Document:

exv10w24

 

Exhibit 10.24

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 $7,500 and reimbursement for travel expenses. In addition, the chairmen of the
Nominating/Corporate Governance and Compensation Committees receives an additional quarterly
retainer of $1,250, while committee members receive an additional quarterly retainer of $1,000, and
the chairman of the Audit Committee receives an additional quarterly retainer of $2,500 while
committee members receive an additional quarterly retainer 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 Option 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 November 18, 2004.

     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.exv10w25

 

Exhibit 10.25

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. The compensation for these executive officers consists of base salary
and perquisites, long-term incentive compensation and annual cash bonus compensation. As of August
31, 2005, 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

	 	$	556,500	 
	Chairman and Chief Executive Officer
	 	 	 	 
	 
	 	 	 	 
	James M. McCluney

	 	$	371,830	 
	President and Chief Operating Officer
	 	 	 	 
	 
	 	 	 	 
	Kirk D. Roller(1)

	 	$	373,065	 
	President, Worldwide Sales
	 	 	 	 
	 
	 	 	 	 
	Karen Mulvany

	 	$	310,852	 
	Exec. V.P., Business Planning and Development
	 	 	 	 
	 
	 	 	 	 
	Michael J. Rockenbach

	 	$	290,589	 
	Exec. V.P. and Chief Financial Officer
	 	 	 	 
	 
	 	 	 	 
	William F. Gill

	 	$	235,469	 
	Exec. V.P., Worldwide Sales
	 	 	 	 

 

			
	(1)	 	Mr. Roller retired effective as of July 1, 2005. Amounts indicated reflect base salary as of
the date of retirement.

 

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 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. A copy of Mr. Folino’s key employee retention agreement is
filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
December 26, 2004.

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 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. 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 named executive officers are eligible for annual performance-based cash bonuses under
the Company’s Executive Bonus Plan, which is described in the Company’s Annual Report on Form 10-K
for the fiscal year ended July 3, 2005. A copy of such Executive Bonus Plan is also filed as
Exhibit 10.26 to the Company’s Annual Report on Form 10-K for the fiscal year ended July 3, 2005.

Long term incentives are provided to the named executives in accordance with the Company’s 2004
Employee Stock Incentive Plan which is attached as Appendix B to the Company’s Definitive Proxy
Statement for the Annual Meeting of Stockholders held on November 18, 2004, and the Company’s
Employee Stock Option Plan, as amended, which is attached as Appendix B to the Company’s Definitive
Proxy Statement for the Annual Meeting of Stockholders held on November 21, 2002, or any successor
stockholder approved equity plans.

2exv10w26

 

Exhibit 10.26

EMULEX CORPORATION

EXECUTIVE BONUS PLAN

Plan Purpose

To focus members of the management team on the achievement of specific Company and individual
accomplishments that contribute to the creation of shareholder value.

To assist in attracting and retaining top quality management.

General Plan Description

The Bonus Plan provides for a quarterly cash award based upon Company performance against net
revenue and net operating income plan goals and specified business goals. In addition, a
discretionary bonus for recognition of extraordinary contributions to the success of the company
may be recommended. All bonus recommendations are subject to the approval of the Compensation
Committee.

Eligibility

Corporate officers, executive officers, operating officers, vice presidents, and senior directors,
excluding those eligible for sales commission (unless otherwise indicated within this plan), are
eligible for selection to participate in the Executive Bonus Plan. A participant must be an active
regular full-time employee.

Participation and Term

Actual Executive Bonus Plan participants will normally be selected from among those eligible
annually, prior to the start of each fiscal year, by the Chairman and Chief Executive Officer and
approved by the Compensation Committee. The Plan is based on a fiscal year and may be modified,
extended, or canceled annually at the discretion of the Compensation Committee. A participant must
be an employee for the entire quarter to be eligible for a quarterly bonus. No proration formula
will be in effect.

Target Bonus Opportunity

Each eligible participant will be assigned a target award opportunity expressed as a percentage of
their actual gross base salary at the end of the respective quarter. The target award opportunity
for:

[Category 1] is 90%

[Category 2] is 70%

[Category 3] is 70%

[Category 4] is 35%

[Category 5] is 10%

Executive Bonus Plan

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Bonus Award Criteria

Bonus award criteria will be based upon achieving a combination of corporate performance goals.

     The weighting factors are:

	 	 	 	 	 	 	 	 	 	 
	Chairman/CEO, President/COO,

officers, vice presidents senior directors	 	EVP WW
Sales	 
	 
	 	 	 	 	 	 	 	 	 
	Net revenue performance

	 	 	45	%	 	 	50	%	 
	Net operating income

	 	 	55	%	 	 	50	%	 

The actual goals for measurement purposes will be the Company’s fiscal Annual Operating Plan (AOP)
as approved by the Board of Directors. Corporate bonus components will be calculated according to
the following procedure:

	1.	 	The target bonus percentage times the participant’s quarterly gross base salary equals
the overall award target.
	 
	 	 	Example : 35% x $25,000 (quarterly salary) = $8,750 target award
	 
	2.	 	The weighting factors for net revenue, net operating income, and subjective as stated above
times the overall target award potential give the bonus target for each weighting factor.

	 	 	 	 	 
	 

	 	Example :
	 	45% x $8,750 = $3,938.00 (net revenue target)
	 

	 	 	 	55% x $8,750 = $4,812.00 (net operating income target)

	3.	 	An accelerator formula of 1.5 x % of performance less 50% (EVP, worldwide sales: 2.0 x % of
performance less 100%) will be used for each part of the quantitative bonus award calculation
to reinforce over-achievement opportunity as well as to minimize any bonus payments for
performance below fiscal AOP planned levels.
	 
	 	 	Using the Example if the first quarter performance is 105% of net revenue and 110% of net
income:

	 	 	 
	 

	 	(105% x 1.50) less 50% = 157.5% – 50% = 107.5% of net revenue target: 1.075
	 

	 	x $3,938.00 = $4,233.35 net revenue bonus payment
	 
	 	 
	 

	 	(110% x 1.50) less 50% = 165% – 50% = 115% of net operating income target:

	 

	 	1.15% x $4,812.00 = $5,533.80 net operating income bonus payment
	 
	 	 
	 

	 	total first quarter bonus award for revenue and income = $9,767.15.

Executive Bonus Plan

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Using the Example if the second quarter performance is 90% of net revenue and 80% of net

operating income:

	 	 	 
	 

	 	(90% x 1.50) less 50% = 135% – 50% = 85% of net revenue target:
	 

	 	.85 x $3,938.00= $3,347.30 net revenue bonus payment
	 
	 	 
	 

	 	(80% x 1.50) less 50% = 120% – 50% = 70% of net operating income target:
	 

	 	.70% x $4,812.00 = $3,368.40 net operating income bonus payment
	 
	 	 
	 

	 	total second quarter bonus award for revenue and income = $6,715.70

	4.	 	Regardless of the award formula, no bonus payments will be granted unless 80% of both the net
revenue and net operating income goals for the quarter are achieved as identified by the Board
of Directors’ approved AOP.

Discretionary Bonuses

Occasionally, an individual makes an extraordinary contribution to the success of the company, a
contribution that deserves special recognition and financial reward. It is the intention of this
“Discretionary Bonus” provision to provide the Chairman/CEO with the latitude to recommend unusual
bonus payments to be made to such contributors when they occur. Such bonus recommendations are not
subject to the guidelines of the plan described above, but are subject to the review and prior
approval of the Compensation Commitee.

Payment of Awards

Any proposed awards by the Chairman/CEO must be reviewed and approved by the Compensation
Committee.

Awards will be paid approximately 30 days following the end of each quarter. All legally required
deductions will be withheld.

Plan Administration

The plan will be administered under the direction of the Chairman/CEO of Emulex Corporation upon
approval by the Emulex Compensation Committee. The administrator’s authority will include, but not
be limited to:

Final approval of plan participants, corporate performance goals, award opportunity and
award payment.

Interpretation of all rules pertaining to the plan.

Changes to the plan or termination of the plan, provided such changes or termination
do not adversely affect the award opportunity or difficulty of earning awards following
the beginning of the fiscal year.

Treatment of special events in calculating performance versus plan, such as a major
acquisition or changes in accounting regulations.

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Plan Term

This Plan will become effective on the first day of the fiscal year and end on the last day of the
fiscal year.

Foreign Currency Considerations

All plan participants whose gross base salary is not denominated in U.S. dollars will be paid in
the same currency as their gross base salary as will all bonus calculations will be made using the
equivalent base salary in US currency as indicated in the most recent payroll information.

Definitions

Active Regular Full-time Employee: An employee working 40 hours per week.

Gross Base Salary: An employee’s base salary plus shift differential and lead bonus, if
applicable. Does not include payment for overtime, bonus payments of any type, or other income
such as relocation allowances, employee referral payments, etc.

Net Revenue: Refers to consolidated net sales.

Net Operating Income: Refers to consolidated earnings from operations before interest/
bonus/profit sharing/retirement savings plan/other income & expense, any workers compensation
related expense and income taxes.

Termination for Cause: Termination of employment as a result of violation of one or more
written or unwritten Company policies, procedures, principles or rules regarding employee conduct
and behavior. If an employee is terminated for cause prior to payment of a quarterly bonus, the
employee will not be eligible for the payment.

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