8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 4, 2006

EMULEX CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	001-31353	51-0300558
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3333 Susan Street
Costa Mesa, California 92626
(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (714) 662-5600

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

EXHIBIT 10.1

EXHIBIT 10.2

EXHIBIT 10.3

EXHIBIT 99.1

Item 1.01. Material Agreements

     Amendments to Key Employee Retention Agreements. Emulex Corporation (the “Company”) has previously entered into a Key Employee Retention Agreement with Paul F. Folino under which Mr. Folino 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. Folino because of a demotion (as defined in such agreement) within two years after a change in control of the Company: (i) a severance payment equal to the present value of two times the sum of Mr. Folino’s annual salary plus the highest annual average of any two of his last three annual bonuses; (ii) continuation for two years following termination of employment of his health and life insurance, disability income, tax assistance and executive automobile benefits (reduced to the extent similar benefits are received by him from another employer); and (iii) acceleration of 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 such option exercise right in the event of termination of his employment without cause or because of a demotion (as defined in such agreement) within two years after the change in control. Effective September 5, 2006, and in connection with the changes in status described in Item 5.02 below, Mr. Folino entered into a new form of Key Employee Retention Agreement having substantially the same terms as described above except for (i) changes to reflect Mr. Folino’s new title of Executive Chairman, (ii) application of the above-referenced acceleration provisions to vesting of restricted stock grants as well as options, and (iii) changes in certain provisions relating to deferral of severance payments and other provisions required to address recent changes in federal tax laws.

     In addition, effective September 5, 2006, the Company entered into a new form of Key Employee Retention Agreement with James M. McCluney which replaces his existing agreement and is substantially the same as Mr. Folino’s new agreement described above. Additionally, in the event that Mr. McCluney is terminated without cause (regardless of whether a change in control has occurred), he will be entitled to severance in the amount of one year’s base salary at the rate then in effect, any deferred incentive bonuses, reimbursement of COBRA premiums, if any, for one year, and continued vesting of his stock options for one year.

     The above descriptions are qualified in their entirety by the forms of Key Employee Retention Agreements for Mr. McCluney and Mr. Folino attached to this Current Report on Form 8-K as Exhibits 10.1 and 10.2.

     Changes in Base Salaries. Effective September 5, 2006, the Compensation Committee of the Board of Directors of the Company increased the annual base salaries of Mr. Folino and Mr. McCluney to $590,527 and $535,000, respectively. Additionally, effective September 4, 2006, the Compensation Committee of the Board of Directors of the Company approved the recommendation to increase the annual base salaries of Michael Rockenbach (Executive Vice President, CFO), William F. Gill (Executive Vice President, Worldwide Sales) and Marshall Lee (Executive Vice President, Engineering) to $323,425, $271,967 and $293,975, respectively.

     Amendment to Executive Bonus Plan. As previously disclosed by the Company in its Current Report on 8-K filed on July 28, 2006, the Company maintains an Executive Bonus Plan (the “Bonus Plan”) which is intended to provide incentives to executive officers and other participants in the form of quarterly cash bonus payments based on Company performance

against net revenue and net operating income targets established periodically and, in certain circumstances, other specified business goals. Each executive officer of the Company has a quarterly target award opportunity expressed as a percentage of quarterly gross base salary at the end of the quarter in question. The quarterly target award opportunity for the executives range from 35% to 90% of quarterly base salary (the “target award percentage”). Effective September 5, 2006, the Compensation Committee of the Board of Directors of the Company approved certain amendments to the Bonus Plan. In particular, the Bonus Plan was amended to modify the target award opportunities for certain categories of executives (within the same range of target award percentages described above). As a result of his appointment as Chief Executive Officer and President, Mr. McCluney’s target award percentage was increased. Mr. Folino’s target award percentage remained unchanged.

     The above description is qualified in its entirety by the Executive Bonus Plan, as amended, attached to this Current Report on Form 8-K as Exhibit 10.3.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officer

     Effective September 5, 2006, James M. McCluney was elected to serve as a director of the Company. In accordance with the Company’s bylaws, Mr. McCluney was elected by vote of the Board of Directors to fill a vacancy created by an increase in the number of authorized directors from 7 to 8 as described in Item 5.03 below.

     In addition, effective September 5, 2006, (i) Paul F. Folino resigned as the Chief Executive Officer of the Company and was appointed by the Board to serve as an officer and employee of the Company in the capacity of Executive Chairman, and (ii) James M. McCluney resigned as Chief Operating Officer of the Company and was appointed as the Company’s Chief Executive Officer and President.

     Mr. Folino joined the Company in May 1993 as president and chief executive officer and as a director, and in July 2002 was promoted to chairman of the board and chief executive officer. From January 1991 to May 1993, Mr. Folino was president and chief operating officer of Thomas-Conrad Corporation, a manufacturer of local area networking products.

     Mr. McCluney joined the Company in November 2003 as president and chief operating officer. Prior to Emulex’s acquisition of Vixel Corporation (Vixel) in November 2003, Mr. McCluney had served as Vixel’s president, chief executive officer, and as a director from April 1999, and the chairman of the board from January 2000. From October 1997 to January 1999, Mr. McCluney served as president and chief executive officer of Crag Technologies, formerly Ridge Technologies, a storage system manufacturer. From October 1994 to September 1997, Mr. McCluney served in various positions at Apple Computer, Inc., including senior vice president of worldwide operations and vice president of European operations.

     A copy of the press release announcing the changes in status described above is furnished as Exhibit 99.1 hereto, and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Exchange Act of 1934 or the Securities Act of 1933, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

     In connection with the changes in offices and duties described above, Mr. McCluney entered into a new Key Employee Retention Agreement and his compensation was modified as described in Item 1.01 above.

Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

     Pursuant to Article III, Section 2 of the Company’s Amended and Restated Bylaws, effective September 5, 2006, the Board of Directors set the number of authorized directors constituting the whole Board at eight (8) members.

Item 9.01 Financial Statements and Exhibits

     (c) Exhibits

Exhibit Number	Exhibit Title or Description
10.1	Key Employee Retention Agreement for James M. McCluney, as amended
10.2	Key Employee Retention Agreement for Paul F. Folino, as amended
10.3	Emulex Corporation Executive Bonus Plan, as amended
99.1	Press release of Emulex Corporation, dated September 5, 2006

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	EMULEX CORPORATION
	(Registrant)
Date: September 5, 2006	By:	/s/ PAUL F. FOLINO
	Paul F. Folino,
	Executive Chairman
Date: September 5, 2006	By:	/s/ JAMES MCCLUNEY
	James McCluney,
	Chief Executive Officer and President

EXHIBIT INDEX

Exhibit Number	Exhibit Title or Description
10.1	Key Employee Retention Agreement for James M. McCluney, as amended
10.2	Key Employee Retention Agreement for Paul F. Folino, as amended
10.3	Emulex Corporation Executive Bonus Plan, as amended
99.1	Press release of Emulex Corporation, dated September 5, 2006

EX-10.1

Exhibit 10.1

September 5, 2006

James M. McCluney
c/o Emulex Corporation
3333 Susan Street
Costa Mesa, California 92626

          Re: Amendment to Key Employee Retention Agreement

Dear Jim:

     Both Emulex Corporation, a Delaware corporation (“Emulex”) and its affiliates, and its wholly owned subsidiary, Emulex Corporate Services Corporation, a California Corporation (the “Company”) value your services as Chief Executive Officer. Because the Company, Emulex and its affiliates wish to assure themselves of both present and future continuity of management in the event of any Change in Control (as defined below), as well as objectivity of management in the event of a proposed Change in Control, you and Emulex and the Company are hereby entering into the following agreements which amend, restate and supersede your prior key employee retention agreement with Emulex and its wholly owned subsidiary Emulex Corporation, a California Corporation with respect to your prior position as President and Chief Operating Officer of the Company:

1. Severance Payment and Employee Benefits. If a Change in Control (as defined below) shall occur after the date of this Agreement, and you are then still an employee of the Company, and at any time within two years after the Change in Control and prior to your Normal Retirement Date (as defined below) your employment is terminated by the Company without Cause (as defined below) or by you because of a Demotion (as defined below):

     1.1 Severance Payment.

          (a) The Company will pay to you within 15 days after the date of termination of your employment (the “Termination Date”) a lump-sum severance payment (the “Severance Payment”) equal to the present value of 200% of the sum of your Annual Base Pay (as defined below) plus your Annual Incentive Pay (as defined below); provided, however, that the Severance Payment will be reduced by the aggregate amount of severance payments received by you under any other severance policy, plan, program, or arrangement of the Company. Such present value shall be determined as if an aggregate amount equal to 200% of the sum of your Annual Base Pay plus your Annual Incentive Pay (minus, if applicable, the aggregate amount of severance payments received by you under any other severance policies, plan, program, or arrangement of the Company) would otherwise have been paid to you in 24 equal monthly installments commencing one month after the

Termination Date, using a discount rate equal to the then-applicable interest rate adopted by the Pension Benefit Guaranty Corporation for purposes of benefit valuations in connection with non-multiemployer pension plan terminations assuming the immediate commencement of benefit payments, as set forth in Table II in Appendix B to Part 4044 (formerly Part 2619) of Title 29 of the Code of Federal Regulations (29 C.F.R. § 4044.75(b)), or any successor appendix, schedule, rule or regulation.

          (b) In lieu of a cash lump sum, you may, in your sole discretion, elect to receive the Severance Payment in equal annual installments over five years (or such lesser number of years as you may elect) beginning on the Deferred Commencement Date described below. Any election must specify the installment period in a form that is acceptable to the Company and in compliance with the conditions herein. Such installments, plus interest calculated at the discount rate specified in Section 1.1(a) hereof determined as of the Termination Date, shall be paid to you on each anniversary of the Deferred Commencement Date, beginning with the first such anniversary and continuing on each such anniversary thereafter until fully paid. Such election to receive the Severance Payment in installments must be made in writing by providing written notice to the Secretary of Emulex of such election and must satisfy the following conditions: (1) such election may not take effect until at least twelve months after the date on which the election is made; and (2) except in the event of your death, disability or unforeseeable emergency, the Deferred Commencement Date that is the date of the first payment to which the installment payment election applies must be deferred for not less than five years after the Termination Date on which such Severance Payment would otherwise have been made. Any such election by you to receive the Severance Payment in installments shall be irrevocable and binding on all parties hereto.

          (c) In the event that on your Termination Date there is not in effect a timely election by you to receive the Severance Payment in installments, such Severance Payment shall be paid to you in a single cash lump sum as provided in Section 1.1(a) hereof. In the event that you have made an appropriate and timely election to receive the Severance Payment in annual installments, and you become entitled to such Severance Payment as provided in this Agreement, then such Severance Payment, to the extent at any time unpaid and/or deferred, shall be deemed to bear interest at the aforementioned discount rate (based on the discount rate determined as of the Termination Date) or, if less, the maximum rate permitted by law. Accrued interest shall be due and payable together with each annual installment of the Severance Payment.

          (d) Notwithstanding anything to the contrary in this Section 1.1, in the event any Severance Payment or other benefits under this agreement are determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and you are a specified employee as defined in Section 409A(2)(B)(i) of the Code, such amounts will not be paid before the date which is six months after your Termination Date. Although it is contemplated that Severance Payment or other benefits resulting from an involuntary termination of employment without Cause will be short-term deferrals that will not constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code, it is not clear that such treatment will be available in all instances, including, for example, a termination by you because of a Demotion. The determination of whether and what amount of the Severance Payment or other benefits constitute deferred compensation and whether you are a specified employee within the

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meaning of Section 409A(2)(B)(i) of the Code shall be determined by the board of directors of the Company or its delegate and any such determination shall be final and binding on the Company and you, unless such decisions are determined to be arbitrary and capricious by a court having jurisdiction. The Company makes no representation and the Company shall have no liability to you or any other person if any Severance Payment or other benefits provided pursuant to the terms of this Agreement are determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the payment terms of such Severance Payment or other benefits do not satisfy the additional conditions applicable to nonqualified deferred compensation under Section 409A of the Code and this Section 1.1(d).

     1.2 Employee Benefits. The Company shall provide or arrange to provide to you continuation of your Employee Benefits (as defined below) for two years following the Termination Date; provided, however, that such Employee Benefits will be reduced to the extent comparable benefits are actually received by you (i) from another employer during such two-year period (and any such benefits actually received by you shall be reported promptly by you to the Company) or (ii) under any other policy, plan, program, or arrangement of the Company.

          Any or all of such Employee Benefits may be provided to you, in the discretion of the Company, pursuant to policies or plans of the Company which exist as of the Termination Date and/or pursuant to policies, plans, or arrangements which are implemented or adopted by the Company on or after the Termination Date, including those which are implemented or adopted by the Company for your benefit only or for the benefit of you and selected other employees or former employees of the Company. The Company, in its discretion, may also fulfill its obligation to provide continuation of any or all of your Employee Benefits in accordance with the foregoing by paying to you in cash from time to time the minimum amount necessary to enable you to purchase a comparable Employee Benefit from another benefit provider; provided, however, that this cash alternative shall not be utilized by the Company if and to the extent comparable Employee Benefits are available to you under the terms of the existing policies or plans of the Company.

     1.3 Certain Payment Reductions.

          (a) For purposes of this Section 1.3, (i) a Payment shall mean any payment or distribution in the nature of compensation to or for your benefit, whether paid or payable pursuant to this Agreement or otherwise; (ii) Agreement Payment shall mean a Payment paid or payable pursuant to this Agreement (determined without regard to this Section 1.3); (iii) Net After Tax Receipt shall mean the Present Value of a Payment net of all taxes imposed on you with respect thereto under Sections 1 and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), determined by applying the highest marginal rate under Section 1 of the Code which applied to your taxable income for the immediately preceding taxable year; (iv) “Present Value” shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (v) “Reduced Amount” shall mean the smallest aggregate amount of Payments which (a) is less than the sum of all Payments (determined without regard to this Section 1.3) and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate Payments were equal to the sum of all Payments (determined without regard to this Section 1.3) or any other amount less than the sum of all payments (determined without regard to this Section 1.3).

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          (b) Anything in this Agreement to the contrary notwithstanding, in the event accountants selected by the Company (the “Accounting Firm”) shall determine that receipt of all Payments would subject you to tax under Section 4999 of the Code, it shall determine whether some amount of Payments would meet the definition of a “Reduced Amount.” If the Accounting Firm determines that there is a Reduced Amount, the aggregate Agreement Payments shall be reduced to such Reduced Amount; provided, however, that if the Reduced Amount exceeds the aggregate Agreement Payments, the aggregate Payments shall, after the reduction of all Agreement Payments, be reduced (but not below zero) in the amount of such excess.

          (c) If the Accounting Firm determines that aggregate Agreement Payments or Payments, as the case may be, should be reduced to the Reduced Amount, the Company shall promptly give you notice to that effect and a copy of the detailed calculation thereof, and you may then elect, in your sole discretion, which and how much of the Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Payments equals the Reduced Amount), and you shall advise the Company in writing of your election within ten days of your receipt of notice. If no such election is made by you within such ten-day period, the Company may elect which of the Agreement Payments or Payments, as the case may be, shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments or Payments, as the case may be, equals the Reduced Amount) and shall notify you promptly of such election. All determinations made by the Accounting Firm under this Section 1.3 shall be binding upon the Company and you and shall be made within 60 days after a termination of your employment. As promptly as practicable following such determination, the Company shall pay to or distribute for your benefit such Payments as are then due to you under this Agreement and shall promptly pay to or distribute for your benefit in the future such Payments as become due to you under this Agreement.

          (d) While it is the intention of the Company and you to reduce the amounts payable or distributable to you hereunder only if the aggregate Net After Tax Receipts to you would thereby be increased, as a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for your benefit pursuant to this Agreement which should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for your benefit pursuant to this Agreement could have been so paid or distributed (“Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder. The Company shall have no obligation to make an Overpayment to you or for your benefit. In the event that the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or you which the Accounting Firm believes has a high probability of success or controlling precedent or other substantial authority, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for your benefit shall be repaid by you promptly to the Company; provided, however, that no such Overpayment shall be repaid by you to the Company if and to the extent such Overpayment and repayment would not either reduce the amount on which you are subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for your benefit together with interest at the applicable federal rate provided for under Section 7872(f)(2) of the Code.

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          (e) The Company will bear the fees and expenses of the Accounting Firm in making the determinations required by this Section 1.3.

2. Accelerated Vesting of Stock Options and Restricted Stock. If a Change in Control shall occur after the date of this Agreement and you are then still an employee of the Company:

     2.1 Partial Acceleration. Upon the Change in Control, the vesting of your right to exercise each Emulex Option (as defined below) and the vesting of any shares of Restricted Stock held by you as of the Change in Control based on the length of your continued employment following the grant of such Emulex Option or Restricted Stock will be accelerated by one year so that your right to exercise such Emulex Option or to vest in shares of Restricted Stock after the Change in Control will be determined as if such Emulex Option or Restricted Stock had been granted to you one year before the actual date of grant of such equity award; provided, however, that the term and expiration date of, and any other restrictions on your right to exercise, such Emulex Option or Restricted Stock shall not be affected by the Change in Control; provided further, however, that, if the agreement evidencing such Emulex Option or Restricted Stock shall provide for acceleration of vesting of your right to exercise such Emulex Option or vest in such Restricted Stock upon a Change in Control which is more favorable to you than the foregoing provisions of this Section 2.1, the acceleration provisions of your Emulex Option or Restricted Stock agreement shall apply and this Section 2.1 shall be disregarded.

     2.2 Full Acceleration. If, within two years after the Change in Control and prior to your Normal Retirement Date, your employment with the Company is terminated by the Company without Cause or by you because of a Demotion, the vesting of your right to exercise each Emulex Option and vest in the Restricted Stock held by you as of the Termination Date will be fully accelerated as of the Termination Date so that you will have the right to exercise such Emulex Option and vest in such Restricted Stock in full at any time during its remaining term.

3. No Mitigation. You shall not be obligated to seek employment or otherwise mitigate the Severance Payment to you under this Agreement, nor shall the Severance Payment be reduced by any compensation earned by you as a result of your employment by another employer after the Termination Date.

4. Employment Rights. Nothing in this Agreement, expressed or implied, shall obligate Emulex, the Company or you to continue your employment with the Company or limit the right of you or the Company to terminate your employment at any time before or after a Change in Control. Notwithstanding the foregoing, if your employment is terminated by the Company without Cause or by you because of a Demotion after commencement by Emulex or the Company of substantive discussions with any third party which result in a Change in Control in which such third party has a significant involvement within one year after commencement of such discussions and prior to your Normal Retirement Date, your right to receive payments and benefits under this Agreement will be determined as if your employment had terminated immediately following the Change in Control. Nothing in this Agreement, expressed or implied, shall obligate Emulex or the Company to make a loan to you or to arrange for the extension of credit to you.

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5. Definitions. For purposes of this Agreement, the terms set forth below are defined as follows:

     5.1 “Annual Base Pay” means an amount equal to the greatest of (i) your annual fixed or base compensation as in effect immediately prior to a Change in Control, (ii) your annual fixed or base compensation as in effect immediately prior to commencement by Emulex or the Company of substantive discussions with any third party that results in a Change in Control in which such third party has a significant involvement within one year after commencement of such discussions, and (iii) your annual fixed or base compensation as in effect immediately prior to the Termination Date.

     5.2 “Annual Incentive Pay” means an amount equal to the highest annual average of the aggregate bonuses or incentive payments of cash compensation in addition to fixed or base compensation paid to you for your services in any two of the last three full fiscal years of the Company immediately preceding the fiscal year of the Company in which the Change in Control occurs (or such lesser number of full fiscal years during which you were employed by the Company if less than three) or, if higher, the highest annual average of the aggregate annual bonuses or incentive payments of cash compensation paid to you for services in any two of the last three full fiscal years of the Company immediately preceding the fiscal year of the Company in which the Termination Date occurs (or such lesser number of full fiscal years during which you were employed by the Company if less than three).

     5.3 “Cause” for termination of your employment by the Company will exist if (i) you become permanently disabled and are unable to perform your duties as an employee of the Company or (ii) you commit any of the following acts and any of such acts shall be determined by the board of directors of the Company to have been materially harmful to the Company at a meeting of the board of directors called and held for such purpose (after reasonable notice to you and an opportunity for you and your representative to make a presentation to the board of directors): an act of fraud, embezzlement or theft in connection with your duties or in the course of your employment with the Company; intentional wrongful damage to property of the Company; intentional wrongful disclosure of trade secrets or confidential information of the Company; or intentional wrongful engagement in any Competitive Activity (as defined below) while you are employed by the Company.

     5.4 “Change in Control” shall be deemed to have occurred only if (i) Emulex is merged or consolidated or reorganized into or with another corporation and less than 51% of the combined voting power of the then-outstanding securities of the surviving corporation immediately thereafter is held in the aggregate by the holders of Voting Stock (as defined below) of Emulex immediately prior to such transaction; (ii) Emulex sells or otherwise transfers all or substantially all of its assets to any other corporation if less than 51% of the combined voting power of the then-outstanding voting securities of such corporation immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer; (iii) there is consummated a transaction which results in Emulex beneficially owning, directly or indirectly, less than a majority of the outstanding shares of Voting Stock of the Company, unless common stock

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of the Company has been listed, approved or otherwise qualified for quotation or trading on the NASDAQ National Market System, the American Stock Exchange or the New York Stock Exchange and no person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, as defined below) other than Emulex beneficially owns (as “beneficial ownership” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act), as of consummation of such transaction, more than 33-1/3% of the Voting Stock of the Company; (iv) the Company sells or otherwise transfers all or substantially all of its assets to another corporation if less than 51% of the Voting Stock of the transferee corporation immediately after such sale or transfer is held in the aggregate by Emulex, the Company or the holders of Voting Stock of Emulex immediately prior to such sale or transfer; (v) there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule or report) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) disclosing that any person has become the beneficial owner of securities representing 33-1/3% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of Emulex (the “Voting Stock”); (vi) Emulex shall file a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Item 1 of Form 8-K thereunder or Item 6(e) of Schedule 14A thereunder (or any successor schedule or report) that a change in control of Emulex has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or (vii) during any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of Emulex cease for any reason to constitute at least a majority thereof unless the election or the nomination for election by Emulex’s shareholders of each director of Emulex first elected during such period (y) was approved by a vote of at least a majority of the directors of Emulex then still in office who were directors of Emulex at the beginning of any such period and (z) such election or nomination was not made in connection with an actual or threatened election contest relating to the election of directors of Emulex, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act. Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement solely because Emulex, an entity in which Emulex directly or indirectly beneficially owns more than 50% of the voting securities, or any Emulex-sponsored employee stock ownership plan or any other employee benefit plan of Emulex or any entity holding shares of Voting Stock for or pursuant to the terms of any such plan either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, or Schedule 14D-1, Item 1 of Form 8-K or Item 6(e) of Schedule 14A (or any successor report or schedule) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock of Emulex, whether in excess of 33-1/3% or otherwise, or because Emulex reports that a change in control of Emulex has or may have occurred or will or may occur in the future by reason of such beneficial ownership.

     5.5 “Competitive Activity” means your participation, without the consent of the board of directors of the Company, in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company and such enterprise’s sales of any product or service competitive with any product or service of the Company amounted to 10% of such enterprise’s net sales for its most recently completed fiscal year and if the Company’s consolidated net sales of such products or services amounted to 10% of the Company’s consolidated net sales for its most recently completed fiscal year. “Competitive Activity” shall not include (i) the mere ownership of securities in any enterprise and exercise of rights appurtenant thereto or (ii) participation in management of any enterprise or business operation thereof other than in connection with competitive operation of such enterprise.

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     5.6 “Deferred Commencement Date” means the date of the first payment to which the installment payment election applies which must be deferred for not less than five years after the Termination Date on which such Severance Payment would otherwise have been made.

     5.7 “Demotion” will be deemed to have occurred if any of the following changes with respect to your employment with the Company shall occur during the two-year period immediately following a Change in Control and prior to your Normal Retirement Date, you provide written notice to the Company within 30 days of the first occurrence of such change and such change is not remedied within 15 days after written notice thereof from you to the Company: (i) a significant adverse change in the nature or scope of the powers, functions, titles, responsibilities or duties in respect of the Company or Emulex which you had immediately prior to the Change in Control; (ii) a reduction of your annual fixed or base compensation below the sum of your annual fixed or base compensation as in effect immediately prior to the Change in Control; (iii) a reduction of your aggregate bonus or incentive payment opportunities below the amount equal to the highest annual average of the aggregate bonuses or incentive payments of cash compensation in addition to fixed or base compensation paid to you for your services in any two of the last three full fiscal years of the Company immediately preceding the fiscal year of the Company in which the Change in Control occurred (or such lesser number of full fiscal years during which you were employed by the Company if less than three), provided that nothing herein shall be construed as a commitment or a guarantee that payment of any cash bonuses or incentive payments will actually be made and no Demotion will occur if actual performance does not result in attainment of the goals required to receive the specified bonus or incentive payment opportunities; (iv) a reduction of the Employee Benefits which you were receiving immediately prior to the Change in Control below the comparable employee benefits provided by the Company to its other executive officers from time to time; or (v) relocation of the principal executive offices of the Company to, or any requirement of you to have as your principal location of work at, any place which is more than 50 miles from the location thereof immediately prior to the Change in Control.

          The parties acknowledge that, in the event of a Change in Control, it may be mutually advantageous for you and your employer to discuss and implement changes in your employment on a trial basis even though such employment changes may constitute a “Demotion” under the terms of this Agreement. Accordingly, any change with respect to your employment to which you do not object in writing will not constitute a Demotion; provided, however, that your acceptance on a trial basis of a change which would otherwise constitute a Demotion will not constitute a waiver of your right to object in writing to such change within 30 days and to treat such change as a Demotion if it is not remedied within 15 days after written notice to the Company of your unwillingness to continue accepting such change.

     5.8 “Employee Benefits” means benefits provided to you by the Company immediately prior to a Change in Control, or, if greater, benefits provided to you by the Company immediately prior to commencement by the Company of substantive discussions with any third party which result in a Change in Control in which such third party has a significant involvement within one year after

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commencement of such discussions, or, if greater, benefits provided to you by the Company immediately prior to the Termination Date, in each case under any and all medical or health, life insurance, disability income, tax assistance, or executive automobile benefit policies, plans, programs or arrangements in which you are a participant at the applicable time.

     5.9 “Emulex Option” means each option to purchase shares of stock of Emulex which is granted to you by Emulex prior to a Change in Control and each option to purchase shares of stock of Emulex’s successor (by purchase of assets, merger, consolidation, reorganization or otherwise) which is granted to you by such successor in connection with or after a Change in Control in exchange or substitution for an option granted to you by Emulex prior to the Change in Control.

     5.10 “Normal Retirement Date” means the date designated by Emulex or the Company for your normal retirement under any retirement policy or plan which is applied to the Company’s executive officers in a non-discriminatory manner or, if no such policy or plan has been established, the date when you attain age 65.

     5.11 “Restricted Stock” means shares of stock of Emulex which is awarded to you by Emulex prior to a Change in Control and each share of stock of Emulex’s successor (by purchase of assets, merger, consolidation, reorganization or otherwise) which is awarded to you by such successor in connection with or after a Change in Control in exchange or substitution for an option granted to you by Emulex prior to the Change in Control, which shares are subject to a substantial risk of forfeiture and restrictions on transferability during a specified vesting period.

6. Withholding of Taxes. The Company or Emulex may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or government regulation or ruling.

7. Notice. For all purposes of this Agreement, all communications provided for herein shall be in writing and shall be deemed to have been duly given when delivered or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the Company or Emulex (to the attention of the Secretary of the Company or Emulex) at its principal executive office and to you at your principal residence, or to such other address as either party may have furnished to the other in writing and in accordance herewith, except that any notice of change of address shall be effective only upon receipt.

8. Successors. This Agreement shall inure to the benefit of and be binding upon the Company, Emulex and their successors. In the event of a Change in Control, any parent company, which directly or indirectly controls a majority of the outstanding Voting Stock of Emulex or the Company, or a successor to Emulex or the Company (by way of merger, consolidation, reorganization, sale of assets or otherwise) shall, in the case of a successor, by an agreement in form and substance reasonably satisfactory to you, expressly assume and agree to perform this Agreement and, in the case of a parent company, by an agreement in form and substance reasonably satisfactory to you, guarantee and agree to cause the performance of this Agreement, in each case, in the same manner and to the same extent as Emulex or the Company would be required to perform if no Change in Control had taken place.

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9. Severability; Entire Agreement; Amendments. This Agreement sets forth the entire understanding among us as to the subject matter hereof. The terms of any prior plans, policies or agreements relating to the subject matter hereof are hereby superseded and replaced by this Agreement. From and after the date of this Agreement, any references to a Key Employee Retention Agreement between the Company or Emulex and you contained in the offer of employment to you from Emulex dated November 13, 2003, or in the related Addendum to Offer of Employment Letter dated November 14, 2003, shall be deemed to refer solely to this Agreement. There are no terms, conditions, representations, warranties or covenants other than those contained herein. No term or provision of this Agreement may be amended, waived, released, discharged or modified in any respect, except in writing, signed by the appropriate party(s). No waiver of any breach or default shall constitute a waiver of any other breach or default whether of the same or any other covenant or condition. A delay or failure to assert rights or a breach of this Agreement shall not be deemed to be a waiver of such rights either with respect to that breach or any subsequent breach. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

10. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California, without giving effect to the principles of conflict of laws of such State.

11. Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same agreement.

12. Board Approval. Each of Emulex and the Company hereby represents that the execution, delivery, and performance of this Agreement has been duly authorized by its board of directors.

13. Dispute Resolution. Except as provided herein, any controversy or claim arising out of or relating in any way to this Agreement or the breach thereof, or your employment and any statutory claims including all claims of employment discrimination shall be subject to private and confidential arbitration in the City of Costa Mesa in accordance with the laws of the State of California and the Executive Employment Dispute Resolution Rules (“Rules”) of the American Arbitration Association (but shall not be required to be conducted under the auspices of the American Arbitration Association). You waive any right to a jury trial. This provision will not apply to disputes where injunctive relief would be appropriate or in connection with claims under the Employee Invention and Non-Disclosure Agreement.

     13.1 The arbitration shall be conducted in a procedurally fair manner by a mutually agreed upon arbitrator selected in accordance with the Rules or if none can be mutually agreed upon, then by one arbitrator appointed pursuant to the Rules;

     13.2 The arbitration shall be conducted confidentially in accordance with the Rules;

     13.3 The arbitration fees shall be paid by the Company;

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     13.4 Each party shall have the right to conduct discovery including (3) three depositions, requests for production of documents and such other discovery as permitted under the Rules or ordered by the arbitrator;

     13.5 The arbitrator shall have the authority to award any damages authorized by law for the claims presented including punitive damages and shall have the authority to award reasonable attorneys fees to the prevailing party;

     13.6 The decision of the arbitrator shall be final and binding on all parties and shall be the exclusive remedy of the parties; and

     13.7 The award shall be in writing in accordance with the Rules, and shall be subject to judicial enforcement in accordance with California law.

14. Late Payment Interest. Any payment which is not made to you when due under this Agreement shall bear interest at the rate of 10% per annum from the due date to the payment date.

Very truly yours,

EMULEX CORPORATE SERVICES CORPORATION, a California
corporation

By:

EMULEX CORPORATION,

a Delaware corporation

By:

AGREED:

James M. McCluney

Dated:

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EX-10.2

Exhibit 10.2

September 5, 2006

Paul F. Folino
c/o Emulex Corporation
3333 Susan Street
Costa Mesa, California 92626

          Re: Amendment to Key Employee Retention Agreement

Dear Paul:

Both Emulex Corporation, a Delaware corporation (“Emulex”) and its affiliates, and its wholly owned subsidiary, Emulex Corporate Services Corporation, a California Corporation (the “Company”) value your services as Executive Chairman. Because the Company, Emulex and its affiliates wish to assure themselves of both present and future continuity of management in the event of any Change in Control (as defined below), as well as objectivity of management in the event of a proposed Change in Control, you and Emulex and the Company are hereby entering into the following agreements which amend, restate and supersede your prior key employee retention agreement with Emulex and its wholly owned subsidiary Emulex Corporation, a California Corporation with respect to your prior position as Chairman and Chief Executive Officer:

     1. Severance Payment and Employee Benefits. If a Change in Control (as defined below) shall occur after the date of this Agreement, and you are then still an employee of the Company, and at any time within two years after the Change in Control and prior to your Normal Retirement Date (as defined below) your employment is terminated by the Company without Cause (as defined below) or by you because of a Demotion (as defined below):

          1.1 Severance Payment.

     (a) The Company will pay to you within 15 days after the date of termination of your employment (the “Termination Date”) a lump-sum severance payment (the “Severance Payment”) equal to the present value of 200% of the sum of your Annual Base Pay (as defined below) plus your Annual Incentive Pay (as defined below); provided, however, that the Severance Payment will be reduced by the aggregate amount of severance payments received by you under any other severance policy, plan, program, or arrangement of the Company. Such present value shall be determined as if an aggregate amount equal to 200% of the sum of your Annual Base Pay plus your Annual Incentive Pay (minus, if applicable, the aggregate amount of severance payments received by you under any other severance policies, plan, program, or arrangement of the Company) would otherwise have been paid to you in 24 equal monthly installments commencing one month after the Termination Date, using a discount rate equal to the then-applicable interest rate adopted by the

Pension Benefit Guaranty Corporation for purposes of benefit valuations in connection with non- multiemployer pension plan terminations assuming the immediate commencement of benefit payments, as set forth in Table II in Appendix B to Part 4044 (formerly Part 2619) of Title 29 of the Code of Federal Regulations (29 C.F.R. § 4044.75(b)), or any successor appendix, schedule, rule or regulation.

          (b) In lieu of a cash lump sum, you may, in your sole discretion, elect to receive the Severance Payment in equal annual installments over five years (or such lesser number of years as you may elect) beginning on the Deferred Commencement Date described below. Any election must specify the installment period in a form that is acceptable to the Company and in compliance with the conditions herein. Such installments, plus interest calculated at the discount rate specified in Section 1.1(a) hereof determined as of the Termination Date, shall be paid to you on each anniversary of the Deferred Commencement Date, beginning with the first such anniversary and continuing on each such anniversary thereafter until fully paid. Such election to receive the Severance Payment in installments must be made in writing by providing written notice to the Secretary of Emulex of such election and must satisfy the following conditions: (1) such election may not take effect until at least twelve months after the date on which the election is made; and (2) except in the event of your death, disability or unforeseeable emergency, the Deferred Commencement Date that is the date of the first payment to which the installment payment election applies must be deferred for not less than five years after the Termination Date on which such Severance Payment would otherwise have been made. Any such election by you to receive the Severance Payment in installments shall be irrevocable and binding on all parties hereto.

          (c) In the event that on your Termination Date there is not in effect a timely election by you to receive the Severance Payment in installments, such Severance Payment shall be paid to you in a single cash lump sum as provided in Section 1.1(a) hereof. In the event that you have made an appropriate and timely election to receive the Severance Payment in annual installments, and you become entitled to such Severance Payment as provided in this Agreement, then such Severance Payment, to the extent at any time unpaid and/or deferred, shall be deemed to bear interest at the aforementioned discount rate (based on the discount rate determined as of the Termination Date) or, if less, the maximum rate permitted by law. Accrued interest shall be due and payable together with each annual installment of the Severance Payment.

          (d) Notwithstanding anything to the contrary in this Section 1.1, in the event any Severance Payment or other benefits under this agreement are determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and you are a specified employee as defined in Section 409A(2)(B)(i) of the Code, such amounts will not be paid before the date which is six months after your Termination Date. Although it is contemplated that Severance Payment or other benefits resulting from an involuntary termination of employment without Cause will be short-term deferrals that will not constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code, it is not clear that such treatment will be available in all instances, including, for example, a termination by you because of a Demotion. The determination of whether and what amount of the Severance Payment or other benefits constitute deferred compensation and whether you are a specified employee within the meaning of Section 409A(2)(B)(i) of the Code shall be determined by the board of directors

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of the Company or its delegate and any such determination shall be final and binding on the Company and you, unless such decisions are determined to be arbitrary and capricious by a court having jurisdiction. The Company makes no representation and the Company shall have no liability to you or any other person if any Severance Payment or other benefits provided pursuant to the terms of this Agreement are determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the payment terms of such Severance Payment or other benefits do not satisfy the additional conditions applicable to nonqualified deferred compensation under Section 409A of the Code and this Section 1.1(d).

     1.2 Employee Benefits. The Company shall provide or arrange to provide to you continuation of your Employee Benefits (as defined below) for two years following the Termination Date; provided, however, that such Employee Benefits will be reduced to the extent comparable benefits are actually received by you (i) from another employer during such two-year period (and any such benefits actually received by you shall be reported promptly by you to the Company) or (ii) under any other policy, plan, program, or arrangement of the Company.

          Any or all of such Employee Benefits may be provided to you, in the discretion of the Company, pursuant to policies or plans of the Company which exist as of the Termination Date and/or pursuant to policies, plans, or arrangements which are implemented or adopted by the Company on or after the Termination Date, including those which are implemented or adopted by the Company for your benefit only or for the benefit of you and selected other employees or former employees of the Company. The Company, in its discretion, may also fulfill its obligation to provide continuation of any or all of your Employee Benefits in accordance with the foregoing by paying to you in cash from time to time the minimum amount necessary to enable you to purchase a comparable Employee Benefit from another benefit provider; provided, however, that this cash alternative shall not be utilized by the Company if and to the extent comparable Employee Benefits are available to you under the terms of the existing policies or plans of the Company.

     1.3 Certain Payment Reductions.

          (a) For purposes of this Section 1.3, (i) a Payment shall mean any payment or distribution in the nature of compensation to or for your benefit, whether paid or payable pursuant to this Agreement or otherwise; (ii) Agreement Payment shall mean a Payment paid or payable pursuant to this Agreement (determined without regard to this Section 1.3); (iii) Net After Tax Receipt shall mean the Present Value of a Payment net of all taxes imposed on you with respect thereto under Sections 1 and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), determined by applying the highest marginal rate under Section 1 of the Code which applied to your taxable income for the immediately preceding taxable year; (iv) “Present Value” shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (v) “Reduced Amount” shall mean the smallest aggregate amount of Payments which (a) is less than the sum of all Payments (determined without regard to this Section 1.3) and (b) results in aggregate Net After Tax Receipts which are equal to or greater than the Net After Tax Receipts which would result if the aggregate Payments were equal to the sum of all Payments (determined without regard to this Section 1.3) or any other amount less than the sum of all payments (determined without regard to this Section 1.3).

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          (b) Anything in this Agreement to the contrary notwithstanding, in the event accountants selected by the Company (the “Accounting Firm”) shall determine that receipt of all Payments would subject you to tax under Section 4999 of the Code, it shall determine whether some amount of Payments would meet the definition of a “Reduced Amount.” If the Accounting Firm determines that there is a Reduced Amount, the aggregate Agreement Payments shall be reduced to such Reduced Amount; provided, however, that if the Reduced Amount exceeds the aggregate Agreement Payments, the aggregate Payments shall, after the reduction of all Agreement Payments, be reduced (but not below zero) in the amount of such excess.

          (c) If the Accounting Firm determines that aggregate Agreement Payments or Payments, as the case may be, should be reduced to the Reduced Amount, the Company shall promptly give you notice to that effect and a copy of the detailed calculation thereof, and you may then elect, in your sole discretion, which and how much of the Payments shall be eliminated or reduced (as long as after such election the present value of the aggregate Payments equals the Reduced Amount), and you shall advise the Company in writing of your election within ten days of your receipt of notice. If no such election is made by you within such ten-day period, the Company may elect which of the Agreement Payments or Payments, as the case may be, shall be eliminated or reduced (as long as after such election the present value of the aggregate Agreement Payments or Payments, as the case may be, equals the Reduced Amount) and shall notify you promptly of such election. All determinations made by the Accounting Firm under this Section 1.3 shall be binding upon the Company and you and shall be made within 60 days after a termination of your employment. As promptly as practicable following such determination, the Company shall pay to or distribute for your benefit such Payments as are then due to you under this Agreement and shall promptly pay to or distribute for your benefit in the future such Payments as become due to you under this Agreement.

          (d) While it is the intention of the Company and you to reduce the amounts payable or distributable to you hereunder only if the aggregate Net After Tax Receipts to you would thereby be increased, as a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for your benefit pursuant to this Agreement which should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for your benefit pursuant to this Agreement could have been so paid or distributed (“Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder. The Company shall have no obligation to make an Overpayment to you or for your benefit. In the event that the Accounting Firm, based either upon the assertion of a deficiency by the Internal Revenue Service against the Company or you which the Accounting Firm believes has a high probability of success or controlling precedent or other substantial authority, determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for your benefit shall be repaid by you promptly to the Company; provided, however, that no such Overpayment shall be repaid by you to the Company if and to the extent such Overpayment and repayment would not either reduce the amount on which you are subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or other substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for your benefit together with interest at the applicable federal rate provided for under Section 7872(f)(2) of the Code.

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          (e) The Company will bear the fees and expenses of the Accounting Firm in making the determinations required by this Section 1.3.

2. Accelerated Vesting of Stock Options. If a Change in Control shall occur after the date of this Agreement and you are then still an employee of the Company:

     2.1 Partial Acceleration. Upon the Change in Control, the vesting of your right to exercise each Emulex Option (as defined below) and the vesting of any shares of Restricted Stock held by you as of the Change in Control based on the length of your continued employment following the grant of such Emulex Option or Restricted Stock will be accelerated by one year so that your right to exercise such Emulex Option or to vest in shares of Restricted Stock after the Change in Control will be determined as if such Emulex Option or Restricted Stock had been granted to you one year before the actual date of grant of such equity award; provided, however, that the term and expiration date of, and any other restrictions on your right to exercise, such Emulex Option or Restricted Stock shall not be affected by the Change in Control; provided further, however, that, if the agreement evidencing such Emulex Option or Restricted Stock shall provide for acceleration of vesting of your right to exercise such Emulex Option or vest in such Restricted Stock upon a Change in Control which is more favorable to you than the foregoing provisions of this Section 2.1, the acceleration provisions of your Emulex Option or Restricted Stock agreement shall apply and this Section 2.1 shall be disregarded.

     2.2 Full Acceleration. If, within two years after the Change in Control and prior to your Normal Retirement Date, your employment with the Company is terminated by the Company without Cause or by you because of a Demotion, the vesting of your right to exercise each Emulex Option and vest in the Restricted Stock held by you as of the Termination Date will be fully accelerated as of the Termination Date so that you will have the right to exercise such Emulex Option and vest in such Restricted Stock in full at any time during its remaining term.

3. No Mitigation. You shall not be obligated to seek employment or otherwise mitigate the Severance Payment to you under this Agreement, nor shall the Severance Payment be reduced by any compensation earned by you as a result of your employment by another employer after the Termination Date.

4. Employment Rights. Nothing in this Agreement, expressed or implied, shall obligate Emulex, the Company or you to continue your employment with the Company or limit the right of you or the Company to terminate your employment at any time before or after a Change in Control. Notwithstanding the foregoing, if your employment is terminated by the Company without Cause or by you because of a Demotion after commencement by Emulex or the Company of substantive discussions with any third party which result in a Change in Control in which such third party has a significant involvement within one year after commencement of such discussions and prior to your Normal Retirement Date, your right to receive payments and benefits under this Agreement will be determined as if your employment had terminated immediately following the Change in Control. Nothing in this Agreement, expressed or implied, shall obligate Emulex or the Company to make a loan to you or to arrange for the extension of credit to you.

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5. Definitions. For purposes of this Agreement, the terms set forth below are defined as follows:

     5.1 “Annual Base Pay” means an amount equal to the greatest of (i) your annual fixed or base compensation as in effect immediately prior to a Change in Control, (ii) your annual fixed or base compensation as in effect immediately prior to commencement by Emulex or the Company of substantive discussions with any third party that results in a Change in Control in which such third party has a significant involvement within one year after commencement of such discussions, and (iii) your annual fixed or base compensation as in effect immediately prior to the Termination Date.

     5.2 “Annual Incentive Pay” means an amount equal to the highest annual average of the aggregate bonuses or incentive payments of cash compensation in addition to fixed or base compensation paid to you for your services in any two of the last three full fiscal years of the Company immediately preceding the fiscal year of the Company in which the Change in Control occurs (or such lesser number of full fiscal years during which you were employed by the Company if less than three) or, if higher, the highest annual average of the aggregate annual bonuses or incentive payments of cash compensation paid to you for services in any two of the last three full fiscal years of the Company immediately preceding the fiscal year of the Company in which the Termination Date occurs (or such lesser number of full fiscal years during which you were employed by the Company if less than three).

     5.3 “Cause” for termination of your employment by the Company will exist if (i) you become permanently disabled and are unable to perform your duties as an employee of the Company or (ii) you commit any of the following acts and any of such acts shall be determined by the board of directors of the Company to have been materially harmful to the Company at a meeting of the board of directors called and held for such purpose (after reasonable notice to you and an opportunity for you and your representative to make a presentation to the board of directors): an act of fraud, embezzlement or theft in connection with your duties or in the course of your employment with the Company; intentional wrongful damage to property of the Company; intentional wrongful disclosure of trade secrets or confidential information of the Company; or intentional wrongful engagement in any Competitive Activity (as defined below) while you are employed by the Company.

     5.4 “Change in Control” shall be deemed to have occurred only if (i) Emulex is merged or consolidated or reorganized into or with another corporation and less than 51% of the combined voting power of the then-outstanding securities of the surviving corporation immediately thereafter is held in the aggregate by the holders of Voting Stock (as defined below) of Emulex immediately prior to such transaction; (ii) Emulex sells or otherwise transfers all or substantially all of its assets to any other corporation if less than 51% of the combined voting power of the then-outstanding voting securities of such corporation immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock of the Company immediately prior to such sale or transfer; (iii) there is consummated a transaction which results in Emulex beneficially owning, directly or indirectly, less than a majority of the outstanding shares of Voting Stock of the Company, unless common stock

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of the Company has been listed, approved or otherwise qualified for quotation or trading on the NASDAQ National Market System, the American Stock Exchange or the New York Stock Exchange and no person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, as defined below) other than Emulex beneficially owns (as “beneficial ownership” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act), as of consummation of such transaction, more than 33-1/3% of the Voting Stock of the Company; (iv) the Company sells or otherwise transfers all or substantially all of its assets to another corporation if less than 51% of the Voting Stock of the transferee corporation immediately after such sale or transfer is held in the aggregate by Emulex, the Company or the holders of Voting Stock of Emulex immediately prior to such sale or transfer; (v) there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule or report) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) disclosing that any person has become the beneficial owner of securities representing 33-1/3% or more of the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors of Emulex (the “Voting Stock”); (vi) Emulex shall file a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Item 1 of Form 8-K thereunder or Item 6(e) of Schedule 14A thereunder (or any successor schedule or report) that a change in control of Emulex has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or (vii) during any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of Emulex cease for any reason to constitute at least a majority thereof unless the election or the nomination for election by Emulex’s shareholders of each director of Emulex first elected during such period (y) was approved by a vote of at least a majority of the directors of Emulex then still in office who were directors of Emulex at the beginning of any such period and (z) such election or nomination was not made in connection with an actual or threatened election contest relating to the election of directors of Emulex, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act. Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred for purposes of this Agreement solely because Emulex, an entity in which Emulex directly or indirectly beneficially owns more than 50% of the voting securities, or any Emulex-sponsored employee stock ownership plan or any other employee benefit plan of Emulex or any entity holding shares of Voting Stock for or pursuant to the terms of any such plan either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, or Schedule 14D-1, Item 1 of Form 8-K or Item 6(e) of Schedule 14A (or any successor report or schedule) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock of Emulex, whether in excess of 33-1/3% or otherwise, or because Emulex reports that a change in control of Emulex has or may have occurred or will or may occur in the future by reason of such beneficial ownership.

     5.5 “Competitive Activity” means your participation, without the consent of the board of directors of the Company, in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company and such enterprise’s sales of any product or service competitive with any product or service of the Company amounted to 10% of such enterprise’s net sales for its most recently completed fiscal year and if the Company’s consolidated net sales of such products or services amounted to 10% of the Company’s consolidated net sales for its most recently completed fiscal year. “Competitive Activity” shall not include (i) the mere ownership of securities in any enterprise and exercise of rights appurtenant thereto or (ii) participation in management of any enterprise or business operation thereof other than in connection with competitive operation of such enterprise.

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     5.6 “Deferred Commencement Date” means the date of the first payment to which the installment payment election applies which must be deferred for not less than five years after the Termination Date on which such Severance Payment would otherwise have been made.

     5.7 “Demotion” will be deemed to have occurred if any of the following changes with respect to your employment with the Company shall occur during the two-year period immediately following a Change in Control and prior to your Normal Retirement Date, you provide written notice to the Company within 30 days of the first occurrence of such change and such change is not remedied within 15 days after written notice thereof from you to the Company: (i) a significant adverse change in the nature or scope of the powers, functions, titles, responsibilities or duties in respect of the Company or Emulex which you had immediately prior to the Change in Control; (ii) a reduction of your annual fixed or base compensation below the sum of your annual fixed or base compensation as in effect immediately prior to the Change in Control; (iii) a reduction of your aggregate bonus or incentive payment opportunities below the amount equal to the highest annual average of the aggregate bonuses or incentive payments of cash compensation in addition to fixed or base compensation paid to you for your services in any two of the last three full fiscal years of the Company immediately preceding the fiscal year of the Company in which the Change in Control occurred (or such lesser number of full fiscal years during which you were employed by the Company if less than three), provided that nothing herein shall be construed as a commitment or a guarantee that payment of any cash bonuses or incentive payments will actually be made and no Demotion will occur if actual performance does not result in attainment of the goals required to receive the specified bonus or incentive payment opportunities; (iv) a reduction of the Employee Benefits which you were receiving immediately prior to the Change in Control below the comparable employee benefits provided by the Company to its other executive officers from time to time; or (v) relocation of the principal executive offices of the Company to, or any requirement of you to have as your principal location of work at, any place which is more than 50 miles from the location thereof immediately prior to the Change in Control.

          The parties acknowledge that, in the event of a Change in Control, it may be mutually advantageous for you and your employer to discuss and implement changes in your employment on a trial basis even though such employment changes may constitute a “Demotion” under the terms of this Agreement. Accordingly, any change with respect to your employment to which you do not object in writing will not constitute a Demotion; provided, however, that your acceptance on a trial basis of a change which would otherwise constitute a Demotion will not constitute a waiver of your right to object in writing to such change within 30 days and to treat such change as a Demotion if it is not remedied within 15 days after written notice to the Company of your unwillingness to continue accepting such change.

     5.8 “Employee Benefits” means benefits provided to you by the Company immediately prior to a Change in Control, or, if greater, benefits provided to you by the Company immediately prior to commencement by the Company of substantive discussions with any third party which result in a Change in Control in which such third party has a significant involvement within one year after

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commencement of such discussions, or, if greater, benefits provided to you by the Company immediately prior to the Termination Date, in each case under any and all medical or health, life insurance, disability income, tax assistance, or executive automobile benefit policies, plans, programs or arrangements in which you are a participant at the applicable time.

     5.9 “Emulex Option” means each option to purchase shares of stock of Emulex which is granted to you by Emulex prior to a Change in Control and each option to purchase shares of stock of Emulex’s successor (by purchase of assets, merger, consolidation, reorganization or otherwise) which is granted to you by such successor in connection with or after a Change in Control in exchange or substitution for an option granted to you by Emulex prior to the Change in Control.

     5.10 “Normal Retirement Date” means the date designated by Emulex or the Company for your normal retirement under any retirement policy or plan which is applied to the Company’s executive officers in a non-discriminatory manner or, if no such policy or plan has been established, the date when you attain age 65.

     5.11 “Restricted Stock” means shares of stock of Emulex which is awarded to you by Emulex prior to a Change in Control and each share of stock of Emulex’s successor (by purchase of assets, merger, consolidation, reorganization or otherwise) which is awarded to you by such successor in connection with or after a Change in Control in exchange or substitution for an option granted to you by Emulex prior to the Change in Control, which shares are subject to a substantial risk of forfeiture and restrictions on transferability during a specified vesting period.

6. Withholding of Taxes. The Company or Emulex may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or government regulation or ruling.

7. Notice. For all purposes of this Agreement, all communications provided for herein shall be in writing and shall be deemed to have been duly given when delivered or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the Company or Emulex (to the attention of the Secretary of the Company or Emulex) at its principal executive office and to you at your principal residence, or to such other address as either party may have furnished to the other in writing and in accordance herewith, except that any notice of change of address shall be effective only upon receipt.

8. Successors. This Agreement shall inure to the benefit of and be binding upon the Company, Emulex and their successors. In the event of a Change in Control, any parent company, which directly or indirectly controls a majority of the outstanding Voting Stock of Emulex or the Company, or a successor to Emulex or the Company (by way of merger, consolidation, reorganization, sale of assets or otherwise) shall, in the case of a successor, by an agreement in form and substance reasonably satisfactory to you, expressly assume and agree to perform this Agreement and, in the case of a parent company, by an agreement in form and substance reasonably satisfactory to you, guarantee and agree to cause the performance of this Agreement, in each case, in the same manner and to the same extent as Emulex or the Company would be required to perform if no Change in Control had taken place.

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9. Severability; Entire Agreement; Amendments. This Agreement sets forth the entire understanding among us as to the subject matter hereof. The terms of any prior plans, policies or agreements relating to the subject matter hereof are hereby superseded and replaced by this Agreement. There are no terms, conditions, representations, warranties or covenants other than those contained herein. No term or provision of this Agreement may be amended, waived, released, discharged or modified in any respect, except in writing, signed by the appropriate party(s). No waiver of any breach or default shall constitute a waiver of any other breach or default whether of the same or any other covenant or condition. A delay or failure to assert rights or a breach of this Agreement shall not be deemed to be a waiver of such rights either with respect to that breach or any subsequent breach. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

10. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California, without giving effect to the principles of conflict of laws of such State.

11. Counterparts. This agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same agreement.

12. Board Approval. Each of Emulex and the Company hereby represents that the execution, delivery, and performance of this Agreement has been duly authorized by its board of directors.

13. Dispute Resolution. Except as provided herein, any controversy or claim arising out of or relating in any way to this Agreement or the breach thereof, or your employment and any statutory claims including all claims of employment discrimination shall be subject to private and confidential arbitration in the City of Costa Mesa in accordance with the laws of the State of California and the Executive Employment Dispute Resolution Rules (“Rules”) of the American Arbitration Association (but shall not be required to be conducted under the auspices of the American Arbitration Association). You waive any right to a jury trial. This provision will not apply to disputes where injunctive relief would be appropriate or in connection with claims under the Employee Invention and Non-Disclosure Agreement.

     13.1 The arbitration shall be conducted in a procedurally fair manner by a mutually agreed upon arbitrator selected in accordance with the Rules or if none can be mutually agreed upon, then by one arbitrator appointed pursuant to the Rules;

     13.2 The arbitration shall be conducted confidentially in accordance with the Rules;

     13.3 The arbitration fees shall be paid by the Company;

     13.4 Each party shall have the right to conduct discovery including (3) three depositions, requests for production of documents and such other discovery as permitted under the Rules or ordered by the arbitrator;

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     13.5 The arbitrator shall have the authority to award any damages authorized by law for the claims presented including punitive damages and shall have the authority to award reasonable attorneys fees to the prevailing party;

     13.6 The decision of the arbitrator shall be final and binding on all parties and shall be the exclusive remedy of the parties; and

     13.7 The award shall be in writing in accordance with the Rules, and shall be subject to judicial enforcement in accordance with California law.

14. Late Payment Interest. Any payment which is not made to you when due under this Agreement shall bear interest at the rate of 10% per annum from the due date to the payment date.

Very truly yours,

EMULEX CORPORATE SERVICES CORPORATION, a California
corporation

By:

EMULEX CORPORATION,
a Delaware corporation

By:

AGREED:

Paul F. Folino

Dated:

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EX-10.3

Exhibit 10.3

EMULEX CORPORATION

EXECUTIVE BONUS PLAN

Plan Purpose

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

To assist in attracting and retaining top quality management.

General Plan Description

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

Eligibility

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

Participation and Term

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

Target Bonus Opportunity

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

[Category 1] is 90%

[Category 2] is 70%

[Category 3] is 60%

[Category 4] is 50%

[Category 5] is 35%

[Category 6] is 10%

Executive Bonus Plan 1 of 4

Bonus Award Criteria

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

The weighting factors are:

	Category 1, 2, 4, 5 and 6			Category 3
Net revenue performance		45	%		50	%
Net operating income		55	%		50	%

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

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

Example :	45% x $8,750 = $3,938.00 (net revenue target)
	55% x $8,750 = $4,812.00 (net operating income target)

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

(105% x 1.50) less 50% = 157.5% — 50% = 107.5% of net revenue target: 1.075 x $3,938.00 = $4,233.35 net revenue bonus payment

(110% x 1.50) less 50% = 165% — 50% = 115% of net operating income target:
1.15% x $4,812.00 = $5,533.80 net operating income bonus payment

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

Executive Bonus Plan 2 of 4

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

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

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

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

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

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

4. Revenue and operating income will be treated as separate bonuses independent of one another regardless of the award formula. However, a minimum threshold of 80% of the Board of Directors’ approved AOP for revenue must be achieved for a revenue bonus payout. Likewise, a minimum threshold of 80% of the Board of Directors’ approved AOP for operating income must be achieved for an operating income payout. No bonus payout of any kind shall be made if operating income falls below 50% of the AOP approved plan.

Discretionary Bonuses

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

Payment of Awards

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

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

Plan Administration

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

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

Interpretation of all rules pertaining to the plan.

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

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

Executive Bonus Plan 3 of 4

Plan Term

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

Foreign Currency Considerations

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

Definitions

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

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

Net Revenue: Refers to consolidated net sales.

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

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

Executive Bonus Plan 4 of 4

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

Investor Contact:	Michael J. Rockenbach	Press Contact:	Robin Austin
	Chief Financial Officer		Director, Public Relations
	(714) 885-3695		(714) 885-3462

Emulex Corporation Announces Leadership Succession

President and Chief Operating Officer, James M. McCluney, to become President and Chief
Executive Officer and a member of the Board of Directors; Chief Executive Officer, Paul F.
Folino, to become Executive Chairman of the Board.

     COSTA MESA, Calif., September 5, 2006 – Emulex Corporation (NYSE:ELX) announced today that its Board of Directors has unanimously approved a succession plan that will ensure strong leadership at Emulex in the years to come. James M. McCluney, President and Chief Operating Officer of Emulex, today becomes President and Chief Executive Officer of Emulex and a member of the Board of Directors. Jim joined Emulex in 2003 as President and Chief Operating Officer after Emulex acquired Vixel Corporation where Jim served as Vixel’s President and Chief Executive Officer. Paul F. Folino, who has been Emulex’s Chief Executive Officer since 1993, now becomes Executive Chairman of the Board. Paul and Jim have been working towards this succession plan since the acquisition of Vixel and a very smooth transition is anticipated.

     “I want to thank the Board of Directors for their confidence in our plans and process,” stated Jim McCluney. “I believe Emulex is very well positioned to execute on our 2007 operating goals and strategies and I am very grateful for the support and confidence the Board of Directors has in our leadership team.”

     “As Chief Executive Officer of Emulex for the past thirteen years, one of my key responsibilities was to build a strong leadership team that could continue to take Emulex to the

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Emulex Announces Leadership Succession
September 5, 2006
Page 2

next level,” stated Paul Folino. “With our eighth straight year of sequential revenue growth and record non-GAAP earnings behind us in fiscal 2006, I am pleased to turn the Chief Executive Officer position over to someone of Jim McCluney’s caliber. Having worked closely with Jim over the past three years and seeing Jim’s leadership style and operational capabilities first hand, I am confident that Jim and the senior management team will continue to build upon our successes. As Executive Chairman of the Board, I plan to continue to work closely with Jim and his team while focusing on the integration of our two most recent acquisitions, Aarohi Communications and Sierra Logic, Inc., and our long-term strategic plan.

About Emulex

     Emulex Corporation is the most trusted name in storage networking connectivity. The world’s leading server and storage providers rely on Emulex award-winning HBAs, embedded storage switching and I/O controller products to build reliable, scalable and high performance storage solutions. Emulex ranked number 19 in the Deloitte 2005 Technology Fast 50 and is listed on the New York Stock Exchange (NYSE:ELX). Corporate headquarters are located in Costa Mesa, California. News releases and other information about Emulex Corporation are available at http://www.emulex.com.

EMULEX We network storage

     This news release refers to various products and companies by their trade names. In most, if not all, cases these designations are claimed as trademarks or registered trademarks by their respective companies.

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