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SEC Filings
DEF 14A
QLOGIC CORP filed this Form DEF 14A on 07/23/1996
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<PAGE>   17
 
     No option granted under the Director Plan shall be exercisable after the
expiration of the earlier of (i) ten years following the date the option is
granted, or (ii) one year following the date the optionee ceases to be a
director of the Company for any reason.
 
     Options granted to a director upon becoming an Eligible Director shall be
exercisable as to one-third of the shares subject to the option on each
anniversary date of the date the option is granted if the director to whom the
option is granted is still a director of the Company on such anniversary. Annual
option grants to directors will be exercisable as to one-third of the shares
subject to the option on each anniversary date of the date the option is granted
if the director to whom the option is granted is still a director of the Company
on such anniversary.
 
     In the event of the death of an optionee, any option (or unexercised
portion thereof) held by the optionee, to the extent exercisable by him or her
on the date of death, may be exercised by the optionee's personal
representatives, heirs, or legatees in accordance with the Director Plan. No
option shall be transferable by an optionee otherwise than by will or the laws
of descent and distribution, and, during the lifetime of the individual to whom
an option is granted, it may be exercised only by such individual or such
individual's guardian or legal representative.
 
     Mergers, Reorganizations and Changes in Control. In the event of a
liquidation of the Company or a merger, reorganization or consolidation of the
Company with any other corporation in which the Company is not the surviving
corporation or the Company becomes a subsidiary of another corporation, any
unexercised options previously granted under the Director Plan shall be deemed
cancelled unless the surviving corporation elects to assume the options or to
use substitute options. However, unless the surviving corporation elects to
assume the options or to use substitute options, the optionee shall have the
right, exercisable during a ten day period ending on the fifth day prior to such
liquidation, merger or consolidation, to fully exercise the optionee's option in
whole or in part without regard to any installment exercise provisions otherwise
provided in the Director Plan. In the event of a change in control of the
Company, as defined in the Director Plan, any unexercised option previously
granted under the Director Plan which is not then already exercisable as to all
of the shares subject to the option shall become exercisable upon such change in
control as to one half of the shares as to which the option is not already
exercisable in addition to the shares, if any, as to which the option is already
exercisable.
 
     Director Plan Amendments. The Director Plan may be terminated or amended by
the Board as its shall deem advisable. Without the authorization and approval of
the stockholders, however, the Board may not make any amendments which would (i)
materially increase the benefits accruing to directors under the Director Plan,
(ii) increase the total number of shares which may be issued under the Director
Plan, or (iii) materially modify the eligibility requirements to receive a stock
option grant under the Director Plan.
 
     Term of Director Plan. The Director Plan expires on December 31, 2001.
 
FEDERAL INCOME TAX CONSEQUENCES
 
     Only non-qualified options which are not intended to meet the incentive
stock option requirements of Section 422 of the Code will be issued under the
Director Plan. Under current federal income tax law, the grant of an option
under the Director Plan will have no federal income tax consequences to the
Company or the Director to whom it is granted. Generally, upon exercise of a
non-qualified stock option granted under the Director Plan, the excess of the
fair market value of the stock at the date of exercise over the option price
(the "Spread") is taxable to the optionee as ordinary income. All such amounts
taxable to an optionee are deductible by the Company as compensation expense.
The deduction will be allowed for the taxable year of the Company in which the
optionee includes an amount in income.
 
     Generally, the shares received on exercise of an option under the Director
Plan are not subject to restrictions on transfer or risks of forfeiture and,
therefore, the optionee will recognize income on the date of exercise of a
nonqualified stock option. However, if the optionee is subject to Section 16(b)
of the Exchange Act, the Section 16(b) restriction will be considered a
substantial risk of forfeiture for tax purposes. Under current law, participants
who are directors of the Company will be subject to restrictions under Sec-
 
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