Exhibit 10.1
EMULEX CORPORATION
Description of Compensation Arrangements for Certain Executive Officers
     The following is a description of the compensation arrangements for each of
the Company’s named executive officers listed in the Company’s Proxy Statement
for the 2006 Annual Meeting of Stockholders of Emulex Corporation. The
compensation for these executive officers consists of base salary and
perquisites, long-term incentive compensation and annual cash bonus
compensation. Effective August 22, 2007, the following are the base salaries (on
an annual basis) of the Company’s named executive officers:

          Name and Principal Position   New Base Salary
 
       
Paul F. Folino *
  $ 590,527  
Executive Chairman
       
 
       
James M. McCluney
  $ 572,450  
Chief Executive Officer and President
       
 
       
Michael J. Rockenbach
  $ 339,596  
Exec. V.P. and Chief Financial Officer
       
 
       
Marshall D. Lee
  $ 307,204  
Exec. V.P., Engineering
       
 
       
William F. Gill
  $ 291,005  
Exec. V.P., Worldwide Sales
       

* Base salary for Paul F. Folino unchanged since September 5, 2006
     The Company does not have employment agreements with any of its executive
officers but has executed key employee retention agreements with each of its
named executive officers and certain other officers and key employees of the
Company. The Company’s agreement with Mr. Folino entitles him 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 (as defined in
such agreement) within 2 years after a change in control of the Company: (i) a
severance payment equal to the present value of 2 times the sum of Mr. Folino’s
annual salary plus the highest annual average of any 2 of his last 3 annual
bonuses; (ii) continuation for 2 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 his right to exercise his
stock options and vesting of any restricted stock awards 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 such option exercise
right and vesting of restricted stock awards in the event of termination of his
employment without cause or because of a demotion (as defined in such agreement)
within two years after the change in control.
     Mr. McCluney’s key employee retention agreement is substantially the same
as Mr. Folino’s agreement described above. Additionally, in the event that
Mr. McCluney is terminated without cause (regardless of whether a change in
control has occurred), he will be entitled to severance in the amount of one
year’s base salary at the rate then in effect, any deferred incentive bonuses,
reimbursement of COBRA premiums, if any, for one year, and continued vesting of
his stock options for one year.
     The above descriptions are qualified in their entirety by the forms of Key
Employee Retention Agreements for Mr. Folino and Mr. McCluney which are
incorporated herein by reference to Exhibits 10.2 and 10.1, respectively, to the
Company’s Current Report on Form 8-K filed on September 6, 2006.
     The Company also has entered into similar agreements with each of the other
named executive officers which provide for 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 2 of the employee’s last 3 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. The form of key employee retention agreement for each of
the other named executive officers is filed as Exhibit 10.7 to the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2006.
     Additionally, the Company’s executive officers are entitled to participate
in health and welfare and retirement plans, perquisite, fringe benefit and other
arrangements generally available to other salaried employees. In addition, each
officer is entitled to participate in the Emulex Corporation Retirement Savings
Plan, and receives group term life insurance premiums and health care
reimbursement paid with respect to the named executive.
     The Company’s executive officers are eligible for annual performance-based
cash bonuses under the Company’s Executive Bonus Plan. The Bonus Plan is
intended to provide incentives to executive officers and other participants in
the form of quarterly cash bonus payments based on Company performance against
net revenue and net operating income targets established periodically and, in
certain circumstances, other specified business goals. Actual goals for
measurement purposes are the Company’s fiscal annual operating plan that is
approved by the Board of Directors. In addition, a discretionary bonus for
recognition of extraordinary contributions to the success of the company may be
recommended by the Chairman or Chief Executive Officer. All bonus
recommendations are subject to the approval of the Compensation Committee. Each
executive officer of the Company has a quarterly target award opportunity
expressed as a percentage of quarterly gross base salary at the end of the
quarter in question. The quarterly target award opportunity for the executives
range from 35% to 90% of quarterly base

 

--------------------------------------------------------------------------------

 

salary (the “target award percentage”). Each participant’s quarterly bonus is
weighted based upon achieving a combination of corporate performance goals. For
example, 45% of an executive officer’s bonus may be based upon achievement of
net revenue performance goals with the remaining 55% of the bonus based on
achievement of net operating income performance. Targeted quarterly bonuses are
further adjusted by application of an accelerator formula pursuant to which
bonuses are increased to reward for over-achievement of targets and decreased to
minimize bonus payments for performance below targeted levels. For example, if
quarterly net revenue is 10% more than targeted net revenue, the bonus
attributable to achievement of net revenue targets for such quarter will be
between 15 and 20% above the targeted bonus amount. Similarly, if quarterly
revenue is 10% less than targeted net revenue, the bonus attributable to
achievement of net revenue targets for such quarter will be decreased by 15% to
20% percent from the targeted bonus amount. Net revenue and net operating income
bonuses are treated separately regardless of the award formula. However, no net
revenue bonus or net operating income bonus will be paid for a given quarter
unless at least 80% of the corresponding net revenue or net operating income
goal, as the case may be, is achieved. In addition, no bonus payout of any kind
shall be made if net operating income is less than 50% of the applicable net
operating income goal. A participant must be an employee for the entire quarter
to be eligible for a quarterly bonus. Quarterly bonuses are generally paid
30 days following the end of each quarter. Award formulas under the Bonus Plan
are established for a fiscal year and may be modified, extended, or canceled
annually at the discretion of the Compensation Committee. The foregoing
description is qualified in its entirety by the Executive Bonus Plan which is
filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on
September 6, 2006.
     Long term incentives are provided to the named executives in accordance
with the Company’s 2005 Equity Incentive Plan which is attached as Appendix B to
the Company’s Definitive Proxy Statement for the Annual Meeting of Stockholders
held on November 30, 2006. In addition, the Company’s executive officers have
previously received options pursuant to option or other equity plans maintained
by the Company prior to the adoption of the 2005 Equity Incentive Plan in 2005.