Document:

Exhibit
4.4

 

AMENDMENT NO. 2 TO THIRD AMENDED AND

RESTATED SHAREHOLDERS AGREEMENT

 

This
Amendment No. 2 to Third Amended and Restated Shareholders Agreement (this
“Amendment”) is made and entered into as of May 1, 2009, by and
between REAL D, a California corporation (the “Company”), and the
undersigned shareholders of the Company (the “Consenting Shareholders”).
Capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed thereto in the Shareholders Agreement (as defined
below).

 

R E C I T A L S

 

WHEREAS,
the Company, the Consenting Shareholders and certain other shareholders of the
Company have heretofore entered into that certain Third Amended and Restated
Shareholders Agreement, dated as of December 24, 2007 (as amended, the “Shareholders  Agreement”);

 

WHEREAS,
Section 10.4 of the Shareholders Agreement provides that the Shareholders
Agreement may be amended by a written agreement executed by (i) the
Company, (ii) the holders of a majority of the Stock then held by the Series A
Holders, (iii) the holders of a majority of the Stock then held by the Series B
Holders, (iv) the holders of a majority of the Stock then held by the Series C
Holders, and (v) the Founders;

 

WHEREAS,
the Company and the Consenting Shareholders constitute each of (i) the
Company, (ii) the holders of a majority of the Stock then held by the Series A
Holders, (iii) the holders of a majority of the Stock then held by the Series B
Holders, (iv) the holders of a majority of the Stock then held by the Series C
Holders and (v) the Founders; and

 

WHEREAS,
the Company and the Consenting Shareholders desire to amend the Shareholders
Agreement as more fully set forth herein.

 

AGREEMENT

 

NOW,
THEREFORE, in consideration of the agreements and obligations set forth herein
and for other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:

 

SECTION 1.
Amendments to Definition of “Permitted Transfer”. The Company and the
Consenting Shareholders agree that the definition of “Permitted Transfer” set
forth in Section 1.1(j) of the Shareholders Agreement is hereby
amended to (x) delete the word “and” at the end of clause (iv) of
such definition, (y) renumber clause (v) of such definition to become
clause (vii) of such definition, and (z) insert a new clause (v) and
a new clause (vi) of such definition to read in their entirety as follows:

 

(v)             the transfer of an aggregate of no more than 769,436
shares of Series D Preferred by Pequot Navigator Offshore Fund, Inc.,
Pequot Core Global Offshore Fund, Inc., Pequot Core Investors Fund, Inc.
and Pequot Institutional

 

 

Fund, Inc.,
to one or more Affiliates of such Series D Holders that, at the time of
such transfer but prior to giving effect to such transfer, executes a proper
Joinder to the Shareholders Agreement; and

 

(vi)            the transfer of no more than 5,000 shares of Common Stock
by William D. Budinger to Mark Luttier; provided, that, at the time of such
transfer but prior to giving effect to such transfer, such transferee executes
a proper Joinder to the Shareholders Agreement; and”

 

SECTION 2.
Governing Law. This Amendment shall be interpreted and enforced in
accordance with and governed by the internal laws of the State of California,
without giving effect to the principles of conflicts of law of such state

 

SECTION 3.
References to the Agreement. Except as amended by this Amendment, all
other terms, conditions and covenants of the Shareholders Agreement are hereby
confirmed by the parties hereto and remain unchanged and in full force and
effect. From and after the date hereof, all references to the “Agreement”
contained in the Shareholders Agreement, shall be deemed to be references to
the Shareholders Agreement as amended by this Amendment.

 

SECTION 4.
Counterparts. This Amendment may be executed in multiple counterparts,
each of which shall be deemed an original and all of which shall be deemed to
constitute one and the same instrument, and it shall be sufficient for each
party to have executed at least one, but not necessarily the same, counterpart.

 

[Signatures
Follow]

 

 

IN WITNESS WHERE OF, this Amendment was executed as of the date first
above written.

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  REAL D

  
	
   

  	
   

  
	
   

  	
  /s/ Andrew Skarupa

  
	
   

  	
  Name: 

  
	
   

  	
  Title: 

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  FOUNDERS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Michael Lewis

  
	
   

  	
  Michael Lewis

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  /s/ Joshua Greer

  
	
   

  	
  Joshua Greer

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  SERIES A HOLDERS:

  
	
   

  	
   

  
	
   

  	
  PERSPECTIVE INVESTMENTS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Daniel MacLean

  
	
   

  	
  Name: Daniel MacLean

  
	
   

  	
  Title: Director

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  /s/ Richard Huston

  
	
   

  	
  Richard Huston

  
	
   

  	
  June 10 2009

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  /s/ William D. Budinger

  
	
   

  	
  William D. Budinger

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  HOBBIT INVESTMENTS, LLC

  
	
   

  	
  By: Sunnyside Mgt., it’s manager

  
	
   

  	
   

  
	
   

  	
  /s/ William D. Budinger

  
	
   

  	
  Name: William D. Budinger

  
	
   

  	
  Title: President

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  SERIES B HOLDERS:

  
	
   

  	
   

  
	
   

  	
  PERSPECTIVE INVESTMENTS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Daniel MacLean

  
	
   

  	
  Name: Daniel MacLean

  
	
   

  	
  Title: Director

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  /s/ Richard Huston

  
	
   

  	
  Richard Huston

  
	
   

  	
  June 10 2009

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  /s/ William D. Budinger

  
	
   

  	
  William D. Budinger

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  HOBBIT INVESTMENTS, LLC

  
	
   

  	
  By: Sunnyside Mgt. its Manager

  
	
   

  	
   

  
	
   

  	
  /s/ William D. Budinger

  
	
   

  	
  Name: William D. Budinger

  
	
   

  	
  Title: President

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  THE SUSAN BUDINGER LONCKI

  
	
   

  	
  SEPARATE PROPERTY TRUST

  
	
   

  	
   

  
	
   

  	
  /s/ Susan Martin Budinger

  
	
   

  	
  Name: Susan Martin Budinger

  
	
   

  	
  Title: Trustee

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  REAL BIG, LLC

  
	
   

  	
   

  
	
   

  	
  /s/ David L. Marrs

  
	
   

  	
  Name: David L. Marrs

  
	
   

  	
  Title: Manager

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  /s/ Paul Kagan

  
	
   

  	
  Paul Kagan

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  /s/ William Charles Powers and Carolyn C Powers

  
	
   

  	
  William Charles Powers and Carolyn Clark Powers

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  /s/ Paul L. MacCaskill

  
	
   

  	
  Paul L. MacCaskill

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]

 

 

	
   

  	
  SERIES C HOLDERS:

  
	
   

  	
   

  
	
   

  	
  SHAMROCK CAPITAL GROWTH FUND

  
	
   

  	
  II, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Stephen D Royer

  
	
   

  	
  Name: Stephen D Royer

  
	
   

  	
  Title: Executive Vice President

  

 

[Signature
Page to Amendment No. 2 to Third Amended and Restated Shareholders Agreement]Exhibit
10.1

 

REAL D

2004 AMENDED AND RESTATED STOCK INCENTIVE PLAN

 

SECTION 1. PURPOSE

 

The
purpose of the Real D 2004 Amended and Restated Stock Incentive Plan is to
attract, retain and motivate employees, officers, directors, consultants,
agents, advisors and independent contractors of the Company and its Related
Companies by providing them the opportunity to acquire a proprietary interest
in the Company and to link their interests and efforts to the long-term
interests of the Company’s stockholders.

 

SECTION 2. DEFINITIONS

 

Certain terms used in the Plan have the
meanings set forth in Appendix A.

 

SECTION 3. ADMINISTRATION

 

3.1          Administration of the Plan

 

The
Plan shall be administered by the Board. Notwithstanding the foregoing, the
Board may delegate concurrent responsibility for administering the Plan,
including with respect to designated classes of Eligible Persons, to a
committee or committees (which term includes subcommittees) consisting of two
or more members of the Board, subject to such limitations as the Board deems
appropriate. If and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, the Board shall consider in selecting the
members of any committee acting as Plan Administrator, with respect to any persons
subject to Section 16 of the Exchange Act, the provisions regarding
“non-employee directors” as contemplated by Rule 16b-3(b)(3) under
the Exchange Act, or any successor provision thereto. Members of any committee
shall serve for such term as the Board may determine, subject to removal by the
Board at any time. All references in the Plan to the “Plan Administrator”  shall be, as
applicable, to the Board or any committee to whom the Board has delegated
authority to administer the Plan.

 

3.2          Administration and Interpretation by
Plan Administrator

 

(a)           Except for the terms and conditions
explicitly set forth in the Plan, the Plan Administrator shall have full power
and exclusive authority, to the extent permitted by applicable law and subject
to such orders or resolutions not inconsistent with the provisions of the Plan
as may from time to time be adopted by the Board or a committee composed of
members of the Board, to (i) select the Eligible Persons to whom Awards
may from time to time be granted under the Plan; (ii) determine the type
or types of Award to be granted to each Participant under the Plan; (iii) determine
the number of shares of Common Stock to be covered by each Award granted under
the Plan; (iv) determine the terms and conditions of any Award granted
under the Plan; (v) approve the forms

 

 

of
agreements for use under the Plan; (vi) determine whether, to what extent
and under what circumstances Awards may be settled in cash, shares of Common
Stock or other property or canceled or suspended; (vii) determine whether,
to what extent and under what circumstances cash, shares of Common Stock, other
property and other amounts payable with respect to an Award shall be deferred
either automatically or at the election of the Participant; (viii) interpret
and administer the Plan and any instrument evidencing an Award; (ix) establish
such rules and regulations as it shall deem appropriate for the proper
administration of the Plan; (x) delegate administrative duties to such of
the Company’s employees as it so determines; and (xi) make any other
determination and take any other action that the Plan Administrator deems
necessary or desirable for administration of the Plan.

 

(b)           Decisions of the Plan Administrator
shall be final, conclusive and binding on all persons, including the Company,
any Participant, any stockholder and any Eligible Person. A majority of the
members of the Plan Administrator may determine its actions.

 

(c)           The effect on the vesting of an Award
of a Company-approved leave of absence or a Participant’s working less than
full-time shall be determined by the Company’s chief human resources officer or
other person performing that function or, with respect to directors or
executive officers, by the Board, and its determination shall be final.

 

SECTION 4. SHARES SUBJECT TO THE PLAN

 

4.1          Authorized Number of Shares

 

Subject
to adjustment from time to time as provided in Section 14.1, a maximum of
Two Million Four Hundred Seventy Two Thousand One Hundred Forty Seven
(2,472,147) shares of Common Stock shall be available for issuance under the
Plan. Shares issued under the Plan shall be drawn from authorized and unissued
shares.

 

4.2          Share Usage

 

(a)           Shares of Common Stock covered by an
Award shall not be counted as used unless and until they are actually issued
and delivered to a Participant. If any Award lapses, expires, terminates or is
canceled prior to the issuance of shares thereunder or if shares of Common
Stock are issued under the Plan to a Participant and thereafter are forfeited
to or otherwise reacquired by the Company, the shares subject to such Awards
and the forfeited or reacquired shares shall again be available for issuance
under the Plan. Any shares of Common Stock (i) tendered by a Participant or
retained by the Company as full or partial payment to the Company for the
purchase price of an Award or to satisfy tax withholding obligations in
connection with an Award or (ii) covered by an Award that is settled in
cash or in a manner such that some or all of the shares covered by the Award are
not issued shall be available for Awards under the Plan. The number of shares
of Common Stock available for issuance under the Plan shall not be reduced to
reflect any dividends

 

2

 

or
dividend equivalents that are reinvested into additional shares of Common Stock
or credited as additional shares of Common Stock subject or paid with respect
to an Award.

 

(b)           The Plan Administrator shall also,
without limitation, have the authority to grant Awards as an alternative to or
as the form of payment for grants or rights earned or due under other
compensation plans or arrangements of the Company.

 

(c)           Notwithstanding anything in the Plan
to the contrary, the Plan Administrator may grant Substitute Awards under the
Plan. In the event that a written agreement between the Company and an Acquired
Entity pursuant to which a merger or consolidation is completed is approved by
the Board and that agreement sets forth the terms and conditions of the
substitution for or conversion or assumption of outstanding awards of the
Acquired Entity, those terms and conditions shall be deemed to be the action of
the Plan Administrator without any further action by the Plan Administrator,
except as may be required for compliance with Rule 16b-3 under the
Exchange Act, and the persons holding such awards shall be deemed to be
Participants.

 

(d)           Notwithstanding the foregoing, the
maximum number of shares that may be issued upon the exercise of Incentive
Stock Options shall equal the aggregate share number stated in Section 4.1,
subject to adjustment as provided in Section 14.1.

 

SECTION 5. ELIGIBILITY

 

An
Award may be granted to any employee, officer or director of the Company or a
Related Company whom the Plan Administrator from time to time selects. An Award
may also be granted to any consultant, agent, advisor or independent contractor
for bona fide services rendered to the Company or any Related Company that (a) are
not in connection with the offer and sale of the Company’s securities in a
capital-raising transaction and (b) do not directly or indirectly promote
or maintain a market for the Company’s securities.

 

SECTION 6. AWARDS

 

6.1          Form, Grant
and Settlement of Awards

 

The
Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be granted under the Plan. Such Awards
may be granted either alone, in addition to or in tandem with any other type of
Award. Any Award settlement may be subject to such conditions, restrictions and
contingencies as the Plan Administrator shall determine.

 

6.2          Evidence of
Awards

 

Awards
granted under the Plan shall be evidenced by a written, including an
electronic, agreement that shall contain such terms, conditions, limitations
and restrictions as the Plan Administrator shall deem advisable and that are
not inconsistent with the Plan.

 

3

 

6.3          Deferrals

 

The
Plan Administrator may permit or require a Participant to defer receipt of the
payment of any Award. If any such deferral election is permitted or required,
the Plan Administrator, in its sole discretion, shall establish rules and
procedures for such payment deferrals, which may include the grant of
additional Awards or provisions for the payment or crediting of interest or
dividend equivalents, including converting such credits to deferred stock unit
equivalents.

 

6.4          Dividends and Distributions

 

Participants
may, if the Plan Administrator so determines, be credited with dividends paid
with respect to shares underlying an Award in a manner determined by the Plan
Administrator in its sole discretion. The Plan Administrator may apply any
restrictions to the dividends or dividend equivalents that the Plan
Administrator deems appropriate. The Plan Administrator, in its sole
discretion, may determine the form of payment of dividends or dividend
equivalents, including cash, shares of Common Stock, Restricted Stock or Stock
Units.

 

SECTION 7. OPTIONS

 

7.1          Grant of Options

 

The
Plan Administrator may grant Options designated as Incentive Stock Options or
Nonqualified Stock Options.

 

7.2          Option Exercise Price

 

Except
in the case of Substitute Awards, the exercise price for shares purchased under
an Option shall be as established by the Plan Administrator, but shall not be
less than (a) 85% of the Fair Market Value of the Common Stock on the
Grant Date with respect to Nonqualified Stock Options, (b) the minimum
exercise price required by Section 8.3 with respect to Incentive Stock
Options, and (c) in the case of an Option granted to a Participant who
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or its parent or subsidiary companies, 110% of
the Fair Market Value of the Common Stock on the Grant Date.

 

7.3          Term of Options

 

Subject
to earlier termination in accordance with the terms of the Plan and the
instrument evidencing the Option, the maximum term of an Option (the “Option Term”) shall be as established for
that Option by the Plan Administrator or, if not so established, shall be ten
years from the Grant Date. For Incentive Stock Options, the Option Term shall
be as specified in Section 8.4.

 

4

 

7.4          Exercise of
Options

 

The Plan Administrator shall
establish and set forth in each instrument that evidences an Option the time at
which, or the installments in which, the Option shall vest and become
exercisable, any of which provisions may be waived or modified by the Plan
Administrator at any time. If not so established in the instrument evidencing
the Option, the Option shall vest and become exercisable according to the
following schedule, which may be waived or modified by the Plan Administrator
at any time:

 

	
   

  	
  Period of Participant’s Continuous

  Employment or Service With the

  Company or Its Related Companies

  From the Vesting Commencement Date

  	
   

  	
  Portion of Total Option That

  Is Vested and Exercisable

  
	
   

  	
  After
  1 year

  	
   

  	
  1/4th

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  After
  each additional one-month period of continuous service completed thereafter

  	
   

  	
  An
  additional 1/48th

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  After
  4 years

  	
   

  	
  100%]

  

 

To
the extent an Option has vested and become exercisable, the Option may be
exercised in whole or from time to time in part by delivery to the Company of a
properly executed stock option exercise agreement or notice, in a form and in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised, the
restrictions imposed on the shares purchased under such exercise agreement or
notice, if any, and such representations and agreements as may be required by
the Plan Administrator, accompanied by payment in full as described in Sections
7.5 and 12. An Option may be exercised only for whole shares and may not be
exercised for less than a reasonable number of shares at any one time, as
determined by the Plan Administrator.

 

7.5          Payment of
Exercise Price

 

The
exercise price for shares purchased under an Option shall be paid in full to
the Company by delivery of consideration equal to the product of the Option
exercise price and the number of shares purchased. Such consideration must be
paid before the Company will issue the shares being purchased and must be in a
form or a combination of forms acceptable to the Plan Administrator for that
purchase, which forms may include:

 

(a)           cash;

 

(b)           check or wire transfer;

 

5

 

(c)           tendering (either actually or, if and
so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) shares of Common Stock that on the day prior
to the exercise date have a Fair Market Value equal to the aggregate exercise
price of the shares being purchased under the Option (such shares must have
been owned by the Participant for at least six months or any shorter period
necessary to avoid a charge to the Company’s earnings for financial reporting
purposes);

 

(d)           if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, and
to the extent permitted by law, delivery of a properly executed exercise
agreement or notice, together with irrevocable instructions to a brokerage firm
designated or approved by the Company to deliver promptly to the Company the
aggregate amount proceeds to pay the Option exercise price and any withholding
tax obligations that may arise in connection with the exercise, all in
accordance with the regulations of the Federal Reserve Board; or

 

(e)           such other consideration as the Plan
Administrator may permit.

 

7.6          Effect
of Termination of Service

 

The
Plan Administrator shall establish and set forth in each instrument that
evidences an Option whether the Option shall continue to be exercisable, and
the terms and conditions of such exercise, after a Termination of Service, any
of which provisions may be waived or modified by the Plan Administrator at any
time. If not so established in the instrument evidencing the Option, the Option
shall be exercisable according to the following terms and conditions, which may
be waived or modified by the Plan Administrator at any time:

 

(a)           Any portion of an Option that is not
vested and exercisable on the date of a Participant’s Termination of Service
shall expire on such date.

 

(b)           Any portion of an Option that is
vested and exercisable on the date of a Participant’s Termination of Service
shall expire on the earliest to occur of:

 

(i)            if the Participant’s Termination of
Service occurs for reasons other than Cause, Retirement, Disability or death,
the date that is one year after such Termination of Service;

 

(ii)           if the Participant’s Termination of
Service occurs by reason of Retirement, Disability or death, the one-year
anniversary of such Termination of Service; and

 

(iii)          the last day of the Option Term (the “Option Expiration Date”).

 

Notwithstanding
the foregoing, if a Participant dies after the Participant’s Termination of
Service but while an Option is otherwise exercisable, the portion of the Option
that is vested and exercisable on the date of such Termination of Service shall
expire upon the earlier to occur of (y) the Option

 

6

 

Expiration
Date and (z) the one-year anniversary of the date of death, unless the
Plan Administrator determines otherwise.

 

Also
notwithstanding the foregoing, in case a Participant’s Termination of Service
occurs for Cause, all Options granted to the Participant shall automatically
expire upon first notification to the Participant of such termination, unless
the Plan Administrator determines otherwise. If a Participant’s employment or
service relationship with the Company is suspended pending an investigation of
whether the Participant shall be terminated for Cause, all the Participant’s
rights under any Option shall likewise be suspended during the period of
investigation. If any facts that would constitute termination for Cause are
discovered after a Participant’s Termination of Service, any Option then held
by the Participant may be immediately terminated by the Plan Administrator, in
its sole discretion.

 

(c)           A Participant’s change in status from
an employee of the Company or a Related Company to a nonemployee director,
consultant, advisor or independent contractor of the Company or a Related
Company or a change in status from a nonemployee director, consultant, advisor
or independent contractor of the Company or a Related Company to an employee of
the Company or a Related Company shall not be considered a Termination of
Service for purposes of this Section 7.6.

 

SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS

 

Notwithstanding
any other provisions of the Plan, the terms and conditions of any Incentive
Stock Options shall in addition comply in all respects with Section 422 of
the Code or any successor provision and any applicable regulations thereunder,
including, to the extent required thereunder, the following:

 

8.1          Dollar Limitation

 

To
the extent the aggregate Fair Market Value (determined as of the Grant Date) of
Common Stock with respect to which a Participant’s Incentive Stock Options
become exercisable for the first time during any calendar year (under the Plan
and all other stock option plans of the Company and its parent and subsidiary
corporations) exceeds $100,000, such portion in excess of $100,000 shall be
treated as a Nonqualified Stock Option. In the event the Participant holds two
or more such Options that become exercisable for the first time in the same
calendar year, such limitation shall be applied on the basis of the order in
which such Options are granted.

 

8.2          Eligible Employees

 

Individuals
who are not employees of the Company or one of its parent or subsidiary
corporations may not be granted Incentive Stock Options.

 

7

 

8.3          Exercise
Price

 

The
exercise price of an Incentive Stock Option shall be at least 100% of the Fair
Market Value of the Common Stock on the Grant Date and, in the case of an
Incentive Stock Option granted to a Participant who owns more than 10% of the
total combined voting power of all classes of the stock of the Company or of
its parent or subsidiary corporations (a “Ten Percent Stockholder”),  shall not be less than 110% of the
Fair Market Value of the Common Stock on the Grant Date. The determination of
more than 10% ownership shall be made in accordance with Section 422 of
the Code.

 

8.4          Option Term

 

Subject
to earlier termination in accordance with the terms of the Plan and the
instrument evidencing the Option, the Option Term of an Incentive Stock Option
shall not exceed ten years, and in the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, shall not exceed five years.

 

8.5          Exercisability

 

An
Option designated as an Incentive Stock Option shall cease to qualify for
favorable tax treatment as an Incentive Stock Option to the extent it is
exercised (if permitted by the terms of the Option) (a) more than three
months after the date of a Participant’s Termination of Service if termination
was for reasons other than death or Disability, (b) more than one year
after the date of a Participant’s Termination of Service if termination was by
reason of Disability, or (c) after the Participant has been on leave of
absence for more than 90 days, unless the Participant’s reemployment rights are
guaranteed by statute or contract.

 

8.6          Taxation of
Incentive Stock Options

 

In
order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422
of the Code, the Participant must hold the shares acquired upon the exercise of
an Incentive Stock Option for two years after the Grant Date and one year after
the date of exercise. A Participant may be subject to the alternative minimum
tax at the time of exercise of an Incentive Stock Option. The Participant shall
give the Company prompt notice of any disposition of shares acquired on the
exercise of an Incentive Stock Option prior to the expiration of such holding
periods.

 

8.7          Code
Definitions

 

For
the purposes of this Section 8, “disability,” “parent corporation” and
“subsidiary corporation” shall have the meanings attributed to those terms for
purposes of Section 422 of the Code.

 

8

 

SECTION 9. STOCK APPRECIATION RIGHTS

 

9.1          Grant of Stock Appreciation Rights

 

The
Plan Administrator may grant Stock Appreciation Rights to Participants at any
time on such terms and conditions as the Plan Administrator shall determine in
its sole discretion. An SAR may be granted in tandem with an Option or alone (“freestanding”).
The grant price of a tandem SAR shall be equal to the exercise price
of the related Option. The grant price of a freestanding SAR shall be
determined in accordance with the procedure for Options set forth in Section 7.2.
An SAR may be exercised upon such terms and conditions and for the term as the
Plan Administrator determines in its sole discretion; provided, however, that,
subject to earlier termination in accordance with the terms of the Plan and the
instrument evidencing the SAR, the term of a freestanding SAR shall be as
established for that SAR by the Plan Administrator or, if not so established,
shall be ten years, and in the case of a tandem SAR, (a) the term shall
not exceed the term of the related Option and (b) the tandem SAR may be
exercised for all or part of the shares subject to the related Option upon the
surrender of the right to exercise the equivalent portion of the related
Option, except that the tandem SAR may be exercised only with respect to the
shares for which its related Option is then exercisable.

 

9.2          Payment of SAR Amount

 

Upon
the exercise of an SAR, a Participant shall be entitled to receive payment from
the Company in an amount determined by multiplying: (a) the difference
between the Fair Market Value of the Common Stock for the date of exercise over
the grant price of the SAR by (b) the number of shares with respect to
which the SAR is exercised. At the discretion of the Plan Administrator as set
forth in the instrument evidencing the Award, the payment upon exercise of an
SAR may be in cash, in shares, in some combination thereof or in any other
manner approved by the Plan Administrator in its sole discretion.

 

SECTION 10. STOCK AWARDS,
RESTRICTED STOCK AND STOCK UNITS

 

 

10.1        Grant of Stock Awards, Restricted Stock
and Stock Units

 

The
Plan Administrator may grant Stock Awards, Restricted Stock and Stock Units on
such terms and conditions and subject to such repurchase or forfeiture
restrictions, if any, which may be based on continuous service with the Company
or a Related Company or the achievement of any performance goals, as the Plan
Administrator shall determine in its sole discretion, which terms, conditions
and restrictions shall be set forth in the instrument evidencing the Award.

 

10.2        Vesting of Restricted Stock and Stock
Units

 

Upon
the satisfaction of any terms, conditions and restrictions prescribed with
respect to Restricted Stock or Stock Units, or upon a Participant’s release
from any terms, conditions and restrictions of

 

9

 

Restricted
Stock or Stock Units, as determined by the Plan Administrator, and subject to
the provisions of Section 12, (a) the shares of Restricted Stock
covered by each Award of Restricted Stock shall become freely transferable by
the Participant, and (b) Stock Units shall be paid in shares of Common
Stock or, if set forth in the instrument evidencing the Award, in cash, or a
combination of cash and shares of Common Stock. Any fractional shares subject
to such Awards shall be paid to the Participant in cash.

 

10.3        Waiver of Restrictions

 

Notwithstanding
any other provisions of the Plan, the Plan Administrator, in its sole
discretion, may waive the repurchase or forfeiture period and any other terms,
conditions or restrictions on any Restricted Stock or Stock Unit under such
circumstances and subject to such terms and conditions as the Plan
Administrator shall deem appropriate.

 

10.4        Minimum Purchase Price

 

The
purchase price for any shares of Common Stock that may be purchased under the
Plan (“Stock Purchase Rights”)  shall be at least 85% of the Fair
Market Value of the Common Stock at the time the Participant is granted the
Stock Purchase Right or at the time the purchase is consummated. Notwithstanding
the foregoing, to the extent required by applicable law, the purchase price
shall be at least 100% of the Fair Market Value of the Common Stock at the time
the Participant is granted the Stock Purchase Right or at the time the purchase
is consummated in the case of any person who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company
or its parent or subsidiary companies.

 

SECTION 11. OTHER STOCK OR CASH-BASED AWARDS

 

Subject
to the terms of the Plan and such other terms and conditions as the Plan
Administrator deems appropriate, the Plan Administrator may grant other
incentives payable in cash or in shares of Common Stock under the Plan as it
determines.

 

SECTION 12. WITHHOLDING

 

The
Company may require the Participant to pay to the Company the amount of (a) any
taxes that the Company is required by applicable federal, state, local or
foreign law to withhold with respect to the grant, vesting or exercise of an
Award (“tax withholding obligations”)  and (b) any amounts due from
the Participant to the Company or to any Related Company (“other
obligations”). The
Company shall not be required to issue any shares of Common Stock or otherwise
settle an Award under the Plan until such tax withholding obligations and other
obligations are satisfied.

 

The
Plan Administrator may permit or require a Participant to satisfy all or part
of the Participant’s tax withholding obligations and other obligations by (a) paying
cash to the Company, (b) having the Company withhold an amount from any
cash amounts otherwise due or to become due from the

 

10

 

Company
to the Participant, (c) having the Company withhold a number of shares of
Common Stock that would otherwise be issued to the Participant (or become
vested in the case of Restricted Stock) having a Fair Market Value equal to the
tax withholding obligations and other obligations, or (d) surrendering a
number of shares of Common Stock the Participant already owns having a value
equal to the tax withholding obligations and other obligations. The value of
the shares so withheld may not exceed the employer’s minimum required tax
withholding rate, and the value of the shares so surrendered may not exceed
such rate to the extent the Participant has owned the surrendered shares for
less than six months if such limitation is necessary to avoid a charge to the
Company for financial reporting purposes.

 

SECTION 13. ASSIGNABILITY

 

No
Award or interest in an Award may be sold, assigned, pledged (as collateral for
a loan or as security for the performance of an obligation or for any other
purpose) or transferred by a Participant or made subject to attachment or
similar proceedings otherwise than by will or by the applicable laws of descent
and distribution, except to the extent the Participant designates one or more
beneficiaries on a Company-approved form who may exercise the Award or receive
payment under the Award after the Participant’s death. During a Participant’s
lifetime, an Award may be exercised only by the Participant. Notwithstanding
the foregoing and to the extent permitted by Section 422 of the Code, the
Plan Administrator, in its sole discretion, may permit a Participant to assign
or transfer an Award, subject to such terms and conditions as the Plan
Administrator shall specify.

 

SECTION 14. ADJUSTMENTS

 

14.1        Adjustment
of Shares

 

In
the event, at any time or from time to time, a stock dividend, stock split,
spin-off, combination or exchange of shares, recapitalization, merger,
consolidation, a statutory share exchange, distribution to stockholders other
than a normal cash dividend, or other change in the Company’s corporate or
capital structure results in (a) the outstanding shares of Common Stock,
or any securities exchanged therefor or received in their place, being
exchanged for a different number or kind of securities of the Company or any
other company or (b) new, different or additional securities of the
Company or any other company being received by the holders of shares of Common
Stock, then the Plan Administrator shall make proportional adjustments in (i) the
maximum number and kind of securities available for issuance under the Plan; (ii) the
maximum number and kind of securities issuable as Incentive Stock Options as
set forth in Section 4.2(d); and (iii) the number and kind of
securities that are subject to any outstanding Award and the per share price of
such securities, without any change in the aggregate price to be paid therefor.

 

The
determination by the Plan Administrator as to the terms of any of the foregoing
adjustments shall be conclusive and binding.

 

11

 

Notwithstanding
the foregoing, the issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services rendered, either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, outstanding Awards. Also notwithstanding the foregoing, a
dissolution or liquidation of the Company or a Company Transaction shall not be
governed by this Section 14.1 but shall be governed by Sections 14.2 and
14.3, respectively.

 

14.2        Dissolution
or Liquidation

 

To
the extent not previously exercised or settled, and unless otherwise determined
by the Plan Administrator in its sole discretion, Options, Stock Appreciation
Rights and Stock Units shall terminate immediately prior to the dissolution or
liquidation of the Company. To the extent a vesting condition, forfeiture
provision or repurchase right applicable to an Award has not been waived by the
Plan Administrator, the Award shall be forfeited immediately prior to the
consummation of the dissolution or liquidation.

 

14.3        Company
Transaction

 

14.3.1 Effect of a Company Transaction             

 

Notwithstanding
any other provision of the Plan to the contrary, unless the Plan Administrator
shall determine otherwise at the time of grant with respect to a particular
Award, in the event of a Company Transaction that is not a Related Party
Transaction, all outstanding Awards shall become fully and immediately
exercisable, and all applicable deferral and restriction limitations and
forfeiture provisions shall lapse, immediately prior to the Company
Transaction, and then terminate upon effectiveness of the Company Transaction,
unless such Awards are assumed, converted or substituted for by the Successor
Company. Notwithstanding the foregoing, with respect to Options or Stock
Appreciation Rights, the Plan Administrator, in its sole discretion, may
instead provide that a Participant’s outstanding Options or SARs shall
terminate upon consummation of such Company Transaction and that each such
Participant shall receive, in exchange therefor, a cash payment equal to the
amount (if any) by which (a) the Acquisition Price multiplied by the
number of shares of Common Stock subject to such outstanding Options or SARs
(whether or not then exercisable) exceeds (b) the respective aggregate
exercise price for such Options or grant price for such SARs.

 

14.3.2 Assumption, Conversion or Substitution

 

For
the purposes of this Section 14.3, an Award shall be considered assumed,
converted or substituted for if following the Company Transaction, the option
or right confers the right to purchase or receive, for each share of Common
Stock subject to the Award immediately prior to the Company Transaction, the
consideration (whether stock, cash, or other securities or property) received
in the Company Transaction by holders of Common Stock for each share held at
the

 

12

 

effective
time of the Company Transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares); provided, however, that if such consideration received
in the Company Transaction is not solely common stock of the Successor Company,
the Plan Administrator may, with the consent of the Successor Company, provide
for the consideration to be received upon the exercise or settlement of the
Award, for each share of Common Stock subject to the Award, to be solely common
stock of the Successor Company substantially equal in fair market value to the
per share consideration received by holders of Common Stock in the Company
Transaction. The determination of such substantial equality of value of
consideration shall be made by the Plan Administrator, and its determination
shall be conclusive and binding.

 

14.3.3.    Acceleration
Following a Company Transaction

 

If
an Award is assumed, converted or exchanged in a Company Transaction and does
not otherwise accelerate at that time, in the event that a Participant’
employment or service relationship with the Successor Company should terminate (i) in
connection with the Company Transaction or (ii) subsequently within one
year following such Company Transaction, and such employment or service
relationship is not terminated by the Successor Company for Cause or by the
Participant voluntarily without Good Reason, then, any portion of the
Participant’s Awards that remain unvested or subject to forfeiture or other
restrictions shall immediately vest and become exercisable, and any forfeiture
provisions or other restrictions shall lapse effective upon such termination of
employment or Service Relationship.

 

14.4        Further
Adjustment of Awards

 

Subject
to Sections 14.2 and 14.3, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, a statutory share
exchange, reorganization, liquidation, dissolution or change in control of the
Company, as defined by the Plan Administrator, to take such further action as
it determines to be necessary or advisable with respect to Awards. Such
authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Awards so as to provide for earlier, later, extended or additional time for
exercise, lifting restrictions and other modifications, and the Plan
Administrator may take such actions with respect to all Participants, to certain
categories of Participants or only to individual Participants. The Plan
Administrator may take such action before or after granting Awards to which the
action relates and before or after any public announcement with respect to such
sale, merger, consolidation, reorganization, liquidation, dissolution or change
in control that is the reason for such action.

 

13

 

14.5        No Limitations

 

The
grant of Awards shall in no way affect the Company’s right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

 

14.6         Fractional Shares

 

In
the event of any adjustment in the number of shares covered by any Award, each
such Award shall cover only the number of full shares resulting from such
adjustment.

 

SECTION 15. FIRST REFUSAL AND REPURCHASE RIGHTS

 

15.1        First Refusal Rights

 

Until
the date on which the initial registration of the Common Stock under Section 12(b) or
12(g) of the Exchange Act first becomes effective, the Company shall have
the right of first refusal with respect to any proposed sale or other
disposition by a Participant of any shares of Common Stock issued pursuant to
an Award. Such right of first refusal shall be exercisable in accordance with
the terms and conditions established by the Plan Administrator and set forth in
the stock purchase agreement evidencing the purchase of the shares.

 

15.2        Repurchase Rights for Vested Shares

 

Until
the date on which the initial registration of the Common Stock under Section 12(b) or
12(g) of the Exchange Act first becomes effective, upon a Participant’s
Termination of Service, all vested shares of Common Stock issued pursuant to an
Award (whether issued before or after such Termination of Service) shall be
subject to repurchase by the Company, at the Company’s sole discretion, at the
Fair Market Value of such shares on the date of such repurchase.
Notwithstanding the foregoing, in the event that (i) a Participant’s
employment or service relationship with the Company or a Related Company is
terminated without Cause and (ii) Participant’s vested shares constitute
more than one percent (1%) of the Company’s total outstanding shares of capital
stock (calculated on a fully-diluted as-converted basis), said shares shall not
be subject to repurchase by the Company. The terms and conditions upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise) shall be established by the Plan Administrator and set forth in
the stock purchase agreement evidencing the purchase of the shares.

 

15.3         Repurchase Rights for Unvested Shares

 

The
Plan Administrator may, in its sole discretion, authorize the issuance of
unvested shares of Common Stock pursuant to the exercise of a Nonqualified
Stock Option. Should the Participant cease to be employed by or provide
services to the Company or a Related Company, then all shares of Common Stock
issued upon exercise of an Option that are unvested at the time of

 

14

 

cessation
of employment or service relationship shall be subject to repurchase at the
lesser of the exercise price paid for such shares and the Fair Market Value of
the Common Stock at the time of repurchase. The terms and conditions upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise) shall be established by the Plan Administrator and set forth in
the stock purchase agreement evidencing the purchase of the shares.

 

Except
as otherwise provided in the instrument evidencing the Award, in the event of a
Company Transaction, the Company’s repurchase rights shall automatically be
assigned to the Successor Company; provided, however, that such repurchase
rights shall automatically lapse if and to the same extent that the vesting
schedule for outstanding Options accelerates in connection with the Company
Transaction.

 

The
Plan Administrator shall have the discretionary authority, exercisable either
before or after a Participant’s Termination of Service, to waive the Company’s
outstanding repurchase rights with respect to one or more shares purchased or
purchasable by the Participant under an Option and thereby accelerate the
vesting of such shares in whole or in part at any time.

 

15.4        Repurchase
Conditions

 

Notwithstanding
the foregoing, to the extent required by applicable law:

 

(a)           the Company’s repurchase right set
forth in Section 15.2 must be exercised for cash or cancellation of
purchase money indebtedness for the shares within 90 days of Termination of
Service (or in the case of securities issued pursuant to Awards after the date
of Termination of Service, within 90 days after the date of issuance), and
publicly traded; and

 

(b)           the Company’s repurchase right set
forth in Section 15.3 shall lapse at the rate of at least 20% of the
shares per year over five years from the date the Award is granted and the
right to repurchase shall be exercised for cash or cancellation of purchase
money indebtedness for the shares within 90 days of termination of employment
(or in the case of securities issued pursuant to Awards after the date of
termination, within 90 days after the date of issuance);

 

provided,
however, that the securities held by an officer, director or consultant of the
Company or a Related Company shall not be subject to these repurchase
conditions.

 

15.5        General

 

The
Company may not exercise its first refusal or repurchase rights under Section 15.1
or 15.2, respectively, earlier than six months and one day following the date
the shares were purchased by a Participant (or any shorter period determined by
the Company to be sufficient to avoid a charge to the Company’s earnings for
financial reporting purposes or required by applicable law).

 

15

 

The
Company’s first refusal and repurchase rights under this Section 15 are
assignable by the Company at any time.

 

SECTION 16. MARKET STANDOFF

 

In
the event of an underwritten public offering by the Company of its equity
securities pursuant to an effective registration statement filed under the
Securities Act, including the Company’s initial public offering, no person may
sell, make any short sale of, loan, hypothecate, pledge, grant any option for
the purchase of, or otherwise dispose of or transfer for value or otherwise
agree to engage in any of the foregoing transactions with respect to any shares
issued pursuant to an Award granted under the Plan without the prior written
consent of the Company or its underwriters. Such limitations shall be in effect
for such period of time as may be requested by the Company or such
underwriters; provided, however, that in no event shall such period exceed 180
days following the effective date of the registration statement. The
limitations of this Section 16 shall in all events terminate two years
after the effective date of the Company’s initial public offering.

 

In
the event of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the Company’s outstanding
Common Stock effected as a class without the Company’s receipt of
consideration, any new, substituted or additional securities distributed with
respect to the purchased shares shall be immediately subject to the provisions
of this Section 16, to the same extent the purchased shares are at such
time covered by such provisions.

 

In
order to enforce the limitations of this Section 16, the Company may
impose stop-transfer instructions with respect to the purchased shares until
the end of the applicable standoff period.

 

SECTION 17. AMENDMENT AND TERMINATION

 

17.1        Amendment, Suspension or Termination

 

The
Board may amend, suspend or terminate the Plan or any portion of the Plan at
any time and in such respects as it shall deem advisable; provided, however,
that, to the extent required by applicable law, regulation or stock exchange
rule, stockholder approval shall be required for any amendment to the Plan.
Subject to Section 17.3, the Board may amend the terms of any outstanding
Award, prospectively or retroactively.

 

17.2         Term of the Plan

 

The
Plan shall have no fixed expiration date. After the Plan is terminated, no
future Awards may be granted, but Awards previously granted shall remain
outstanding in accordance with their applicable terms and conditions and the
Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive Stock
Options may be granted more than ten years after the later of (a) the
adoption of the Plan by the Board and (b) the adoption by the Board of any
amendment to the Plan that constitutes the adoption of a new plan for purposes
of Section 422 of the Code. Notwithstanding

 

16

 

the
foregoing, no Award may be granted to a resident of California more than ten
years after the earlier of the date of adoption of the Plan and the date the
Plan is approved by the stockholders.

 

17.3        Consent of
Participant

 

The
amendment, suspension or termination of the Plan or a portion thereof or the
amendment of an outstanding Award shall not, without the Participant’s consent,
materially adversely affect any rights under any Award theretofore granted to
the Participant under the Plan. Any change or adjustment to an outstanding
Incentive Stock Option shall not, without the consent of the Participant, be
made in a manner so as to constitute a “modification” that would cause such
Incentive Stock Option to fail to continue to qualify as an Incentive Stock
Option. Notwithstanding the foregoing, any adjustments made pursuant to
Sections 14.2 and 14.3 shall not be subject to these restrictions.

 

SECTION 18. GENERAL

 

18.1          No Individual Rights

 

No
individual or Participant shall have any claim to be granted any Award under
the Plan, and the Company has no obligation for uniformity of treatment of
Participants under the Plan.

 

Furthermore,
nothing in the Plan or any Award granted under the Plan shall be deemed to
constitute an employment contract or confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any other
relationship with, the Company or any Related Company or limit in any way the
right of the Company or any Related Company to terminate a Participant’s employment
or other relationship at any time, with or without cause.

 

18.2        Issuance of
Shares

 

Notwithstanding
any other provision of the Plan, the Company shall have no obligation to issue
or deliver any shares of Common Stock under the Plan or make any other
distribution of benefits under the Plan unless, in the opinion of the Company’s
counsel, such issuance, delivery or distribution would comply with all
applicable laws (including, without limitation, the requirements of the
Securities Act or the laws of any state or foreign jurisdiction) and the
applicable requirements of any securities exchange or similar entity.

 

The
Company shall be under no obligation to any Participant to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under the laws of any state or foreign jurisdiction, any
shares of Common Stock, security or interest in a security paid or issued
under, or created by, the Plan, or to continue in effect any such registrations
or qualifications if made.

 

As
a condition to the exercise of an Option or any other receipt of Common Stock
pursuant to an Award under the Plan, the Company may require (a) the
Participant to represent and warrant at the

 

17

 

time
of any such exercise or receipt that such shares are being purchased or
received only for the Participant’s own account and without any present
intention to sell or distribute such shares and (b) such other action or
agreement by the Participant as may from time to time be necessary to comply
with the federal, state and foreign securities laws. At the option of the
Company, a stop-transfer order against any such shares may be placed on the
official stock books and records of the Company, and a legend indicating that such
shares may not be pledged, sold or otherwise transferred, unless an opinion of
counsel is provided (concurred in by counsel for the Company) stating that such
transfer is not in violation of any applicable law or regulation, may be
stamped on stock certificates to ensure exemption from registration. The Plan
Administrator may also require the Participant to execute and deliver to the
Company a purchase agreement or such other agreement as may be in use by the
Company at such time that describes certain terms and conditions applicable to
the shares.

 

To
the extent the Plan or any instrument evidencing an Award provides for issuance
of stock certificates to reflect the issuance of shares of Common Stock, the
issuance may be effected on a noncertificated basis, to the extent not
prohibited by applicable law or the applicable rules of any stock
exchange.

 

18.3       
Indemnification

 

To
the maximum extent permitted by law, each person who is or shall have been a
member of the Board, or a committee appointed by the Board to whom authority
was delegated in accordance with Section 3.1 shall be indemnified and held
harmless by the Company against and from any loss, cost, liability or expense
that may be imposed upon or reasonably incurred by such person in connection with
or resulting from any claim, action, suit or proceeding to which such person
may be a party or in which such person may be involved by reason of any action
taken or failure to act under the Plan and against and from any and all amounts
paid by such person in settlement thereof, with the Company’s approval, or paid
by such person in satisfaction of any judgment in any such claim, action, suit
or proceeding against such person; provided, however, that such person shall
give the Company an opportunity, at its own expense, to handle and defend the
same before such person undertakes to handle and defend it on such person’s own
behalf, unless such loss, cost, liability or expense is a result of such
person’s own willful misconduct or except as expressly provided by statute.

 

The
foregoing right of indemnification shall not be exclusive of any other rights
of indemnification to which such person may be entitled under the Company’s
articles of incorporation or bylaws, as a matter of law, or otherwise, or of
any power that the Company may have to indemnify such person or hold such
person harmless.

 

18

 

18.4        No Rights as a Stockholder

 

Unless
otherwise provided by the Plan Administrator or in the instrument evidencing
the Award or in a written employment, services or other agreement, no Option,
Stock Appreciation Right or Stock Unit shall entitle the Participant to any
cash dividend, voting or other right of a stockholder unless and until the date
of issuance under the Plan of the shares that are the subject of such Award.

 

18.5         Compliance With Laws and Regulations

 

In
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an “incentive stock option” within the meaning of Section 422
of the Code.

 

18.6        Participants in Other Countries or
Jurisdictions

 

Without
amending the Plan, the Plan Administrator may grant Awards to eligible persons
who are foreign nationals on such terms and conditions different from those
specified in the Plan, which may, in the judgement of the Plan Administrator,
be necessary or desirable to foster and promote achievement of the purposes of
the Plan and shall have the authority to adopt such modifications, procedures,
and subplans and the like as may be necessary or desirable to comply with
provisions of the laws or regulations of other countries or jurisdictions in
which the Company or any Related Company may operate or have employees to
ensure the viability of the benefits from Awards granted to Participants
employed in such countries or jurisdictions, meet the requirements that permit
the Plan to operate in a qualified or tax efficient manner, comply with
applicable foreign laws or regulations and meet the objectives of the Plan.

 

18.7         No Trust or Fund

 

The
Plan is intended to constitute an “unfunded” plan. Nothing contained herein
shall require the Company to segregate any monies or other property, or shares
of Common Stock, or to create any trusts, or to make any special deposits for
any immediate or deferred amounts payable to any Participant, and no Participant
shall have any rights that are greater than those of a general unsecured
creditor of the Company.

 

18.8        Successors

 

All
obligations of the Company under the Plan with respect to Awards shall be
binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all the business and/or
assets of the Company.

 

19

 

18.9         Severability

 

If
any provision of the Plan or any Award is determined to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person, or would disqualify the
Plan or any Award under any law deemed applicable by the Plan Administrator,
such provision shall be construed or deemed amended to conform to applicable
laws, or, if it cannot be so construed or deemed amended without, in the Plan
Administrator’s determination, materially altering the intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction, person or
Award, and the remainder of the Plan and any such Award shall remain in full
force and effect.

 

18.10       Choice of
Law

 

The
Plan, all Awards granted thereunder and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by the laws of the
United States, shall be governed by the laws of the State of California without
giving effect to principles of conflicts of law.

 

18.11      Financial
Reports

 

To
the extent required by applicable law, the Company shall provide annual
financial statements of the Company to each Participant. Such financial
statements need not be audited and need not be issued to employees whose duties
within the Company assure them access to equivalent information.

 

18.12       Legal
Requirements

 

The
granting of Awards and the issuance of shares of Common Stock under the Plan is
subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required.

 

SECTION 19. EFFECTIVE DATE

 

The
effective date (the “Effective Date”)
is the date on which the Plan is adopted by the Board. If the
stockholders of the Company do not approve the Plan within 12 months after the
Board’s adoption of the Plan, (a) any Award exercised or settled before
the stockholders of the Company approve the Plan shall be rescinded and any
such shares shall not be counted in determining whether such stockholder
approval is obtained, and (b) any Incentive Stock Options granted under
the Plan will be treated as Nonqualified Stock Options.

 

20

 

PLAN ADOPTION AND
AMENDMENTS/ADJUSTMENTS

SUMMARY PAGE

 

	
  Date of

  Board Action

  	
   

  	
  Action

  	
   

  	
  Section/Effect of

  Amendment

  	
   

  	
  Date of Stockholder

  Approval

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  May 25, 2004

  	
   

  	
  Initial Plan Adoption

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  June    ,
  2004

  	
   

  	
  Restated Plan Adoption

  	
   

  	
   

  	
   

  	
  June    , 2004

  	
   

  

 

 

APPENDIX A

 

“Acquired Entity”  means any
entity acquired by the Company or a Related Company or with which the Company
or a Related Company merges or combines.

 

“Acquisition Price”  means the fair
market value of the securities, cash or other property, or any combination
thereof, receivable upon consummation of a Company Transaction in respect of a
share of Common Stock.

 

“Award”  means any
Option, Stock Appreciation Right, Stock Award, Restricted Stock, Stock Unit or
cash-based award or other incentive payable in cash or in shares of Common
Stock, as may be designated by the Plan Administrator from time to time.

 

“Board”  means the Board
of Directors of the Company.

 

“Cause,”  unless
otherwise defined in the instrument evidencing the Award or in a written
employment, services or other agreement between the Participant and the Company
or a Related Company, means dishonesty, fraud, serious willful misconduct,
unauthorized use or disclosure of confidential information or trade secrets, or
conviction or confessoin of a felony, in each case as determined by the
Company’s chief human resources officer or other person performing that
function or, in the case of directors and executive officers, the Board, each
of whose determination shall be conclusive and binding.

 

“Code”  means the
Internal Revenue Code of 1986, as amended from time to time.

 

“Common Stock” means the common stock, no
par value, of the Company.

 

“Company”  means Real D, a
California corporation.

 

“Company Transaction,”  unless
otherwise defined in the instrument evidencing the Award or in a written
employment, services or other agreement between the Participant and the Company
or a Related Company, means consummation of

 

(a)           a merger or consolidation of the
Company with or into any other company or other entity,

 

(b)           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, or

 

(c)           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.

 

 

Where
a series of transactions undertaken with a common purpose is deemed to be a
Company Transaction, the date of such Company Transaction shall be the date on
which the last of such transactions is consummated.

 

“Disability,”  unless
otherwise defined by the Plan Administrator or in the instrument evidencing the
Award or in a written employment, services or other agreement between the
Participant and the Company or a Related Company, means a mental or physical
impairment of the Participant that is expected to result in death or that has
lasted or is expected to last for a continuous period of 12 months or more and
that causes the Participant to be unable to perform his or her material duties for
the Company or a Related Company and to be engaged in any substantial gainful
activity, in each case as determined by the Company’s chief human resources
officer or other person  performing that function or, in the case of
directors and executive officers, the Board, each of whose determination shall
be conclusive and binding.

 

“Effective Date”  has the meaning
set forth in Section 18.

 

“Eligible Person”  means any
person eligible to receive an Award as set forth in Section 5. 

 

“Exchange Act”  means the Securities
Exchange Act of 1934, as amended from time to time.

 

“Fair Market Value” means the per share fair
market value of the Common Stock as established in good faith by the Board or,
if the Common Stock is publicly traded, the average of the high and low trading
prices for the Common Stock on any given date during regular trading or, if not
trading on that date, such price on the last preceding date on which the Common
Stock was traded, unless determined otherwise by the Plan Administrator using
such methods or procedures as it may establish.

 

“Good Reason,”  unless
otherwise defined in the instrument evidencing the Award or in a written
employment, services or other agreement between the Participant and the Company
or a Related Company, means the occurrence of any of the following events or
conditions and the failure of the Successor Company to cure such event or
condition within 30 days after receipt of written notice from the Participant:

 

(a)           a change in the Participant’s status,
title, position or responsibilities (including reporting responsibilities)
that, in the Participant’s reasonable judgment, represents a substantial
reduction in the Participant’s status, title, position or responsibilities as
in effect immediately prior thereto; the assignment to the Participant of any
duties or responsibilities that, in the Participant’s reasonable judgment, are
materially inconsistent with the Participant’s status, title, position or
responsibilities; or the Participant’s removal from or any failure to reappoint
or reelect the Participant to any of such positions, except in connection with
the termination of the Participant’s employment for Cause, as a result of the
Participant’s Disability or death, or by the Participant other than for Good
Reason;

 

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(b)           a reduction in the Participant’s
annual base salary;

 

(c)           the Successor Company’s requiring the
Participant (without the Participant’s consent) to be based at any place
outside a 50-mile radius of the Participant’s place of employment prior to the
Company Transaction, except for reasonably required travel on the Successor
Company’s business that is not materially greater than such travel requirements
prior to the Company Transaction;

 

(d)           the Successor Company’s failure to (i) continue
in effect any material compensation or benefit plan (or the substantial
equivalent thereof) in which the Participant were participating at the time of
a Company Transaction, including, but not limited to, the Plan, or (ii) provide
the Participant with compensation and benefits substantially equivalent (in
terms of benefit levels and/or reward opportunities) to those provided for
under each material employee benefit plan, program and practice as in effect
immediately prior to the Company Transaction;

 

(e)           any material breach by the Successor
Company of its obligations to the Participant under the Plan or any
substantially equivalent plan of the Successor Company; or

 

(f)            any purported termination of the
Participant’s employment or service relationship for Cause by the Successor
Company that is not in accordance with the definition of Cause under the Plan.

 

“Grant Date” means the later
of (a) the date on which the Plan Administrator completes the corporate
action authorizing the grant of an Award or such later date specified by the
Plan Administrator or (b) the date on which all conditions precedent to an
Award have been satisfied, provided that conditions to the exercisability or
vesting of Awards shall not defer the Grant Date.

 

“Incentive Stock
Option” means an Option granted with the intention that it
qualify as an “incentive stock option” as that term is defined for purposes of Section 422
of the Code or any successor provision.

 

“Nonqualified Stock
Option” means an Option other than an Incentive Stock
Option. 

 

“Option” means a right
to purchase Common Stock granted under Section 7.

 

“Option Expiration
Date” has the meaning set forth in Section 7.6.

 

“Option Term” means the
maximum term of an Option as set forth in Section 7.3. 

 

“Participant” means any
Eligible Person to whom an Award is granted.

 

“Plan” means the Real
D 2004 Amended and Restated Stock Incentive Plan. 

 

“Plan Administrator” has the meaning
set forth in Section 3.1.

 

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“Related Company”  means any
entity that, directly or indirectly, is in control of, is controlled by or is
under common control with the Company.

 

“Related Party Transaction” means (a) 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; (b) a sale, lease, exchange or other transfer
of all or substantially all of the Company’s assets to a majority-owned
subsidiary company; or (c) 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.

 

“Restricted Stock”  means an Award
of shares of Common Stock granted under Section 10, the rights of
ownership of which may be subject to restrictions prescribed by the Plan
Administrator.

 

“Retirement,”  unless
otherwise defined in the instrument evidencing the Award or in a written
employment, services or other agreement between the Participant and the Company
or a Related Company, means “retirement” as defined for purposes of the Plan by
the Plan Administrator or the Company’s chief human resources officer or other
person performing that function or, if not so defined, means Termination of
Service on or after the date the Participant reaches “normal retirement age,”
as that term is defined in Section 411(a)(8) of the Code.

 

“Securities Act”  means the
Securities Act of 1933, as amended from time to time.

 

“Stock Appreciation Right”
or “SAR”  means a right granted under Section 9.1
to receive the excess of the Fair Market Value of a specified number of shares
of Common Stock over the grant price.

 

“Stock Award”  means an Award
of shares of Common Stock granted under Section 10, the rights of
ownership of which are not subject to restrictions prescribed by the Plan
Administrator.

 

“Stock Unit”  means an Award
denominated in units of Common Stock granted under Section 10.

 

“Substitute Awards”  means Awards
granted or shares of Common Stock issued by the Company in assumption of, or in
substitution or exchange for, awards previously granted by an Acquired Entity.

 

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

 

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“Termination of Service”
means a termination of employment or service relationship with the
Company or a Related Company for any reason, whether voluntary or involuntary,
including by reason of death, Disability or Retirement. Any question as to
whether and when there has been a Termination of Service for the purposes of an
Award and the cause of such Termination of Service shall be determined by the
Company’s chief human resources officer or other person performing that
function or, with respect to directors and executive officers, by the Board,
and its determination shall be conclusive and binding. Transfer of a
Participant’s employment or service relationship between the Company and any
Related Company shall not be considered a Termination of Service for purposes
of an Award. Unless the Board determines otherwise, a Termination of Service
shall be deemed to occur if the Participant’s employment or service
relationship is with an entity that has ceased to be a Related Company.

 

“Vesting Commencement Date”
means the Grant Date or such other date selected by the Plan Administrator
as the date from which the Award begins to vest.

 

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