Document:

exv10w25

 

Exhibit 10.25

EMULEX CORPORATION

Description of Compensation Arrangements with Non-Employee Directors

     The following is a description of the compensation arrangements for the non-employee directors
of Emulex Corporation (the Company).

     Directors’ Fees. Directors who are not employees of the Company receive a quarterly retainer
of $13,750 and reimbursement for travel expenses. In addition, the Chairmen of the
Nominating/Corporate Governance Committee, the Compensation Committee and the Audit Committee
receive additional quarterly retainers of $1,500, $2,000, and $3,000, respectively. Members of the
Nominating/Corporate Governance Committee and the Compensation Committee (other than the Chairmen)
receive an additional quarterly retainer of $1,000 and members of the Audit Committee (other than
the Chairman) receive additional quarterly retainers of $2,000. 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. Upon becoming a director of the Company, a non-employee director receives an
automatic grant of an option under the Emulex Corporation 1997 Stock Award Plan for Non-Employee
Directors (the Director Plan) to purchase 60,000 shares of common stock of the Company at a
purchase price equal to the fair market value per share of that stock on the date of grant of the
option. Under the terms of the Director Plan, the option would vest as to one-third of the shares
on each anniversary of the grant date if the director is still a director on those dates and will
expire one year after she or he ceases to be a director. In addition, the Director Plan provides
for automatic annual option grants to non-employee directors of 20,000 shares of common stock,
which grants will occur on each yearly anniversary of the director’s commencement date as a
director. The Director Plan is incorporated by reference to Appendix C to the Company’s Definitive
Proxy Statement for its Annual Meeting of Stockholders held on December 1, 2005.

     Indemnification. In addition to the indemnification afforded to directors under Delaware law
and the Company’s Bylaws, the Company typically enters into an indemnification agreement with a new
director upon his or her appointment as a director. The form of the indemnification agreement is
attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 17, 2005. The
Company also maintains directors and officers liability insurance.exv10w26

 

Exhibit 10.26

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 who were serving as executive officers of the Company on July 2, 2006.
The compensation for these executive officers consists of base salary and perquisites, long-term
incentive compensation and annual cash bonus compensation. As of September 5, 2006, the following
are the base salaries (on an annual basis) of the Company’s named executive officers:

	 	 	 	 	 
	Name and Principal Position	 	Base Salary
	Paul F. Folino (1)
	 	$	590,527	 
	Executive Chairman
	 	 	 	 
	 
	 	 	 	 
	James M. McCluney (1)
	 	$	535,000	 
	Chief Executive Officer and President
	 	 	 	 
	 
	 	 	 	 
	Michael J. Rockenbach
	 	$	323,425	 
	Exec. V.P. and Chief Financial Officer
	 	 	 	 
	 
	 	 	 	 
	Marshall Lee
	 	$	293,975	 
	Exec. V.P., Engineering
	 	 	 	 
	 
	 	 	 	 
	William F. Gill
	 	$	271,967	 
	Exec. V.P., Worldwide Sales
	 	 	 	 

 

			
	(1)	 	Effective September 5, 2006, (i) Mr.
Folino resigned as Chief Executive
Officer and was appointed Executive
Chairman of the Company, (ii) Mr.
McCluney resigned as Chief Operating
Officer and was appointed as Chief
Executive Officer and President.

     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 10.8 to the
Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 26, 2004.

     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 and 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 officers 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 December 1, 2005. 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.

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