SAIC/ Nanosys Master Marketing And Business Development Agreement

EXHIBIT 10.12


SAIC/ NANOSYS MASTER MARKETING AND BUSINESS DEVELOPMENT AGREEMENT


This Master Marketing Agreement ("Agreement"), is entered into as of the later of the dates set forth at the end of this Agreement (the "Effective Date"), by and between Nanosys, Incorporated, a corporation duly organized under the laws of the State of Delaware and having its principal place of business at 2625 Hanover Street, Palo Alto, California ("Nanosys"), and Science Applications International Corporation, a corporation duly organized under the laws of the State of Delaware and having its principal place of business at 10260 Campus Point Drive, San Diego, California 92121, through its Advanced Systems Group ("SAIC"). Nanosys and SAIC may hereinafter be referred to individually as a "Party" or collectively as the "Parties".


WHEREAS, SAIC is recognized as a leader in the information technology and systems integration field with technologies and expertise that includes, but is not limited to, systems design and engineering, database architecture, software development, and large project management;


WHEREAS, Nanosys is recognized as a leader in the development of nanotechnology materials and nanotechnology enabled modules, systems and processes;


WHEREAS, the Parties, from time to time, have collaborated in order to bid for and to perform under contracts and grants awarded by various agencies of the United States government; and


WHEREAS, Nanosys and SAIC mutually desire to establish a preferred marketing relationship with each other in order to identify and pursue additional contracts and awards with the United States government ("Opportunities") relating to nanoscience and nanotechnology as a team, to further both their businesses;


NOW THEREFORE, in consideration of the mutual terms and conditions set forth herein, the Parties hereby agree as follows:


1. Scope of the Agreement. This Agreement is a master agreement that
commits the Parties to work together for their mutual benefit to
identify and advise each other as to specific Opportunities to market
and advertise their respective services and products in accordance with
the following terms, and as provided by Attachment A. SAIC will perform
activities in the following areas: systems integration; joint prototype
development; and marketing. Nanosys will perform activities in the
following areas: nanotechnology materials and nanotechnology-enabled
module development; joint prototype development; and marketing support.
Each Opportunity that is to be jointly pursued by the Parties shall be
defined and described in written, mutually agreed-upon exhibits
attached hereto (each a "Marketing Exhibit"). Each Marketing Exhibit
shall specify the particular Opportunity, the complementary products
and/or services to be marketed, the prospective customer base, and the
scope of effort required of each Party. Each Marketing Exhibit shall,
when executed, become an addendum to this Agreement. The first
Marketing Exhibit shall be titled "Marketing Exhibit No. 1," and
additional Marketing Exhibits shall be numbered sequentially.


(a) The obligations of the Parties under this Agreement are
non-exclusive. `Either Party may, at any time and for any
reason, enter into similar arrangements with any other entity
with respect to the same or similar areas or Opportunities set
forth in the Marketing Exhibits or for any other business
purposes. However, notwithstanding the foregoing, for any
given Opportunity for which: (1) the Parties have
complementary technology and/or intellectual property for
addressing such Opportunity; (2) a Party chooses not to pursue
such Opportunity on its own, or with a partner entity or
organization that is already a Strategic Commercial Partner of
such Party at the time the Party chooses to pursue such
opportunity; (3) a Party does not already have a proposal
submitted for such Opportunity; (4) a Party has not had such
Opportunity presented to such Party by a third party; and (5)
resources for pursuing such Opportunity are supported
Resources pursuant to Section 2 of this Agreement; then each
Party agrees to offer to the other Party the first opportunity
to enter into a Marketing


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Exhibit for such Opportunities contemplated to be pursued by
such Party. In the event that a Party desires to pursue an
Opportunity on its own, it shall notify the other Party to
allow the other Party an opportunity to present information
supporting the JOINT pursuit of such Opportunity by the
Parties hereto. The Party being offered the first opportunity
to enter into a Marketing Exhibit or to present information
supporting the joint pursuit of an Opportunity, shall
communicate any acceptance of such offer to the other Party
within a reasonable time, which time is not to exceed ten(10)
business days, unless otherwise agreed to by the Parties in
writing. If the offer of first opportunity or to present
information for joint pursuit is rejected, or not accepted
within such reasonable time, either Party is then free to
pursue the Opportunity on its own or with any other person or
entity. Further, commencing upon the execution of a Marketing
Exhibit and continuing during the effectiveness of any
definitive agreement relating thereto, the Parties agree that
they shall not participate in any effort to prepare or submit
a separate proposal relating to the specific technology,
application and customer of the Opportunity identified in the
Marketing Exhibit. Strategic Commercial Partner shall mean a
partner entity or organization with which the Party has a
fully executed commercial development agreement.


(b) Except as set forth in this Agreement or a Marketing Exhibit
executed hereunder, each Party will bear all costs, risks and
liabilities incurred by it arising out of its obligations and
efforts under this Agreement and any such Marketing Exhibit.
Unless otherwise specified in this Agreement or a Marketing
Exhibit, neither Party shall have any right to any
reimbursement, payment or compensation of any kind from the
other Party for activities pursuant to this Agreement or a
Marketing Exhibit.


(c) This Agreement, including all Marketing Exhibits, sets forth
the provisions and conditions pursuant to which the Parties
may identify and advise each other of a mutually beneficial
Opportunity.


(d) Each Party shall designate one or more duly authorized
representatives to interact with the other for purposes of
this Agreement. Initially, [*** Redacted] and [*** Redacted]
shall be the representatives of Nanosys and [*** Redacted] and
[*** Redacted] shall be the representatives of SAIC. Each
Party's representative(s) may select and submit to the other
for its consideration such Opportunities that the Party
believes may be of mutual interest and the representatives
shall jointly determine whether to pursue such Opportunity
together. If the Parties determine to pursue an Opportunity
jointly, the representatives shall determine jointly the
appropriate marketing strategy; including planning for
directing the timing and use of the Resources described in
Section 2 which efforts shall be reflected in a Marketing
Exhibit hereto. At least one representative of each Party
shall meet and confer periodically with at least one
representative of the other as necessary, either in person or
by telephone, to discuss prospective Opportunities and
performance with respect to existing Marketing Exhibits
(including, but not limited to the Parties obligations under
Section 2 below). The Parties agree that the representatives
shall meet at agreed-upon intervals but not less than once in
any calendar quarter. Subject to the provisions of section
1(a) above relating to the Parties' actions commencing upon
execution of a Marketing Exhibit and continuing during the
effectiveness of any definitive agreement relating thereto, if
either Party's representative determines that it is not in
that Party's best interest to initiate or continue an
Opportunity jointly, either Party is free to pursue such
Opportunity, using its sole efforts or in conjunction with any
other person or entity.


(e) In those circumstances where the Parties' marketing efforts
identify a specific Opportunity, and the Parties decide to
pursue the Opportunity jointly as set forth in a Marketing
Exhibit, then the Parties agree to enter into good faith
negotiations to execute an appropriate definitive agreement
for the particular Opportunity. Generally, it is anticipated
that Nanosys would primarily apply its nanoscience and
nanotechnology development expertise and be the


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


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preferred provider of any nanotechnology-based modules to the
Opportunity, and SAIC would primarily apply its system
integration expertise to the Opportunity. Each such definitive
agreement shall contain terms and conditions that are
customary for a teaming agreement, including, but not limited
to, allocating responsibility for preparation of proposals and
determining the structure of the proposal effort. Each such
definitive agreement shall set forth additional mutually
agreed-upon terms and conditions with respect to the rights
and obligations of the Parties with regard to that specific
Opportunity.


2. Mutual Commitment to Fund the Initiative.


(a) The Parties agree that, in order to initially support the
marketing activities associated with the Opportunities
anticipated to be identified in Marketing Exhibits, the work
of approximately [*** Redacted] full time employee equivalents
("FTEs", the FTEs and associated costs are collectively
referred to as the "Resources") will be necessary to
specifically support the marketing activities associated with
the Opportunities. The effort of each individual supporting an
Opportunity will be dedicated at a percentage agreed upon by
the representatives of each party authorized by this
Agreement. The Resources needed will include technical and
marketing resources. The Parties agree that Nanosys shall be
responsible for providing Resources equivalent to [***
Redacted] FTEs and SAIC shall be responsible for providing
Resources equivalent to [*** Redacted] FTEs.


(b) SAIC agrees, during the Initial Term, as defined in Section
3(a), to fund the cost of the Resources of both Parties set
forth in Section 2(a). Such costs are expected to be burdened
actual expenses, not including any fees or profit, and are
invoiced monthly in accordance with 2f, below. The funding
support will be subject to quarterly reviews, as stated in
1(d) above. The maximum Resources funded by SAIC under this
section during the Initial Term of this Agreement, and that
have not been reimbursed under section 2(c)(iii), are not to
exceed $2.2 M, (It is currently estimated that $1.6 M will be
allocated to Nanosys and $0.6 M to SAIC), unless otherwise
agreed to by the Parties. Resources reimbursed under section
2(c)(iii) may, during the Initial Term, be reused to fund
additional Resources if mutually agreed by the Parties. Unless
specifically agreed upon by the Parties in writing, the work
performed by the representatives of the Parties in carrying
out their periodic review responsibilities under Section 1(d),
shall not be included in the amounts funded by SAIC. Among the
tasks to be performed by the Parties' FTEs are support for
preparation of proposals for contracts and awards,
demonstrations, and marketing presentations.


(c) In consideration of SAIC's agreement to fund the Resources
(including SAIC Resources) described in paragraph (b) above,
the Parties agree that all United States government contract
revenue, including the subcontract(s) from one Party to the
other Party, ("Contracts") arising out of or resulting from
work performed under this Agreement shall be allocated in
accordance with the following priority schedule, with funds
received under any Contract first being applied to the highest
priority category until all costs thereunder are reimbursed,
before applying any remaining funds to the next level of
priority, etc.:


i. First priority: Reimbursement of reasonable
costs, not including any fee or profit,
incurred in performance of the Contract.


ii. Second priority: Reimbursement of costs, on
a pro-rata basis between Nanosys and SAIC,
not including any fee or profit, incurred
under this Agreement that are incurred in
the performance of the Contract but not
billable to the Contract, and


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


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iii. Third priority: Reimbursement of costs
incurred by SAIC in funding the initial Term
of the Agreement under Section 2(b) above.
Such reimbursement will be accomplished
through allocation of fees earned from such
Contracts not allocated under either of the
first or second priorities, above, where
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