This excerpt taken from the ELX DEF 14A filed Oct 7, 2009.
Potential Payments Upon Termination or Change in Control
Emulex has executed key employee retention agreements with each of its Named Executive Officers and certain of its other officers and key employees. Each of these agreements was amended and restated effective January 16, 2009. Under the terms of these agreements, as amended, Emulex provides certain benefits and payments for its executive officers in the case of a separation from Emulex. These benefits are considered and approved as a part of Emulexs total compensation program. Emulex enters into retention agreements with its key executive officers to minimize distraction and risk of departure of executives in the event of a potential change-in-control transaction, to align the potential severance benefits for senior executives with competitive practices and to ensure that the interests of these officers are aligned with the interests of the stockholders.
The amended key employee retention agreements for Messrs. Benck, Rockenbach and Lee provide that they are entitled to receive the following payments and benefits in the event of a termination of their employment by Emulex without cause, or by them for good reason (each as defined in the agreements) during the period beginning twelve months before and ending twenty-four months after the effective date of a change in control of Emulex:
Mr. Lees retention agreement terminated effective upon the termination of his employment on September 25, 2009 and in connection with that termination, Mr. Lee received the termination arrangement described below.
The agreements also provide these executives with reimbursement of up to $15,000 for outplacement services utilized within the first twelve months following termination of employment. If the severance payment and benefits received by any one of these executives would be considered an excess parachute payment within the meaning of Section 280G of the Internal Revenue Code, thereby subjecting the executive to a 20% penalty excise tax, then the severance payment and benefits will be reduced to the extent that a reduction would result in these executives receiving a greater after-tax amount.
The terms of the amended key employment retention agreements for Messrs. Folino and McCluney are substantially the same as described above, except that they provide for a lump sum cash severance payment equal to twenty-four months of their base pay, inclusive of their target bonus level with respect to the fiscal year prior to their termination date, and continuation of their health insurance with all premiums paid by Emulex for two years following the termination of their employment.
Marshall D. Lees, the Executive Vice President, Engineering of Emulex Design and Manufacturing Corporation (EDM), one of Emulexs principal operating subsidiaries, last day of employment with Emulex was September 25, 2009. In connection with his departure, Mr. Lee entered into a termination and consulting agreement with EDM for a total maximum term of one year. Under this agreement, Mr. Lee would be retained as a consultant through September 24, 2010 on an as-needed basis in exchange for a $500 per month consulting fee. His consulting arrangement will automatically terminate if Mr. Lee becomes an employee or consultant of certain of Emulexs competitors at any time before September 24, 2010. To the extent Mr. Lee remains a consultant through September 24, 2010, he will be entitled to continued vesting of Emulex restricted stock and stock options through September 24, 2010. Further, subject to the execution of a release and the expiration of a statutory revocation period, EDM has also agreed to (i) pay Mr. Lee a lump sum payment of $246,389.99, less applicable withholdings, (ii) pay for the cost of insurance coverage under COBRA through June 30, 2010, and (iii) pay for up to $25,000 of executive outplacement counseling.