Exhibit 10.1

OPTION AGREEMENT
For a
NON-EXCLUSIVE LICENSE

          This Agreement, effective as of Apri1 15, 2002 (the “Effective Date”),
is between the University of Massachusetts (“University”), a public institution
of higher education of the Commonwealth of Massachusetts and Applied Nanotech,
Inc.  (“ANI”), a Texas Corporation with a usual place of business at 3006
Longhorn Blvd., Suite 107, Austin, Texas 78758.

R E C I T A L S

          WHEREAS, the University has significant expertise in the area of
self-assembling polymers and ultra high density nanowire arrays which can lead
to several commercializable applications including Field Emission Devices; and

          WHEREAS, ANI is an industrial leader in employing the latest
technology in the manufacture of field emission displays and other emissivity
devices; and

          WHEREAS, both University and ANI desire to test some University
technology which may lead to possible new applications of University technology;

          NOW, THEREFORE, University and ANI hereby agree as follows:

1.          Exclusive License Option.

          1.1.          Definitions.

                    (a)  “Field” means development and commercialization of
field emission devices, as seen in Exhibit A.

                    (b)  “Patent Rights” means the United States and foreign
patents and patent applications set forth on Exhibit B including any divisional,
continuation, continuation-in-part, and foreign equivalents thereof, as well as
any patents issued thereon or reissues, reexaminations, or extensions thereof

          1.2.          Grant of Option Right.  University grants ANI a first
option to obtain a worldwide, royalty-bearing, non-exclusive license (without
the right to sublicense) wider its rights in the Patent Rights in the Field (the
“Option Right”).  ANI may exercise the Option Right upon written notice to
University, which is received by University within twelve (12) months after the
Effective Date (the “Option Period”).  If ANI elects not to exercise the Option
Right, or fails to exercise the Option Right during the Option Period,
University may License its commercial rights under the relevant Patent Right to
any third party.   If ANI does elect to exercise the Option Right, University
and ANI shall negotiate in good faith a license agreement containing
commercially

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reasonable terms and conditions.  If University and ANI are unable to reach
agreement within six (6) months after ANI exercised the Option Right (the
“Negotiation Period”), University may offer its rights in the relevant Patent
Right to any third parties.

          1.3.          Warranty Disclaimer.  University represents that its
employees have assigned to University their entire right, title, and interest in
the Patent Rights and that it has authority to grant the option right set forth
in this Agreement UNIVERSITY MAKES NO OTHER WARRANTIES CONCERNING THE PATENT
RIGHTS, INCLUDING WITHOUT LIMITATION ANY EXPRESS OR IMPLIED WARRANTY OF
MERCHANTABILIIY OR FITNESS FOR A PARTICULAR PURPOSE.  Specifically, University
makes no warranty or representation (i) regarding the validity or scope of the
Patent Rights, (ii) that the exploitation of the Patent Rights will not infringe
any patents or other intellectual property rights of a third party, and (iii)
that any third party is not currently infringing or will not infringe the Patent
Rights.

2.          Consideration for Option Right.

          2.1.          Option Fee.  In partial consideration of the rights
granted ANI under this Agreement, ANI shall pay to University a nonrefundable
option fee of Ten Thousand and no/100 ($10,000.00) Dollars within ten (10)
business days of the Effective Date.

          2.2.          Payment of Patent Expenses.  In partial consideration of
the rights granted ANI under this Agreement, ANI shall reimburse University
within ten (10) business days of the Effective Date for any past patent expenses
(which the University is not presently compensated), as of the Effective Date in
connection with obtaining the Parent Rights, but nevertheless limited to patent
filing fees and attorney fees for preparing, prosecuting and defending the
patent applications (“Patent-Related Expenses”), Thereafter, ANI shall reimburse
University for Patent-Related Expenses as set forth In Section 3.2.  below.  The
total amount of Parent Expense reimbursement (past and future) on patents as
seen in Exhibit B, shall be limited to a total of Twenty-Five Thousand ($25,000)
dollars during the Option Term.

          2.3.          Disclosure of Technology.  In partial consideration for
the option fee and the reimbursement of Patent Expenses, University will
disclose to ANI and its designated representative, all of the means know how of
the technology, technical information, research and development information,
test results and data in the laboratories of the inventors, necessary for the
effective understanding to tie implementation of the Patent Rights.

3.          Maintenance of Patent Rights.

          3.1.          Responsibility for Patent Rights.  University is
responsible for preparation, filing, prosecution, and maintenance of the Patent
Rights, using patent counsel reasonably acceptable to ANI.  University shall
consult with ANI as to the.  preparation, filing, prosecution.  and maintenance
of all Parent Rights reasonably prior to any deadline or action with the United
States Patent & Trademark Office or any foreign patent office and shall furnish
ANI with copies of all relevant documents reasonably in advance of such
consultation.  All disclosures of patent-related

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information and documents are University Confidential Information, regardless of
whether they are marked or otherwise designated as confidential, as described in
Article 4 below.

          3.2.          Payment of Expenses.   Within thirty (30) days after
University invoices ANI, ANI shall reimburse University for all reasonable
Patent-Related Expenses incurred by University pursuant to Section 3.1.  ANI may
elect, upon sixty (60) days written notice to University, to cease payment of
the expenses associated with obtaining or maintaining patent protection for one
(1) or more Patent Rights in one or more countries.  In that event, ANI will
have no rights under this Agreement with respect to those Patent Rights in those
countries.  ANI shall be given every opportunity to take advantage of permitted
delays in the prosecution of the PCT and foreign patent applications, including,
but not limited to, the filing of Chapter 11 Demands.

4.          Information Exchange.

          4.1.          Purpose.  During the term of this Agreement, ANI and
University are likely to exchange information relating to the Parent Rights and
their potential commercial exploitation by ANI.   The following provisions are
intended to protect the confidential or proprietary information of each party
during this period of information exchange.

          4.2.          Definition of Confidential Information.  “Confidential
Information” means any confidential or proprietary information furnished by one
party (the “Disclosing Party’) to the other party (the “Receiving Party”) in
connection with this Agreement, provided that the information is specifically
designated as confidential.  Confidential Information includes any information
relating to the Patent Rights regardless of whether it is specifically
designated as confidential.    Confidential Information that is disclosed in
writing shall be marked with a legend indicating its confidential status (such
as, “Confidential” or “Proprietary”).  Confidential Information that is
disclosed.  orally or visually shall be documented in a written notice prepared
by the Disclosing Party and delivered to the Receiving Party as soon as possible
within thirty (30) days of the date of disclosure; the notice shall summarize
the Confidential Information disclosed to the Receiving Party and reference the
time and place of disclosure.

          4.3.          Obligations.  For a period of five (5) years after
disclosure of any portion of Confidential Information, the Receiving Party shall
(i) maintain such Confidential Information in confidence, except that the
Receiving Party may disclose or permit the disclosure of any Confidential
Information to its trustees or directors, officers, employees, consultants, and
advisors who are obligated to maintain the confidential nature of Confidential
Information and who need to know Confidential Information for the purposes of
this Agreement (ii) use Confidential Information solely for the purposes of this
Agreement and (iii) allow its trustees or directors, officers, employees,
consultants, and advisors to reproduce Confidential Information only to the
extent necessary for the purposes of this Agreement, with all reproductions
being considered Confidential Information.

          4.4.          Exception.  The obligations of the Receiving Party under
Section 4.3.  above do not apply to the extent the Receiving Party can
demonstrate that Confidential Information (i) was in the public domain prior to
the time of its disclosure under this Agreement; (ii) entered the public

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domain after the time of its disclosure under this Agreement through means other
than an unauthorized disclosure resulting from an act or omission by the
Receiving Party (iii) was independently developed or discovered by the Receiving
Party without use of the Confidential Information; (iv) is or was disclosed to
the Receiving Party at any time, whether prior to or after the time of its
disclosure under this Agreement, by a third party having no fiduciary
relationship with the Disclosing Party and/or having no obligation of
confidentiality with respect to the Confidential Information; or (v) is required
to be disclosed to comply with applicable laws or regulations, or with a court
or administrative order, provided that the Disclosing Party receives reasonable
prior written notice of the disclosure.

          4.5.          Ownership and Return.  The Receiving Party acknowledges
that the Disclosing Party (or any third party entrusting its own information to
the Disclosing Party) claims ownership of its Confidential Information in the
possession of the Receiving Party.  Upon the expiration or termination of this
Agreement or at the request of the Disclosing Party, the Receiving Party shall
return to the Disclosing Party all originals, copies, and summaries of
documents, materials, and other tangible manifestations of Confidential
Information in the possession or control of the Receiving Party, except that the
Receiving Party may retain one (i) copy of the Confidential Information solely
for the purpose of monitoring its obligations under this Agreement.

5.       Term and Termination.

          5.1.          Term.  This Agreement begins on the Effective Date and
remains in effect for a period of one (1) year, unless earlier terminated in
accordance with the provisions of this Agreement.

          5.2.          Failure to Exercise Option Right.  In the event that ANI
fails to exercise the Option Right during the Option Period, this Agreement
terminates upon the conclusion of the Option Period.

          5.3.          Termination for Default.  In the event that either party
commits a material breach of its obligations under this Agreement and fails to
cure that breach within thirty (30) days after receiving written notice thereof,
the other party may terminate this Agreement immediately upon written notice to
the party in breach.

          5.4.          Effect of Termination.  The following provisions survive
the expiration or termination of this Agreement:   Articles 4 and 6; Sections
7.1.  and 7.6.

6.       Dispute Resolution,

          6.1.          Procedures Mandatory.  The parties agree that any
dispute arising out of or relating to this Agreement will be resolved solely by
means of the procedures set forth in this Article, and that these procedures
constitute legally binding obligations that are an essential provision of this
Agreement provided, however, that all procedures and deadlines specified In this
Article may be modified by written agreement of the parties.  If either parry
fails to observe the procedures of

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this Article, as modified by their written agreement, the other party may bring
an action for specific performance in any court of competent jurisdiction.

          6.2.          Dispute Resolution Procedures.

                    (a)  Negotiation.  In the event of any dispute arising out
of or relating to this Agreement, the affected party shall notify the other
party, and the parties shall attempt in good faith to resolve the matter within
ten (10) days after the date notice is received by the other party (the “Notice
Date”).  Any disputes not resolved by good faith discussions shall be referred
to senior executives of each party, who shall meet at a mutually acceptable time
and location as soon as possible within thirty (30) days after the Notice Date
and attempt to negotiate a settlement.

                    (b)  Mediation.  If the matter remains unresolved within
sixty (60) days after the Notice Date, or if the senior executives fail to meet
within thirty (30) days after the Notice Date, either party may initiate
mediation upon written notice to the other party, whereupon both parties are
obligated to engage in a mediation proceeding under the then current Center for
Public Resources (“CPR”) Model Procedure for Mediation of Business Disputes,
except that specific provisions of this Section will override inconsistent
provisions of the CM Model Procedure.  The mediator will be selected from the
CPR Panels of Neutrals.  If the parties cannot agree upon the selection of a
mediator within ninety (90) days after the Notice Date, then upon the request of
either party, the CTR shall appoint the mediator.  The parties shall attempt to
resolve the dispute through mediation until one of the following occurs: (i) the
parties reach a written settlement; (ii) the mediator notifies the parties in
writing that they have reached an impasse; (iii) the parties agree in writing
that they have reached an impasse; or (iv) the parties have not reached a
settlement within one hundred and twenty (120) days after the Notice Date.

                    (c)  Trial Without Jury.  If the parties fail to resolve the
dispute through mediation, or if neither party elects to initiate mediation,
each party has the right to pursue any other remedies legally available to
resolve the dispute provided, however, that the parties expressly waive any
right to a jury in any legal proceeding under this Section.

          6.3.          Preservation of Rights Pending Resolution.

                    (a)  Performance to Continue.  Each party shall continue to
perform its obligations under this Agreement pending final resolution of any
dispute arising out or relating to this Agreement; provided, however, that a
party may suspend performance of its obligations during any period in which the
other party fails or refuses to perform its obligations.

                    (b) Provisional Remedies.  Although the procedures specified
in this Article are the sole procedures for the resolution of disputes arising
out of or relating to this Agreement, either party may seek a preliminary
injunction or other provisional equitable relief if, in its reasonable judgment,
that action is necessary to avoid irreparable harm to itself or to preserve its
rights under this Agreement.

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                    (c)  Statute of Limitations.  The parties agree that all
applicable statutes of limitation and time-based defenses (such as estoppel, and
laches) are tolled while the procedures set forth m Subsections 6.2.(a) and
6.2.(b) are pending.  The parties shall take any actions necessary to effectuate
this result.

7.          Miscellaneous.

          7.1.          Publicity Restrictions.  Except as required by law,
court order, or government regulation, ANI shall not use the name of University
or any of its trustees, officers, faculty, students, employees, or agents, or
any adaptation of their names, or any terms of this Agreement in any promotional
material or other public announcement or disclosure without the prior written
consent of University.

7.2          Research Funded by Grants.

                    (a)  Federal Government.  To the extent that any invention
claimed in the Patent Rights has been funded by the federal government, this
Agreement and the grant of any rights in that invention is subject to and
governed by federal law as set forth in 35 U.S.C.  §§ 201.211, and the
regulations promulgated thereunder, as amended, or any successor statutes or
regulations.  If any term of this Agreement fails to conform with those laws and
regulations, the relevant term shall be deemed an invalid provision and modified
by the parties pursuant to Section 7.8.

                    (b)  Other Organizations.  To the extent that any invention
claimed in the Patent Rights hat been partially funded by a non-profit
organization or state or local agency, this Agreement and the grant of any
rights in that invention is subject to and governed by the terms and conditions
of the applicable research grant.   If any term of this Agreement fails to
conform with those terms and conditions, the relevant term shall be deemed an
invalid provision and modified by the parties pursuant to Section 7.8.

          7.3.          Tax-Exempt Status.  ANI acknowledges that University, as
a public institution of the Commonwealth of Massachusetts, holds the status of
an exempt organization under the Internal Revenue Code of 1986, as amended.  ANI
also acknowledges that certain facilities in which the inventions subject to the
license option were developed may have been financed through offerings of
tax-exempt bonds.  If the Internal Revenue Service determines, or if counsel to
University reasonably determines, that any term of this Agreement jeopardizes
the tax-exempt status of University or the bonds used to finance University
facilities, the relevant term shall be deemed an invalid provision and modified
in accordance with Section 7.8.

          7.4.          Assignment.  This Agreement may not be assigned by
either party without the prior written consent of the other party, which shall
not be reasonably withheld, in connection with the merger.  reorganization, or
sale of all, or substantially all of the business assets of ANI.

          7.5.          Amendment and Waiver.  This Agreement may be amended,
supplemented, or otherwise modified only by means of a written instrument signed
by both parties.  Any waiver of any rights or failure to act in a specific
instance relates only to that instance and shall not be

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construed as an agreement to waive any rights or fail to act in any other
instance, whether or not similar.

          7.6.          Governing Law.  This Agreement is governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
irrespective of any conflicts of law principles.

          7.7.          Notice.  Any notices required or permitted under this
Agreement shall be in writing.  shall specifically  refer to this Agreement, and
shall be sent by recognized national overnight courier, confirmed facsimile
transmission, confirmed electronic mail, or registered or certified mail,
postage prepaid, return receipt requested, to the following addresses or
facsimile numbers of the parties:

          If to University:

> Office of Commercial Ventures and Intellectual Property
> University of Massachusetts
> 140 Hicks Way, 512 Goodell
> Amherst, MA 01003-9272
> Attention:            Dr.  E.  Bradley Moynahan
>                            Director
> 
> Tel: (413) 545-3606
> Fax: (413) 545-3632
> Email:  evip@resge@umass.edu

 

          If to ANI:

> Applied Nanotech, Inc.
> 3006 Longhorn Blvd., Suite 107
> Austin, TX 78158
> Attention:          Dr.  Zvi Yaniv
>                         President and CEO
> 
> Tel:  (512) 339-5020 x 103
> Mobile: (512) 924-4856
> Fax: (512) 339-5021
> Email: zyaniv@CARBONTECH.net

All notices under this Agreement are effective upon receipt.  A party may change
its contact information immediately upon written notice to the other party in
the manner provided in this Section.

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          7.8.          Severability.  If any provision of this Agreement is
held invalid or unenforceable for any reason, the invalidity or unenforceability
will not affect any other provision of this Agreement, and the parties shall
negotiate in good faith to modify the Agreement to preserve (to the extent
possible) their original intent.   If the parties fail to reach a modified
agreement within sixty (60) days after the relevant provision is held invalid or
unenforceable, then the dispute shall be resolved in accordance with the
procedures set forth in Article 7.  While the dispute is pending resolution,
this Agreement shall be construed as if the provision were deleted by agreement
of the parties.

          7.9.          Entire Agreement.  This Agreement, including Exhibits A
and B, constitutes the entire agreement between the parties with respect to its
subject matter and supersedes all prior agreements or understandings between the
parties relating to its subject matter.

          The parties have caused this Agreement to be executed by their duly
authorized representatives as of the date first written above.

UNIVERSITY OF MASSACHUSETTS

APPLIED NANOTECH, INC.

 

 

 

 

By:  /s/ Thomas Chmura

By:   /s/ Zvi Yaniv

      Thomas Chmura
       Vice President-Economic Development

        Zvi Yaniv
       President and CEO

 

 

Date:  4/19/02

Date:  4/17/02

 

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