Exhibit 10.3

 

CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED (INDICATED BY: [***]) FROM THE
EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD LIKELY CAUSE
COMPETITIVE HARM IF PUBLICLY DISCLOSED.

Prototype Project Agreement

﻿

FOR

﻿

Organic Light Emitting Diode (OLED) Micro-Displays

﻿

BETWEEN

﻿

the United States of America

﻿

AND

﻿

eMagin Corporation

﻿

UNDER

﻿

[***]

Agreement Number: [***]

Agreement Type: Fixed Amount

Total Amount:

﻿

Phase

Amount

Status

Description

Total Funded Amount

Phase I

$ 5,455,685.58

Funded

Base

$5,455,685.58

[***]

$ [***]

[***]

[***]

$[***]

[***]

$  [***]

[***]

[***]

$[***]

[***]

$[***]

-

-

$5,455,685.58

﻿

Government Share: $[***]

Contractor Share: $0

Authority: 10 U.S.C. § 2371b Effective Date: 8 June 2020

I.

Authority

﻿

This agreement is an "Other Transaction" pursuant to 10 U.S.C. § 2371b. This
agreement is not a procurement contract, cooperative agreement or grant
agreement for purposes of Federal Acquisition Regulation (FAR) Subsection
31.205- 18 or any other purpose. The provisions of the FAR, Department of
Defense Federal Acquisition Regulation Supplement and Army Federal Acquisition
Regulation Supplement do not apply, unless explicitly included in
this agreement.

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

II.

Overview

﻿

A.

The United States Government, hereinafter referred to as the “Government”, and
eMagin Corporation, agree to assess and improve the existing industrial base
production capacity and capability of OLED micro-displays that meet military
requirements. This effort shall be performed in accordance with the contents in
this agreement, as well as Prototype Obligation Agreement [***] and its
corresponding attachments.

﻿

B.

This is a fixed amount OTA Prototype Project Agreement. eMagin will be paid a
 fixed amount for each payable milestone accomplished in accordance with Payable
Milestones and Deliverables set forth in Section VII.

﻿

C.

To meet 10 U.S.C. § 2371b, eMagin Corporation is a small business contractor.

﻿

III.

Objective

﻿

The primary objective of this agreement is to assess and improve the existing
industrial base production capacity and capability of OLED micro-displays to
meet military requirements.

﻿

IV.

Responsibilities

﻿

A.

The Agreements Officer (AO) will use reasonable efforts to:

﻿

i.

Provide agreement support and management.

ii.

Provide technical support in the performance of contractor efforts.

iii.

Perform efforts as agreed upon.

iv.

Make mutual changes to requirement/timeline when necessary.

﻿

B.

The Contractor will use reasonable efforts to:

﻿

i.

Manage the agreement and potential subcontractors.

ii.

Manage the intellectual property and technical design packages.

iii.

Perform efforts as agreed upon by both parties.

﻿

V.

Tasks

﻿

The Contractor shall be responsible for executing all requirements of each
executed Phase encompassed by the Statement of Work (SOW) – Organic Light
Emitting Diode (OLED) Supply Chain Resiliency dated March 5, 2020. [***].

﻿

 

2

 

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

﻿

﻿

VI.

Metrics for Successful Completion

Contractor shall demonstrate improvements in yield of the OLED micro-display
against a baseline yield of [***]. Improvements shall be [***] (threshold) and
[***] (objective) over the baseline yield.

﻿

VII.

Payable Milestones and Deliverables

﻿

Milestone payments will be made in accordance with this section. Each
deliverable shall demonstrate progress towards meeting objectives of this
initiative. Deliverable reports shall be submitted to the AO, Agreements Officer
Representative (AOR), Program Manager, and Agreements Specialist found at the
bottom of this agreement. Prior to invoicing, the Contractor must receive
Government approval of each deliverable item. Further detail can be found in
section VIII, Financial Obligations.

﻿

Within 10 calendar days after the completion of each milestone, the Contractor
will provide the Government with a milestone status report that provides, as
applicable: updates on progress to meet the requirements of the SOW, questions
or concerns related to the overall status of the program, a breakdown of any
information or status updates needed from the Government, and a breakdown of the
planned activities in the follow-on reporting period. In addition to providing a
milestone status report, the Contractor will hold monthly teleconference calls
with the Government to present the reporting deliverables and cooperatively
develop and redirect project plans on an as- needed basis.

﻿

The following are the Payable Milestones for the Base Award for Phase I of the
Primary Prototype Tasks, along with the agreed upon milestones for the Phase II
and III Options. For the options, contract award refers to the modification to
fund those options:

﻿

Milestone Deliverable Schedule

﻿

Task #

 

Milestone

 

Deliverable

 

Total

Months After Contract Award

﻿

 

3.1

 

 

Baseline Assessment

Risk Baseline assessment & mitigation tasks ; Baseline

briefing/report

0  1 

﻿

 

 

3.2

Government Milestone Decision Point Baseline

Review

 

 

Provide copy of Government notification along with invoice

 

 

 

$2,402,668.77

1 

﻿

3.3

Risk Mitigation Task

Execution

 

Task Reports

 

$1,102,667.17

3 

﻿

3.3

Risk Mitigation Task Execution

 

Task Reports

 

$946,853.72

6 

 

3

 

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

﻿

﻿

 

 

254,358.88

 

﻿

3.3

Risk Mitigation Task

Execution

 

Task Reports

 

$254,358.88

9 

﻿

3.3

Risk Mitigation Task

Execution

 

Task Reports

 

$203,568.48

12 

﻿

 

 

3.4

 

 

Production Capability Verification

 

 

Samples (15), Test Data and Report

 

 

 

$-

Reports 15,18,21: No

Milestone

Payments

﻿

3.5

 

Project Close

Final Report & Briefing

Materials

 

$545,568.56

24 

Total Phase I

$5,455,685.58

 

﻿

[***]

 

[***]

 

﻿

VIII.

Financial Obligations

﻿

A.

Government Obligation

﻿

i.

The Government will provide $5,455,685.58 to fund the Phase I Primary Prototype
Tasks for this effort, as described in Section VII.

﻿

B.

Basis of Payment

﻿

i.

The basis of payment for this effort will be in accordance with Section VII. The
milestones represent meaningful efforts that are an integral and necessary part
of performance. Each milestone shall be tracked on an integrated master
schedule. For each milestone, the Contractor shall provide a status report
detailing the completion of each specific Contract Line Item Number (CLIN). No
specific format is required for the milestone status report. Initial submission
of the milestone report submitted to the AO, AOR, and Agreements Specialist.

﻿

ii.

Acceptance criteria for each milestone will be approved/disapproved by the AOR
within 14 calendar days of receipt from the Contractor. Once the Government has
determined the milestone has been successfully completed and provided
notification of approval, the Contractor may invoice through Wide Area Work Flow
(WAWF) as outlined in paragraph D below.

﻿

C.

Use of Funds and Comptroller General Access

﻿

i.

All funds are to be used only for costs that a reasonable and prudent person
would incur in carrying out this prototype project.

4

 

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

﻿

ii.

To the extent required by 10 U.S.C. § 2371b(c), the Comptroller General shall be
permitted to examine the records of any party to this agreement.

﻿

D.

WAWF

﻿

i.

Payments will be made by the Defense Finance and Accounting Services, as
indicated below, within 30 calendar days of an accepted invoice in WAWF.

﻿

ii.

The Contractor is required to utilize the WAWF system when processing invoices
and receiving reports under this agreement. The Contractor shall (i) ensure an
electronic business point of contact is designated in System for Award
Management (SAM) at [***].

﻿

iii.

The Contractor shall use the "2-in-1" Combo format when submitting invoices. The
following inputs shall be included on each invoice submitted in WAWF:

﻿

a. Pay Official:[***]

﻿

b. Issue By:[***]

﻿

c. Admin:[***]

﻿

d. Inspect By:[***]

﻿

e. Ship To:[***]

﻿

f. Service Acceptor: [***]

﻿

g. Ship From, Service Approver, and Local Processing Office fields shall be left
blank unless otherwise directed by the AO.

﻿

iv.

The following guidance is provided for invoicing processed under this agreement
through WAWF:

﻿

a.

The Contractor shall attach the AOR’s approval of each milestone with each
invoice in WAWF.

﻿

b.

The Contractor, when entering invoices in WAWF shall utilize the CLINs
associated with each payable milestone. The description of the CLIN shall
include reference to the associated milestone number along with other necessary
descriptive information. The Contractor agrees that the Government may reject
invoices not submitted in accordance with this provision.

 

5

 

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

﻿

c.

The AOR will formally inspect and accept all deliverables/payable milestones.
The AOR will review the invoices in WAWF and either accept or reject them.

﻿

E.

Payment by Electronic Funds Transfer: All payments by the Government under this
contract, shall be made by electronic funds transfer (EFT). The Government will
make payment to the Contractor using the EFT information contained in the SAM.
In the event that the EFT information changes, the Contractor shall be
responsible for providing the updated information to the SAM.

﻿

IX.

Clauses

﻿

A.

Government Property: No Government property is being furnished under this
agreement.

﻿

B.

Follow-on Contract: The potential for follow-on production for projects awarded
from this CIR will be in accordance with 10 U.S.C. 2371b(f). Upon determination
that the competitively awarded prototype project has been successfully
completed, the requiring office may determine to award a follow-on production
contract or transaction without the use of competitive procedures.

﻿

C.

Freedom of Information Act (FOIA): Any sensitive documents or other proprietary
data submitted by non-Government parties to this agreement shall be marked with
a restrictive legend. The Government will follow its FOIA procedures, including
submitter notice, in the event that any person requests sensitive or proprietary
data which belongs to a non-Government party.

﻿

D.

Limitation of Government Liability: Claims for damages of any nature whatsoever
pursued under this agreement shall be limited to direct damages only up to the
aggregate amount of Government funding disbursed as of the time the dispute
arises. In no event shall the Government be liable for claims for consequential,
punitive, special and incidental damages, claims for lost profits, or other
indirect damages.

﻿

E.

Depreciation of Assets: Contractor agrees to exclude the depreciation of assets
acquired under this Agreement in future proposals to support DoD requirements.

﻿

F.

Industrial Capacity: Contractor agrees to keep the current manufacturing
capacity open and ready to produce for the Government and their prime
contractors during the performance of this Agreement. Execution of this
Agreement does not relieve the Contractor of any existing delivery requirements
under DoD contracts and subcontracts. In the event the Contractor proposes to
sell or otherwise transfer any intellectual property or assets acquired or

 

6

 

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

﻿

developed under this Agreement, the Government shall have the right of first
refusal of the aforementioned intellectual property and assets.

﻿

G.

Recoupment Clause: Upon successful completion of this Agreement, the Contractor
will reimburse the Government a calculated percentage of the

Government’s investment under this Agreement if the Contractor fails to keep the
manufacturing capacity developed under this Agreement operational for five years
after completion of the Agreement. The following table represents the pro- rate
recoupment amount due from the Contractor to the Government depending on the
time when the line closes or the equipment ceases to be in an operational
condition:

﻿

Period

Recovery Percentage

Less than 1 year

85% of Government Investment

1 year through less than 2 years

70% of Government Investment

2 years through less than 3 years

55% of Government Investment

3 years through less than 4 years

40% of Government Investment

4 years through less than 5 years

25% of Government Investment

5 years and later

No Recoupment

﻿

X.

Intellectual Property/Data Rights

﻿

The Government will retain Government Purpose Rights to all technical data for
the manufacturing processes for OLED applications, including the processes and
procedures necessary to maintain those capabilities as determined by the
Government. Technical data includes, but is not limited to, all process records,
descriptions of manufacture, operating and inspection procedures, quality
performance and test procedures, maintenance procedures and records, material
and component purchase descriptions, software, and software applications.

﻿

Government purpose rights involves the right to use, modify, reproduce, release,
perform, display, or disclose the data within the Government without
restriction; and release or disclose technical data outside the Government only
for Government purposes. Technical data will be provided to the Government at
the end of the contract performance period in its most current form; i.e.,
current as of the last date of its use.

 

7

 

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

﻿

Technical data delivered with Government Purpose Rights will automatically
revert to Unlimited Rights five years after the end of the contract performance
period.

﻿

XI.

Modifications

﻿

A.

All modifications, except for minor or administrative corrections, shall be
made by mutual agreement of the parties and be subject to negotiations. Minor or
administrative agreement corrections (e.g., changes in the paying office or
appropriation data, changes to Government or the Contractor personnel identified
in the agreement, etc.) may be made unilaterally by the Government.

﻿

B.

Any modification to this agreement shall be executed, in writing, and signed by
an authorized representative of the Government and the Contractor. Modification
of this agreement does not modify the terms of the [***].

﻿

C.

The Government will be responsible for executing all modifications to this
agreement. There is no modification unless there is a formal
written modification to the agreement by the AO.

﻿

D.

In the event of a material breach of any term of this agreement, the aggrieved
party shall provide notice to the other party in accordance with the Disputes
section of this agreement. Willful failure to perform a material term of this
agreement, unless excused by circumstances beyond that party’s control, will be
considered a breach of this agreement. The aggrieved party shall have all
contractual remedies available under Federal law, including specific performance
and other equitable relief.

﻿

E.

If one party desires the termination of this agreement for its convenience, the
parties agree to negotiate in good faith for a mutual resolution of any
settlement issues, including payment of costs incurred and a reasonable
allowance for profit on work performed, data rights, and deliveries of prototype
items and data. Upon receiving notice that one party desires a convenience
termination of this agreement, all parties will take reasonable efforts to
minimize additional costs while the settlement is negotiated. In the event that
a settlement cannot be reached, the Disputes section of this agreement will be
utilized to reach a final determination.

﻿

XII.

Disputes

﻿

A.

Whenever disputes, disagreements, or misunderstandings arise, the Parties shall
attempt to resolve the issue(s) involved by discussion and mutual agreement as
soon as practicable. The Parties are committed to an open and forthright

 

8

 

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

﻿

handling of disputes, with a good faith attempt to resolve such issues at the
lowest level possible.

﻿

B.

In the event of a dispute, the aggrieved party shall document the factual
issues in a concise written format, and provide a copy to the other party for
review. Within 10 calendar days, the other party shall respond in writing to the
issues raised, and both parties will attempt to resolve the issues. If a dispute
remains after this point, the issue shall be elevated to the contractor point of
contact listed in Section XVIII of this document, and the Government AO, for
resolution. In the event that this senior level of discussion does not settle
the issue, the Senior Contracting Official (SCO) for Army Contracting Command -
Rock Island (ACC- RI), shall review the issue and provide a final decision in
writing within 20 calendar days. The SCO’s resolution of the issue shall be
considered final and binding unless the Contractor appeals or files a suit as
provided in the Tucker Act, 28 U.S.C. § 1491.

﻿

XIII.

Accounting System Requirements

﻿

A.

The Contractor shall ensure that appropriate arrangements have been made for
receiving, distributing and accounting for Federal funds under this agreement.
Consistent with this stipulation, an acceptable accounting system will be one in
which all cash receipts and disbursements are controlled and documented properly
and which is capable of generating a cost element summary.

﻿

XIV.

Security, Safety, Environmental

﻿

A.

SECURITY

﻿

i.

The Security level is unclassified. No Controlled Unclassified Information (CUI)
or information covered by International Traffic in Arms Regulation (ITAR) is
expected to be generated during this contract.

﻿

B.

SAFETY:

﻿

i.

The Contractor shall comply with all Federal, State, and Local safety laws and
regulations in order to maintain a safe and non-hazardous occupational
environment during execution of this agreement.

﻿

ii.

Accident/Incident Report: The contractor shall report immediately any major
accident/incident (including fire) resulting in any one or more of the
following: causing one or more fatalities or one or more disabling injuries;
damage of Government property exceeding $10,000; affecting program planning or
production schedules; degrading the safety of equipment under contract, such as
personnel injury or property damage may be involved; identifying a

 

9

 

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

﻿

potential hazard requiring corrective action. The contractor shall prepare the
report in accordance with Data Item Description (DID) DI-SAFT-81563 for each
incident (all DIDs referenced in this SOW can be found at
https://quicksearch.dla.mil/qssearch.aspx).

﻿

C.

ENVIRONMENTAL: The contractor shall adhere with Federal, State, and local
environmental laws and regulations, Executive Orders, treaties, and agreements.
The contractor shall consider alternate materials and processes in order to
eliminate, reduce or minimize the generation of hazardous waste while minimizing
item cost and risk/degradation to system performance.

﻿

XV.

Foreign Participation:

﻿

A.

FOREIGN INVOLVEMENT:  For the entirety of this agreement, keeping with the
[***] of "Strengthen the force posture of the US Defense Industrial Base (DIB),"
and in accordance with the 2018 Unclassified National Defense Strategy (NDS)
which articulates the threat from foreign predatory economics and inter-state
strategic competitions that are the primary threats to US security, [***] will
restrict foreign participation, access and transfers. Any proposed foreign
participation, access or transfer will require government notification and
concurrence on a case-by-case basis prior to initiating any work effort.

﻿

B.

NON-US RESEARCH PROGRAMS: For the entirety of this agreement, keeping with  the
[***] of "Strengthen the force posture of the US Defense Industrial Base (DIB),"
and the intent of protecting tax-payer investments and intellectual property,
[***] will restrict direct or indirect participation, collaboration,
communication or acceptance of funding with non-US research programs, such as
the Thousand Talent Program (TTP), even in the case the activity is conducted
with and/or through a US citizen, entity or company. Any proposed non-US
research program involvement will require government notification and
concurrence on a case-by-case basis prior to initiating any work effort.

﻿

C.

FOREIGN ACQUISITIONS AND MERGERS: For the entirety of this agreement, the
[***] Member shall notify the Government within three business days of entering
any discussions regarding potential foreign acquisition or merger, for itself or
any business unit of the [***] Member. Said notification will include all
relevant details of the potential merger or acquisition. Per the “Foreign
Involvement” clause, above, the Government retains the right to consent to any
foreign acquisition or merger, considering whether or not the merger/acquisition
is consistent with the best interests of the Government.

﻿

XVI.

Non-Government Personnel

 

10

 

 

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8 June 2020 Prototype Project Agreement:

Organic Light Emitting Diode (OLED) Micro-Displays

eMagin Corporation

 

﻿

This OTA will utilize non-Government personnel to function as technical advisors
to the Government. These Non-Government personnel will have access to the
information submitted under this OTA and will provide technical expertise and/or
advice as required. All non-Government personnel have Non-Disclosure Agreements
on file with the Government and are required to protect information to the same
standards as Government personnel.

﻿

XVII.

PERFORMANCE

﻿

A.

PLACE OF PERFORMANCE: Contractor Facilities

﻿

B.

PERIOD OF PERFORMANCE (PoP): The PoP for the base effort is two years, with
option periods totaling three years, for a potential total PoP of five years.

﻿

XVIII.

POINTS OF CONTACT

﻿

The following personnel are designated as the Points of Contact between the
Parties in the performance of this Prototype Project Agreement:

﻿

[***]

﻿

[***]

﻿

[***]

﻿

[***]

﻿

[***]

11

 

 

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