Document:

EXHIBIT
10.112

 

ECD/SOUTHWALL

DEVELOPMENT
& TECHNOLOGY AGREEMENT

 

DEVELOPMENT AND TECHNOLOGY

This “Agreement” is made this 11th of April, 1997
between Energy Conversion Devices, Inc., a Delaware corporation with a
principal place of business at 1675 West Maple Road, Troy, Michigan 48084;
(hereinafter referred to as “ECD”); and Southwall Technologies, a corporation,
with a principal place of business at 1029 Corporation Way, Palo Alto,
California 94303 (hereinafter referred to as “Southwall”) the parties agree;

 

WITNESSETH:

WHEREAS, ECD is presently engaged in the research,
development and commercialization of proprietary technology relating to
microwave plasma enhanced chemical vapor deposited (“MPECVD”) multilayered
optical coatings and the manufacturer of products that incorporate such coating
“MPECVD TECHNOLOGY” and owns intellectual property rights, including patents,
patent applications Trade Secrets and know-how relating thereto;

 

WHEREAS, Southwall is presently engaged in the
research, development and manufacture of sputtered multilayered coatings on
substrates (the “Field”) and owns intellectual property rights, including
patents and patent applications, trade secrets and know-how relating thereto;
and

 

WHEREAS, Southwall desires to have ECD develop and
possibly produce, using ECD’s MPECVD Technology, at least one layer of at least
one type of multilayered coating (the “Product(s)”) and Southwall desires to
obtain rights under ECD’s proprietary MPECVD Technology in the Field on an
exclusive basis in the Territory for the Exclusivity Period (as hereafter
defined);

 

Article 1.  GRANT OF LICENSE

1.1 ECD grants
Southwall an exclusive (even to ECD) Royalty-bearing, Worldwide License, with
the right to sub license, under ECD’s proprietary MPECVD Technology and
Improvement Inventions to use the MPECVD Technology and Improvement Inventions
and make, use and sell the Product(s) in the Field for the period of time
covered by the Exclusivity Period (the “License”.) Southwall agrees to share
equally any and all up-front licensing fees it receives from Southwall’s
sublicenses of MPECVD Technology, if any.

 

1

 

1.2  Southwall grants ECD a non exclusive royalty
free world wide license, with the right to sub-license, under improvements
Southwall may make during the term of agreement to ECD’s proprietary MPECVD
Technology (for ECD’s use outside of the “Field” which is exclusive to
Southwall), including all patents and patent applications, to make, have made,
use, sell or otherwise dispose of product(s). 
If Southwall requires an expansion of Field applications, the parties
will negotiate in good faith such expansion, giving due consideration to ECD’s
current business plans and Southwall’s ability to exploit the expanded applications.

 

Article 2.  DEFINITIONS

 

2.1 
Products

Products shall mean any and all product(s) incorporating one or more
multilayered optical coatings in which at least one layer of a multilayer stack
is deposited by ECD’s MPECVD Technology.

 

2.2 
Demonstration Product The Demonstration Product
shall meet the performance and process requirements to be achieved in the
Development Program as set forth in Appendix A attached hereto, “The
Demonstration Product and ECD’s PECVD Process”

 

2.3 
Field

Product(s) produced forsale as coatings in display applications (CRT’s,
Flat Panel Displays, Digitizers, Touchpanels, etc) and coatings for flexible
substrate applied to automotive and building glass and decorative and reflector
applications, and for non low emissivity coatings on automotive and
building glass, decorative and reflector glass applications.

 

2.4 
Territory

Territory shall mean the world.

 

2

 

2.5 
Exclusivity

Exclusivity shall mean that ECD and any affiliates of ECD or
sublicensees of ECD will not manufacture, market or sell the Product(s) nor
license any third party to market or sell Products, in the Field in the
Territory for the duration of the Exclusivity Period or any extension thereof.  Southwall is obligated to use it’s
reasonable best efforts to commercialize the product(s).

 

2.6 
Exclusivity Period

Exclusivity Period shall begin upon the effective date of this
Agreement and extend for a two (2) calendar year period which begins from the
date that Southwall commercially introduces the first Product(s) incorporating
at least one MPECVD layer utilizing ECD’s MPECVD Technology, and any extension
thereof.

 

2.7 
Technology

Technology shall mean ECD’s MPECVD Technology and any and all know-how
utilized by ECD for the manufacture of Products including without limitation
all specifications, process parameters, designs, drawings and all other
documents and trade secrets relating or pertaining thereto, in existence during
the effective term of (i) this agreement or (ii) the long term license
agreement contemplated by the parties hereto (the “Long Term License
Agreement”) is in effect, whichever is longer.

 

2.8 
Improvement Inventions

“Improvement Inventions” shall mean any and all improvements,
enhancements, modifications, and additions to the Technology conceived pursuant
to the joint development effort (the Development Program) during the term of
this Agreement, specifically including (but not limited to) any patent
applications and patents issuing therefrom.

 

2.9 
Net Sales Price

The gross invoice price to third parties in armslength transactions in
the ordinary course of business of Product(s) as packed for shipment less the
following deductions:

a) Trade or quantity discounts as well as bonuses and incentive
allowances and rebates granted to the customer, including the related
advertising expenses and commissions.

b) Transportation, packing costs and insurance charges on shipments to
customers.

c) Sales and use taxes paid by Southwall directly on such sale to the
government.

 

3

 

d) Credits for product(s) returned by the customer.

 

Article 3.  JOINT DEVELOPMENT

 

3.1  Southwall and ECD shall jointly design and
develop the manufacturing apparatus and processes during the Development
Program which begins as soon as practicable following the execution of this
Agreement.  The Development Program will
continue unless terminated according to the terms of this Agreement, at least
until first generation Product(s) produced in ECU’s machine are qualified by
Southwall.  This Agreement shall extend
at least until the contemplated Long Term Licensing Agreement is in effect,
after which time ongoing development support may be required by Southwall, and
at which time Southwall may wish to purchase a machine to manufacture
Product(s) at its own facility, using the Technology.

 

If Southwall at its sole discretion, elects to purchase from ECD, ECD
agrees to sell to Southwall, a full scale MPECVD production machine for placing
a minimum of one or two layers of coating on a 1.2m wide roll of
substrate.  Southwall and its licensees
will purchase all future production machines using the technology from ECD,
provided that ECD is competitive in total cost, performance, and delivery of
any such machines.

 

3.2  At present ECD’s machine is capable of
producing a uniform .2 meter wide coating on .3 meter wide substrate web.  During the development program ECD will
refine and modify, at a cost not to exceed $20,000 its current MPECVD apparatus
(which cost will be borne by Southwall) to produce the 0.27m SiO2 top layer in
Southwall’s multilayered anti-reflective stack, on a 0.4 meter wide web of PET
substrate material, to meet the SONY product specifications set forth in
Exhibit A.

 

Concurrently therewith, ECD will, if requested by Southwall, design,
deliver and help install, to the extent possible, MPECVD apparatus in
Southwall’s existing lab sputtering machine LC1 for a price to be negotiated by
ECD and Southwall.  If Southwall
requires only consultation with ECD personnel in order to install the MPECVD
apparatus inside the LC1 lab machine, this consultation will be rendered during
the term of this Agreement at no additional cost beyond the monthly fees
described in Paragraph 3.4.

 

4

 

Also if requested by Southwall, ECD will design, develop and make
modifications to their existing .3 meter wide MPECVD machine to accommodate
substrates of .54m width (two full “cuts”) for production purposes, at a cost
not to exceed $200,000 and a delivery time of about 6 months (1 month down
time)

 

3.3  Southwall and ECD shall jointly own the
Improvements Technology created by the joint development efforts.  Improvement inventions and patents issuing
therefrom shall be assigned jointly to Southwall and ECD with each party owning
an undivided 50% interest thereto and shall be included within the subject
matter of the license.  ECD will take
the lead in filing of process patents evolving from the Improvements
Technology.  Southwall will lead in
filing of any product patents evolving from the Improvements Technology.

 

3.4  In consideration of the development
activities set forth above, Southwall shall make payments to ECD pursuant to
the following schedule:

 

$20K/month for the term of the Agreement.  This payment will cover both ECD routine hardware costs and
development costs, starting from the Effective Date of this Agreement; in
consideration of this payment ECD commits use of its machine to achieve the
objectives of its development program contained in Appendix A, of up to eight
hours a day, up to five days a week.  In
addition, this fee shall cover any consulting required to assist Southwall in
installing MPECVD hardware in LC1.

 

3.5  ECD warrants and represents that the list of
patents and patent applications in Appendix C is a complete list of presently
existing patents and patent applications relevant to the practice of the
Technology for the manufacture, use and sale of Product(s).

 

5

 

Article 4.  LONG TERM AGREEMENT

 

4.1  At anytime during the term of this
Agreement, Southwall shall have the option to enter into a Long Term License
Agreement with ECD, upon the basic terms and conditions here stated and agreed
to by both parties:

 

“Product’(s)”, “Net Sales Price”,”Technology”, “MPECVD Technology”
“Improvement Inventions”,”Exclusivity”, “Territory”, and “Field” shall be
defined as above.

 

Term: Five years, with Southwall having an option to renew for
consecutive five year terms.

 

License Fee and Royalty:  2.25% of Net Sales Price directly
attributable to MPECVD Technology for the first five years, 1.25% of Net Sales
Price of Net Sales Price directly attributable to MPECVD Technology for all
years thereafter.  Minimum royalty
payment per year shall be negotiated in good faith by the parties prior to
finalization of the Long Term License Agreement, but in no case will it be less
than $250,000/year after production of qualified SONY product using MPECVD
technology (See Appendix A) attains a Net Sales volume of $500,000/month (using
Net Sales Price/unit x sales volume in units) for three consecutive months.

 

Up Front Fee:  The $20K/month payments are considered to be
in lieu of all up front licensing fees. 
If the program is terminated prior to one year from the date hereby,
Southwall shall owe the differential to ECD, should Southwall elect to maintain
Exclusivity.

 

Article 5.  PROPRIETARY INFORMATION

 

5.1  All technical, manufacturing, maintenance,
installation, marketing or other information of either ECD or Southwall which
are marked proprietary or confidential and made available by one party to the
other party pursuant to this Agreement shall be held in confidence by the
receiving party and shall be neither disclosed by the receiving party to third
parties, nor used by the receiving party except in accordance with and in
furtherance of this Agreement or the Long Term License Agreement.  Notwithstanding the foregoing, neither ECD
nor Southwall shall have any obligation hereunder with respect to any
information of the other party which:

 

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(a) was of written record existing in its own files prior to its first
receipt hereunder from such other party;

(b) at any time becomes a matter of general public knowledge or is
published publicly without any fault on the part of the recipient;

(c) is at any time lawfully received by it from a third parry under
circumstances permitting its disclosure to others.

 

5.2  Each party shall take the same action and
utilize the same precautions in preventing unauthorized disclosure of the other
party’s proprietary or confidential information as its uses with regard to its
own proprietary or confidential information and in no circumstances less than
reasonable care.

 

5.3  In the event of termination of this
Agreement for any reason, both parties, upon request of the other party, shall
return to the other party or destroy and certify the destruction of all
confidential or proprietary information and reproductions thereof to the other
party.

 

5.4  The obligation of either party not to use or
disclose the confidential or proprietary information of the other party shall
end five (5) years after the date of the first receipt of the said confidential
or proprietary information/or two (2) years after the termination or expiration
of the Agreement, which ever occurs first.

 

Article 6.  TERM AND TERMINATION

 

6.1  This Agreement shall become effective as of
the date on which the last signature is affixed (“Effective Date”) and shall
remain in effect unless earlier terminated pursuant to any other provisions of
this Agreement.

 

6.2.1  If either party, at any time, breaches any
provisions of this Agreement (other than a Material Breach), the other party
shall give written notice of such breach. 
Failure to give written notice does not waive the breach but only abates
the cure period.

 

7

 

If the defaulting party fails to cure any such non–Material
Breach within thirty (30) days after receipt of such written notice of breach,
the other party may in its own discretion terminate this Agreement forthwith by
giving further written notice to that effect.

 

6.2.2  This Agreement may be terminated forthwith
by either party hereto by giving the other party a written notice of
termination:

(a) if the other party is adjudged to be bankrupt or insolvent;

(b) if the other party filed a voluntary petition in bankruptcy or
insolvency, or for the appointment of a receiver with respect to all of the
property of the other party.

(c) if the other party filed petition or answer seeking to reorganize
or readjust under any law relating to insolvency or bankruptcy;

(d) if the other party executed an assignment for the benefit of its
creditors generally; or

(e) if the other party instituted any proceeding for liquidation or
winding up of its business other than for purposes of reorganization,
consolidation or merger; (collectively “Material Breach”); or

(f) if a Material Breach occurs which is not remedied within thirty
(30) calendar days of the date such Material Breach occurs; however, the
non-breaching party is not required to give the breaching party notice
of such Material Breach at the time of occurrence.  Delay in recognizing a Material Breach shall not be considered a
waiver of the breach.

 

6.2.3  Southwall may terminate this Agreement at
any time and upon such event neither party shall have any liability to the
other except pursuant to section 6.2.4.

 

6.2.4  Upon any termination of this Agreement, all
rights, duties and obligations of the parties hereunder shall terminate
forthwith except as otherwise specifically provided in this Agreement and also
except for:

(a) the obligations of either party to pay to the other any amounts due
and remaining unpaid on the effective date of such termination; and

(b) any right or cause of action which occurred prior to the effective
date of such termination.

 

6.2.5  ECD may terminate this Agreement if
Southwall fails to use its reasonable best efforts to commercialize the Product(s)
ECD may terminate Southwall rights to a particular Product(s) for failure by
Southwall to use its reasonable best efforts to commercialize this Product(s).

 

8

 

Article 7.  FORCE MAJEURE

 

7.1  Neither ECD nor Southwall shall be liable
for any failure to perform or delay in the performance of its obligations
hereunder caused by circumstances beyond its control including, but not limited
to, acts of God, acts of Government or any agency thereof, strikes,
transportation, embargoes, acts of public enemies, declared war, rebellion,
sabotage, epidemic or quarantine restrictions, fire, storm, flood, earthquake,
hurricane or tornado.

 

Article 8.  ASSIGNMENT

 

8.1 This Agreement
may not be assigned by ECD or Southwall, except as provided herein, without the
prior written consent of the other party, which consent shall not be reasonably
withheld,1 except to a successor in interest to all or substantially
all of its business to which this Agreement relates, and any attempted
assignment made without such consent shall be null and void.

 

Article 9.  GOVERNING LAW

 

9.1  The interpretation, construction and effect
of this Agreement shall be governed in all respects by the laws of the State of
California.  Jurisdiction of disputes,
where applicable, shall be vested in the state and federal courts of California

 

9

 

Article 10.  NOTICES AND REQUESTS

 

10.1  All notices, authorizations, and requests in
connection with this Agreement shall be deemed given on the day they are
deposited in the U.S. mails, postage prepaid, certified or registered, return
receipt requested, and addressed as follows:

 

For Southwall:

 

Southwall Technologies 1029 Corporation Way, Palo Alto, California 94303

Attention: Martin M. Schwartz

 

For ECD:

 

Energy Conversion Devices, Inc.

1675 W. Maple Road

Troy, Michigan 48084

Attention: Stanford R. Ovshinsky

 

Article 11. MISCELLANEOUS

 

11.1  If any provision of this Agreement shall be
held by a court of competent jurisdiction to be illegal, invalid or
unenforceable, the remaining provisions shall remain in full force and effect.

 

11.2  The Section headings used in this Agreement
and the attached Exhibits are intended for convenience only and shall not be
deemed to supersede or modify any provision.

 

11.3  Neither this Agreement, nor any terms and
conditions contained herein, shall be construed as creating a partnership,
joint venture or agency relationship or as granting a franchise.

 

10

 

Article 12. COMPLETE AGREEMENT

 

12.1  This Agreement, together with its
appendices, represents the entire Agreement between the parties and supersedes
all prior contemporaneous agreements or representations, whether oral or
written, relating to the subject matter hereof and no course of prior dealings
between the parties and no usage of the trade shall be relevant to supplement
or explain any term in this Agreement. 
This Agreement shall not be modified except by written amendments signed
by both parties.

 

Article 13.  SURVIVING PROVISIONS

 

Articles 2, 3.3, 5, 6.2.3, 6.2.4, 9, 10 and 13 shall survive the
expiration or termination of this agreement

 

IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives on the day and year first above written.

 

	
  SOUTHWALL TECHNOLOGIES

  	
  ENERGY CONVERSION DEVICES, INC.

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
								

 

11

 

Southwall Confidential

 

APPENDIX A. THE DEMONSTRATION PRODUCT
AND ECD’s PECVD PROCESS.

 

Woodard and Shimshock

 

April 9, 1997

 

 

I. INTRODUCTION

 

This specification describes Southwall’s expectations for the
performance of a specific product (i.e. the demonstration product) and the
PECVD process which ECD will use to deposit one layer in that product.  The demonstration product is an
antireflection coating on a polymeric substrate (7 mil PET) which is currently
manufactured by Southwall and sold to Sony for application to CRT
monitors.  In the demonstration product,
ECD’s PECVD technology is used to deposit approximately 85 nm of optical
quality SiO2 as one of the layers of an optical stack containing other vacuum
coated and wet coated layers.  The “other”
layers are Southwall’s responsibility. 
It is the intent of this specification to outline the requirements if
one is to produce an AR coating with a PECVD SiO2 layer which completely meets
Sony’s expectations.  It is the further
intent of the document to identify process requirements which must be met in
order to insure that PECVD is a coating technology which Southwall Technologies
should adopt.

 

At the completion of the program, ECD will provide to Southwall a
written document summarizing the work done during the development program.  In addition, a program review will conducted
in which both Southwall and ECD technical staff summarize the results of their
work.

 

ECD personal may visit Southwall at mutually agreed upon times to
observe and or participate in the measurement of various samples.  Similarly, Southwall employs may participate
in PECVD development work done at ECD in support of this program.

 

 

II. SAMPLE SPECIFICATIONS

 

The specifications are stated below as discrete items.  Furthermore in some cases, to simplify
verification of certain aspects of the PECVD SiO2 process or material, a
demonstration prototype is called for which does not contain all the elements
of the complete demonstration product. 
However, it is intended that all of the product and process
specifications should be attainable simultaneously when producing the
demonstration product.

 

Southwall Confidential

 

 

Southwall will provide in a timely manner the testing (i.e. optical,
electrical, mechanical, etc.) necessary to help ECD meet the objectives of this
program.

 

1              Specifications for the PECVD SiO2 layer deposited at a
thickness of ca. 100 nm onto bare low–haze PET such as 2 mil ICI 453.

 

1.1           The
PECVD SiO2 layer should have a real refractive index between 1.44 and 1.48.

 

1.2           The coated substrate should have a
visible absorption less than 0.5% while the absorption at a wavelength of 400
nm should be less than 1%.

 

1.3           On the ECD experimental machine, the
PECVD process should provide +/-2% cross web uniformity in optical thickness
(i.e. physical thickness* refractive index). 
In a demonstration run, this cross-web uniformity should be obtained
continuously for at least 500 meters of 2 mil substrate.  This cross web uniformity should be obtained
over the full web length for at least a 270 mm wide section of the substrate
where the incoming substrate width will be 13.5 inches (343 mm).  This uniformity should be demonstrated with
the PECVD hardware configured in a mode suitable for coating conductive
substrate with a sheet resistivity less than 200 ohms/square.

 

1.4           On the ECD experimental machine, the
PECVD process will deposit a 100 nm thick SiO2 at a line speed of 50
mm/sec.  This will be demonstrated at
the same time as the uniformity demonstration given above in 1.3.  In addition to the process details given in
1.3 above, these rates will be attained with a single microwave applicator with
no more than 24 inches of the web exposed to the plasma.  There will be no evidence of thermal
distortion of the 2 mil PET substrate.

 

2.             Specifications for
the Complete Demonstration Product

The components of the demonstration product are as
follows:

PET (6-7mil)

Hardcoat

primer

20 nm ITO

20 nm SiO2

105 nm ITO

85 nm SiO2 - Deposited by ECD

Antismudge

 

2

 

2.1           Reflection: The average reflection of
the coated surface between 450 and 650 nm will be less than 0.75% with no
reflection measurement in that wavelength range exceeding 2.0%.

 

2.2           Adhesion: The coating will show no
evidence of deterioration when subjected to a cross–hatch peel test with
Scotch brand #610 cellulose tape.  This
test is done without the antismudge layer applied.

 

2.3           Pencil Hardness: The coating shall
show no signs of deterioration after being subjected to a 3H pencil inclined at
45 degrees loaded with a 1000 g mass.

 

2.4           Mechanic Pencil Tip Hardness: The
coating shall show no signs of deterioration after being subjected to a
mechanical pencil tip inclined at 45 degrees and loaded with a 150 gram
mass.  This test is done after the antismudge
layer is applied.

 

2.5           Humidity Test: After being laminated
to glass and scored, the product shall show no evidence of deterioration
following a 48 hour exposure to a relative humidity of 98% at 50 degrees
centigrade.

 

2.6           Acetone Rub Test: The product shall
show no signs of deterioration after 50 strokes with an acetone saturated towel
loaded at 2224 grams/sq cm.

 

2.7           Electrical Properties: The product
will have and average cross web sheet resistivity of 250 ohms/square with no
value exceeding 320 ohms/square.

 

2.8           Physical Defects: The product will be
essentially free of physical defects. 
If defects are visible to the naked eye after lamination to a CRT tube
then they are unacceptable.  For example
no spot defects with a diameter greater than 0.6 mm are allowed.

 

2.9           Heat Distortion: The product must not
be distorted (i.e. made non planar) during the PECVD process.

 

2.10         Cross web Uniformity: All
specifications of the demonstration product are expected to be obtained over
most of the 200 meter web length for at least a 270 mm wide section of the
substrate.  Acceptable yield losses are
described below in section 3.

 

3

 

III. PROCESS SPECIFICATIONS

 

To meet the objectives of this work, Southwall will not be expected to
provide more than 40 rolls of 200 meter long sputter coated substrate.  This includes the 30 rolls to be coated to
demonstrate process robustness (section 3.2).

 

 

3              Process
Demonstration Requirements

 

3.1           The demonstration product will be of
suitable quality to achieve qualification by Sony.  Namely, it will meet the specifications given in section 2.

 

The demonstration product will be made using 13.5 inch
wide sputter coated substrate from Southwall coaters LC1 or LC2.  It will be verified that the Southwall
coated substrate supplied by Southwall will pass all Sony qualification test if
the top SiO2 layer is also sputtered coated by Southwall.  The coated substrate will be supplied on 6”
cores in 200 meter lengths at a thickness of 6 or 7 mils with 2 mil thick ICI
453 attached as leaders and tails.

 

Southwall will be responsible for supplying ECD an “in
situ” optical monitor and the know–how required to tune–in and
control downweb the thickness of the PECVD SiO2 layer.

 

3.2           After the demonstration product has
been qualified, ECD will manufacture 30 rolls of demonstration product.  During this period, there will be no more
than a 20% yield loss due to the PECVD operation at ECD.  This yield is based on linear footage (i.e.
does not include trim losses) and does not include leader or tails.  Roll maps will be provided Southwall for
each coated roll.  The maps will be
updated by ECD to identify the location of “in-spec” material.

 

During the 30 roll
process demonstration the average line speed for the PECVD coating process will
be at least 50 mm/sec.

 

4EXHIBIT
10.113

 

EQUIPMENT
PURCHASE CONTRACT

 

This Equipment Purchase
Contract (“Contract”) effective February     
, 1999 (the Effective Date) by and between Energy Conversion Devices,
Inc. (“ECD”), with offices at 1675 West Maple Road, Troy, Michigan 48084, and
Southwall Technologies, Inc. (“Southwall”), with offices at 1029 Corporation
Way, Palo Alto, California 94303.  The
foregoing parties shall be sometimes hereinafter referred to collectively as
the “parties” and each individually as a “party” to this Contract.

 

RECITALS

 

WHEREAS, ECD is presently
engaged in the research, development and commercialization of proprietary
technology relating to microwave plasma enhanced chemical vapor deposited
(“MPECVD”) multilayered optical coatings and is the manufacturer of equipment
to deposit such coatings and products that incorporate such coating and owns
intellectual property rights, including patents, patent applications, trade
secrets and know-how relating thereto; and

 

WHEREAS, Southwall is
presently engaged in the research, development and manufacture of sputtered
multilayered coatings on substrates and owns intellectual property rights,
including patents and patent applications, trade secrets and know-how relating
thereto; and

 

WHEREAS, ECD and
Southwall entered into a Development and Technology Agreement dated April 11,
1997, to further develop and then produce MPECVD Products; and

 

WHEREAS, having
successfully completed the development program, Southwall desires to have ECD
build and ECD desires to build a machine for the MPECVD manufacture of an
antireflective product.

 

NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:

 

1

 

I.              Equipment and Prices

 

A.                                   Southwall
has located an existing multistation sputtering machine built by Leybold, said
machine including a web handling system. 
Southwall will drop-ship the Leybold machine to Troy, Michigan.  ECD will strip the machine of the existing
sputtering stations, modify and retrofit same with MPECVD capabilities as set
forth in Appendix A hereto.

 

B.                                     Pursuant
to the terms provided in this Contract, ECD shall design and build in
accordance with the specifications herein, sell and deliver to Southwall, and
Southwall shall purchase and accept the equipment to assist Southwall in the
manufacture of MPECVD multilayered optical coatings (the “MPECVD Equipment”).

 

C.                                     Southwall
and ECD shall agree, prior to the date of shipment of the MPECVD Equipment to
Southwall in Tempe, AZ, upon the ownership and disposal of any parts or
components of the Leybold machine that are not used, modified or retrofitted by
ECD to manufacture the MPECVD Equipment.

 

D.                                    A
detailed description of the machine is set forth in Appendix A hereto.  The specifications for the MPECVD Equipment
shall be as set forth in said Appendix A.

 

E.                                      The
MPECVD Equipment shall comply with performance and safety rules, regulations,
and standards of the U.S. Occupational Safety and Health Administration.

 

F.                                      The
purchase price, F.O.B. Troy, Michigan, shall be as set forth in Appendix B
hereto.  Southwall shall pay to ECD the
amount set forth in the payment schedule in said Appendix B in accordance with
the time periods therein.  Southwall may
request in writing revisions of the equipment and specifications, including the
timetable for completion of work pursuant to this Article 1.  It is understood that any change by
Southwall in the MPECVD Equipment may necessitate a price or delivery revision;
otherwise the price and delivery are firm.

 

2

 

II.            Completion
Schedule

 

ECD shall use its best
efforts to complete the manufacture and production of the MPECVD Equipment at
ECD within 12 months of the execution of this Agreement by the parties,
provided the payments from Southwall to ECD in accordance with Appendix B do
not delay ECD’s timetable for completion of the work.

 

III.           Acceptance
and Risk of Loss

 

A.                                   On
the date for acceptance of the MPECVD Equipment, the MPECVD Equipment that ECD
has manufactured shall meet and otherwise perform in accordance with the
acceptance requirements set forth in Appendix C hereto (the “Acceptance
Requirements”).  In the event that the
MPECVD Equipment fails to perform in accordance with the Acceptance
Requirements, ECD shall make such modifications, enhancements and improvements
thereto in order to cause such equipment to perform in accordance with the
Acceptance Requirements.  If the MPECVD
equipment fails to meet the Acceptance Requirements at Southwall’s facility in
Tempe, AZ and such failure shall continue for a period of time exceeding ninety
(90) days, then, notwithstanding such failure, if the MPECVD Equipment is
capable of producing MPECVD Products which are commercially saleable, Southwall
and ECD shall enter into good-faith negotiations concerning the amount of the
final payment to be paid to ECD.

 

(1)                                   Risk
of loss or damage to the MPECVD Equipment while resident in ECD’s facility is
the responsibility of ECD.

 

(2)                                   Title
to and risk of loss or damage to the MPECVD Equipment shall pass to Southwall
from ECD upon initial acceptance after factory floor test at ECD’s facility in
Troy, MI pursuant to Appendix C (SK548). 
Title to the MPECVD Equipment shall be transferred to Southwall free and
clear of all liens, claims and encumbrances of any kind.

 

3

 

(3)                                 Within
three (3) days after completion and acceptance of the MPECVD Equipment following
the factory floor tests (Appendix C (SK548)) at Southwall’s facility in Tempe,
AZ, Southwall shall provide ECD with a Certificate of Final Factory Acceptance.

 

B.            Force Majeure

 

In the event of any
failure or delay by either party hereto in the performance of all or any part
of this Contract due to acts of God, war, civil commotion, riots, enactment,
alteration or abrogation of law, labor dispute, quarantine restrictions,
embargoes or any other force majeure beyond the control of either party or causes
similar thereto, the party concerned with any of these events shall be exempted
from any obligation to be performed hereunder provided that such failure or
delay shall be excusable only in the event of a Force Majeure that is beyond
the reasonable control of the affected party. 
The party not claiming the benefit of excusable delay hereunder will
likewise be excused from performance of its obligations on a day-to-day basis
to the extent such party’s obligations are affected due to the other party’s
delayed performance.  If any of the
above-stated events should occur with respect to manufacture of the MPECVD
Equipment, ECD shall notify Southwall immediately within 24 hours in writing to
that effect accompanied by materials evidencing such occurrence.  If an event of Force Majeure prevents ECD
from performing its obligations under this Contract for a period exceeding
sixty (60) days, Southwall may, upon written notice to ECD, terminate this
Contract with no additional costs accruing to Southwall.

 

C.            Warranty and Service

 

(1)                                   ECD’s
warranty as to the web drive and handling system is limited to the  modifications/refurbishments which it makes
thereto.  Other than the foregoing,  responsibility for the operation of said web
drive and handling system, as well as the optical monitoring system, is the
responsibility of Southwall.

 

4

 

(2)                                  ECD
warrants that, during the warranty period (as hereinafter defined), the MPECVD
Equipment will perform in accordance with the specifications set forth in
Appendix A in normal use and operation and will be free from any defects in
material and workmanship.

 

(3)                                  ECD
shall provide all warranty service, components, parts, peripheral equipment,
and accessories (excluding consumable items, raw materials and leasehold
improvements) in support of the MPECVD Equipment required to ensure proper
functioning of the MPECVD Equipment at the performance level required for
passing the acceptance tests (Appendix C) during the Warranty Period at no charge
or cost to Southwall.  ECD shall elect,
in any particular instance, either to repair or to replace such components,
parts, peripheral equipment, and/or accessories, as the case may be.   This warranty does not extend to further
product optimization after acceptance by Southwall at Tempe.

 

(4)                                  The
warranty period shall be one (1) year commencing on the date on which the
MPECVD Equipment has been accepted by Southwall at its Tempe facility in
accordance with the terms hereof.

 

(5)                                  The
warranty does not extend to negligent or accidental damage or misoperation of
the MPECVD Equipment or components and parts thereof.

 

(6)                                  Notwithstanding
the above, the warranty period on components or software supplied by third
parties is limited to the warranty received by ECD from the supplier of the
components or software.

 

D.            Change
Orders

 

Southwall
may submit change orders to ECD for changes in specifications or other
production modifications for the MPECVD Equipment.  The parties shall reach agreement on any pricing changes
accompanying such a change order.  Upon
acceptance of any change order, the

 

5

 

specifications
for the MPECVD Equipment shall be deemed to be amended and modified by the
specifications and/or modifications reflected in such change order.

 

A list
of spare parts for continuing commercial operation of the MPECVD equipment will
be jointly prepared.  Southwall shall
bear the financial responsibility for procurement of such parts.

 

6

 

E.             Assignment

 

Neither ECD nor
Southwall shall assign or otherwise transfer any right or obligation hereunder
to any third party without the prior written consent of the other party, which
shall not be unreasonably withheld.

 

F.             Indemnification

 

ECD shall
indemnify and hold Southwall and its members, managers, officers, agents and
employees (the “Indemnitees”) harmless from and against all third-party claims,
demands, suits, proceedings, damages, costs, expenses, liabilities (including,
without limitation, reasonable legal fees) or causes of action brought against
or incurred by the Indemnitees for any injury to persons, loss or damage to
property, violation of applicable laws, or any other acts or omissions,
negligence, error, willful misconduct or strict liability of ECD, its
directors, officers, agents, employees, or subcontractors in the performance of
this Contract or the proper use and operation by Southwall of the MPECVD
Equipment.

 

G.            Notices

 

(1)                      Any
notice, consent, demand or request required or permitted by this Contract shall
be in writing and shall be deemed to have been sufficiently given when
personally delivered or deposited in the United States mail, postage prepaid,
addressed as follows:

 

	
  Energy Conversion
  Devices, Inc.

  	
   

  	
  Southwall Technologies Inc.

  
	
   

  	
   

  	
   

  
	
  1675 West Maple Road

  Troy, Michigan 48084

  Attention: President

  	
   

  	
  1029 Corporation Way

  Palo Alto, California 94303

  Attention: President

  

 

(2)                      Alternations
of addresses stated above shall become effective ten (10) days after the
dispatching of such written notice.

 

7

 

H.            Term of Contract

 

(1)                                  This
Contract shall be valid and in force for the period commencing on the Effective
Date and ending upon acceptance of the MPECVD Equipment.

 

(2)                                  The
provisions of Article III: (A), (C), (F), and (G) shall be binding upon both
parties after the termination hereof.

 

I.              Applicable Law

 

The
formation, validity, construction and the performance of this Contract shall be
governed by the laws of the State of Michigan.

 

J.             Entire Agreement

 

This Contract and the
appendices attached hereto embody the entire understanding of the parties, and
there are no other agreements or understandings between the parties relating to
the subject matter hereof.  No amendment
or modification of this Contract shall be valid or binding upon such parties
unless made in writing and signed on behalf of each of such parties by their
respective proper officers thereunto duly authorized.  Any further consulting arrangements between the parties will be
specifically reduced to writing and will not be binding until duly executed.

 

IN WITNESS WHEREOF, both
parties hereto have caused this Contract to be signed by their respective
representatives duly authorized thereunto on the date first above written.

 

	
  ENERGY
  CONVERSION DEVICES, INC.

  	
   

  	
  SOUTHWALL
  TECHNOLOGIES, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Stanford R.
  Ovshinsky

  	
   

  	
  By:

  	
  /s/ Thomas G. Hood

  	
   

  
	
  Name:

  	
  Stanford R. Ovshinsky

  	
   

  	
  Name:

  	
  Thomas G. Hood

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  	
  Title:

  	
  President & CEO

  	
   

  
	
   

  	
   

  

 

8

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