Document:

Ex. 10.38 Long-Term Compensation Program, as amended December 2011

    
EXHIBIT 10.38 

InterDigital
Long-Term Compensation Program
The Long-Term Compensation Program (the “Program”) of InterDigital (the “Company”) is designed to encourage employees to exercise their best efforts toward ensuring the success of the Company.  All regular full-time and regular part-time employees (as defined in the Company's Employee Handbook) are eligible to participate in one or more components of the Program, based on their level within the organization.  These Program components are offered pursuant to the InterDigital, Inc. 2009 Stock Incentive Plan (the “Plan”).
Program Participation Levels and Payout Targets.  Each participant's level of participation in the Program is established as a target percentage of their annual base salary, based on their level within the organization pursuant to the chart set forth below:
	
		
	Organizational Level
	Target Payout (% of Annual Base Salary)

	Chief Executive Officer
	150%

	Chief Financial Officer; President, Patent Licensing
	100%

	Other Executive
	80-90%*

	Vice President (or functional equivalent)
	50%

	Senior Director (or functional equivalent)
	45%

	Director (or functional equivalent)
	40%

	Senior Manager (or functional equivalent)
	35%

	Manager (or functional equivalent)
	30%

	Non-Manager (or functional equivalent):
	 

	Band 1
	9%

	Band 2
	7%

	Band 3
	5%

 * Other Executives' participation is 80% until they have completed three years in an executive-level position, at which time it increases to 90%.
Compensation Components.  The Program consists of two compensation components:  (1) a Restricted Stock Unit Program  (“RSU Program”) consisting of awards of time-based restricted stock units (“RSUs”) and (2) a Long-Term Incentive Plan (the “LTIP”) providing performance-based awards in the form of cash or equity (or a combination thereof).  For all Program participants at or below the Non-Manager/functional equivalent level, 100% of their Program participation will be in the form of time-based RSUs granted pursuant to the RSU Program.  For all Program participants at or above the Manager/functional equivalent level, 25% of their total Program participation will be in the form of time-based RSUs granted pursuant to the RSU Program and 75% of their total Program participation will be awarded pursuant to the LTIP.  
Program Cycles.  The Program consists of cycles (each a “Cycle”) that are each generally three years in length, normally commencing on January 1st of each year.
(1) RSU Program.  The RSU Program provides all Program participants with an opportunity to share in the growth of the Company's value in the marketplace and rewards participants based on the performance of the Company's stock over time through awards of time-based RSUs.  A time-based RSU is a contractual right to receive a share of InterDigital common stock, par value $0.01 per share, after completion of a specified time period.  Pursuant to the RSU Program, each Program participant will receive an award of time-based RSUs on the first day of each Cycle, and each such award shall generally have a three-year vesting period, with the vesting schedule to be determined by the Compensation Committee (the “Compensation Committee”) of the Board of Directors of the Company in its sole discretion.  The default vesting schedule will provide for the time-based RSUs to vest at the end of the three-year Cycle.  Each time-based RSU recipient will receive an award agreement setting forth the terms and conditions of each RSU grant.  In the event of any conflict between these Program terms and conditions and an RSU award agreement, the RSU award agreement will govern.

(2) Long-Term Incentive Plan. The Long-Term Incentive Plan (the “LTIP”) provides Program participants at or above the Manager/functional equivalent level with performance-based awards that may be paid out, as determined by the Compensation Committee, in its sole discretion, in the form of cash or InterDigital common stock or stock options or any combination thereof.  However, the “default” allocation will be 25% cash and 75% stock.  The allocation of the awards may be determined either at the start or the end of each Cycle.  Any payout under the LTIP is determined by the Compensation Committee in its sole discretion based on the Company's achievement of one or more performance goals during the Cycle period, as established and approved by the Compensation Committee.   Payouts under the LTIP may exceed or be less than target, depending on the level of achievement of the performance goal(s).  Unless the Compensation Committee, in its sole discretion, authorizes an exception, no payout may be made if the Company fails to achieve at least 80% of the performance goal(s) for the applicable Cycle, and the Company's achievement of the performance goal(s) for any particular Cycle that exceeds the target is capped at 140%.  Each 1-point variation in performance achievement results in a 2.5-point variation in payout.  Accordingly, the minimum performance achievement that qualifies for a payout results in a payout amount equal to 50% of target and the maximum payout performance achievement results in a payout amount of no more than 200% of target.  
Payouts under the LTIP will be made no later than March 15th of the year following the end of each Cycle.  
Program Participation
New Program Participants.  A newly hired employee is eligible for pro-rata participation in the LTCP Cycle that began on January 1st of the hire year and full participation beginning with the next applicable Cycle, so long as they remain eligible.  Participation in the pro-rata Cycle will be determined based on the amount of time (number of pay periods) remaining in the Cycle upon hire.  
Promotion during Program Cycle.  If an employee is promoted within the first six months of the start of a LTCP Cycle and such promotion results in (i) an accompanying increase in his or her LTCP participation target or (ii) his or her participation in the LTIP for the first time, the benefit of the Program target increase or initial participation in the LTIP will be realized effective as of the date of the promotion for the Cycle that began on January 1st of the promotion year.  If an employee is promoted at any other time during a Cycle, any change to their participation in the LTCP will be realized at the beginning of the next applicable Cycle, unless the Compensation Committee, in its sole discretion, authorizes an exception.
Effect of Termination of Employment.  A Program participant must remain continuously employed by the Company or an Affiliate (as defined below) through the end of the Cycle in order to receive  RSU vesting and must continue to be employed at least until the time the LTIP payout is made in order to receive the LTIP payout..  For purposes of this Program, an Affiliate means any other individual, corporation, partnership, association, trust or other entity that, directly or indirectly, is in control of or is controlled by or is under common control with the Company.   Any benefits from the Program are forfeited upon termination of employment by the participant (i.e., the participant voluntarily resigns from employment).  Benefits may be vested to some degree, as explained below, where the participant's employment terminates due to his or her death, “disability,” “retirement,” or as a result of the termination of employment by the Company other than for “cause” (each as defined below).  
Partial Vesting of RSU Award granted under the RSU Program.  If a participant's employment terminates due to death, disability or retirement, or the participant's employment with InterDigital is terminated by the Company without cause, vesting of any time-based RSUs will occur immediately and on a pro-rata basis based on the portion of the Cycle during which the participant was employed.  The settlement of any time-based RSUs that become vested as described above will occur as soon as administratively practical after termination of employment.
Partial Vesting of LTIP Award.  If a participant's employment terminates for any reason during the first year of a Cycle and/or a participant's total length of employment is less than six (6) months, the participant forfeits eligibility to receive any LTIP payout associated with that Cycle.  If, however, during the second or third year of a Cycle, a participant's employment with the Company terminates due to his or her death, disability or retirement, or the participant is terminated by the Company without cause, and the participant has been employed by the Company for at least six (6) months, the participant will be eligible to earn a pro-rata portion of the LTIP payout.  Any pro-rata cash payout or shares vesting resulting from the LTIP cycle will be delivered to the employee (or, if applicable, the employee's estate) as soon as administratively practicable after any payout would have taken place if the participant had remained employed, as described above, but in any event no later than March 15 after the year of termination.   
NOTE: To the extent any LTIP or RSU payout is determined to be a form of nonqualified deferred compensation subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), payment may be delayed to a date that is at least six months following the participant's termination of employment to the extent it is determined to be necessary to avoid the detrimental tax treatment applicable to deferred compensation benefits that are not fully compliant with the distribution rules of 

Code Section 409A.  This will only be applicable to participants who are determined to be “specified employees” as that term is defined for purposes of Code Section 409A.  
 For purposes of the Program: 
*    “cause” means: (a) willful and repeated failure of an employee to perform substantially his or her duties (other than any such failure resulting from incapacity due to physical or mental illness); (b) an employee's conviction of, or plea of guilty or nolo contendere to, a felony which is materially and demonstrably injurious to the Company or an Affiliate; (c) willful misconduct or gross negligence by an employee in connection with his or her employment; (d) unsatisfactory job performance; or (e) an employee's breach of any material obligation or duty owed to the Company or an Affiliate.
*    “disability” means: (a) a disability entitling the employee to long-term disability benefits under the applicable long-term disability plan of the Company (or an Affiliate if employee is employed by such Affiliate); or (b) if the employee is not covered by such a plan, a physical or mental condition or illness that renders the employee incapable of performing his or her duties for a total of 180 days or more during any consecutive 12-month period.
*    “retirement” means resignation after attaining a combination of age plus years of service at the Company (and Affiliates) equal to 70. 
Effect of a Terminating Event.  If a Terminating Event (meaning either a Change of Control, as defined below, or a liquidation of the Company) occurs during a Cycle and while a participant is actively employed by the Company or an Affiliate, then:
*    immediately prior to (but contingent on the occurrence of) that Terminating Event, all time-based RSUs will become fully vested and a distribution of InterDigital shares with respect to those RSUs will be made; 
*    at the same time, any performance-based RSUs, if awarded as part of any LTIP, will become fully vested to an extent that is equal to the greater of (i) the portion of the employee's performance-based RSUs that would become vested at the target level, or (ii) the level of performance achieved at the time of the Terminating Event if participant has been employed by the Company or an Affiliate for at least six (6) months at the time of the Terminating Event; and
*    an early payment of the employee's LTIP will be made in an amount equal to the greater of (i) the employee's target LTIP, or (ii) the level of performance achieved at the time of the Terminating Event if participant has been employed by the Company or an Affiliate for at least six (6) months at the time of the Terminating Event.  Payment of this amount will be made not later than 30 days after the Terminating Event.
Any participant employed by the Company or an Affiliate for less than six (6) months upon a Terminating Event, forfeits any and all benefits from the LTIP.  
For purposes of the Program:
		
	•
	“Change of Control” means the first to occur of any of the following events:

(a)    Any “person,” as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), acquires voting securities of the Company and immediately thereafter is a “50% Beneficial Owner.”  For purposes of this provision, a “50% Beneficial Owner” shall mean a person who is the “beneficial owner” (as defined in Rule 13d‐3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company's then-outstanding voting securities;
(b)    During any period of two consecutive years commencing on or after the Effective Date, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person (as defined above) who has entered into an agreement with the Company to effect a transaction described in subsections (a), (c), (d) or (e) of this definition) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (the “Continuing Directors”) cease for any reason to constitute at least a majority thereof;

(c)    The shareholders of the Company have approved a merger, consolidation, recapitalization, or reorganization of the Company, or a reverse stock split of any class of voting securities of the Company, or the consummation of any such transaction if shareholder approval is not obtained, other than any such transaction which would result in at least 50% of the combined voting power of the voting securities of the Company or the surviving entity outstanding immediately after such transaction being beneficially owned by the persons who were shareholders of the Company immediately prior to the transaction in substantially the same proportion as their ownership of the voting power immediately prior to the transaction; provided that, for purposes of this Section 3.7(c), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 50% threshold (or to substantially preserve such relative ownership of the voting securities) is due solely to the acquisition of voting securities by an employee benefit plan of the Company, such surviving entity or a subsidiary thereof; and provided further, that, if consummation of the corporate transaction referred to in this Section 3.7(c) is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency or approval of the shareholders of another entity or other material contingency, no Change in Control shall occur until such time as such consent and approval has been obtained and any other material contingency has been satisfied;
(d)    The shareholders of the Company accept shares in a share exchange in which the shareholders of the Company immediately before such share exchange do not or will not own directly or indirectly immediately following such share exchange more than 50% of the combined voting power of the outstanding voting securities of the corporation resulting from or surviving such share exchange in substantially the same proportion as the ownership of the Voting Securities outstanding immediately before such share exchange;
(e)    The shareholders of the Company have approved a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect); provided that, if consummation of the transaction referred to in this Section 3.7(e) is subject, at the time of such approval by shareholders, to the consent of any government or governmental agency or approval of the shareholders of another entity or other material contingency, no Change in Control shall occur until such time as such consent and approval has been obtained and any other material contingency has been satisfied; and
(f)    Any other event which the Board determines shall constitute a Change in Control for purposes of this Plan.
Other Program Information
Taxation of Awards.  The following is a brief description of the federal income and employment tax treatment of Program awards.  The rules governing these awards are complex and their application may vary depending upon individual circumstances.  Moreover, statutory and regulatory provisions and their interpretations are subject to change.  Employees are, therefore, encouraged to consult with a personal tax advisor regarding the tax consequences of participation in the Program.
For federal income and employment tax purposes, the full amount of any cash-based LTIP payout will be taxable at the time the cash is paid, and will be subject to applicable income and wage tax withholding requirements.  
For federal income tax purposes, the value of shares distributed in respect of RSUs or any share-based LTIP payout will be recognized as ordinary income at the time the shares are distributed based on the value of those shares at that time.  If LTIP payment or settlement of RSUs is delayed (e.g., in the case of later payments for certain mid-Cycle employment terminations), the value of the shares subject to RSUs may be taxed at the time the RSUs vest, based on the value of those shares at that time.  Further information regarding the taxation of RSUs is contained in the Plan prospectus.  
Future Program Cycles.  While the Company reserves the right to alter or discontinue the Program at any time, its present intent is to continue the Program for future Cycles.  If an employee is eligible to participate in a future Cycle, additional information will be distributed at the start of that Cycle.
Administration.  The Program is administered by the Compensation Committee.  The Compensation Committee has the right to terminate or amend the Program and its components at any time for any reason.  The Compensation Committee also has the authority to select employees to receive awards, to create, amend and rescind rules regarding the operation of the Program, to set/approve specific cycle goals, to determine whether LTIP goals have been achieved, to reconcile inconsistencies, to supply omissions and to otherwise make all determinations necessary or desirable for the operation of the Program.  The Compensation Committee delegates the authority to amend the Program to the Chief Executive Officer, Chief Financial 

Officer, Chief Administrative Officer, General Counsel or one or more of these employees as part of  a committee of employees and/or directors of the Company, provided, however, that any amendment of the Program that is a “material amendment” (as determined pursuant to NASDAQ Stock Market Rule 5635(c) and the interpretive material thereunder) must be approved by the Compensation Committee or by a majority of the Company's independent directors, as defined for purposes of such rule.
Election to Defer Settlement of RSUs.  Participants who are eligible to defer settlement of their RSUs must make such election in the calendar year preceding the date of vest of the RSUs to be deferred.  All determinations regarding eligibility to defer settlement of RSUs shall be made by the Company, in its sole discretion.  Where deferral of settlement of RSUs is linked to payment following termination of employment of the participant, settlement of the RSUs may be delayed until at least six months following the participant's termination of employment if that is necessary to avoid tax penalties under Code Section 409A.  This will only be applicable to participants who are determined to be “specified employees” as defined for purposes of Code Section 409A.  
No Assignment.  An employee may not assign, pledge or otherwise transfer any right relating to any award under the Program and any attempt to do so will be void.
No Right to Continued Employment.  Participation in the Program does not give any employee any right to continue in employment or limit in any way the right of the Company to terminate employment at any time, for any reason.
Questions.  Please contact Gary Isaacs, Chief Administrative Officer, at 610-878-5721 with any questions regarding the Program.

December 30, 2011ex10-1.htm

Exhibit 10.1

 

AGENCY AGREEMENT

 

This AGENCY AGREEMENT (this “Agreement”), effective as of February 22, 2012 (the “Effective Date”), is entered by and between Adrienne Graves, an individual (“Consultant”), and TearLab Corporation, having offices at 7360 Carroll Rd, Ste 200, San Diego, CA 92121 (hereinafter referred to as “TearLab” or the “Company”). Consultant and TearLab may each be referred to herein as a “Party” and, together, as the “Parties.

 

Now, therefore, in consideration of the promises and mutual covenants herein, TearLab and Consultant agree as follows:

 

1             Definitions

 

The following terms as used in this Agreement shall have the meanings set forth in this Article 1:

 

1.1           “Affiliate” means, with respect to a Person, any Person that, directly or indirectly (through one or more intermediaries), controls, is controlled by, or is under common control with the first Person.  For purposes of this Section 1.1, “control” means (a) the direct or indirect ownership of fifty percent (50%) or more of the voting stock or other voting interests or interest in the profits of the Person, or (b) the ability to otherwise control or direct the decisions of the board of directors or equivalent governing body thereof.

 

1.2           “Consideration” means the value of all cash, securities, or other consideration paid to TearLab by a Japanese Licensee in connection with a Facilitated Agreement, either before, on or within the twenty-four (24)-month period after, the effective date of such Facilitated Agreement, including without limitation all up-front fees, option payments, milestone payments, and success fees; provided that, if a Facilitated Agreement provides for consideration for the grant of rights with respect to Japan and other territories or countries in addition to Japan, only consideration for the grant of rights with respect to Japan shall be Consideration, unless otherwise agreed to in writing by the Company.

 

1.3           “Facilitated Agreement” means any agreement between TearLab and a Japanese Licensee that provides for consideration for grant of rights with respect to Japan to a Japanese Licensee (a) with respect to which (1) Consultant initiated contact and, to the extent requested and/or agreed to by TearLab, arranged or actively participated in negotiations and meetings between TearLab and such Japanese Licensee that contributed to the execution of such Facilitated Agreement related to the TearLab Technology or (2) Consultant initiated contact with a Japanese Licensee that was not a party to the Facilitated Agreement but entered into a confidentiality agreement with TearLab covering discussions with respect to a potentially competitive arrangement related to the TearLab Technology; and (b) which was executed during the Term of the Agreement or within twelve (12) months after the Term. For the avoidance of doubt, Facilitated Agreement does not comprise agreements that TearLab executes with Japanese Licensees that are pure supply agreements, consultancy agreements or similar agreements that do not include the sale or out-license of the TearLab Technology.

 

  

 

  

 

1.4           “Japanese Licensee” means any company operating in the ophthalmology or diagnostic sectors in Japan, including without limitation those listed on Exhibit A, as amended from time to time upon mutual written agreement of the Parties.  Consultant shall obtain the approval of TearLab’s Chief Executive Officer prior to initiating contact with any Japanese Licensee or potential Japanese Licensee headquartered in the United States.

 

1.5           “TearLab Technology” means any product or technology owned or controlled by TearLab, including but not limited to the TearLab® Osmolarity System, TearLab’s proprietary lab-on-a-chip technologies for testing disease markers in tears at the point-of-care; provided that TearLab Technology shall not, for purposes of this Agreement, include rights in such technology or products that TearLab has licensed or assigned to a Third Party prior to the Effective Date.

 

1.6           “Person” means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization or government or political subdivision thereof.

 

1.7           “Third Party” means any Person other than TearLab, Consultant or their respective Affiliates.

 

2             Appointment

 

TearLab hereby, subject to the terms of this Agreement, including Section 3,  appoints Consultant, and Consultant hereby accepts an appointment to act, as TearLab’s agent during the Term (as defined below) concerning Facilitated Agreements, upon the terms and conditions set forth hereinafter.  Consultant shall use, itself or through its Affiliates, commercially reasonable efforts to solicit partnering arrangements with Japanese Licensees for the TearLab Technology on TearLab’s behalf.  For clarity, Consultant shall have the right to fulfill some or all of its obligations under this Agreement through its Affiliates.

 

3             Privity

 

Consultant shall not be authorized to conclude any contract on TearLab’s behalf, and shall not make any representation, warranty, promise or any other act binding TearLab.  TearLab shall at its sole discretion determine whether or not to enter into any Arrangement and nothing in this Agreement shall obligate TearLab to enter into any Facilitated Agreement.

 

4             Scope of Services

 

4.1           General.  During the Term, Consultant shall use commercially reasonable efforts to:

 

	
  

	
a)

	
Familiarize itself with the business of TearLab; provided that TearLab shall provide Consultant with all reasonably relevant information regarding its business and the TearLab Technology;

 

	
  

	
b)

	
If requested by TearLab, assist TearLab in preparing materials describing TearLab, its business and the TearLab Technology (based on information supplied by TearLab) for distribution to Japanese Licensees for purposes of soliciting partnering arrangements for the TearLab Technology;

 

  

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c)

	
Introduce TearLab to appropriate individuals at Japanese Licensees;

 

	
  

	
d)

	
Arrange and participate, subject to further agreement with TearLab, in negotiations between TearLab and such Japanese Licensees;

 

	
  

	
e)

	
Assist TearLab in identifying and contacting competing Japanese Licensees to ascertain their interest in the TearLab Technology; and

 

	
  

	
f)

	
Assist TearLab, in conjunction with TearLab’s legal and other advisors, in obtaining necessary permissions from Japanese regulatory authorities relating to any Facilitated Agreement.

 

4.2           Reports.  Consultant shall provide TearLab with monthly reports summarizing its activities under this Agreement.

 

5             Expenses

 

In addition to any Success Fee owed to Consultant pursuant to Article 7 below, TearLab shall reimburse Consultant for all reasonable Third Party expenses in line with TearLab’s expense policy incurred by Consultant or its Affiliates in the performance of services under this Agreement; provided that no such Third Party services shall be initiated and no consultants shall be engaged by Consultant or its Affiliates for purposes of providing services under this Agreement without the prior written approval of TearLab, which approval shall not be unreasonably withheld; and provided further, that all international travel expenses shall require the prior written approval of TearLab’s Chief Executive Officer.

 

6             Non-Exclusivity

 

Consultant’s right to solicit partnering arrangements for the TearLab Technology under this Agreement shall be non-exclusive.  Notwithstanding the foregoing, TearLab shall keep Consultant informed regarding TearLab’s actual or potential engagements with Third Parties for purposes of approaching and contracting with Japanese Licensees to develop, distribute or commercialize the TearLab Technology. TearLab shall keep Consultant informed regarding such TearLab actual and potential direct interactions with Japanese Licensees regarding the development or commercialization of the TearLab Technology.

 

7             Compensation/Payment

 

7.1           Success Fee.  As consideration for the services to be rendered by Consultant hereunder, TearLab shall pay to Consultant three percent (3%) of all Consideration actually received by TearLab (the “Success Fee”). To be clear this fee will be net of proceeds that must be paid to University of California San Diego. TearLab shall pay the consideration due to Consultant under this Section 7.1 to Consultant within thirty (30) days of TearLab’s receipt of the Consideration.  The Success Fee associated with each Facilitated Agreement shall not exceed one million dollars (U.S.$1,000,000) or be less than one hundred thousand dollars (U.S.$100,000).  For clarity, TearLab shall pay Consultant a Success Fee of at least one hundred thousand dollars (U.S.$100,000) in connection with each Facilitated Agreement.

 

  

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7.2           Payment.  All cash payments due hereunder shall be paid in United States dollars.  If any currency conversion shall be required in connection with the payment of any payments hereunder, such conversion shall be made by using the exchange rate used by TearLab for its financial reporting purposes.  Should the Parties agree that payments to Consultant should be paid in a form or forms other than cash, such compensation shall be duly issued and/or recorded in the name of Consultant in the same form or forms as such property, share or interest is issued to TearLab, whether it be stock, bonds, warrants, options, fees, or otherwise.  Any and all withholding or similar taxes imposed or levied on account of the payment of amounts under this Agreement, which are required to be withheld, shall be deducted by the payer prior to remittance and shall be paid to the proper taxing authority.  Proof of payment shall be secured, if available, and sent to payee by payer as evidence of such payment in such form as required by the tax authorities having jurisdiction over payer.  Each Party agrees to cooperate with the other Party in claiming exemptions from such deductions or withholdings under any agreement or treaty from time to time in effect.

 

8             Confidentiality

 

8.1           Confidential Information.  Except as provided herein, each Party shall maintain in confidence, and shall not use for any purpose or disclose to any Third Party, information disclosed by the other Party, whether before or after the Effective Date, and related to the subject matter hereof including the TearLab Technology, Facilitated Agreements or its activities hereunder (collectively, “Confidential Information”).  Notwithstanding the foregoing, Confidential Information shall not include any information that the receiving Party can reasonably show is:  (i) already known to the receiving Party at the time of disclosure hereunder, or (ii) is now or hereafter becomes publicly known other than through acts or omissions of the receiving Party, or (iii) is disclosed to the receiving Party by a Third Party under no obligation of confidentiality to the disclosing Party, or (iv) independently developed by the receiving Party without use of or reliance on the Confidential Information of the disclosing Party.

 

8.2           Permitted Usage.  Notwithstanding the provisions of Section 8.1, each Party may use or disclose Confidential Information of the other Party to the extent reasonably necessary to exercise its rights or fulfill its obligations and/or duties hereunder and in prosecuting or defending litigation, complying with applicable governmental regulations and/or submitting information to tax or other governmental authorities.

 

8.3           Terms of Agreement.  Except as otherwise permitted in accordance with this Section 8.3, no Party shall make any public announcements concerning this Agreement or the terms hereof, without the prior written consent of the other Party.  Notwithstanding the foregoing, each Party shall have the right to disclose this Agreement or the terms hereof (i) to advisors and actual or potential investors or acquirers on a need-to-know basis under conditions which reasonably ensure the confidentiality thereof; (ii) to the extent required by any court or other governmental body or in connection with any government or regulatory filings (including filings with the U.S. Securities and Exchange Commission and other similar agencies), in which case the Party disclosing the Agreement or terms hereof shall promptly inform the other Party; and (iii) as otherwise required by law. For clarity, neither Consultant nor its Affiliates shall have any right to disclose any terms or conditions of any Facilitated Agreement.

 

  

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9             Term/Termination

 

9.1           Term.  This Agreement shall remain in full force and effect for twelve (12) months from the Effective Date, unless otherwise terminated in accordance with this Article 9 (“Term”).

 

9.2           Termination for Breach.  This Agreement may be terminated by either Party at any time upon the occurrence of a material breach by the other Party of any of the terms and conditions hereof which breach remains uncured for a period of thirty (30) days after the date of receipt of written notice from the non-breaching Party advising of the nature of such breach.

 

9.3           Termination upon Notice.  After the expiration of the first six (6) months of the Term, either Party may terminate this Agreement upon sixty (60) days prior written notice to the other Party.

 

9.4           Survival.  Articles 1, 5, 7, 8, 10 and 11 and this Section 9.4 shall survive the expiration or termination of this Agreement for any reason.

 

10           Indemnification.

 

10.1         TearLab shall indemnify, defend and hold harmless Consultant, its directors, officers, employees, agents, successors or assigns from and against any and all claims, losses, liabilities, damages, costs and expenses (including without limitation, reasonable attorneys’ fees) (collectively, “Losses”) to which any of them may become subject as a result of or in connection with this Agreement, provided that no such indemnification would be required with respect to Losses caused by Consultant’s negligence, reckless or intentionally wrongful acts, willful misconduct or willful material breach of this Agreement.

 

10.2         Consultant agrees to indemnify and hold harmless TearLab and its affiliates and their directors, officers and employees from and against all Losses arising directly or indirectly from or in connection with (i) any negligent, reckless or intentionally wrongful act of Consultant or Consultant’s assistants, employees, contractors or agents, (ii) a determination by a court or agency that the Consultant is not an independent contractor, (iii) any breach by the Consultant or Consultant’s assistants, employees, contractors or agents of any of the covenants contained in this Agreement, or (iv) any failure of Consultant to perform its services or obligations under this Agreement in accordance with all applicable laws, rules and regulations.

 

11           Miscellaneous

 

11.1         Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the California, without reference to principles of conflicts of laws.

 

11.2         Arbitration and Equitable Relief.

 

  

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(a)           Arbitration. IN CONSIDERATION OF CONSULTANT’S CONSULTING RELATIONSHIP WITH COMPANY, ITS PROMISE TO ARBITRATE ALL DISPUTES RELATED TO CONSULTANT’S CONSULTING RELATIONSHIP WITH THE COMPANY AND CONSULTANT’S RECEIPT OF THE COMPENSATION AND OTHER BENEFITS PAID TO CONSULTANT BY COMPANY, AT PRESENT AND IN THE FUTURE, CONSULTANT AGREES THAT ANY AND ALL CONTROVERSIES, CLAIMS, OR DISPUTES WITH ANYONE (INCLUDING COMPANY AND ANY EMPLOYEE, OFFICER, DIRECTOR, STOCKHOLDER OR BENEFIT PLAN OF THE COMPANY IN THEIR CAPACITY AS SUCH OR OTHERWISE), WHETHER BROUGHT ON AN INDIVIDUAL, GROUP, OR CLASS BASIS, ARISING OUT OF, RELATING TO, OR RESULTING FROM CONSULTANT’S CONSULTING RELATIONSHIP WITH THE COMPANY OR THE TERMINATION OF CONSULTANT’S CONSULTING RELATIONSHIP WITH THE COMPANY, INCLUDING ANY BREACH OF THIS AGREEMENT, SHALL BE SUBJECT TO BINDING ARBITRATION UNDER THE ARBITRATION PROVISIONS SET FORTH IN CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 1280 THROUGH 1294.2, INCLUDING SECTION 1281.8 (THE “ACT”) AND PURSUANT TO CALIFORNIA LAW, AND SHALL BE BROUGHT IN CONSULTANT’S INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING. THE FEDERAL ARBITRATION ACT SHALL CONTINUE TO APPLY WITH FULL FORCE AND EFFECT NOTWITHSTANDING THE APPLICATION OF PROCEDURAL RULES SET FORTH IN THE ACT. DISPUTES WHICH CONSULTANT AGREES TO ARBITRATE, AND THEREBY AGREES TO WAIVE ANY RIGHT TO A TRIAL BY JURY, INCLUDE ANY STATUTORY CLAIMS UNDER LOCAL, STATE, OR FEDERAL LAW, INCLUDING, BUT NOT LIMITED TO, CLAIMS UNDER TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE OLDER WORKERS BENEFIT PROTECTION ACT, THE SARBANES-OXLEY ACT, THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, THE FAMILY AND MEDICAL LEAVE ACT, THE CALIFORNIA FAMILY RIGHTS ACT, THE CALIFORNIA LABOR CODE, CLAIMS OF HARASSMENT, DISCRIMINATION AND WRONGFUL TERMINATION AND ANY STATUTORY OR COMMON LAW CLAIMS. CONSULTANT FURTHER UNDERSTANDS THAT THIS AGREEMENT TO ARBITRATE ALSO APPLIES TO ANY DISPUTES THAT THE COMPANY MAY HAVE WITH CONSULTANT.

 

(b)           Procedure. CONSULTANT AGREES THAT ANY ARBITRATION WILL BE ADMINISTERED BY JUDICIAL ARBITRATION & MEDIATION SERVICES, INC. (“JAMS”) PURSUANT TO ITS EMPLOYMENT ARBITRATION RULES & PROCEDURES (THE “JAMS RULES”). CONSULTANT AGREES THAT THE ARBITRATOR SHALL HAVE THE POWER TO DECIDE ANY MOTIONS BROUGHT BY ANY PARTY TO THE ARBITRATION, INCLUDING MOTIONS FOR SUMMARY JUDGMENT AND/OR ADJUDICATION AND MOTIONS TO DISMISS AND DEMURRERS APPLYING THE STANDARDS SET FORTH UNDER THE CALIFORNIA CODE OF CIVIL PROCEDURE. CONSULTANT AGREES THAT THE ARBITRATOR SHALL ISSUE A WRITTEN DECISION ON THE MERITS. CONSULTANT ALSO AGREES THAT THE ARBITRATOR SHALL HAVE THE POWER TO AWARD ANY REMEDIES AVAILABLE UNDER APPLICABLE LAW, AND THAT THE ARBITRATOR SHALL AWARD ATTORNEYS’ FEES AND COSTS TO THE PREVAILING PARTY WHERE PROVIDED BY APPLICABLE LAW. CONSULTANT AGREES THAT THE DECREE OR AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED AS A FINAL AND BINDING JUDGMENT IN ANY COURT HAVING JURISDICTION THEREOF. CONSULTANT AGREES THAT THE ARBITRATOR SHALL ADMINISTER AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW, INCLUDING THE CALIFORNIA CODE OF CIVIL PROCEDURE AND THE CALIFORNIA EVIDENCE CODE, AND THAT THE ARBITRATOR SHALL APPLY SUBSTANTIVE AND PROCEDURAL CALIFORNIA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO RULES OF CONFLICT OF LAW. TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH CALIFORNIA LAW, CALIFORNIA LAW SHALL TAKE PRECEDENCE. CONSULTANT FURTHER AGREES THAT ANY ARBITRATION UNDER THIS AGREEMENT SHALL BE CONDUCTED IN SAN DIEGO, CALIFORNIA.

 

  

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(c)           Remedy. EXCEPT AS PROVIDED BY THE ACT AND THIS AGREEMENT, ARBITRATION SHALL BE THE SOLE, EXCLUSIVE, AND FINAL REMEDY FOR ANY DISPUTE BETWEEN CONSULTANT AND THE COMPANY. ACCORDINGLY, EXCEPT AS PROVIDED FOR BY THE ACT AND THIS AGREEMENT, NEITHER CONSULTANT NOR THE COMPANY WILL BE PERMITTED TO PURSUE COURT ACTION REGARDING CLAIMS THAT ARE SUBJECT TO ARBITRATION.

 

(d)           Availability of Injunctive Relief. IN ACCORDANCE WITH RULE 1281.8 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, THE PARTIES AGREE THAT ANY PARTY MAY ALSO PETITION THE COURT FOR INJUNCTIVE RELIEF WHERE EITHER PARTY ALLEGES OR CLAIMS A VIOLATION OF ANY AGREEMENT REGARDING INTELLECTUAL PROPERTY, CONFIDENTIAL INFORMATION OR NONINTERFERENCE. IN THE EVENT EITHER PARTY SEEKS INJUNCTIVE RELIEF, THE PREVAILING PARTY SHALL BE ENTITLED TO RECOVER REASONABLE COSTS AND ATTORNEYS’ FEES.

 

(e)           Administrative Relief. CONSULTANT UNDERSTANDS THAT EXCEPT AS PERMITTED BY LAW THIS AGREEMENT DOES NOT PROHIBIT CONSULTANT FROM PURSUING CERTAIN ADMINISTRATIVE CLAIMS WITH LOCAL, STATE OR FEDERAL ADMINISTRATIVE BODIES OR GOVERNMENT AGENCIES SUCH AS THE DEPARTMENT OF FAIR EMPLOYMENT AND HOUSING, THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, THE NATIONAL LABOR RELATIONS BOARD, OR THE WORKERS’ COMPENSATION BOARD. THIS AGREEMENT DOES, HOWEVER, PRECLUDE CONSULTANT FROM BRINGING ANY ALLEGED WAGE CLAIMS WITH THE DEPARTMENT OF LABOR STANDARDS ENFORCEMENT. LIKEWISE, THIS AGREEMENT DOES PRECLUDE CONSULTANT FROM PURSUING COURT ACTION REGARDING ANY ADMINISTRATIVE CLAIMS, EXCEPT AS PERMITTED BY LAW.

 

(F)           Voluntary Nature of Agreement. CONSULTANT ACKNOWLEDGES AND AGREES THAT HE/SHE IS EXECUTING THIS AGREEMENT VOLUNTARILY AND WITHOUT ANY DURESS OR UNDUE INFLUENCE BY THE COMPANY OR ANYONE ELSE. CONSULTANT FURTHER ACKNOWLEDGES AND AGREES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND THAT CONSULTANT HAS ASKED ANY QUESTIONS NEEDED FOR CONSULTANT TO UNDERSTAND THE TERMS, CONSEQUENCES AND BINDING EFFECT OF THIS AGREEMENT AND FULLY UNDERSTAND IT, INCLUDING THAT CONSULTANT IS WAIVING HIS/HER RIGHT TO A JURY TRIAL. FINALLY, CONSULTANT AGREES THAT HE/SHE HAS BEEN PROVIDED AN OPPORTUNITY TO SEEK THE ADVICE OF AN ATTORNEY OF CONSULTANT’S CHOICE BEFORE SIGNING THIS AGREEMENT.

 

  

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11.3           Limited Liability.  EXCEPT FOR LIABILITY ARISING FROM BREACH OF SECTION 8.1 ABOVE, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR OTHER INDIRECT DAMAGES (INCLUDING LOST OR ANTICIPATED REVENUES OR PROFITS RELATING TO THE SAME), ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED ON WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR OTHERWISE, EVEN IF AN AUTHORIZED REPRESENTATIVE OF SUCH PARTY IS ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

 

11.4           Assignment.  The Parties agree that their rights and obligations under this Agreement may not be delegated, transferred or assigned to a Third Party without prior written consent of the other Party hereto.  Notwithstanding the foregoing, TearLab may transfer or assign its rights and obligations under this Agreement to a successor to all or substantially all of its business or assets relating to this Agreement whether by sale, merger, operation of law or otherwise.  This Agreement shall be binding upon and accrue to the benefit of TearLab’s successors and permitted assigns.

 

11.5           Notices.  Any required notices hereunder shall be given in writing by facsimile (receipt confirmed), certified mail or overnight express delivery service (such as DHL) at the address of each Party immediately, or to such other address as either Party may substitute by written notice.  Notice shall be deemed served when delivered or, if delivery is not accomplished by reason or some fault of the addressee, when tendered.  For TearLab, any required notice shall be addressed to General Counsel at the address shown above.  For Consultant, any required notice shall be addressed to .

 

11.6           No Other Rights.  No right, title, or interest of any nature whatsoever is granted whether by implication, estoppel, reliance, or otherwise, by a Party to the other.

 

11.7           Severability.  In the event that any provisions of this Agreement are determined to be invalid or unenforceable by a court of competent jurisdiction, the remainder of the Agreement shall remain in full force and effect without said provision.  The Parties shall in good faith negotiate a substitute clause for any provision declared invalid or unenforceable, which shall most nearly approximate the intent of the Parties in entering this Agreement.

 

11.8           Modification; Waiver.  This Agreement may not be altered, amended or modified in any way except by a writing signed by both Parties.  The failure of a Party to enforce any provision of the Agreement shall not be construed to be a waiver of the right of such Party to thereafter enforce that provision or any other provision or right.

 

11.9           Entire Agreement.  The Parties hereto acknowledge that this Agreement sets forth the entire agreement and understanding of the Parties hereto as to the subject matter hereof, and supersedes all prior discussions, agreements and writings in respect hereto.

 

  

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11.10         Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and which together shall constitute one instrument.

 

[Signature Page Follows]

 

  

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IN WITNESS WHEREOF, TearLab and Consultant have executed this Agreement by their respective duly authorized representatives.

 

	
  

 

	 	TearLab Corporation	 
	By:	/s/ Adrienne Graves	 	By:	/s/ Elias Vamvakas	 
	 	 	 	 	 	 
	Print Name:	Adrienne Graves	 	Print Name:	Elias Vamvakas	 
	 	 	 	 	 	 
	Title:	Consultant	 	Title:	CEO	 

                                                                           

  

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EXHIBIT A

 

CERTAIN JAPANESE LICENSEES

 

	
 

Company Name

	
 

  

	
 

  

	
  

 

	
 

 

	
 

  

	
 

  

	
 

  

	
 

  

	
 

  

	
 

  

	
 

  

	
 

  

	
 

  

	
 

  

  

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EXHIBIT B

 

JAPANESE LICENSEES

 

WITH WHICH TEARLAB INITIATED CONTACT PRIOR TO THE EFFECTIVE DATE

 

 

 

 

 

 

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