<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
QLOGIC CORPORATION
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of schedule 14(a).
[ ] 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:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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 paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
QLOGIC CORPORATION
26600 LAGUNA HILLS DRIVE
ALISO VIEJO, CA 92656
(949) 389-6000
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 18, 2000
To the Stockholders of QLOGIC CORPORATION:
You are cordially invited to attend the Annual Meeting of Stockholders of
QLogic Corporation, a Delaware corporation (the "Company"), which will be held
at the Sutton Place Hotel, 4500 MacArthur Boulevard, Newport Beach, California,
at 10:00 a.m., Pacific Daylight Time, on Monday, September 18, 2000, 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 six directors to serve until the next annual
meeting of the Company's stockholders and until their successors have
been elected and qualified; and
2. To approve and ratify an amendment to the certificate of incorporation
to increase authorized common stock from 150,000,000 shares to
500,000,000; and
3. To approve and ratify an amendment to the QLogic Corporation Stock
Awards Plan ("Awards Plan") to increase the maximum number of shares by
3,000,000 from 19,800,000 to 22,800,000; and
4. To approve and ratify an amendment to the Non-Employee Director Stock
Option Plan ("Director Plan") to increase the maximum number of shares
by 200,000 from 1,600,000 to 1,800,000; and
5. To ratify the selection of KPMG LLP as the Company's independent public
accountants for fiscal year 2001; and
6. 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 July 31, 2000, 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 ANY TIME BEFORE IT IS VOTED.
BY ORDER OF THE BOARD OF DIRECTORS
Michael R. Manning
Secretary
Aliso Viejo, California
August 14, 2000
<PAGE> 3
QLOGIC CORPORATION
26600 LAGUNA HILLS DRIVE
ALISO VIEJO, CA 92656
(949) 389-6000
------------------------
PROXY STATEMENT
------------------------
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO STOCKHOLDERS:
AUGUST 18, 2000
The following information is provided in connection with the solicitation
of proxies for the Annual Meeting of Stockholders of QLogic Corporation, a
Delaware corporation (the "Company"), to be held at the Sutton Place Hotel, 4500
MacArthur Boulevard, Newport Beach, California, at 10:00 a.m., Pacific Daylight
Time, on Monday, September 18, 2000, 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 Corporate Investor Communications Incorporated, New York,
New York, 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 $7,000. Members of the Management of the
Company may also solicit some stockholders in person, or by telephone, telegraph
or telecopy, 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 six of the
nominee-directors specified herein, FOR the approval of an increase in
authorized common shares, FOR the approval of an increase to the number of
shares under the Awards Plan, FOR the approval of an increase to the number of
shares under the Director Plan, and FOR the ratification of the selection of
KPMG LLP as the Company's independent public accountants for fiscal year 2001,
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 represented at the Meeting but
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 six other individuals
receiving a larger number of votes. Any shares represented at the Meeting but
not voted (whether by abstention, broker non-vote or otherwise) with respect to
the proposals to approve an increase in authorized common shares, to approve an
increase to the number of shares under the Awards Plan, to approve an increase
to the number of shares under the Director Plan, and to ratify the selection of
KPMG LLP will have no effect on the vote for such proposals except to the extent
the number of shares not voted causes the number of shares voted in favor of
such proposals not to equal or exceed a majority
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<PAGE> 4
of the shares present or represented and entitled to vote at the Meeting (in
which case such proposals would not be approved).
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 the right to revoke it at any time by either (i) a later-dated proxy
voted at the Meeting, (ii) a later-dated proxy or 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.
VOTING SECURITIES
The Company has outstanding only common stock, of which 74,769,625 shares
were outstanding as of the close of business on July 31, 2000 (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.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth as of July 14, 2000, information regarding
beneficial ownership of the Company's common stock by each director and each
executive officer and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
--------------------
NUMBER PERCENT
--------- -------
<S> <C> <C>
H.K. Desai(2)............................................... 678,768 1.0%
Larry R. Carter(3).......................................... 21,334 *
James R. Fiebiger........................................... 0 *
Carol L. Miltner(4)......................................... 13,400 *
George D. Wells(5).......................................... 29,550 *
Thomas R. Anderson(6)....................................... 184,534 *
Mark K. Edwards(7).......................................... 220,001 *
Lawrence F. Fortmuller, Jr.(8).............................. 208,449 *
Michael R. Manning(9)....................................... 107,002 *
Robert W. Miller(10)........................................ 66,104 *
David M. Race(11)........................................... 57,992 *
Mark D. Spowart............................................. 74 *
David Tovey(12)............................................. 357,416 *
All Directors and Executive Officers as a group (13
Persons).................................................. 1,944,624 3.0%
</TABLE>
---------------
* Less than 1% of the outstanding shares of common stock.
(1) Based upon 74,696,055 shares of common stock outstanding. Each named person
and all directors and executive officers as a group are deemed to be the
beneficial owners of shares of common stock that may be acquired within 60
days upon exercise of stock options. Accordingly, the number of shares and
percentages set forth next to the name of such person and all directors and
executive officers as a group include the shares of common stock issuable
upon stock options exercisable within 60 days. However, the shares of
common stock so issuable upon such exercise by any such persons are not
included in calculating the percentage of common stock beneficially owned
by any other stockholder. Kenneth E. Hendrickson became a director on
August 4, 2000, and received an initial grant of 64,000 options under the
Director Plan.
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<PAGE> 5
(2) Includes 214,758 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
(3) Consists entirely of shares which may be purchased pursuant to stock
options which are currently, or within the next 60 days will be,
exercisable.
(4) Includes 8,000 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
(5) Includes 14,000 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
(6) Includes 28,296 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
(7) Includes 99,000 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
(8) Includes 39,874 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
(9) Includes 14,800 shares held for the benefit of Mr. Manning's minor children
and 5,000 shares which may be purchased, pursuant to stock options which
are currently, or within the next 60 days will be, exercisable.
(10) Includes 24,290 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
(11) Includes 41,412 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
(12) Includes 119,016 shares which may be purchased pursuant to stock options
which are currently, or within the next 60 days will be, exercisable.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding ownership of
outstanding shares of our common stock by those individuals or groups who have
advised us that they own more than five percent (5%) of such outstanding shares.
<TABLE>
<CAPTION>
SHARES OWNED AS OF
JULY 25, 2000
--------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ --------- -------
<S> <C> <C>
FMR Corp. .................................................. 7,758,952(1) 10.6%
82 Devonshire Street
Boston, MA 02109
Morgan Stanley Dean Witter & Co. ........................... 5,321,038(2) 7.1%
1585 Broadway
New York, NY 10036
</TABLE>
---------------
(1) Based on its Schedule 13G/A filed July 25, 2000, FMR Corp., a parent holding
company of investment companies with its principal offices at 82 Devonshire
Street, Boston, MA 02109, Edward C. Johnson 3d, the Chairman of FMR Corp.
and Abigail P. Johnson, a Director of FMR Corp., beneficially owned
7,758,952 shares of common stock, including sole voting power over 3,453,800
shares and sole dispositive power over 7,008,352 shares, as of July 18,
2000.
(2) Based on its Schedule 13G filed February 4, 2000 Morgan Stanley Dean Witter
& Co., an investment advisor with their principal offices at 1585 Broadway,
New York, NY 10036, beneficially owned 5,321,038 shares of common stock,
including shared voting power over 5,157,438 shares and shared dispositive
power over 5,321,038 shares, as of February 4, 2000.
3
<PAGE> 6
PROPOSAL ONE
NOMINATION AND ELECTION OF DIRECTORS
The Company's directors are to be elected at each annual meeting of
stockholders to serve until the next annual meeting of stockholders or until
their successors are elected and qualified. The Board of Directors proposes the
election of six directors at the Meeting. Each of the nominated directors named
below was elected as a director of the Company at the Company's 1999 Annual
Meeting of Stockholders, with the exception of James R. Fiebiger and Kenneth E.
Hendrickson who were appointed by the Company's Board of Directors on February
3, 2000 and August 4, 2000, respectively, to fill vacancies on the Board of
Directors.
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 six 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 or until their successors are elected and
qualified. Proxies cannot be voted for more than six nominees for director.
Unless authority to vote for directors has been withheld in the proxy, the
persons named in the enclosed proxy intend to vote at the Meeting for the
election of the six nominee-directors presented below. Persons named as proxies
may not vote for the election of any person to the office of director for which
a bone fide nominee is not named in the Proxy Statement.
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 public 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 and paragraphs set forth the names of and certain
information concerning the nominees for election as directors of the Company:
<TABLE>
<CAPTION>
NOMINEE(1) POSITION(S) WITH THE COMPANY AGE
---------- ---------------------------- ---
<S> <C> <C>
H.K. Desai............................. Chairman of the Board, Chief Executive 54
Officer and President
Larry R. Carter(3)..................... Director 57
James R. Fiebiger(3)................... Director 59
Kenneth E. Hendrickson................. Director and Consultant 59
Carol L. Miltner(2).................... Director 58
George D. Wells(2)..................... Director 65
</TABLE>
---------------
(1) The Company does not have a nominating committee of the Board of Directors.
The nominees for election as directors at the Annual 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 Ms. Miltner and Mr. Wells, neither of whom
is an employee of the Company.
(3) Member of the Audit Committee of the Board of Directors of the Company,
currently consisting of Mr. Carter and Dr. Fiebiger, neither of whom is an
employee of the Company.
Mr. Desai joined the Company in August 1995 as President and Chief
Technical Officer. He was subsequently promoted to President and Chief Executive
Officer, became a Director in January 1996 and
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<PAGE> 7
Chairman of the Board in May 1999. From May 1995 to August 1995, he was Vice
President, Engineering (Systems Products) at Western Digital Corporation, a
manufacturer of disk drives. From July 1990 until May 1995, he served as
Director of Engineering, and subsequently Vice President of Engineering for
QLogic. Mr. Desai is also a board member of Microsemi Corporation, a supplier of
analog integrated circuits and power and signal discrete semiconductors.
Mr. Carter has served as a director since June 1999. Since January 1995 he
has worked for Cisco Systems, Inc., a computer networking products company, most
recently as Sr. Vice President of Finance and Administration, Chief Financial
Officer and Secretary. In July 2000, Mr. Carter was appointed to Cisco Systems,
Inc.'s Board of Directors. From July 1992 to January 1995, he served as Vice
President and Corporate Controller of Advanced Micro Devices, Inc. Mr. Carter
has also served as Chief Financial Officer for VLSI Technology, Inc. and for SGS
Thompson Microelectronics, Inc. Mr. Carter currently serves as a member of the
Board of Directors of Network Appliance, Inc., a high performance network
attached storage and access devices company, and eSpeed, Inc., a provider of
business-to-business electronic marketplace solutions company.
Dr. Fiebiger has served as a director since February 2000. Since December
1999 he has been Chairman and Chief Executive Officer of Lovoltech, a start-up
fabless semiconductor company specializing in low voltage devices. He is also a
board member of Mentor Graphics and Artest Corporation. Dr. Fiebiger has also
served as President and Chief Operating Officer for VLSI Technology, Inc. and
Corporate Vice President and Assistant General Manager for Motorola
Semiconductor Sector.
Mr. Hendrickson has served as a director and a consultant since August
2000. Mr. Hendrickson has served as the Chief Executive Officer and as a
Director of Ancor Communications, Inc. from July 1997 to August 2000, and as
their Chairman of the Board of Directors from September 1997 until August 2000,
when Ancor Communications, Inc. merged with QLogic. He was Executive Vice
President and General Manager of the Microcomputer Products Group of Western
Digital Corporation, a disk drive company, from March 1993 to June 1996. Mr.
Hendrickson is also a member of the Board of Directors of NetPropulsion, Inc.
Ms. Miltner has served as a director since February 1994. She is a senior
partner of Impact LLC, a management consultant and seminar firm. From December
1993 until March 1995, she served as Executive Vice President of Sales and
Marketing of AmeriQuest Technologies, Inc., a subassembler of storage products
and distributor of microcomputer products. From July 1991 to December 1993 she
was President of Motivation by Miltner.
Mr. Wells has served as a director since February 1994. He was President
and Chief Executive Officer of Exar Corporation, from June 1992 until October
1996. Before joining Exar, he served as President and Chief Operating Officer of
LSI Logic, a manufacturer of HCMOS and BiCMOS application specific integrated
circuits, for seven years.
BOARD MEETINGS AND COMMITTEES
There were five meetings of the Board of Directors of the Company during
the fiscal year ended April 2, 2000. The Board of Directors has established a
standing Audit Committee and a Compensation Committee. The Compensation
Committee held five meetings and the Audit Committee held seven meetings during
the last fiscal year. Each of the directors of the Company attended 80% or more
of the aggregate of the total number of meetings of the Board of Directors held
during the period in which he or she was a director and the total number of
meetings held by all committees of the Board of Directors on which he or she
served during such period.
The Audit Committee reviews, acts on, and reports to the Board of Directors
with respect to several auditing and accounting matters, including the selection
of the Company's independent public accountants, the scope of the annual audits,
the nature of nonaudit services, fees to be paid to the independent public
accountants, the performance of the Company's independent public accountants,
and the accounting practices of the Company.
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<PAGE> 8
The Compensation Committee reviews the performance of the executive
officers of the Company and reviews the compensation programs for other key
employees, including salary and cash incentive payment levels and option grants
under the Awards Plan.
There is no standing nominating committee or other committee performing a
similar function.
COMPENSATION OF DIRECTORS
Directors' Fees. For service on the Board of Directors, directors who are
not employees of the Company receive a quarterly retainer of $6,000 plus $1,000
for each meeting of the Board of Directors in excess of five per year, and
reimbursement for travel expenses. In addition, the chairmen of the audit and
compensation committees receive an additional quarterly retainer of $1,000.
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. On January 12, 1994, the Board of Directors of the Company
adopted the QLogic Corporation Non-Employee Director Stock Option Plan (the
"Director Plan") under which shares of Common Stock of the Company may be issued
pursuant to the 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 Emulex Corporation ("Emulex"), the former parent
corporation and sole stockholder of the Company, prior to the distribution of
all of the Company's outstanding Common Stock by Emulex to the then stockholders
of Emulex on February 28, 1994, as a result of which the Company became a
separate publicly held company.
In June 1996, the Board adopted, and in August 1996 the stockholders
approved, amendments to the Director Plan to (i) extend the termination date of
the Director Plan by five years to December 31, 2001, (ii) increase the number
of shares of Common Stock subject to the Director Plan by 600,000, (iii) provide
for initial grants to new directors of options to purchase 64,000 shares of
Common Stock, and (iv) provide for annual grants to each non-employee director
(other than the Chairman of the Board) of options to purchase 24,000 shares of
Common Stock, and annual grants to a non-employee Chairman of the Board of
options to purchase 40,000 shares of Common Stock. In June 1999, the Board
adopted, and in September 1999 the stockholders approved, a further amendment to
the Director Plan to increase annual grants of options to purchase shares of
common stock from 24,000 to 32,000 for each non-employee director (other than
the Chairman of the Board), and from 40,000 to 54,000 for a non-employee
Chairman of the Board.
As amended to date, a total of 1,600,000 shares of Common Stock have been
reserved for issuance under the Director Plan. As of July 31, 2000, an aggregate
of 877,996 shares of Common Stock had been issued upon exercise of stock options
granted under the Director Plan, options for a total of 254,000 shares were
outstanding and the remaining 468,004 shares were available for grant. All stock
options granted under the Director Plan have 10-year terms, and become
exercisable as to one-third of the shares subject to the option 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. (All share
quantities have been restated to reflect the Company's stock splits and stock
dividends to date).
The Director Plan provisions discussed above do not reflect the amendment
to the Director Plan adopted by the Board of Directors on June 21, 2000 and
subject to approval at this Meeting, which is described in more detail in
Proposal Four of this Proxy Statement.
Other Compensation. The Company has entered into a consulting agreement
with Mr. Hendrickson which provides for a one-year term, commencing on August 1,
2000. Under the consulting agreement, as amended, Mr. Hendrickson received a
lump-sum bonus of $500,000 in recognition of his efforts in assisting in
consummating the Company's merger with Ancor Communications, Inc., and will be
paid a consulting fee of $250,000, annualized and payable in installments over
the term of the consulting agreement. Mr. Hendrickson has also agreed not to
compete with or solicit employees from the Company or its subsidiaries during
the term of his consultancy and for a period of one year after termination.
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<PAGE> 9
EXECUTIVE OFFICERS
The following table and paragraphs set forth the names of and certain
information concerning the executive officers of the Company as of July 31,
2000:
<TABLE>
<CAPTION>
NAME POSITION(S) WITH THE COMPANY AGE
---- ---------------------------- ---
<S> <C> <C>
H.K. Desai............................. Chairman of the Board, Chief Executive 54
Officer and President
Thomas R. Anderson..................... Vice President and Chief Financial 56
Officer
Mark K. Edwards........................ Vice President and General Manager, 42
Computer Systems
Lawrence F. Fortmuller, Jr............. Vice President, Corporate Marketing 51
Robert W. Miller....................... Vice President, Operations 44
David M. Race.......................... Vice President and General Manager, 44
Enclosure Management Products
Mark D. Spowart........................ Vice President, Sales 49
David Tovey............................ Vice President and General Manager, 55
Peripheral Products
Michael R. Manning..................... Secretary and Treasurer 46
</TABLE>
For information on the business background of Mr. Desai, see "Nomination
and Election of Directors" above.
Mr. Anderson joined the Company in July 1993 as Vice President and Chief
Financial Officer. Prior to joining the Company, Mr. Anderson was Executive Vice
President, Chief Operating Officer and Chief Financial Officer of HIARC, a
software startup company. From October 1990 to December 1992, he was Corporate
Senior Vice President and Chief Financial Officer of Distributed Logic
Corporation, a manufacturer of tape and disk controllers and computer
subsystems.
Mr. Edwards joined the Company in September 1996 as Vice President, Sales
and Corporate Marketing, and is currently Vice President and General Manager,
Computer Systems. Prior to joining the Company, Mr. Edwards served as Vice
President -- Sales and Marketing for the Storage Systems Division of Unisys
Corporation, from August 1994 to September 1996, and as Director -- European
Channels from August 1993 through August 1994. Prior to joining Unisys, Mr.
Edwards served as Regional Sales Manager for Zitel Corporation from April 1991
through August 1993. Prior to joining Zitel, Mr. Edwards held a sales and
management position with Digital Equipment Corporation.
Mr. Fortmuller joined the Company in October 1996 as Vice President and
General Manager, Computer Systems, and is currently Vice President, Corporate
Marketing. Prior to joining the Company, Mr. Fortmuller held various positions
with AST Research, Inc., a manufacturer of microprocessor-based systems, for
nine years, including Vice President -- Americas Marketing from September 1995
to October 1996; Vice President and General Manager -- Server Business Unit from
August 1994 through September 1995; Director of Product Marketing from 1990
through August 1994; and various product marketing positions. Prior to joining
AST Research, Inc., Mr. Fortmuller held various product marketing positions with
Data Card Corporation, MSI Data Corporation and Litton Industries, Inc.
Mr. Miller joined Emulex, a network product manufacturer (our former parent
company) in June 1990 as a staff engineer and was named Engineering Manager in
August 1992. After joining the Company in 1993 he was named Director of
Engineering in July 1994 and Director of Operations in August 1995. He was
subsequently promoted to Vice President of Operations in July 1997.
Mr. Race joined the Company in August 1998 as Vice President and General
Manager, Enclosure Management Products. Mr. Race was Co-founder and President of
Silicon Design Resources, Inc. (SDR) from January 1996 until August 1998, when
SDR was acquired by QLogic. From January 1996 to August 1998 Mr. Race also held
the position of Director of Sales at Software.com. From March 1989 to
7
<PAGE> 10
January 1996 Mr. Race held various positions at Distributed Processing
Technology including Vice President, Strategic Planning.
Mr. Spowart joined the Company in January 2000 as Vice President, Sales.
Prior to joining us, Mr. Spowart worked at ATL Products from March 1992 to
January 2000 where he was most recently Vice President, Worldwide Sales. Mr.
Spowart has held a number of sales executive positions at Auspex Systems and
Memorex Telex.
Mr. Tovey has served as Vice President and General Manager, Peripheral
Products since October 1996. From April 1994 to October 1996, Mr. Tovey served
as Vice President, Marketing of the Company. From March 1985 to April 1994, he
held various positions in the Disk Products Division of Toshiba America
Information Systems, a computer system and disk drive manufacturer, including
Director of Technology Planning and Vice President -- HDD Marketing. Prior to
1985, Mr. Tovey held various marketing and sales management positions with
Unisys Corporation and engineering positions with Ferranti, Ltd. in the U.K.
Mr. Manning joined the Company in June 1993 as Treasurer and Secretary.
Previously, Mr. Manning held various positions at Emulex, including Senior
Director and Treasurer from April 1991 with the additional role of Secretary in
1992. Mr. Manning joined Emulex in July 1983 as Tax Director. Prior to joining
Emulex, Mr. Manning was a Tax Manager at KPMG LLP, independent certified public
accountants.
8
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth compensation received for the three fiscal
years ended April 2, 2000 by our Chief Executive Officer and the four next
highest paid executive officers (the "Named Officers") at April 2, 2000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
OTHER -------------------------------
NAME AND ANNUAL STOCK OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY(S) BONUS($) COMP.(1) GRANTS(2) COMPENSATION(3)
------------------ ---- --------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
H. K. Desai...................... 2000 373,434 400,000 -0- 632,000 shs. 11,620
Chairman of the Board, CEO 1999 316,224 334,000 -0- 280,000 shs. 11,258
President, and Director(4) 1998 277,008 200,000 -0- 120,000 shs. 9,980
Thomas R. Anderson............... 2000 206,875 146,550 -0- 80,000 shs. 7,443
V.P. and Chief Financial 1999 179,369 120,000 -0- 80,000 shs. 6,468
Officer 1998 163,908 70,000 -0- -0- shs. 5,764
Mark K. Edwards.................. 2000 192,928 136,500 -0- 60,000 shs. 6,309
V.P. and General Manager -- 1999 165,625 120,000 -0- 60,000 shs. 5,447
Computer Products 1998 158,008 70,000 -0- -0- shs. 5,122
Lawrence F. Fortmuller, Jr....... 2000 186,342 115,000 -0- 40,000 shs. 6,355
V.P. Corporate Marketing 1999 170,667 110,000 -0- 60,000 shs. 6,020
1998 159,760 70,000 -0- -0- shs. 5,430
David Tovey...................... 2000 194,078 137,100 -0- 80,000 shs. 6,948
V.P. and General Manager -- 1999 168,660 120,000 -0- 60,000 shs. 6,135
Peripheral Products 1998 160,680 70,000 -0- -0- shs. 5,633
</TABLE>
---------------
(1) Perquisites and other personal benefits did not in the aggregate equal or
exceed the lesser of $50,000 for any named individual or 10% of the total of
annual salary and bonus reported in this table for such person.
(2) The amounts in the table represent shares of our common stock covered by
stock options granted to the named individual under the Awards Plan. Share
quantities for all fiscal years presented have been restated to reflect out
stock splits.
(3) This column includes our matching contributions to the QLogic Corporation
Retirement Savings Plan and group term life insurance premiums paid with
respect to the named individual.
(4) Mr. Desai served as our Vice President of Engineering from February 1994,
when the Company became a separate publicly-held corporation, until his
resignation on May 1, 1995. He was rehired on August 4, 1995 as President
and Chief Technical Officer. Mr. Desai was subsequently appointed as our
President and Chief Executive Officer effective January 1996, and Chairman
of the Board of Directors in May 1999.
KEY EMPLOYEE RETENTION AGREEMENT
The Company has previously entered into an agreement with Mr. Desai under
which Mr. Desai 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. Desai 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. Desai'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, 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 within two years after the change in control.
9
<PAGE> 12
OPTION GRANTS DURING FISCAL 2000
The following table sets forth information on grants of stock options
pursuant to the Awards Plan during the fiscal year ended April 2, 2000, to the
Named Officers:
OPTION GRANTS IN FISCAL YEAR 2000
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM($)(4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SHARE) DATE(3) 5% 10%
---- ----------- --------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
H. K. Desai............... 432,000 18.74 31.3125 6/25/09 8,507,058 21,558,554
200,000 8.67 52.0625 11/01/09 6,548,365 16,594,843
Thomas R. Anderson........ 80,000 3.47 31.3125 6/25/09 1,575,381 3,992,325
Mark K. Edwards........... 60,000 2.60 31.3125 6/25/09 1,181,536 2,994,243
Lawrence F. Fortmuller,
Jr...................... 40,000 1.73 31.3125 6/25/09 787,691 1,996,162
David Tovey............... 80,000 3.47 31.3125 6/25/09 1,575,381 3,992,325
</TABLE>
---------------
(1) The amounts in the table represent shares of our common stock covered by
stock options granted to the named individual under the Awards Plan. Each
option 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. All share quantities
have been restated to reflect stock splits.
(2) Options to purchase an aggregate of 2,306,000 shares of common stock were
granted to employees, including the Named Officers, during the fiscal year
ended April 2, 2000.
(3) Options granted have a term of 10 years, subject to earlier termination in
certain events related to termination of employment.
(4) These columns present hypothetical future values of the stock obtainable
upon exercise of the option net of the option's exercise price, assuming
that the market price of our common stock appreciates at a 5% and 10%
compound annual rate over the ten year term of the options. The 5% and 10%
rates of stock price appreciation are presented as examples pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC") and
do not necessarily reflect our estimate or projection of QLogic's future
stock price performance. The potential realizable values presented are not
intended to indicate the value of the options.
10
<PAGE> 13
OPTION EXERCISES IN FISCAL 2000 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 2000 by the Named Officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(2)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
H. K. Desai................ 240,754 11,064,010 31,758 884,504 4,241,878 94,801,871
Thomas R. Anderson......... 92,340 4,066,845 3,296 127,492 439,791 14,556,180
Mark K. Edwards............ 190,000 13,421,983 60,250 133,750 8,024,228 16,021,796
Lawrence F. Fortmuller,
Jr. ..................... 92,550 3,768,973 13,708 133,742 1,811,026 16,602,625
David Tovey................ 166,000 14,714,720 98,764 131,236 13,117,103 15,085,551
</TABLE>
---------------
(1) Share quantities for all transactions have been restated to reflect stock
splits.
(2) Market value of underlying securities at exercise date or year end, as the
case may be, minus the exercise or base price of "in-the-money" options. The
closing sale price for the Company's common stock as of April 2, 2000 on The
Nasdaq National Market was $135.50.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current Compensation Committee of the Company consists of Mr. Wells and
Ms. Miltner, neither of whom is now, or was at any time during the last
completed fiscal year of the Company, an officer or employee of the Company.
During fiscal year 2000, 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.
REPORT OF 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 executives of the
Company. It makes recommendations to the Board of Directors as to the
compensation of the Chief Executive Officer of the Company and reviews and
determines the compensation programs for other key employees, including salary
and cash incentive payment levels and stock awards under the QLogic Corporation
Stock Awards Plan.
Compensation Policies and Philosophy. The Company's executive compensation
policies are designed to attract, retain and reward executives who contribute to
the Company's success, to provide economic incentives for executives to achieve
the Company's business objectives by linking the executives' 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 incentive payments and stock awards to achieve
the aforementioned objectives.
11
<PAGE> 14
In carrying out these objectives, the Compensation Committee considers a
number of factors, which include the level and types of compensation paid to
executives in similar positions by comparable companies. Some, but not all, of
the comparable companies are included in the Stockholder Return Performance
Presentation set forth immediately following this Report of the Compensation
Committee. 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, 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.
Section 162(m) of the Internal Revenue Code establishes a limitation on the
deductibility of compensation payable in any particular tax year to the Chief
Executive Officer and the four most highly compensated other executive officers.
The Company has not paid, and does not foresee any payment authorized in fiscal
2000 of, any compensation that would be non-deductible under Section 162(m).
Components of Compensation. Executives' salaries are established in
relation to a range of salaries for comparable positions among a peer group of
other technology companies of comparable size and complexity. The Company seeks
to pay its executives salaries that are commensurate with the qualifications,
duties and responsibilities and that are competitive in the marketplace. In
general, the Company attempts to set executive compensation that equals or
exceeds the 50th 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 during the prior
fiscal year in helping to meet the Company's financial and business objectives
as well as the executives' performance of their individual responsibilities.
Executives' annual cash incentive payments are used to provide executives
with financial incentives to meet annual performance targets of the Company.
Performance targets and cash incentive payment recommendations for executives
other than principal executives are proposed by the management of the Company's
principal operating divisions, reviewed and, when appropriate, revised by the
Compensation Committee and approved by the Board of Directors. Personal goals
and cash incentive payment recommendations for the principal executives of the
Company are recommended by the Compensation Committee and approved by the Board.
The Compensation Committee believes that equity ownership by executives
provides incentives to build stockholder value and align the interests of
executives with the stockholders. Upon hiring executives, the Compensation
Committee typically recommends stock option or stock awards grants to the
officers under the Awards Plan, subject to applicable vesting periods.
Thereafter, the Compensation Committee periodically considers awarding
additional grants under the Awards Plan. The Compensation Committee believes
that these additional grants provide incentives for executives to remain with
the Company. Stock options and awards generally have value only if the price of
the Company's common stock increases over the exercise or grant price. The size
of options or awards is usually based upon factors such as comparable equity
compensation offered by other technology companies, the seniority of the
executive and the contribution that the executive is expected to make to the
Company. In determining the size of the periodic grants, the Compensation
Committee considers prior grants to the executive, the executive's performance
during the current fiscal year and his or her expected contributions during the
succeeding fiscal year.
Compensation of the Principal Executive Officer. The Compensation
Committee reviews the performance of the principal executive officer of the
Company, as well as other executives of the Company annually. As the principal
executive officer of the Company, Mr. Desai's compensation was determined based
on a subjective consideration of the various factors discussed above, including
the performance of the Company, the individual performance of Mr. Desai, a
review of the compensation packages of executives in technology companies
similar in size and complexity to the Company, and Mr. Desai's performance
compared to various
12
<PAGE> 15
objective and subjective goals established by the Board of Directors. It is the
practice of the Board of Directors to set performance goals at the commencement
of a fiscal year, to give a performance appraisal to the Chief Executive Officer
at the end of the fiscal year, and to set payment of incentive payments based on
the Chief Executive's performance as measured against such objectives.
Respectfully submitted,
Compensation Committee:
George D. Wells
Carol L. Miltner
13
<PAGE> 16
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 Nasdaq Composite
Index and the Nasdaq Computer Index for the period beginning April 2, 1995 and
ended April 2, 2000.
COMPARISON OF CUMULATIVE TOTAL RETURN*
QLOGIC CORPORATION COMMON STOCK, NASDAQ COMPOSITE INDEX AND
NASDAQ COMPUTER INDEX
COMPARISON GRAPH
COMPARISON GRAPH
<TABLE>
<CAPTION>
NASDAQ COMPOSITE NASDAQ COMPUTER
QLOGIC CORPORATION INDEX INDEX
------------------ ---------------- ---------------
<S> <C> <C> <C>
4/2/95 100.00 100.00 100.00
3/31/96 184.21 134.78 142.12
3/30/97 436.84 152.90 186.98
3/29/98 789.47 223.15 286.88
3/28/99 2552.65 296.03 474.72
4/2/00 22820.87 559.57 1010.49
</TABLE>
---------------
* Assumes that the value of the investment in the Company's common stock and
each index was $100 on April 2, 1995, and reinvestment of dividends into the
same security.
14
<PAGE> 17
PROPOSAL TWO
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED COMMON STOCK
The Company's Certificate of Incorporation currently authorizes the
issuance of up to 150,000,000 shares of common stock. As of the Record Date, the
Company had 74,769,625 shares of common stock issued and outstanding, and an
additional 19,800,000 shares of common stock reserved for issuance under stock
plans. This leaves approximately 55,430,375 shares of common stock currently
available for other purposes.
At the Meeting, the stockholders of the Company will be asked to approve
amendments to the Company's Certificate of Incorporation to increase the number
of authorized shares of common stock from 150,000,000 to 500,000,000. If the
stockholders approve this Proposal Two, the second sentence of the first
paragraph of Article IV of the Company's Certificate of Incorporation will be
amended to read in its entirety as follows:
"The amount of total authorized capital stock of the corporation is
501,000,000 shares, divided into 500,000,000 shares of Common Stock,
par value $0.001 per share, and 1,000,000 shares of Preferred Stock,
par value $0.001 per share."
On June 21, 2000, the Board of Directors unanimously approved, subject to
stockholder approval, the foregoing amendment to the Company's Certificate of
Incorporation.
REASONS FOR THE AMENDMENT
The Company's reserve of authorized but unissued shares of common stock has
been substantially depleted in recent years as a result of the Company's recent
acquisition, stock splits and stock dividend, financing activities through the
sale of common stock and the granting of stock options under stock options
plans. The proposed amendment to the Company's Certificate of Incorporation will
increase the number of authorized shares of common stock from 150,000,000 to
500,000,000. The Board of Directors has decided to increase the authorized
number of shares of common stock in order to ensure the Company has a sufficient
number of authorized and unissued shares of common stock for corporate
opportunities, such as additional stock offerings, acquisitions, stock splits,
stock dividends and compensation plans. There are currently no arrangements,
agreements or understandings for the issuance or use of the additional shares of
authorized common stock (other than issuances permitted or required under the
Company's stock option plans or awards made pursuant to those plans). However,
and while this is not the intent of this Proposal Two, in addition to general
corporate purposes, the proposed share increase can be used to make a change in
control of the Company more difficult. See "Potential Anti-Takeover Effect of
Authorized Securities" below.
The additional shares of common stock for which authorization is sought
would be identical to the shares of common stock of the Company authorized prior
to approval of this Proposal Two. Holders of common stock do not have preemptive
rights to subscribe to additional securities that may be issued by the Company,
which means that current stockholders do not have a prior right to purchase any
new issue of capital stock of the Company in order to maintain their
proportionate ownership of the Company, except for such rights as may arise
under the Shareholder Rights Plan described under "Potential Anti-Takeover
Effect of Unissued Securities" below.
As of the Record Date, no shares of the Corporation's preferred stock, of
which 1,000,000 shares are authorized, were issued or outstanding. No increase
in the number of authorized shares of preferred stock of the Company is proposed
or anticipated at the present time. However, the Company has implemented a
Shareholder Rights Plan (described below), pursuant to which shares of preferred
stock may in the future be issued.
If approved, the increased number of authorized shares of common stock will
be available for issue from time to time for such purposes and consideration as
the Board of Directors may approve, and no further vote of stockholders of the
Company will be required, except as provided under Delaware law or under
applicable stock exchange or stock market rules. The availability of additional
shares for issuance, without the delay and
15
<PAGE> 18
expense of obtaining stockholder approval at a special meeting, will restore the
Company's flexibility to issue common stock to a level that the Board of
Directors believes is advisable.
POTENTIAL ANTI-TAKEOVER EFFECT OF AUTHORIZED SECURITIES
The increase in the authorized common stock may facilitate certain
anti-takeover devices that may be advantageous to management if management
attempts to prevent or delay a change of control. The Board of Directors could
create impediments to a takeover or transfer of control of the Company by
causing such additional authorized shares to be issued to a holder or holders
who might side with the Board of Directors in opposing a takeover bid. In
connection, the Board of Directors could issue shares of common stock to a
holder that would thereby have sufficient voting power to assure that certain
types of proposals would not receive the requisite stockholder vote, including
any proposal to remove directors, to accomplish certain business combinations
opposed by the Board of Directors, or to alter, amend or repeal provisions in
the Company's Certificate of Incorporation or Bylaws relating to any such
action. Furthermore, the existence of such shares might have the effect of
discouraging any attempt by a person or entity, through the acquisition of a
substantial number of shares of common stock, to acquire control of the Company,
since the issuance of such shares could dilute the common stock ownership of
such person or entity. Employing such devices may adversely impact stockholders
who desire a change in management or who desire to participate in a tender offer
or other sale transaction involving the Company. By use of such anti-takeover
devices, the Board of Directors may thwart a merger or tender offer even though
stockholders might be offered a substantial premium over the then current market
price of the common stock. At the present time, the Company is not aware of any
contemplated mergers, tender offers or other plans by a third party to attempt
to effect a change in control of the Company, and this Proposal Two is not being
made in response to any such attempt.
The Certificate of Incorporation of the Company authorizes the issuance of
1,000,000 shares of preferred stock, of which 800,000 shares remain undesignated
("preferred stock"). In 1996, the Board of Directors designated 200,000 shares
of preferred stock as Series A Junior Participating preferred stock ("Series A
Preferred Stock") in connection with its adoption of the Shareholder Rights Plan
(discussed below). The Board of Directors, within the limitations and
restrictions contained in the Certificate of Incorporation and without further
action by the Company's stockholders, has the authority to issue the remaining
undesignated preferred stock from time to time in one or more series and to fix
the number of shares and the relative rights, conversion rights, voting rights,
rights and terms of redemption, liquidation preferences and any other
preferences, special rights and qualifications of any such series. Any issuance
of preferred stock with voting rights could, under certain circumstances, have
the effect of delaying or preventing a change in control of the Company by
increasing the number of outstanding shares entitled to vote and increasing the
number of votes required to approve a change in control of the Company.
On June 4, 1996, the Board of Directors adopted the Shareholder Rights Plan
(the "Rights Plan"), pursuant to which preferred stock rights ("Rights") were
distributed in the form of a dividend to stockholders of record on June 20, 1996
on the basis of one-eighth Right (after adjustments for stock splits and stock
dividends to date) for each share of common stock held. One-eighth Right also
attach to each share of common stock issued by the Company subsequent to June
20, 1996, and prior to the Distribution Date (defined below). In general, the
Rights become exercisable or transferable only upon the occurrence of certain
events related to changes in ownership of the common stock. Once exercisable,
each Right entitles its holder to purchase from the Company 1/100th of a share
of the Company's Series A Preferred Stock. Initially, the purchase price was
fixed at $45.00 per 1/100th of a share, subject to adjustment. In September
1997, the Board of Directors amended the Rights Plan to increase such purchase
price from $45.00 to $225.00, and in June 1999, the Board further amended the
Rights Plan to increase such purchase price from $225.00 to $425.00. The Rights
will separate from the common stock and become exercisable or transferable on a
distribution date (the "Distribution Date"), which will occur on the earlier of
(i) 10 days following a public announcement that a person or a group of
affiliated or associated persons (an "Acquiring Person") has acquired beneficial
ownership of securities representing 15% or more of the common stock, or (ii) 10
days following the commencement of a tender or exchange offer that would result
in a person or group of related persons becoming an Acquiring Person. Upon the
occurrence of certain other events related to changes in the
16
<PAGE> 19
ownership of the Company stock, each holder of a Right would be entitled to
purchase shares of the common stock, or an acquiring corporation's common stock,
having a market value equal to two times the exercise value of the Right. The
Rights expire on the earliest of (a) June 4, 2006, (b) consummation of a merger
transaction with a person or group who acquires common stock pursuant to a
transaction approved by a majority of the disinterested members of the Company's
Board of Directors, or (c) redemption of the Rights. Subject to certain
conditions, the Rights may be redeemed by the Company's Board of Directors at
any time at a price of $0.001 per Right. The Rights are not currently
exercisable and trade together with the shares of common stock to which they are
attached. The Rights, if exercised, could cause a substantial dilution to the
equity interest in the Company to a person's or group's ownership interest in
the common stock that attempts to acquire the Company on terms not approved by
the Company's Board of Directors. The Rights Plan may be amended or terminated
at the discretion of the Company's Board of Directors then in office; provided,
however, that if a majority of the Board of Directors is elected by stockholder
action by written consent or at a special meeting of stockholders (a meeting
other than a regularly scheduled annual meeting), no proposed amendment will be
effective until the earlier of (i) the 180th day following the effectiveness of
such election or (ii) the next regular annual meeting of stockholders of the
Company following the effectiveness of such election.
The Company is also governed by Section 203 of the Delaware General
Corporation Law (the "Delaware anti-takeover law"), which provides that certain
"business combinations" between a Delaware corporation whose stock is generally
traded or held of record by more than 2,000 stockholders, such as the Company,
and an "interested stockholder" (generally defined as a stockholder who
beneficially owns 15% or more of a Delaware corporation's voting stock) are
prohibited for a three-year period following the date that such stockholder
became an "interested stockholder," unless certain exceptions apply. The term
"business combination" is defined generally to include, among other
transactions, mergers, tender offers and transactions which increase an
"interested stockholder's" percentage ownership of stock in a Delaware
corporation.
While it may be deemed to have potential anti-takeover effects, the
proposed amendment to increase the authorized common stock is not prompted by
any specific effort or takeover threat currently perceived by the Board of
Directors. Moreover, the Board of Directors does not currently intend to propose
additional anti-takeover measures in the foreseeable future.
BOARD OF DIRECTORS' RESERVATION OF RIGHTS
The Board of Directors retains the authority to take or to authorize
discretionary actions as may be appropriate to carry out the purposes and
intentions of this Proposal Two, including without limitation editorial
modifications or any other change to the proposed amendment to the Certificate
of Incorporation which the Board of Directors may adopt without stockholder vote
in accordance with the Delaware General Corporation Law.
NO DISSENTERS' RIGHTS
Under Delaware law, stockholders are not entitled to dissenters' rights of
appraisal with respect to this Proposal Two.
VOTE REQUIRED FOR APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION;
RECOMMENDATION OF BOARD DIRECTORS
Approval of this Proposal Two to amend the Company's Certificate of
Incorporation requires the affirmative vote of the holders of a majority of the
shares of common stock of the Company outstanding on the Record Date. Both
abstentions and broker non-votes are not affirmative votes and, therefore, will
have the same effect as votes against this Proposal Two.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION.
17
<PAGE> 20
PROPOSAL THREE
AMENDMENT OF THE STOCK AWARDS PLAN
At the Meeting, the stockholders of the Company will be asked to approve an
amendment to the QLogic Corporation Stock Awards Plan (the "Awards Plan") to
increase the maximum number of shares of common stock of the Company available
for awards granted under the Awards Plan by 3,000,000 shares, from 19,800,000
shares to 22,800,000 shares.
In January 1994, the Company's Board of Directors adopted the Awards Plan
and the Awards Plan was approved by Emulex, the Company's then sole stockholder.
In June 1995, the Board of Directors amended the Awards Plan to increase the
maximum number of shares of common stock available for awards granted under the
Awards Plan from 8,800,000 shares to 10,800,000 shares, and the stockholders
approved this amendment at the Annual Meeting held in August 1995. In August
1997, the Board of Directors adopted a further amendment to the Awards Plan to
further increase the maximum number of shares of common stock available for
awards granted under the Awards Plan from 10,800,000 shares to 13,800,000
shares, and to establish a maximum number of derivative securities that may be
granted to any one participant in any calendar year at 2,000,000, and the
stockholders approved this further amendment at the Annual Meeting held in
August 1997. In June 1999, the Board of Directors adopted a further amendment to
the Awards Plan to further increase the maximum number of shares of common stock
available for awards granted under the Awards Plan from 13,800,000 to 19,800,000
shares, and the stockholders approved this further amendment at the annual
meeting held in August 1999. (All share quantities have been restated to reflect
the Company's stock splits and stock dividends to date).
THE AMENDMENT
On June 21, 2000, the Board of Directors amended the Awards Plan to further
increase the maximum number of such shares by 3,000,000, from 19,800,000 shares
to 22,800,000 shares, subject to stockholder approval.
PURPOSE OF THE AWARDS PLAN
The purpose of the Awards Plan is to advance the interests of the Company
by encouraging employees who will largely be responsible for the long-term
success and development of the Company to acquire and retain an ownership
interest in the Company. The Awards Plan is also intended to provide flexibility
to the Company in attracting and retaining key employees and stimulating their
efforts on behalf of the Company. The Awards Plan is designed to provide a
competitive and balanced incentive and reward program for participants.
REASONS FOR AMENDMENT OF THE AWARDS PLAN
The amendment to the Awards Plan to increase the number of shares available
thereunder was adopted by the Board and is recommended for approval by the
Company's stockholders because, due to overall revenue growth, including by
acquisition, the number of employees eligible to participate in the Awards Plan
has increased substantially. The Board believes that option grants or other
awards under the Awards Plan play an important role in the Company's ability to
attract, motivate and retain employees of outstanding ability and to reward
employees for outstanding performance; if the Company were unable to grant
additional options under the Awards Plan, the Company's future hiring, promotion
and operating plans could be negatively impacted.
DESCRIPTION OF THE AWARDS PLAN
Awards under the Awards Plan may include incentive stock options,
nonqualified stock options, stock appreciation rights, restricted stock awards,
unrestricted stock awards, deferred stock awards, performance unit awards and
other stock-based awards. As of July 31, 2000, of the 19,800,000 shares
authorized under the Awards Plan, stock options were outstanding under the
Awards Plan in respect of an aggregate of 6,485,760 shares; and an aggregate of
5,143,955 shares were available for future grants of options or other awards.
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The principal features of the Awards Plan are summarized below, but the
summary is qualified in its entirety by reference to the Awards Plan itself.
Copies of the Awards Plan and of the proposed amendment will be available at the
Annual Meeting and can be obtained by writing to the Corporate Secretary, QLogic
Corporation, 26600 Laguna Hills Drive, Aliso Viejo, California 92656.
Eligibility. Employees of the Company and its subsidiaries, if any, as
selected by the Plan Administrator (defined below), are eligible to receive
awards under the Awards Plan. As of July 31, 2000, approximately 380 employees
were eligible to receive awards under the Awards Plan.
Administration. The Awards Plan is administered by the Plan Administrator,
which has broad discretion in determining the type and specific terms and
provisions of the various awards described below. The Awards Plan provides that
the Plan Administrator will be the Board of Directors of the Company, if all
members of the Board are "disinterested persons," within the meaning of SEC
regulations, who are ineligible to receive awards under the Awards Plan.
Alternatively, the Board may delegate this function to the Compensation
Committee, or to any other committee appointed by the Board that includes two or
more directors of the Company who are "disinterested persons." The Awards Plan
is currently administered by the Compensation Committee.
Stock Option Awards. The Awards Plan permits the Plan Administrator to
grant nontransferable stock options that qualify as incentive stock options
under Section 422 of the Code ("ISOs") and stock options that do not so qualify
("NSOs"). All ISO awards under the Awards Plan must have an exercise price that
is equal to at least 100% of the fair market value of the shares to which the
options relate as of the option grant date, and ISOs granted to any employee
possessing more than 10% of the combined voting power of all classes of stock of
the Company or its subsidiaries must be granted at 110% of fair market value as
of the option grant date. Optionees under the Awards Plan may exercise their
options by paying cash, by using the cashless exercise procedure allowed under
Federal Reserve Regulation T or by tendering shares of the Company's common
stock that they already own.
Stock Appreciation Rights. The Awards Plan authorizes the Plan
Administrator to grant stock appreciation rights ("SARs") and to determine the
form of payment therefor. A SAR entitles the recipient to receive an amount in
cash or shares of the Company's common stock, or a combination thereof, having a
value equal to the excess of the fair market value of a share on the date of
exercise over a specified price fixed by the Plan Administrator multiplied by
the number of shares with respect to which the holder is exercising SARs. SARs
may be granted in tandem with any previously or contemporaneously granted option
or independent of any option. The specified price of a tandem SAR will be the
option price of the related option. To the extent a tandem SAR is exercised, the
related option will be cancelled and, to the extent that related option is
exercised, the tandem SAR will be cancelled. ISOs and options which are not ISOs
may provide that in connection with exercises thereof, the holders will receive
cash payments in amounts necessary to reimburse holders for their income tax
liability resulting from such exercise in the payment made pursuant to this
provision.
Restricted Stock Awards. The Awards Plan also permits the Plan
Administrator to grant shares of common stock to a participant subject to the
terms and conditions imposed by the Plan Administrator ("Restricted Stock").
Each certificate for Restricted Stock will be registered in the name of the
participant and deposited, together with a stock power endorsed in blank, with
the Company. There will be established for each Restricted Stock award a
restriction period (the "Restriction Period") determined by the Plan
Administrator during which shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered. Except for such restrictions on
transfer and such other restrictions as the Plan Administrator may impose, the
participant will have all the rights of a holder of common stock as to such
Restricted Stock.
The Plan Administrator may permit or require the payment of cash dividends
to be deferred and, if it so determines, reinvested in additional Restricted
Stock or otherwise invested. At the expiration of the Restriction Period, the
Company will redeliver to the participant (or the participant's legal
representative or designated beneficiary) the certificates deposited. Except as
may be provided at the time of grant or otherwise,
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upon a termination of employment for any reason during the Restriction Period
all shares still subject to restriction shall be forfeited by the participant.
Unrestricted Stock. In addition to Restricted Stock awards, the Plan
Administrator may grant or sell to any participant shares of common stock free
of restrictions under the Awards Plan ("Unrestricted Stock"). Any purchase of
Unrestricted Stock by a recipient must take place within 60 days after the grant
of the right to purchase such shares. Notwithstanding the foregoing, any shares
of Unrestricted Stock granted to a participant subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") may not be sold
or otherwise disposed of for value for a period of six months from the date of
grant.
Deferred Stock Awards. The Awards Plan also permits the Plan Administrator
to make a Deferred Stock award. A Deferred Stock award is an award entitling the
recipient to acquire shares of common stock with payment in one or more
installments at a future date or dates, as determined in the Plan
Administrator's discretion. The Plan Administrator may condition such
acquisition on the attainment of specified performance goals or on such other
factors or criteria as the Plan Administrator may deem appropriate.
The deferral period will be determined by the Plan Administrator and set
forth in a Deferred Stock award agreement executed between the Company and the
participant. Subject to the Plan Administrator's approval, a participant may
elect to further defer receipt of the common stock payable under a Deferred
Stock award for a specified period, provided such election is made at least
twelve months prior to the completion of the deferral period specified in the
Deferred Stock award agreement.
Performance Unit Awards. The Awards Plan permits the Plan Administrator to
make awards entitling the recipient to acquire cash or shares of common stock,
or a combination of cash and common stock, upon the attainment of specified
performance goals established by the Plan Administrator at the date of grant.
The performance goals may relate to objectives relating to the Company or the
individual participant. Performance goals may vary from participant to
participant and between groups of participants as determined by the Plan
Administrator. Performance units may be awarded independent of or in combination
with the grant of any other award under the Awards Plan. The specific terms of
the performance unit award, the performance periods, goals and payment terms
shall be set forth in the terms of an award agreement prepared by the Plan
Administrator and executed between the Company and the participant.
Other Stock-Based Awards. Under the Awards Plan, in addition to the types
of awards described above, participants may be awarded other stock-based awards
under which common stock is or may in the future be acquired. Such awards may
include, without limitation, debt securities convertible into or exchangeable
for shares of common stock. Awards will be granted upon such conditions,
including attainment of performance goals, as the Plan Administrator may
determine at the time of grant. However, no other stock-based award will be
exercisable in whole or in part during the first six months following the date
of grant or, if shares of common stock are awarded to a participant on the date
of grant, such stock shall be subject to restrictions against transfer for a
minimum of six months. In addition, no convertible or exchangeable debt may be
issued unless the Plan Administrator provides a means of avoiding any right of
the holders of such debt to prevent a corporate transaction by reason of
covenants in such debt. The Plan Administrator has discretion to determine the
consideration, if any, payable upon the issuance or exercise of any other
stock-based award, the conditions under which any such award could be forfeited,
or other terms and conditions which are to be specified in any award agreement
entered into between the Company and the participant.
Change of Control. In the event of a liquidation of the Company, or a
merger, reorganization, or consolidation of the Company with any other
corporation in which the Company is not the surviving corporation or the Company
becomes a wholly owned subsidiary of another corporation, any unexercised
options or other award rights theretofore granted under the Awards Plan shall be
deemed cancelled unless the surviving corporation in any such transaction elects
to assume such award rights or to substitute other award rights therefor;
provided, however, if such award rights would otherwise be cancelled in
accordance with the foregoing, the award recipient will have the right,
exercisable during a ten-day period ending on the fifth day prior to such
transaction, to exercise the award rights without regard to any restrictions on
exercisability.
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Amendment, Modification and Termination. The Awards Plan will terminate on
the earliest to occur of the date when all shares of common stock available
under the Awards Plan have been acquired through the exercise of awards and the
payment of benefits in connection with awards under the Awards Plan, February
28, 2004, or such earlier date as the Board of Directors may determine. The
Board of Directors may amend, modify or terminate the Awards Plan, but may not
without the approval of stockholders make any amendments which would (i)
materially increase the benefits accruing to participants under the Awards Plan,
(ii) increase the total number of shares which may be issued under the Awards
Plan, or (iii) materially modify the class of employees eligible to participate
in the Awards Plan. No amendment of the Awards Plan will impair the rights of
any participant without such participant's consent.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences of
participation in the Awards Plan. Such summary should not be relied upon as
being a complete statement. Federal tax laws are complex and subject to change.
Moreover, participation in the Awards Plan may also have consequences under
state and local tax laws which may vary from the federal tax consequences
described below. For such reasons, the Company recommends that each participant
consult his or her personal tax advisor to determine the specific tax
consequences applicable to him or her.
Incentive Options. No taxable income will be recognized by an optionee
under the Awards Plan upon either the grant or the exercise of an incentive
option. Instead, a taxable event will occur upon the sale or other disposition
of the shares acquired upon exercise of an incentive option, and the tax
treatment of the gain or loss realized will depend upon how long the shares were
held before their sale or disposition. As is discussed below, the exercise of an
incentive option and the subsequent disposition of the shares acquired also may
result in items of "tax preference" for purposes of the "alternative minimum
tax."
If a sale or other disposition of the shares received upon the exercise of
an incentive option occurs more than (i) one year after the date of exercise of
the option and (ii) two years after the date of grant of the option, the holder
will recognize long-term capital gain or loss at such time equal to the full
amount of the difference between the proceeds realized and the exercise price
paid. However, a sale, exchange, gift or other transfer of legal title of such
stock before the expiration of either the one-year or two-year period described
above will constitute a "disqualifying disposition." A disqualifying disposition
involving a sale or exchange will result in ordinary income to the optionee in
an amount equal to the lesser of (i) the fair market value of the stock on the
date of exercise minus the exercise price, or (ii) the amount realized on
disposition minus the exercise price. If the amount realized in a disqualifying
disposition exceeds the fair market value of the stock on the date of exercise,
the gain realized, in excess of that taxed as ordinary income as indicated
above, will be taxed as capital gain. A disqualifying disposition as a result of
a gift will result in ordinary income to the optionee in an amount equal to the
difference between the exercise price and the fair market value of the stock on
the date of exercise. Any loss realized upon a disqualifying disposition will be
treated as a capital loss. Capital gains and losses resulting from disqualifying
dispositions will be treated as long-term or short-term depending upon whether
the shares were held for more or less than the applicable statutory holding
period (which currently is one year). The Company will be entitled to a tax
deduction in an amount equal to the ordinary income recognized by the optionee
as a result of the disqualifying disposition.
If legal title to any shares acquired upon exercise of an incentive option
is transferred by sale, gift or exchange, such transfer will be treated as a
disposition for purposes of determining whether a "disqualifying disposition"
has occurred. However, certain transfers will not be treated as dispositions for
such purposes, such as transfers to an estate or by inheritance upon an
optionee's death, a mere pledge or hypothecation, or a transfer into the name of
the optionee and another person as joint tenants.
Section 55 of the Code imposes an "alternative minimum tax" on an
individual's income to the extent the amount of the alternative minimum tax
exceeds the individual's regular tax for the year. For purposes of computing the
alternative minimum tax, the excess of the fair market value (on the date of
exercise) of the shares received upon the exercise of an incentive option over
the exercise price paid is included in alternative minimum taxable income in the
year the option is exercised. If the shares are sold in the same year that the
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<PAGE> 24
option is exercised, the regular tax treatment and the alternative tax treatment
will be the same. If the shares are sold during a year subsequent to that in
which the option was exercised, the basis of the stock acquired will equal its
fair market value on the date of exercise for purposes of computing alternative
minimum taxable income in the year of sale. For example, assume that an
individual pays an exercise price of $10 to purchase stock having a fair market
value of $15 on the date of exercise. The amount included in alternative minimum
taxable income is $5, and the stock has a basis of $10 for regular tax purposes
and $15 for alternative minimum tax purposes. If the individual sells the stock
in a subsequent year for $20, the gain recognized is $10 for regular tax
purposes and $5 for alternative minimum tax purposes.
Under the Awards Plan, the Plan Administrator may permit an optionee to pay
the exercise price of an incentive option by delivering shares of common stock
of the Company already owned by the optionee, valued at their fair market value
on the date of exercise. Generally, if the exercise price of an incentive option
is paid with already-owned shares or by a combination of cash and already-owned
shares, there will be no current taxable gain or loss recognized by the optionee
on the already-owned shares exchanged. A special rule applies, however, if the
shares exchanged were previously acquired through the exercise of an incentive
option and the applicable holding period requirements for favorable tax
treatment of such shares have not been met at the time of the exchange. In such
event, the exchange will be treated as a disqualifying disposition of such
shares and will result in the recognition of income to the optionee, in
accordance with the rules described above for disqualifying dispositions. If
this special rule does not apply, then the new shares received by the optionee
upon the exercise of the option equal in number to the old shares exchanged will
have the same tax basis and holding period for long-term capital gain purposes
as the optionee's basis and holding period in the old shares. The balance of the
shares received by the optionee upon exercise of the option will have a tax
basis equal to any cash paid by the optionee, and if no cash was paid, the tax
basis of such shares will be zero. The holding period of the additional shares
for long-term capital gain purposes will commence on the date of exercise. The
holding period for purposes of the one-year and two-year periods described above
will commence on the date of exercise as to all of the shares received upon the
exercise of an incentive option. If any of the shares subject to the basis
allocation rules described above are subsequently transferred in a disqualifying
disposition, the shares with the lowest tax basis will be treated as being
transferred first.
Nonqualified Options. No taxable income is recognized by an optionee upon
the grant of a nonqualified option. Upon exercise, however, the optionee will
recognize ordinary income in the amount by which the fair market value of the
shares purchased exceeds, on the date of exercise, the exercise price paid for
such shares. The income recognized by the optionee will be subject to income tax
withholding by the Company out of the optionee's current compensation. If such
compensation is insufficient to pay the taxes due, the optionee will be required
to make a direct payment to the Company for the balance of the tax withholding
obligation. The Company will be entitled to a tax deduction equal to the amount
of ordinary income recognized by the optionee, provided certain reporting
requirements are satisfied. If the exercise price of a nonqualified option is
paid by the optionee in cash, the tax basis of the shares acquired will be equal
to the cash paid plus the amount of income recognized by the optionee as a
result of such exercise. If the exercise price is paid by delivering shares of
common stock of the Company already owned by the optionee or by a combination of
cash and already-owned shares, there will be no current taxable gain or loss
recognized by the optionee on the already-owned shares exchanged (however, the
optionee will nevertheless recognize ordinary income to the extent that the fair
market value of the shares purchased on the date of exercise exceeds the price
paid, as described above). The new shares received by the optionee equal in
number to the old shares exchanged will have the same tax basis and holding
period as the optionee's basis and holding period in the old shares. The balance
of the shares received will have a tax basis equal to any cash paid by the
optionee plus the amount of income recognized by the optionee as a result of
such exercise, and will have a holding period COMMENCING with the date of
exercise.
Upon the sale or disposition of shares acquired pursuant to the exercise of
a nonqualified option, the difference between the proceeds realized and the
optionee's basis in the shares will be a capital gain or loss and will qualify
for long-term capital gain or loss treatment if the shares have been held for
more than the applicable statutory holding period.
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<PAGE> 25
Restricted Stock. The receipt of Restricted Stock will not result in a
taxable event to the Participant until the expiration of any repurchase rights
retained by the Company with respect to such stock, unless the participant makes
an election under Section 83(b) of the Code to be taxed as of the date of
purchase. If no repurchase rights are retained, or if a Section 83(b) election
is made, the participant will recognize ordinary income in an amount equal to
the excess of the fair market value of such shares on the date of purchase over
the purchase price paid for such shares. Even if the purchase price and the fair
market value of the shares are the same (in which case there would be no
ordinary income), a Section 83(b) election must be made to avoid deferral of the
date ordinary income is recognized. The election must be filed with the Internal
Revenue Service not later than thirty (30) days after the date of transfer.
If no Section 83(b) election is made or if no repurchase rights are
retained, a taxable event will occur on each date the participant's ownership
rights vest (e.g., when the Company's repurchase rights expire) as to the number
of shares that vest on that date, and the holding period for long-term capital
gain purposes will not commence until the date the shares vest. The participant
will recognize ordinary income on each date shares vest in an amount equal to
the excess of the fair market value of such shares on that date over the amount
paid for such shares.
AWARDS OUTSTANDING UNDER THE AWARDS PLAN
As of July 31, 2000, awards in the form of outstanding options under the
Awards Plan were held by approximately 428 persons to purchase an aggregate of
6,485,760 shares of common stock at an average exercise price of $31.25 per
share, and 5,143,955 shares (excluding those contemplated by the subject
amendment) were available for future grants of options under the Awards Plan.
Grants under the Awards Plan in fiscal 2000 to the Chief Executive Officer and
certain other executive officers are set forth above in the table entitled
"Option Grants During Fiscal 2000." As of July 14, 2000, stock options under the
Awards Plan were held by the following persons: H.K. Desai -- 1,358,762 shares;
Thomas R. Anderson -- 208,288 shares; Mark K. Edwards -- 274,000 shares; Michael
R. Manning -- 50,000 shares; David Tovey -- 269,000 shares; Larry F. Fortmuller,
Jr. -- 149,866 shares; Robert W. Miller -- 125,282 shares; Mark D.
Spowart -- 212,000 shares; and David M. Race -- 185,420 shares; all current
executive officers as a group (9 persons) -- 2,832,618 shares; all optionees as
a group (excluding current executive officers) (approximately 419
persons) -- 3,653,142 shares. Current directors or nominees for director who are
not employees of the Company have not been granted any options under the Awards
Plan. In addition, no associate of any current director, nominee for director or
executive officer has been granted any options under the Awards Plan. As of July
31, 2000, options were the only type of award that had been granted under the
Awards Plan.
The market value of the Company's common stock on July 31, 2000 was $74.50
per share.
VOTE REQUIRED FOR APPROVAL OF AMENDMENT TO AWARDS PLAN; RECOMMENDATION OF BOARD
DIRECTORS
Approval of this Proposal Three to amend the Awards Plan to increase the
authorized shares by 3,000,000 requires the affirmative vote of the holders of a
majority of the shares of common stock of the Company present, or represented,
and entitled to vote at the Annual Meeting. If Proposal Three to approve such
amendment is not approved by the stockholders, the Awards Plan, as previously
approved, will continue in effect.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS
PROPOSAL TO AMEND THE AWARDS PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE
THEREUNDER.
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PROPOSAL FOUR
AMENDMENT OF THE NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
At the Meeting, the stockholders of the Company will be asked to approve an
amendment to the QLogic Corporation Non-Employee Director Stock Option Plan (the
"Director Plan"), to increase the maximum number of shares of common stock of
the Company available for option grants under the Director Plan by 200,000
shares, from 1,600,000 shares to 1,800,000 shares.
In January 1994, the Company's Board of Directors adopted the Director Plan
and the Director Plan was approved by Emulex, the Company's then sole
stockholder. In June 1996, the Board of Directors adopted, and in August 1996
the stockholders approved, amendments to the Director Plan to (i) extend the
termination date of the Director Plan by five years to December 31, 2001, (ii)
increase the number of shares of common stock available for option grants under
the Director Plan by 600,000 (from 1,000,000 to 1,600,000), (iii) provide for
initial grants to new directors of options to purchase 64,000 shares of common
stock and (iv) provide for annual grants to each non-employee director (other
than the Chairman of the Board) of options to purchase 24,000 shares of common
stock, and annual grants to a non-employee Chairman of the Board of options to
purchase 40,000 shares of common stock. In June 1999, the Board of Directors
adopted, and in September 1999 the stockholders approved, a further amendment to
the Director Plan to increase annual grants of options to purchase shares of
common stock from 24,000 to 32,000 for each non-employee director (other than
the Chairman of the Board), and from 40,000 to 54,000 for a non-employee
Chairman of the Board. (All share quantities have been restated to reflect the
Company's stock splits and stock dividends to date).
THE AMENDMENT
On June 21, 2000, the Board of Directors amended the Director Plan to
increase the maximum number of shares of common stock of the Company available
for option grants under the Director Plan by 200,000 shares, from 1,600,000
shares to 1,800,000 shares, subject to stockholder approval.
PURPOSE OF THE DIRECTOR PLAN
The Director Plan is intended to increase the proprietary and vested
interests of the non-employee directors of the Company and the growth and
performance of the Company by granting to them options to purchase shares of
common stock of the Company, to encourage them to continue their services to the
Company, and to attract individuals with outstanding ability to serve on the
Board of Directors of the Company.
REASONS FOR AMENDMENT OF THE DIRECTOR PLAN
The foregoing amendment to increase the number of shares available
thereunder was adopted by the Board and is recommended for approval by the
Company's stockholders because, in conjunction with the overall growth of the
Company, the size of the Board has increased in the past few years, and the
Board believes that continued option grants under the Director Plan play an
important role in the Company's efforts to attract and retain the services of
individuals of outstanding ability as directors of the Company. The Board also
believes that option grants such as those contemplated in the Director Plan are
consistent with a trend in computer industry companies similar in size and
complexity to the Company to compensate directors with stock options.
DESCRIPTION OF THE DIRECTOR PLAN
The Director Plan provides for the grant of stock options to purchase
shares of the Company's common stock to directors who are not employees of the
Company or any of its subsidiaries.
The principal features of the Director Plan are summarized below, but the
summary is qualified in its entirety by reference to the Director Plan itself.
Copies of the Director Plan and of the proposed amendment
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will be available at the Meeting and can be obtained by writing to the Corporate
Secretary, QLogic Corporation, 26600 Laguna Hills Drive, Aliso Viejo, California
92656.
Options granted under the Director Plan are non-qualified stock options not
eligible for favorable tax consequences given to incentive stock options by
Section 422 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 shall be 100% of the fair market value per share of such
common stock on the date of grant.
No option granted under the Director Plan shall be exercisable after the
expiration of the earlier of (i) ten years following the date the option is
granted, or (ii) one year following the date the optionee ceases to be a
director of the Company for any reason.
Options granted to a director upon becoming an Eligible Director (as
defined below), as well as options granted to a director upon re-election, shall
be exercisable as to one-third of the shares subject to the option on each
anniversary date 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.
In the event of the death of an optionee, any option (or unexercised
portion thereof) held by the optionee, to the extent exercisable by him or her
on the date of death, may be exercised by the optionee's personal
representatives, heirs, or legatees in accordance with the Director Plan. No
option shall be transferable by an optionee otherwise than by will or the laws
of descent and distribution, and, during the lifetime of the individual to whom
an option is granted, it may be exercised only by such individual or such
individual's guardian or legal representative.
Eligibility. Each director of the Company shall be 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 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 (an "Eligible Director"). Only Eligible Directors may receive
options under the Director Plan. All current members of the Board of Directors,
other than Mr. Desai are Eligible Directors.
Administration. The Board of Directors is authorized to administer the
Director Plan in accordance with its terms; however, the Board shall have no
discretion with respect to the selection of directors to receive options, the
number of shares of common stock of the Company subject to any such options, or
the exercise price thereof. The Board may, in its sole discretion, delegate any
or all of its administrative duties to a committee of not fewer than two
non-employee members of the Board.
Mergers, Reorganizations and Changes in Control. In the event of a
liquidation of the Company or a merger, reorganization or consolidation of the
Company with any other corporation in which the Company is not the surviving
corporation or the Company becomes a subsidiary of another corporation, any
unexercised options previously granted under the Director Plan shall be deemed
cancelled unless the surviving corporation elects to assume the options or to
use substitute options. However, unless the surviving corporation elects to
assume the options or to use substitute options, the optionee shall have the
right, exercisable during a ten day period ending on the fifth day prior to such
liquidation, merger or consolidation, to fully exercise the optionee's option in
whole or in part without regard to any installment exercise provisions otherwise
provided in the Director Plan. In the event of a change in control of the
Company, as defined in the Director Plan, any unexercised option previously
granted under the Director Plan which is not then already exercisable as to all
of the shares subject to the option shall become exercisable upon such change in
control as to one half of the shares as to which the option is not already
exercisable in addition to the shares, if any, as to which the option is already
exercisable.
Director Plan Amendment. The Director Plan may be terminated or amended by
the Board as it shall deem advisable. Without the authorization and approval of
the stockholders, however, the Board may not make any amendments which would (i)
materially increase the benefits accruing to directors under the Director Plan,
(ii) increase the total number of shares which may be issued under the Director
Plan,
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(iii) materially modify the eligibility requirements to receive a stock option
grant under the Director Plan, (iv) reduce the exercise price of options granted
under the Director Plan, or (v) extend the exercise date of any option granted
under the Director Plan.
Term of Director Plan. The Director Plan expires December 31, 2001.
FEDERAL INCOME TAX CONSEQUENCES
Only non-qualified options which are not intended to meet the incentive
stock option requirements of Section 422 of the Code will be issued under the
Director Plan. Under current federal income tax law, the grant of an option
under the Director Plan will have no federal income tax consequences to the
Company or the Director to whom it is granted. Generally, upon exercise of a
non-qualified stock option granted under the Director Plan, the excess of the
fair market value of the stock at the date of exercise over the option price
(the "Spread") is taxable to the optionee as ordinary income. All such amounts
taxable to an optionee are deductible by the Company as compensation expense.
The deduction will be allowed for the taxable year of the Company in which the
optionee includes an amount in income.
Generally, the shares received on exercise of an option under the Director
Plan are not subject to restrictions on transfer or risks of forfeiture and,
therefore, the optionee will recognize income on the date of exercise of a
nonqualified stock option. However, if the optionee is subject to Section 16(b)
of the Exchange Act, the Section 16(b) restriction will be considered a
substantial risk of forfeiture for tax purposes. Under current law, participants
who are directors of the Company will be subject to restrictions under Section
16(b) of the Exchange Act during their term of service and for up to six months
after termination of such service. SEC Rule 16b-3 provides an exemption from the
restrictions of Section 16(b) for the grant of derivative securities, such as
stock options, under qualifying plans. Because the Director Plan satisfies the
requirements for exemption under SEC Rule 16b-3, the grant of options will not
be considered a purchase and the exercise of the options to acquire the
underlying shares of common stock will not be considered a purchase or sale.
Thus, ordinary income will be recognized and the Spread will be measured on the
date of exercise.
The foregoing discussion, based upon federal tax laws now in effect, is not
intended to cover all relevant tax aspects of the Director Plan.
OPTIONS OUTSTANDING UNDER THE DIRECTOR PLAN
A total of 1,600,000 shares of common stock shall be reserved for issuance
under the Director Plan. As of July 31, 2000, an aggregate of 877,996 shares of
common stock had been issued upon exercise of stock options granted under the
Director Plan, options for a total of 254,000 shares at an average exercise
price of $42.38 per share were outstanding and held by the four non-employee
directors of the Company, and the remaining 468,004 shares were available for
grant. On August 4, 2000, Kenneth E. Hendrickson received an initial grant of
64,000 options under the Director Plan.
The market value of the Company's common stock on July 31, 2000 was $74.50
per share.
VOTE REQUIRED FOR APPROVAL OF AMENDMENT TO DIRECTOR PLAN; RECOMMENDATION OF
BOARD OF DIRECTORS
Approval of this Proposal Four to amend the Director Plan to increase the
maximum number of shares available for option grants thereunder by 200,000
requires the affirmative vote of the holders of a majority of the shares of
common stock of the Company present, or represented, and entitled to vote at the
Annual Meeting. If Proposal Four to approve such amendment is not approved by
the stockholders, the Director Plan, as previously approved, will continue in
effect.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS
PROPOSAL TO AMEND THE DIRECTOR PLAN TO INCREASE THE MAXIMUM NUMBER OF SHARES
AVAILABLE FOR OPTION GRANTS THEREUNDER.
26
<PAGE> 29
PROPOSAL FIVE
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 and
has served in such capacity since the Company's inception. 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 2001. 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. The Company has
not determined its intended actions in the event of a negative vote.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) 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 National Association of Securities Dealers
concerning their holdings of, and transactions in, securities of the Company.
Copies of these filings must be furnished to the Company. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required, during
the Company's most recent fiscal year all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than 10% beneficial
owners have been met.
STOCKHOLDER PROPOSALS
Stockholders who wish to present proposals for action at the 2001 Annual
Meeting of Stockholders 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 April 1, 2001 for inclusion in next year's proxy statement and proxy
card. In addition, the Company's Bylaws provide that a stockholder's notice must
be received by the Company not less than 60 nor more than 90 days prior to the
date of such annual meeting in order for the proposal to be considered at the
meeting; provided, however, that in the event that the first public disclosure
of the date of the annual meeting is made less than 70 days prior to the date of
such meeting, proposals must be received not later than the close of business on
the tenth day following the day on which such public disclosure was first made.
ANNUAL REPORT TO STOCKHOLDERS
The Annual Report to Stockholders of the Company for the fiscal year ended
April 2, 2000, 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 judgment.
27
<PAGE> 30
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 by
first class mail within one business day of receipt of request without charge to
any person from whom the accompanying proxy is solicited upon written request to
Investor Relations, QLogic Corporation, 26600 Laguna Hills Drive, Aliso Viejo,
California 92656. If Exhibit copies are requested, a copying charge of $.20 per
page will be made.
BY ORDER OF THE BOARD OF DIRECTORS
Michael R. Manning
Secretary
Aliso Viejo, California
August 14, 2000
STOCKHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND TO DATE, SIGN, AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL
AND YOUR COOPERATION WILL BE APPRECIATED.
28
<PAGE> 31
PROXY PROXY
QLOGIC CORPORATION
26600 LAGUNA HILLS DRIVE, ALISO VIEJO, CALIFORNIA 92656
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints H.K. Desai and George D. Wells as
Proxies, each with full power to appoint substitutes, and hereby authorizes them
or either of them to represent and to vote as designated below, all the shares
of common stock of QLogic Corporation held of record by the undersigned on July
31, 2000, at the Annual Meeting of Stockholders to be held on September 18,
2000, or any adjournments thereof.
PLEASE READ, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 32
QLOGIC CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
<TABLE>
<S> <C> <C> <C>
For All
1. ELECTION OF DIRECTORS FOR ALL EXCEPT For Withheld Except
NOMINEES CROSSED OUT. [ ] [ ] [ ]
H. K. Desai Carol L. Miltner
George D. Wells Larry R. Carter
Kenneth E. Hendrickson James R. Fiebiger
2. APPROVAL OF INCREASE IN AUTHORIZED SHARES FROM For Against Abstain
150,000,000 TO 500,000,000 OF COMMON STOCK [ ] [ ] [ ]
3. APPROVAL OF INCREASE IN MAXIMUM NUMBER OF SHARES For Against Abstain
IN QLOGIC STOCK AWARDS PLAN BY 3,000,000 [ ] [ ] [ ]
4. APPROVAL OF INCREASE IN MAXIMUM NUMBER OF SHARES For Against Abstain
IN NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN BY [ ] [ ] [ ]
200,000.
5. RATIFICATION OF SELECTION OF KPMG LLP AS For Against Abstain
INDEPENDENT PUBLIC ACCOUNTANTS [ ] [ ] [ ]
6. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED For Against Abstain
TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY [ ] [ ] [ ]
COME BEFORE THE MEETING.
</TABLE>
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, 2, 3, 4 and 5.
Please sign exactly as name appears below. When shares are held by joint tenant,
both should sign. When signing as attorney, as executor, administrator, trustee,
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated: _______________________________, 2000
____________________________________________
Signature
