Document:

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                                                                    Exhibit 10.5

                                LICENSE AGREEMENT

                                     between

                           PURDUE RESEARCH FOUNDATION

                                       and

                               NANO DYNAMICS, INC.

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                         <C>
ARTICLE 1.  DEFINITIONS .................................................     2
ARTICLE 2.  GRANT OF LICENSE ............................................     4
ARTICLE 3.  DILIGENCE AND COMMERCIALIZATION .............................     5
ARTICLE 4.  CONSIDERATION FOR LICENSE ...................................     6
ARTICLE 5.  REPORTS AND PAYMENTS ........................................     7
ARTICLE 6.  RECORDS .....................................................     8
ARTICLE 7.  PATENT PROSECUTION ..........................................     8
ARTICLE 8.  ABATEMENT OF INFRINGEMENT ...................................     8
ARTICLE 9.  CONFIDENTIALITY .............................................     9
ARTICLE 10. LIMITED WARRANTY, MERCHANTABILITY AND EXCLUSION OF
            WARRANTIES ..................................................     9
ARTICLE 11. DAMAGES, INDEMNIFICATION, AND INSURANCE .....................    10
ARTICLE 12. TERM AND TERMINATION ........................................    10
ARTICLE 13. ASSIGNMENT ..................................................    12
ARTICLE 14. MISCELLANEOUS ...............................................    12
ARTICLE 15. NOTICES .....................................................    13
EXHIBIT A - Licensed Patents and Licensed Technology ....................   [__]
EXHIBIT B - Licensee's Development Plan .................................   [__]
</TABLE>

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THIS LICENSE AGREEMENT is made and entered into as of this 20th day of December,
2002, by and between the PURDUE RESEARCH FOUNDATION, a statutory body corporate
formed and existing under the Indiana Foundation or Holding Companies Act of
1921, with offices located at 1291 Cumberland Avenue, Suite F, West Lafayette,
Indiana (hereinafter referred to as "PRF") and NANO DYNAMICS, a New York,
corporation with corporate headquarters located at 901 Fuhrmann Boulevard,
Buffalo, NY 14203 (hereinafter referred to as "LICENSEE"),

WHEREAS, the Purdue University Board of Trustees has, by general resolution
and/or assignment, designated PRY to administer all matters pertaining to
protection, utilization and commercialization of the intellectual property
developed at Purdue University; and

WHEREAS, PRF owns certain rights, title, and interest in and to the Licensed
Patents and Licensed Technology (as defined herein), including patent-protected
materials as follows:

"Formation of Nano-Crystalline and Sub-Micron Structures in Steels and Other
Metals by Machining and Their Use in the Engineering of New Materials" (PRF
Reference No. P-00002);

"Direct Method for Creating Nanostructured Bulk Forms by Machining" (PRF
Reference No. P-02129); and

"Method of Creating Submicron Particles by Abrasive Machining" (PRF Reference
No. P-02130).

WHEREAS, PRF wishes to have the Licensed Patents and Licensed Technology
further developed and marketed at the earliest possible time in order that
products resulting therefrom may be available for public use and benefit; and

WHEREAS, LICENSEE desires to hereby enter into this Agreement whereby LICENSEE
obtains to use the Licensed Patents and Licensed Technology and for commercial
purposes; and

WHEREAS, LICENSEE represents that it possesses the expertise to do so; and

WHEREAS, PRF is willing to enter into this Agreement with LICENSEE, under the
terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and premises contained
herein, the receipt and sufficiency of which is hereby acknowledged, the Parties
hereto agree as follows:

                             ARTICLE 1. DEFINITIONS

     The following terms as used herein shall have the following meaning:

     1.1 "Affiliate" shall mean a corporation, company, partnership, or other
business entity that controls or is controlled by, or is under common control,
with the LICENSEE. In the

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case of a corporation or company, "control" means
ownership either directly or indirectly of at least fifty percent (50%) of the
shares of stock entitled to vote for the election of directors.

     1.2 "Agreement" or "License Agreement" shall mean this Agreement, including
all Exhibits attached to this Agreement.

     1.3 "Field of Use" shall mean all fields of use.

     1.4 "Indemnitees" shall mean PRF, PRF's officers and directors, PU, PU's
employees, and the Inventors, and their heirs, executors, administrators, and
legal representatives.

     1.5 "Inventors" shall mean Drs. Dale Compton, Srinivasan Chandrasekar,
Thomas Farris, and Kevin Trumble.

     1.6 "Licensed Patents" shall mean the patent applications and patents
identified in EXHIBIT A hereto, together with all divisionals, continuations,
reissues, reexaminations and foreign counterparts of such applications or
patents.

     1.7 "Licensed Product(s)" shall mean products or services, the development,
manufacture, use or sale of which would infringe a Valid Claim and/or require
the use of Licensed Technology.

     1.8 "Licensed Technology" shall mean all technical information known to one
or more Inventors that is, as of the date of this Agreement, legally vested in
PRF, as assignee of Purdue University, and within the scope of the disclosure of
Licensed Technology set forth in Exhibit A. The term "Licensed Technology" does
not include either (a) any invention covered by Valid Claim(s) or any other
patent or (b) any right or interest in or to or arising from any future research
at Purdue University.

     1.9 "Licensed Territory" shall mean worldwide.

     1.10 "Valid Claim" shall mean a claim included among the Licensed Patents,
which claim shall not have been irrevocably abandoned or held invalid in an
unappealable decision of a court or other authority of competent jurisdiction.

     1.11 "Commercial Sublicense" shall mean any sublicensing agreement or
arrangement between LICENSEE and a third party by which the third-party is
licensing Licensed Patents or Licensed Technology primarily to incorporate
Licensed Products for commercial purposes. The holder of a Commercial Sublicense
is a "Commercial Sublicensee."

     1.12 "Authorized Uses" shall mean uses of the Licensed Patents and Licensed
Technology to develop and make and have made Licensed Product(s) for use,
license and sale.

     1.13 "Gross Receipts" means the gross payments and other consideration
(whether cash or non-cash) accrued or received by LICENSEE (net of product
returns) in consideration for provision by LICENSEE of Licensed Product(s),
including but not limited to: fees, gains, or other consideration for sale,
license, or lease of Licensed Product(s), or other service or product

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fees otherwise related in any way to Licensed Product(s). This definition
includes all amounts for installation, products, maintenance, and/or other
services provided in conjunction with Licensed Product(s). Where a sale, gift,
use, or other disposition of a Licensed Product is transacted for value other
than cash, the term "Gross Receipts" shall mean, per unit of said Licensed
Product, the fair market value of said Licensed Product as evidenced by the
retail price realized for sales of comparable Licensed Product during the
immediately preceding three (3) month period. Gross Receipts excludes the
following items as separately charged and enumerated on an invoice to customers,
packing, transportation and insurance charges; and import, export, excise,
sales, use and value added taxes, and customs duties. Any royalty income or
other consideration for a Commercial Sublicense that is subject to paragraph 4.2
hereof shall not be deemed to be "Gross Receipts" hereunder.

     1.14 "Effective Date" shall mean the date this Agreement is duly executed
by both Parties hereto.

                          ARTICLE 2. GRANT OF LICENSE

     2.1 Subject to compliance with this Agreement, and subject to the
reservation of rights stated below, PRF grants, and LICENSEE accepts, a license
to the Licensed Patents and Licensed Technology on a royalty-bearing basis for
Authorized Uses in the Field of Use in the Licensed Territory and for issuance
of corresponding Commercial Sublicenses, for seven (7) years from the date of
issuance of the first patent, directly between LICENSEE and Commercial
Sublicensee on terms and conditions consistent with this Agreement. The license
granted to LICENSEE under this paragraph is exclusive for Licensed Patents for a
period of seven (7) years from the issuance of the first patent. The license
granted to LICENSEE under this paragraph is non-exclusive for a period of seven
(7) years from the issuance of the first patent for the Licensed Technology.
After the seven (7) year period, PRF and LICENSEE shall negotiate in good faith
the license to the Licensed Patents and Licensed Technology.

     2.2 Except as expressly granted by PRF to LICENSEE herein, all rights and
entitlements, whether now existing or that may hereafter come into existence,
are reserved to PRF.

     2.3 This Agreement shall not be construed to confer any rights upon
LICENSEE by implication or estoppel.

     2.4 LICENSEE acknowledges and consents that, notwithstanding any provision
of this Agreement, Purdue University retains a permanent, irrevocable,
royalty-free reversionary license from PRF to utilize the Licensed Patents and
Licensed Technology.

     2.5 LICENSEE shall notify PRF of any proposed grant of a Commercial
Sublicense, and the terms thereof. LICENSEE shall ensure that all uses of
Licensed Patents and Licensed Technology and all development and distribution of
Licensed Products by Commercial Sublicensees 1) are consistent with the terms
and conditions of this Agreement, and 2) return value to LICENSEE commensurate
with the benefits conferred on the Commercial Sublicensee by the Commercial
Sublicense. LICENSEE may not authorize a Commercial Sublicensee to further
sublicense a Licensed Patent. Prior to execution of a Commercial Sublicense,
LICENSEE

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shall submit the proposed Commercial Sublicense to PRF for PRF's review
and determination whether the proposed Commercial Sublicense conforms to this
Agreement. PRF shall be deemed to have approved the proposed Commercial
Sublicense unless, within thirty days of LICENSEE's tender of the proposed
Commercial Sublicense to PRF, PRF provides to LICENSEE either a) written notice
of nonapproval and the reasons for nonapproval, or b) written notice of approval
that is conditioned on specified actions by LICENSEE and/or the proposed
Commercial Sublicensee. Nonapproval by PRF shall be binding on LICENSEE and
render the proposed Commercial Sublicense invalid, subject only to judicial
review in a court of competent jurisdiction. LICENSEE shall remain responsible
for the operations of Commercial Sublicensees as if such operations were carried
out by LICENSEE, including but not limited to the payment of all fees and
royalties due to PRF under this Agreement, whether or not such payments are made
to LICENSEE by its Commercial Sublicensees.

                   ARTICLE 3. DILIGENCE AND COMMERCIALIZATION

     3.1 Diligence and Commercialization. LICENSEE shall use its reasonable
efforts throughout the term of this Agreement to bring Licensed Products, in
each licensed Field of Use, to market through a, diligent program for
exploitation of the right and license granted in this Agreement to LICENSEE and
to create, supply, and service in the Licensed Territory as extensive a market
as possible, consistent with LICENSEE's Development Plan attached hereto as
Exhibit B. In no instance shall LICENSEE's reasonable efforts be less than
efforts customary in LICENSEE's industry.

     3.2 Lack of Diligence. If PRF concludes that LICENSEE is not in material
compliance with Article 3.1, then, any time after one year from the Effective
Date, PRF shall have the right to terminate LICENSEE's rights under this License
Agreement, to all or some of the Fields of Use, pursuant to Article 12. Prior to
exercising said right, PRF shall give notice to LICENSEE stating the basis for
its conclusion. Within five (5) days of such notice, LICENSEE may request that
both parties and negotiate, in good faith, a resolution to the LICENSEE's
non-compliance. Such negotiation shall be concluded within forty-five (45) days
of said notice from PRF. Failure of LICENSEE to comply with the resolution
reached shall automatically (not subject to any requirement for further cause,
legal process, or other action of PRF or LICENSEE) cause this License Agreement
to be deemed to be conclusively terminated upon notice of non-compliance to the
resolution from PRF. Failure to reach a resolution within the said forty-five
(45) day period shall cause this License Agreement to be deemed to be
conclusively terminated upon notice from PRF.

     3.3 Lack of Commercial Sublicensing Diligence. IF LICENSEE is not in
compliance with Commercial Sublicensing due diligence, as called for in
LICENSEE's Development Plan, PRF shall have the right to issue appropriate
license(s) to other entities, at which time this Agreement will be amended
accordingly to reflect rights conferred to the new licensee(s).

     3.4 Financial Capability. At all times during the term of this license,
LICENSEE shall maintain the financial capability to comply with Article 3.1.

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                      ARTICLE 4. CONSIDERATION FOR LICENSE

     4.1 License Fee. LICENSEE shall pay PRF a license fee of sixty thousand
dollars ($60,000) payable according to the following schedule:

<TABLE>
<S>                                 <C>
Effective Date                      $30,000
Six months from Effective Date      $15,000
Twelve months from Effective Date   $15,000
</TABLE>

Said License Fee shall not be credited toward any other obligation of LICENSEE
under this Agreement.

     4.2 Commercial Sublicensing Income. LICENSEE shall, on an annual basis, pay
to PRF thirty five percent (35%) of all Commercial Sublicensing Income other
than royalties, And LICENSEE shall, on an annual basis pay thirty five percent
(35%) of all royalties received from Commercial Sublicensees.

This paragraph 4.2 shall also apply to any recovery by LICENSEE of royalty
damages on a claim for infringement of Licensed Patent(s), said recovery to be
discounted by the documented amount of any attorneys fees and costs reasonably
incurred by LICENSEE in the direct prosecution of said infringement claim.

     4.3 Royalty On Gross Receipts. As further consideration for the grant of
rights hereunder, LICENSEE will pay PRF an earned cumulative annual royalty on
Gross Receipts of three percent (3%).

     Said annual period shall end on December 31 of each annual period during
the Term of the Agreement (the "Annual Period"). For the purpose of calculation
of royalties under this paragraph 4.3, Gross Receipts will include sales of all
Licensed Products for all Fields of Use.

     4.4 Minimum Annual Royalties. LICENSEE shall pay PRF the following minimum
annual payments:

<TABLE>
<S>                                                  <C>
(a)  December 31, 2003                               $ 30,000
(b)  December 31, 2004                               $ 30,000
(b)  December 31, 2005                               $ 60,000
(c)  December 31, 2006                               $ 80,000
(d)  December 31, 2007 and for the remaining years   $100,000
</TABLE>

     The amounts due from LICENSEE to PRF as earned royalties on Gross Receipts
in each Annual Period shall be creditable against the minimum annual royalties
for that Annual Period. In the event that such amounts do not achieve the
required minimum, LICENSEE's payment shall include payment of the balance needed
to achieve the minimum annual royalties for that Annual Period, pursuant to
Article 5.

     4.5 Reimbursement for Legal and Patent Expenses. LICENSEE shall reimburse
PRF for all out-of-pocket legal and other fees, costs, and expenses heretofore
and hereafter during the term of this Agreement paid or incurred by PRF in the
preparation of this Agreement and filing,

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prosecuting, and maintaining the Licensed Patents in the United States only.
LICENSEE shall deliver such reimbursement to PU within thirty (30) days after
PRF notifies LICENSEE from time to time of the amount of such fees, costs, and
expenses that have been paid or incurred by PRF.

     4.6 License Grant-back. As further consideration for the grant of rights
herein, LICENSEE agrees to grant to PRF and Purdue University an irrevocable,
royalty-free, nonexclusive right, to use Licensed Product(s), for educational or
research purposes of Purdue University, including such components as are
independently developed by LICENSEE. This grant of nonexclusive rights includes
the right to make or have made for use at Purdue University, products or devices
(or the rights to practice the process, if a process invention) that are based
on Licensed Product(s); provided however, that (i) PRF and/or Purdue University
may not sell, assign, transfer, license, or otherwise commercially exploit the
rights, products or services referred to herein, and (ii) further provided, that
PRF will take all necessary and reasonable steps to prevent misuse of any such
proprietary information.

                        ARTICLE 5. REPORTS AND PAYMENTS

     5.1 LICENSEE agrees to make written reports and payments of earned
royalties to PRF within thirty (30) days of the end of each calendar quarter for
each Annual Period of this Agreement. For the quartet being reported, LICENSEE
will provide:

     (a)  For each Licensed Product, the number of units sold and the Gross
          Receipts during the reporting period.

     (b)  For each Commercial Sublicense, descriptions of Licensed Patent(s),
          Licensed Technology and/or Licensed Product(s), name and address of
          the Commercial Sublicensee, primary terms of the Commercial
          Sublicense, and consideration received by LICENSEE from the Commercial
          Sublicensee during the reporting period.

     (c)  Total payments due to PRF, with supporting calculations.

Concurrent with the issuance of each report, LICINSEE shall pay PRF the amounts
due for the quarter covered by such report. Minimum annual royalties are due on
the thirtieth day after the conclusion of the Annual Period and shall be payable
concurrent with the quarterly report for the final quarter of each Annual
Period. Reports are required even if no earned royalties are due.

     5.2 All royalties to be paid by LICENSEE hereunder shall be paid in U.S.
Dollars. To the extent that Gross Receipts received by LICENSEE in any calendar
quarter are received in currencies other than U.S. Dollars, for purposes of
calculating the royalties due hereunder, such Gross Receipts shall be converted
to U.S. Dollars at the exchange rate existing between the U.S. Dollar and the
relevant currency on the last day of such calendar quarter, as such rate is
determined by the Chase Manhattan Bank of New York.

     5.3 Payments required under this Agreement shall, if overdue, bear interest
until payment at a per annum rate of two percent (2%) above the prime rate in
effect as published in

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the Wall Street Journal on the due date. The payment of such interest shall not
foreclose PRF from exercising any other rights it may have because any payment
is late.

                               ARTICLE 6. RECORDS

     6.1 Records of Sales. During the term of this Agreement and for a period of
seven years thereafter, LICENSEE shall keep at its principal place of business
true and accurate records of all Sales in such form and manner so that all
royalties owed to PU may be readily and accurately determined. LICENSEE shall
furnish PRF copies of such records upon PRF's request.

     6.2 Audit of Records. Upon the request and at the expense of PRF, the
accounting records maintained by LICENSEE for the purpose of establishing the
amount of the payments due to PRF under this Agreement (including earned
royalties and sublicensing fees) shall be subject, at all reasonable times, and
upon at least thirty (30) days written notice to LICENSEE, to audit by a PRF
auditor for the purposes of determining and verifying the royalty payments made
under this Agreement. if the audit reveals a material underpayment by LICENSEE
to PRF, then LICENSEE shall reimburse PRF for its expenses incurred in the
conduct of the audit.

                         ARTICLE 7. PATENT PROSECUTION

     7.1 Prosecution and Maintenance of Licensed Patents. The prosecution and
maintenance of the Licensed Patents shall be the primary responsibility of PRF.
PRF shall keep LICENSEE informed as to all developments with respect to Licensed
Patents. LICENSEE shall be afforded reasonable opportunities to advise PRF and
cooperate with PRF in such prosecution and maintenance. If LICENSEE should fail
to timely make reimbursement for patent expenses incurred under this paragraph
as required in Article 4.5 of this Agreement, PRF shall have no further
obligation to prosecute or maintain the, Licensed Patents. LICENSEE, upon ninety
(90) days advance written notice to PRF, may advise PRF that it no longer wishes
to pay expenses for filing, prosecuting or maintaining one or more Licensed
Patents. PRF may, at its option, elect to pay such expenses or permit such
Licensed Patents to become abandoned or lapsed. If PRF elects to pay such
expenses, such patents shall not be subject to any license granted to LICENSEE
hereunder.

     7.2 Extension of Licensed Patents. LICENSEE may request that PRF have the
normal term of any Licensed Patent extended or restored under a country's
procedure of extending life for time lost in government regulatory approval
processes, and the expense of same shall be borne in accordance with the terms
of Article 4.5. LICENSEE shall assist PRF to take whatever action is necessary
to obtain such extension. In the case of such extension, royalties pursuant to
Article 4 hereof shall be payable until the end of the extended life of the
patent. In the event that LICENSEE does not elect to extend Licensed Patent(s),
PRF may, at its own expense, effect the extension of such Licensed Patent(s). If
PRF elects to pay such expenses, such extended Licensed Patents shall not be
subject to any license granted to LICENSEE hereunder.

                      ARTICLE 8. ABATEMENT OF INFRINGEMENT

     8.1 LICENSEE acknowledges that the Licensed Patents and Licensed Technology
are of great value to PRF, and therefore, LICENSEE promises to take all
appropriate measures to

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protect PRF's interests therein. LICENSEE shall not permit any entity,
individual or firm to have access to the Licensed Patents and Licensed
Technology, except as authorized in this Agreement.

     8.2 LICENSEE shall promptly inform PRF of any suspected infringement of any
Licensed Patents.

     8.3 LICENSEE shall have the first right (but not the obligation) to notify
the infringer and/or initiate legal proceedings to abate the infringement. Upon
failure by LICENSEE to begin or continue to do so timely, PRF shall have the
right (but not the obligation) to take those steps on behalf of itself and
LICENSEE.

     8.4 If LICENSEE leads proceedings to abate and remedy infringement, any
monetary recovery (net of litigation costs) from the infringement of Licensed
Patents shall be treated as Commercial Sublicensing Income. If PRF leads
proceedings to abate and remedy infringement, any monetary recovery from the
infringement of Licensed Patents shall belong exclusively to PRF. If LICENSEE
and PRF jointly lead proceedings to abate and remedy infringement, any monetary
recovery (net of the parties' respective litigation costs) from the infringement
of Licensed Patents shall be divided equally between LICENSEE and PRF.

     8.5 LICENSEE and PRF shall each bear their own attorney fees and costs
incurred in the prosecution of any infringement proceedings under this Article,
subject to the provisions of Section 11.1 of this Agreement.

                           ARTICLE 9. CONFIDENTIALITY

LICENSEE and PRF shall not, without the express written consent of the other
party, for any reason or at any time either during or subsequent to the term of
this Agreement disclose to third parties the financial terms set forth in this
Agreement, except upon a subpoena or other court order made with appropriate
provision for protection of confidential information.

    ARTICLE 10. LIMITED WARRANTY, MERCHANTABILITY AND EXCLUSION OF WARRANTIES

Each Party warrants to the other that it is fully empowered to enter into this
Agreement. PRF represents, in good faith and to the best of its knowledge, that
there are not, as of the date of this Agreement, any claims, demands, suits, or
judgments against it that in any manner would or might impair or interfere with
PRF's performance of the license granted by PRF to LICENSEE under this
Agreement. Notwithstanding the foregoing, PRF does not warrant the validity of
any Licensed Patents or Licensed Technology. PRF does not warrant the content
contained in the Licensed Patents or Licensed Technology or that they will be
error free or that any defects will be corrected. PRF makes no representation
whatsoever with regard to the scope or commercial potential or profitability or
income of or from the Licensed Patents or Licensed Technology or that such
Licensed Patents or Licensed Technology may be exploited by LICENSEE or its
Affiliates without infringing any rights of any other party. PRF makes no
covenant either to defend any infringement charge by a third party or to
institute action against infringers of Licensed Patents or Licensed Technology.
PRF does not warrant that the Licensed Patents or Licensed Technology will meet
LICENSEE'S or any of LICENSEE'S customer's specific requirements. LICENSEE
warrants that it possesses the necessary expertise and skill to make,

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and has made, its own evaluation of the capabilities, safety, utility, and
commercial application of the Licensed Patents and Licensed Technology.
ACCORDINGLY, THE LICENSED PATENTS AND LICENSED TECHNOLOGY ARE PROVIDED "AS IS."
PRF MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND WITH RESPECT TO THE
LICENSED PATENTS AND LICENSED TECHNOLOGY AND EXPRESSLY DISCLAIMS ANY WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER IMPLIED
WARRANTIES WITH RESPECT TO THE CAPABILITIES, SAFETY, UTILITY, OR COMMERCIAL
APPLICATION OF LICENSED PATENTS AND LICENSED TECHNOLOGY.

              ARTICLE 11. DAMAGES, INDEMNIFICATION, AND INSURANCE

     11.1 LICENSEE shall defend, indemnify and hold PRF and/or Purdue
University, their trustees, officers, agents, employees or assigns, and the
Inventors harmless from any and all claims, demands, actions and causes of
action against PRF, whether groundless or not, in connection with any and all
injuries, losses, damages or liability of any kind whatsoever arising, directly
or indirectly, out of use, exploitation, distribution, or sale of Licensed
Patents Licensed Technology, or Licensed Product(s) by or through the LICENSEE
or its Affiliate(s) or sublicensees, whether or not the claims, demands, actions
or causes of action are alleged to have resulted in whole or in part from the
negligent acts or omissions of PRF and/or Purdue University, their agents,
employees or assigns, or from acts or omissions of such persons for which PRF
would otherwise be strictly liable. This indemnification obligation shall
include, without limiting the generality of the foregoing, reasonable attorney
fees and other costs or expenses incurred in connection with the defense of any
and all such claims, demands, actions, or causes of action.

     11.2 Without limiting LICENSEE's indemnity obligations, within ninety (90)
days of the commercial distribution of any LICENSED PRODUCT or on the date of
initiation of any human trials whichever occurs sooner, LICENSEE shall acquire a
liability insurance policy and shall further maintain said policy throughout the
term of this Agreement and for five (5) years thereafter, said policy to cover
PRF and Purdue University as named insureds (with right to prior notice of
cancellation) for all liabilities, claims, damages, and actions arising from or
relating to LICENSEE's exercise of its license under this Agreement, including
but not limited to product liability and other matters within the scope of
LICENSEE's indemnity obligations under this Agreement, said coverage to be in an
amount no less than [Two Million Dollars ($2,000,000)] per occurrence for bodily
injury and [Five Million Dollars ($5,000,000)] per occurrence for property
damage, subject to a reasonable aggregate amount.

     11.3 LICENSEE shall promptly notify PRF of each claim relating in any way
to a Licensed Product and provide PRF with LICENSEE'S good-faith evaluation of
the claim.

                        ARTICLE 12. TERM AND TERMINATION

     12.1 Term. Unless otherwise extended in writing by mutual agreement of the
Parties, this Agreement will remain valid and in force for seven (7) years from
the Effective Date. Any extensions may include additional provisions or
modifications to terms herein as applicable, and

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such changes shall be negotiated between the Parties and a written amendment to
this Agreement will be made as appropriate.

     12.2 LICENSEE shall have the right to terminate this Agreement at any time,
upon ninety (90) days prior written notice, without cause and for any reason. If
LICENSEE terminates this Agreement under this provision, PRF, will not be under
any obligation to return any portion of the consideration paid by LICENSEE to
PRF. In the event of such termination, LICENSEE agrees, upon the request of PRF,
to provide PRF with all existing data in support of governmental registration of
Licensed Products. PRF shall have the unrestricted right to provide such data to
third parties.

     12.3 If LICENSEE should at any time default or commit any material breach
of any covenant or any obligation of the license, and should fail to remedy any
default or breach within thirty (30) days of LICENSEE's receipt of written
notice, PRF may, at its sole option, terminate this license by notice in writing
to the LICENSEE. Upon termination, LICENSEE shall remain responsible for all
obligations contained in this Agreement, including without limiting the
generality of the foregoing, reasonable attorney fees and other costs or
expenses incurred by PRF as a result of LICENSEE's breach and/or default.

     12.4 If LICENSEE: (a) liquidates and ceases to carry on its business, (b)
becomes "insolvent" (as such term is defined in the United States Bankruptcy
Code, as amended from time to time), or (c) voluntarily seeks, consents to or
acquiesces in the benefits of any bankruptcy or similar debtor-relief laws, then
PEF may terminate this Agreement without prejudice to any other remedy to which
PRF may be entitled at law or in equity or elsewhere under this Agreement, by
giving written notice of termination to LICENSEE.

     12.5 Upon termination of the Agreement, LICENSEE and any Commercial
Sublicensees shall cease all uses of the Licensed Patents and Licensed
Technology.

     12.6 If this Agreement is terminated for any reason whatsoever, LICENSEE
shall return, or at PRF's direction destroy, all plans, drawings, papers, notes,
writings and other documents, samples, organisms, biological materials and
models pertaining to the Licensed Patents and Licensed Technology, retaining no
copies, and shall refrain from using or publishing any portion thereof. Upon
termination of this Agreement, LICENSEE shall cease manufacturing, processing,
producing, using, or selling Licensed Products; provided, however, that LICENSEE
may continue to sell in the ordinary course of business for a period of three
(3) months reasonable quantities of Licensed Products that are fully
manufactured and in LICENSEE's normal inventory at the date of termination if
(a) all monetary obligations of LICENSEE to PRF have been satisfied, and (b)
royalties on such sales are paid to PRF in the amounts and in the manner
provided in this Agreement. However, nothing herein shall be construed to
release either party of any obligation that matured prior to the effective date
of such termination.

     12.7 The provisions of Articles 9, 10, and 11 of this Agreement shall
remain in full force and effect notwithstanding the termination of this
Agreement.

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                             ARTICLE 13. ASSIGNMENT

This Agreement shall be binding upon and shall inure to the benefit of the legal
representatives and assigns of PRF and LICENSEE, provided, however, that any
assignment of this Agreement by LICENSEE to a third party may be made only upon
prior written consent of PRF, which consent may be reasonably withheld or
conditioned by PRF as necessary to prevent prejudice to the Licensed Patents and
Licensed Technology and to preserve the value of the consideration promised by
LICENSEE to PRF under this Agreement.

                           ARTICLE 14. MISCELLANEOUS

     14.1 Export Controls. LICENSEE acknowledges that PRF is subject to United
States laws and regulations controlling the export of technical data, computer
software, laboratory prototypes, and other commodities and that PRF's
obligations under this Agreement are contingent upon compliance with applicable
United States export laws and regulations. The transfer of technical data and
commodities may require a license from the cognizant agency of the United States
government or written assurances by LICENSEE that LICENSEE shall not export data
or commodities to certain foreign countries without the prior approval of
certain United States agencies. PRF neither represents that an export license
shall not be required nor that, if required, such export license shall issue.

     14.2 Jurisdiction, Venue, Choice of Law, and Attorney's Fees. Any
justifiable dispute between LICENSEE and PRF shall be determined solely and
exclusively under Indiana law by a court of competent jurisdiction in Tippecanoe
County in Indiana. The prevailing party in any litigated dispute shall be
entitled to reimbursement of its attorney's fees and costs.

     14.3 Legal Compliance. LICENSEE shall comply with all laws and regulations
relating to its manufacture, processing, producing, use, Selling, or
distributing of Licensed Products. LICENSEE shall not take any action that would
cause PRF or LICENSEE to violate any laws and regulations.

     14.4 Independent Contractor. LICENSEE's relationship to PRF shall be that
of a licensee only. LICENSEE shall not be the agent of PRF and shall have no
authority to act for or on behalf of PRF in any matter. Persons retained by
LICENSEE as employees or agents shall not by reason thereof be deemed to be
employees or agents of PRF.

     14.5 Patent Marking. LICENSEE shall mark Licensed Products sold in the
United States with United States patent numbers. Licensed Products manufactured
or sold in other countries shall be marked in compliance with the intellectual
property laws in force in such foreign countries.

     14.6 Use of Names. LICENSEE shall obtain the prior written approval of PRF,
PU, or the Inventors prior to making use of their names for any commercial
purpose, except as required by law. As an exception to the foregoing, both
LICENSEE and PRF shall have the right to publicize the existence of this
Agreement; however, neither LICENSEE nor PRF shall disclose the terms and
conditions of this Agreement without the other party's consent, except as
required by law.

                                       12

<PAGE>

     14.7 Place of Execution. This Agreement and any subsequent modifications or
amendments hereto shall be deemed to have been executed in the State of Indiana,
U.S.A.

     14.8 Governing Law. This Agreement and all amendments, modifications,
alterations, or supplements hereto, and the rights of the parties hereunder,
shall be construed under and governed by the laws of the State of Indiana and
the United States of America.

     14.9 Entire Agreement. This Agreement constitutes the entire agreement
between PRF and LICENSEE with respect to the subject matter hereof and shall not
be modified, amended or terminated except as herein provided or except by
another agreement in writing executed by the parties hereto.

     14.10 Severability. All rights and restrictions contained herein may be
exercised and shall be applicable and binding only to the extent that they do
not violate any applicable laws and are intended to be limited to the extent
necessary so that they will not render this Agreement illegal, invalid or
unenforceable. If any provision or portion of any provision of this Agreement
not essential to the commercial purpose of this Agreement shall be held to be
illegal, invalid or unenforceable by a court of competent jurisdiction, it is
the intention of the parties that the remaining provisions or portions thereof
shall constitute their agreement with respect to the subject matter hereof, and
all such remaining provisions or portions thereof shall remain in full force and
effect. To the extent legally permissible, any illegal, invalid or unenforceable
provision of this Agreement shall be replaced by a valid provision that will
implement the commercial purpose of the illegal, invalid or unenforceable
provision. In the event that any provision essential to the commercial purpose
of this Agreement is held to be illegal, invalid or unenforceable and cannot be
replaced by a valid provision that will implement the commercial purpose of this
Agreement, this Agreement and the rights granted herein shall terminate.

     14.11 Force Majeure. Any delays in, or failure of, performance of any party
to this Agreement shall not constitute default hereunder, or give rise to any
claim for damages, if and to the extent caused by occurrences beyond the control
of the party affected, including, but not limited to, acts of God, strikes or
other work stoppages, civil disturbances, fires, floods, explosions, riots, war,
rebellion, sabotage, acts of governmental authority or failure of governmental
authority to issue licenses or approvals that may be required.

                              ARTICLE 15. NOTICES

     15.1 All notices and other communications shall be hand delivered, sent by
private overnight mail service, or sent by registered or certified U.S. mail,
postage prepaid, return receipt requested, and addressed to the party to receive
such notice or other communication at the address given below, or such other
address as may hereafter be designated by notice in writing:

     If to PRF:   Assistant Vice President and Director
                  Purdue Research Foundation
                  Office of Technology Commercialization
                  1291 Cumberland Ave.
                  Lafayette, IN 47906
                  Facsimile: (765) 496-1277

                                       13

<PAGE>

     If to LICENSEE:   President
                       NanoDynamics, Inc.
                       901 Fuhrmann Boulevard
                       Buffalo, NY 14203
                       Facsimile: (716) 853-4900

Such notices or other communications shall be effective upon receipt by an
employee, agent or representative of the receiving party authorized to receive
notices or other communications sent or delivered in the manner set forth above.

     IN WITNESS WHEREOF, PRF and LICENSEE have caused this Agreement to be
signed by their duly authorized representatives, under seal, as of the day and
year indicated above.

PRF:                                    LICENSEE:
PURDUE RESEARCH FOUNDATION              NANODYNAMICS, INC.

By: /s/ Joseph B. Hornet                By: /s/ Keith A. Blakely
    ---------------------------------       ------------------------------------
Name: Joseph B. Hornet                  Name: Keith A. Blakely
Title: Senior Vice President and        Title: CEO
       Treasurer

                                       14

<PAGE>

                                  AMENDMENT TO
                           EXCLUSIVE LICENSE AGREEMENT

THIS AMENDMENT, made and entered into this 18th day of September, 2006 amends
the Agreement executed on December 20, 2002, (hereinafter AGREEMENT) between
Purdue Research Foundation (hereinafter known as PRF) and NanoDynamics, Inc.
(hereinafter known as LICENSEE).

NOW THEREFORE, the parties hereto do hereby agree as follows:

     1.   ARTICLE 2.1 SHALL BE DELETED IN ITS ENTIRETY AND REPLACED WITH THE
          FOLLOWING:

          License. Subject to compliance with this Agreement, and subject to the
          reservation of rights stated below, PRF grants, and LICENSEE accepts,
          an exclusive license to the Licensed Patent(s) to develop, make, have
          made, use, and sell Licensed Products on a royalty-bearing basis in
          the Field of Use in the Licensed Technology and for issuance of
          corresponding Commercial Sublicenses directly between LICENSEE and a
          Sublicensee on terms and conditions consistent with this Agreement.
          Exclusivity of the License is subject to the terms mentioned in
          Article 4.5

     2.   ARTICLE 12.1, TERM IS DELETED IN ITS ENTIRETY AND REPLACED WITH THE
          FOLLOWING:

          Term. Unless otherwise extended in writing by mutual agreement of the
          Parties, this Agreement will remain valid and in force for ten (10)
          yews from the date of the first sale of a Licensed Product in any
          country, or until the expiration date of the last of the valid claims
          of the last to expire of the Licensed Patents, whichever is greater.

     3.   ARTICLE 4.5, B, C, D ARE REPLACED IN ITS ENTIRETY WITH THE FOLLOWING:

<TABLE>
<S>                                             <C>
September 25, 2006                              $30,000
December 31, 2006 and for the remaining years   $30,000
</TABLE>

          For a period of ten (10) years from the effective date of this
          amendment, if Licensee shall fail to pay minimum royalties within the
          due date of each year, License will be considered in default and shall
          be the grounds for termination,

          After 10 years, if anytime the Licensee discontinues minimum royalty
          payments, the license shall be automatically converted into a
          Non-Exclusive license.

     4.   THE FOLLOWING TECHNOLOGIES ARE LICENSED TO NANODYNAMICS, INC. THEREBY
          AMENDING EXHIBIT A OF THE AGREEMENT TO INCLUDE:

                                       1

<PAGE>

          "Large Strain Machining: A Method for Making Bulk Nanostructured
          Materials" PRF Reference No. 64588

<TABLE>
<CAPTION>
Purdue Ref No.   Serial/Patent No.   Country   File/Date   Comments
--------------   -----------------   -------   ---------   --------
<S>              <C>                 <C>       <C>         <C>
64588.00.WO      In the process of filing PCT
</TABLE>

          "Micro- and Meso- Scale Components with Ultrafine Grained (UFG)
          Microstructure and Enhanced Performance" PRF Reference No. 64341

<TABLE>
Perdue Ref No.   Serial/Patent No.   Country   File/Date   Comments
--------------   -----------------   -------   ---------   --------
<S>              <C>                 <C>       <C>         <C>
64341.00.WO      PCT/US06/16974                 5/3/2006   Filed
64341.00.US      11/381,387          US         5/3/2006   Filed
</TABLE>

     5.   ARTICLE 13 (ASSIGNMENT) SHALL BE REPLACED ENTIRELY WITH THE FOLLOWING:

          This Agreement shall be binding upon and shall inure to the benefit of
          the legal representatives and assigns of PRF and LICENSEE, provided,
          however, that any assignment of this Agreement by License to a third
          party may be made only upon prior written consent of PRF, such consent
          not to be unreasonably withheld. Notwithstanding the foregoing, either
          panty may, without consent of the other party, assign this Agreement
          and its rights and obligations hereunder to an Affiliate or in
          connection with the transfer or sale of all or substantially all of
          its business to which this Agreement relates, or in the event of its
          merger, consolidation, change in control or similar transaction. PRF
          shall have the right to assign this Agreement to a non-profit
          corporation that promotes the research purposes of PU. Any permitted
          assignee shall assume all obligations of its assignor under this
          Agreement. Any purported assignment or transfer in violation of this
          section shall be void.

All other terms and conditions of the original agreement remain unchanged and in
effect.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first above written.

Purdue Research Foundation              Nanodynamics, Inc.

By:   /s/ Joseph B. Hornett               By: /s/ Richard L. Berger
      ---------------------------------       ----------------------------------
Name:  Joseph B. Hornett                  Name: Richard L. Berger
Title: Senior Vice President              Title: President
Date: 10/2/2006                         Date: September 27, 2006

                                       2<PAGE>

                                                                    Exhibit 10.6

                              NONEXCLUSIVE LICENSE

                                     Between

                               NANODYNAMICS, INC.

                                       And

                      UNITED STATES DEPARTMENT OF THE NAVY

                                       At

                            NAVAL RESEARCH LABORATORY

<PAGE>

                                Table of Contents

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Article 1. DEFINITIONS ..................................................     2
   1.1  "AFFILIATE" .....................................................     2
   1.2  "COMMERCIAL DEVELOPMENT PLAN" ...................................     2
   1.3  "EFFECTIVE DATE" ................................................     2
   1.4  "FIELD OF USE" ..................................................     2
   1.5  "LICENSED INVENTION" ............................................     3
   1.6  "LICENSED PATENTS" ..............................................     3
   1.7  "LICENSED TERRITORY" ............................................     3
   1.8  "NET SELLING PRICE" .............................................     3
   1.9  "NET SALES" .....................................................     3
   1.10 "PRACTICAL APPLICATION" .........................................     4
   1.11 "REPORTING PERIOD" ..............................................     4
   1.12 "ROYALTY-BEARING PRODUCT" .......................................     4
   1.13 "TO PRACTICE THE LICENSED INVENTION" ............................     4
   1.14 "UNITED STATES" .................................................     4
   1.15 "KEY MILESTONES" ................................................     4

Article 2. LICENSE GRANT ................................................     4

Article 3. LICENSEE'S PERFORMANCE .......................................     5

Article 4. ROYALTIES AND OTHER CONSIDERATION ............................     5
   4.1  License Issue Fee ...............................................     5
   4.2  Running Royalties ...............................................     5
   4.3  Annual License Fee ..............................................     6
   4.4  Milestone Payments ..............................................     6
   4.5  Method of Payment ...............................................     7
   4.6  Late Payments ...................................................     7
   4.7  Retention of Records ............................................     7
   4.8  Audits ..........................................................     8

Article 5. PATENT MARKING AND NONENDORSEMENT ............................     8

Article 6. REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS .............     8

Article 7. REPORTS ......................................................     9
   7.1  Progress Reports ................................................     9
   7.2  Sales Reports ...................................................     9

Article 8. MODIFICATION AND TERMINATION .................................    10
   8.1  Termination or Modification by Mutual Agreement .................    10
   8.2  Termination by LICENSOR .........................................    10
   8.3  Procedures for Termination by LICENSOR ..........................    11
   8.4  Termination by LICENSEE .........................................    11
</TABLE>

                                       i

<PAGE>

                                Table of Contents

<TABLE>
<S>                                                                         <C>
Article 9. NOTICES ......................................................    11

Article 10. RESERVATION OF RIGHTS .......................................    12

Article 11. PATENT PROSECUTION AND LITIGATION, ..........................    12

Article 12. GENERAL PROVISIONS ..........................................    13
        12.1  Governing Law .............................................    13
        12.2  Complete Agreement ........................................    13
        12.3  Severability ..............................................    13
        12.4  Interpretation of Headings ................................    13
        12.5  Independent Parties/Entities ..............................    13

Article 13. SIGNATURES ..................................................    13
        13.1  For NanoDynamics, Inc .....................................    13
        13.2  For the Department of the Navy ............................    14
</TABLE>

                                       ii

<PAGE>

                                    PREAMBLE

     This non-exclusive patent license agreement (hereinafter called "LICENSE")
is made and entered into by and between the United States Department of the Navy
as represented by the Naval Research Laboratory (hereinafter called "LICENSOR"),
and NanoDynamies, Inc. a corporation incorporated in Delaware (hereinafter
called "LICENSEE") whose headquarters are located at 901 Fuhrmann Boulevard,
Buffalo, New York 14203.

     WITNESSETH:

     (1) WHEREAS Title 35 of the United States Code, section 207, authorizes
Federal agencies to license their patents; and

     (2) WHEREAS Title 37 of the Code of Federal Regulations, Chapter IV, Part
404 entitled "Licensing of Government Owned Inventions" sets forth the terms and
conditions under which licenses may be granted; and

     (3) WHEREAS the above cited authorities provide that licensing of Federal
Government inventions will best serve the interests of the Government and the
public when utilization of such inventions is promoted and such inventions are
brought to PRACTICAL APPLICATION; and

     (4) WHEREAS LICENSOR has an assignment of title to the inventions disclosed
and claimed in U.S. Patent No, 5,492,696 issued on February 20, 1996, for
"Controlled Release Microstructures", U.S. Patent No. 5,651,976 issued on July
29, 1997, for "Controlled Release of Active Agents Using Inorganic Tubules",
U.S. Patent No. 5,705,191 issued January 6, 1998, for "Sustained Delivery of
Active Compounds from Tubules, with Rational Control" and U.S. Patent 6,280,759
issued on August 28, 2001, for "Method of Controlled Release and Controlled
Release Microstructures" that has been made available to LICENSEE; and

     (5) WHEREAS LICENSOR has published in the Federal Register of March 10,
2004, the availability of a license under U.S. Patent No. 5,492,696, in the
Federal Register of April 9, 2004, the availability of a license under U.S.
Patent Nos. 5,651,976 and 5,705,191; and in the Federal Register of February 3,
2005 the availability of a license under U.S. Patent No. 6,280,759; and

     (6) WHEREAS LICENSEE has supplied LICENSOR with a plan for development and
marketing of the inventions that is hereby incorporated into this LICENSE as
Appendix A, and has expressed its intention to carry out this plan upon the
granting of this LICENSE; and

     (7) WHEREAS LICENSEE has agreed that any products embodying the inventions
or produced through the use of the inventions for use or sale in the UNITED
STATES will be manufactured substantially in the UNITED STATES; and

     (8) WHEREAS LICENSOR has determined that the interest of the Federal
Government and the public will best be served by the proposed license, in view
of

<PAGE>

               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

LICENSEE's intentions, plans, and ability to bring the inventions described and
claimed in U.S. Patent Nos. 5,492,696, 5,651,976, 5,705,191 and 6,280,759 to
PRACTICAL APPLICATION or otherwise promote the inventions' utilization by the
public;

     (9) WHEREAS LICENSOR has considered the capabilities of LICENSEE to bring
the inventions to PRACTICAL APPLICATION and has found that LICENSEE is a
responsible party for negotiating this LICENSE on terms and conditions most
favorable to the public interest and that to grant this nonexclusive LICENSE
would be in the public interest;

     NOW, THEREFORE, in accordance with and to the extent provided by the
aforementioned authorities and in consideration of the foregoing premises and of
the covenants and obligations hereinafter set forth to be well and truly
performed, and other good and valuable consideration, the parties hereto agree
to the foregoing and as follows:

Article 1. DEFINITIONS

          The following definitions shall apply to the defined words where such
words are used in this LICENSE.

     1.1 "AFFILIATE" shall mean any company, corporation, association or
business in which LICENSEE owns directly or indirectly a controlling interest.

     1.2 "COMMERCIAL DEVELOPMENT PLAN" shall mean the plan for development and
marketing submitted by LICENSEE in LICENSEE's Application for License, with all
its attachments and amendments, incorporated into this LICENSE as Appendix A.

     1.3 "EFFECTIVE DATE" shall mean the date of the last signature of the
signatories executing this LICENSE.

     1.4 "FIELD OF USE" means the use of Halloysite microtubules for the elution
of biocidal, antifungal, or other antimicrobial agents for the prevention of
growth of bacteria and/or mold in Building Materials in the residential,
commercial, institutional, and healthcare construction products market.
Specifically, the Building Materials subfields of use are limited to those
listed below:

          1.4.1 grouts, cements, paging materials, stuccos, and mortars

          1.4.2 wallboards, and cellulose-based materials such as wallboard
               papers, wallpapers, particleboard, paneling, MDF paneling,
               plywood, chipboard, and ceiling tile

          1.4.3 caulks, sealants and adhesives high pressure laminates,
               including wall, counter top and floor coverings or components
               thereof

                                       2

<PAGE>

               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

          1.4.4 ceramics, cultured marbles, and tiles

          1.4.5 non-cellulose (i.e. polymer) based wallpapers, paneling and
               other wall, counter top and floor coverings or components

          1.4.6 insulations

Note: The Building Materials field of use does not include paint, stain, varnish
     and other finish coatings associated with structures.

     1.5 "LICENSED INVENTION" means an invention claimed in the LICENSED

     1.6 "LICENSED PATENTS" means U.S. Patent No, 5,492,696 entitled "Controlled
Release Microstructures" issued on February 20, 1996 to Ronald R. Price, Joel M.
Schnur, Paul E. Schoen, Mary Testoff, Jacque H. Georger, Jr., Alan Rudolph and
Robert F. Brady; U.S. Patent No. 5,651,976 entitled "Controlled Release of
Active Agents Using Inorganic Tubules" issued on July 29, 1997 to Ronald R.
Price and Bruce P. Gaber; and U.S. Patent No. 5,705,191 entitled "Sustained
Delivery of Active Compounds from Tubules, with Rational Control" issued
January 6, 1998, to Ronald R. Price, Joel M. Schnur, Alan S. Rudolph, Jonathan
Selinger, Alok Singh and Bruce P. Caber; and U.S. Patent No. 6,280,759 entitled
"Method of Controlled Release and Controlled Release Microstructures" issued on
August 28, 2001 to Ronald R. Price, Joel M. Schnur, Paul E. Schoen, Mary
Testoff, Jacque H. Georger, Jr., Alan Rudolph and Robert F. Brady, and any
patents issuing thereon and any re-issue, continuation, or division thereof (to
the extent that the inventions in those applications are claimed in the parent
application on the EFFECTIVE DATE of this LICENSE) and any foreign counterparts
filed or issued in the LICENSED TERRITORY.

     1.7 "LICENSED TERRITORY" Shall mean those geographic locations listed in
the attached Appendix B.

     1.8 "NET SELLING PRICE" shall mean the invoice price of the ROYALTY-BEARING
PRODUCT sold by LICENSEE and not returned. A ROYALTY-BEARING PRODUCT will be
considered to be sold when shipped or delivered to a customer. NET SELLING PRICE
does not include (i) customary trade, quantity, or cash discounts to the extent
actually allowed and taken; (ii) to the extent separately stated on invoices,
taxes levied on the production, sale, transportation, delivery or use of a
ROYALTY-BEARING PRODUCT paid by LICENSEE; and (iii) to the extent separately
stated on invoices, outbound transportation costs.

     1.9 "NET SALES" shall mean the gross amount billed by LICENSEE and its
AFFILIATES for a ROYALTY-BEARING PRODUCT sold by LICENSEE and its AFFILIATES,
respectively. NET SALES do not include (i) customary trade, quantity, or cash
discounts to the extent actually allowed and taken; (ii) to the extent
separately stated on invoices, taxes levied on the production, sale,
transportation, delivery or use of a

                                       3

<PAGE>

               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

ROYALTY-BEARING PRODUCT paid by LICENSEE; and (iii) to the extent separately
stated on invoices, outbound transportation costs.

     1.10 "PRACTICAL APPLICATION" means to manufacture in the case of a
composition or product, to practice in the case of a process or method, or to
operate in the ease of a machine or system, and, in each case under such
conditions as to establish that the LICENSED INVENTIONS are being utilized and
that their benefits are to the extent permitted by law and Government
regulations available to the public on reasonable terms;

     1.11 "REPORTING PERIOD" shall begin on the first day of each calendar year
and end on the last day of such calendar year.

     1.12 "ROYALTY-BEARING PRODUCT" means any product within the scope of any
claim of the LICENSED PATENTS or made by a method claimed IN the LICENSED
PATENTS.

     1.13 "TO PRACTICE THE LICENSED INVENTION" means to make, use, sell, offer
to sell, import, lease, or otherwise dispose of according to law any machine,
article of manufacture, composition of matter, or process physically embodying
or made according to a LICENSED INVENTION by or on behalf of LICENSEE.

     1.14 "UNITED STATES" means the United States of America, its territories
and possessions, the District of Columbia, and the Commonwealth of Puerto Rico.

     1.15 "KEY MILESTONES" means the milestones listed in Appendix C.

Article 2. LICENSE GRANT

     2.1 LICENSOR grants to LICENSEE a nonexclusive right and license TO
PRACTICE THE LICENSED INVENTIONS throughout the LICENSED TERRITORY in the
Building Materials FIELDS OF USE for the life of the LICENSED PATENTS commencing
on the EFFECTIVE DATE of execution of this LICENSE and continuing until each
LICENSED PATENT expires unless the LICENSE is sooner modified or terminated in
whole or in part. NOTE: Should a partially exclusive license for the FIELD OF
USE become available, LICENSOR shall notify LICENSEE.

     2.2 Except as provided herein, this LICENSE is not transferable or
assignable and does not grant LICENSEE the right to sublicense the LICENSED
INVENTIONS.

     2.3 LICENSOR hereby grants to LICENSEE the right to extend the LICENSE
granted hereunder to one or more AFFILIATES subject to the terms and conditions
hereof, provided that the AFFILIATE is not directly or indirectly controlled by
a foreign company, corporation, association, business or government.

                                       4

<PAGE>

               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

     2.4 The LICENSE is nonassignable without written approval of LICENSOR
except to the successor of that part of LICENSEE's business to which the
LICENSED INVENTIONS pertain, provided that the successor is not directly or
indirectly controlled by a foreign company, corporation, association, business
or government.

Article 3. LICENSEE'S PERFORMANCE

     3.1 LICENSEE agrees to carry out the COMMERCIAL DEVELOPMENT PLAN to bring
the LICENSED INVENTIONS to PRACTICAL APPLICATION by December 31, 2006. LICENSEE
will, thereafter, continue to make the benefits of the LICENSED INVENTIONS
reasonably accessible to the public for the remainder of the period of the
LICENSE.

     3.2 LICENSEE agrees that during the period of this LICENSE any products
embodying a LICENSED INVENTION or produced through the use of a LICENSED
INVENTION for use or sale by LICENSEE in the UNITED STATES will be manufactured
substantially in the UNITED STATES.

     3.3 LICENSEE agrees to report promptly to LICENSOR any changes in mailing
address, name or company affiliation during the period of this LICENSE.

     3.4 LICENSEE agrees to report within thirty (30) days discontinuance of
LICENSEE'S making the benefits of the LICENSED INVENTIONS reasonably accessible
to the United States public.

Article 4. ROYALTIES AND OTHER CONSIDERATION

     4.1 License Issue Fee

          LICENSEE shall pay to LICENSOR a non-refundable license issue fee in
the amount of five thousand dollars ($5000) payable upon the EFFECTIVE DATE of
this LICENSE. The above License Issue Fee is a "token" license issue fee as this
license is intended to be a temporary license for a period of up to one year
during which LICENSOR shall resolve internal administrative issues related to
the issuance of a partially exclusive license to LICENSEE and during which
LICENSEE and LICENSOR shall negotiate a partially exclusive license for the
FIELDS OF USE. In the event that a partially exclusive license for the FIELD OF
USE is not executed within two (2) years of the EFFECTIVE DATE, because LICENSEE
has declined LICENSOR's offer of a partially exclusive license, LICENSEE shall
pay to LICENSOR a License Issue fee of fifty thousand dollars ($50,000) which
shall be due and payable on the second anniversary of the EFFECTIVE DATE.

     4.2 Running Royalties

     LICENSEE shall pay royalties to LICENSOR of two and one half percent (2.5%)
of the NET SELLING PRICE for each ROYALTY-BEARING PRODUCT made, used

                                       5

<PAGE>

               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

or sold by LICENSEE, and its licensed AFFILIATES in the LICENSED TERRITORY.
Royalties will not be paid to LICENSOR, nor shall they be charged or collected,
on items sold directly to instrumentalities of the U.S. Government or for known
and verifiable U.S. Government end use. Such sales of ROYALTY-BEARING PRODUCT
with established list or catalog prices shall have their prices reduced by an
amount equal to that part of the established price attributable to the royalty.
On sales made between LICENSEE and its AFFILIATES for resale, the royalty shall
be paid on the highest NET SELLING PRICE among such sales.

     4.3 Annual License Fee

          Notwithstanding the foregoing provision for the payment of running
royalties on the NET SELLING PRICE, LICENSEE agrees to pay an annual license fee
of six thousand dollars ($6,000) for calendar year 2007, fifteen thousand
dollars ($15,000) for calendar year 2008 thirty thousand dollars ($30,000) for
calendar year 2010 and each calendar year thereafter throughout the period of
the LICENSE. If, however, LICENSOR shall grant a license of the LICENSED
INVENTIONS for the FIELD OF USE to a third party during the term of this
Agreement, from the date of such third party license, LICENSEE shall pay annual
license fees equal to fifty percent (50%) of the amount set forth in the
immediately preceding sentence. The annual license fee for each calendar year
shall be paid on the anniversary of the EFFECTIVE DATE and will be credited
toward any payment of running royalties to accrue during the calendar year
following payment. Such annual license fee payments are not refundable in whole
or in part, and unapplied credits will not carry forward into subsequent
calendar years.

     4.4 Milestone Payments

          LICENSEE shall make payments to LICENSOR upon the achievement of
milestones in accordance with the following schedule:

          4.4.1 Upon completion of KEY MILESTONE 3, LICENSEE shall make a
               Milestone Payment of five thousand dollars ($5,000) which shall
               be due and payable within thirty (30) days of the completion of
               this KEY MILESTONE.

          4.4.2 Upon completion of KEY MILESTONE 4, LICENSEE shall make a
               Milestone Payment of five thousand dollars ($5,000) which shall
               be due and payable within thirty (30) days of the completion of
               this KEY MILESTONE,

          4.4.3 Upon completion of KEY MILESTONE 5, LICENSEE shall make a
               Milestone Payment of five thousand dollars ($5,000) which shall
               be due and payable within ninety (90) days of the completion of
               this KEY MILESTONE.

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               Nonexclusive Patent License Agreement No. 04-28466
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          4.4.4 Upon completion of KEY MILESTONE 6, LICENSEE shall make a
               Milestone Payment of five thousand dollars ($5,000) which shall
               be due and payable within one hundred eighty (180) days of the
               completion of this KEY MILESTONE.

     4.5 Method of Payment

          LICENSEE shall send to LICENSOR all running royalties that accrue for
each REPORTING PERIOD and shall be due to LICENSOR within sixty (60) days of the
end of each REPORTING PERIOD. The final royalty payment shall be due within
sixty (60) days of expiration or termination of the LICENSE. All royalty
payments shall be accompanied by a sales report, in accordance with Article 7.

          All payments due LICENSOR under this LICENSE shall be made payable in
United States dollars to:

               Department of the Navy

and mailed to:

               Office of Naval Research
               Office of Corporate Counsel (ONR BDCC)
               One Liberty Center
               875 North Randolph Street
               Arlington, VA 22203-1995

          Conversion of foreign currency to US dollars shall be made at the
conversion rate existing in the United States, as reported in the Wall Street
Journal, on the last working date of the applicable calendar year. Such payments
shall be without deduction of exchange, collection, or other charges, and
specifically, without deduction of withholding or similar taxes or other
government-imposed fees or taxes, except as permitted in the definition of NET
SELLING PRICE.

     4.6 Late Payments

          Payments made by LICENSEE after the due date shall include a surcharge
of two percent (2%) and interest at the rate of one and one-half percent (1 1/2
%) per month or part month late. Further, if the License Issue Fee, the Running
Royalty, the Annual License Fee or other fee or reimbursement is not paid within
two months of the due date, together with any surcharge and interest due, this
LICENSE may be terminated by LICENSOR, in accordance with Article 8.

     4.7 Retention of Records

          LICENSEE agrees to make and keep, and shall require its AFFILIATES to
make and keep, full, accurate and complete books and records (together with

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               Nonexclusive Patent License Agreement No. 04-28466
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supporting documentation) as are necessary to establish its compliance with
Article 4. Such records shall be retained for at least three (3) years following
the end of the REPORTING PERIOD to which they relate.

     4.8 Audits

          LICENSEE agrees that LICENSOR may, if LICENSOR so desires at a future
time or times, have a duly authorized agent or representative in LICENSOR's
behalf examine all books and records and supporting documentation described in
the preceding section, either at LICENSEE's business premises or at a place
mutually agreed upon by LICENSEE and LICENSOR for the sole purpose of verifying
reports and payments hereunder. In conducting examinations pursuant to this
paragraph, LICENSOR's representative shall have access to all records that
LICENSOR reasonably believes to be relevant to the calculation of royalties
under Article 4. If a royalty payment deficiency is determined, LICENSEE shall
pay the royalty deficiency outstanding within thirty (30) days of receiving
written notice thereof. Payments made by LICENSEE after the due date shall
include interest at the rate of one and one-half percent (1 1/2 %) per month or
part month late, plus a two percent (2%) surcharge. Such examination by
LICENSOR's representative shall be at LICENSOR's expense, except that, if such
examination shows an underreporting or underpayment in excess of five percent
(5%) for any twelve (12) month period, then LICENSEE shall pay the cost of such
examination.

Article 5. PATENT MARKING AND NONENDORSEMENT

          LICENSEE hereby agrees to mark each ROYALTY-BEARING PRODUCT under
this LICENSE (or when the character of the product precludes marking, the
package containing any such ROYALTY-BEARING PRODUCT) with the notation "Licensed
under U.S. Patent No. (LICENSEE to insert relevant patent numbers) issued to the
United States of America, as represented by the Secretary of the Navy." LICENSEE
agrees not to create the appearance that LICENSOR endorses LICENSEE'S business
or products.

Article 6. REPRESENTATIONS, WARRANTIES, AND ACKNOWLEDGMENTS

     6.1 LICENSOR makes no warranties or representations of any kind or nature
regarding the patentability of any LICENSER INVENTION or the validity, scope, or
enforceability of the LICENSED PATENTS, or any claims therein.

     6.2 LICENSOR makes no warranties or representations of any kind or nature
with respect to the practice, including but not limited to freedom to operate,
of any LICENSER INVENTION or regarding any ROYALTY-BEARING PRODUCT, nor assumes
any liability therefore.

     6.3 Neither the grant of this LICENSE nor anything contained in or related
to the grant of this LICENSE is intended nor shall be construed to confer upon
LICENSEE or any other person immunity from or defenses under the antitrust laws,
a

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               Nonexclusive Patent License Agreement No. 04-28466
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charge of patent misuse, or any other provision of law (of any jurisdiction) by
reason of the source of the grant or otherwise.

     6.4 Neither this LICENSE nor anything contained herein is intended nor
shall be construed to grant to LICENSEE any kind or nature of rights in any
inventions or patents other than the LICENSED INVENTIONS and the LICENSED
PATENTS.

     6.5 LICENSEE acknowledges that it is subject to and shall comply with all
applicable United States laws, regulations, and Executive orders, pertaining to
exporting from the United States. LICENSEE shall not export, or assist others in
the export, of any ROYALTY-BEARING PRODUCT or information related to the
practice of the LICENSED INVENTIONS without first having, solely at its own
expense, identified and obtained all required export licenses and
authorizations.

Article 7. REPORTS

     7.1 Progress Reports

          LICENSEE shall submit semiannual progress reports on its efforts to
achieve PRACTICAL APPLICATION of the LICENSED INVENTIONS. The first report is
due six months after the EFFECTIVE DATE, the second report is due one year after
the EFFECTIVE DATE and subsequent reports shall be made every year thereafter
until such time as the LICENSED INVENTIONS for each subfield of use has been
brought to the point of PRACTICAL APPLICATION. Progress reports shall describe
in detail LICENSEE's efforts toward carrying out its COMMERCIAL DEVELOPMENT
PLAN. Progress reports shall also include a discussion of the actual number of
staff and expenditures directed toward the commercialization effort since the
preceding report. Progress reports shall also contain information within
LICENSEE's knowledge pertaining to any commercial use being made of the LICENSED
INVENTIONS; and, any other information that LICENSOR and LICENSEE agree is
pertinent to the commercialization effort.

     7.2 Sales Reports

          7.2.1 After the first commercial sale of a LICENSED INVENTION,
               LICENSEE shall deliver reports to LICENSOR within sixty (60) days
               of the end of each REPORTING PERIOD, containing information
               concerning the immediately preceding REPORTING PERIOD, as further
               described this section.

          7.2.2 LICENSEE shall submit an annual report detailing the sales
               activity of ROYALTY-BEARING PRODUCTS during the preceding
               calendar year to include: dates of sales; quantities sold; NET
               SELLING PRICE; and, the total amount of royalties paid for the
               year. The annual sales report shall be submitted, regardless of
               the volume of sales, within sixty (60) days of the end of each

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               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

               REPORTING PERIOD with any royalty payments due in accordance with
               Article 4. A final sales report is due sixty (60) days after the
               expiration or termination of this LICENSE.

          7.2.3 Method of Reporting

          All reports shall be submitted to:

               Office of Naval Research
               Office of Corporate Counsel (ONR RDCC)
               One Liberty Center
               875 North Randolph Street
               Arlington, VA 22203-1995

with a copy of each report to:

               Naval Research Laboratory
               Technology Transfer Office
               4555 Overlook Avenue, SW
               Washington, DC 20375

Article 8. MODIFICATION AND TERMINATION

     8.1 Termination or Modification by Mutual Agreement

          Any modification or termination of this LICENSE by mutual agreement
shall be in writing and signed by both parties.

     8.2 Termination by LICENSOR

          LICENSOR may terminate this LICENSE, in whole or in part, if:

          (a) LICENSEE is not executing the KEY MILESTONES as listed in Appendix
C;

          (b) LICENSOR determines that such action is necessary to meet
requirements for public use as specified in Federal regulations issued after the
date of this LICENSE and such requirements are not reasonably being satisfied by
LICENSEE;

          (c) LICENSEE willfully made a false statement of or willfully omitted
a material fact in its application for license or in any report required by this
LICENSE;

          (d) LICENSEE has been found by a court of competent jurisdiction to
have violated Federal antitrust laws or any other provision of law in connection
with its performance under this LICENSE;

                                       10

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               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

          (e) LICENSEE commits a material breach of a covenant contained in this
LICENSE, including but not limited to the covenants in Article 3; other than a
breach resulting in automatic termination; or,

          (f) LICENSEE defaults in the payment of any amount due to LICENSOR and
fails to cure such default within thirty (30) calendar days after the date of
written notice thereof from LICENSOR.

     8.3 Procedures for Termination by LICENSOR

          8.3.1 Before terminating this LICENSE, in whole or in part, for any
               reason other than by mutual agreement or under the automatic
               termination provisions, LICENSOR shall furnish LICENSEE a
               written notice of intention to terminate stating the reason(s)
               therefor. LICENSEE shall be allowed thirty calendar (30) days
               after the date of the notice (or such other period as may be
               agreed to by the parties) to remedy any deficiency stated in the
               notice as the reason for termination or to show cause why this
               LICENSE should not be terminated.

          8.3.2 After the expiration of thirty (30) calendar days following the
               date of the notice, LICENSOR shall consider any matter submitted
               by LICENSEE and provide a written determination about termination
               of the LICENSE to LICENSEE.

          8.3.3 LICENSEE has a right to appeal, in accordance with procedures
               prescribed by the Chief of Naval Research, any decision or
               determination of LICENSOR concerning the interpretation,
               modification, and/or termination (in whole or in part) of this
               LICENSE.

     8.4 Termination by LICENSEE

          LICENSEE may terminate this LICENSE by providing a written notice of
its intent to terminate the LICENSE to LICENSOR no less than sixty days prior to
the intended date of termination. Licensee's written notice must include
LICENSEE's statement that LICENSEE shall not PRACTICE THE LICENSED INVENTIONS
after the LICENSE terminates. LICENSEE's written notice shall specify the
EFFECTIVE DATE of termination,

Article 9. NOTICES

     9.1 All notices required under this LICENSE shall be considered timely made
if properly addressed and sent via commercial overnight delivery service by the
due date.

                                       11

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               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

     9.2 All communications and notices required to be made to LICENSOR shall be
addressed as follows:

               Naval Research Laboratory
               Technology Transfer Office
               4555 Overlook Avenue, SW
               Washington, DC 20375

     9.3 All communications and notices required to be made to LICENSEE shall be
addressed as follows:

               Dr. Alan Rae
               NanoDynamics, Inc.
               901 Fuhrmann Boulevard
               Buffalo, NY 14203

Article 10. RESERVATION OF RIGHTS

          This LICENSE is subject to the irrevocable, royalty-free right of the
Government of the United States TO PRACTICE AND HAVE PRACTICED THE LICENSED
INVENTIONS throughout the world by or on behalf of the United States and by or
on behalf of any foreign government or intergovernmental or international
organization pursuant to any existing or future treaty or agreement with the
Government of the United States.

Article 11. PATENT PROSECUTION AND LITIGATION

     11.1 LICENSOR shall diligently prosecute and maintain the LICENSED PATENTS,
and, if requested by LICENSEE and permitted by law and regulation, provide
LICENSEE with copies of all relevant documentation. LICENSEE agrees not to
disclose to others such documentation without prior written approval from
LICENSOR.

     11.2 Notwithstanding Article 9, any notice by LICENSEE pertaining to patent
prosecution under this Article shall be addressed to:

               Office of Naval Research
               Office of Corporate Counsel (ONR BDCC)
               One Liberty Center
               875 North Randolph Street
               Arlington, VA 22203-1995

with copy to:

               Naval Research Laboratory
               Technology Transfer Office

                                       12

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               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

               4555 Overlook Avenue, SW
               Washington, DC 20375

     11.3 LICENSOR does not by entering into this LICENSE transfer the property
rights in the LICENSED INVENTIONS.

Article 12. GENERAL PROVISIONS.

     12.1 Governing Law

          This LICENSE shall be governed by and construed in accordance with
applicable United States Federal Law, Regulations, Directives, and Instructions.

     12.2 Complete Agreement

          This LICENSE constitutes the complete understanding and agreement
between LICENSOR and LICENSEE and supersedes any prior understanding or written
or oral agreement relative to the subject matter of this LICENSE.

     12.3 Severability

          The illegality or invalidity of any Article of this LICENSE shall not
impair, affect, or invalidate any other Article of this LICENSE.

     12.4 Interpretation of Headings

          Headings of the Articles of this LICENSE are for convenience of
reference only and do not form a part of this LICENSE and shall in no way
affect the interpretation thereof.

     12.5 Independent Parties/Entities

          The relationship of LICENSOR and LICENSEE is that of independent
parties and not as agents of each other, partners, or participants in a joint
venture. LICENSOR and LICENSEE shall each maintain sole and exclusive control
over their respective personnel and operations.

Article 13. SIGNATURES

          IN WITNESS WHEREOF, the parties hereto have caused this LICENSE to be
executed by their authorized representatives.

     13.1 For NanoDynamics, Inc.

          I the undersigned, am authorized to bind NanoDynamics, Inc. to this
LICENSE and do so by affixing my signature hereto.

                                       13

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               Nonexclusive Patent License Agreement No. 04-28466
           Between NanoDynamics, Inc. and the U.S. Department of Navy

Entered into this 16th day of September 2005,

By: /s/ Keith A. Blakely
    ---------------------------------
(signature)

Typed Name: Keith A. Blakely
Title: CEO

     13.2 For the Department of the Navy

          I, the undersigned, in accordance with 35 USC 209, am authorized to
bind the United States Department of the Navy to this LICENSE and do so by
affixing my signature hereto.

Entered into this 23rd day of
September 2005,

By: /s/ D.M. Schubert
    ---------------------------------
(signature)

Typed Name: D.M. Schubert
Title: Commanding Officer, Captain,
       U.S. Navy

                                       14

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