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                                                                    EXHIBIT 10.9

                              DEVELOPMENT AGREEMENT

         This DEVELOPMENT AGREEMENT ("Agreement") dated and effective as of
November 18, 2002 ("Effective Date"), is entered into between Nanosys, Inc.
("Nanosys"), a Delaware corporation having offices at 2625 Hanover St., Palo
Alto, CA 94304, and Matsushita Electric Works, Ltd. ("MEW"), a Japanese
corporation having offices at 1048, Kadoma, Osaka 571-8686, Japan.

                                   WITNESSETH:

         WHEREAS, Nanosys possesses certain proprietary technology, know how and
experience relating to the design, prototype development, development and
manufacture of nanotechnology enabled systems in the field of solar cells;

         WHEREAS, MEW possesses certain proprietary technology, know how and
experience relating to the development, manufacture and commercialization of
Building Materials (as defined below) in Asia;

         WHEREAS, both parties desire to collaborate to investigate developing
OPVs for use in Building Materials in Asia, as set forth herein;

         NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties hereby agree as follows:

                            ARTICLE 1 -- DEFINITIONS

         For purposes of the Agreement, the terms defined in this Article I
shall have the respective meanings set forth below:

1.1      "Asia" shall mean the countries of: China (including Hong Kong and
         Macau), Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan and
         Thailand.

1.2      "Background Technology" shall mean each party's technology, know-how,
         information and intellectual property rights disclosed, embodied or
         incorporated in the items provided by one party to the other party
         hereunder, which had existed prior to the Effective Date or were
         conceived, developed or otherwise made during the term of this
         Agreement outside of the Development Project and independent of the
         other party's Background Technology.

1.3      "Building Materials" shall mean materials primarily directed for use in
         the construction or fabrication of commercial, residential or other
         buildings or similar outdoor structures. Notwithstanding the foregoing,
         Building Materials shall exclude without limitation materials primarily
         directed for use in consumer products, portable and/or mobile power
         sources or structures, commercial power generation or supply, or for
         extraterrestrial applications.

1.4      "Development Goals" shall mean the development goals for each party
         under Development Project as set forth in Appendix A attached hereto.

1.5      "Development Period" shall mean the period commencing upon Nanosys'
         receipt of the Two Million United States Dollars (U.S. $2,000,000)
         payment set forth in Section 3.1, and unless terminated earlier upon
         termination of this Agreement pursuant to Article 6 or extended by the
         mutual written agreement of the parties, expiring fifteen (15) months
         after the Effective Date.

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1.6      "Development Project" shall mean the activities undertaken by each
         party during the Development Period that it reasonably determines, in
         consultation with the other party, are necessary and/or appropriate for
         achieving its Development Goals.

1.7      "FTE" shall mean a full-time employee, or in the case of less than a
         full-time dedicated person, a full-time equivalent person-year, based
         upon the total of one thousand eight hundred thirty two (1,832) hours
         per year.

1.8      "OPV" shall mean any photovoltaic device which incorporates
         Nanostructures or Nanocomposites as part of an active component. It is
         understood that OPVs shall include the primary encapsulation around
         such photovoltaic device.

1.9      "Phase I Technology" shall mean all materials, technology, know-how and
         information conceived, developed or otherwise made by either party
         during the term of this Agreement (i) in the course of performing the
         Development Project, or (ii) using the confidential or proprietary
         Background Technology of the other party. It Is understood that Phase I
         Technology shall include all patent, copyright, trade secret,
         confidential information and other intellectual property or proprietary
         rights therein and thereto.

1.10     "Nanocomposite" shall mean any material comprising a [*** Redacted] and
         a [*** Redacted] or composition, said [*** Redacted] acting as a matrix
         in which the Nanostructure is embedded or otherwise [*** Redacted].
         Nanocomposites can be [*** Redacted] or [*** Redacted] and include
         without limitation mixtures of [*** Redacted] and [*** Redacted] or
         [*** Redacted] and/or [*** Redacted] or [*** Redacted]. Appendix B
         attached hereto illustrates the Nanocomposite of one potential OPV.


1.11     "Nanostructure" shall mean any material, structure or composition with
         any single dimension less than [*** Redacted]. Nanostructures include,
         but are not limited to semiconductors, metals, semimetals and
         insulators, and include, but are not limited to [*** Redacted], [***
         Redacted], [*** Redacted] and [*** Redacted].

1.12     "Nanotechnology" shall mean all materials, technology, know-how and
         information relating to, or useful for the exploitation of
         Nanostructures, Nanocomposites or properties thereof, or standalone
         functional devices incorporating or based on such Nanostructures,
         Nanocomposites or properties thereof, or components of such devices,
         including without limitation the properties, design and architecture
         (including without limitation [*** Redacted]), development (including
         without limitation methods and tools tor modeling and prototyping),
         manufacturing, synthesis, packaging, applications and commercialization
         thereof and interfaces therewith (including without limitation [***
         Redacted], electrical and/or optical and/or magnetic contacts and
         integration components, methodologies). Nanotechnology shall exclude
         technology for integrating OPVs into surrounding Building Materials.
         For the avoidance of doubt, in no event shall Nanotechnology include
         inventions conceived after the end of the Development Period.

1.13     "Option Period" shall mean a period commencing upon the conclusion of
         the Election Period, and ending nine (9) months thereafter, unless
         terminated earlier by MEW upon written notice.

                        ARTICLE 2 -- DEVELOPMENT PROJECT

2.1      Conduct Of the Development Project. Subject to the terms and conditions
         of this Agreement, Nanosys and MEW each shall use commercially
         reasonable efforts to conduct its activities under the Development
         Project. Nanosys and MEW each shall conduct its activities under the
         Development Project in good scientific manner and in compliance in all
         material respects with requirements of any applicable laws and
         regulations. It is understood that consistent with the

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treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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         requirements of this Agreement, each party shall determine in its sole
         discretion the manner and means by which it performs its activities
         under the Development Project.

2.2      Contemplated Allocation of Responsibilities and Level of Efforts. It is
         contemplated that Nanosys' activities under the Development Project
         will be primarily directed to the development of OPVs, which will
         ultimately meet the specifications of the Development Goals for such
         use in Building Materials and MEW's activities under the Development
         Project will be primarily directed to developing technology and
         manufacturing strategies for incorporating into Building Materials the
         OPVs developed by Nanosys hereunder, and performing market research
         relating thereto. Details in this connection shall be described in
         Appendix A attached hereto. During the Development Period, Nanosys will
         dedicate, the equivalent of [*** Redacted] FTEs on activities under the
         Development Project, and at least another [*** Redacted] FTEs on
         programs outside of the Development Project relating to core
         nanotechnologies which would be available to the development of OPVs
         under the Development Project if applicable. It is presently
         contemplated that MEW will expend Two Million United States Dollars
         (U.S. $2,000,000) on performing its activities under the Development
         Project.

2.3      Communications; Coordination. Nanosys and MEW each shall keep the other
         generally informed from time to time during the Development Period of
         any results from the Development Project. Without limiting the
         generality of the foregoing the parties shall hold during the
         Development Period a technical meeting every month, and a managerial
         meeting every three (3) months. Unless otherwise agreed such meeting
         shall be held at Nanosys' facilities. Each party shall appoint a
         "Project Manager," who shall oversee such party's efforts on the
         Development Project and any meetings, exchanges, visits and
         collaboration between the parties hereunder. The initial Project
         Manager for Nanosys is [*** Redacted]; the initial Project Manager for
         MEW is [*** Redacted]. The parties may from time to time change the
         identity of its Project Manager upon written notice. At any time upon
         the request of MEW, but in no event more frequent than once per
         calendar quarter, Nanosys will prepare a written report summarking the
         work done to-date and the results meeting the specifications of the
         Development Goals.

2.4      Visiting and Collaborating Personnel. During the Development Period,
         each party shall make its personnel available to visit with and
         collaborate with the other party's personnel in carrying out the
         Development Project, for the benefit of the collaboration upon a
         mutually agreeable schedule. Such activities may Include prototyping,
         testing and evaluation of devices developed under the Development
         Project, but shall not include any synthesis of Nanostructures or
         associated [*** Redacted] interface [*** Redacted]. In the event one
         party's personnel is performing or observing the performance of the
         Development Project at the other party's facilities, such visiting
         personnel shall agree to be bound by all reasonable orders, rules and
         regulations pertaining to the hosting party's facilities while at such
         facilities, including reasonable confidentiality obligations, In case
         of any direct conflict between the terms of the Agreement and such
         facilities' orders, rules, and regulations, the terms of this Agreement
         shall prevail.

2.5      Records. Nanosys and MEW each shall maintain records in English, in
         sufficient detail and in good scientific manner, which shall reflect
         work done and results achieved in the performance of the Development
         Project. Each party shall provide the other party with written
         disclosure describing each invention developed during the Development
         Project in which such other party has an ownership interest hereunder,
         upon the receipt of an invention disclosure from its personnel.

2.6      Formal Review Meeting. On or about nine (9) months after the Effective
         Date, the parties shall hold a meeting in person at Nanosys' facilities
         to formally review the results of the Development Project as of the
         date of such meeting. At such meeting each party shall have at least
         one representative who is at the director level or higher, and the
         parties shall make a joint formal presentation describing the outcomes
         and results of its activities to date. Additionally if MEW has not
         previously exercised its option pursuant to Section 3.2 below, at such
         meeting the parties

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        shall discuss MEW's desire to exercise such option, provided such early
        discussion shall not shorten MEW's Election Period as defined in Section
        3.2 below. It is understood that the meeting described in this Section
        2.6 shall be in lieu of any meeting to be held pursuant to Section 2.3
        above for such month.

2.7     Final Report. Promptly upon expiration of the Development Period, each
        party shall provide the other party with a final report describing the
        results of its activities under the Development Project, including the
        extent to which it has met its Development Goals (each, the "Final
        Report").

2.8     Testing of Deliverables. Promptly upon the conclusion of the
        Development Period, Nanosys shall make available to MEW for testing a
        reasonable number of sample units of the OPVs created by Nanosys meeting
        or most closely meeting the Development Goals(or components if a
        complete OPV has not been created). Such testing shall take place at
        Nanosys' facilities, or may be conducted jointly by the parties at MEW's
        facilities.

                        ARTICLE 3 -- PAYMENTS/EXCLUSIVITY

3.1     Payments. In consideration of Nanosys' performance of its activities
        under the Development Project, MEW shall pay Nanosys Two Million United
        States Dollars (U.S. $2,000,000) within fifteen (15) days of execution
        of this Agreement. It is contemplated that such amount shall be in
        consideration for the efforts undertaken and be partial reimbursement
        for the costs and expenses incurred by Nanosys in performing its
        activities hereunder. As additional consideration, within thirty (30)
        days of the conclusion of the Development Period, provided that Nanosys
        has met its Development Goals or MEW provides or has provided Nanosys
        with an Exercise Notice pursuant to Section 3.2 or MEW elects in its
        discretion to make such payment, MEW shall pay Nanosys an additional
        Five Hundred Thousand United States Dollars (U.S. $500,000). MEW shall
        make all payments hereunder by check or wire transfer in immediately
        available funds to an account designated by Nanosys. All amounts payable
        hereunder shall be paid in United States Dollars, and shall be net of
        any sales, use, withholding or other taxes. Except as set forth in this
        Section 3.1, each party shall be responsible for and bear its own costs
        for carrying out its activities under the Development Project.

3.2     Option to Negotiate Additional Development. At any time after the
        commencement of the Development Period and prior to a lapse of thirty
        (30) days after Nanosys provides its Final Report under Section 2.7 (the
        "Election Period"), MEW may provide Nanosys with written notice (the
        "Exercise Notice"), stating that MEW desires to negotiate the terms and
        conditions under which the parties would continue the development of
        OPVs for use in Building Materials ("Phase II") and would commercialize
        such OPVs and Building Materials in Asia, including Nanosys supplying
        certain components thereof ("Phase III") (collectively, the Phase II/III
        Projects"). Promptly after Nanosys' receipt of the Exercise Notice as
        set forth above, the parties shall meet to negotiate in good faith the
        terms and conditions of the Phase II and/or Phase III Projects for a
        period of sixty (60) days (the "Negotiation Period"). The Negotiation
        Period shall be extended to the extent mutually agreed between the
        parties. Such terms and conditions may include: (i) Nanosys having a
        nonexclusive, worldwide license under subject matter developed by MEW
        relating to Nanotechnology under mutually agreeable terms and
        conditions, and (ii) other customary and reasonable terms and conditions
        standard for development, supply and commercialization arrangements of
        the type contemplated above. If the parties have not mutually agreed on
        the terms and conditions for the Phase II/III Projects for any reason by
        the expiration of the Negotiation Period, neither party shall have any
        further obligation to the other party under this Section 3.2 thereafter.
        It is understood that Phase II/III Projects may include additional Asian
        countries as mutually agreed between the parties.

3.3     Exclusivity. During the period ("Exclusive Period") beginning upon the
        commencement of the Development Period and ending (i) upon the
        expiration of the Negotiation Period, if MEW provides the Exercise
        Notice in accordance with Section 3.2, or (ii) upon expiration of the
        Election Period, if MEW fails to provide the Exercise Notice in
        accordance with Section 3.2, each party

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         agrees not to enter into any written agreement with any third party
         with respect to the development, commercialization or other
         exploitation of OPVs containing inorganic Nanostructures for use in
         Building Materials in Asia. Each party remains free to enter into
         collaborations with third parties relating to OPVs containing
         Nanostructures other than inorganic Nanostuctures.

3.4      Other Opportunities. Nanosys and MEW may discuss the possibility of and
         terms and conditions for the parties collaborating together with
         respect to the development and commercialization in Asia of the OPVs
         developed hereunder, other than for use in Building Materials.

3.5      Option to License Phase I Technology. Provided that MEW has made the
         Five Hundred Thousand Dollars ($500,000) payment to Nanosys pursuant to
         Section 3.1, if thereafter during the Option Period Nanosys enters into
         a written agreement ("Third Party Agreement") with a third party
         ("Third Party") with respect to the Field (as defined below) granting
         such Third Party license rights which includes a material portion of
         Phase I Technology, Nanosys shall notify MEW and disclose the scope of
         such license rights in the Field and the terms and conditions agreed to
         by such Third Party for such license rights ("Notice of Third Party
         Agreement"). Upon written request of MEW received by Nanosys within
         thirty (30) days after the Notice of Third Party Agreement, Nanosys
         shall enter into a written agreement with MEW ("Written License)
         granting to MEW the same license rights in the Field as set forth in
         such Notice of Third Party License, on the same terms and conditions as
         agreed to by the respective Third Party. The license rights offered to
         MEW in the Notice of Third Party Agreement shall include all
         intellectual property rights that Nanosys grants to the Third Party
         that relate directly to the Field; provided however, that the Written
         License is not required to grant MEW any rights with respect to any
         intellectual property (i) which has been funded by or in conjunction
         with such Third Party to the Third Party Agreement or created during
         the course of such Third Party Agreement, or (ii) for any use outside
         the Field. During the Option Period, MEW agrees not to enter into any
         written agreement with any third party with respect to the Field. As
         used herein, the "Field" shall mean commercialization in Asia of OPVs
         containing inorganic Nanostructures specifically for use in Building
         Materials. Each party remains free to enter into collaborations with
         third parties relating to OPVs containing inorganic Nanostructures
         other than inorganic Nanostuctures.

                ARTICLE 4- CONFIDENTIALITY/HANDLING OF MATERIALS

4.1      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 that is disclosed by the other party in
         writing and marked "Confidential," or that is disclosed orally and
         identified as or should reasonably be considered confidential, or that
         is obtained through inspection of tangible items marked or located in a
         area designated as confidential (collectively, "Confidential
         Information"). Confidential Information shall not include any
         information that the receiving party can demonstrate was: (i) already
         known to the receiving party at the time of disclosure hereunder, or
         (ii) now or hereafter becomes publicly known other than through acts or
         omissions of the receiving party, or (iii) is rightfully disclosed
         without restriction to the receiving party by a third party or (iv)
         independently developed by the receiving party without use of or
         reference to the Confidential Information of the disclosing party. The
         obligations of this Section 4 shall survive for five (5) years after
         any termination or expiration of this Agreement.

4.2      Permitted Usage. Notwithstanding the provisions of Section 4.1 above,
         the receiving party may use or disclose Confidential Information of the
         disclosing party solely to the extent necessary to exercise the rights
         granted to it or perform its obligations hereunder (provided it uses
         commercially reasonable efforts to protect such information
         commensurate with the efforts used to protect its own information of a
         similar nature) or in prosecuting or defending litigation, filing for
         patent rights with respect to Phase I Technology, complying with
         applicable governmental regulations and/or submitting information to
         tax or other governmental authorities; provided that if the receiving
         party is required by law to make any public disclosures of Confidential
         Information of the disclosing party, to the extent it may legally do
         so, it will give reasonable advance notice to

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         the disclosing party of such disclosure and will use its reasonable
         efforts to secure confidential treatment of Confidential Information
         prior to its disclosure (whether through protective orders or
         otherwise).

4.3      Materials. Each party may in the course of performance of the
         Development Project transfer Materials that are necessary for the other
         party's performance of its duties under the Development Project. As
         used herein, a party's "Materials" shall refer to such materials and
         any other proprietary materials, compositions or software, provided by
         such party to the other party hereunder. Notwithstanding, Nanosys'
         Materials shall include any and all OPVs, Nanostructures,
         Nanocomposites and components or parts thereof created during the
         course of the Development Project. Each party shall retain all of its
         right, title and interest in and to its Materials.

         a.       Use. A party shall use the other party's Materials for the
                  sole purpose of conducting the Development Project, and not
                  for any other study or purpose without the prior written
                  consent of providing party. Each party shall only allow its
                  employees who are working on activities under the Development
                  Project, who have agreed to be bound by obligations of
                  confidentiality and non-use restrictions as materially
                  protective as this Agreement, to have access to the other
                  party's Materials.

         b.       Restrictions. Each party agrees to retain control over the
                  Materials of the other party and not to transfer such
                  Materials to any third party without the prior written consent
                  of the other party. Except as expressly provided, neither
                  party shall reverse engineer, disassemble or decompile any of
                  the Materials of the other party.

         c.       Markings. Each party agrees not to remove any markings on any
                  Materials of the other party.

         d.       Unknown Characteristics. Each party acknowledges that the
                  Materials are experimental in nature and may have unknown
                  characteristics and therefore agrees to use prudence and
                  reasonable care in the use, handling, storage, transportation
                  and disposition and containment of the Materials.

         e.       Limitations. Notwithstanding the foregoing, nothing in this
                  Article 4 shall be construed (1) to impose any obligations on
                  MEW with respect to MEW's Materials, and on Nanosys with
                  respect to Nanosys' Materials, (ii) as a grant by either party
                  to the other party of any license or other rights in or to the
                  Materials, (iii) to require either party to transfer any
                  Materials to the other party.

                       ARTICLE 5 -- INTELLECTUAL PROPERTY

5.1      Phase I Technology. Nanosys shall solely own all Phase I Technology
         created by either party constituting Nanotechnology. MEW hereby
         irrevocably assigns, and agrees to assign, to Nanosys Phase I
         Technology created by MEW constituting Nanotechnology, and agrees to
         assist Nanosys, upon Nanosys' reasonable request, to secure or perfect
         any or all such rights without MEW assuming any financial obligation.
         Except as set forth in this Article 5, the ownership of any Phase I
         Technology shall be determined by inventorship under the intellectual
         property laws of the country where the technology is created. It is
         understood that neither party shall have any obligation to account to
         the other party for profits, or to obtain any approval of the other
         party to license or exploit any jointly owned Phase I Technology, by
         reason of their joint ownership thereof, and each party hereby waives
         any right it may have under the laws of any country to require such
         accounting or approval. During the term of this Agreement and one (1)
         year thereafter, Nanosys shall inform MEW reasonably promptly following
         the filing of any patent applications regarding Phase I Technology. In
         the event that Nanosys files a patent application for Phase I
         Technology in the United State, Nanosys shall file a counterpart
         application for the same technology in each country in Asia in a timely
         fashion in accordance with international conventions or treaties at

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         Nanosys' expense, but only provided that the Option Period has not
         expired or the parties proceed with a Phase II/III Project.

                            ARTICLE 6 -- TERMINATION

6.1      Expiration. Unless terminated earlier or extended by the mutual written
         agreement of the parties, this Agreement shall expire upon the later of
         (i) the expiration of the Development Period, or (ii) the expiration of
         the Exclusive Period (as defined in Section 3.3).

6.2      Termination. Either party may terminate this Agreement upon written
         notice in the event of material breach of this Agreement by the other
         party, which breach is not cured within thirty (30) days days after
         written notice specifying such breach and the notifying party's
         intention to terminate.

6.3      Obligations Surviving Expiration or Termination. Expiration or earlier
         termination of this Agreement shall not relieve the parties of any
         obligation accruing prior to such expiration or termination, and the
         provisions of Articles and Sections 2.5, 2.7, 3.1, 4, 5, 6 and 7 shall
         survive any expiration or termination of this Agreement. Upon
         termination or expiration of this Agreement (or earlier request of the
         other party), each party shall promptly return any and all Confidential
         Information and Materials of the other party. Section 3.5 shall survive
         the termination or expiration of this Agreement with respect to
         Nanosys' obligations, except in the case of termination due to MEW's
         breach. Section 3.5 shall survive the termination or expiration of this
         Agreement with respect to MEW's obligations, except in the case of
         termination due to Nanosys' breach.

                       ARTICLE 7 -- ADDITIONAL PROVISIONS

7.1      Notices. Any consent, notice, or report required or permitted to be
         given or made under this Agreement by one party to the other party
         shall be in writing, delivered personally or by facsimile (receipt
         confirmed), first class mall postage prepaid, or internationally
         recognized courier or delivery service, and addressed to.the other
         party at its address indicated below, or to other such address as the
         addressee shall have last furnished in writing to the addressor. Except
         as otherwise provided in the Agreement, such consent, notice, or report
         shall be effective upon receipt by the addressee.

         If to Nanosys:                  If to MEW:

         Attn: Calvin Y.H. Chow          Attn: Junji Adachi
         Nanosys, Inc.                   Matsushita Electric Works, Ltd.
         2625 Hanover Street,            Advanced Technology Research Laboratory
         Palo Alto, CA 94304             1048, Kadoma, Osaka 571-8686
         United States of America        Japan

7.2      Governing Law. This Agreement shall be governed by and construed in
         accordance with the laws of the State of New York, United States of
         America, without regard to the conflicts of law principles thereof. The
         parties disclaim any application of the U.N. Convention on Contracts
         for the International Sale of Goods to this Agreement.

7.3      Arbitration. Any dispute or claim arising out of or in connection with
         this Agreement or the performance, breach or termination thereof, shall
         be finally settled by binding arbitration in Santa Clara County,
         California. U.S.A., in accordance with the rules then obtaining of the
         International Chamber of Commerce by three (3) arbitrators appointed in
         accordance with said rules, unless the parties have agreed on one (1)
         arbitrator. The decision and/or award rendered by the arbitrator(s)
         shall be written, final and non-appealable and may be entered in any
         court of competent jurisdiction. The arbitral proceedings and all
         pleadings and evidence shall be in the English language. Any evidence
         originally in a language other than English shall be submitted

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         with an English translation accompanied by an original or true copy
         thereof. The costs of any arbitration, including administrative fees
         and fees of the arbitrator(s), shall be shared equally by the parties,
         unless otherwise determined by the arbitrator(s). Each party shall bear
         the cost of its own attorneys' and expert fees. The parties agree that,
         any provision of applicable law notwithstanding, they will not request,
         and the arbitrator shall have no authority to award, punitive or
         exemplary damages against any party.

7.4      Independent Contractors. The relationship of MEW and Nanosys
         established by this Agreement is that of independent contractors. This
         Agreement shall not constitute, create, or otherwise imply a joint
         venture, pooling arrangement, partnership, or formal business
         organization of any kind. The parties agree that the obligations and
         duties of each party arising under this Agreement regardless of whether
         shared, identical, or otherwise similar, are separate and distinct from
         the obligations and duties of the other party. Actions or failures to
         act by one party shall not confer joint and several liability to the
         other party.

7.5      Language. This Agreement is in the English language only, which
         language shall be controlling in all respects, and all versions hereof
         in any other language shall not be binding on the parties hereto. All
         communications and notices to be made or given pursuant to this
         Agreement shall be in the English language.

7.6      U.S. Export Laws and Regulations. Each party hereby acknowledges that
         the rights and obligations of this Agreement are subject to the laws
         and regulations of the United States relating to the export of products
         and technical information. Each party shall comply with all such laws
         and regulations.

7.7      Force Majeure. Except with respect to payment of amounts due hereunder,
         neither party shall be held liable or responsible to the other party
         nor be deemed to have defaulted under or breached this Agreement for
         failure or delay in fulfilling or performing any term of the Agreement
         to the extent, and for so long as, such failure or delay is caused by
         or results from causes beyond the reasonable control of the affected
         party including but not limited to fires, earthquakes, floods,
         embargoes, wars, acts of war (whether war is declared or not),
         insurrections, riots, civil commotions, strikes, lockouts or other
         labor disturbances, acts of God or acts, omissions, or delays in acting
         by any governmental authority or other person. The term of the
         Development Period shall be extended by the number of days of any delay
         or interruption.

7.8      Representations and Warranties. Each party represents, warrants and
         covenants to the other party that (i) it has the power and authority to
         execute and deliver this Agreement and to perform its obligations
         hereunder, and (ii) the execution, delivery and performance of this
         Agreement by such party has been duly authorized by all requisite
         corporate action, and this Agreement constitutes such party's legal,
         valid and binding obligation enforceable against it in accordance with
         its term, (iii) to the knowledge of such party, it is the owner or
         licensee of all its Background Technology relied upon in its
         performance of this Agreement, (iv) to the knowledge of such party, its
         performance of this Agreement will not Infringe the intellectual
         property rights of any third party, and (v) such party shall not use
         any government funds for performance of the Development Project which
         would preclude or impair the ability to grant the other party
         commercialization rights to the Phase I Technology as contemplated
         under Section 3.2.

7.9      Disclaimer. Neither party makes any representation or warranty or
         guaranty that the Development Project will be successful, in whole or
         part, or that the parties will successfully meet their Development
         Goals or develop any OPV (or any other products or intellectual
         property) under the Development Project. EXCEPT AS SET FORTH HEREIN,
         MEW AND NANOSYS EXPRESSLY DISCLAIM ANY AND ALL WARRANTIES OR
         CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO
         THE CONFIDENTIAL INFORMATION, MATERIALS, PHASE I TECHNOLOGY AND ANY
         OTHER MATERIALS, TECHNOLOGY OR INFORMATION PROVIDED HEREUNDER,
         INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS
         FOR A PARTICULAR PURPOSE, VALIDITY,

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<PAGE>

         USEFULNESS OR RELIABILITY OF ANY SUCH INFORMATION AND TECHNOLOGY,
         PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF THE INTELLECTUAL
         PROPERTY RIGHTS OF THIRD PARTIES.

7.10     Limitation of Liability. IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE
         OTHER FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR PUNITIVE DAMAGES
         INCURRED BY SUCH PARTY ARISING UNDER OR AS A RESULT OF THIS AGREEMENT
         (OR THE PERFORMANCE, BREACH OR TERMINATION HEREOF) INCLUDING, BUT NOT
         LIMITED TO, THE LOSS OF PROSPECTIVE PROFITS OR ANTICIPATED SALES, OR ON
         ACCOUNT OF EXPENSES, INVESTMENTS, OR COMMITMENTS IN CONNECTION WITH THE
         BUSINESS OR GOODWILL OR OTHERWISE, EVEN IF AN AUTHORIZED REPRESENTATIVE
         OF SUCH PARTY IS ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

7.11     Assignment. Except as set forth in this Section 7.11, neither party
         shall assign Its rights or obligations under this Agreement, in whole
         or in part, by operation of law or otherwise, without the prior written
         consent of the nonassigning party. Either party may assign this
         Agreement, and all of its rights hereunder, to a person or entity that
         acquires all or substantially all of the business or assets of that
         party (or that portion thereof to which this Agreement pertains) in
         each case whether by merger, acquisition, operation of law or
         otherwise, provided that such assignee agrees in writing to be bound by
         the terms and conditions of this Agreement. Any purported assignment in
         violation of this provision shall be null and void. Subject to the
         foregoing, this Assignment shall bind and inure to the benefit of each
         party's permitted successors or assigns.

7.12     Entire Agreement. This Agreement, including Appendix A and Appendix B
         attached hereto, embodies the entire understanding between the parties
         and supersedes any prior understandings and agreements between and
         among them respecting the subject matter hereof. There are no
         representations, agreements, arrangements or understandings, oral or
         written, between the parties hereto relating to the subject matter of
         the Agreement which are not fully expressed herein. No change,
         modification, extension, termination, or waiver of the Agreement, or
         any of the provisions herein contained, shall be valid unless made in
         writing and signed by duly authorized representatives of the parties
         hereto.

7.13     Counterparts. This Agreement may be executed in counterparts, each of
         which shall be deemed an original, but both of which together shall
         constitute one and the same instrument.

IN WITNESS WHEREOF, the parties through their duly authorized representatives
have executed the Agreement as of the date first set forth above.

NANOSYS, INC.                              MATSUSHITA ELECTRIC WORKS, LTD.

By   /s/ Calvin Chow                        By  /s/ Hiroshi Kikuchi
     ---------------------                      -----------------------------
Name   CALVIN CHOW                          Name Hiroshi Kikuchi
Title  CHIEF OPERATING OFFICER              Title Senior Managing Director

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                                   APPENDIX A

                               Development Goals

Nanosys

A proof of concept of an OPV meeting the following specifications:

         -Device Size: [*** Redacted].

         -Raw Device [*** Redacted]: At least [*** Redacted] and [*** Redacted]
         and not including [*** Redacted].

         -Device Material: [*** Redacted], or other [*** Redacted] materials

MEW

1. Developing technology and strategies for manufacturing OPVs for use in
   Building Materials.

2. Performing market research relating to OPVs for use in Building Materials in
   Asia.

Nanosys Confidential

*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

<PAGE>
                                   APPENDIX B

DEFINITIONS OF WORDS IN THE DEVELOPMENT PROJECT

[*** Redacted]





*** Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.