Exhibit 10.27


 


May 25, 2010


 


Andrew A. Skarupa


c/o RealD Inc.


100 N. Crescent Dr., Suite 120


Beverly Hills, CA 90210


 


Dear Andrew:


 


On behalf of RealD Inc., a
Delaware corporation  (the “Company”),
I am pleased to provide you with this letter setting forth the terms and
conditions of your continued employment with the Company (the “Agreement”).


 


1.                                       Title; Duties;
Reporting.  You will
continue to serve as the Company’s Chief Financial Officer and Chief Operating
Officer and shall report directly to the Chief Executive Officer of the
Company.  You shall be a member of the
Company’s senior management team and shall have such duties and
responsibilities as shall be consistent with your position.  You shall work out of the Company’s
headquarters in Beverly Hills, California. 
You will also devote your full time, efforts, abilities, and energies to
promote the general welfare and interests of the Company and any related
enterprises of the Company.  You will
loyally, conscientiously, and professionally do and perform all duties and
responsibilities of your position, as well as any other duties and
responsibilities as will be reasonably assigned to you by the Company,
consistent with your position.  You will
strictly adhere to and obey all Company rules, policies, procedures,
regulations and guidelines including, but not limited to, those contained in
the Company’s employee handbook, as well as any others that the Company may
establish.  You will strictly adhere to
all applicable state and/or federal laws and/or regulations relating to your
employment with the Company.


 


(a)                                  No Conflicting
Obligations.  By signing
this Agreement, you confirm to the Company that you have no contractual
commitments or other legal obligations that would prohibit you from performing
your duties for the Company.


 


(b)                                 Start Date.  The effective date of this Agreement shall be
April 1, 2010 (the “Effective Date”).


 

















 


(c)                                  Outside Activities. 
Notwithstanding anything to the contrary contained herein, you may (i) serve
as a director or member of a committee or organization involving no actual or
potential conflict of interest with the Company and its subsidiaries and
affiliates; (ii) deliver lectures and fulfill speaking engagements; (iii) engage
in charitable and community activities; and (iv) invest your personal
assets in such form or manner that will not violate this Agreement; provided, however, that the
activities described in clauses (i), (ii), (iii) or (iv) do not
materially affect or interfere with the performance of your duties and obligations
to the Company and further provided that the Company’s Chief Executive Officer
must provide its advance written consent with respect to the items referenced
in clause (i).


 


2.                                       Term.


 


(a)                                  Length of Term.  The term of this Agreement shall extend from
the Effective Date through March 31, 2012 (“Term”) unless
terminated earlier in accordance with the terms herein.  On April 1, 2011, and on each subsequent
April 1st through and including April 1, 2015, the end date of the
Term shall automatically be extended by one (1) additional year, unless
either party has previously provided written notice to the other party to not
so extend the Term.  Once such notice has
been provided, then the Term shall no longer be extended on any following April 1st.  Notwithstanding anything to the contrary,
this Agreement shall in all cases expire no later than (and cannot be extended
beyond) March 31, 2017.  Upon
expiration of the Term due to either parties’ providing written notice to not
extend the Term then, except as provided in Section 2(c) below, your
employment with the Company shall terminate (if not terminated earlier in
accordance with the terms herein) as of the end of the Term.   The terms of Sections 6 through 13
shall survive any termination or expiration of this Agreement or of your
employment.


 


(b)                                 Resignation.  Upon termination of your employment for any
reason, you shall be deemed to have immediately resigned from all positions as
an employee, officer and/or director  with the Company, and any of its affiliates, as of your last
day of employment.


 


(c)                                  At-Will Status.  If the Term ends on March 31, 2017 and
if you are then still employed by the Company, then your employment shall
thereafter continue on an “at will” basis and during such at-will period either
party can terminate your employment without obligation (including without
limitation any obligation to provide severance payments or benefits) and/or the
Company can change any or all of the terms of your employment at any time for
any reason or no reason by providing written notice of the same.  For the avoidance of doubt, no advance
written notice will be required to effectuate a termination of your employment
after the expiration of the Term.


 


(d)                                 No Eligibility for Severance.  For the avoidance of doubt, the act of either
party providing written notice of its intention to not extend the Term, or the
expiration of the Term either on March 31, 2017 or as a result of a party
providing such written notice


 


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to not extend the Term, shall not
trigger any rights to or eligibility for severance, including without
limitation those payments and benefits described under Sections 3(d)(i) or
3(d)(ii).


 


3.                                       Compensation.


 


(a)                                  Base Salary.


 


(i)                                     Effective as of January 1, 2010, your
base salary is $350,000 per year, payable in accordance with the
Company’s standard payroll procedures.  No later
than twenty (20) days after the date of execution of this Agreement, the
Company shall pay you a one-time catch-up payment in an amount equal to the
excess of the $350,000 base salary payable under this Agreement commencing as
of January 1, 2010, over the base salary actually paid to you during such
period.


 


(ii)                                  Effective upon the effective date of an
initial public offering (“IPO”), if any, of the Company’s common shares
pursuant to an effective registration statement filed with the United States
Securities and Exchange Commission, your annual base salary shall be increased
to $420,000.


 


(iii)                               For all purposes of this Agreement, the term
“Base Salary” shall refer to the base salary in effect from time to
time.  During the Term, your Base Salary
will be reviewed annually and is subject to increase (but not decrease) at the
discretion of the Board.


 


(b)                                 Bonus.


 


During each fiscal year of the Term, beginning with the fiscal
year ending March 31, 2011, you will annually be eligible to earn a cash
performance bonus (“Performance Bonus”) with a target amount of eighty
percent (80%) of your Base Salary.  Your
actual bonus for fiscal year 2011, if any, shall be based on your successful
completion of the performance objectives (“MBO Goals”) prescribed and established by the Company.  Thereafter, the MBO Goals will continue to be prescribed and
established by the Company and you may have input into the development of such
MBO Goals (provided that MBO Goals may be replaced with a successor incentive
plan for you (and/or other employees) at the direction of a compensation
committee of the Board acting in good faith). 
The Performance Bonus shall be paid to you no later than the 15th day of the third month immediately following
the fiscal year with respect to which the Performance Bonus relates.  To earn any Performance Bonus, you must
remain employed by the Company through the end of the fiscal year(s) with
respect to which the Performance Bonus relates, except in the event a “Pro-Rated
Bonus” (defined below) is payable pursuant to Section 3(d)(i)(B) below
(Qualifying Termination), Section 4(d) below (death) or Section 4(e) below
(Disability).


 


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(c)                                  Company-Sponsored
Benefits.


 


As a member of the senior management team of the Company, you will also
be eligible to receive all employee benefits pursuant to the Company’s standard
benefit plans that the Company generally provides to the other members of the
senior management team that may be in effect from time to time.  These currently include, without limitation,
paid vacation, group health benefits, 401(k) retirement benefits, business
expense reimbursements, PTO, sick time and Company paid holidays.  The Company may, in its sole discretion and
from time to time, amend or eliminate any of these benefits.


 


(d)                                 Severance and
Other Termination Benefits.


 


(i)                                     Qualifying
Termination.  If your
employment is terminated during the Term without Cause (as defined
below) by the Company or by you for “Good Reason” (as defined below) (each, a “Qualifying
Termination”), the Company shall pay you (or cause to occur, as applicable)
each of the following:


 


(A)                              cash severance
installment payments in an aggregate amount equal to one hundred percent (100%)
of your annual Base Salary as in effect on your Termination Date (“Cash
Severance”) being paid in ten monthly pro-rata installments with the first
installment of Cash Severance being paid on the 90th day after
your “separation from service” (within the meaning of Internal Revenue Code (“Code”)
Section 409A) from the Company (“Termination Date”) and the last
installment being paid on the first anniversary of the Termination Date;


 


(B)                                a pro-rated cash Performance Bonus, calculated as
follows:  the product of (x) the
Performance Bonus that would have been earned during the fiscal year in which
the Qualifying Termination occurred, assuming that the Qualifying Termination
had not occurred and that you remained as Chief Financial Officer and Chief
Operating Officer of the Company through the end of such fiscal year, which
Performance Bonus, if any, shall be based on the extent to which the Company
achieved the MBO Goals (or the performance standards set forth in any successor
incentive plan) during such fiscal year, multiplied by (y) a fraction, the
numerator of which is the number of days of the Company’s fiscal year prior to
the Termination Date and the denominator of which is 365 days.  This pro-rated Performance Bonus (a “Pro-Rated
Bonus”) shall be paid to you no later than the 15th day of the third month
immediately following the fiscal year in which the Qualifying Termination has
occurred;


 


(C)                                the Company will continue to pay the cost
(to the same extent that the Company was doing so immediately before the
Termination


 


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Date) for all
group employee benefit coverage continuation under the Consolidated Omnibus
Budget Reconciliation Act of 1985 (“COBRA”) to the same extent provided
by the Company’s group plans immediately before the Termination Date for twelve
(12) months after the Termination Date or until you become eligible for group
insurance benefits from another employer, whichever occurs first, provided that
you timely elect COBRA coverage (“COBRA Benefits”).  You agree (i) at any time either before
or during the period of time you are receiving benefits under this subsection
(C), to inform the Company promptly in writing if you become eligible to
receive group health coverage from another employer; and (ii) that you may
not increase the number of your designated dependents, if any, during this time
unless you do so at your own expense. 
The period of such COBRA Benefits shall be considered part of your COBRA
coverage entitlement period; and


 


(D)                               the “Accrued Obligations” (defined below) as of the
Termination Date.


 


For avoidance of doubt, the payments and benefits that may be provided
under Sections 3(d)(i) above or 3(d)(ii) below shall not be provided
more than once and if payments and benefits are provided under either one of
these subsections, then no payments or benefits will otherwise be provided
again under either one of these subsections.


 


(ii)                                  Change in
Control.  If, during the Term, there is a Qualifying
Termination and your Termination Date occurs (because of such Qualifying
Termination) during the time period that commences on the date that is ninety
(90) days before a “Change in Control” (defined below) and extends through the
date that is twenty-four (24) months after a Change in Control, then: (a) the
amount of the total Cash Severance in Section 3(d)(i)(A) shall be
equal to one hundred eighty percent (180%) of the then annual Base Salary; (b) the
duration of your COBRA Benefits under Section 3(d)(i)(C) shall be
increased from twelve months to eighteen (18) months; and (c) one hundred
percent (100%) of the Options (defined below), including any additional stock
options and other equity compensation incentives granted to you during the Term (collectively, the “Equity
Incentives”)(but excluding any portion of the Performance Option or any other
performance awards which are/were forfeited due to failure to achieve the
requisite performance objectives) which are outstanding and unvested as of the
Termination Date shall become fully vested and exercisable as of the later of
your Termination Date or immediately prior to the date of the Change in
Control.  Subject to Section 13
below, your Cash Severance shall instead be fully paid to you in a single lump
sum payment on the 90th day after your Termination Date.  For avoidance of doubt, the payments and
benefits that may be provided under Sections 3(d)(i) or 3(d)(ii) shall
not be duplicated and if payments and benefits are 


 


5

















 


provided under one such subsection then no payments or benefits will be
provided under the other subsection and vice-versa.


 


(iii)                               Revision of
Cash Severance Payment Schedule.  Notwithstanding anything to the contrary and
solely to the extent necessary to comply with Code Section 409A (“Section 409A”),
if there is a Qualifying Termination and your Termination Date occurs on or
before September 1, 2011, then upon satisfaction of the requirements under
Section 3(d)(iv), your Cash Severance shall instead be provided in an
amount that is equal to one-half (1/2) of the Base Salary as in effect on your
Termination Date, less all applicable withholdings and deductions, as a cash
payment payable in a lump sum amount on the 90th day following your Termination
Date.  The remainder of the Cash
Severance (which amount shall equal your total Cash Severance as specified in Section 3(d)(i) or
Section 3(d)(ii), as applicable, less such partial payment of one-half of
your Base Salary described in the preceding sentence) shall be paid in
accordance with Section 3(d)(i) or Section 3(d)(ii), as
applicable.


 


(iv)                              Release of
Claims.  Notwithstanding anything to the
contrary, in order to receive any payments or benefits under Section 3(d)(i) or
Section 3(d)(ii) as applicable, you must timely execute and deliver
(and not revoke) a separation agreement and general release of claims in favor
of the Company, any affiliates or related entities, and their employees and
affiliates, in the form and content attached as Exhibit A hereto,
within the time period specified in the release, but in no event after the 60th day following the Termination Date.  However, you shall receive payment or benefits from the
Company of the Accrued Obligations, as applicable, regardless of
whether a separation agreement and general release of claims in the form and
content attached as Exhibit A hereto is executed and timely
provided to the Company.


 


(v)                                 Golden
Parachute Excise Tax.  If
any payment or benefit received or to be received by you (including any payment
or benefit received pursuant to this Agreement or otherwise) would be (in whole
or part) subject to the excise tax imposed by Code Section 4999, or any
successor provision thereto, or any similar tax imposed by state or local law,
or any interest or penalties with respect to such excise tax (such tax or
taxes, together with any such interest and penalties, are hereafter
collectively referred to as the “Excise Tax”), then, the payments or
benefits provided under this Agreement or any other agreement pursuant to which
you receive payments that give rise to the Excise Tax will either be (a) paid
in full or (b) reduced to the extent necessary to make such payments and
benefits not subject to such Excise Tax. 
The Company shall reduce or eliminate the payments first by reducing
those payments that are not payable in cash and then by reducing or eliminating
cash payments, in each case in reverse order beginning with payments that are
to be paid the farthest in time from the determination.  You shall receive the greater, on an
after-tax basis, of (a) or (b). 
However, if the imposition of such Excise Tax could be avoided by
approval of stockholders as 


 


6

















 


described in Code Section 280G(b)(5)(B), then you may request the
Company to solicit a vote of such stockholders (described in Code Section 280G(b)(5)(B) and
in which case you will cooperate and execute any such waivers of compensation
as may be necessary to enable the stockholder vote to comply with the
requirements specified under Code Section 280G and the regulations
promulgated thereunder.  In no event will
the Company be required to gross up any payment or benefit to you to avoid the
effects of the Excise Tax or to pay any regular or excise taxes arising from
the application of the Excise Tax. 
Unless the Company and you otherwise agree in writing, any parachute
payment calculation will be made in writing by independent public accountants
selected by the Company, whose calculations will be conclusive and binding upon
the Company and you for all purposes. 
The Company and you will furnish to the accountants such information and
documents as the accountants may reasonably request in order to make a
parachute payment determination.  The
accountants also will provide its calculations, together with detailed
supporting documentation, both to the Company and to you, before making any
payments that may be subject to the Excise Tax. 
As expressly permitted by Q/A #32 of the Code Section 280G
regulations, with respect to performing any present value calculations that are
required in connection with this Section, the parties affirmatively elect to
utilize the Applicable Federal Rates that are in effect in May, 2010 (the “May 2010
AFRs”) and the accountants shall therefore use such May 2010 AFRs in
their determinations and calculations.


 


(e)                                  Expense
Reimbursement.  You shall be
reimbursed for all documented reasonable business expenses that are incurred in
the ordinary course of business in accordance with the Company’s expense
reimbursement policy as in effect from time to time.  Any reimbursements or in-kind benefits
provided under this Agreement that are subject to Section 409A shall be
made or provided in compliance with the requirements of Section 409A,
including, where applicable, the requirement that (i) any reimbursement is
for expenses incurred during the period of time specified in this Agreement, (ii) the
amount of expenses eligible for reimbursement, or in-kind benefits provided,
during a fiscal year may not affect the expenses eligible for reimbursement or
in-kind benefits to be provided, in any other fiscal year, (iii) the
reimbursement of an eligible expense will be made no later than the last day of
the fiscal year following the year in which the expense is incurred, and (iv) the
right to reimbursement or in-kind benefits is not subject to liquidation or
exchange for another benefit.


 


4.                                       Other Termination Rules.


 


Notwithstanding
anything to the contrary in this Agreement whether express or implied, the
Company may at any time terminate your employment with the Company and the Term,  for any reason or no reason, and with or without
Cause, and you may resign from your employment with or without Good Reason and
terminate the Term, all as set forth in greater detail in this Section 4.  If your employment terminates due to your resignation
without Good Reason, or due to your death or Disability or by the Company 


 


7

















 


for Cause, or the
Agreement is terminated at the end of the Term due to non-renewal in accordance
with Section 2, then you will not be eligible for any severance benefits,
except as provided in Sections 4(d) and 4(e).


 


(a)                                  The following
definitions shall apply for purposes of this Agreement:


 


(i)                                     “Accrued Obligations” shall mean the
sum of (i) any portion of your accrued but unpaid Base Salary through the
Termination Date; (ii) subject to Section 13, any compensation
previously earned but deferred by you (together with any interest or earnings
thereon) that has not yet been paid and that is not otherwise to be paid at a
later date pursuant to any deferred compensation arrangement of the Company to
which you are a party, if any; (iii) your accrued but unpaid vacation pay
through the Termination Date; (iv) any reimbursements that you are
entitled to receive under Section 3(e) of the Agreement or otherwise;
and (v) any vested benefits or amounts that you are otherwise entitled to
receive under any plan, policy, practice or program of or any other contract or
agreement with the Company in accordance with the terms thereof (other than any
such plan, policy, practice or program of the Company that provides benefits in
the nature of severance or continuation pay).


 


(ii)                                  “Cause” shall mean (i) your
commission of fraud, (ii) your willful misconduct, (iii) your
material violation of Company policies or practices, (iv) your use or
disclosure of Confidential Information (as defined below) that is unauthorized
by this Agreement, or (v) your performance of any act or omission which,
if you were prosecuted, would constitute a felony, in each case as determined
by the Board of Directors of the Company (the “Board”) (or a committee
of members of the Board), whose determination shall be conclusive and binding.


 


(iii)                               “Change in Control” shall mean:


 


(1)                                  any person or group of persons (as defined
in Section 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended ( the “Exchange Act”) together with its affiliates, but
excluding (i) the Company or any of its subsidiaries, (ii) any
employee benefit plans of the Company, or (iii) a corporation or other
entity owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company
(individually, a “Person” and collectively, “Persons”), is or
becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act) of securities of the Company representing 50% or more
of the combined voting power of the Company’s then-outstanding securities (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates);


 


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(2)                                  the consummation of a merger or
consolidation of the Company or any direct or indirect subsidiary of the
Company with any other corporation or other entity regardless of which entity
is the survivor, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company, such surviving entity or
any parent thereof outstanding immediately after such merger or consolidation;
or


 


(3)                                  there is consummated an agreement for the
sale or disposition of all or substantially all of the Company’s assets.


 


(iv)                              “Confidential Information” shall
mean:  The Company’s confidential and
proprietary business information, including but not limited to the Company’s
products, services, customers, contracts, fees, prices, costs, business
affairs, marketing, accounting, financial statements, employees, research,
inventions, data, software, and any other confidential and proprietary business
information of any kind, nature or description, tangible or intangible, in
whatever form.


 


(v)                                 “Disability” shall mean your medically-determined
incapacity due to physical or mental illness which makes you unable to perform
substantially the duties pertaining to your employment with or without
reasonable accommodation for a period of six (6) consecutive months.


 


(vi)                              “Good Reason” shall mean any one or
more of the following: (1) a material diminution in your Base Salary, (2) a
material diminution in your authority, duties, reporting or responsibilities as
the Company’s Chief Financial Officer, (3) a material change in the
geographic location at which you must perform your services to the Company,
which shall be defined to be a relocation of your principal workplace to a new
location that is more than thirty miles away from the workplace location
specified in Section 1 above, or (4) a material breach by the Company
of this Agreement.  Notwithstanding the foregoing, a diminution in your authority, duties,
reporting or responsibilities as the Company’s Chief Operating Officer,
including any reduction, sharing or relinquishment of your title and/or role as
Chief Operating Officer,
shall not constitute Good Reason.


 


(vii)                           “Separation from Service” has the
meaning set forth in Treasury Regulations Section 1.409A-1(h)(1).


 


(viii)                        “termination or resignation for Good
Reason” shall mean any termination or resignation by you of your employment
for Good Reason.


 


9














 


(ix)                                “termination without Cause” shall
mean any termination of your employment by the Company for any reason other
than Cause or your death or Disability.


 


(b)                                 Termination for Cause.  The Company may terminate your employment
and the Term at any time for Cause, provided, however, that in the event the
Board determines to terminate your employment for Cause, such termination shall
only become effective if the Board shall first provide you with written notice
detailing the alleged grounds for such Cause, and if such act or omission is
susceptible to cure, provide you a 30 day period to cure such act or
omission.  Upon a termination of your
employment by the Company for Cause, you only will be entitled to any salary
and other benefits earned, but unpaid (including accrued but unpaid vacation),
and any reimbursement for expenses owed to you by the Company, as of the
Termination Date.


 


(c)                                  Termination without Cause.  The Company shall
have the unilateral right to terminate your employment and the Term at any time without Cause,
and without notice, in the Company’s sole and absolute discretion.  Any such termination without Cause shall not
constitute a breach of any term of this Agreement, express or implied, or a
wrongful deprivation of your office or position.  If the Company terminates your employment and
the Term without Cause,
it shall be treated as a Qualifying Termination and the Company shall have no
obligation to you, except to continue to pay you (or cause to occur, if
applicable) the amounts (and actions) set forth in Section 3(d)(i) above
in accordance with the terms thereof and any related provisions of this
Agreement.


 


(d)                                 Termination due to Death.  Your
employment and the Term  will be automatically terminated on the date of your death.  In the event of your death, the Company
shall pay your estate or assignees (or allow your estate or assignees to
retain, as applicable) within thirty (30) days of the Termination Date the
Accrued Obligations, subject to Section 13 below.  In addition, you shall be eligible to receive
a Pro-Rated Bonus for the year in which your employment is terminated,
calculated with reference to the Termination Date and calculated and paid as
provided in Section 3(d)(i)(B) above. 
The vested
Equity Incentives as of the date of your death shall be exercisable by your
estate or assignees until the earliest of (x) twelve (12) months following
the Termination Date; (y) the scheduled expiration date of the Equity
Incentives; or (z) the date on which the Equity Incentives are canceled
(and not substituted or assumed) pursuant to a Change in Control or merger or
acquisition or similar transaction involving the Company.


 


(e)                                  Termination due to Disability.  If you are
subject to a Disability, and if within thirty (30) days after written notice is
provided to you by the Company you shall not have returned to perform
substantially your duties, your employment and the Term may be terminated by the
Company for Disability.  During any
period prior to such termination during which you are unable to perform
substantially such duties due to Disability, the Company shall continue to pay
all amounts required to be paid under this Agreement (including without
limitation your Base Salary), offset by any amounts payable to your under any
disability insurance plan or policy provided by the Company, 


 


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and the Company shall continue to provide all benefits to you
hereunder.  Upon termination of your
employment due to Disability, the Company shall pay you (or allow you to
retain, as applicable) within thirty (30) days of such termination the Accrued
Obligations, subject to Section 13 below. 
In addition, you shall be eligible to receive a Pro-Rated Bonus for the
year in which your employment is terminated, calculated with reference to the
Termination Date and calculated and paid as provided in Section 3(d)(i)(B) above.  The vested Equity Incentives as of the Termination
Date shall be exercisable by you until the earliest of (x) twelve (12)
months following the Termination Date; (y) the scheduled expiration date
of the Equity Incentives; or (z) the date on which the Equity Incentives
are canceled (and not substituted or assumed) pursuant to a Change in Control
or merger or acquisition or similar transaction involving the Company.


 


(f)                                    Resignation for Good Reason.  You
may terminate your employment and the Term at any time for Good Reason,
provided that you provide written notice to the Company describing the
existence of any Good Reason condition(s) within ninety (90) days of the
date of the initial existence of the condition(s) or else you will be
deemed to have waived any Good Reason with respect to such condition(s).  Upon the Company’s receipt of such written
notice, the Company shall then have thirty (30) days during which it may cure
or remedy the condition(s).  If the
Company does cure or remedy the condition(s) during such thirty (30) day
period then Good Reason will be deemed to have not occurred with respect to
such condition(s).  If the Company does
not cure or remedy the condition(s) during such thirty (30) day period
then your employment with the Company and the Term shall be terminated for Good
Reason as of the day following the expiration of the thirty (30) day
cure/remedy period.  If you terminate
your employment for Good Reason in accordance with the provisions of this Section 4(f),
it shall be treated as a Qualifying Termination and the Company shall pay you
(or cause to occur, if applicable) the amounts (and actions) set forth in Section 3(d)(i) above
in accordance with the terms thereof and any related provisions of this
Agreement.


 


(g)                                 Resignation without Good Reason.  You
may terminate your employment and the Term at any time for no reason, or for
any reason that does not otherwise constitute Good Reason, in your sole and
absolute discretion, but only if you provide written notice to the Company at
least six (6) months prior to the effective date of your resignation (and
such notice must specify the effective date of your resignation of
employment).  In the event you so
terminate your employment without Good Reason, you shall only be entitled to
receive (subject to Section 13 below) the Accrued Obligations through the
effective date of your resignation, as well as all other compensation and
benefits required under this Agreement through the effective date of your
resignation, and neither you nor the Company shall have any further obligations
to the other except as set forth in Section 6 (Confidential Information), Section 7
(Covenants) and Sections 8 through and including 13.  However, in the event you terminate your
employment without Good Reason and your Termination Date occurs prior to the
end of the required minimum six-month notice period provided in this Section 4(g),
then all of the Options and any additional stock options or stock appreciation
rights granted to you after March 31, 2010 shall immediately expire and be
forfeited as of such 


 


11

















 


Termination
Date; and provided further, for the avoidance of doubt, that no stock options
or stock appreciation rights granted to you prior to April 1, 2010
shall be subject to this forfeiture provision. 
The Company is not obligated to actually utilize your services at any
time during the six-month period preceding the effective date of your
resignation, and may prevent you from accessing any of the Company premises or
resources during such six-month period. 
Additionally, as long as the Company provides you with any compensation
and benefits that would have been earned by you pursuant to Sections 3(a), 3(b) and
3(c) during the six-month period preceding the effective date of your
resignation had you remained employed during such period, the Company may
terminate your employment prior to the expiration of such six-month period
without triggering any rights to or eligibility for severance, including
without limitation those payments and benefits described under Sections 3(d)(i) or
3(d)(ii).


 


5.                               Equity
Compensation.


 


(a)                                  On or before
the effective date of the IPO, if any, but in any event no later than September 30,
2010, you  will be granted a non-qualified stock option to purchase 70,000 shares
of common stock (the “Annual Grant  Option”) of the Company and a
second non-qualified stock option to purchase 70,000 shares of common stock
(the “Performance Option” and together with the Annual Grant Option, the
“Options”) of the Company.  The
Annual Grant Option will vest over four years subject to your continued
employment with the Company, except as otherwise provided herein.  Fifty percent of the Performance Option will
vest over four years subject to your continued employment with the Company and
the other fifty percent will be based both on a three year time-based cliff
vesting schedule and on relative total shareholder return objectives over a
three (3) year period as measured against a peer group of companies as
described in the Performance Option agreement attached as Exhibit B.  If the Options are granted on the IPO date,
then their per share exercise prices will be determined by the Board based upon
the IPO price, but in any event will be equal to not less than the fair market
value of a Company common share on the date of grant as determined in
accordance with the Company’s 2004 Amended and Restated Stock Plan or 2010
Stock Incentive Plan, or any successor plan thereto (“Stock Plan”).  In the event of a Change in Control that
occurs prior to both the IPO date and September 30, 2010, the Options will
be granted as of the date immediately prior to the consummation date of the
Change in Control and will have per share exercise prices determined by the
Board based on the Change in Control transaction price, but in any event will
be equal to not less than the fair market value of a Company common share on
the date of grant as determined in accordance with the terms of the Stock
Plan.  The Options will be on other terms
and conditions set forth in the stock option agreements evidencing the grants,
which stock option agreements will include the terms and conditions of the Options
as set forth in this Agreement, and which you must execute as a condition of
grant, with vesting to commence on the date of the grant and in accordance with
the vesting schedule set forth in the Stock Plan and Option agreements
consistent with the terms of this Agreement. 
Further details on the Stock Plan and the specific terms and conditions
applicable to any Options granted to you will be provided upon final approval
of such grant by the Board.  Copies of
the Stock Plan 


 


12

















 


and the option grant notices and stock option agreements evidencing any
Options granted to you will be delivered to you at the time of the grant.  The number
of shares subject to the Options will be proportionately adjusted upon any
stock split of the Company’s common shares which occurs before the Options
are granted.


 


(b)                                 You shall be
eligible to be considered for additional equity awards during each year of the Term at the discretion of the
Board (or an appropriate committee thereof).


 


6.                                       Confidential
Information.  As an
employee of the Company, you will have access to certain confidential
information of the Company and you may, during the course of your employment or
thereafter, develop certain information or inventions which will be the
property of the Company.  In
consideration of, and as a condition to, your employment with the Company, and
as an essential inducement to the Company to enter into this Agreement, this
Agreement is expressly subject to your executing (and complying with) the RealD
Inc. Employee Invention Assignment and Confidentiality Agreement (the “Confidentiality
Agreement”) in the form enclosed hereto as Exhibit C.


 


7.                                       Covenants.  You agree to timely and fully comply with all
of the covenants set forth in this Section 7 and further understand and
agree that such covenants shall survive any termination of your employment and
termination or expiration of this Agreement.


 


(a)                                  Return of
Company Property.  On your
Termination Date, or at any other time as required by the Company, you will
immediately surrender to the Company all Company property, including but not
limited to Confidential Information (as such term is defined in the
Confidentiality Agreement), keys, key cards, computers, telephones, pagers,
credit cards, automobiles, equipment, and/or other similar property of the
Company.


 


(b)                                 Nondisparagement.  You will not at any time during the period of
your employment with the Company and during any period in which you are
receiving severance payments under Section 3(d), make (or direct anyone
else to make) any disparaging statements (oral or written) about the Company,
or any of its affiliated entities, officers, directors, employees,
stockholders, representatives or agents, or any of the Company’s products or
services or work-in-progress, that are harmful to their businesses, business
reputations or personal reputations.


 


(c)                                  Cooperation.  You agree that, upon the Company’s request
and without any payment therefore, you shall reasonably cooperate with the
Company (and be available as necessary) after the Termination Date in
connection with any matters involving events that occurred during your period
of employment with the Company.


 


(d)                                 Amounts Due.  You will fully pay off any outstanding
amounts owed to the Company no later than their applicable due date or within
thirty days of the Termination Date (if no other due date has previously been
established).  Within thirty 


 


13

















 


(30) days of the Termination Date, you will submit any outstanding
business expense reports to the Company for business expenses incurred prior to
the Termination Date.


 


(e)                                  Company
Resources.  As of the
Termination Date, you will no longer represent that you are an officer,
director or employee of the Company or any Company affiliate and you will
immediately discontinue using the Company mailing address, telephone, facsimile
machines, voice mail and e-mail.


 


(f)                                    Notice of New
Employment.  You will
provide written notice to the Company within three (3) business days after
the date that you agree to accept new full or part time employment or agree to
provide consulting or other services to another entity or venture.


 


(g)                                 Representations.  You represent that you have not entered into
any agreements, understandings, or arrangements with any person or entity that
you would breach as a result of, or that would in any way preclude or prohibit
you from entering into, this Agreement with the Company or performing any of
the duties and responsibilities provided for in this Agreement.  You represent that you do not possess any
confidential, proprietary business information belonging to any other entity,
and will not use any confidential, proprietary business information belonging
to any other entity in connection with your employment with the Company.  You represent that you are
not resigning employment or relocating any residence in reliance on any promise
or representation by the Company regarding the kind, character, or existence of
such work, or the length of time such work will last, or the compensation
therefor.


 


(h)                                 Clawback Policy.  Without limiting the requirement in Section 1
that you will strictly adhere to and obey Company policies, you understand and
agree that the Company may in the future implement a policy on the recoupment
of compensation (“Clawback Policy”).  As
a result, you may be
required to repay to the Company certain previously paid compensation (that was
earned or accrued on or after the Effective Date) in accordance with any such
Clawback Policy and/or in accordance with applicable law.


 


(i)                                     Violations.  You acknowledge that (i) upon a
violation of any of the covenants contained in this Section 7; or (ii) if
the Company is terminating your employment for Cause as provided under this
Agreement, the Company would sustain irreparable harm as a result and that the
Company would not have entered into this Agreement without such restrictions,
and, therefore, you agree that in addition to any other remedies which the
Company may have, the Company shall be entitled, without bond of any kind, to
seek equitable relief including specific performance and injunctions
restraining you from committing or continuing any such violation.


 


8.                                       Entire
Agreement.  This
Agreement and its attachments, the Employee Invention Assignment and
Confidentiality Agreement, and the Company’s Stock Plan, and any other
agreements referenced herein, as amended or superseded from time to time,
contain the entire agreement between you and the Company regarding their terms
and supersede any and all prior 


 


14

















 


written
or oral understandings including without limitation that Amended and Restated
Agreement of Employment by and between REAL D and Andrew Skarupa, dated September 1,
2007.  Except as otherwise provided
herein, this Agreement may not be amended or modified except in a writing,
executed by you and a duly authorized officer of the Company other than
yourself.  This Agreement may be executed
by facsimile signatures and in counterparts, each of which shall constitute an
original, and all of which shall constitute one and the same instrument.


 


9.                                       Choice of Law;
Severability; Waiver.  This
Agreement will be governed by the laws of the State of California, United
States, without reference to the conflict of law provisions thereof.  If any provision of this Agreement, or
portion thereof, shall be held invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision or portion thereof, and shall not in any manner affect or render
invalid or unenforceable any other provision, or portion thereof, of this
Agreement.  No breach of any provision
hereof can be waived unless in writing. 
Waiver of any one breach of any provision hereof will not be deemed to
be a waiver of any other breach of the same or any other provision of this
Agreement.


 


10.                                 Successors and
Assigns.  The Company
may assign this Agreement to any successor (whether by amalgamation, merger,
consolidation, sale of assets, purchase or otherwise) to all or substantially
all of the equity, assets or business of the Company, and this Agreement will
be binding upon and inure to the benefit of such successors and assigns,
including any successor entity.  You may
not assign this Agreement or your obligations hereunder.


 


11.                                 Notice.  Any and all notices required or permitted to
be given to you or the Company pursuant to the provisions of this Agreement
will be in writing, and will be effective and deemed to provide such party
sufficient notice hereunder on the earliest of the following: (i) at the
time of personal delivery, if delivery is in person; (ii) one (1) business
day after deposit with an express overnight courier for United States
deliveries, or two (2) business days after such deposit for deliveries
outside of the United States; (iii) three (3) business days after
deposit in the United States mail by certified mail (return receipt requested)
for United States deliveries.  All
notices that the
Company is required to or may desire to give you that are not delivered
personally will be sent with postage and/or other charges prepaid and properly addressed to you at your home address of
record with the Company, or at such other address as you may from time to time
designate by one of the indicated means of notice herein.  All notices that you are required to or may desire to give to the
Company that are not delivered personally will be sent with postage
and/or other charges prepaid and properly addressed to the Company’s General Counsel at its
principal office, or at such other office as the Company may from time to time
designate by one of the indicated means of notice herein.


 


12.                                 Withholding and
Taxes.  The Company shall have the
right to withhold and deduct from any payment hereunder any federal, state or
local taxes of any kind required by law to be withheld with respect to any such
payment.  The Company (including without
limitation members of the Board) shall not be liable to you or other persons as
to any unexpected or adverse tax consequence realized by you and you shall be
solely responsible for the timely payment of all taxes arising from this
Agreement that are imposed on you.


 


15

















 


13.                                 Section 409A.  The payments under this Agreement are
intended to be exempt from the application of Section 409A pursuant to the
“short-term deferral” exception and “separation pay plan” exception under Section 409A
to the fullest extent possible.  Each
individual payment provided under Sections 3(d), 4(d) or 4(e) is
intended to be a separate payment and not a series of payments for purposes of Section 409A.  Anything in this Agreement to the contrary
notwithstanding, if the severance payment above constitutes an item of
nonqualified deferred compensation subject to Section 409A, the Company
and you shall take all steps necessary (including with regard to any
post-termination services you may perform) to ensure that any such termination
constitutes a “separation from service” within the meaning of Section 409A.  In addition, if you are deemed at the time of
your “separation from service” to be a “specified employee” within the meaning
of that term under Section 409A and to the extent delaying commencement of
payment of nonqualified deferred compensation (that is payable on account of
your separation from service) is required in order to avoid the imposition of
taxes under Section 409A, then all such payments and benefits will instead
be paid to you in a lump sum without interest on the earlier of (a) the
first business day of the seventh month following your “separation from service”
or (b) five business days after the date the Company receives written
confirmation of your death.  It is
intended that payments under this Agreement will be exempt from or comply with Section 409A,
but the Company makes no representation or covenant to ensure that the payments
under this Agreement are exempt from, or compliant with, Section 409A, and
will have no liability to you or any other party if a payment under this
Agreement that is intended to be exempt from, or compliant with, Section 409A
is not so exempt or compliant.


 


14.                                 Reimbursement
of Legal Fees.  The Company
shall pay directly to your legal counsel your reasonable legal fees and costs
(not to exceed $15,000) incurred in connection with the negotiation of this
Agreement and its related agreements referenced herein.  Payment will be made within 45 days of the
Company’s receipt of applicable invoices and such invoices must be submitted to
the Company within 45 days of the execution of this Agreement.


 


15.                                 Exhibits.  All Exhibits attached to this Agreement shall
be incorporated herein by this reference as though fully set forth herein.


 


A duplicate original of this
Agreement is enclosed for your records. 
If you decide to accept the terms of this Agreement, please sign the
enclosed copy of this Agreement and the Employee Invention Assignment and
Confidentiality Agreement in the spaces indicated and return it to me.  Your signature will acknowledge that you have
read and understood and agreed to the terms and conditions of this Agreement
and Employee Invention Assignment and Confidentiality Agreement.  Should you have anything else that you wish
to discuss, please do not hesitate to contact me.


 


	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  RealD
  Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Michael
  V. Lewis

  
	
   

  	
   

  	
  Chief Executive Officer

  



 


16

















 


I have read, understand, and
accept this offer.  Furthermore, in
choosing to accept this offer, I agree that I am not relying on any
representations, whether verbal or written, except as specifically set out
within this Agreement.


 


 


	
   

  	
   

  
	
  Employee
  Signature

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Printed
  Name

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date:
  May     , 2010

  	
   

  



 


 


	
  Enclosures:

  	
   

  	
  Duplicate
  Original Letter

  
	
   

  	
   

  	
  EXHIBIT
  A:

  	
  FORM OF
  SEPARATION AGREEMENT AND RELEASE OF CLAIMS

  
	
   

  	
   

  	
  EXHIBIT
  B:

  	
  PERFORMANCE
  OPTION AGREEMENT

  
	
   

  	
   

  	
  EXHIBIT C:

  	
  EMPLOYEE INVENTION
  ASSIGNMENT AND CONFIDENTIALITY AGREEMENT

  



 


17

















 


EXHIBIT
A


FORM OF
SEPARATION AGREEMENT AND RELEASE OF CLAIMS


 


[SEE EXHIBIT NUMBER 10.31]


 

















 


EXHIBIT
B


PERFORMANCE OPTION AGREEMENT


 


[SEE EXHIBIT NUMBER 10.7]


 

















 


EXHIBIT C


EMPLOYEE INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT


 


[SEE EXHIBIT NUMBER 10.32]