**Exhibit 10.1**

 

EXECUTION COPY

 

The portions of this Exhibit 10.1 marked “******” have been omitted and confidentially filed with the Securities and Exchange Commission pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.

 

 

 

**License and Strategic BusinessAgreement**

 

**Between**

 

**Uni-Pixel Displays, Inc.**

 

**And**

 

**Lockheed Martin Corporation**

**Lockheed Martin SystemsIntegration – Owego**

 

**October 5, 2005**

 

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**Licenseand Strategic Business Agreement**

 

**Tableof Contents**

 
| **Recitals**        |                                                         |       |
|---------------------|--------------------------------------------------------------|------------|
| ** **          | ** **                                                   | ** ** |
| **Article 1**  | **General Definitions And  Relationships Among Definitions** | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 2**  | **Research and Development  Work**                           | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 3**  | **Technological Know-How,  Ideas, and Inventions**           | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 4**  | **Preferred Supplier and License**                           | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 5**  | **Patent  Rights**                                           | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 6**  | **Patent  Infringement and Defense**                         | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 7**  | **Representations  and Warranties**                          | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 8**  | **Term and  Termination**                                    | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 9**  | **Survival After Termination**                               | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 10** | **Escrow Agreement**                                         | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 11** | **Non-exclusiveness  of Remedies**                           | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 12** | **Notices**                                                  | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 13** | **Assignment**                                               | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 14** | **Force Majeure**                                            | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 15** | **Successors,  Assigns, Etc.**                               | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 16** | **Limitation of  Liability**                                 | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 17** | **Confidential  Information**                                | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 18** | **Governing Law**                                            | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 19** | **Invalidity**                                               | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 20** | **Waiver**                                                   | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 21** | **Publicity**                                                | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 22** | **Order of  Precedence**                                     | ** ** |
| ** **          | ** **                                                   | ** ** |
| **Article 23** | **Sole Agreement**                                           | ** ** |

 

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**LICENSEAND STRATEGIC BUSINESS**

**AGREEMENT**

 

This Agreement, made as of 05 October 2005and having an effective date as of 15 October 2004 (the “Effective Date”),by and between Uni-Pixel Displays, Inc., a Texas corporation havingoffices at 8708 Technology Forest Pl. Suite 100, The Woodlands, TX 77381)(referred to as “UPD”); and Lockheed Martin Corporation, a Marylandcorporation, acting by and through Lockheed Martin Systems Integration-Owegoand having offices at 1801 Route 17C, Owego, New York 13827 (referred to as “LOCKHEEDMARTIN”);

 

# **1.**                                      RECITALS

# ** **

Whereas, UPD has developed proprietary TMOSDisplay Technology  (as definedhereinafter);

 

Whereas, UPD has to date provided LOCKHEEDMARTIN with certain information pertaining to said TMOS Display Technologypursuant to that certain Agreement to Exchange of Confidential Information(AECI) No.  9552 dated 05 May 2004;

 

Whereas, UPD is willing to research anddevelop prototypes of UPD Licensed Products (as defined hereinafter) based uponsuch TMOS Display Technology for

 

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exclusive marketing by LOCKHEED MARTIN in the Military/Aerospace Fieldand by UPD in all fields other than the Military/Aerospace Field;

 

Whereas, LOCKHEED MARTIN has financiallysupported a portion of such research and development relating to the prototypesof the UPD Licensed Products;

 

Whereas, UPD and LOCKHEED MARTIN agree that,in consideration of the financial and engineering resources provided byLOCKHEED MARTIN under Purchase Order 270662 for the research and development byUPD on said prototype(s) UPD Licensed Products, UPD shall sell and license theUPD Licensed Products exclusively to LOCKHEED MARTIN for worldwide use in theMilitary/Aerospace Field and LOCKHEED MARTIN shall designate UPD as a “PreferredSupplier” to LOCKHEED MARTIN for said UPD Licensed Products, all as furtherdescribed herein; and

 

Whereas, LOCKHEED MARTIN is willing to grantUPD a nonexclusive license under any LOCKHEED MARTIN IPR directly relating toTMOS Display Technology for markets other than the Military/Aerospace Field.

 

Now therefore, in consideration of the termsand conditions of this Agreement, and for other good and valuableconsideration, the receipt and sufficiency of which is acknowledged by theexecution and delivery hereof, UPD and LOCKHEED MARTIN agree as follows:

 

ARTICLE 1: General Definitions And Relationships Among Definitions

 

Terms in this Agreement, other than the names of theParties and Article headings, which are set forth in upper case letters,have the meaning established for 

 

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suchterms in the succeeding paragraphs of this Article.  The Article headings are for convenienceonly and are not otherwise a part of the context of this Agreement.  Those terms defined above are incorporatedinto this Article 1 as if repeated in full herein.

 

1.1                                 UPD and LOCKHEED MARTIN are hereundercommonly referred to as “Parties” (in singular and plural usage as required bythe context). This License and Strategic Business Agreement shall be referredto as the “Agreement”.

 

1.2                                 “UPD LicensedProducts” shall mean any display product originated by the Research andDevelopment Work described in this Agreement or in any Subcontract whichembodies, is made using, or otherwise uses UPD’s IPR related to UPD’sproprietary TMOS Display Technology i) existing as of the Effective Date ofthis Agreement; ii) developed pursuant to and during the Term of thisAgreement; or iii) arising out of Research and Development Work under anySubcontract.

 

1.3                                 “LOCKHEEDMARTIN Licensed Products” shall mean any display product originated by theResearch and Development Work described in this Agreement or in any Subcontractwhich embodies, is made using, or otherwise uses LOCKHEED MARTIN’s IPR directlyrelated to TMOS Display Technology i) existing as of the Effective Date of thisAgreement; ii) developed pursuant to and during the Term of this Agreement; oriii) arising out of the work performed by LOCKHEED MARTIN under this Agreement.

 

1.4                                 “Research andDevelopment Work” shall mean the research and development of the prototype UPDLicensed Products by UPD pursuant to this Agreement.

 

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1.5                                 “UPD IPR” shallmean all UPD Patent Rights, copyrights, trade secrets, and all otherintellectual property rights (except trademarks, tradenames, and Internetdomain names) owned, controlled by, or licensable by UPD, including withoutlimitation all software, know-how, mask works, designs, specifications,drawings, scientific, engineering, manufacturing or technical information,whether or not patentable or copyrightable, in the lawful possession of UPD, andany further enhancements, modifications, and variations thereof, conceived,developed or produced by employees or agents of UPD during the Term of thisAgreement and/or pursuant to the Subcontract(s).

 

1.6                                 “UPD PatentRights” shall mean any and all U.S. and foreign patents and patent applications(including all substitutions, continuations, continuations-in-part, anddivisionals of patent applications, and all reissues, reexaminations, renewalsand extensions of issued patents) or similar rights in any country of theworld  relating to TMOS DisplayTechnology currently owned or licensable by UPD as of the Effective Date ofthis Agreement (including such patents and patent applications and inventiondisclosures (to the extent that patent applications are subsequently filedthereon) listed in Exhibit A hereto), and shall further include anyand all U.S. and foreign patents and patent applications (including allsubstitutions, continuations, continuations-in-part, and divisionals of patentapplications and all reissues, reexaminations, renewals, and extensions  of issued patents) developed by the Partiesarising out of the Research and Development Work pursuant to and during theTerm of this Agreement.

 

1.7                                 “LOCKHEEDMARTIN Patent Rights” shall mean any and all U.S. and foreign patents andpatent applications (including all substitutions, continuations, 

 

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continuations-in-part, and divisionals ofpending patent applications and all reissues, reexaminations, renewals, andextensions of issued patents) or similar rights in any country of theworld  relating to TMOS DisplayTechnology currently owned or licensable by LOCKHEED MARTIN as of the EffectiveDate of this Agreement (including such patents and patent applications andinvention disclosures (to the extent that patent applications are subsequentlyfiled thereon) listed in Exhibit A hereto) and shall furtherinclude any and all U.S. and foreign patents and patent applications (includingall substitutions, continuations, continuations-in-part, divisionals of pendingpatent applications and all reissues, reexaminations, renewals, and extensionsof issued  patents) developed by theParties arising out of the Research and Development Work pursuant to and duringthe Term of this Agreement.

 

1.8                                 “Affiliate”means any person or business entity who directly controls, is controlled by, oris under common control with another person or business entity (for purposes ofthis definition, “control,” “controlled by,” or “under common control with”means possession, directly or indirectly, of the power to direct or cause thedirection of management or policies of a person or business entity, whetherthrough ownership of voting securities or otherwise).  In addition, for the purposes of thisAgreement, business units of Lockheed Martin Corporation other than LockheedMartin Systems Integration-Owego shall be considered Affiliates of LOCKHEEDMARTIN.

 

1.9                                 “LOCKHEEDMARTIN Sublicensee” shall mean any individual or legal entity granted asublicense by LOCKHEED MARTIN under UPD IPR to make, have made, use, or sellany UPD Licensed Products in the Military/Aerospace Field.

 

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1.10                           “UPDSublicensee” shall mean any individual or legal entity granted a sublicense byUPD under LOCKHEED MARTIN IPR to make, have made, use, or sell any LOCKHEEDMARTIN Licensed Products outside the Military/Aerospace Field.

 

1.11                           “Licensed Party”shall mean (a) LOCKHEED MARTIN, when referring to UPD Licensed Products,and (b) UPD, when referring to LOCKHEED MARTIN Licensed Products.  Consistently, the “Licensing Party” shallmean (a) UPD, when referring to UPD Licensed Products, and (b) LOCKHEEDMARTIN, when referring to LOCKHEED MARTIN Licensed Products

 

1.12                           “Net Sale (s)Price” for respective LOCKHEED MARTIN Licensed Products and UPD LicensedProducts sold, leased or used by a Licensed Party shall mean such LicensedParty ‘s actual gross sales price, less trade discounts actually allowedthereon; sales, use, excise, or similar taxes; customs duties borne by suchLicensed Party; and transportation and insurance charges incurred by suchLicensed Party in transporting its respective Licensed Products to thirdparties to the extent those charges are actually shown as separate items on theinvoice for said respective Licensed Products. For respective Licensed Productssold by a Licensed Party to an Affiliate, the Net Sales Price shall mean theaverage sales price, if available, to a non-Affiliate for the same or substantiallysimilar respective Licensed Product during the relevant accounting period.  In the case a Licensed Party makes any of itsrespective Licensed Product solely for use by it and not for sale, and nosubstantially similar respective Licensed Product has been sold to anindependent third party end user in an arm’s length transaction, the Net SalesPrice for such respective Licensed Product shall be the so-called “book value”thereof, as reported or required to be reported to the U.S. 

 

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Internal Revenue Service (or similargovernmental authority for such respective Licensed Products made or used incountries outside the United States) for depreciation purposes.

 

1.13                           “Unit,” shallmean a single Licensed Product.  A UPDLicensed Product is the prototype display being developed by UPD pursuant tothe Subcontract, which is a light guide, active layers, panel, optical shutterpixels, supporting driver electronics, and connectors.

 

1.14                           “Military/AerospaceField” shall mean any and all applications (i) by the National Aeronauticsand Space Administration (NASA) or similar agencies worldwide; (ii) theUnited States Department of Defense or similar agencies worldwide (MODs), or (iii) requiring‘ruggedized or militarized’ products. For purposes hereof, “ruggedized ormilitarized” products would include radiation-hardened, tempest-modified, shockand/or vibration resistant or modified to meet certain thermal parameters, ineach case arising from government requirements or governmentally- sponsoredmilitary, space or intelligence activities.

 

1.15                           “TMOS DisplayTechnology” (“Time Multiplexed Optical Shutter” Display Technology) shall meana thin panel, edge injected, light valve display technology (including thesupporting enabling technologies, such as drive control circuitry, lightinjection, etc.) that facilitates the manufacture and use of a range of paneldisplays which offer the following advantages over current state of the artdisplay technologies: lower power consumption, simplified architecture andbetter visual quality.

 

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1.16                           “Subcontract”shall refer to the subcontract or future executed subcontracts as contemplatedby this Agreement, including LOCKHEED MARTIN Purchase Order No. 270662 (Exhibit B)entitled “Solicitation Prototype Development, Time and Materials” effective 15 October 2004,entered into between UPD and LOCKHEED MARTIN relating to either UPD’s R&Dactivities under the Research and Development Work or UPD’s manufacture andsale of UPD Licensed Products for or on behalf of LOCKHEED MARTIN.

 

1.17                           “PreferredSupplier” shall mean that, during the exclusivity term and any extensionthereto, LOCKHEED MARTIN agrees that LOCKHEED MARTIN shall contract exclusivelywith UPD for the UPD Licensed Products subject to the terms of Article 4.1.

 

1.18                           “LOCKHEEDMARTIN” shall mean the specific Lockheed Martin business unit identified asLockheed Martin Systems Integration — Owego operating at 1801 State Route 17C,Owego New York 13827, and not the entire Lockheed Martin Corporation.

 

1.19                           “LOCKHEEDMARTIN IPR” shall mean all patents, patent applications, copyrights, tradesecrets, and all other intellectual property rights (except trademarks,tradenames, and Internet domain names) owned, controlled by, or licensable byLockheed directly related to TMOS Display Technology, including withoutlimitation all inventions, discoveries, software, know-how, mask works,designs, specifications, drawings, scientific, engineering, manufacturing ortechnical information, whether or not patentable or copyrightable, in thelawful possession of LOCKHEED MARTIN, and to any further enhancements,modifications, and variations thereof, conceived, developed 

 

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or created pursuant to and during the Term ofthis Agreement.

 

ARTICLE 2: Research and Development Work

 

2.1                                 UPD shall exert commercially reasonableefforts in performing Research and Development Work directed towards successfulcompletion of one or more viable prototypes of UPD Licensed Products meetingthe LOCKHEED MARTIN Interface Control Drawing (ICD), Electronic Specifications,and Electronics Plan in Exhibit C hereto.

 

2.2                                 The Research and Development Work,including but not limited to that set forth in the Subcontract, has been, isnow, and will continue to be carried out in a series of discrete tasks. Priorto the commencement of any additional tasks, LOCKHEED MARTIN and UPD shallagree in writing pursuant to good faith negotiations to a development proposal.Each prototype development proposal under this Article 2.2 shall bereduced to writing, and Research and Development Work directed thereto shallonly commence upon the execution of said prototype development Subcontract byan authorized representative of each of the parties. The terms, and provisionsof each such Subcontract shall govern the Research and Development Work in thetasks covered thereby, but only to the extent that the terms and provisions ofsuch development Subcontract do not conflict with the terms and provisions ofthis Agreement.   Any divergence betweenthe present Agreement and any Subcontract shall be resolved in favor of thisAgreement.

 

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2.3                                 If, after good faith negotiations, UPDand LOCKHEED MARTIN cannot agree to the requisite conditions for any follow-onSubcontract, set out in Articles 2.5 through 2.9, or if a prototype displayproduct is not produced that is marketable by LOCKHEED MARTIN in the Military/AerospaceField, then LOCKHEED MARTIN may elect to terminate this Agreement by givingforty five (45) days’ written notice to UPD. Alternatively, LOCKHEED MARTIN may elect to keep the Agreement in effect(except for its obligations to purchase UPD Licensed Products from UPD pursuantto a Preferred Supplier relationship) and retain the exclusive license of theUPD IPR in the Military/Aerospace Field provided that it complies with itsroyalty payment and other obligations set forth in this Agreement.  “Marketable” means that the production readyproduct can be manufactured to LOCKHEED MARTIN or its Customer standards andthe product is cost competitive with other readily available market solutions.

 

2.4                                 UPD shall deliver to LOCKHEED MARTINwritten reports, weekly or at a frequency commensurate with the Subcontracttasks as determined by LOCKHEED MARTIN, outlining the status of the Researchand Development Work to be completed by UPD during performance of theSubcontract. In addition, upon completion of the Prototype Research andDevelopment Work, UPD will deliver to LOCKHEED MARTIN a written completionreport as well as the agreed number of prototype(s) specified in theSubcontract.

 

2.5                                 Within forty-five (45) days of receipt ofsaid completion report and the prototype(s), or such longer period as theParties may agree to in writing, LOCKHEED MARTIN shall provide UPD with noticein writing as to any prototypes which does not reasonably conform to thespecifications and/or conditions agreed upon under the 

 

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correspondingprototype development Subcontract, and shall set forth in such notice thereasons why such prototype(s) is/are not in conformance.

 

2.6                                 LOCKHEED MARTIN shall allow UPDforty-five (45) days or such longer period as the parties may agree to inwriting to cure any non-conformance noted according to Article 2.5 above.The expense of effecting said cure shall be UPD’s for UPD’s contributory effortand any later acceptance by LOCKHEED MARTIN shall be in the manner provided inthis Article 2 above.

 

2.7                                 In the event that, after good faithefforts by UPD and LOCKHEED MARTIN the two parties cannot agree as to whetherwork delivered by UPD to LOCKHEED MARTIN for approval under Article 2.5 isin conformance with the specifications and/or conditions set out in thecorresponding Subcontract; or UPD fails to effect a reasonable cure within thetime provided in Article 2.6; this Agreement and/or the Subcontract may beterminated by LOCKHEED MARTIN in accordance with Article 2.3 of thisAgreement.

 

2.8                                 If LOCKHEED MARTIN, at any time during theSubcontract finds it necessary or desirable to change any of the specificationsand/or conditions set forth in any one or more Subcontract tasks, then it shallso notify UPD in writing specifying in that notice the reasons for thatchange.  Upon receipt of such notice, UPDshall use commercially reasonable efforts to effect such change at such anadjusted time frame and fee as the parties may agree to in writing pursuant to goodfaith negotiations in the manner set forth in Article 2.2 above, and shallappropriately modify any one or more of the tasks in the Subcontract affectedthereby as so agreed. If, after good faith 

 

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negotiations by the parties, no agreement regardingmodification of said Subcontract is reached, then the Subcontract and/or thisAgreement may be terminated by LOCKHEED MARTIN in accordance with Article 2.3of this Agreement.

 

2.9                                 If UPD, at any time during the Subcontractresearch and development effort, in any one or more tasks, determines thatthere will be cost overruns related to the Subcontract, then it shall so notifyLOCKHEED MARTIN in writing specifying in that notice the amount thereof and thereason therefore.  Upon receipt of suchnotice, LOCKHEED MARTIN and UPD shall use their commercially reasonable effortsto effect such change in the cost structure as the parties may agree to inwriting pursuant to good faith negotiations and shall appropriately modify anySubcontract task or provision(s) affected thereby as so agreed.  If, after good faith negotiations by theparties, no agreement regarding modification of said Subcontract is reached,then the Subcontract task and/or this Agreement may be terminated by LOCKHEEDMARTIN in accordance with Article 2.3 of this Agreement.

 

2.10                           In the event that this Agreement isterminated in accordance with Articles 2.3, and to the extent that Subcontracttasks for any one or more tasks is accepted and paid for in full by LOCKHEEDMARTIN, any product(s) arising out of such Subcontract shall be considered tobe a UPD Licensed Product within the terms of this Agreement.  In addition, to the extent that anySubcontract is terminated, LOCKHEED MARTIN shall pay for all work completed andaccepted under such Subcontract and UPD shall deliver to LOCKHEED MARTIN anysuch work that has not yet been delivered.

 

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2.11                           Upon the completion of the Research andDevelopment Work under the Subcontract, the parties shall mutually determinefinal specifications for, and a description of the UPD Licensed Products which,when prepared will be incorporated into  Exhibit Cand, thereafter, identify the UPD Licensed Products to be supplied to LOCKHEEDMARTIN by UPD.

 

ARTICLE 3: Technological Know-How, Ideas and Inventions

 

3.1                                 UPD hasdeveloped, is developing, and shall continue to develop UPD    IPR.

 

3.2                                 UPD shalldisclose to LOCKHEED MARTIN in writing any UPD inventions which UPD makes, conceives,or develops related to the TMOS Technology during its performance under theSubcontracts by forwarding to LOCKHEED MARTIN within sixty (60) days a copy ofany invention disclosure form, which is filed with its designated corporateoffices.  Title to any and all UPD IPR inthe performance of any Research and Development Work in compliance with anySubcontract shall be retained by UPD, subject to the licenses in theAerospace/Military Field granted to LOCKHEED MARTIN pursuant to this Article andArticle 4 herein.

 

3.3                                 Subject to anyrights of the United States Government and pursuant to the terms of thisAgreement, UPD shall grant, and does hereby grant to LOCKHEED MARTIN aworld-wide, irrevocable, royalty-free, exclusive license to the portion of theUPD IPR arising out of the Research and Development Work under any Subcontract,to make, have made, use, sell, offer for sale, lease, import, and modify UPDLicensed Products, including the right to sublicense to third parties aslimited by this Agreement, 

 

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solely in the Military/Aerospace Field.

 

3.4                                 Subject to anyrights of the United States Government and pursuant to the terms of thisAgreement, LOCKHEED MARTIN shall grant UPD a world-wide, irrevocable,royalty-free, non-exclusive worldwide license to the portion of the LOCKHEEDMARTIN IPR directly related to TMOS technology work performed by LOCKHEEDMARTIN under this Agreement to make, have made, use, sell, offer for sell,lease, import, and modify LOCKHEED MARTIN Licensed Products, including theright to sublicense to third parties as limited by this Agreement, solely infields other than the Military/Aerospace Field.

 

ARTICLE 4: Preferred Supplier and Licenses

 

4.1                                 Subject to the terms of this Article 4and upon LOCKHEED MARTIN accepting the Research and Development Work pursuantto Articles 2.5-2.7, LOCKHEED MARTIN agrees to regard UPD as the “PreferredSupplier” of UPD Licensed Products for the Military/Aerospace Field.  During the period that UPD is a PreferredSupplier, LOCKHEED MARTIN agrees to purchase all its requirements for UPDLicensed Products in the Military/Aerospace Field from UPD, provided, however,that UPD produces UPD Licensed Products for the Military/Aerospace Field that:1) meet or exceed LOCKHEED MARTIN or its customer’s Quality, Producibility,Delivery, Performance and/or Reliability Standards, including but not limitedto detailed performance specifications; and 2) remain price and technicallycompetitive.  UPD anticipates the cost toproduce these products in a production environment will be less than that ofother current technologies (other than CRT) including but not limited to: 

 

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AMLCD,OLED, and FED. In order to maintain its Preferred Supplier status, UPD shallmeet the standards set forth in this Agreement and Exhibits B and C.  The parties agree that the standardspresently set forth in Exhibit C may need to be modified in thefuture, subject to the mutual agreement of the parties, which agreement shallnot be unreasonably withheld or delayed.

 

4.2                                 LOCKHEED MARTIN shall have no obligationto pay UPD the royalty on such UPD Licensed Products manufactured by UPD forLOCKHEED MARTIN that it would otherwise pay to UPD pursuant to Article 4.3if LOCKHEED MARTIN were to manufacture, or have manufactured, and sell such UPDLicensed Products under license from UPD.

 

4.3                                 (a)                                     In the event, and to the extent, that UPDis unable to maintain its material obligations as a Preferred Supplier toLOCKHEED MARTIN of UPD Licensed Products, LOCKHEED MARTIN will provide writtennotice to UPD of such failure and UPD will be given forty five (45) calendardays to remedy such failure relating to its Preferred Supplier status.  If UPD fails to remedy such failure, LOCKHEEDMARTIN may terminate UPD’s Preferred Supplier status at its sole discretionupon written notice to UPD.  If UPD isunable to maintain its Preferred Supplier status as defined in Article 4.1then, subject to any rights of the United States Government, and pursuant tothe terms of this Agreement, UPD agrees to grant, and does hereby grant toLOCKHEED MARTIN, a worldwide, royalty-bearing, exclusive license to the UPD IPRto make, have made, sell, offer for sale, lease, use, import, or modify the UPDLicensed Products, including the right to sublicense to third parties aslimited by this Agreement, solely in the Military/Aerospace Field.

 

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(b)                                Such sales, use or other disposition ofUPD Licensed Products not sold to LOCKHEED MARTIN by UPD shall be subject to arunning royalty of **********Percent (******%)of the Net Sale Price per Unit of the UPD Licensed Products.

 

(c)                                  The license granted to LOCKHEED MARTINpursuant to Article 3.3 and this Article is similarly granted to anyAffiliate of LOCKHEED MARTIN and the term LOCKHEED MARTIN herein shall beconstrued to include such Affiliate of LOCKHEED MARTIN; provided, however,LOCKHEED MARTIN shall remain responsible for the performance of the terms andconditions of this Agreement, including payment of any royalties, by suchAffiliate, and shall be fully liable to UPD thereof in the event of any defaultby such Affiliate.  Any license grantedhereunder to an Affiliate shall terminate on the Affiliate’s ceasing to be anAffiliate.

 

(d)                                 LOCKHEED MARTIN shall have the right tosublicense UPD IPR licensed by it; provided, any sublicense of UPD tradesecrets or confidential information shall include suitable confidentialityagreements. To the extent LOCKHEED MARTIN grants a sublicense pursuant to Article 4.3(a),the sale, use or other disposition of UPD Licensed Products by the LOCKHEEDMARTIN Sub-licensee shall be subject to a running royalty of: (i) ******Percent (******%) of the Net Sale Price per Unit of the UPD Licensed Productplus (ii) an equal share of the royalty above the ****** Percent stated insubparagraph (i).

 

(e)                                  The royalties stated in Article 4.3(b) aboveare based on the IPR contribution to the “Unit” of the Licensed Product only andthe royalties are not extended to the remainder of the end items sold byLOCKHEED MARTIN.  All such 

 

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royaltyon UPD Licensed Product sold or otherwise transferred to customers  shall be paid by LOCKHEED MARTIN within 30days of LOCKHEED MARTIN receiving payment from customers for the sale or othertransfer of UPD Licensed Product to customers.  LOCKHEED MARTIN shallremain liable for all royalties due as a result of sales or other transfers ofUPD Licensed Product to customers.  Inthe event such UPD Licensed Products are used by LOCKHEED MARTIN or itsAffiliates, the royalty shall accrue as of the date of first use of those UPDLicensed Products.

 

(f)                                    To the extent permitted by applicablelaw, LOCKHEED MARTIN will use commercially reasonable efforts to impose licenserestrictions on the use of the UPD Licensed Products that it leases or sells tocommercial customers in the Military/ Aerospace Field.  UPD is obligated under the provisions of thisSection to supply only such information concerning technical improvementsin the Military/ Aerospace Field as UPD has the legal right to supply toLOCKHEED MARTIN and only to the extent and manner set forth in thisAgreement.  If, at any time, thedisclosure and/or use of any information concerning technical improvementswithin the Military/Aerospace Field by UPD to Lockheed should require paymentsby LOCKHEED MARTIN and/or UPD, such disclosure and/or use shall be made onlyafter the parties hereto have agreed as to the bearing of the cost of suchpayments. In the event that any intellectual property offered by UPDconstitutes UPD-licensed third party intellectual property, Lockheed shall havethe option, at its discretion, to accept or reject such third party intellectualproperty.  Any rejection of such UPDoffered third party intellectual property by LOCKHEED MARTIN based upon groundsother than the failure by UPD to meet another of its material obligationspursuant to this Agreement shall not constitute a default by UPD of this 

 

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Agreement.UPD shall not be obligated to provide LOCKHEED MARTIN with classifiedinformation of the United States or a foreign government without the priorwritten approval of the appropriate governmental authority.

 

4.4                                 (a)                                 Subject to any rights of the UnitedStates Government, and pursuant to the terms of this Agreement, LOCKHEED MARTINagrees to grant, and does hereby grant to UPD, a worldwide, royalty-bearing,non-exclusive license to the LOCKHEED MARTIN IPR to make, have made, sell,offer for sale, lease, use, import, or modify LOCKHEED MARTIN LicensedProducts, including the right to sublicense to third parties as limited by thisAgreement, in fields other than the Military/Aerospace Field.

 

(b)                                 Such sales, use or other disposition ofLOCKHEED MARTIN Licensed Products not sold to UPD by LOCKHEED MARTIN shall besubject to a running royalty of ****** Percent (******%) of the Net Sale Priceper Unit of LOCKHEED MARTIN Licensed Products.

 

(c)                                  The license granted to UPD pursuant to Article 3.4and this Article is similarly granted to any Affiliate of UPD and the termUPD herein shall be construed to include such Affiliate of UPD; provided,however, UPD shall remain responsible for the performance of the terms andconditions of this Agreement, including payment of any royalties, by suchAffiliate, and shall be fully liable to LOCKHEED MARTIN thereof in the event ofany default by such Affiliate.  Any licensegranted hereunder to an Affiliate shall terminate on the Affiliate’s ceasing tobe an Affiliate.

 

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(d)                                 UPD shall have the right to sublicenseLOCKHEED MARTIN IPR licensed by it; provided, any sublicense of LOCKHEED MARTINtrade secrets or confidential information shall include suitableconfidentiality agreements. To the extent UPD grants a sublicense pursuant to Article 4.4(a),the sale, use or other disposition of LOCKHEED MARTIN Licensed Products by theUPD Sub-licensee shall be subject to a running royalty of: (i) ****** Percent(******%) of the Net Sale Price per Unit of the LOCKHEED MARTIN LicensedProduct plus (ii) an equal share of the royalty above the ****** Percent (******%)stated in subparagraph (i).

 

(e)                                  The royalties stated in Article 4.4(b) aboveare based on the IPR contribution to the “Unit” of the Licensed Product onlyand the royalties are not extended to the remainder of the end items sold byUPD.  All such royalty on LOCKHEED MARTINLicensed Product sold or otherwise transferred shall be paid by UPD within 30days of UPD receiving payment for the sale or other transfer of LOCKHEED MARTINLicensed Product from its customers.  UPDshall remain liable for all royalties due as a result of sales or othertransfers of LOCKHEED MARTIN Licensed Product to customers.  In the event such LOCKHEED MARTIN LicensedProducts are used by UPD or its Affiliates, the royalty shall accrue as of thedate of first use of those LOCKHEED MARTIN Licensed Products.

 

(f)                                    To the extent permitted by applicablelaw, UPD will use commercially reasonable efforts to impose licenserestrictions on the use of LOCKHEED MARTIN Licensed Products that it leases orsells to commercial customers in fields outside the Military/Aerospace Field.  LOCKHEED MARTIN is obligated under theprovisions of this Section to supply only such information concerningtechnical 

 

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improvements in the licensed fields(i.e., in fields outside the Military/Aerospace Field) as LOCKHEED MARTIN hasthe legal right to supply to UPD and only to the extent and manner set forth inthis Agreement.  If, at any time, thedisclosure and/or use of any information concerning technical improvementswithin the licensed fields by LOCKHEED MARTIN to UPD should require payments byLOCKHEED MARTIN and/or UPD, such disclosure and/or use shall be made only afterthe parties hereto have agreed as to the bearing of the cost of suchpayments.  In the event that any intellectualproperty offered by LOCKHEED MARTIN constitutes LOCKHEED MARTIN-licensed thirdparty intellectual property, UPD shall have the option, at its discretion, toaccept or reject such third party intellectual property. Any rejection of suchLOCKHEED MARTIN offered  third partyintellectual property by UPD based upon grounds other than the failure by UPDto meet another of its material obligations pursuant to this Agreement  shall not constitute a default by LOCKHEEDMARTIN of this Agreement.  LOCKHEEDMARTIN shall not be obligated to provide UPD with classified information of theUnited States or a foreign government without the prior written approval of theappropriate governmental authority.

 

4.5                                 Each Licensed Party obligated to make anyroyalty payments shall, within sixty (60) days after each calendar quarter ineach year during the Term of this Agreement, and within sixty (60) days of thetermination of the Agreement, deliver to the Licensing Party, a complete andaccurate report, showing the number and designation of its respective LicensedProducts subject to royalty payment hereunder in the preceding calendarquarter, together with all information relevant to computation of royalties orother amounts payable hereunder.  TheLicensed Party obligated to make 

 

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suchpayments shall, in accordance with Articles 4.3(e) and 4.4(e), pay to theother party, in U.S. dollars, at the offices of the Licensing Party, the totalroyalties or other amounts due hereunder in respect to each and every respectingLicensed Product imported, manufactured, sold, leased, or used in the relevantcalendar quarter or portion thereof.

 

4.6                                 Licensed Party shall keep accuratewritten records of all the Licensed Products, pursuant to the license grants inArticle 4 and will provide Licensing Party with a summary thereof at thetime of its payment within sixty (60) days of the end of each calendar quarterfor the cumulative royalties due for that quarter.  Licensed Party shall retain the records uponwhich each periodic royalty payment is based for a period of three yearsfollowing the close of the calendar quarter to which such payment relates.During such three year period, Licensing Party will be entitled, at its ownexpense and through a third party to review such records on a confidentialbasis during regular business hours at the place where same are maintained,upon giving Licensed Party reasonable prior notice thereof and subject toLicensed Party’s security procedures.

 

4.7                                 (a) This Agreement is intended toform the framework for the parties to exploit existing and potential businessopportunities related to the application of TMOS Display Technology in theMilitary/Aerospace Field as well as “commercial” market fields. At the time,neither party has the ability to make a firm business commitment to the otherfor future orders for products incorporating TMOS Display Technology. In orderto accommodate both parties to this Agreement, LOCKHEED MARTIN has establisheda ****** which it may exploit (“******”), a copy of which has been provided toUPD. To date, LOCKHEED MARTIN represents that it has expended an estimated 

 

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$******in connection with various research and development efforts by LOCKHEED MARTIN,by government agencies in various cooperative research and developmentprograms, and by UPD pursuant to the previously referenced Subcontract thathave application to the development of the prototypes contemplated by theSubcontract. In all cases, potential investments by LOCKHEED MARTIN referencedin the ****** are proposed on an annual basis and must compete with otherproposed Lockheed Martin Corporation and Lockheed Owego business unit programson a highly competitive basis.  Eachannual contribution by LOCKHEED MARTIN to the development and commercializationof TMOS-based products is dependent upon the prior progress made with priorcontributions and the potential business value of the resulting TMOS-basedproducts developed. Based upon such parameters, LOCKHEED MARTIN is hereinmaking a non-binding good faith estimate that LOCKHEED MARTIN will make anadditional $****** in investments toward the development of TMOS-based productsin periodic traunches over the course of the planned development effort whichmay last up to ******. Such investment is not a requirement of this Agreement.As part of the non-binding estimate, LOCKHEED MARTIN’s proposed futureinvestment plans include a purchase by LOCKHEED MARTIN of ****** TMOS-based ******for application evaluation at such time and price as to be mutually agreed uponand when deliverable under the development effort. LOCKHEED MARTIN and UPDagree to conduct quarterly marketing meetings to determine jointly theappropriate opportunities in the Military/Aerospace Field to pursue.  LOCKHEED MARTIN’s future contributions arealso subject to the following:

 

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(i)             Acceptable completion of qualificationtesting of the prototype UPD Licensed Products pursuant to this Agreement

 

(ii)          Early adoption by programs with newrequirements;

 

(b)  At the earliest reasonable timefollowing LOCKHEED MARTIN’s acceptance of the prototype UPD Licensed Productsreferenced in Article 2.3 or within four years following the EffectiveDate of this Agreement, the parties agree to commence negotiations regardingeither the minimum annual quantity of UPD Licensed Products that LOCKHEEDMARTIN will agree to order from UPD or the minimum annual royalties that itwill agree to pay in order to maintain the exclusivity of the exclusivelicenses granted to LOCKHEED MARTIN pursuant to Article 3.3 and 4.3  In the event the parties do not reachagreement on either minimum annual quantities of UPD Licensed Products orminimum annual royalties by October 15, 2008, the following defaultminimum royalty provisions will become effective.

 

## Inthe event UPD is no longer a “Preferred Supplier” and the royalties accruing toUPD upon UPD Licensed Products made, used, sold or leased by LOCKHEED MARTIN,its Affiliates or Sub-licensees following the second contract year after theEffective Date of this Agreement does not exceed the following minimum royaltyrequirements, UPD , at its option, may convert the exclusive licenses grantedunder Articles 3.3 and 4.3 of this Agreement to non-exclusive licenses orterminate the licenses to the background portion of UPD IPR under Article 4.3unless LOCKHEED MARTIN pays UPD, by the deadline for making the final royaltypayments under Article 4.5 for such year, such additional sums to satisfy suchminimum annual royalty requirements for the year: 

 

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## (i)  Beginning thefirst calendar year following the loss of “Preferred  Supplier” status, the annual minimum royaltyshall be ******    Dollars ($******) percalendar year for the three years after the ****** are ordered.

##  

## (ii)  At least sixmonths prior to the end of the last calendar year for which a minimum royaltyis provided pursuant to subparagraph (i), the Parties agree to begin, andcontinue with due diligence, good faith negotiations on mutually acceptableannual minimum royalties for the remaining years of the Term of this Agreement.

 

Inthe event LOCKHEED MARTIN contracts with UPD to make UPD Licensed Productsfor LOCKHEED MARTIN which itthen uses or sells to a third party without paying a royalty pursuant to Article 4.3 LOCKHEEDMARTIN shall be entitled to receive a credit toward its minimum annual royalty obligations under this Article equalto the royalty LOCKHEED MARTINwould have paid if it had manufactured the UPD Licensed Products which it sold, transferred or used.

 

(c)  In the event LOCKHEED MARTIN, aftera period of five years from the Effective Date of this Agreement, has notobtained a commercial market for UPD Licensed Products licensed under Article 4.3,has discontinued making commercial versions of the UPD Licensed Products previouslymade for a period greater than one year, or decides to abandon utilization ofUPD’s IPR licensed under Article 4.3, LOCKHEED MARTIN or UPD, in its solediscretion, may terminate this Agreement without prejudice upon written noticeto the other party.

 

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4.8                                 Pursuant to the terms of 4.7, LOCKHEEDMARTIN shall, at is sole option, have the option to place an order for UPDLicensed Products or make payments in the amounts set forth therein in order tomaintain the exclusivity of the licenses granted in this Agreement by UPD toLOCKHEED MARTIN in the Military/Aerospace Field.

 

4.9                                 UPD shall develop and deliver to LOCKHEEDMARTIN, no later than thirty (30) days after availability of the firstproduction Unit of the UPD Licensed Product, an “As Built” cost which shallInclude, but is not limited to, estimated labor cost, material costs and profitrequired to produce production quantities.

 

4.10                           Except for the express licenses as setforth in Articles 3, 4, and 5.2, no other license is granted under thisAgreement with respect to either LOCKHEED MARTIN IPR or UPD IPR, including, butnot limited to, any implied licenses to any Party’s background IPR.

 

ARTICLE 5:Patent Rights in Improvements

 

5.1                                 The sole inventions of either partyrelating to the display product improvements conceived or developed pursuant tothis Agreement shall be owned exclusively by that party. Joint inventions shallbe jointly owned.   LOCKHEED MARTIN shallbe responsible for the costs associated with adequately and timely filing ofpatent applications on the jointly owned inventions under both companies’names.  During the Term of thisAgreement, UPD’s patent applications filed on UPD IPR will automatically beadded to UPD IPR licensed to LOCKHEED MARTIN. LOCKHEED MARTIN agrees to disclose to UPD any LOCKHEED MARTIN inventionsconceived or developed 

 

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pursuant tothis Agreement or the Subcontracts directly related to TMOS Display Technology,and, during the Term of this Agreement, any such inventions (and any LOCKHEEDMARTIN patent applications filed thereon on Lockheed IPR) will automatically beadded to LOCKHEED MARTIN IPR licensed to UPD.

 

5.2                                 In the event that LOCKHEED MARTIN declinesto seek a particular opportunity for a sale of UPD Licensed Products in theMilitary/Aerospace Field, LOCKHEED MARTIN shall grant to UPD a limitednon-exclusive license under LOCKHEED MARTIN IPR and UPD IPR in theMilitary/Aerospace Field sufficient for and restricted solely to UPD’s sales ofsuch product (including support of UPD’s bid for such sales).  Such limited non-exclusive license shall beroyalty bearing and shall subject to the royalty payments and terms provided inArticle 4.4(b) and other related Articles.

 

5.3                                 Ifeither Party decides not to prepare, file and diligently prosecute any patentapplication on an invention that it owns pursuant to Article 5.1, orsubsequently decides to abandon such patent application, in any country, thatParty shall so notify the other Party in writing at least sixty (60) days priorto such abandonment or such longer period as shall reasonably permit the otherParty to act thereon.  Within areasonable time after receiving such notice, the other Party (the “AcceptingParty”) may elect to accept the responsibility to prepare, file, diligentlyprosecute, or otherwise assume responsibility for such patent application.  Upon such notice from the Accepting Party,the other party shall, under applicable law assign such patent application tothe Accepting Party.

 

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5.4                                 If UPD elects to forego maintenance onany patent constituting part of the UPD Patent Rights added by Section 5.3,then UPD shall so notify LOCKHEED MARTIN at least sixty (60) days prior to thetime such maintenance payment is due or such longer period as shall reasonablypermit LOCKHEED MARTIN to so maintain such patent under applicable law, andLOCKHEED MARTIN may, in its sole judgment and at its own expense, do so.

 

5.5                                 Each party shall execute any document andperform such other acts as the Party preparing, filing, and prosecuting anypatent application may reasonably request in writing. The prosecuting Partywill provide the other Party with a reasonable opportunity to review andcomment on any such application during its preparation and on any office actionand response thereto incident to its prosecution and will supply the otherParty with a copy of all correspondence and like communications sent or receivedbetween itself and the applicable government agency in connection therewith, asand when sent or received.

 

5.6                                 Each Party preparing, filing andprosecuting any patent application will do so at its own expense, using theattorney or attorneys of its choice. The other Party will bear its own expensesassociated with its cooperation in such preparation, filing, prosecution,review and comment.

 

5.7                                 UPD shall pay, as and when due, all feesand annuities and do such other things as may be necessary or advisable tomaintain any patent issuing from any application constituting part of the UPDPatent Rights.

 

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ARTICLE 6: Patent Infringement And Defense

 

6.1                                 In the event either party becomes aware orreasonably suspects that there is or may be infringement by others of any UPDIPR exclusively licensed to LOCKHEED MARTIN under this Agreement, that partymust provide written notice to the other party. For the purposes of this Article 6 of this Agreement the partiesagree that the “taking” of UPD IPR that would form the basis of a “takings case”under 28 U.S.C. Section 1498 shall be regarded as act of infringement andthat such a takings case will be regarded as a suit for infringement.

 

6.2                                 In the event of any infringement ormisappropriation by others of any UPD IPR exclusively licensed to LOCKHEEDMARTIN under this Agreement within the Military/ Aerospace Field, LOCKHEEDMARTIN shall have the first right (but not the obligation) to enforce any suchexclusively licensed IPR under the UPD IPR against any infringement,misappropriation or alleged infringement or misappropriation thereof solely inthe Military/Aerospace Field in its own name and in the name of UPD (“Lockheed’sFirst Right to Enforce”).  LOCKHEEDMARTIN shall have thirty (30) days from the date of the notice provided under Article 6.1to elect whether it shall accept Lockheed’s First Right to Enforce.  If LOCKHEED MARTIN does not accept Lockheed’sFirst Right to Enforce within thirty (30) days from the date of the noticeprovided under Article 6.1, than either party may provide written noticeto the other that it shall enforce any such exclusively licensed IPR under theUPD IPR in the Military/Aerospace Field. Once a party has provided written notice to the other that it shallenforce any such exclusively 

 

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licensed IPR under the UPD IPR in theMilitary/Aerospace Field, it shall be deemed the “Enforcing Party” and theother party shall be deemed the “Non-Enforcing Party.”

 

6.3                                 The Enforcing Party shall at all times keepthe Non-Enforcing Party reasonably informed as to the status of the EnforcingParty’s enforcement activities.

 

6.4                                 The Enforcing Party may, in its solejudgment and at its own expense, institute suit against any such infringer oralleged infringer, and control, settle and defend such suit in a mannerconsistent with the terms and provisions hereof and recover, for its account,except as set out in Article 6.7, any damages, awards or settlementsresulting therefrom. The Parties further agree that the Enforcing Party mayinitiate good faith negotiations with the infringer, and such acts constituteacts of enforcement of the exclusively licensed IPR under the UPD IPR by theEnforcing Party.

 

6.5                                 To the extent, LOCKHEED MARTIN is theEnforcing Party, LOCKHEED MARTIN shall join UPD in any suit brought to enforcesuch exclusively licensed IPR and UPD agrees that it shall join in any suchsuit.  Furthermore, LOCKHEED MARTIN shallmake good faith reasonable efforts to enforce the exclusively licensed IPR, andUPD shall have the right to become the Enforcing Party should LOCKHEED MARTINnot either enter into a license agreement or bring suit against the knowninfringing third parties within eighteen (18) months of LOCKHEED MARTINelecting to enforce the exclusively licensed IPR.

 

6.6                                 To the extent UPD is the Enforcing Party,LOCKHEED MARTIN agrees it shall not provide any sublicense in theMilitary/Aerospace Field to alleged infringing parties during such enforcementproceedings without the prior written consent of UPD, 

 

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which consentshall not be unreasonably withheld or delayed.

 

6.7                                 To the extent that there is a recovery by theEnforcing Party, the Enforcing Party shall be entitled to the proceeds, lessthe reasonable legal fees and expenses borne by the Non-Enforcing Party, ifapplicable.

 

6.7.1                   To the extent LOCKHEED MARTIN is the Enforcing Party, after beingreimbursed reasonable legal fees and expenses incurred by both parties,LOCKHEED MARTIN shall provide a royalty payment to UPD consistent with LOCKHEEDMARTIN’s obligations under Article 4.3 for such sales, use or otherdisposition of UPD Licensed Products not sold to LOCKHEED MARTIN by UPD.

 

6.7.2                   To the extent UPD is the Enforcing Party, UPD shall not grant asublicense in the Military/Aerospace Field to any alleged infringer toeffectuate settlement of the dispute without the prior written consent ofLOCKHEED MARTIN.  LOCKHEED MARTIN’sconsent shall be within its sole discretion. After taking into account reasonable legal fees and expenses incurred byboth parties, LOCKHEED MARTIN and UPD shall allocate the royalty payment undersuch sublicense consistent with the obligations under Article 4.3 for suchsublicenses.

 

6.8                                 Solely in connection with enforcing any IPRunder exclusively licensed UPD IPR against any infringement, misappropriationor alleged infringement or misappropriation thereof by a third party in theMilitary/Aerospace Field, either Party shall have the right to defend againstany third party counterclaim respecting the invalidity and/or enforceabilitythereof, and at all times shall keep the other Party reasonably informed as tothe status thereof.

 

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6.9                                 In the event suit is brought by the EnforcingParty, the Non-Enforcing Party agrees to cooperate in such suit in order tosuppress any material infringement of said exclusively licensed UPD IPR.  Further, the Non-Enforcing Party shall beentitled to retain counsel of its choice and participate in such suit.  In the event any court of competentjurisdiction renders a final judgment on any claims or claims of any of anypatent within exclusively Licensed UPD Patent Rights, with all right of appealexhausted, such holding shall be binding upon the parties to this Agreement forpurposes of subsequent construction or enforceability of this Agreement or suchexclusively licensed UPD Patent Rights.

 

6.10                           (a) If any claim or proceeding is broughtagainst LOCKHEED MARTIN and/or its Affiliates, based on any infringement oralleged infringement of any third party’s patent in connection with manufactureor sale of UPD Licensed Products for use within the Military/Aerospace Field,UPD shall have the right to defend, and shall indemnify and hold LOCKHEED MARTIN harmless from all recoveriesand expenses resulting from such claim or proceeding, provided that LOCKHEEDMARTIN promptly notifies UPD in writing of such claim or proceeding andLOCKHEED MARTIN cooperate in connection with the defense of such claim orproceeding, however, UPD shall not be obligated to defend, indemnify, or holdLOCKHEED MARTIN harmless if the infringement arises out of (i) LOCKHEEDMARTIN’s, its Affiliate’s, its Sub-licensee’s, or its customer’s requiredspecifications, (ii) from use of UPD IPR in a manner different from thatoriginally contemplated by UPD, (iii) from a combination with any LOCKHEEDMARTIN and/or third party products unless expressly agreed to in writing by UPDor (iv) 

 

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for UPD Licensed Products licensed under Article 4.3that were not sold to LOCKHEED MARTIN by UPD, from such UPD Licensed Product tothe extent not made to UPD provided specifications.  UPD’s liability hereunder shall not exceedthe amounts set forth in Article 6.10(c).

 

(b)                                 The defense, settlement, or compromise of anysuit which UPD shall have the right to defend shall be in UPD’s sole control,except if LOCKHEED MARTIN, desires to employ counsel at its own expense toassist in the defense of the suit; provided, however, that UPD may not withoutthe prior written approval of LOCKHEED MARTIN settle, or compromise any suit insuch fashion as to impose upon LOCKHEED MARTIN injunctive relief or moneydamages.

 

(c)                                  Whenever UPD shall be given notice, asprovided in Article 6.10 of a claim by a third party, by suit orotherwise, that LOCKHEED MARTIN’s manufacture, use, lease, sale or offer forsale of UPD Licensed Products infringes any third party patent, and in order tomitigate any damages which might therefore accrue both to LOCKHEED MARTIN andUPD, UPD may inform LOCKHEED MARTIN that the infringement claim, upon advice ofcounsel, appears to be valid, and request and instruct LOCKHEED MARTIN to modify,or have its Affiliate or its Sub-licensee modify, the UPD Licensed Product insuch a manner as to avoid such infringement (to the extent this does notmaterially alter the UPD Licensed Product) or may advise LOCKHEED MARTIN todiscontinue the infringing use thereof, and if LOCKHEED MARTIN shall fail tocomply promptly with said request of UPD, UPD shall be discharged from anyobligations or liabilities accruing thereafter except as hereinafterprovided.  LOCKHEED MARTIN may offset itscosts associated with its obtaining a license from such third party from up to 

 

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one-halfof any periodic royalty otherwise payable, or which may become payable, byLOCKHEED MARTIN to UPD  under Article 4.3of this Agreement.

 

ARTICLE 7:Representations, Warranties, Indemnities and Dispute Resolution

 

7.1                                 UPD represents and warrants to LOCKHEEDMARTIN that it owns or has the right to license the Patent Rights and the UPDIPR licensed hereunder and has granted no licenses or entered into any otheragreements or understandings effective on the date first above written orapplicable during the Term of this Agreement restricting or limiting LOCKHEEDMARTIN’s rights and licenses granted in this Agreement, and that UPD shall notdo so during such Term.  In addition, UPDhereby warrants that it has no knowledge, as of the execution of thisAgreement, that its TMOS Display Technology infringes any third partyintellectual property rights.

 

7.2                                 LOCKHEED MARTIN represents and warrantsto UPD that it owns or has the right to license the LOCKHEED MARTIN IPRlicensed hereunder and has granted no licenses or entered into any otheragreements or understandings effective on the date first above written orapplicable during the Term of this Agreement restricting or limiting UPD’srights and licenses granted in this Agreement, and that UPD shall not do soduring such Term.  In addition, LOCKHEEDMARTIN hereby warrants that it has no knowledge, as of the execution of thisAgreement, that its TMOS Display Technology infringes any third partyintellectual property rights.

 

7.3                                 Neither party makes any representationsor warranties, express or implied, as to the validity, enforceability, or scopeof any of its patents.  Neither partymakes any warranty, express or implied, of non-infringement by the LicensedProducts 

 

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of patents orother intellectual property rights owned by third parties.

 

7.4                                 Each party shall indemnify and hold the otherparty harmless from and against any damage, liability, cost, claim or suit(including reasonable attorneys’ fees and court costs) incident to any breachof the representations or warranties set forth in this Article 7.

 

7.5                                 With respect to any claim or suit based on Article 7.4,the party seeking indemnification (“Indemnified Party”) shall promptly give theindemnifying party (“Indemnifying Party”) written notice thereof and, if sorequested, the Indemnifying Party shall defend same, using counsel of its ownselection, and shall keep the Indemnified Party reasonably informed as to thestatus thereof.

 

7.6                                 Dispute Resolution – The parties agree toexercise all reasonable efforts to resolve any dispute arising hereunder bynegotiation. In furtherance and not limitation of the foregoing, Parties agreethat for a period of no less than thirty (30) days following written notice ofdispute, the serving president of UPD or a designee of such officer with actualdelegated authority to negotiate and compromise the disputed issue on the onehand and the serving comparable officer of LOCKHEED MARTIN or a designee ofsuch officer with actual delegated authority to negotiate and compromise thedisputed issue shall negotiate in good faith to resolve such dispute, includingmaking themselves available for no less than two full business days ofin-person negotiations, if such negotiations are required. In the event theParties are not able to amicably resolve such dispute,  either Party may pursue any legal rights andremedies afforded to them under this Agreement or Governing Law.

 

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ARTICLE 8: Term, Termination, and Survivability

 

8.1                                 This Agreement shall begin on the EffectiveDate and unless terminated as provided in Article 2 or this Article 8below, shall remain in effect for the full term of the last of the UPD PatentRights or LOCKHEED MARTIN Patent Rights to expire.

 

8.2                                 LOCKHEED MARTIN defines the first productionready UPD Licensed Product as a UPD Licensed Product meeting the specificationsand requirements included in the present and future Subcontracts and said UPDLicensed Product has completed first article inspection and productionreadiness review.

 

8.3                                 Upon UPD’s or LOCKHEED MARTIN’s breach ofany material representation or warranty made in Article 7, or made in anyinstrument incorporated in this Agreement by reference (a “Material Breach”),or upon either party’s failure to observe and perform any material term orprovision hereof or thereof on its part to be observed and performed (a “MaterialFailure”), the other party (“Non-Defaulting Party”) shall have the right togive the Defaulting Party written notice thereof, and the Defaulting Partyshall have sixty (60) days after receipt of said notice to cure same. If suchdefault is so cured, this Agreement shall remain in full force and effect; ifsame is not cured within such period, then the Non-Defaulting Party shall havethe right to do one or more of the following upon written notice to theDefaulting Party:

 

(a)                                  Immediately terminate the Agreement,provided the Material Breach or Material Failure is due to one or more of thefollowing:

 

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(i)                                     The failure of a Licensed Party to makeits royalty payments required under Article 4.3, 4.4 or 4.7;

 

(ii)                                  A Material Breach or Material Failureresulting from the Defaulting Party’s willful, intentional or grossly negligentaction or inaction;  .

 

(iii)                               A Material Breach or Material Failure ofconfidentiality obligations;

 

(iv)                              A fraudulent misrepresentation;

 

(v)                                 A failure of the essential purpose of theAgreement; or

 

(vi)                              Intentional sales of Licensed Products bya Licensed Party outside its licensed fields.

 

(b)                                        Immediately convert any exclusive licenseunder this Agreement to a non-exclusive license;

 

(c)              Immediately terminate theDefaulting Party’s applicable royalty-bearing licenses set forth in Section 4.3or 4.4 to the Non-Defaulting Party’s IPR in the event such Defaulting Partyfails to make the applicable royalty payments required under Article 4.3,4.4, or 4.7; and/or

 

(d)                                        Pursue any and all other remedies, at lawor in equity, other than termination of the Agreement.

 

8.4                                 Insolvency or Bankruptcy  –Either Party may terminate this Agreementimmediately by written notice to the other Party, if the other Party becomesinsolvent or 

 

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voluntary orinvoluntary proceedings are instituted against the other Party and notdismissed within sixty (60) days under any applicable bankruptcy, insolvency orcreditor’s rights laws, or a Party makes an assignment for the benefit of itscreditors or a receiver or custodian is appointed for the other Party or theother Party’s business is placed under attachment, garnishment or other processinvolving a significant portion of the business or the other Party, or theother Party fails to maintain operations as a going business for more thansixty (60) consecutive days.

 

8.5                                 Termination for Convenience andTermination by Mutual Consent—LOCKHEED MARTIN shall have the right to terminateits licenses (including its royalty and annual minimum royalty obligations) ofUPD IPR under this Agreement upon ninety (90) days prior written notice;provided however, such termination shall not effect UPD’s rights and licensesin connection with LOCKHEED MARTIN IPR, including the license set forth in Article 4.4.  The Agreement may also be terminated by thewritten mutual consent of both Parties. LOCKHEED MARTIN further has the rightto terminate this Agreement as provided in Article 2.3.

 

8.6                                 (a)                                  In the event this Agreement terminates,all licenses granted under Article 3, including Article 3.3, shallbecome non-exclusive licenses to the extent such licenses are not, or have notbecome, already non-exclusive under the terms of this Agreement.

 

(b)                                 Upon the termination of this entire Agreement, the licenses grantedunder Article 4 by each Party to the Licensed Party shall terminate exceptto the extent necessary for each Party to fulfill any existing contractual commitment,including 

 

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obligations  to manufacture,maintain, and/or repair Licensed Product for an existing customer.

 

(c)                                  Absent termination of the Agreement, thelicenses granted under Article 4.3 and 4.4 are not revocable by eitherparty except as set forth in Article 8.3(c).  However, the exclusive license granted under Article 4.3may become non-exclusive during the term of this Agreement, as provided for inthis Agreement, including Articles 4.7 and 4.8.

 

8.7                                 The provisions of Paragraphs 8.7through 8.10 shall also apply to the rights and obligations of the Partieshereto upon termination of the Agreement under this Section.

 

8.8                                 Notwithstanding any termination of thisAgreement, each party shall remain obligated to render statements, furnishprescribed information and make payments as provided herein with respect to anyroyalty, if any, due on the manufacture, sale, lease or use of its respectiveLicensed Products (by it, its Affiliates, or its Sub-licensees) prior to thedate of termination of the respective licenses. Termination of this Agreement shall also not affect a party’s right toexamine and audit records and accounts as provided in Article 14 hereofcommencing within six (6) months after submission of the Licensing Party’sfinal statement.

 

8.9                                 In the event of a termination of thisAgreement, each party agrees that the confidentiality provisions set forth in Article 17of this Agreement shall nonetheless remain in full force and effect, and if theconfidentiality provisions are in effect each receiving party further agrees,to the extent not otherwise expressly provided, to return 

 

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and deliver tothe disclosing party following the termination of the applicable licenses(including as provided under Article 8.6) all copies of all notes,reports, photographs, manuals, memoranda, plans, drawings, records or otherdocuments containing any of the disclosing party’s licensed ConfidentialInformation under licenses that are terminated or any information or technicalimprovements provided by the disclosing party hereunder and further agrees todestroy all copies of any material prepared by the receiving party whichcontain the disclosing party’s Confidential Information for which the licenseshave been terminated.  Such return shallinclude the return of any escrowed materials, except those escrowed materialsretained by LOCKHEED MARTIN pursuant to Section 8.6(b), that may have beenobtained by LOCKHEED MARTIN under Article 10 of this Agreement to theextent they relate to IPR for which the prior license has been terminated.  Such return and delivery shall be withinsixty (60) days from the date that a party notifies the other party of any suchtermination of this Agreement except to the extent and for the duration of suchlicenses that are necessarily continued pursuant to Article 8.6(b).

 

## 8.10                           Survivability. Any terms of thisAgreement which by their nature extend beyond their expiration, or due to a contractualobligation by or to a third party, shall remain in effect until fulfilled andshall bind the parties and their legal representatives, successors, heirs orassigns.

 

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ARTICLE 9: RESERVED

 

ARTICLE 10: Escrow Agreement

 

10.1              The parties agree to negotiate in good faiththe terms of an escrow agreement (“Escrow Agreement”) within ninety (90) daysof the Effective Date of this Agreement.  Within ninety (90) days following execution the Escrow Agreement, UPDagrees to place in escrow, via deposit, all UPD IPR relating to TMOS DisplayTechnology, including that required for manufacturing and software source Codethat is required for LOCKHEED MARTIN to be able to use, modify, make or havemade Licensed Products. The Escrow Agreement shall provide, among other things,for: (i) LOCKHEED MARTIN to pay UPD ******% royalty on the Net Sales Priceit receives for the sale, lease or other transfer to a third party of LicensedProducts or for the reconstruction, upgrade, service or spares associated withthe Licensed Products and (ii) UPD to periodically update thedocumentation in a timely fashion and reasonable intervals to ensure it remainscomplete and reflects the then-current configurations.  In the event that a triggering event occursas described in Article 10.2, the materials in escrow shall be releasedimmediately to LOCKHEED MARTIN to permit LOCKHEED MARTIN to modify, make, orhave made, the Licensed Products.   TheEscrow Agreement, when developed, will become Exhibit E  to this Agreement.

 

10.2              To ensure that the items in escrow areadequate for LOCKHEED MARTIN to perform should a triggering event occur,LOCKHEED MARTIN shall, at its expense, have the right to retain a qualifiedthird party who executes a suitable nondisclosure agreement with UPD toindependently review the documentation held in escrow and 

 

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provide a recommendation as to the adequacy of thedeposited data, to determine if it meets the intent of this Agreement.  The “Triggering Events” shall be as follows:

 

1)  UPD chooses not to remain in the TMOSbusiness;

 

2)  Bankruptcy or Insolvency of UPD under Article 8.4;

 

3)  UPD fails to maintain its “Preferred Supplier”status; or

 

4)  UPD is acquired by a company competing in theMilitary/Aerospace Field.

 

10.3   In the event a Triggering Event occurs, (1) UPD shall update theescrowed materials for the final time and shall promptly transfer such updatedmaterials to LOCKHEED MARTIN and, (2) LOCKHEED MARTIN shall be able toexercise all the rights and licenses granted under this Agreement, using suchmaterials.

 

ARTICLE 11: Non-exclusiveness of Remedies

 

11.1                                            Each party’s right of indemnification andtermination provided in this Agreement or in any instrument incorporated hereinby reference shall not be the exclusive remedies of such parties in the eventof any misrepresentation, breach or default hereunder or thereunder, but willbe in addition to any other remedies accorded them at law or in equity.

 

ARTICLE 12: Notices

 

12.1                                            All notices, requests, approvals andother like communications required or permitted to be given under thisAgreement or under any instrument incorporated herein by reference shall be inwriting and will be deemed effective and given when delivered 

 

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in person orsent by certified or registered mail, postage and certification prepaid, to UPDat its address first above written, and to LOCKHEED MARTIN at its address firstabove written. The present points of contact for each company are as follows:

 

Uni-Pixel Displays, Inc.

8708 Technology Forest Pl. Suite 100

The Woodlands, Texas 77381

Attn: Bruce Rehburg

 

Lockheed Martin Systems Integration-Owego

1801 Route 17C

Owego, New York 13827

Attn: Robert M. Powell

 

ARTICLE 13:Assignment

 

13.1                           Neither this Agreement nor any instrumentincorporated herein by reference nor any Subcontract may be assigned by eitherParty without the prior written approval of the other Party, which approvalwill not be unreasonably delayed or withheld, except that LOCKHEED MARTIN orUPD may assign its rights and delegate its obligations  without such approval to any of itsAffiliates or Subsidiaries upon written notice to the other Party pursuant towhich it expressly assumes the obligations of the assigning party.

 

ARTICLE 14: Force Majeure

 

14.1                           Either Party’s failure to observe andperform any term or provision of this Agreement or any instrument incorporatedherein by reference nor any Subcontract shall be excused in the event, to theextent and only during the period that same arises from or is incident tounforeseen causes beyond the excused Party’s control not resulting from itsfault or negligence, including but not limited to, act of public enemy, 

 

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government orGod.

 

ARTICLE 15: Successors, Assigns, Etc.

 

15.1                                            This Agreement and the instrumentsincorporated herein by reference shall be binding and inure to the benefit ofboth Parties and their respective successors in interest and permitted assigns.

 

ARTICLE 16: Limitation of Liability

 

16.1                           Except asotherwise contemplated by Articles 6.10, 7.4 and 17 herein, neither Party shallbe liable for indirect, special, consequential or punitive damages (includingloss of income, profits or goodwill) arising under or in relation to thisAgreement whether based on action or claim in contact, equity, negligence,intended conduct, tort, or otherwise and each Party hereby waives any claimswith respect thereto.  LOCKHEED MARTINand UPD expressly acknowledge that the limitations and exclusions contained inthis Article 16 have been the subject of active and complete negotiationsbetween the Parties and represent the Parties’ agreement based upon the levelof risk to UPD and LOCKHEED MARTIN associated with their respective obligationsunder this Agreement and the consideration exchanged hereunder.

 

ARTICLE 17: Confidential Information

 

17.1                           Any exchange of Confidential Informationbetween the parties shall be governed by Agreement to Exchange ConfidentialInformation (AECI) Number 9552 dated 04 May 2004 provided both partiesagree the term of the AECI is extended until the greater of (a) five yearsfrom the Effective Date and (b) three (3) years after 

 

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termination of this Agreement so as to keep the AECIin full force and effect during the entire term of this Agreement and for threeyears thereafter.

 

ARTICLE 18:  Governing Law

 

ThisAgreement and the instruments incorporated herein by reference shall be deemedto have been made in the State of Texas, and will be construed under andgoverned by the internal laws of that State.

 

ARTICLE 19:Invalidity

 

The unenforceability of any term or provision of this Agreement or ofany instrument incorporated herein by reference shall not affect the otherterms or provisions, and such invalid or unenforceable term or provision shall,in all events, be construed and enforced to the fullest extent permissibleunder law.

 

ARTICLE 20:Waiver

 

Thefailure of either Party to enforce at any time the terms, conditions,requirements or any other provision of the Agreement shall not be construed asa waiver, by either Party, or any succeeding non-performance of the same terms,conditions, requirements or any other provision of this Agreement.

 

ARTICLE 21:Publicity

 

TheParties shall agree that any and all announcements related to this Agreement,as well as any other public announcements related to the terms of thisAgreement, including product announcements, shall be approved in writing by theother party prior 

 

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torelease, which approval shall not be unreasonably withheld.

 

ARTICLE 22  Order of Precedence

 

In the event of aconflict or inconsistency in or between the provisions of this Agreement andthe Exhibits or other documents referenced herein, the documents shall takeprecedence in the following order:

 

1)              This Agreement

 

2)              Purchase Order(s) or Subcontracts betweenUPD and LOCKHEED MARTIN

 

3)              LOCKHEED MARTIN Terms and Conditions

 

4)              Interface Control Document

 

5)              Electrical Specifications

 

6)              Electronics Plan

 

7)              Escrow Agreement

 

8)              Other documents and attachments

 

ARTICLE 23: Sole Agreement

 

This Agreement and the instruments incorporated herein by referenceincluding, but not limited to, all Subcontracts and/or Exhibits shallconstitute the entire agreement between the parties respecting the subjectmatter hereof and thereof, and neither this Agreement nor any such instrument maybe changed or modified except upon an instrument in writing signed by bothParties which states that it is an amendment hereto 

 

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or thereto.

 

IN WITNESS WHEREOF, the Parties have set their hands to this Agreement,or caused their duly authorized representative to execute same.

 

 
| LOCKHEED MARTIN SYSTEMS INTEGRATION – OWEGO |                                                   |
|--------------------------------------------------|--------------------------------------------------------|
|                                             |                                                   |
| By:                                              |    /s/ Robert Powell                    |   |   |
|                                             |                                                   |
| Its:                                             |    Subcontract Administrator Sr.  Staff |   |   |
|                                             |                                                   |
| Date:                                            |    10-6-05                              |   |   |
|                                             |                                                   |
| UNI-PIXEL DISPLAYS, INC.                         |                                                   |
|                                             |                                                   |
| By:                                              |    /s/ Reed Killion                     |   |   |
|                                             |                                                   |
| Its:                                             |    President                            |   |   |
|                                             |                                                   |
| Date:                                            |    10-6-05                              |   |   |
|                                                  |                                                        |  |  |  |  |  |

 

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List of Exhibits to Agreement:

 

Exhibit A                                                                       Patent Rights

 

Exhibit B                                                                         Subcontract 270662

 

Exhibit C                                                                         ICD, SPEC, Electrical Design

 

Exhibit D                                                                        Detailed Program Schedule

 

Exhibit E                                                                          Escrow Agreement (90 Days After Agreement)

 

Exhibit F                                                                          Agreement to Exchange ConfidentialInformation 9552 Dated 04 May 2004.

 

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