Exhibit 10.3


 


REALD INC.

2010 STOCK INCENTIVE PLAN


(Effective as of April 9, 2010)


 


SECTION 1.  INTRODUCTION.


 


The Company’s Board of
Directors adopted the RealD Inc. 2010 Stock Incentive Plan to be effective on
the Effective Date conditioned on and subject to obtaining Company stockholder
approval.  The Plan was approved by
Company stockholders on the Stockholder Approval Date.


 


The purpose of the Plan
is to promote the long-term success of the Company and the creation of
stockholder value by offering Selected Employees an opportunity to acquire a
proprietary interest in the success of the Company, or to increase such
interest, and to encourage such Selected Employees to continue to provide
services to the Company and to attract new individuals with outstanding
qualifications.


 


The Plan seeks to achieve
this purpose by providing for Awards in the form of Options (which may
constitute Incentive Stock Options or Nonstatutory Stock Options), Stock
Appreciation Rights, Restricted Stock Grants and/or Stock Units.


 


Capitalized terms shall
have the meaning provided in Section 2 unless otherwise provided in this
Plan or any related Stock Option Agreement, SAR Agreement, Restricted Stock
Grant Agreement or Stock Unit Agreement.


 


SECTION 2.  DEFINITIONS.


 


(a)                                  “Affiliate” means any entity other than a
Subsidiary, if the Company and/or one or more Subsidiaries own not less than
50% of such entity.  For purposes of
determining an individual’s “Service,” this definition shall include any entity
other than a Subsidiary, if the Company, a Parent and/or one or more
Subsidiaries own not less than 50% of such entity.


 


(b)                                 “Award” means any award of an Option,
SAR, Restricted Stock Grant or Stock Unit under the Plan.


 


(c)                                  “Board” means the Board of Directors of
the Company, as constituted from time to time.


 


(d)                                 “California Participant” means a
Participant whose Award was issued in reliance on Section 25102(o) of
the California Corporations Code.


 


(e)                                  “Cashless Exercise” means, to the extent
that a Stock Option Agreement so provides and as permitted by applicable law
and in accordance with any procedures established by the Committee, an
arrangement whereby payment of some or all of the aggregate Exercise Price may
be made all or in part by delivery of an irrevocable direction to a securities
broker to sell Shares and to deliver all or part of the sale proceeds 


 


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to the
Company.  Cashless Exercise may also be
utilized to satisfy an Option’s tax withholding obligations as provided in Section 14(b).


 


(f)                                    “Cause” means, except as may otherwise be
provided in a Participant employment agreement or applicable Award agreement
(and in such case the employment agreement or Award agreement shall govern as
to the definition of Cause), (i) dishonesty or fraud, (ii) serious
willful misconduct, (iii) unauthorized use or disclosure of confidential
information or trade secrets, (iv) conviction or confession of a felony,
or (v) any other act or omission by a Participant that could reasonably be
expected to adversely affect the Company’s or a Subsidiary’s or an Affiliate’s
business, financial condition, prospects and/or reputation.  In each of the foregoing subclauses (i) through
(v), whether or not a “Cause” event has occurred will be determined by the Company’s
chief human resources officer or other person performing that function or, in
the case of Participants who are Directors or Officers or Section 16
Persons, the Board, each of whose determination shall be final, conclusive and
binding.  A Participant’s Service shall
be deemed to have terminated for Cause if, after the Participant’s Service has
terminated, facts and circumstances are discovered that would have justified a
termination for Cause, including, without limitation, violation of material Company
policies or breach of noncompetition, confidentiality or other restrictive
covenants that may apply to the Participant.


 


(g)                                 “Change In Control” except as may
otherwise be provided in a Participant employment agreement or applicable Award
agreement (and in such case the employment agreement or Award agreement shall
govern as to the definition of Change In Control), means any of the following:


 


(i) A merger or consolidation of the Company with
or into any other company or other entity;


 


(ii) A statutory share exchange pursuant to which
the Company’s outstanding shares are acquired or a sale in one transaction or a
series of transactions undertaken with a common purpose of at least 80% of the
Company’s outstanding voting securities;


 


(iii) A sale, lease, exchange or other transfer
in one transaction or a series of related transactions undertaken with a common
purpose of all or substantially all of the Company’s assets; or


 


(iv) Commencing as of the Effective Date, during
any period of 24 consecutive months, individuals, who at the beginning of such
period constitute the Board, and any new director whose election by the Board,
or whose nomination for election by the Company’s stockholders, was approved by
a vote of at least one-half (1/2) of the directors then in office (other than
in connection with a contested election), cease for any reason to constitute at
least a majority of the Board.


 


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A
transaction shall not constitute a Change In Control if it is a Related Party
Transaction or if its sole purpose is to change the state of the Company’s
incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the Company’s
securities immediately before such transactions.  In addition, an IPO shall not constitute a
Change In Control.


 


(h)                                 “Code” means the Internal Revenue Code of
1986, as amended, and the regulations and interpretations promulgated
thereunder.


 


(i)                                     “Committee” means a committee described
in Section 3.


 


(j)                                     “Common Stock” means the Company’s common
stock, $0.0001 par value per Share, and any other securities into which such
shares are changed, for which such shares are exchanged or which may be issued
in respect thereof.


 


(k)                                  “Company” means RealD Inc., a Delaware
corporation.


 


(l)                                     “Consultant” means an individual who
performs bona fide services to the Company, a Parent, a Subsidiary or an
Affiliate, other than as an Employee or Director or Non-Employee Director.


 


(m)                               “Covered Employees” means those
individuals whose compensation is subject to the deduction limitations of Code Section 162(m).


 


(n)                                 “Director” means a member of the Board
who is also an Employee.


 


(o)                                 “Disability” means, except as may
otherwise be provided in a Participant employment agreement or applicable Award
agreement (and in such case the employment agreement or Award agreement shall
govern as to the definition of Disability), that the Participant is classified
as disabled under a long-term disability policy of the Company or, if no such
policy applies, the Participant is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months.


 


(p)                                 “Effective Date” means April 9,
2010.


 


(q)                                 “Employee” means any individual who is a
common-law employee of the Company, or of a Parent, or of a Subsidiary or of an
Affiliate.


 


(r)                                    “Exchange Act” means the Securities
Exchange Act of 1934, as amended.


 


(s)                                  “Exercise Price” means, in the case of an
Option, the amount for which a Share may be purchased upon exercise of such
Option, as specified in the applicable Stock Option Agreement.  “Exercise Price,” in the case of a SAR, means
an amount, as specified in the applicable SAR Agreement, which is subtracted
from the Fair Market Value in determining the amount payable to a Participant
upon exercise of such SAR.


 


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(t)                                    “Fair Market Value” means the market
price of a Share, determined by the Committee as follows:


 


(i)                                     If the Shares were traded on a stock
exchange (such as the New York Stock Exchange, the NASDAQ Global Market or
NASDAQ Capital Market) at the time of determination, then the Fair Market Value
shall be equal to the regular session closing price for such stock as reported
by such exchange (or the exchange or market with the greatest volume of trading
in the Shares) on the date of determination, or if there were no sales on such
date, on the last date preceding such date on which a closing price was
reported;


 


(ii)                                  If the Shares were traded on the OTC
Bulletin Board at the time of determination, then the Fair Market Value shall
be equal to the last-sale price reported by the OTC Bulletin Board for such
date, or if there were no sales on such date, on the last date preceding such
date on which a sale was reported; and


 


(iii)                               If neither of the foregoing provisions is
applicable, then the Fair Market Value shall be determined by the Committee in
good faith using a reasonable application of a reasonable valuation method as
the Committee deems appropriate.


 


Whenever possible, the
determination of Fair Market Value by the Committee shall be based on the prices
reported by the applicable exchange or the OTC Bulletin Board, as applicable,
or a nationally recognized publisher of stock prices or quotations (including
an electronic on-line publication).  Such
determination shall be conclusive and binding on all persons.


 


(u)                                 “Fiscal Year” means the Company’s fiscal
year.


 


(v)                                 “Grant” means any grant of an Award under
the Plan.


 


(w)                               “Incentive Stock Option” or “ISO” means
an incentive stock option described in Code Section 422.


 


(x)                                   “IPO” means an initial public offering by
the Company of the Shares.


 


(y)                                 “Net Exercise” means, to the extent that
a Stock Option Agreement so provides and as permitted by applicable law, an
arrangement pursuant to which the number of Shares issued to the Optionee in
connection with the Optionee’s exercise of the Option will be reduced by the
Company’s retention of a portion of such Shares.  Upon such a net exercise of an Option, the
Optionee will receive a net number of Shares that is equal to (i) the
number of Shares as to which the Option is being exercised minus (ii) the
quotient (rounded down to the nearest whole number) of the aggregate Exercise
Price of the Shares being exercised divided by the Fair Market Value of a Share
on the Option exercise date.  The number
of Shares covered by clause (ii) will be retained by the Company and not
delivered to the Optionee.  No fractional Shares will be created as a
result of a Net Exercise and the Optionee must contemporaneously pay for any
portion of the aggregate Exercise Price that is not covered by the Shares
retained by the Company 


 


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under clause
(ii).  The number of Shares delivered
to the Optionee may
be further reduced if Net Exercise is utilized under Section 14(b) to
satisfy applicable tax withholding obligations.


 


(z)                                   “Non-Employee Director” means a member of
the Board who is not an Employee.


 


(aa)                            “Nonstatutory Stock Option” or “NSO”
means a stock option that is not an ISO.


 


(bb)                          “Officer” means an individual who is an
officer of the Company within the meaning of Rule 16a-1(f) of the
Exchange Act.


 


(cc)                            “Option” means an ISO or NSO granted
under the Plan entitling the Optionee to purchase a specified number of Shares,
at such times and applying a specified Exercise Price, as provided in the
applicable Stock Option Agreement.


 


(dd)                          “Optionee” means an individual, estate or
other entity that holds an Option.


 


(ee)                            “Parent” means any corporation (other
than the Company) in an unbroken chain of corporations ending with the Company,
if each of the corporations other than the Company owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.  A
corporation that attains the status of a Parent on a date after the Effective
Date shall be considered a Parent commencing as of such date.


 


(ff)                                “Participant” means an individual or
estate or other entity that holds an Award.


 


(gg)                          “Performance Goals” means one or more
objective performance targets established for a Participant which may be
described in terms of Company-wide objectives and/or objectives that are
related to the performance of the individual Participant or a Parent,
Subsidiary, Affiliate, division, department or function within the Company or
entity in which the Participant is employed, and such targets may be applied
either individually, alternatively or in any combination, and measured either
annually or cumulatively over a period of years, on an absolute basis or
relative to a pre-established target, to previous years’ results or to a
designated comparison group, in each case as specified by the Committee.  Any Performance Goals that are included in an
Award in order to make such Award qualify as performance-based compensation under
Code Section 162(m) shall be limited to one or more of the following
target objectives:  (i) operating
income; (ii) earnings before interest, taxes, depreciation and
amortization, or EBITDA; (iii) earnings; (iv) cash flow; (v) market
share; (vi) sales or revenue; (vii) expenses; (viii) cost of
goods sold; (ix) profit/loss or profit margin; (x) working capital;
(xi) return on equity or assets; (xii) earnings per share; (xiii) economic
value added, or EVA; (xiv) stock price; (xv) price/earnings ratio; (xvi) debt
or debt-to-equity; (xvii) accounts receivable; (xviii) writeoffs; (xix) cash;
(xx) assets; (xxi) liquidity; (xxii) operations; (xxiii) research or related
milestones; (xxiv) business development; (xxv) 


 


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intellectual
property (e.g., patents); (xxvi) product development; (xxvii) regulatory
activity; (xxviii) information technology; (xxix) financings; (xxx) product
quality control; (xxxi) management; (xxxii) human resources; (xxxiii) corporate
governance; (xxxiv) compliance program; (xxxv) legal matters; (xxxvi) internal
controls; (xxxvii) policies and procedures; (xxxviii) accounting and reporting;
(xxxix) strategic alliances, licensing and partnering; (xl) site, plant or
building development; (xli) mergers and acquisitions or divestitures; and/or
(xlii) Company advancement milestones (including revenue from specified
products, number of ordered or installed RealD Cinema Systems, RealD-enabled
screens, or other similar RealD products and/or market penetration of new or
key products measurable by pre-established objective criteria).  Awards issued to individuals who are not
Covered Employees (or which are not intended to qualify as performance-based
compensation under Code Section 162(m)) may take into account other (or
no) factors.


 


(hh)                          “Performance Period” means any period of
time as determined by the Committee, in its sole discretion.  The Committee may establish different
Performance Periods for different Participants, and the Committee may establish
concurrent or overlapping Performance Periods.


 


(ii)                                  “Plan” means this RealD Inc. 2010 Stock
Incentive Plan as it may be amended from time to time.


 


(jj)                                  “Prior Equity Compensation Plans” means
the Company’s 2004 Amended and Restated Stock Incentive Plan (as assumed from
Real D, a California corporation) and its predecessor plans and any other
Company equity compensation plans.


 


(kk)                            “Re-Price” means that the Company has
lowered or reduced the Exercise Price of outstanding Options and/or outstanding
SARs for any Participant(s) in a manner described by SEC Regulation S-K
Item 402(d)(2)(viii) (or as described in any successor provision(s) or
definition(s)).


 


(ll)                                  “Related Party Transaction” means (i) a
merger or consolidation of the Company, or a statutory share exchange pursuant
to which the Company’s outstanding shares are acquired, in which the holders of
the outstanding voting securities of the Company immediately prior to the
merger or consolidation hold at least a majority of the outstanding voting
securities of the Successor Company immediately after the merger, consolidation
or statutory share exchange; (ii) a sale, lease, exchange or other
transfer of all or substantially all of the Company’s assets to a
majority-owned subsidiary company; or (iii) a transaction undertaken for
the principal purpose of restructuring the capital of the Company, including,
but not limited to, reincorporating the Company in a different jurisdiction,
converting the Company to a limited liability company or creating a holding
company.


 


(mm)                      “Restricted Stock Grant” means Shares
awarded under the Plan as provided in Section 9.


 


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(nn)                          “Restricted Stock Grant Agreement” means
the agreement described in Section 9 evidencing each Award of a Restricted
Stock Grant.


 


(oo)                          “SAR Agreement” means the agreement
described in Section 8 evidencing each Award of a Stock Appreciation
Right.


 


(pp)                          “SEC” means the Securities and Exchange
Commission.


 


(qq)                          “Section 16 Persons” means those
officers, directors or other persons who are subject to Section 16 of the
Exchange Act.


 


(rr)                                “Securities Act” means the Securities Act
of 1933, as amended.


 


(ss)                            “Selected Employee” means an Employee,
Consultant, Director, or Non-Employee Director who has been selected by the
Committee to receive an Award under the Plan.


 


(tt)                                “Separation From Service” means a
Participant’s separation of service with the Company within the meaning of Code
Section 409A.


 


(uu)                          “Service” means service as an Employee,
Director, Non-Employee Director or Consultant. 
Service will be deemed terminated as soon as the entity to which
Service is being provided is no longer either (i) the Company, (ii) a
Parent, (iii) a Subsidiary or (iv) an Affiliate.  A Participant’s Service does not terminate if he or
she is a common-law employee and goes on a bona fide leave of absence that was
approved by the Company in writing and the terms of the leave provide for
continued service crediting, or when continued service crediting is required by
applicable law.  However, for purposes of
determining whether an Option is entitled to continuing ISO status, a
common-law employee’s Service will be treated as terminating ninety (90) days
after such Employee went on leave, unless such Employee’s right to return to
active work is guaranteed by law or by a contract.  Service terminates in any event when the
approved leave ends, unless such Employee immediately returns to active
work.  The Committee determines which leaves
count toward Service, and when Service commences and terminates for all purposes
under the Plan.  For avoidance of doubt,
a Participant’s Service shall not be deemed terminated if the Committee
determines that (i) a transition of employment to service with a
partnership, joint venture or corporation not meeting the requirements of a
Subsidiary in which the Company or a Subsidiary is a party is not considered a
termination of Service, (ii) the Participant transfers between service as
an Employee and service as a Consultant or other personal service provider (or
vice versa), or (iii) the Participant transfers between service as an
Employee and that of a Non-Employee Director (or vice versa).  The Committee may determine whether any
company transaction, such as a sale or spin-off of a division or subsidiary
that employs a Participant, shall be deemed to result in termination of Service
for purposes of any affected Awards, and the Committee’s decision shall be
final and binding.


 


(vv)                          “Share” means one share of Common Stock.


 


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(ww)                      “Specified Employee” means a Participant
who is considered a “specified employee” within the meaning of Code Section 409A.


 


(xx)                              “Stock Appreciation Right” or “SAR” means
a stock appreciation right awarded under the Plan which provides the holder
with a right to potentially receive, in cash and/or Shares, value with respect
to a specific number of Shares, as provided in Section 8.


 


(yy)                          “Stock Option Agreement” means the
agreement described in Section 6 evidencing each Award of an Option.


 


(zz)                              “Stock Unit” means a bookkeeping entry
representing the equivalent of one Share, as awarded under the Plan and as
provided in Section 10.


 


(aaa)                      “Stock Unit Agreement” means the agreement described
in Section 10 evidencing each Award of Stock Units.


 


(bbb)                   “Stockholder Approval Date” means [DATE], 2010.


 


(ccc)                      “Subsidiary” means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.  A corporation that attains the status of a
Subsidiary on a date after the Effective Date shall be considered a Subsidiary
commencing as of such date.


 


(ddd)                   “Successor Company” means the surviving company, the successor company,
the acquiring company or its parent, as applicable, in connection with a
Company Transaction.


 


(eee)                      “Termination Date” means the date on which a Participant’s
Service terminates.


 


(fff)                            “10-Percent Shareholder” means an individual who owns
more than 10% of the total combined voting power of all classes of outstanding
stock of the Company, its Parent or any of its Subsidiaries.  In determining stock ownership, the
attribution rules of Section 424(d) of the Code shall be
applied.


 


SECTION 3.  ADMINISTRATION.


 


(a)                                  Committee Composition. 
A Committee appointed by the Board shall administer the Plan.  Unless the Board provides otherwise, the
Board’s Compensation Committee (or a comparable committee of the Board) shall
be the Committee.  The Board may also at
any time terminate the functions of the Committee and reassume all powers and
authority previously delegated to the Committee.


 


To the extent required, the
Committee shall have membership composition which enables (i) Awards to Section 16
Persons to qualify as exempt from liability under 


 


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Section 16(b) of
the Exchange Act and (ii) Awards to Covered Employees to be able to
qualify as performance-based compensation as provided under Code Section 162(m) (to
the extent such Awards are intended to qualify as performance-based
compensation).


 


The Board may also
appoint one or more separate committees of the Board, each composed of
directors of the Company who need not qualify under Rule 16b-3 or Code Section 162(m),
that may administer the Plan with respect to Selected Employees who are not Section 16
Persons or Covered Employees, respectively, may grant Awards under the Plan to
such Selected Employees and may determine all terms of such Awards.  To the extent permitted by applicable law,
the Board may also appoint a committee, composed of one or more officers of the
Company, that may authorize Awards to Employees (who are not Section 16
Persons or Covered Employees) within parameters specified by the Board and
consistent with any limitations imposed by applicable law.


 


Notwithstanding the
foregoing, the Board shall constitute the Committee and shall administer the
Plan with respect to all Awards granted to Non-Employee Directors.


 


(b)                                 Authority of the Committee. 
Subject to the provisions of the Plan, the Committee shall have full
authority and discretion to take any actions it deems necessary or advisable
for the administration of the Plan.  Such
actions shall include without limitation:


 


(i) determining Selected Employees who are to
receive Awards under the Plan;


 


(ii) determining the type, number, vesting
requirements, Performance Goals (if any) and their degree of satisfaction, and
other features and conditions of such Awards and amending such Awards;


 


(iii) correcting any defect, supplying any
omission, or reconciling or clarifying any inconsistency in the Plan or any
Award agreement;


 


(iv) accelerating the vesting, or extending the
post-termination exercise term, or waiving restrictions, of Awards at any time
and under such terms and conditions as it deems appropriate;


 


(v) interpreting the Plan and any Award
agreements;


 


(vi) making all other decisions relating to the
operation of the Plan; and


 


(vii) adopting such plans or subplans as may be
deemed necessary or appropriate to provide for the participation by non-U.S.
employees of the Company and its Subsidiaries and Affiliates, which plans
and/or subplans shall be attached hereto as appendices.


 


The Committee may adopt
such rules or guidelines, as it deems appropriate to implement the
Plan.  The Committee’s determinations
under the Plan shall be final, 


 


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conclusive
and binding on all persons.  The
Committee’s decisions and determinations need not be uniform and may be made
selectively among Participants in the Committee’s sole discretion.  The Committee’s decisions and determinations
will be afforded the maximum deference provided by applicable law.


 


(c)                                  Indemnification. 
To the maximum extent permitted by applicable law, each member of the
Committee, or of the Board, or any persons (including without limitation
Employees and Officers) who are delegated by the Board or Committee to perform
administrative functions in connection with the Plan, shall be indemnified and
held harmless by the Company against and from (i) any loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by him or
her in connection with or resulting from any claim, action, suit, or proceeding
to which he or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under the Plan or any Stock Option
Agreement, SAR Agreement, Restricted Stock Grant Agreement or Stock Unit
Agreement, and (ii) from any and all amounts paid by him or her in
settlement thereof, with the Company’s approval, or paid by him or her in
satisfaction of any judgment in any such claim, action, suit, or proceeding
against him or her, provided he or she shall give the Company an opportunity,
at its own expense, to handle and defend the same before he or she undertakes
to handle and defend it on his or her own behalf.  The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company’s Certificate of Incorporation or Bylaws, by
contract, as a matter of law, or otherwise, or under any power that the Company
may have to indemnify them or hold them harmless.


 


SECTION 4.  GENERAL.


 


(a)                                  General Eligibility. 
Only Employees, Consultants, Directors and Non-Employee Directors shall
be eligible for designation as Selected Employees by the Committee.


 


(b)                                 Incentive Stock Options.  Only
Selected Employees who are common-law employees of the Company, a Parent or a
Subsidiary shall be eligible for the grant of ISOs.  In addition, a Selected Employee who is a
10-Percent Shareholder shall not be eligible for the grant of an ISO unless the
requirements set forth in Section 422(c)(5) of the Code are
satisfied.  If and to the extent that any
Shares are issued under a portion of any Option that exceeds the $100,000
limitation of Section 422 of the Code, such Shares shall not be treated as
issued under an ISO notwithstanding any designation otherwise. Certain
decisions, amendments, interpretations and actions by the Committee and certain
actions by a Participant may cause an Option to cease to qualify as an ISO
pursuant to the Code and by accepting an Option the Participant agrees in
advance to such disqualifying action.


 


(c)                                  Buyout of Awards. 
The Committee may at any time (i) offer to buy out for a payment in
cash or cash equivalents (including without limitation Shares valued at Fair
Market Value that may or may not be issued from this Plan) an Award previously
granted or (ii) authorize a Participant to elect to cash out an Award
previously granted, in


 


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either case at
such time and based upon such terms and conditions as the Committee shall
establish.


 


(d)                                 Restrictions on Shares. 
Any Shares issued pursuant to an Award shall be subject to such Company
policies, rights of repurchase, rights of first refusal and other transfer
restrictions as the Committee may determine. 
Such restrictions shall apply in addition to any restrictions that may
apply to holders of Shares generally and shall also comply to the extent necessary
with applicable law.  In no event shall
the Company be required to issue fractional Shares under this Plan.


 


(e)                                  Beneficiaries. 
A Participant may designate one or more beneficiaries with respect to an
Award by timely filing the prescribed form with the Company.  A beneficiary designation may be changed by
filing the prescribed form with the Company at any time before the Participant’s
death.  If no beneficiary was designated
or if no designated beneficiary survives the Participant, then after a
Participant’s death any vested Award(s) shall be transferred or
distributed to the Participant’s estate.


 


(f)                                    Performance Goals. 
The Committee may, in its discretion, include Performance Goals or other
performance objectives in any Award.  If
Performance Goals are included in Awards to Covered Employees in order to
enable such Awards to qualify as performance-based compensation under Code Section 162(m),
then such Awards will be subject to the achievement of such Performance Goals
that will be established and administered pursuant to the requirements of Code Section 162(m) and
as described in this Section 4(e). 
If an Award is intended to qualify as performance-based compensation
under Code Section 162(m) and to the extent required by Code Section 162(m),
the Committee shall certify in writing the degree to which the Performance
Goals have been satisfied before any Shares underlying an Award or any Award
payments are released to a Covered Employee with respect to a Performance
Period.  Without limitation, the approved
minutes of a Committee meeting shall constitute such written
certification.  With respect to Awards
that are intended to qualify as performance-based compensation under Code Section 162(m),
the Committee may adjust the evaluation of performance under a Performance Goal
(to the extent permitted by Code Section 162(m)) to remove the effects of
certain events including without limitation the following:


 


(i)                                     asset write-downs or discontinued
operations,


 


(ii)                                  litigation or claim judgments or
settlements,


 


(iii)                               material changes in or provisions under
tax law, accounting principles or other such laws or provisions affecting
reported results,


 


(iv)                              reorganizations or restructuring programs
or divestitures or acquisitions, and/or


 


(v)                                 extraordinary non-recurring items as
described in applicable accounting principles and/or items of gain, loss or
expense determined to be extraordinary or unusual in nature or infrequent in
occurrence.


 


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Notwithstanding
satisfaction of any completion of any Performance Goal, to the extent specified
at the time of grant of an Award, the number of Shares, Options, SARs,
Restricted Stock Units or other benefits granted, issued, retainable and/or
vested under an Award on account of satisfaction of such Performance Goals may
be reduced by the Committee on the basis of such further considerations as the
Committee in its sole discretion shall determine.  Awards with Performance Goals or performance
objectives (if any) that are granted to Selected Employees who are not Covered
Employees or any Awards to Covered Employees which are not intended to qualify
as performance-based compensation under Code Section 162(m) need not
comply with the requirements of Code Section 162(m).


 


(g)                                 No Rights as a Stockholder. 
A Participant, or a transferee of a Participant, shall have no rights as
a stockholder (including without limitation voting rights or
dividend or distribution rights) with respect to any Common Stock covered by an Award
until such person becomes entitled to receive such Common Stock, has satisfied
any applicable withholding or tax obligations relating to the Award and the
Common Stock has been issued to the Participant.  No adjustment shall be made for cash or stock
dividends or other rights for which the record date is prior to the date when
such Common Stock is issued, except as expressly provided in Section 11.


 


(h)                                 Termination of Service. 
Unless the applicable Award agreement or employment agreement provides
otherwise (and in such case, the Award or employment agreement shall govern as
to the consequences of a termination of Service for such Awards), the following
rules shall govern the vesting, exercisability and term of outstanding
Awards held by a Participant in the event of termination of such Participant’s
Service (in all cases subject to the term of the Option or SAR as applicable):


 


(i) if the Service of a Participant is terminated
for Cause, then all Options, SARs, unvested portions of Stock Units and
unvested portions of Restricted Stock Grants shall terminate and be forfeited
immediately without consideration as of the Termination Date (except for
repayment of any amounts the Participant had paid to the Company to acquire
Shares underlying the forfeited Awards); and


 


(ii) if the Service of Participant is terminated
for any reason other than for Cause (including due to death or Disability),
then the vested portion of his/her then-outstanding Options/SARs may be
exercised by such Participant or his or her personal representative within one
year after the Termination Date and all unvested portions of any outstanding
Awards shall be forfeited without consideration as of the Termination Date
(except for repayment of any amounts the Participant had paid to the Company to
acquire Shares underlying the forfeited Awards).


 


(i)                                     Code Section 409A. 
Notwithstanding anything in the Plan to the contrary, the Plan and
Awards granted hereunder are intended to comply with the requirements of Code Section 409A
and shall be interpreted in a manner consistent with such intention.  


 


12

















 


In the event that
any provision of the Plan or an Award Agreement is determined by the Committee
to not comply with the applicable requirements of Code Section 409A and
the Treasury Regulations and other guidance issued thereunder, the Committee
shall have the authority to take such actions and to make such changes to the
Plan or an Award Agreement as the Committee deems necessary to comply with such
requirements, provided that no such action shall adversely affect any
outstanding Award with the consent of the affected Participant.  Notwithstanding the foregoing or anything
elsewhere in the Plan or an Award Agreement to the contrary, if upon a
Participant’s Separation From Service he/she is then a Specified Employee, then
solely to the extent necessary to comply with Code Section 409A and avoid
the imposition of taxes under Code Section 409A, the Company shall defer
payment of “nonqualified deferred compensation” subject to Code Section 409A
payable as a result of and within six (6) months following such separation
from service under this Plan until the earlier of (i) the first business
day of the seventh month following the Participant’s separation from service,
or (ii) ten (10) days after the Company receives written confirmation
of the Participant’s death.  Any such
delayed payments shall be made without interest.  In no event whatsoever shall the Company be
liable for any additional tax, interest or penalties that may be imposed on a
Participant by Code Section 409A or any damages for failing to comply with
Code Section 409A.


 


(j)                                     Suspension or Termination of Awards. 
If at any time (including after a notice of exercise has been delivered)
the Committee (or the Board), reasonably believes that a Participant has
committed an act of Cause (which includes a failure to act), the Committee (or
Board) may suspend the Participant’s right to exercise any Option or SAR (or
vesting of Restricted Stock Grants or Stock Units) pending a determination of
whether there was in fact an act of Cause. 
If the Committee (or the Board) determines a Participant has committed
an act of Cause, neither the Participant nor his or her estate shall be
entitled to exercise any outstanding Option or SAR whatsoever and all of
Participant’s outstanding Awards shall then terminate without
consideration.  Any determination by the
Committee (or the Board) with respect to the foregoing shall be final,
conclusive and binding on all interested parties.


 


(k)                                  Electronic Communications. 
Subject to compliance with applicable law and/or regulations, an Award
agreement or other documentation or notices relating to the Plan and/or Awards
may be communicated to Participants by electronic media.


 


(l)                                     Unfunded Plan. 
Insofar as it provides for Awards, the Plan shall be unfunded.  Although bookkeeping accounts may be
established with respect to Participants who are granted Awards under this
Plan, any such accounts will be used merely as a bookkeeping convenience.  The Company shall not be required to
segregate any assets which may at any time be represented by Awards, nor shall
this Plan be construed as providing for such segregation, nor shall the Company
or the Committee be deemed to be a trustee of stock or cash to be awarded under
the Plan.


 


(m)                               Liability of Company. 
The Company (or members of the Board or Committee) shall not be liable
to a Participant or other persons as to: (a) the non-issuance or sale of
Shares as to which the Company has been unable to obtain from any regulatory 


 


13

















 


body having
jurisdiction the authority deemed by the Company’s counsel to be necessary to
the lawful issuance and sale of any Shares hereunder; and (b) any
unexpected or adverse tax consequence or any tax consequence expected, but not
realized, by any Participant or other person due to the grant, receipt,
exercise or settlement of any Award granted hereunder.


 


(n)                                 California Participants. 
Grants to California Participants shall also be subject to the following
terms regarding the time period to exercise vested Options or SARs after
termination of Service.  These additional
terms shall apply to Grants until such time that the Shares are publicly traded
and/or the Company is subject to the reporting requirements of the Exchange Act:  In the event of termination of a Participant’s
Service, (i) if such termination was for reasons other than death or
Disability or Cause, the Participant shall have at least 30 days after the date
of such termination to exercise any of his/her vested outstanding Options or
SARs (but in no event later than the expiration of the term of such Options or
SARs established by the Committee as of the Grant date) or (ii) if such
termination was due to death or Disability, the Participant shall have at least
six months after the date of such termination to exercise any of his/her vested
outstanding Options or SARs (but in no event later than the expiration of the
term of such Options or SARs established by the Committee as of the Grant
date).


 


(o)                                 Reformation. 
In the event any provision of this Plan shall be held illegal or invalid
for any reason, such provisions will be reformed by the Board if possible and
to the extent needed in order to be held legal and valid.  If it is not possible to reform the illegal
or invalid provisions then the illegality or invalidity shall not affect the
remaining parts of this Plan, and this Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.


 


(p)                                 Director Fees. 
If the Board affirmatively determines to implement this Section 4(p),
then each Non-Employee Director may be awarded either a Restricted Stock Grant
or Stock Units in accordance with the terms and conditions contained in this Section 4(p).


 


(i)   Participation
Elections.  Each Non-Employee
Director may elect to receive a Restricted Stock Grant (or Stock Units) under
the Plan in lieu of payment of a portion of his or her annual cash
retainer.  Such an election may be for
any dollar or percentage amount equal to at least 50% of the Non-Employee
Director’s annual cash retainer (up to a limit of 100% of the annual cash
retainer of Non-Employee Directors).  The
election must be made prior to the beginning of the annual board of directors
cycle which shall be any twelve month continuous period designated by the Board
(the “Board Cycle”) and such election may need to be made earlier as necessary
to comply with Code Section 409A. 
Any amount of the annual retainer not elected to be received as a
Restricted Stock Grant or Stock Units shall be payable in cash in accordance
with the Company’s standard payment procedures.


 


14

















 


(ii)   Grants
of Stock.  As soon as reasonably
practicable following the commencement of each Board Cycle, each Non-Employee
Director who has timely made the election described in Section 4(p)(i) with
respect to that Board Cycle shall be granted a number of Shares pursuant to a
Restricted Stock Grant (or Stock Units) having a fair market value equivalent
to the amount of the annual cash retainer elected to be received as a
Restricted Stock Grant (or Stock Units) under Section 4(p)(i) for
such Board Cycle, rounded down to the nearest full Share.  Such Restricted Stock Grant (or Stock Units)
will be evidenced by an executed Restricted Stock Grant Agreement (or Stock
Unit Agreement) between the Company and the electing Non-Employee
Director.  Such Restricted Stock Grant
(or Stock Units) may be subject to vesting conditions at grant.


 


(iii)   Other
Terms.  Shares (or Stock Units) granted
under this Section 4(p) shall otherwise be subject to the terms of
the Plan applicable to Non-Employee Directors or to Participants generally
(other than provisions specifically applying only to Employees).


 


(q)                                 Successor Provision. 
Any reference to a statute, rule or regulation, or to a section of
a statute, rule or regulation, is a reference to that statute, rule,
regulation, or section as amended from time to time, both before and after the
Effective Date and including any successor provisions.


 


(r)                                    Governing Law. 
This Plan and all Awards shall be construed in accordance with and
governed by the laws of the State of California, but without regard to its
conflict of law provisions.  The Committee
may provide that any dispute as to any Award shall be presented and determined
in such forum as the Committee may specify, including through binding
arbitration.  Unless otherwise provided
in the Award Agreement, recipients of an Award under the Plan are deemed to submit
to the exclusive jurisdiction and venue of the federal or state courts of
California to resolve any and all issues that may arise out of or relate to the
Plan or any related Award Agreement.


 


SECTION 5.  SHARES SUBJECT TO PLAN AND SHARE LIMITS.


 


(a)                                  Basic Limitations. 
The Common Stock issuable under the Plan shall be authorized but
unissued Shares or treasury Shares. 
Subject to adjustment as provided in Sections 5(b), 5(c) and 11,
the maximum aggregate number of Shares reserved for Awards under the Plan shall
not exceed 2,500,000 Shares.  The maximum
aggregate number of Shares that may be issued in connection with any single
type of Award (NSOs, ISOs, SARs, Restricted Stock Grants or Stock Units) under
the Plan shall be 2,500,000 Shares.


 


(b)                                 Additional Shares. 
Subject to adjustment as provided in Section 11, the numerical
limits set forth in Section 5(a) for the maximum aggregate number of
Shares issuable shall be each increased on January 1, 2011 and on each
subsequent January 1 through and including January 1, 2020, by a
number of Shares (the “Annual Increase”) 


 


15

















 


equal to the
lesser of (i) four percent (4 %) of the number of Shares issued and
outstanding on the immediately preceding December 31, or (ii) 2,000,000
Shares, or (iii) an amount determined by the Board.


 


(c)                                  Share Re-Use. 
If Awards are forfeited or are terminated for any reason other than
being exercised, then the Shares underlying such Awards shall again become
available for Awards under the Plan.  If
SARs are exercised or Stock Units are settled in Shares, then only the number
of Shares (if any) actually issued in settlement of such SARs or Stock Units
shall reduce the number of Shares available under Section 5(a), as
adjusted by Section 5(b), and the balance shall again become available for
Awards under the Plan.  If a Participant
pays the Exercise Price by Net Exercise or by surrendering previously owned
Shares (or by stock attestation) and/or, as permitted by the Committee, pays
any withholding tax obligation with respect to an Award by electing to have
Shares withheld or surrendering previously owned Shares (or by stock
attestation), the surrendered Shares and the Shares withheld to pay taxes shall
be available for issuance under the Plan and shall not count toward the maximum
number of shares that may be issued under the Plan as set forth in Section 5(a),
as adjusted by Section 5(b).


 


(d)                                 Dividend Equivalents. 
Any dividend equivalents distributed under the Plan shall not be applied
against the number of Shares available for Awards.


 


(e)                                  Share Limits. 
For so long as: (x) the Company is a “publicly held corporation”
within the meaning of Code Section 162(m) and (y) the deduction
limitations of Code Section 162(m) are applicable to Awards granted
to the Company’s Covered Employees under this Plan, then the limits specified
below in this Section 5(e) shall be applicable to Awards issued under
the Plan that are intended to qualify as performance-based compensation under
Code Section 162(m).


 


(i)                                     Limits on Options. 
No Selected Employee shall receive Options to purchase Shares during any
Fiscal Year that in the aggregate cover in excess of 2,000,000 Shares.


 


(ii)                                  Limits on SARs. 
No Selected Employee shall receive Awards of SARs during any Fiscal Year
that in the aggregate cover in excess of 2,000,000 Shares.


 


(iii)                               Limits on Restricted Stock Grants. 
No Selected Employee shall receive Restricted Stock Grants during any
Fiscal Year that in the aggregate cover in excess of 2,000,000 Shares.


 


(iv)                              Limits on Stock Units. 
No Selected Employee shall receive Stock Units during any Fiscal Year
that in the aggregate cover in excess of 2,000,000 Shares.


 


(v)                                 Limit on Total Amount of All Awards. 
No Selected Employee shall receive Awards during any Fiscal Year in
excess of the aggregate amount of 2,000,000 Shares, whether such Awards are in
the form of Options, SARs, Restricted Stock Grants and/or Stock Units.


 


16

















 


(vi)                              Increased Limits for First Year of
Employment.  The numerical limits expressed in the
foregoing subparts (i) through (v) shall in each case be increased to
4,000,000 Shares with respect to Awards granted to a Selected Employee during
the Fiscal Year of the Selected Employee’s commencement of employment with the
Company or during the first Fiscal Year that the Selected Employee becomes a
Covered Employee.


 


SECTION 6.  TERMS AND CONDITIONS OF OPTIONS.


 


(a)                                  Stock Option Agreement. 
Each Grant of an Option under the Plan shall be evidenced by a Stock
Option Agreement between the Optionee and the Company.  Such Option shall be subject to all
applicable terms and conditions of the Plan and may be subject to any other
terms and conditions that are not inconsistent with the Plan (including without
limitation any Performance Goals).  The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical.  The Stock Option
Agreement shall also specify whether the Option is an ISO and if not specified
then the Option shall be an NSO.


 


(b)                                 Number of Shares. 
Each Stock Option Agreement shall specify the number of Shares that are
subject to the Option and shall provide for adjustment of such number in
accordance with Section 11.


 


(c)                                  Exercise Price. 
An Option’s Exercise Price shall be established by the Committee and set
forth in a Stock Option Agreement.  The
Exercise Price of an Option shall not be less than 100% of the Fair Market
Value (110% for ISO Grants to 10-Percent Shareholders) on the date of Grant.


 


(d)                                 Exercisability and Term. 
Each Stock Option Agreement shall specify the date when all or any
installment of the Option is to become vested and/or exercisable.  The Stock Option Agreement shall also specify
the term of the Option; provided that the term of an Option shall in no event
exceed ten years from the date of Grant (and may be for a shorter period of
time than ten years).  No Option can be
exercised after the expiration date specified in the applicable Stock Option
Agreement.  A Stock Option Agreement may
provide for accelerated vesting in the event of the Participant’s death, or
Disability or other events. Notwithstanding the previous sentence, an ISO that
is granted to a 10-Percent Shareholder shall have a maximum term of five
years.  Notwithstanding any other
provision of the Plan, no Option can be exercised after the expiration date
provided in the applicable Stock Option Agreement.  A Stock Option Agreement may permit an
Optionee to exercise an Option before it is vested (an “early exercise”),
subject to the Company’s right of repurchase at the original Exercise Price of
any Shares acquired under the unvested portion of the Option which right of
repurchase shall lapse at the same rate the Option would have vested had there
been no early exercise.  In no event shall
the Company be required to issue fractional Shares upon the exercise of an
Option and the Committee may specify a minimum number of Shares that must be
purchased in any one Option exercise.


 


17

















 


(e)                                  Modifications or Assumption of Options. 
Within the limitations of the Plan, the Committee may modify, extend or
assume outstanding Options or may accept the cancellation of outstanding stock
options (whether granted by the Company or by another issuer) in return for the
grant of new Options for the same or a different number of Shares and at the
same or a different Exercise Price.  For
avoidance of doubt, the Committee may Re-Price outstanding Options.  No modification of an Option shall, without
the consent of the Optionee, impair his or her rights or increase his or her
obligations under such Option.


 


(f)                                    Assignment or Transfer of Options. 
Except as otherwise provided in the applicable Stock Option Agreement
and then only to the extent permitted by applicable law, no Option shall be
transferable by the Optionee other than by will or by the laws of descent and
distribution.  Except as otherwise
provided in the applicable Stock Option Agreement, an Option may be exercised
during the lifetime of the Optionee only by Optionee or by the guardian or legal
representative of the Optionee.  No
Option or interest therein may be assigned, pledged or hypothecated by the
Optionee during his or her lifetime, whether by operation of law or otherwise,
or be made subject to execution, attachment or similar process.


 


SECTION 7.  PAYMENT FOR OPTION SHARES.


 


(a)                                  General Rule. 
The entire Exercise Price of Shares issued upon exercise of Options
shall be payable in cash at the time when such Shares are purchased by the
Optionee, except as follows and if so provided for in an applicable Stock
Option Agreement:


 


(i)                                     In the case of an ISO granted under the
Plan, payment shall be made only pursuant to the express provisions of the
applicable Stock Option Agreement.  The
Stock Option Agreement may specify that payment may be made in any form(s) described
in this Section 7.


 


(ii)                                  In the case of an NSO granted under the
Plan, the Committee may, in its discretion at any time, accept payment in any
form(s) described in this Section 7.


 


(b)                                 Surrender of Stock. 
To the extent that the Committee makes this Section 7(b) applicable
to an Option in a Stock Option Agreement, payment for all or a part of the
Exercise Price may be made with Shares which have already been owned by the
Optionee for such duration as shall be specified by the Committee.  Such Shares shall be valued at their Fair
Market Value on the date when the new Shares are purchased under the Plan.


 


(c)                                  Cashless Exercise. 
To the extent that the Committee makes this Section 7(c) applicable
to an Option in a Stock Option Agreement, payment for all or a part of the
Exercise Price may be made through Cashless Exercise.


 


(d)                                 Net Exercise. 
To the extent that the Committee makes this Section 7(d) applicable
to an Option in a Stock Option Agreement, payment for all or a part of the Exercise
Price may be made through Net Exercise.


 


18

















 


(e)                                  Other Forms of Payment. 
To the extent that the Committee makes this Section 7(e) applicable
to an Option in a Stock Option Agreement, payment may be made in any other form
that is consistent with applicable laws, regulations and rules and
approved by the Committee.


 


SECTION 8.  TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS.


 


(a)                                  SAR Agreement. 
Each Award of a SAR under the Plan shall be evidenced by a SAR Agreement
between the Participant and the Company. 
Such SAR shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan (including
without limitation any Performance Goals). 
A SAR Agreement may provide for a maximum limit on the amount of any
payout notwithstanding the Fair Market Value on the date of exercise of the
SAR.  The provisions of the various SAR
Agreements entered into under the Plan need not be identical.  SARs may be granted in consideration of a
reduction in the Participant’s other compensation.


 


(b)                                 Number of Shares. 
Each SAR Agreement shall specify the number of Shares to which the SAR
pertains and is subject to adjustment of such number in accordance with Section 11.


 


(c)                                  Exercise Price. 
Each SAR Agreement shall specify the Exercise Price.  The Exercise Price of a SAR shall not be less
than 100% of the Fair Market Value on the date of Grant.


 


(d)                                 Exercisability and Term. 
Each SAR Agreement shall specify the date when all or any installment of
the SAR is to become exercisable.  The
SAR Agreement shall also specify the term of the SAR which shall not exceed ten
years from the date of Grant.  No SAR can
be exercised after the expiration date specified in the applicable SAR
Agreement.  A SAR Agreement may provide
for accelerated exercisability in the event of the Participant’s death, or
Disability or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Participant’s Service.  A SAR may be included in an ISO only at the
time of Grant but may be included in an NSO at the time of Grant or at any
subsequent time, but not later than six months before the expiration of such
NSO.  A SAR granted under the Plan may provide
that it will be exercisable only in the event of a Change In Control.


 


(e)                                  Exercise of SARs. 
If, on the date when a SAR expires, the Exercise Price under such SAR is
less than the Fair Market Value on such date but any portion of such SAR has
not been exercised or surrendered, then such SAR may automatically be deemed to
be exercised as of such date with respect to such portion to the extent so
provided in the applicable SAR agreement. Upon exercise of a SAR, the
Participant (or any person having the right to exercise the SAR after
Participant’s death) shall receive from the Company (i) Shares, (ii) cash
or (iii) any combination of Shares and cash, as the 


 


19

















 


Committee shall
determine.  The amount of cash and/or the
Fair Market Value of Shares received upon exercise of SARs shall, in the
aggregate, be equal to the amount by which the Fair Market Value (on the date
of surrender) of the Shares subject to the SARs exceeds the Exercise Price of
the Shares.


 


(f)                                    Modification or Assumption of SARs. 
Within the limitations of the Plan, the Committee may modify, extend or
assume outstanding SARs or may accept the cancellation of outstanding SARs
(including stock appreciation rights granted by another issuer) in return for
the grant of new SARs for the same or a different number of Shares and at the
same or a different Exercise Price.  For
avoidance of doubt, the Committee may Re-Price outstanding SARs.  No modification of a SAR shall, without the
consent of the Participant, impair his or her rights or increase his or her
obligations under such SAR.


 


(g)                                 Assignment or Transfer of SARs. 
Except as otherwise provided in the applicable SAR Agreement and then
only to the extent permitted by applicable law, no SAR shall be transferable by
the Participant other than by will or by the laws of descent and
distribution.  Except as otherwise
provided in the applicable SAR Agreement, a SAR may be exercised during the
lifetime of the Participant only by the Participant or by the guardian or legal
representative of the Participant.  No
SAR or interest therein may be assigned, pledged or hypothecated by the
Participant during his or her lifetime, whether by operation of law or
otherwise, or be made subject to execution, attachment or similar process.


 


SECTION 9.  TERMS AND CONDITIONS FOR RESTRICTED STOCK GRANTS.


 


(a)                                  Restricted Stock Grant Agreement. 
Each Restricted Stock Grant awarded under the Plan shall be evidenced by
a Restricted Stock Grant Agreement between the Participant and the
Company.  Each Restricted Stock Grant
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions that are not inconsistent with the
Plan (including without limitation any Performance Goals).  The provisions of the Restricted Stock Grant
Agreements entered into under the Plan need not be identical.


 


(b)                                 Number of Shares and Payment. 
Each Restricted Stock Grant Agreement shall specify the number of Shares
to which the Restricted Stock Grant pertains and is subject to adjustment of
such number in accordance with Section 11. 
Restricted Stock Grants may be issued with or without cash consideration
under the Plan.


 


(c)                                  Vesting Conditions. 
Each Restricted Stock Grant may or may not be subject to vesting.  Vesting shall occur, in full or in
installments, upon satisfaction of the conditions specified in the Restricted
Stock Grant Agreement.  A Restricted
Stock Grant Agreement may provide for accelerated vesting in the event of the
Participant’s death, or Disability or other events.


 


(d)                                 Voting and Dividend Rights. 
The holder of a Restricted Stock Grant (irrespective of whether the
Shares subject to the Restricted Stock Grant are vested or


 


20














 


unvested) awarded
under the Plan shall have the same voting, dividend and other rights as the
Company’s other stockholders.  However,
any dividends received on Shares that are unvested (whether such dividends are
in the form of cash or Shares) may be subject to the same vesting conditions
and restrictions as the Restricted Stock Grant with respect to which the
dividends were paid.  Such additional
Shares issued as dividends that are subject to the Restricted Stock Grant shall
not reduce the number of Shares available for issuance under Section 5.


 


(e)                                  Modification or Assumption of Restricted
Stock Grants.  Within the limitations of the Plan, the
Committee may modify or assume outstanding Restricted Stock Grants or may
accept the cancellation of outstanding Restricted Stock Grants (including stock
granted by another issuer) in return for the grant of new Restricted Stock
Grants for the same or a different number of Shares.  No modification of a Restricted Stock Grant
shall, without the consent of the Participant, impair his or her rights or
increase his or her obligations under such Restricted Stock Grant.


 


(f)                                    Assignment or Transfer of Restricted
Stock Grants.  Except as provided in Section 14, or in
a Restricted Stock Grant Agreement, or as required by applicable law, a
Restricted Stock Grant awarded under the Plan shall not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any
creditor’s process, whether voluntarily, involuntarily or by operation of
law.  Any act in violation of this Section 9(f) shall
be void.  However, this Section 9(f) shall
not preclude a Participant from designating a beneficiary pursuant to Section 4(e) nor
shall it preclude a transfer of Restricted Stock Grant Awards by will or
pursuant to Section 4(e).


 


SECTION 10.  TERMS AND CONDITIONS OF STOCK UNITS.


 


(a)                                  Stock Unit Agreement. 
Each grant of Stock Units under the Plan shall be evidenced by a Stock
Unit Agreement between the Participant and the Company.  Such Stock Units shall be subject to all applicable
terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan (including without limitation any Performance
Goals).  The provisions of the various
Stock Unit Agreements entered into under the Plan need not be identical.  Stock Units may be granted in consideration
of a reduction in the Participant’s other compensation.


 


(b)                                 Number of Shares and Payment. 
Each Stock Unit Agreement shall specify the number of Shares to which
the Stock Unit Grant pertains and is subject to adjustment of such number in
accordance with Section 11.  To the
extent that an Award is granted in the form of Stock Units, no cash
consideration shall be required of the Award recipients.


 


(c)                                  Vesting Conditions. 
Each Award of Stock Units may or may not be subject to vesting.  Vesting shall occur, in full or in
installments, upon satisfaction of the conditions specified in the Stock Unit
Agreement.  A Stock Unit Agreement may
provide for accelerated vesting in the event of the Participant’s death, or
Disability or other events.


 


21

















 


(d)                                 Voting and Dividend Rights. 
The holders of Stock Units shall have no voting rights.  Prior to settlement or forfeiture, any Stock
Unit awarded under the Plan may, at the Committee’s discretion, carry with it a
right to dividend equivalents.  Such
right entitles the holder to be credited with an amount equal to all cash or
Common Stock dividends paid on one Share while the Stock Unit is outstanding.  Dividend equivalents may be converted into
additional Stock Units.  Settlement of
dividend equivalents may be made in the form of cash, in the form of Shares, or
in a combination of both.  Prior to
vesting of the Stock Units, any dividend equivalents accrued on such unvested
Stock Units may be subject to the same vesting conditions and restrictions as
the Stock Units to which they attach.


 


(e)                                  Modification or Assumption of Stock Units. 
Within the limitations of the Plan, the Committee may modify or assume
outstanding Stock Units or may accept the cancellation of outstanding Stock
Units (including stock units granted by another issuer) in return for the grant
of new Stock Units for the same or a different number of Shares.  No modification of a Stock Unit shall,
without the consent of the Participant, impair his or her rights or increase
his or her obligations under such Stock Unit.


 


(f)                                    Assignment or Transfer of Stock Units. 
Except as provided in Section 14, or in a Stock Unit Agreement, or
as required by applicable law, Stock Units shall not be anticipated, assigned,
attached, garnished, optioned, transferred or made subject to any creditor’s
process, whether voluntarily, involuntarily or by operation of law.  Any act in violation of this Section 10(f) shall
be void.  However, this Section 10(f) shall
not preclude a Participant from designating a beneficiary pursuant to Section 4(e) nor
shall it preclude a transfer of Stock Units pursuant to Section 4(e).


 


(g)                                 Form and Time of Settlement of Stock
Units.  Settlement of vested Stock Units may be made
in the form of (a) cash, (b) Shares or (c) any combination of
both, as determined by the Committee. 
The actual number of Stock Units eligible for settlement may be larger
or smaller than the number included in the original Award.  Methods of converting Stock Units into cash
may include (without limitation) a method based on the average Fair Market
Value of Shares over a series of trading days. 
Except as otherwise provided in a Stock Unit Agreement or a timely
completed deferral election, vested Stock Units shall be settled within thirty
days after vesting.  The distribution may
occur or commence when all vesting conditions applicable to the Stock Units
have been satisfied or have lapsed, or it may be deferred, in accordance with applicable
law, to a later specified date.  The
amount of a deferred distribution may be increased by an interest factor or by
dividend equivalents.  Until an Award of
Stock Units is settled, the number of such Stock Units shall be subject to
adjustment pursuant to Section 11.


 


(h)                                 Creditors’ Rights. 
A holder of Stock Units shall have no rights other than those of a
general creditor of the Company.  Stock
Units represent an unfunded and unsecured obligation of the Company, subject to
the terms and conditions of the applicable Stock Unit Agreement.


 


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SECTION 11.  ADJUSTMENTS.


 


(a)                                  Adjustments. 
In the event of a subdivision of the outstanding Shares, a declaration
of a dividend payable in Shares, a declaration of a dividend payable in a form
other than Shares in an amount that has a material effect on the price of
Shares, a combination or consolidation of the outstanding Shares (by
reclassification or otherwise) into a lesser number of Shares, a stock split, a
reverse stock split, a reclassification or other distribution of the Shares
without the receipt of consideration by the Company, of or on the Common Stock,
a recapitalization, a combination, a spin-off or a similar occurrence, the
Committee shall make equitable and proportionate adjustments to:


 


(i)                  the maximum aggregate number of Shares specified in Section 5(a);


 


(ii)               clause (ii) of the Annual Increase specified in Section 5(b);


 


(iii)            the number and kind of securities available for Awards
(and which can be issued as ISOs) under Section 5;


 


(iv)           the limits on Awards issued under the Plan that are
intended to qualify as performance-based compensation under Code Section 162(m) under
Section 5(e);


 


(v)              the number and kind of securities covered by each
outstanding Award;


 


(vi)           the Exercise Price under each outstanding SAR and
Option; and


 


(vii)        the number and kind of outstanding securities issued
under the Plan.


 


(b)                                 Participant Rights. 
Except as provided in this Section 11, a Participant shall have no
rights by reason of any issue by the Company of stock of any class or
securities convertible into stock of any class, any subdivision or
consolidation of shares of stock of any class, the payment of any stock
dividend or any other increase or decrease in the number of shares of stock of
any class.  If by reason of an adjustment
pursuant to this Section 11, a Participant’s Award covers additional or
different shares of stock or securities, then such additional or different
shares and the Award in respect thereof shall be subject to all of the terms,
conditions and restrictions which were applicable to the Award and the Shares
subject to the Award prior to such adjustment.


 


(c)                                  Fractional Shares. 
Any adjustment of Shares pursuant to this Section 11 shall be
rounded down to the nearest whole number of Shares.  Under no circumstances shall the Company be
required to authorize or issue fractional shares.  To the extent permitted by applicable law, no
consideration shall be provided as a result of any fractional shares not being
issued or authorized.


 


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SECTION 12.  EFFECT OF A CHANGE IN CONTROL.


 


(a)                                  Merger or Reorganization. 
In the event that the Company is a party to a merger or other
reorganization, outstanding Awards shall be subject to the agreement of merger
or reorganization.  Such agreement may
provide, without limitation, that subject to the consummation of the merger or
other reorganization, for the assumption (or substitution) of outstanding
Awards by the surviving corporation or its parent, for their continuation by
the Company (if the Company is a surviving corporation), for accelerated
vesting or for their cancellation with or without consideration, in all cases
without the consent of the Participant.


 


(b)                                 Acceleration. 
Except as otherwise provided in the applicable Stock Option Agreement,
SAR Agreement, Stock Unit Agreement or Restricted Stock Grant Agreement (and in
such case the applicable Award agreement shall govern), in the event that a
Change In Control occurs and there is no assumption, substitution or
continuation of Awards pursuant to Section 12(a), all Awards shall vest
and become exercisable as of immediately before such Change In Control.  For avoidance of doubt, “substitution”
includes, without limitation, an Award being replaced by a cash award that
provides an equivalent intrinsic value (wherein intrinsic value equals the
difference between the market value of a share and any exercise price).


 


SECTION 13.  LIMITATIONS ON RIGHTS.


 


(a)                                  Retention Rights. 
Neither the Plan nor any Award granted under the Plan shall be deemed to
give any individual a right to remain in Service as an Employee, Consultant,
Director or Non-Employee Director or to receive any other Awards under the
Plan.  The Company and its Parents and
Subsidiaries and Affiliates reserve the right to terminate the Service of any
person at any time, and for any reason, subject to applicable laws, the Company’s
Certificate of Incorporation and Bylaws and a written employment agreement (if any).


 


(b)                                 Regulatory Requirements. 
Any other provision of the Plan notwithstanding, the obligation of the
Company to issue Shares or other securities under the Plan shall be subject to
all applicable laws, rules and regulations and such approval by any regulatory
body as may be required.  The Company
reserves the right to restrict, in whole or in part, the delivery of Shares or
other securities pursuant to any Award prior to the satisfaction of all legal
requirements relating to the issuance of such Shares or other securities, to
their registration, qualification or listing or to an exemption from
registration, qualification or listing.


 


(c)                                  Dissolution. 
To the extent not previously exercised or settled, Options, SARs,
unvested Stock Units and unvested Restricted Stock Grants shall terminate
immediately prior to the dissolution or liquidation of the Company and shall be
forfeited to the Company.


 


(d)                                 Clawback Policy. 
The Company may (i) cause the cancellation of any Award, (ii) require
reimbursement of any Award by a Participant and (iii) effect any other
right of recoupment of equity or other compensation provided under this Plan or
otherwise in accordance with Company policies and/or applicable law (each, a 


 


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“Clawback Policy”).  In addition, a Participant may be required to
repay to the Company certain previously paid compensation, whether provided
under this Plan or an Award Agreement or otherwise, in accordance with the
Clawback Policy.


 


SECTION 14.  TAXES.


 


(a)                                  General.  A Participant
shall make arrangements satisfactory to the Company for the satisfaction of any
withholding tax obligations that arise in connection with his or her
Award.  The Company shall not be required
to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.


 


(b)                                 Share Withholding. 
The Committee in its discretion may permit or require a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Shares that otherwise would
be issued to him or her or by surrendering all or a portion of any Shares that
he or she previously acquired (or by stock attestation).  Such Shares shall be valued based on the
value of the actual trade or, if there is none, the Fair Market Value as of the
previous day.  Any payment of taxes by
assigning Shares to the Company may be subject to restrictions, including, but
not limited to, any restrictions required by rules of the SEC.  The Committee may also, in its discretion,
permit or require a Participant to satisfy withholding or income tax
obligations (up to the maximum amount permitted by applicable law) related to
an Award through a sale of Shares underlying the Award or, in the case of Options,
through Net Exercise or Cashless Exercise.


 


SECTION 15.  DURATION AND AMENDMENTS.


 


(a)                                  Term of the Plan. 
The Plan, as set forth herein, is effective on the Effective Date.  The Plan shall terminate on April 8,
2020 and may be terminated on any earlier date pursuant to this Section 15.  This Plan will not in any way affect
outstanding awards that were issued under the Prior Equity Plans or other
Company equity compensation plans.  No
further awards may be granted under the Prior Equity Compensation Plans as of
the effective date of an IPO.


 


(b)                                 Right to Amend or Terminate the Plan. 
The Board may amend or terminate the Plan at any time and for any
reason.  No Awards shall be granted under
the Plan after the Plan’s termination. 
An amendment of the Plan shall be subject to the approval of the Company’s
stockholders only to the extent required by applicable laws, regulations or
rules.  In addition, no such amendment or
termination shall be made which would impair the rights of any Participant,
without such Participant’s written consent, under any then-outstanding Award,
provided that no such Participant consent shall be required with respect to any
amendment or alteration if the Committee determines in its sole discretion that
such amendment or alteration either (i) is required or advisable in order
for the Company, the Plan or the Award to satisfy or conform to any law or
regulation or to meet the requirements of any accounting standard, or (ii) is
not reasonably likely to significantly diminish the benefits provided under
such Award, or that any such diminishment has been adequately compensated.  In the event of any 


 


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conflict in terms
between the Plan and any Award agreement, the terms of the Plan shall prevail
and govern.


 


SECTION 16.  EXECUTION.


 


To record the adoption of
this restatement of the Plan by the Board, the Company has caused its duly
authorized Officer to execute this Plan on behalf of the Company.


 


	
   

  	
  REALD INC. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  Michael Lewis

  
	
   

  	
  Title

  	
  Chief Executive Officer

  



 


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