., Inc., each of
which is a wholly-owned subsidiary of FMR Corp., (ii) 5,264,064 shares were
beneficially owned by Fidelity Management Trust Company, a wholly-owned
subsidiary of FMR Corp., and (iii) 1,821,950 shares were beneficially owned
by Fidelity International Limited on behalf of certain of its direct or
indirect subsidiaries.
(2) Based on its Schedule 13G filed February 13, 2001 and as updated by
conversations with the beneficial owner, it is the Company's belief that as
of October 1, 2001, Putnam Investments, LLC ("PI"), a wholly-owned
subsidiary of Marsh & McLennan Companies, Inc., is the beneficial owner of
(i) 6,425,689 shares through Putnam Investment Management, LLC, a subsidiary
of PI, and (ii) 1,222,050 shares through The Putnam Advisory Company, LLC, a
subsidiary of PI.
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(3) Based on its Schedule 13G filed February 12, 2001 and as updated by
conversations with such owner, it is the Company's belief that Massachusetts
Financial Services Company beneficially owned the number of shares indicated
as of October 1, 2001.
NOMINATION AND ELECTION OF DIRECTORS
The Company's directors are to be elected at each annual meeting of
stockholders. The seven 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 was elected a director at the 2000
Annual Meeting of Stockholders of the Company, with the exception of Cornelius
Ferris who was appointed by the Company's Board of Directors on March 2, 2001.
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 seven 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 (all of such nominees being continuing members of the
Company's present Board of Directors):
<Table>
<Caption>
NOMINEE(1) PRINCIPAL OCCUPATION AGE
---------- -------------------- ---
Fred B. Cox(2)........................ Chairman of the Board of the Company 67
Paul F. Folino........................ President and Chief Executive Officer of the Company 56
Michael P. Downey(3).................. Chairman of the Board of Artisoft, Inc. 54
Bruce C. Edwards(3)................... President and Chief Executive Officer of Powerwave 47
Technologies, Inc.
Cornelius A. Ferris(2)................ Private Investor 56
Robert H. Goon(3)..................... Attorney 60
Don M. Lyle(2)........................ Principal of Technology Management Company 61
</Table>
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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 three directors, none 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 three directors, none of whom is an employee of the
Company, which held six meetings during the last fiscal year of the Company.
See "Report of the Audit Committee of the Board of Directors."
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 served as a member of
its Board of Directors until its acquisition in December 2000.
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., a
developer of software-based phone systems, and served as its interim President
and Chief Executive Officer from March 2000 to July 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 Metawave Communications
Corporation, a supplier of smart antenna systems to the wireless communications
industry.
Mr. Ferris was appointed as a director of the Company on March 2, 2001. Mr.
Ferris served as the President of Giganet, Inc., which was acquired by the
Company in March 2001, from September 1998 and as President and Chief Executive
Officer of Giganet, Inc. from April 1999 until March 2001. Prior to joining
Giganet, Inc., Mr. Ferris served as Chief Executive Officer of Netscheme
Solution, Inc., a web-based data access company, from August 1995 until such
company's sale to Accuate Corporation in September 1997. Prior to such time, Mr.
Ferris co-founded and was Chief Executive Officer of Fluent, a multimedia
software company, which was sold to Novell in July 1993, at which time Mr.
Ferris joined Novell as Vice President of the Advanced Services Division, which
developed Novell's entry into the telephony market.
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 36 years. From before 1995
until October 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
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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 several private companies.
There were nine 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. In fiscal 2001, directors who were not employees of the
Company received a quarterly retainer of $5,000 and reimbursement for travel
expenses. In addition, the chairmen of the Audit and Compensation Committees
received an additional quarterly retainer of $500, while committee members
received an additional quarterly retainer of $300. For fiscal 2002, the
quarterly retainer for non-employee directors has been increased to $7,500 while
the additional quarterly retainers payable to committee chairmen and committee
members increased to $1,250 and $1,000, respectively. 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. 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
1,480,000 shares, was approved by stockholders of the Company at the 2000 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
("Plan Eligible Director"). Only Plan Eligible Directors may receive options
under the Director Plan. There are currently six Plan Eligible
Directors -- Messrs. Cox, Downey, Edwards, Ferris, Goon and Lyle.
Until June 2001, the Director Plan provided that an option to purchase
120,000 shares of common stock of the Company was 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, the Director Plan provided
that on each yearly anniversary of the date of grant of the initial option to
each Plan Eligible Director, each such Plan Eligible Director would
automatically be granted an additional option to purchase 40,000 shares of
common stock. Effective June 2001, the Board of Directors amended the Director
Plan to reduce the initial grant amounts from 120,000 shares to 30,000 shares
and the annual grant amount from 40,000 shares to 10,000 shares. Options granted
under the Director Plan 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.
The initial options granted under the Director Plan are 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 annual option grants to purchase 10,000 shares
shall be exercisable (i) as to one-half of the shares on the six month
anniversary of the grant, (ii) as to one-quarter of
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the shares on the nine month anniversary of the grant, and (iii) as to the
remaining one-quarter of the shares on the first yearly anniversary of the
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 March 2001, the Company completed the acquisition
of Giganet, Inc., a privately-held Massachusetts corporation, pursuant to the
terms of a merger transaction whereby Giganet became a subsidiary of the Company
and was later merged into the Company's primary operating subsidiary. Pursuant
to the terms of the merger, Mr. Ferris and trusts maintained for the benefit of
Mr. Ferris' family members received an aggregate of 336,764 shares of the
Company's common stock in exchange for shares of Giganet owned by Mr. Ferris or
his family members. In addition, upon appointment as a director of the Company,
Mr. Ferris received an option to acquire 120,000 shares of common stock of the
Company in accordance with the terms of the Director Plan. In March 2001, the
Company entered into a consulting agreement with Mr. Ferris to serve as a
consultant to facilitate the transitioning of the operations of Giganet into
those of the Company. Mr. Ferris' consulting agreement had a term of six months
which expired in September 2001 and provided for a monthly consulting fee of
$18,750. Pursuant to the terms of the consulting agreement, Mr. Ferris agreed to
a two year non-competition and non-solicitation covenant.
In fiscal 2001, the Company and/or its subsidiaries obtained legal services
from Mr. Goon with respect to various matters on terms which the Company
believes were as favorable as would have been obtained from unaffiliated
parties.
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
<Table>
<Caption>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- ---------------------------
OTHER STOCK ALL
ANNUAL OPTION OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTS(2) COMPENSATION(3)
--------------------------- ---- -------- -------- --------------- --------- ---------------
Paul F. Folino........... 2001 $415,406 $519,997 -0- 400,000 $11,553
President & CEO 2000 337,096 731,565 -0- 320,000 8,575
1999 289,000 140,187 -0- 200,000 13,143
Kirk D. Roller........... 2001 220,532 184,862 -0- 230,000 15,182
Chief Operating Officer 2000 164,801 218,172 83,781(4) 120,000 14,649
1999 150,000 61,910 -0- 200,000(5) 7,730
Ronald P. Quagliara...... 2001 234,980 126,071 37,599(6) 160,000 7,883
President, IP Storage 2000 208,981 200,778 -0- 80,000 5,021
Networking Group 1999 210,469 42,239 -0- 440,000(7) 2,267
Karen Mulvany(8)......... 2001 172,461 140,534 -0- 120,000 8,272
Exec. V.P., Business 2000 44,183 80,745 98,333 300,000 1,472
Planning and 1999 -0- -0- 90,875 -0- -0-
Development
Michael J. Rockenbach.... 2001 196,387 103,994 -0- 150,000 9,369
Exec. V.P. and CFO 2000 161,853 145,342 -0- 80,000 9,363
1999 150,716 28,441 -0- 372,000(9) 8,877
</Table>
7
10
---------------
(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. Other Annual
Compensation does not include the value realized upon exercise of options
during the periods in question.
(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.
Share amounts have been adjusted to reflect a two-for-one stock split
effected in fiscal 2001 and two additional two-for-one stock splits effected
in fiscal 2000.
(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 $77,181 of reimbursement for relocation expenses.
(5) Represents shares subject to options which were granted in 1998 and repriced
in 1999.
(6) Includes $30,999 for reimbursement of expenses related to membership in a
country club.
(7) Includes 340,000 shares subject to options which were granted in previous
years and repriced in fiscal year 1999.
(8) Ms. Mulvany became an officer of the Company in March 2000. Amounts
indicated as Other Annual Compensation for fiscal 2000 and 1999 consist of
compensation received by Ms. Mulvany as a consultant to the Company.
(9) Includes 312,000 shares subject to options which were granted in previous
years and repriced in 1999.
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 Ms. Mulvany, and with three other executives
of the Company. The key employee retention agreements for Messrs. Quagliara,
Roller, Rockenbach and Ms. Mulvany 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.
8
11
OPTION GRANTS DURING FISCAL 2001
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 1, 2001, to the officers identified in the Summary Compensation
Table:
OPTION GRANTS IN FISCAL YEAR 2001
<Table>
<Caption>
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 2001(2) PRICE(3) DATE 5% 10%
---- ---------- ---------- -------- ---------- ------------- -------------
Paul F. Folino............ 400,000 8.10 $43.47 8/16/10 $10,931,434 $27,700,219
Kirk D. Roller............ 80,000 1.62 36.75 8/15/10 1,848,310 4,683,612
50,000 1.01 62.84 12/3/10 1,975,303 5,005,411
100,000 2.02 17.00 4/5/11 1,068,751 2,708,211
Ronald P. Quagliara....... 80,000 1.62 36.75 8/15/10 1,848,310 4,683,612
30,000 0.61 62.84 12/3/10 1,185,182 3,003,247
50,000 1.01 17.00 4/5/11 534,375 1,354,105
Karen Mulvany............. 20,000 0.40 62.84 12/3/10 790,121 2,002,164
100,000 2.02 17.00 4/5/11 1,068,751 2,708,211
Michael J. Rockenbach..... 80,000 1.62 36.75 8/15/10 1,848,310 4,683,612
20,000 0.40 62.84 12/3/10 790,121 2,002,164
50,000 1.01 17.00 4/5/11 534,375 1,354,105
</Table>
---------------
(1) The amounts in the table represent shares of the Company's common stock
covered by stock options granted to the named individual under the Emulex
Corporation Employee Stock Option Plan. Each option granted becomes
exercisable on a cumulative basis as to 25% of the option shares one year
after the date of grant and as to an additional 6.25% of the option shares
each three month interval thereafter.
(2) The number of shares of Company common stock covered by the options granted
to the named individual during the last completed fiscal year of the Company
equals the percentage set forth below of the total number of shares of the
Company's common stock covered by all options granted by the Company to
employees of the Company during such year.
(3) The exercise price of each option is the market price of the common stock of
the Company on the date of grant.
(4) These columns present hypothetical future values of the stock obtainable
upon exercise of the options net of the option's exercise price, assuming
that the market price of the Company's common stock appreciates at a five
and ten percent compound annual rate over the ten year term of the options.
The five and ten percent rates of stock price appreciation are presented as
examples pursuant to the Securities and Exchange Commission rules governing
the preparation of proxy statements and do not necessarily reflect
management's assessment of the Company's future stock price performance. The
potential realizable values presented are not intended to indicate the value
of the options.
9
12
OPTION EXERCISES IN FISCAL 2001 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 2001 by the officers named
in the Summary Compensation Table:
OPTION EXERCISES AND YEAR-END VALUE TABLE
<Table>
<Caption>
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......... 932,185 $55,303,712 177,500 652,505 $5,131,000 $7,561,045
Kirk D. Roller......... 92,500 4,945,975 15,000 355,000 131,550 5,798,450
Ronald P. Quagliara.... 60,000 4,608,000 201,578 247,502 7,317,530 4,136,292
Karen Mulvany.......... -0- -0- 62,500 357,500 -0- 4,296,000
Michael J.
Rockenbach........... 56,182 1,428,361 102,594 222,502 3,598,740 3,725,342
</Table>
---------------
(1) Common Stock valued at $40.40 per share which represents the closing price
of the Company's common stock on June 29, 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 2001, Don M. Lyle, Fred B. Cox and Cornelius A Ferris served as
members of the Compensation Committee of the Company. After the meeting, it is
anticipated that Messrs. Cox, Lyle and Ferris will remain members of the
Compensation Committee. Neither Mr. Cox, Mr. Lyle nor Mr. Ferris are now, nor
were at any time during the last completed fiscal year of the Company, an
officer or employee of the Company. During fiscal 2001, 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. Mr. Ferris was
a director and officer of Giganet, Inc. until the Company acquired such entity
in March 2001. Mr. Ferris resigned as an officer and director of Giganet, Inc.
simultaneously with the closing of the acquisition and, thereafter, was
appointed as a member of the Compensation Committee. See "Compensation of
Directors -- Other Compensation" above.
In October 2000, Mr. Ferris received a loan from Giganet, Inc. in the
original principal amount of $837,235 in connection with his exercise of
outstanding options and the purchase of restricted shares of Giganet, Inc. In
addition, in January 2001, Mr. Ferris received a loan of $235,969.02 in
connection with the payment by Giganet, Inc. of withholding taxes on
compensation. Both loans had terms of five years, provided for variable interest
and were secured by shares of Giganet, Inc. held by Mr. Ferris as well as a
personal guaranty of Mr. Ferris. The loans were repaid in full by Mr. Ferris in
June 2001.
REPORT OF EXECUTIVE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors makes this report on
executive compensation pursuant to Item 402 of Regulation S-K. Notwithstanding
anything to the contrary set forth in any of the Company's previous filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that might incorporate future filings,
including this Proxy Statement, in whole or in part, this report and the graph
which follows this report shall not be incorporated by reference into any such
filings, and such information shall be entitled to the benefits provided in Item
402(a)(9).
The Compensation Committee reviews the performance of the executive
officers of the Company, makes recommendations to the Board of Directors as to
the compensation of the executive officers of the Company and its subsidiaries,
reviews the compensation programs for other key employees, including salary and
cash bonus levels, reviews and approves certain employee benefit policies and
programs, and reviews and makes recommendations to management with respect to
executive recruitment. In addition, the Compensation Committee administers the
Emulex Corporation Employee Stock Option Plan ("Employee Plan"), including
review and approval of grants of options under the plan to executive officers
and other key employees of the Company and its subsidiaries. In addition, the
Compensation Committee administers the Emulex Corporation Employee Stock
Purchase Plan.
10
13
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.
11
14
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.
Effective September 2000 the Compensation Committee elected to increase Mr.
Folino's annual base salary and bonus base to $432,081 and $259,249,
respectively. Mr. Folino was awarded a stock option grant of 400,000 shares
under the Emulex Corporation Employee Stock Option Plan at an exercise price of
$43.47.
Respectfully submitted,
Compensation Committee:
DON M. LYLE, Chairman
FRED B. COX
CORNELIUS A. FERRIS
12
15
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 JP Morgan Hambrecht & Quist Computer Hardware Sector Index for
the period of five fiscal years commencing July 1, 1996 and ended July 1, 2001.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
EMULEX CORPORATION COMMON STOCK, S&P 500 INDEX AND
JP MORGAN HAMBRECHT & QUIST COMPUTER HARDWARE SECTOR INDEX
[PERFORMANCE GRAPH]
<Table>
<Caption>
JP MORGAN H&Q COMPUTER
EMULEX CORP. S&P 500 HARDWARE SECTOR
------------ ------- ----------------------
Jun-96 100.00 100.00 100.00
Sep-96 100.00 103.09 111.07
Dec-96 107.70 111.68 125.78
Mar-97 105.98 114.68 130.10
Jun-97 104.28 134.70 153.22
Sep-97 114.53 144.79 214.72
Dec-97 94.02 148.95 171.24
Mar-98 62.39 169.72 202.96
Jun-98 40.60 175.33 217.33
Sep-98 90.60 157.89 239.69
Dec-98 273.51 191.51 329.01
Mar-99 225.64 201.05 342.34
Jun-99 760.26 215.22 369.33
Sep-99 1174.38 201.78 413.07
Dec-99 3076.97 231.81 602.42
Mar-00 2984.66 237.12 685.85
Jun-00 1796.61 230.83 635.87
Sep-00 3350.47 228.59 697.57
Dec-00 4372.71 210.70 458.63
Mar-01 1029.07 185.72 306.75
Jun-01 2209.94 196.59 344.04
</Table>
---------------
* Assumes that the value of the investment in the Company's common stock and
each index was $100 on July 1, 1996.
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 2002. This matter is not required to be submitted for stockholder
approval, but the Board of Directors has elected to seek ratification of its
selection of the independent public accountants by the affirmative vote of a
majority of the shares represented and voting at the Meeting.
Notwithstanding the ratification by shareholders of the appointment of KPMG
LLP, the Board of Directors may, if the circumstances dictate, appoint other
independent accountants.
13
16
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The following is the report of the Audit Committee of the Board of
Directors with respect to the Company's audited financial statements for the
fiscal year ended July 1, 2001, included in the Company's Annual Report on Form
10-K for such year. The information contained in this report shall not be deemed
to be "soliciting material" or to be "filed" with the Securities and Exchange
Commission. Notwithstanding anything to the contrary set forth in any of the
Company's filings under the Securities Act of 1933, as amended, or the Exchange
Act, that might incorporate future filings, including this Proxy Statement, in
whole or in part, this report shall not be incorporated by reference into any
such filings, except to the extent that the Company specifically incorporates it
by reference in such filing.
In accordance with its written charter adopted by the Board of Directors, a
copy of which is attached as Appendix A hereto, the Audit Committee serves as
the representative of the Board in fulfilling its responsibility for oversight
of the quality and integrity of the accounting, auditing and financial reporting
practices of the Company. The Audit Committee reviews its charter periodically
to reassess the adequacy of the charter. The Audit Committee consists of three
non-employee directors, each of whom the Company believes to be "independent"
within the meaning of Rule 4200(a)(15) of the National Association of Securities
Dealers, Inc. listing requirements.
The Company's management has primary responsibility for the Company's
internal controls and for the preparation of financial statements. The Company's
independent accountants are responsible for performing an independent audit of
the Company's consolidated financial statements in accordance with generally
accepted auditing standards and to issue a report thereon. The Audit Committee
is responsible for monitoring the integrity of the Company's financial reporting
process and systems of internal controls regarding finance, accounting, and
legal compliance, monitoring the independence and performance of the Company's
independent auditors, and providing an avenue of communication among the
independent auditors, management and the Board of Directors. The Audit Committee
recommends to the Board of Directors, subject to stockholder ratification, the
selection of the Company's independent accountants.
During the most recent fiscal year, the Audit Committee:
- reviewed and discussed the audited financial statements and interim
financial statements with the Company's management;
- discussed with KPMG LLP the matters required to be discussed by Statement
on Auditing Standards No. 61; and
- reviewed the written disclosures and the letter from KPMG LLP required by
Independence Standards Board Standard No. 1 and discussed with KPMG LLP
its independence.
Based on the foregoing review and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's 2001 Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
FEES BILLED TO THE COMPANY BY KPMG LLP DURING FISCAL 2001
Audit Fees. Fees billed to the Company by KPMG LLP for the fiscal year
ended July 1, 2001 for the audit of the Company's annual consolidated financial
statements and for the reviews of the consolidated financial statements included
in the Company's quarterly reports on Form 10-Q for the fiscal year totaled
$174,000.
Financial Information Systems Design and Implementation Fees. The Company
did not engage KPMG LLP to provide advice to the Company regarding financial
information systems design and implementation during the fiscal year ended July
1, 2001.
14
17
Other Fees. Fees billed to the Company by KPMG LLP for the fiscal year
ended July 1, 2001 for all other non-audit services rendered to the Company
totaled $1,245,000. Non-audit services rendered consisted primarily of
merger-related services, tax advisory and compliance services, staff assistance,
controls review, and retirement plan audit.
The Audit Committee has considered whether the services provided by KPMG
LLP are compatible with maintaining the independence of KPMG LLP and has
concluded that the independence of KPMG LLP is maintained and is not compromised
by the services provided.
Submitted by the Audit Committee of
the Board of Directors,
MICHAEL P. DOWNEY, Chairman
BRUCE C. EDWARDS
ROBERT H. GOON
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,
except as indicated below, the Company believes that during the 2001 fiscal year
its officers, directors and greater than 10% stockholders complied with all
applicable Section 16(a) filing requirements. Sadie Herrera, the Company's
Executive Vice President, Human Resources, inadvertently failed to report the
disposition of 35,000 shares of Common Stock in May 2001. In October 2001, an
amended Form 5 was filed by Ms. Herrera with respect to such disposition.
STOCKHOLDER PROPOSALS
Stockholders who wish to present proposals for action at the 2002 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,
2002, 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 1, 2001, 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.
15
18
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
Executive Vice President, Chief
Financial Officer,
Secretary and Treasurer
Costa Mesa, California
October 15, 2001
16
19
APPENDIX A
EMULEX CORPORATION
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE PURPOSE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
- Monitor the independence and performance of the Company's independent
auditors.
- Provide an avenue of communication among the independent auditors,
management, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate of fulfilling its responsibilities, and it has direct access to the
independent auditors as well as anyone in the organization. The Audit Committee
has the ability to retain, at the Company's expense, special legal, accounting,
or other consultants or experts it deems necessary in the performance of its
duties.
AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the Nasdaq Exchange.
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent nonexecutive directors, free
from any relationship that would interfere with the exercise of his or her
independent judgment. All members of the Committee shall have a basic
understanding of finance and accounting and be able to read and understand
fundamental financial statements, and at least one member of the Committee shall
have accounting or related financial management expertise.
Audit Committee members shall be appointed by the Board. If an Audit
Committee Chair is not designated or present, the members of the Committee may
designate a Chair by majority vote of the Committee membership.
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. The Audit Committee Chair shall approve an agenda in
advance of each meeting. The Committee shall meet privately in executive session
at least annually with management, the independent auditors, and as a committee
to discuss any matters that the Committee or each of these groups believe should
be discussed. In addition, a quorum of the Committee will communicate with
management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors' limited
review procedures.
AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
1. Review and reassess the adequacy of this Charter at least annually.
Submit the Charter to the Board of Directors for approval and have the document
published at least every three years in accordance with SEC regulations.
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with management and
independent auditors of significant issues regarding accounting principles,
practices, and judgments.
3. In consultation with the management and the independent auditors,
consider the integrity of the Company's financial reporting processes and
controls. Discuss significant financial risk exposures and the steps
A-1
20
management has taken to monitor, control and report such exposures. Review
significant findings prepared by the independent auditors.
4. Review with financial management and the independent auditors the
company's quarterly financial results prior to the release of earnings and/or
the company's quarterly financial statements prior to filing or distribution.
Discuss any significant changes to the Company's accounting principles and any
items required to be communicated by the independent auditors in accordance with
SAS No. 61 (see item 9). The Chair of the Committee may represent the entire
Audit Committee for purposes of this review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review the
independence and performance of the auditors and annually recommend to the Board
of Directors the appointment of the independent auditors or approve any
discharge of auditors when circumstances warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the Company
that could impair the auditors' independence.
8. Review the independent auditors audit plan -- discuss scope, staffing,
locations, reliance upon management, and internal audit and general audit
approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required to be
communicated to audit committees in accordance with SAS No. 61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
11. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the organization's
financial statements, the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental agencies.
Other Audit Committee Responsibilities
12. Annually prepare a report to shareholders as required by the
Securities and Exchange Commission. The report should be included in the
Company's annual proxy statement.
13. Perform any other activities consistent with the Charter, the
Company's by-laws, and governing law, as the Committee or the Board deems
necessary or appropriate.
14. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
A-2
21
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 1, 2001, at the Annual Meeting
of Stockholders to be held on November 15, 2001, or any adjournment thereof.
-- FOLD AND DETACH HERE --
22
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 AND 2.
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 [ ] Cornelius A. Ferris
(except as marked to vote for all nominees [ ] Michael P. Downey [ ] Paul F. Folino
to the contrary) listed to the right [ ] Bruce C. Edwards [ ] Robert H. Goon
[ ] Don M. Lyle
2. RATIFICATION OF SELECTION OF KPMG LLP AS 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:___________________________, 2001
_______________________________________
Signature
_______________________________________
Signature if held jointly
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hereon. When shares are held by joint
tenants, both should sign. When
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please give full title as such. If a
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corporate name of the President or
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