Document:

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

 

 

 

License and Strategic Business
Agreement

 

Between

 

Uni-Pixel Displays, Inc.

 

And

 

Lockheed Martin Corporation

Lockheed Martin Systems
Integration – Owego

 

October 5, 2005

 

 

License
and Strategic Business Agreement

 

Table
of Contents

 

	
  Recitals

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 1

  	
  General Definitions And
  Relationships Among Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 2

  	
  Research and Development
  Work

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 3

  	
  Technological Know-How,
  Ideas, and Inventions

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 4

  	
  Preferred Supplier and License

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 5

  	
  Patent
  Rights

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 6

  	
  Patent
  Infringement and Defense

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 7

  	
  Representations
  and Warranties

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 8

  	
  Term and
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 9

  	
  Survival After Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 10

  	
  Escrow Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 11

  	
  Non-exclusiveness
  of Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 12

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 13

  	
  Assignment

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 14

  	
  Force Majeure

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 15

  	
  Successors,
  Assigns, Etc.

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 16

  	
  Limitation of
  Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 17

  	
  Confidential
  Information

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 18

  	
  Governing Law

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 19

  	
  Invalidity

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 20

  	
  Waiver

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 21

  	
  Publicity

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 22

  	
  Order of
  Precedence

  	
   

  
	
   

  	
   

  	
   

  
	
  Article 23

  	
  Sole Agreement

  	
   

  

 

2

 

LICENSE
AND STRATEGIC BUSINESS

AGREEMENT

 

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

 

1.                                      RECITALS

 

Whereas, UPD has developed proprietary TMOS
Display Technology  (as defined
hereinafter);

 

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

 

Whereas, UPD is willing to research and
develop prototypes of UPD Licensed Products (as defined hereinafter) based upon
such TMOS Display Technology for

 

3

 

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

 

Whereas, LOCKHEED MARTIN has financially
supported a portion of such research and development relating to the prototypes
of the UPD Licensed Products;

 

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

 

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

 

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

 

ARTICLE 1: General Definitions And Relationships Among Definitions

 

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

 

4

 

such
terms in the succeeding paragraphs of this Article.  The Article headings are for convenience
only and are not otherwise a part of the context of this Agreement.  Those terms defined above are incorporated
into this Article 1 as if repeated in full herein.

 

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

 

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

 

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

 

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

 

5

 

1.5                                 “UPD IPR” shall
mean all UPD Patent Rights, copyrights, trade secrets, and all other
intellectual property rights (except trademarks, tradenames, and Internet
domain names) owned, controlled by, or licensable by UPD, including without
limitation all software, know-how, mask works, designs, specifications,
drawings, scientific, engineering, manufacturing or technical information,
whether or not patentable or copyrightable, in the lawful possession of UPD, and
any further enhancements, modifications, and variations thereof, conceived,
developed or produced by employees or agents of UPD during the Term of this
Agreement and/or pursuant to the Subcontract(s).

 

1.6                                 “UPD Patent
Rights” shall mean any and all U.S. and foreign patents and patent applications
(including all substitutions, continuations, continuations-in-part, and
divisionals of patent applications, and all reissues, reexaminations, renewals
and extensions of issued patents) or similar rights in any country of the
world  relating to TMOS Display
Technology currently owned or licensable by UPD as of the Effective Date of
this Agreement (including such patents and patent applications and invention
disclosures (to the extent that patent applications are subsequently filed
thereon) listed in Exhibit A hereto), and shall further include any
and all U.S. and foreign patents and patent applications (including all
substitutions, continuations, continuations-in-part, and divisionals of patent
applications and all reissues, reexaminations, renewals, and extensions  of issued patents) developed by the Parties
arising out of the Research and Development Work pursuant to and during the
Term of this Agreement.

 

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

 

6

 

continuations-in-part, and divisionals of
pending patent applications and all reissues, reexaminations, renewals, and
extensions of issued patents) or similar rights in any country of the
world  relating to TMOS Display
Technology currently owned or licensable by LOCKHEED MARTIN as of the Effective
Date of this Agreement (including such patents and patent applications and
invention disclosures (to the extent that patent applications are subsequently
filed thereon) listed in Exhibit A hereto) and shall further
include any and all U.S. and foreign patents and patent applications (including
all substitutions, continuations, continuations-in-part, divisionals of pending
patent applications and all reissues, reexaminations, renewals, and extensions
of issued  patents) developed by the
Parties arising out of the Research and Development Work pursuant to and during
the Term of this Agreement.

 

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

 

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

 

7

 

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

 

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

 

1.12                           “Net Sale (s)
Price” for respective LOCKHEED MARTIN Licensed Products and UPD Licensed
Products sold, leased or used by a Licensed Party shall mean such Licensed
Party ‘s actual gross sales price, less trade discounts actually allowed
thereon; sales, use, excise, or similar taxes; customs duties borne by such
Licensed Party; and transportation and insurance charges incurred by such
Licensed Party in transporting its respective Licensed Products to third
parties to the extent those charges are actually shown as separate items on the
invoice for said respective Licensed Products. For respective Licensed Products
sold by a Licensed Party to an Affiliate, the Net Sales Price shall mean the
average sales price, if available, to a non-Affiliate for the same or substantially
similar respective Licensed Product during the relevant accounting period.  In the case a Licensed Party makes any of its
respective Licensed Product solely for use by it and not for sale, and no
substantially similar respective Licensed Product has been sold to an
independent third party end user in an arm’s length transaction, the Net Sales
Price for such respective Licensed Product shall be the so-called “book value”
thereof, as reported or required to be reported to the U.S. 

 

8

 

Internal Revenue Service (or similar
governmental authority for such respective Licensed Products made or used in
countries outside the United States) for depreciation purposes.

 

1.13                           “Unit,” shall
mean a single Licensed Product.  A UPD
Licensed Product is the prototype display being developed by UPD pursuant to
the Subcontract, which is a light guide, active layers, panel, optical shutter
pixels, supporting driver electronics, and connectors.

 

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

 

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

 

9

 

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

 

1.17                           “Preferred
Supplier” shall mean that, during the exclusivity term and any extension
thereto, LOCKHEED MARTIN agrees that LOCKHEED MARTIN shall contract exclusively
with UPD for the UPD Licensed Products subject to the terms of Article 4.1.

 

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

 

1.19                           “LOCKHEED
MARTIN IPR” shall mean all patents, patent applications, copyrights, trade
secrets, and all other intellectual property rights (except trademarks,
tradenames, and Internet domain names) owned, controlled by, or licensable by
Lockheed directly related to TMOS Display Technology, including without
limitation all inventions, discoveries, software, know-how, mask works,
designs, specifications, drawings, scientific, engineering, manufacturing or
technical information, whether or not patentable or copyrightable, in the
lawful possession of LOCKHEED MARTIN, and to any further enhancements,
modifications, and variations thereof, conceived, developed 

 

10

 

or created pursuant to and during the Term of
this Agreement.

 

ARTICLE 2: Research and Development Work

 

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

 

2.2                                 The Research and Development Work,
including but not limited to that set forth in the Subcontract, has been, is
now, and will continue to be carried out in a series of discrete tasks. Prior
to the commencement of any additional tasks, LOCKHEED MARTIN and UPD shall
agree in writing pursuant to good faith negotiations to a development proposal.
Each prototype development proposal under this Article 2.2 shall be
reduced to writing, and Research and Development Work directed thereto shall
only commence upon the execution of said prototype development Subcontract by
an authorized representative of each of the parties. The terms, and provisions
of each such Subcontract shall govern the Research and Development Work in the
tasks covered thereby, but only to the extent that the terms and provisions of
such development Subcontract do not conflict with the terms and provisions of
this Agreement.   Any divergence between
the present Agreement and any Subcontract shall be resolved in favor of this
Agreement.

 

11

 

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

 

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

 

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

 

12

 

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

 

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

 

2.7                                 In the event that, after good faith
efforts by UPD and LOCKHEED MARTIN the two parties cannot agree as to whether
work delivered by UPD to LOCKHEED MARTIN for approval under Article 2.5 is
in conformance with the specifications and/or conditions set out in the
corresponding Subcontract; or UPD fails to effect a reasonable cure within the
time provided in Article 2.6; this Agreement and/or the Subcontract may be
terminated by LOCKHEED MARTIN in accordance with Article 2.3 of this
Agreement.

 

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

 

13

 

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

 

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

 

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

 

14

 

2.11                           Upon the completion of the Research and
Development Work under the Subcontract, the parties shall mutually determine
final specifications for, and a description of the UPD Licensed Products which,
when prepared will be incorporated into  Exhibit C
and, thereafter, identify the UPD Licensed Products to be supplied to LOCKHEED
MARTIN by UPD.

 

ARTICLE 3: Technological Know-How, Ideas and Inventions

 

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

 

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

 

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

 

15

 

solely in the Military/Aerospace Field.

 

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

 

ARTICLE 4: Preferred Supplier and Licenses

 

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

 

16

 

AMLCD,
OLED, and FED. In order to maintain its Preferred Supplier status, UPD shall
meet the standards set forth in this Agreement and Exhibits B and C.  The parties agree that the standards
presently set forth in Exhibit C may need to be modified in the
future, subject to the mutual agreement of the parties, which agreement shall
not be unreasonably withheld or delayed.

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

18

 

royalty
on UPD Licensed Product sold or otherwise transferred to customers  shall be paid by LOCKHEED MARTIN within 30
days of LOCKHEED MARTIN receiving payment from customers for the sale or other
transfer of UPD Licensed Product to 
customers.  LOCKHEED MARTIN shall
remain liable for all royalties due as a result of sales or other transfers of
UPD Licensed Product to customers.  In
the event such UPD Licensed Products are used by LOCKHEED MARTIN or its
Affiliates, the royalty shall accrue as of the date of first use of those UPD
Licensed Products.

 

(f)                                    To the extent permitted by applicable
law, LOCKHEED MARTIN will use commercially reasonable efforts to impose license
restrictions on the use of the UPD Licensed Products that it leases or sells to
commercial customers in the Military/ Aerospace Field.  UPD is obligated under the provisions of this
Section to supply only such information concerning technical improvements
in the Military/ Aerospace Field as UPD has the legal right to supply to
LOCKHEED MARTIN and only to the extent and manner set forth in this
Agreement.  If, at any time, the
disclosure and/or use of any information concerning technical improvements
within the Military/Aerospace Field by UPD to Lockheed should require payments
by LOCKHEED MARTIN and/or UPD, such disclosure and/or use shall be made only
after the parties hereto have agreed as to the bearing of the cost of such
payments. In the event that any intellectual property offered by UPD
constitutes UPD-licensed third party intellectual property, Lockheed shall have
the option, at its discretion, to accept or reject such third party intellectual
property.  Any rejection of such UPD
offered third party intellectual property by LOCKHEED MARTIN based upon grounds
other than the failure by UPD to meet another of its material obligations
pursuant to this Agreement shall not constitute a default by UPD of this 

 

19

 

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

 

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

 

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

 

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

 

20

 

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

 

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

 

(f)                                    To the extent permitted by applicable
law, UPD will use commercially reasonable efforts to impose license
restrictions on the use of LOCKHEED MARTIN Licensed Products that it leases or
sells to commercial customers in fields outside the Military/Aerospace Field.  LOCKHEED MARTIN is obligated under the
provisions of this Section to supply only such information concerning
technical 

 

21

 

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

 

4.5                                 Each Licensed Party obligated to make any
royalty payments shall, within sixty (60) days after each calendar quarter in
each year during the Term of this Agreement, and within sixty (60) days of the
termination of the Agreement, deliver to the Licensing Party, a complete and
accurate report, showing the number and designation of its respective Licensed
Products subject to royalty payment hereunder in the preceding calendar
quarter, together with all information relevant to computation of royalties or
other amounts payable hereunder.  The
Licensed Party obligated to make 

 

22

 

such
payments shall, in accordance with Articles 4.3(e) and 4.4(e), pay to the
other party, in U.S. dollars, at the offices of the Licensing Party, the total
royalties or other amounts due hereunder in respect to each and every respecting
Licensed Product imported, manufactured, sold, leased, or used in the relevant
calendar quarter or portion thereof.

 

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

 

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

 

23

 

$******
in connection with various research and development efforts by LOCKHEED MARTIN,
by government agencies in various cooperative research and development
programs, and by UPD pursuant to the previously referenced Subcontract that
have application to the development of the prototypes contemplated by the
Subcontract. In all cases, potential investments by LOCKHEED MARTIN referenced
in the ****** are proposed on an annual basis and must compete with other
proposed Lockheed Martin Corporation and Lockheed Owego business unit programs
on a highly competitive basis.  Each
annual contribution by LOCKHEED MARTIN to the development and commercialization
of TMOS-based products is dependent upon the prior progress made with prior
contributions and the potential business value of the resulting TMOS-based
products developed. Based upon such parameters, LOCKHEED MARTIN is herein
making a non-binding good faith estimate that LOCKHEED MARTIN will make an
additional $****** in investments toward the development of TMOS-based products
in periodic traunches over the course of the planned development effort which
may last up to ******. Such investment is not a requirement of this Agreement.
As part of the non-binding estimate, LOCKHEED MARTIN’s proposed future
investment plans include a purchase by LOCKHEED MARTIN of ****** TMOS-based ******
for application evaluation at such time and price as to be mutually agreed upon
and when deliverable under the development effort. LOCKHEED MARTIN and UPD
agree to conduct quarterly marketing meetings to determine jointly the
appropriate opportunities in the Military/Aerospace Field to pursue.  LOCKHEED MARTIN’s future contributions are
also subject to the following:

 

24

 

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

 

(ii)          Early adoption by programs with new
requirements;

 

(b)  At the earliest reasonable time
following LOCKHEED MARTIN’s acceptance of the prototype UPD Licensed Products
referenced in Article 2.3 or within four years following the Effective
Date of this Agreement, the parties agree to commence negotiations regarding
either the minimum annual quantity of UPD Licensed Products that LOCKHEED
MARTIN will agree to order from UPD or the minimum annual royalties that it
will agree to pay in order to maintain the exclusivity of the exclusive
licenses granted to LOCKHEED MARTIN pursuant to Article 3.3 and 4.3  In the event the parties do not reach
agreement on either minimum annual quantities of UPD Licensed Products or
minimum annual royalties by October 15, 2008, the following default
minimum royalty provisions will become effective.

 

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

 

25

 

(i)  Beginning the
first calendar year following the loss of “Preferred  Supplier” status, the annual minimum royalty
shall be ******    Dollars ($******) per
calendar year for the three years after the ****** are ordered.

 

(ii)  At least six
months prior to the end of the last calendar year for which a minimum royalty
is provided pursuant to subparagraph (i), the Parties agree to begin, and
continue with due diligence, good faith negotiations on mutually acceptable
annual minimum royalties for the remaining years of the Term of this Agreement.

 

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

 

(c)  In the event LOCKHEED MARTIN, after
a period of five years from the Effective Date of this Agreement, has not
obtained a commercial market for UPD Licensed Products licensed under Article 4.3,
has discontinued making commercial versions of the UPD Licensed Products previously
made for a period greater than one year, or decides to abandon utilization of
UPD’s IPR licensed under Article 4.3, LOCKHEED MARTIN or UPD, in its sole
discretion, may terminate this Agreement without prejudice upon written notice
to the other party.

 

26

 

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

 

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

 

4.10                           Except for the express licenses as set
forth in Articles 3, 4, and 5.2, no other license is granted under this
Agreement with respect to either LOCKHEED MARTIN IPR or UPD IPR, including, but
not limited to, any implied licenses to any Party’s background IPR.

 

ARTICLE 5:
Patent Rights in Improvements

 

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

 

27

 

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

 

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

 

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

 

28

 

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

 

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

 

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

 

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

 

29

 

ARTICLE 6: Patent Infringement And Defense

 

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

 

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

 

30

 

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

 

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

 

6.4                                 The Enforcing Party may, in its sole
judgment and at its own expense, institute suit against any such infringer or
alleged infringer, and control, settle and defend such suit in a manner
consistent with the terms and provisions hereof and recover, for its account,
except as set out in Article 6.7, any damages, awards or settlements
resulting therefrom. The Parties further agree that the Enforcing Party may
initiate good faith negotiations with the infringer, and such acts constitute
acts of enforcement of the exclusively licensed IPR under the UPD IPR by the
Enforcing Party.

 

6.5                                 To the extent, LOCKHEED MARTIN is the
Enforcing Party, LOCKHEED MARTIN shall join UPD in any suit brought to enforce
such exclusively licensed IPR and UPD agrees that it shall join in any such
suit.  Furthermore, LOCKHEED MARTIN shall
make good faith reasonable efforts to enforce the exclusively licensed IPR, and
UPD shall have the right to become the Enforcing Party should LOCKHEED MARTIN
not either enter into a license agreement or bring suit against the known
infringing third parties within eighteen (18) months of LOCKHEED MARTIN
electing to enforce the exclusively licensed IPR.

 

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

 

31

 

which consent
shall not be unreasonably withheld or delayed.

 

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

 

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

 

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

 

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

 

32

 

6.9                                 In the event suit is brought by the Enforcing
Party, the Non-Enforcing Party agrees to cooperate in such suit in order to
suppress any material infringement of said exclusively licensed UPD IPR.  Further, the Non-Enforcing Party shall be
entitled to retain counsel of its choice and participate in such suit.  In the event any court of competent
jurisdiction renders a final judgment on any claims or claims of any of any
patent within exclusively Licensed UPD Patent Rights, with all right of appeal
exhausted, such holding shall be binding upon the parties to this Agreement for
purposes of subsequent construction or enforceability of this Agreement or such
exclusively licensed UPD Patent Rights.

 

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

 

33

 

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

 

(b)                                 The defense, settlement, or compromise of any
suit which UPD shall have the right to defend shall be in UPD’s sole control,
except if LOCKHEED MARTIN, desires to employ counsel at its own expense to
assist in the defense of the suit; provided, however, that UPD may not without
the prior written approval of LOCKHEED MARTIN settle, or compromise any suit in
such fashion as to impose upon LOCKHEED MARTIN injunctive relief or money
damages.

 

(c)                                  Whenever UPD shall be given notice, as
provided in Article 6.10 of a claim by a third party, by suit or
otherwise, that LOCKHEED MARTIN’s manufacture, use, lease, sale or offer for
sale of UPD Licensed Products infringes any third party patent, and in order to
mitigate any damages which might therefore accrue both to LOCKHEED MARTIN and
UPD, UPD may inform LOCKHEED MARTIN that the infringement claim, upon advice of
counsel, appears to be valid, and request and instruct LOCKHEED MARTIN to modify,
or have its Affiliate or its Sub-licensee modify, the UPD Licensed Product in
such a manner as to avoid such infringement (to the extent this does not
materially alter the UPD Licensed Product) or may advise LOCKHEED MARTIN to
discontinue the infringing use thereof, and if LOCKHEED MARTIN shall fail to
comply promptly with said request of UPD, UPD shall be discharged from any
obligations or liabilities accruing thereafter except as hereinafter
provided.  LOCKHEED MARTIN may offset its
costs associated with its obtaining a license from such third party from up to 

 

34

 

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

 

ARTICLE 7:
Representations, Warranties, Indemnities and Dispute Resolution

 

7.1                                 UPD represents and warrants to LOCKHEED
MARTIN that it owns or has the right to license the Patent Rights and the UPD
IPR licensed hereunder and has granted no licenses or entered into any other
agreements or understandings effective on the date first above written or
applicable during the Term of this Agreement restricting or limiting LOCKHEED
MARTIN’s rights and licenses granted in this Agreement, and that UPD shall not
do so during such Term.  In addition, UPD
hereby warrants that it has no knowledge, as of the execution of this
Agreement, that its TMOS Display Technology infringes any third party
intellectual property rights.

 

7.2                                 LOCKHEED MARTIN represents and warrants
to UPD that it owns or has the right to license the LOCKHEED MARTIN IPR
licensed hereunder and has granted no licenses or entered into any other
agreements or understandings effective on the date first above written or
applicable during the Term of this Agreement restricting or limiting UPD’s
rights and licenses granted in this Agreement, and that UPD shall not do so
during such Term.  In addition, LOCKHEED
MARTIN hereby warrants that it has no knowledge, as of the execution of this
Agreement, that its TMOS Display Technology infringes any third party
intellectual property rights.

 

7.3                                 Neither party makes any representations
or warranties, express or implied, as to the validity, enforceability, or scope
of any of its patents.  Neither party
makes any warranty, express or implied, of non-infringement by the Licensed
Products 

 

35

 

of patents or
other intellectual property rights owned by third parties.

 

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

 

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

 

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

 

36

 

ARTICLE 8: Term, Termination, and Survivability

 

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

 

8.2                                 LOCKHEED MARTIN defines the first production
ready UPD Licensed Product as a UPD Licensed Product meeting the specifications
and requirements included in the present and future Subcontracts and said UPD
Licensed Product has completed first article inspection and production
readiness review.

 

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

 

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

 

37

 

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

 

(ii)                                  A Material Breach or Material Failure
resulting from the Defaulting Party’s willful, intentional or grossly negligent
action or inaction;  .

 

(iii)                               A Material Breach or Material Failure of
confidentiality obligations;

 

(iv)                              A fraudulent misrepresentation;

 

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

 

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

 

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

 

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

 

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

 

8.4                                 Insolvency or Bankruptcy  –Either Party may terminate this Agreement
immediately by written notice to the other Party, if the other Party becomes
insolvent or 

 

38

 

voluntary or
involuntary proceedings are instituted against the other Party and not
dismissed within sixty (60) days under any applicable bankruptcy, insolvency or
creditor’s rights laws, or a Party makes an assignment for the benefit of its
creditors or a receiver or custodian is appointed for the other Party or the
other Party’s business is placed under attachment, garnishment or other process
involving a significant portion of the business or the other Party, or the
other Party fails to maintain operations as a going business for more than
sixty (60) consecutive days.

 

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

 

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

 

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

 

39

 

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

 

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

 

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

 

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

 

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

 

40

 

and deliver to
the disclosing party following the termination of the applicable licenses
(including as provided under Article 8.6) all copies of all notes,
reports, photographs, manuals, memoranda, plans, drawings, records or other
documents containing any of the disclosing party’s licensed Confidential
Information under licenses that are terminated or any information or technical
improvements provided by the disclosing party hereunder and further agrees to
destroy all copies of any material prepared by the receiving party which
contain the disclosing party’s Confidential Information for which the licenses
have been terminated.  Such return shall
include the return of any escrowed materials, except those escrowed materials
retained by LOCKHEED MARTIN pursuant to Section 8.6(b), that may have been
obtained by LOCKHEED MARTIN under Article 10 of this Agreement to the
extent they relate to IPR for which the prior license has been terminated.  Such return and delivery shall be within
sixty (60) days from the date that a party notifies the other party of any such
termination of this Agreement except to the extent and for the duration of such
licenses that are necessarily continued pursuant to Article 8.6(b).

 

8.10                           Survivability. Any terms of this
Agreement which by their nature extend beyond their expiration, or due to a contractual
obligation by or to a third party, shall remain in effect until fulfilled and
shall bind the parties and their legal representatives, successors, heirs or
assigns.

 

41

 

ARTICLE 9: RESERVED

 

ARTICLE 10: Escrow Agreement

 

10.1              The parties agree to negotiate in good faith
the terms of an escrow agreement (“Escrow Agreement”) within ninety (90) days
of the Effective Date of this Agreement.  
Within ninety (90) days following execution the Escrow Agreement, UPD
agrees to place in escrow, via deposit, all UPD IPR relating to TMOS Display
Technology, including that required for manufacturing and software source Code
that is required for LOCKHEED MARTIN to be able to use, modify, make or have
made Licensed Products. The Escrow Agreement shall provide, among other things,
for: (i) LOCKHEED MARTIN to pay UPD ******% royalty on the Net Sales Price
it receives for the sale, lease or other transfer to a third party of Licensed
Products or for the reconstruction, upgrade, service or spares associated with
the Licensed Products and (ii) UPD to periodically update the
documentation in a timely fashion and reasonable intervals to ensure it remains
complete and reflects the then-current configurations.  In the event that a triggering event occurs
as described in Article 10.2, the materials in escrow shall be released
immediately to LOCKHEED MARTIN to permit LOCKHEED MARTIN to modify, make, or
have made, the Licensed Products.   The
Escrow Agreement, when developed, will become Exhibit E  to this Agreement.

 

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

 

42

 

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

 

1)  UPD chooses not to remain in the TMOS
business;

 

2)  Bankruptcy or Insolvency of UPD under Article 8.4;

 

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

 

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

 

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

 

ARTICLE 11: Non-exclusiveness of Remedies

 

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

 

ARTICLE 12: Notices

 

12.1                                            All notices, requests, approvals and
other like communications required or permitted to be given under this
Agreement or under any instrument incorporated herein by reference shall be in
writing and will be deemed effective and given when delivered 

 

43

 

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

 

Uni-Pixel Displays, Inc.

8708 Technology Forest Pl. Suite 100

The Woodlands, Texas 77381

Attn: 
Bruce Rehburg

 

Lockheed Martin Systems Integration-Owego

1801 Route 17C

Owego, New York 13827

Attn: 
Robert M. Powell

 

ARTICLE 13:
Assignment

 

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

 

ARTICLE 14: Force Majeure

 

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

 

44

 

government or
God.

 

ARTICLE 15: Successors, Assigns, Etc.

 

15.1                                            This Agreement and the instruments
incorporated herein by reference shall be binding and inure to the benefit of
both Parties and their respective successors in interest and permitted assigns.

 

ARTICLE 16: Limitation of Liability

 

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

 

ARTICLE 17: Confidential Information

 

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

 

45

 

termination of this Agreement so as to keep the AECI
in full force and effect during the entire term of this Agreement and for three
years thereafter.

 

ARTICLE 18:  Governing Law

 

This
Agreement and the instruments incorporated herein by reference shall be deemed
to have been made in the State of Texas, and will be construed under and
governed by the internal laws of that State.

 

ARTICLE 19:
Invalidity

 

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

 

ARTICLE 20:
Waiver

 

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

 

ARTICLE 21:
Publicity

 

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

 

46

 

to
release, which approval shall not be unreasonably withheld.

 

ARTICLE 22  Order of Precedence

 

In the event of a
conflict or inconsistency in or between the provisions of this Agreement and
the Exhibits or other documents referenced herein, the documents shall take
precedence in the following order:

 

1)              This Agreement

 

2)              Purchase Order(s) or Subcontracts between
UPD and LOCKHEED MARTIN

 

3)              LOCKHEED MARTIN Terms and Conditions

 

4)              Interface Control Document

 

5)              Electrical Specifications

 

6)              Electronics Plan

 

7)              Escrow Agreement

 

8)              Other documents and attachments

 

ARTICLE 23: Sole Agreement

 

This Agreement and the instruments incorporated herein by reference
including, but not limited to, all Subcontracts and/or Exhibits shall
constitute the entire agreement between the parties respecting the subject
matter hereof and thereof, and neither this Agreement nor any such instrument may
be changed or modified except upon an instrument in writing signed by both
Parties which states that it is an amendment hereto 

 

47

 

or thereto.

 

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

 

 

	
  LOCKHEED MARTIN SYSTEMS INTEGRATION – OWEGO

  	
   

  
	
   

  	
   

  
	
  By:

  	
     /s/ Robert Powell

  	
   

  	
   

  
	
   

  	
   

  
	
  Its:

  	
     Subcontract Administrator Sr.
  Staff

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
     10-6-05

  	
   

  	
   

  
	
   

  	
   

  
	
  UNI-PIXEL DISPLAYS, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
     /s/ Reed Killion

  	
   

  	
   

  
	
   

  	
   

  
	
  Its:

  	
     President

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
     10-6-05

  	
   

  	
   

  
							

 

48

 

List of Exhibits to Agreement:

 

Exhibit A                                                                       Patent Rights

 

Exhibit B                                                                         Subcontract 270662

 

Exhibit C                                                                         ICD, SPEC, Electrical Design

 

Exhibit D                                                                        Detailed Program Schedule

 

Exhibit E                                                                          Escrow Agreement (90 Days After Agreement)

 

Exhibit F                                                                          Agreement to Exchange Confidential
Information 9552 Dated 04 May 2004.

 

49Exhibit 10.1

 

THIRD AMENDMENT TO LEASE AGREEMENT

 

THIS  THIRD AMENDMENT TO LEASE AGREEMENT (“Third
Amendment”) is entered into as of the 24th day of August, 2005,
by and between ProLogis North American Properties Fund I LLC, as
successor-in-interest to ProLogis Development Services Incorporated (“Landlord”)
and 1-800 CONTACTS INC. (“Tenant”).

 

WITNESSETH:

 

WHEREAS,
Landlord (or its predecessor-in-interest) and Tenant have entered into a Lease,
dated as of the 13th day of  October,
1998, as amended by that certain First Amendment to Lease Agreement
dated 9th day of October 2000, and as further amended by that
certain Second Amendment to Lease Agreement dated 1st  day of March 2002 (the Lease and all
amendments thereto shall collectively hereinafter be referred to as the “Lease”)
pursuant to which Landlord leased to Tenant certain premises located at 1130
South 3800 West  Salt Lake City,  UT  84104 (the “Premises”);
and,

 

WHEREAS,
Landlord and Tenant desire to extend the term of the Lease and otherwise modify
the Lease on the terms and conditions set forth below.

 

NOW
THEREFORE, in consideration of Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Landlord and Tenant agree as follows:

 

1.             The
Lease Term is extended for thirty six (36) months, such that the Lease shall
terminate on the 31st day of December, 2008 (the “Extension Period”).  All of the terms and conditions of the Lease
shall remain in full force and effect during the Extension Period except as
otherwise modified herein.

 

2.             The
Monthly Base Rent during the Extension Period shall be as follows:

 

	
  January 1,
  2006 – January 31, 2006

  	
   

  	
  $0.00

  
	
  February 1, 2006 – June 30, 2007

  	
   

  	
  $23,436.00 per month

  
	
  July 1, 2007 – December 31, 2008

  	
   

  	
  $24,273.00 per month

  

 

3.             In
addition to the Monthly Base Rent as set forth above, Tenant shall remain
obligated for the payment of Operating Expenses during the Extension Period in
accordance with the terms of the Lease.

 

4.             Landlord
hereby consents to certain Tenant-Made Alterations to be made by Tenant to the
Premises, subject to Landlord’s approval of the scope of work and final plans
and specifications related thereto, which such approval shall not be
unreasonably withheld.  Landlord shall
contribute up to a maximum amount totaling $20,925 (the “Allowance”) toward
such Tenant-Made Alterations.  Payment of
the Allowance shall be made by Landlord to Tenant within 30 days following (i) completion
of such agreed upon Tenant-Made Alterations, (ii) Landlord’s receipt of
Tenant’s invoice substantiating the costs related thereto, (iii) Landlord’s
receipt of final lien waivers from all contractors and subcontractors who did
work in connection with such Tenant-Made Alterations, and (iv) Landlord’s
receipt of a copy of the final permit approved by the applicable governing
authority to the extent required for such Tenant-Made Alterations.  Landlord shall be under no obligation to pay
for any other Tenant-Made Alterations to the Premises or for any costs in
connection with such alterations in excess of the Allowance.  Further, such Allowance shall only be
available for Tenant’s use through December 31, 2006, and Tenant hereby
waives any and all rights to any unused portion of the Allowance remaining as
of January 1, 2007.

 

5.             Tenant’s
parking rights as granted under the Lease shall be revised to reflect that
Tenant shall be entitled to park in those areas as designated on Exhibit A
attached hereto and made a part hereof. 
Further, in the event that Landlord develops additional parking on
vacant land within the Project or expands existing parking areas within the
Project (collectively, “Additional Parking”) and the purpose of such Additional
Parking is for the use thereof to be in common by tenants in the Project on a
nonreserved and nonexclusive basis, Tenant shall have the right to the use of
such Additional Parking.  This provision
shall not apply if such Additional Parking is developed by Landlord for the
exclusive use of another tenant. 
Further, notwithstanding the foregoing, if Tenant determines that it
requires additional parking within the Project, Landlord shall use commercially
reasonable efforts to (but shall not be obligated to) accommodate such
additional parking requirements.

 

6.             The
second paragraph of Paragraph 6 of the Lease, “Operating Expenses”, shall be
revised to include the following:

 

“Landlord shall provide Tenant within 90 days
following the final day of the calendar year Landlord’s itemized year-end
common area maintenance reconciliation reports which reference and include all
applicable Operating Expenses for such year. 
Upon Tenant’s written request (which request must be made within 60 days
following Tenant’s receipt of Landlord’s reconciliation report as described in
the preceding sentence), Landlord shall provide photocopies of invoices of
major expenditures, as well as other standard Landlord reports to substantiate
such costs, for the expenses as provided in such reconciliation reports.”

 

7.             Tenant
shall be granted one (1) 2-year renewal option and one (1) 3-year
renewal option beyond the expiration of the Extension Period pursuant to the
provisions of Addendum 1 attached hereto. 
Further, if Tenant exercises its right to extend the Extension Period
pursuant to the provisions of Addendum 1 attached hereto, Tenant

 

 

may reduce the square
footage of the Premises by either 17,850 rentable square feet or 31,000
rentable square feet (each referred to as the “Reduced Premises”), as shown on Exhibit B
attached hereto, upon the giving of no less than 6 months’ prior written notice
to Landlord.  In the event that Tenant
elects to reduce the square footage of the Premises pursuant to the provisions
contained herein, then Landlord shall prepare and Tenant shall execute an amendment
to the Lease confirming the reduction of the square footage of the Premises and
the other provisions applicable thereto. 
It is the express intent of the parties that Tenant’s right to reduce
the square footage of the Premises as set forth herein shall not be applicable
at any time during the Extension Period.

 

8.             If,
at any time during the Extension Period and any renewals thereof as set forth
in Addendum 1, other premises within the ProLogic Park Crossroads Corporate
Center (the “Building”) become available (except as the same relates to the
tenant then occupying such space (or its affiliates)) (the “Offered Space”),
Landlord shall provide Tenant written notice of the availability of such
Offered Space (the “Offered Space Notice”). 
If Tenant desires to expand into such Offered Space, Tenant shall
provide Landlord with written notice thereof (“Expansion Notice”) within 5
business days of receipt of the Offered Space Notice.  Effective for a period of ninety (90) days
following Landlord’s receipt of such Expansion Notice, Tenant shall be granted
a right of first offer on such Offered Space pursuant to the provisions of
Addendum 2 attached hereto.

 

9.             Except
as modified herein, the Lease, and all of the terms and conditions thereof,
shall remain in full force and effect.

 

10.           Any
obligation or liability whatsoever of ProLogis, a Maryland real estate
investment trust, which may arise at any time under the Lease or this Agreement
or any obligation or liability which may be incurred by it pursuant to any
other instrument, transaction or undertaking contemplated hereby, shall not be
personally binding upon, nor shall resort for the enforcement thereof be had to
the property of, its trustees, directors, shareholders, officers, employees, or
agents regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.

 

IN
WITNESS WHEREOF, the parties hereto have signed this Third Amendment to Lease
Agreement as of the day and year first above written.

 

 

	
   

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PROLOGIS NORTH
  AMERICAN PROPERTIES

  FUND I LLC, a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  ProLogis
  Management Incorporated,

  
	
   

  	
   

  	
   

  	
  its Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ W. Scott
  Lamson

  	
   

  
	
   

  	
   

  	
  Name:

  	
  W. Scott Lamson

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1-800 CONTACTS
  INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Kale Carlile

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Kale Carlile

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President
  of purchasing and supply chain

  	
   

  
											

 

 

ADDENDUM 1

 

TWO RENEWAL OPTIONS

 

ATTACHED TO AND A PART OF THE THIRD AMENDMENT TO LEASE AGREEMENT

DATED AUGUST 24, 2005, BETWEEN

PROLOGIS NORTH AMERICAN PROPERTIES FUND I LLC

AND

1-800 CONTACTS, INC.

 

(a)           Provided
that as of the time of the giving of the First Extension Notice and the
Commencement Date of the First Extension Term, (x) Tenant is the Tenant
originally named herein, (y) Tenant actually occupies at least 50% of the
Premises initially demised under this Lease and any space added to the
Premises, and (z) no Event of Default exists or would exist but for the
passage of time or the giving of notice, or both; then Tenant shall have the right
to extend the Lease Term for an additional term of 2 years (such additional
term is hereinafter called the “First Extension Term”) commencing on January 1,
2009 (hereinafter referred to as the “Commencement Date of the First
Extension Term”).  Tenant shall give
Landlord notice (hereinafter called the “First Extension Notice”) of its
election to extend the term of the Lease Term no later than March 31,
2008.

 

(b)           Provided
that as of the time of the giving of the Second Extension Notice and the
Commencement Date of the Second Extension Term, (x) Tenant is the Tenant
originally named herein, (y) Tenant actually occupies at least 50% of the
Premises initially demised under this Lease and any space added to the
Premises, and (z) no Event of Default exists or would exist but for the
passage of time or the giving of notice, or both and provided Tenant has
exercised its option for the First Extension Term; then Tenant shall have the
right to extend the Lease Term for an additional term of 3 years (such
additional term is hereinafter called the “Second Extension Term”)
commencing on January 1, 2011 (hereinafter referred to as the “Commencement
Date of the Second Extension Term”). 
Tenant shall give Landlord notice (hereinafter called the “Second
Extension Notice”) of its election to extend the term of the Lease Term no
later than March 31, 2010, but no earlier than December 31, 2009.

 

(c)           The Base
Rent payable by Tenant to Landlord during the First Extension Term shall be
$25,110.00 during the time period of January 1, 2009 through November 30,
2010 and shall be $0.00 for the time period of December 1, 2010 through December 31,
2010.

 

(d)           The
Base Rent payable by Tenant to Landlord during the Second Extension Term shall
be the lesser of $25,100.00 or (i) 95% of the Fair Market Rent, as defined
and determined pursuant to Paragraphs (e), (f), and (g) below.

 

(e)           The
term “Fair Market Rent” shall mean the Base Rent, expressed as an annual
rent per square foot of floor area, which Landlord would have received from
leasing the Premises for the Second Extension Term to an unaffiliated person
which is not then a tenant in the Project, assuming that such space were to be
delivered in “as-is” condition, and taking into account the rental which such
other tenant would most likely have paid for such premises, including market
escalations.  Fair Market Rent means only
the rent component defined as Base Rent in the Lease and does not include
reimbursements and payments by Tenant to Landlord with respect to Operating
Expenses and other items payable or reimbursable by Tenant under the
Lease.  In addition to its obligation to
pay Base Rent (as determined herein), Tenant shall continue to pay and
reimburse Landlord as set forth in the Lease with respect to such Operating
Expenses and other reimbursable items with respect to the Premises.  The arbitration process described below shall
be limited to the determination of the Base Rent and shall not affect or
otherwise reduce or modify the Tenant’s obligation to pay or reimburse Landlord
for such Operating Expenses and other reimbursable items.

 

(f)            Landlord
shall notify Tenant of its determination of the Fair Market Rent (which shall
be made in Landlord’s sole discretion) for the Second Extension Term within 10
days following receipt of the Second Extension Notice, and Tenant shall advise
Landlord of any objection within 10 days of receipt of Landlord’s notice.  Failure to respond within the 10-day period
shall constitute Tenant’s rejection of such Fair Market Rent.  If Tenant objects or rejects such Fair Market
Rent, Landlord and Tenant shall commence negotiations to attempt to agree upon
the Fair Market Rent within 30 days of Landlord’s receipt of Tenant’s objection
notice or Tenant’s rejection of such Fair Market Rent.  If the parties cannot agree, each acting in
good faith but without any obligation to agree, then the Lease Term shall not
be extended and shall terminate on its scheduled termination date and Tenant
shall have no further right hereunder or any remedy by reason of the parties’
failure to agree unless Tenant or Landlord invokes the arbitration procedure
provided below to determine the Fair Market Rent.

 

(g)           Arbitration
to determine the Fair Market Rent shall be in accordance with the Real Estate
Valuation Arbitration Rules of the American Arbitration Association.  Unless otherwise required by state law,
arbitration shall be conducted in the metropolitan area where the Project is
located by a single arbitrator unaffiliated with either party.  Either party may elect to arbitrate by sending
written notice to the other party and the Regional Office of the American
Arbitration Association within 5 days after the 30-day negotiating period
provided in Paragraph (f), invoking the binding arbitration provisions of this
paragraph.  Landlord and Tenant shall
each submit to the arbitrator their respective proposal of Fair Market
Rent.  The arbitrator must choose between
the Landlord’s proposal and the Tenant’s proposal and may not compromise
between the two or select some other amount. 
The cost of the arbitration shall be paid by Tenant if the Fair Market
Rent is that proposed by Landlord and by Landlord if the Fair Market Rent is
that proposed by Tenant.  If the
arbitrator has not determined the Fair Market Rent as of the end of the First
Extension Term, Tenant shall pay the Base Rent in effect under the Lease as of
the end of the First Extension Term until the Fair Market Rent is determined as
provided herein.  Upon such
determination, Landlord and Tenant shall make the appropriate adjustments to the
payments between them.

 

 

(h)           The
parties consent to the jurisdiction of any appropriate court to enforce the
arbitration provisions of this Addendum and to enter judgment upon the decision
of the arbitrator.

 

(i)            Except
for the Base Rent as determined above, Tenant’s occupancy of the Premises
during the First Extension Term and the Second Extension Term shall be on the
same terms and conditions as are in effect on December 31, 2008 and December 31,
2010, respectively; provided, however, Tenant shall have no further right to
any allowances, credits or abatements or any options to expand, contract, renew
or extend the Lease.

 

(j)            If
Tenant does not give the First Extension Notice within the period set forth in
paragraph (a) above, Tenant’s right to extend the Lease Term for the First
Extension Term and the Second Extension Term shall automatically
terminate.  If Tenant does not give the
Second Extension Notice within the period set forth in paragraph (b) above,
Tenant’s right to extend the Lease Term for the Second Extension Term shall
automatically terminate.  Time is of the
essence as to the giving of the First Extension Notice and Second Extension
Notice and the notice of Tenant’s objection under Paragraph (f).

 

(k)           Landlord
shall have no obligation to refurbish or otherwise improve the Premises for the
First Extension Term or the Second Extension Term.  The Premises shall be tendered on the
Commencement Date of the First Extension Term and Second Extension Term in “as-is”
condition.

 

(l)            If
the Lease is extended for either the First Extension Term or Second Extension
Term, then Landlord shall prepare and Tenant shall execute an amendment to the
Lease confirming the extension of the Lease Term and the other provisions
applicable thereto (the “Amendment”).

 

(m)          If
Tenant exercises its right to extend the term of the Lease for the First
Extension Term  or Second Extension Term
pursuant to this Addendum, the term  “Lease
Term” as used in the Lease, shall be construed to include, when practicable,
the First Extension Term or Second Extension Term, as applicable, except as
provided in (i) above.

 

 

ADDENDUM 2

 

RIGHT OF FIRST OFFER

 

ATTACHED TO AND A PART OF THE THIRD AMENDMENT TO LEASE AGREEMENT

DATED AUGUST 24, 2005, BETWEEN

PROLOGIS NORTH AMERICAN PROPERTIES FUND I LLC

AND

1-800 CONTACTS, INC.

 

(a)           “Offered
Space” shall mean any space which becomes available for lease (except as
the same relates to the tenant then occupying such space (or its affiliates))
within the Building.

 

(b)           Provided
that as of the date of the giving of the Expansion Notice, (x) Tenant is the
Tenant originally named herein, (y) Tenant actually occupies at least 50%
of the Premises originally demised under this Lease and any premises added to
the Premises, and (z) no Event of Default or event which but for the passage of
time in the giving of notice, or both, would constitute an Event of Default has
occurred and is continuing, if at any time during the Extension Period and any
renewals thereof as set forth in Addendum 1 of this Third Amendment any lease
for any portion of the Offered Space shall expire, then Landlord, before
offering such Offered Space to anyone, shall offer to Tenant the right,
effective for 90 days from receipt of the Expansion Notice, to include the
Offered Space within the Premises on the same terms and conditions upon which
Landlord intends to offer the Offered Space for lease.

 

(c)           Such
offer shall be made by Landlord to Tenant in a written notice (hereinafter
called the “First Offer Notice”) which offer shall designate the Offered
Space and shall specify the terms which Landlord intends to offer with respect
to any such Offered Space.  Tenant may
accept the offer set forth in the First Offer Notice by delivering to Landlord
an unconditional acceptance (hereinafter called “Tenant’s Acceptance”)
of such offer within 5 business days after delivery by Landlord of the First
Offer Notice to Tenant.  Time shall be of
the essence with respect to the giving of Tenant’s Acceptance.  If Tenant does not accept (or fails to timely
accept) an offer made by Landlord pursuant to the provisions of this Addendum
with respect to the Offered Space designated in the First Offer Notice,
Landlord shall be under no further obligation with respect to such Offered
Space by reason of this Addendum, except as otherwise provided for herein.

 

 (d)          If
Tenant at any time declines any Offered Space offered by Landlord, Tenant shall
be deemed to have irrevocably waived all further rights to such Offered Space
under this Addendum, and Landlord shall be free to lease the Offered Space to
third parties including on terms which may be less favorable to Landlord than
those offered to Tenant; provided, however, if Landlord intends to lease the
Offered Space to a proposed party on terms which are less than 95% of the terms
as those first offered to Tenant, then Tenant shall have a second right to
lease the Offered Space upon all the terms and conditions as offered to such
proposed party.  Such second offer shall
be made by Landlord to Tenant in a written notice (hereinafter called the “Second
Offer Notice”) which offer shall designate the space being offered and
shall specify the terms for such Offered Space which shall be the same as those
set forth to such proposed party.  Tenant
may accept the offer set forth in the Second Offer Notice by delivering to
Landlord an unconditional acceptance (hereinafter called “Tenant’s Second Acceptance”)
of such offer within 5 business days after delivery by Landlord of the Second
Offer Notice to Tenant.  Time shall be of
the essence with respect to the giving of Tenant’s Second Acceptance.  If Tenant does not accept (or fails to timely
accept) such second offer made by Landlord pursuant to the provisions of this
Addendum with respect to the Offered Space designated in the Second Offer
Notice, Landlord shall be under no further obligation with respect to such Offered
Space by reason of this Addendum.  In
order to send the Second Offer Notice, Landlord does not need to have
negotiated a complete lease with such proposed party but may merely have agreed
upon the material economic terms for the Offered Space, and Tenant must make
its decision with respect to the Offered Space as long as it has received a
description of such material economic terms.

 

(e)           Notwithstanding
anything contained herein to the contrary, Landlord shall be obligated to give
an Offered Space Notice to Tenant any time Offered Space becomes available
during the Extension Period.

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