Document:

Prepared by R.R. Donnelley Financial -- EX-10.15

 Exhibit 10.15 

FIRST AMENDMENT TO LEASE AGREEMENT 

FIRST AMENDMENT TO LEASE AGREEMENT (this “First Amendment”) is made as of October 30 2013, by and between
ARE-TECHNOLOGY CENTER SSF, LLC, a Delaware limited liability company (“Landlord”), and CALITHERA BIOSCIENCES, INC., a Delaware corporation (“Tenant”). 

RECITALS 
 A.
Landlord and Tenant are now parties to that certain Lease Agreement dated as of February 14, 2013, as amended by that certain letter agreement dated as of March 31, 2013 (as amended, the “Lease”). Pursuant to the
Lease, Tenant leases certain premises consisting of approximately 17,507 rentable square feet (“Original Premises”) in a building located at 343 Oyster Point Boulevard, South San Francisco, California. The Original Premises are more
particularly described in the Lease. Capitalized terms used herein without definition shall have the meanings defined for such terms in the Lease. 

B. Landlord and Tenant desire, subject to the terms and conditions set forth below, to amend the Lease to, among other things,
(i) expand the size of the Original Premises by adding approximately 11,573 rentable square feet of space in the Building, and (ii) extend the Base Term of the Lease. 

NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by this reference, the mutual promises and
conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows: 

 

	1.	Expansion Premises. In addition to the Original Premises, commencing on the Expansion Premises Commencement Date (as defined in Section 2 below), Landlord leases to Tenant, and Tenant leases
from Landlord, that certain portion of the Building consisting of approximately 11,573 rentable square feet, as shown on Exhibit A attached hereto (the “Expansion Premises”). 

 

	2.	Delivery. The “Expansion Premises Commencement Date” shall be December 1, 2013. Upon the request of Landlord, Tenant shall execute and deliver a written acknowledgment of the
Expansion Premises Commencement Date and the Expiration Date of the Lease in the form of the “Acknowledgement of Premises Commencement Date” attached to the Lease as Exhibit D; provided, however, Tenant’s failure
to execute and deliver such acknowledgment shall not affect Landlord’s rights hereunder. 

 Landlord shall permit Tenant
access to the Expansion Premises commencing on the date that is 1 day after the mutual execution and delivery of this First Amendment by the parties for Tenant’s space planning in connection with the Expansion Premises Tenant Improvements (as
defined in Section 7 below) (collectively, “Planning Access”), provided that such Planning Access is coordinated with Landlord, and Tenant complies with the Lease and all other reasonable restrictions and conditions
Landlord may impose during the Planning Access. In no event may Tenant commence construction of the Expansion Premises Tenant Improvements prior to the Expansion Premises Commencement Date. Any access to the Expansion Premises by Tenant before the
Expansion Premises Commencement Date shall be subject to all of the terms and conditions of the Lease, excluding the obligation to pay Base Rent and Operating Expenses. 

For the period of 90 consecutive days after the Expansion Premises Commencement Date, Landlord shall, at its sole cost and expense (which shall
not constitute an Operating Expense), be responsible for any repairs that are required to be made to the Building Systems serving the Expansion Premises, unless Tenant or any Tenant Party was responsible for the cause of such repair, in which case
Tenant shall pay the cost. 

  

					
		  	
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 Except as set forth in this First Amendment: (i) Tenant shall accept the Expansion Premises
in their condition as of the Expansion Premises Commencement Date; (ii) Landlord shall have no obligation for any defects in the Expansion Premises; and (iii) Tenant’s taking possession of the Expansion Premises shall be conclusive
evidence that Tenant accepts the Expansion Premises and that the Expansion Premises were in good condition at the time possession was taken. 

Tenant agrees and acknowledges that, except as otherwise set forth in this First Amendment, neither Landlord nor any agent of Landlord has made
any representation or warranty with respect to the condition of all or any portion of the Expansion Premises, and/or the suitability of the Expansion Premises for the conduct of Tenant’s business, and Tenant waives any implied warranty that the
Expansion Premises are suitable for the Permitted Use. 
  

	3.	Premises and Building. Commencing on the Expansion Premises Commencement Date, the defined terms for “Premises” and “Rentable Area of Premises” on page 1 of the Lease are
deleted in their entirety and replaced with the following: 

 “Premises: That portion of the Building containing
approximately 29,080 rentable square feet, consisting of (i) the “Original Premises” containing approximately 17,507 rentable square feet, and (ii) the “Expansion Premises” containing approximately 11,573
rentable square feet, all as determined by Landlord, as shown on Exhibit A.” 
 “Rentable Area of Premises: 29,080
sq. ft.” 
 As of the Expansion Premises Commencement Date, Exhibit A to the Lease shall be amended to include the Expansion
Premises described on Exhibit A attached to this First Amendment. 
  

	4.	Base Term. Commencing on the Expansion Premises Commencement Date, the defined term “Base Term” on page 1 of the Lease is deleted in its entirety and replaced with the following:

 “Base Term. Beginning, (i) with respect to the Original Premises on the Commencement Date, and
(ii) with respect to the Expansion Space on the Expansion Premises Commencement Date, and ending, with respect to the entire Premises, on the date that is 48 months after the Expansion Premises Commencement Date (“Expiration
Date”).” 
  

	5.	Base Rent. 

 (a) Original Premises. Tenant shall
continue to pay Base Rent with respect to the Original Premises through June 30, 2015, as provided for in the Lease. Commencing on July 1, 2015, Tenant shall pay Base Rent for the Original Premises in the amount of $2.80 per rentable
square foot of the entire Original Premises per month through the Expiration Date 
 (b) Expansion Premises.
Commencing on the Expansion Premises Commencement Date, Tenant shall (in addition to Base Rent for the Original Premises) commence paying Base Rent for the Expansion Premises (“Expansion Premises Base Rent”) at the rate of $2.60 per
rentable square foot of the Expansion Premises per month. Commencing on the first anniversary of the Expansion Premises Commencement Date, Tenant shall commence paying Expansion Premises Base Rent in the amount of $2.80 per rentable square foot of
the Expansion Premises per month through the Expiration Date. 

  

					
		  	
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 Notwithstanding the foregoing, for (i) the period commencing on the Expansion Premises
Commencement Date through the last day of the 6th month after the Expansion Premises Commencement Date, Tenant shall be required to pay Expansion Premises Base Rent with respect to only 3,000
rentable square feet of the Expansion Premises, and (ii) for the period commencing on the 1st day of the 7th month after the Expansion
Premises Commencement Date through the last day of the 12th month after the Expansion Premises Commencement Date, Tenant shall be required to pay Expansion Premises Base Rent with respect to only 6,000 rentable square feet of the Expansion Premises.
Commencing on the first anniversary of the Expansion Premises Commencement Date, Tenant shall commence paying Expansion Premises Base Rent with respect to the entire Expansion Premises. Notwithstanding anything to the contrary contained herein, if
at any time prior to the last day of the 12th month after the Expansion Premises Commencement Date, Tenant subleases to a third party (pursuant to the terms of the Lease) a portion of the
Expansion Premises in excess of the rentable square footage with respect to which Tenant is then-required to pay Base Rent pursuant to this Section 5(b), then any such base rent payable under the sublease with respect to such additional
square footage only shall be due and payable as Additional Rent under the Lease and Tenant shall pay to Landlord (on the same day that Base Rent is due) all such base rent payable under the sublease in connection with such additional square footage.

  

	6.	Tenant’s Share. Commencing on the Expansion Premises Commencement Date, the defined terms “Tenant’s Share of Operating Expenses of Building” and “Tenant’s Share of
Operating Expenses of Project” on page 1 of the Lease are deleted in their entirety and replaced with the following: 

“Tenant’s Share of Operating Expenses of Building: 53.87%” 

“Tenant’s Share of Operating Expenses of Project: 26.94%” 

Notwithstanding the foregoing, Tenant shall continue to pay Operating Expenses (other than Utilities) with respect the Original Premises as
provided for in Section 5 of the Lease through June 30, 2015. Notwithstanding anything to the contrary contained in the Lease, Tenant shall commence paying Operating Expenses with respect to the entire Original Premises on
July 1, 2015. For the period commencing on the Expansion Premises Commencement Date through the last day of the 6th month after the Expansion Premises Commencement Date, Tenant shall be
required to pay Operating Expenses (including Utilities) only with respect to only 4,874 rentable square feet of the Expansion Premises. For the period commencing on the 1st day of the 7th month after the Expansion Premises Commencement Date through the last day of the 12th month after the Expansion Premises Commencement Date,
Tenant shall be required to pay Operating Expenses (including Utilities) with respect to only 6,000 rentable square feet of the Expansion Premises. On the first day of the 13th month after the
Expansion Premises Commencement Date, Tenant shall commence paying Operating Expenses (including Utilities) with respect to the entire Expansion Premises. 

Notwithstanding anything to the contrary contained herein, if at any time prior to the last day of the 12th month after the Expansion Premises Commencement Date, Tenant subleases to a third party (pursuant to the terms of the Lease) a portion of the Expansion Premises in excess of the rentable square
footage with respect to which Tenant is then-required to pay Operating Expenses pursuant to this Section 6, then commencing on the commencement date of the sublease, Tenant shall be required to pay Operating Expenses (including
Utilities) with respect to such additional square footage. 
  

	7.	 Expansion Premises TI Allowance. Landlord shall make available to Tenant a tenant improvement allowance of up to $20.00 per rentable
square foot of the Expansion Premises, or $231,460 (the “Expansion Premises TI Allowance”) for the design and construction of fixed and 

  

					
		  	
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permanent improvements desired by and performed by Tenant in the Expansion Premises (the “Expansion Premises Tenant Improvements”). Except as otherwise provided in this
Section 7, the Expansion Premises TI Allowance shall be available only for the design and construction of Expansion Premises Tenant Improvements in the Expansion Premises. Tenant acknowledges that upon the expiration of the Term of the
Lease, the Expansion Premises Tenant Improvements shall become the property of Landlord and may not be removed by Tenant. Notwithstanding anything to the contrary contained herein, the Expansion Premises TI Allowance shall not be used to purchase
any furniture, personal property or other non-Building system materials or equipment, including, but not limited to, Tenant’s voice or data cabling, non-ducted biological safety cabinets and other scientific equipment not incorporated into the
Expansion Premises. Except for the Expansion Premises TI Allowance, Tenant shall be solely responsible for all of the costs of the Expansion Premises Tenant Improvements. The Expansion Premises Tenant Improvements shall be treated as Alterations and
shall be undertaken pursuant to Section 12 of the Lease. The contractor for the Expansion Premises Tenant Improvements shall be selected by Tenant, subject to Landlord’s approval, which approval shall not be unreasonably withheld,
conditioned or delayed. Prior to the commencement of the Expansion Premises Tenant Improvements, Tenant shall deliver to Landlord a copy of any contract with Tenant’s contractors, and certificates of insurance from any contractor performing any
part of the Expansion Premises Tenant Improvements evidencing industry standard commercial general liability, automotive liability, “builder’s risk”, and workers’ compensation insurance. Tenant shall cause the general contractor
to provide a certificate of insurance naming Landlord, Alexandria Real Estate Equities, Inc., and Landlord’s lender (if any) as additional insureds for the general contractor’s liability coverages required above. Tenant shall not be
required to remove the Expansion Premises Tenant Improvements at the expiration or earlier termination of the Term nor shall Tenant have the right to remove any of the Expansion Premises Tenant Improvements at any time during the Term. 

During the course of design and construction of the Expansion Premises Tenant Improvements, Landlord shall reimburse Tenant for the cost of the
Expansion Premises Tenant Improvements once a month against a draw request in Landlord’s standard form, containing evidence of payment of the applicable costs and such certifications, lien waivers (including a conditional lien release for each
progress payment and unconditional lien releases for the prior month’s progress payments), inspection reports and other matters as Landlord customarily obtains, to the extent of Landlord’s approval thereof for payment, no later than 30
days following receipt of such draw request. Upon completion of the Expansion Premises Tenant Improvements (and prior to any final disbursement of the Expansion Premises TI Allowance) Tenant shall deliver to Landlord the following items:
(i) sworn statements setting forth the names of all contractors and subcontractors who did work on the Expansion Premises Tenant Improvements and final lien waivers from all such contractors and subcontractors; and (ii) “as
built” plans for the Expansion Premises Tenant Improvements. Notwithstanding the foregoing, if the cost of the Expansion Premises Tenant Improvements exceeds the Expansion Premises TI Allowance, Tenant shall be required to pay such excess in
full prior to Landlord having any obligation to fund any of the Expansion Premises TI Allowance. The Expansion Premises TI Allowance shall only be available for use by Tenant for the construction of the Expansion Premises Tenant Improvements in the
Premises until the date that is 12 months after the Expansion Premises Commencement Date, and any portion of the Expansion Premises TI Allowance which has not been disbursed by Landlord on or before until the date that is 12 months after the
Expansion Premises Commencement Date shall be applied to reduce the monthly Base Rent first coming due under the Lease following the completion of the Expansion Premises Tenant Improvements and the payment of all costs incurred in connection with
the Expansion Premises Tenant Improvements. Except as otherwise provided in the immediately preceding sentence, Tenant shall have no right to the use or benefit of any portion of the Expansion Premises TI Allowance not required for the construction
of the Expansion Premises Tenant Improvements. 

  

					
		  	
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	8.	Miscellaneous. 

 (a) This First Amendment is the entire
agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions. This First Amendment may be amended only by an agreement in writing, signed by the
parties hereto. 
 (b) Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other
person (collectively, “Broker”) in connection with the transaction reflected in this First Amendment and that no Broker brought about this transaction, other than CRESA Partners. Landlord and Tenant each hereby agree to indemnify
and hold the other harmless from and against any claims by any Broker, other than the broker, if any, named in this First Amendment, claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as
applicable, with regard to this leasing transaction. 
 (c) This First Amendment is binding upon and shall inure to the
benefit of the parties and their respective successors and assigns. 
 (d) This First Amendment may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument. The signature page of any counterpart may be detached therefrom without impairing the legal effect of the
signature(s) thereon provided such signature page is attached to any other counterpart identical thereto except having additional signature pages executed by other parties to this First Amendment attached thereto. 

(e) Except as amended and/or modified by this First Amendment, the Lease is hereby ratified and confirmed and all other terms
of the Lease shall remain in full force and effect, unaltered and unchanged by this First Amendment. In the event of any conflict between the provisions of this First Amendment and the provisions of the Lease, the provisions of this First Amendment
shall prevail. Whether or not specifically amended by this First Amendment, all of the terms and provisions of the Lease are hereby amended to the extent necessary to give effect to the purpose and intent of this First Amendment. 

[Signatures are on the next page.] 

  

					
		  	
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 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as of the dad
and year first above written. 
  

							
	TENANT:
	
	 CALITHERA BIOSCIENCES, INC.,

a Delaware corporation

		
	By:	 	 /s/ Susan Molineaux

	Its:	 	 President & CEO

	
	LANDLORD:
	
	 ARE-TECHNOLOGY CENTER SSF, LLC,

a Delaware limited liability company

		
	By:	 	 ALEXANDRIA REAL ESTATE EQUITIES, L.P.,

a Delaware limited partnership,

		 	managing member
			
		 	By:	 	ARE-QRS CORP.,
		 		 	a Maryland corporation,
		 		 	general partner
				
		 		 	By:	 	 /s/ Eric Johnson

		 		 	Its:	 	 Vice President, Real Estate Legal Affairs

  

					
		  	
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 EXHIBIT A 

EXPANSION PREMISESEX-101ELXEICP

Exhibit 10.1

  

EMULEX CORPORATION
EXECUTIVE INCENTIVE COMPENSATION PLAN 
TERMS & CONDITIONS (Effective June 30, 2014 to June 28, 2015)

PLAN PURPOSE

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

To assist in attracting and retaining top quality management.

GENERAL PLAN DESCRIPTION

These terms and conditions set forth within this document hereby govern the interpretation, eligibility, and calculations for the Emulex Corporation (the “Company”) Executive Incentive Compensation Plan (“EICP” or the “Plan”).  

This Plan provides for an incentive cash payment (“Award”) based upon Company performance against Net Revenue and Net Operating Income plan goals and specified business goals as detailed below.  In addition, a discretionary cash payment for recognition of extraordinary contributions to the success of the company may be recommended.  All recommendations are subject to the approval of the Compensation Committee of the Emulex Board of Directors.

ELIGIBILITY

Corporate officers, executive officers, operating officers, senior vice presidents, vice presidents, senior directors, and directors, excluding those eligible for sales commission (unless otherwise indicated in this Plan), are eligible for selection to participate in this Plan.  Actual Plan participants will normally be selected from among those eligible annually, prior to the start of each fiscal year, by the Chief Executive Officer and approved by the Compensation Committee.  

See the “Appendix” for a list of eligible positions/levels and targets covered by this Plan.

TERM, PERFORMANCE PERIOD, AND PAYMENT

Plan Term – The Plan is effective on the first day of the Company’s fiscal year and ends on the last day of the fiscal year.

Performance Period — The performance period is selected at the discretion of the Company and may be:
		
	◦
	Quarterly: Beginning on the first day of the fiscal quarter and ending on the last day of the fiscal quarter.

		
	◦
	Semi-Annual: Beginning on the first day of the fiscal quarter 1 and ending on the last day of the fiscal quarter 2, and beginning on the first day of fiscal quarter 3 and ending on the last day of fiscal quarter 4.

		
	◦
	Annual:  Beginning on the first day of the fiscal year and ending on the last day of the fiscal year.

Payment — Awards are payable upon approval by the Compensation Committee, as recommended by the CEO.
For FY15 there will be five performance periods weighted as follows:
		
	•
	80% of the target Award will be earned based on quarterly performance periods equally weighted 20% each.  

		
	•
	20% of the target Award will be tied to the full fiscal year performance period (June 30, 2014 to June 28, 2015)

	
						
	Performance Periods
	Q1
	Q2
	Q3
	Q4
	Full Year

	% of Target Incentive Award Earned
	20%
	20%
	20%
	20%
	20%

TARGET AWARD OPPORTUNITY
Each Plan participant will be assigned a Target Award Opportunity expressed as a percentage of his or her actual gross base salary in effect at the end of the respective performance period based on job title.  

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.  All Award calculations will be made using the equivalent gross base salary in US dollars.

TARGET AWARD CRITERIA
Target Award criteria will be based upon achievement of a combination of performance goals.  The Emulex Corporate metrics and associated weighting are:

	
			
	Operating Unit
	Emulex Corporate Plan - Metric Weightings

	Metric
	Emulex Revenue
	Emulex Net Operating Income

	Weighting
	40%
	60%

A separate metrics and weighting scheme will be applied to Target Award criteria for Plan participants in the Company’s Endace Division1.  For FY15, it will be:
	
					
	 
	Endace Division Plan Metrics Weightings

	Operating Unit
	Emulex Corporate Metric Weightings
	Endace Division Metrics Weightings

	Metric
	Emulex Revenue
	Emulex Net Operating Income
	Endace Revenue
	Endace Pre-EICP  
Operating Income

	Weighting
	8%
	12%
	36%
	44%

	Overall Weighting
	20% Emulex Corporation Weighting
	80% Endace Division Weighting

________________________________________________________ 
1 The Endace Division is one operating unit. The entire company, including the Endace Division, is another operating unit, and is referred to as Emulex Corporation.

2 

For both groups, the Award pool will be established based on the following: 

	
				
	CORPORATE PERFORMANCE GOAL
	THRESHOLD (MINIMUM)*
	AOP
	MAXIMUM

	ACHIEVEMENT %
	70.00%
	100.00%
	133.33%

	AWARD -  % EARNED
	50.0%
	85.0%
	150.0%

	* Note:  No Award will be deemed earned or payable if Net Operating Income for the Operating Unit’s applicable performance periods falls below 50% of the AOP approved plan. In the case of participants with a target Award based on the performance of more than one Operating Unit, the portion of the Award based on the performance of a particular Operating Unit will not be deemed earned or payable if Net Operating Income for that Operating Unit’s applicable performance periods falls below 50% of the AOP approved plan.

The actual goals for measurement purposes will be based upon the Company's fiscal Annual Operating Plan (AOP) as approved by the Emulex Board of Directors.  Corporate incentive components will be calculated according to the following procedure (assumes quarterly performance period):

		
	1.
	The Target Award opportunity times the participant’s quarterly gross base salary equals the Target Award.

Example :      35% x $100,000 (annual salary) = $35,000 Total Target Award.  Each performance period will have a target award of $7,000
    
		
	2.
	The weighting factors for net revenue, net operating income as stated above times the Target Award give the incentive target for each weighting factor.

Example :      40% x $7,000 = $2,800 (net revenue target)    
60% x $7,000 = $4,200 (net operating income target)

		
	3.
	The Award payment for the Revenue and Net Operating Income Achievement components begins at 70% achievement, which earns 50% of the Target Award for this component.  If the Net Operating Income Unit does not achieve the minimum threshold of 50%, then no Award will be deemed earned for the operating unit’s applicable performance period.

		
	•
	For each 1.0% of incremental achievement above the 70% minimum threshold, up to 100%, the Award earned increases by 1.1667% yielding a payout between 50.0% and 85.0%. 

		
	•
	For each 1.0% of incremental achievement above 100.0%, up to 105.0% the Award increases by 5.0% yielding a payout from 85.0% to 115.0%.  

		
	•
	For each 1.0% of incremental achievement above 105.0%, up to 133.0% the Award increases by 1.25% yielding a payout from 115.0% to 150.0%. 

		
	•
	The maximum, or cap, is 133.0% Revenue and Net Operating Income, which is equivalent to 150.0% of the Target Award for each component.  

Using the Example, if the first quarter performance is 105% of net revenue and 110% of     net income:

		
	•
	105.0%of net revenue target:

115.0% x $2,800 = $3,220.00 net revenue incentive component
		
	•
	110.0% of net operating income target:

121.3% x $4,200 = $5,094.60 net operating income incentive component

Total first quarter incentive components = $8,312.50

3 

Using the Example, if the second quarter performance is 90% of Net Revenue and 80% of Net Operating income:

		
	•
	90.0%of net revenue target: 

73.3% x $2,800 = $2,053.33 net revenue incentive component

		
	•
	80.0% of net operating income target:

61.7% x $4,200 = $2,590 net operating income incentive component

Total second quarter incentive components = $4,643.33

		
	4.
	Net Revenue and Net Operating Income will be treated as separate components independent of one another regardless of the award formula, and will be added to compute the Award.  However, a minimum performance threshold of 70% of the Board of Directors’ approved AOP for Net Revenue and Net Operating Income must be achieved for each respective incentive component to be included in the Award.  Likewise, a maximum Award has been established based on performance at 133% of plan for each component. 

 
Note:  In no event will a cash award be deemed earned or payable under any component or provision of the plan if actual Net Operating Income for the Operating Unit’s applicable performance periods falls below 50% of the approved AOP for Net Operating Income for such performance period.

		
	5.
	A participant’s Award may be adjusted by a Performance Contribution Factor (PCF) which represents the level of the participant’s contribution to the Company’s results for the quarter, and the payment made to the participant shall be the Award multiplied by the PCF.  The PCF will be determined by the Company, and can range from 0.9 to 1.1, as a factor to be multiplied by the Award for the performance period.  A PCF other than 1.0 should be applied on an exception basis.  The PCF for a participant will be based on exceptional performance (positive or negative) against the objectives set for that participant at the beginning of the quarter, and the participant’s progress against those objectives as discussed with his or her manager.  

PLAN ADMINISTRATION, INTERPRETATION, AMENDMENT, AND TERMINATION

The Plan will be administered under the direction of the CEO of Emulex Corporation upon approval by the Emulex Compensation Committee.  The administrator's authority includes recommendations as noted below as well as:

		
	◦
	Identification of Plan participants, corporate performance goals, Award opportunity and Award payment.

		
	◦
	Interpretation of 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.

4 

The Company reserves the right in its sole discretion and without advance notice to amend or terminate the Plan.  The terms and provisions of this Plan are not intended to be a contract and are not contractually enforceable.  

ELIGIBILITY THRESHOLDS & PRO-RATION OF AWARD

Except as otherwise provided in this Plan or as required by law, if an employee is (a) hired by the Company into an eligible incentive position, (b) is promoted or transferred during the performance period into an eligible position or (c) demoted or transferred during the performance period out of an Award eligible position, his/her Award opportunity will be based on the effective date of the event and prorated accordingly.
New Hires Minimum Participation Requirement –  A participant must be an active regular full-time employee during the performance period for which the Award is paid.  A pro-rated Award payment will be made for employment during portions of a performance period, provided the participant has been employed for a minimum of 30 calendar days: 

Calculation of Prorated Target Award Opportunity – An employee, who is placed into, moves between Plan eligible positions or removed from a Plan eligible position during the performance period, is eligible for a prorated Award target.  A proration factor is calculated based upon the number of days divided by the total number of days in the performance period. (minimum days of service required for new-hires as stated above).  The proration factor will be applied against the Plan participant’s  target Award to calculate the prorated target Award percentage.
For example:  A Plan participant who is promoted into (or out of) a Plan eligible position on August 16th would be eligible for a prorated payment under the Plan (assuming a quarterly payout) as follows: 
		
	◦
	August 16th = 46th day of quarter; full quarter is 91 days therefore proration factor would be 49.45% (45 days/91 days)

		
	◦
	Assuming this Plan participant had a 35% incentive target the prorated target Award for the quarter would be = 17.31% (35% Target Award x 49.45%)

All quarterly, semi-annual and/or annual Award opportunities under the Plan will be determined and prorated based on full days, as described above. 
Leaves of Absence (LOA) – Except as otherwise provided in this Plan or as required by law, if a Plan participant goes on an approved Family Medical Leave Act (FMLA), Workers Compensation or Personal Leave of Absence during the performance period, the participant’s Target Award Opportunity will be prorated based upon full number of days worked during the performance period.

		
	◦
	A Plan participant who is out of work on an Approved Leave of Absence for any reason and, as a result, does not work during the performance period will NOT be eligible for an Award.  

		
	◦
	Payment for any Award earned up to the start of an applicable Approved Leave of Absence will be calculated and paid according to the normal process, even if such payment occurs while a Plan participant is out on an Approved Leave of Absence. Further, payment for any Award earned during an applicable Approved Leave of Absence will be calculated according to the normal process, and payment will be made 

5 

as soon as administratively possible following the Plan participant’s return from approved leave.
Participant Performance Requirement – Notwithstanding anything to the contrary in this document, except as otherwise required by law, eligibility to participate in the Plan or to earn or receive credit for any Award for a given full-month period during the performance period is contingent on performance by the Plan participant at a “satisfactory level” for such period, which is defined as: (i) having no deficiencies in meeting goals or failure to meet job standards as determined by the Company in its discretion; (ii) effectively performing his/her duties and responsibilities as generally outlined in the job description as determined by the Company in its discretion; or (iii) not being subject to a written Performance Improvement Plan (PIP) or on probation for the period defined in such PIP or probation.
Separation From Employment – Except as otherwise provided in the Plan, below in this Section or as required by law, a Plan participant is eligible to receive an Award if he/she is employed by the Company on the day of actual Award payment and otherwise meets the Award goal/target, performance, and other eligibility requirements set forth in this Plan.
		
	◦
	In the event a Plan participant is terminated by the Company from his/her employment for any of the reasons listed below, the Plan participant will be eligible to receive an Award payment for each applicable performance period (e.g., for monthly, quarterly and/or annual components). The Award will be based upon the full number of days the Plan participant worked during the performance period, regardless of when the Award is paid.

		
	•
	Permanent or indefinite reduction in staff resulting in job elimination;

		
	•
	Reduction of a Plan participant’s position as the result of an organizational or business restructuring;

		
	•
	Discontinuance of an operation;

		
	•
	Relocation of all or a part of Emulex’s business;

		
	•
	Lack of work;

		
	•
	Location closing;

		
	•
	Sale of an operation to a third party; or

		
	•
	Sale or other change in ownership of all or a part of Emulex’s business.

		
	◦
	In the event a Plan participant is terminated by the Company, resigns or is otherwise separated from his/her employment for any reason other than those described above prior to payment of all or a portion of an Award for an applicable performance period (e.g., for quarterly, semi-annually, and/or annual), the Plan participant shall immediately cease eligibility as a participant in the Plan, and shall not be entitled to any Award.   

Examples of reasons for termination or separation that disqualify a Plan participant from receiving an Award include, but are not limited to:

		
	•
	Resignation for any reason.

		
	•
	Termination by the Company for unsatisfactory job performance, violation of rules of conduct, disloyalty or breach of fiduciary duty to the Company, or any other reason not specifically listed above.

		
	◦
	In the event of a Plan participant’s death, the Plan participant’s estate will be eligible to receive an Award payment in whole or prorated for each applicable performance period (e.g., for quarterly, semi-annually and/or annual) if decedent was employed by the Company prior to death of such performance period and otherwise meets the Award goal/target.

6 

		
	◦
	All Awards paid upon separation from employment shall be payable at the same time and in accordance with this Plan.  Exceptions must be approved in writing by the CEO. 

Payment of Awards – Upon approval of an Award in accordance with this Plan, the Award payment will be distributed no later than the first payroll cycle following the 60 days after the performance period ends. The Award payment will be processed after financial close of the performance period, completion of the audit/review of the Company’s financial statements by the Company’s independent auditors, and approval by the Emulex Compensation Committee.

DISCRETIONARY CASH PAYMENT

The CEO may recommend a discretionary cash payment to employees who makes an extraordinary contribution to the success of the Company.  Such discretionary cash payment 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.  

AT-WILL EMPLOYMENT 

This document contains guidelines relating to compensation of certain employees of Emulex.  This document is not intended and shall not be read to create any express or implied promise or contract for employment, for any benefit, or for specific treatment in specific situations.  Unless the employee has an employment agreement with the Company, the employment relationship with Emulex is at-will, meaning the employment is not for any minimum or set period, and is subject to the mutual consent of the employee and Emulex, and either party may terminate the employment at any time, for any reason, without cause or prior notice.  

EQUAL EMPLOYMENT OPPORTUNITY 

This Plan will be administered and any Award paid on an equal opportunity basis without regard to race, religion, sex, age, national origin, physical or mental disability, marital status, sexual orientation, or any other characteristic that is protected by applicable law.

DEFINITIONS

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

Gross Base Salary:  An employee's base salary, and does not include payment for overtime, incentive payment of any type, or other income such as relocation allowances, employee referral payment, etc.

Net Revenue:  Net revenue as presented in the Company's consolidated financial statements.

Net Operating Income:  Non-GAAP Operating income as publicly disclosed.

Pre-EICP Operating Income: Non-GAAP Operating income as publicly disclosed, before reduction for Award expense.

7 

Target Award Opportunity Categories 

	
		
	Employee Category
	Target Award Opportunity Percentage

	1
	110%

	2
	70%

	3
	60%

	4
	55%

	5
	50%

	6
	40%

	7
	35%

	8
	20%

	9
	10%

8

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