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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

This is Nanosys, Inc.’s initial public offering. Nanosys is selling all of the shares.

We expect the initial public offering price per share to be between $ and $ per share. Currently, no public market exists for the shares. We have applied to have our common stock quoted on the Nasdaq National Market under the symbol “NNSY.”

Investing in the common stock involves risks that are described in the “Risk Factors” section beginning on page 6 of this prospectus.

The underwriters may also purchase up to an additional shares from Nanosys at the initial public offering price, less the underwriting discount, within 30 days from the date of this prospectus to cover overallotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

We currently have two applications pending to register Nanosys and the Nanosys logo as our trademarks. Other service marks, trademarks and trade names referred to in this prospectus are the property of their respective owners.

You should read the following summary, together with the more detailed information regarding our company, especially the “Risk Factors” section, and our financial statements and notes to those statements appearing elsewhere in this prospectus, before deciding to invest in shares of our common stock.

We are in the early stages of investigative research to develop nanotechnology-enabled products based on our specialized expertise and intellectual property. We plan to sell our nanotechnology-enabled products to our partners and directly to end user customers. We are developing products based on our core technology, which includes patents, know how and other intellectual property. We use our core technology to create nano-sized structures, or nanostructures, composed of inorganic materials, such as silicon. Unlike traditional materials which are used to fabricate devices, our nanostructures can themselves act as devices. We are utilizing our technology to develop potential products for multiple industries such as energy, defense, electronics, life sciences and information technology. We have not yet developed any of these products and may not be able to do so for several years, if at all.

We have established and intend to continue to establish collaborations with partners and government agencies that we believe could benefit significantly from the incorporation of nanotechnology-enabled products into their end user products. Our current collaborators include E.I. DuPont de Nemours and Company, In-Q-Tel, Inc., Intel Corporation, Matsushita Electric Works, Ltd., Science Applications International Corporation and various United States government agencies. Our product development activities and collaborations typically contemplate several phases, including an investigation phase, a development phase and a commercialization phase. We are currently in the investigation phase of all of our potential products, including pursuant to our collaborations with our partners. As part of our strategy, we intend to enter into additional collaborations to enter multiple markets and expand our core technology across additional multiple industries and applications. We may also generate revenue from research feasibility studies in the early stages of collaborative arrangements. We intend to continue to pursue and to enter into new collaborations and government contracts and grants that will enable us to further our core technology, provide additional funding and allow us to develop dual use products and technology that may be sold in both government and commercial markets.

Some of our nanotechnology-enabled product development efforts include disposable test plates for use with tools for life sciences research, solar cells, electronic circuits on flexible film and semiconductor memory devices that retain data in the absence of power. We have assembled an experienced business and technical team, with development and product commercialization expertise, which is supported by the members of our scientific advisory board who are recognized experts in the field of nanotechnology. We have over 200 patents and patent applications which we have licensed from educational institutions and research centers or developed internally. Our granted patents and patent applications derive from over 78 different patent families, each of which represents what we or our licensors believe is a distinct technological development, or in some cases, a collection of distinct technological developments. In addition, some of our patents or patent applications represent foreign patents or patent applications that relate to similar or identical technology to our United States patents and patent applications. We believe our strong team will enable us to deliver nanotechnology-enabled products for use in multiple industries.

Nanotechnology is the ability to control or manipulate materials on the atomic scale to create structures that have novel properties and functions because of their size, shape or composition. By organizing atoms into structures of various shapes and sizes on a nanoscale, important properties including electrical, optical and physical, can be controlled. At the nanoscale, these properties can be fundamentally different than the properties of the same materials at a larger, traditional scale. When nanostructures are engineered into end user products, these products benefit from the unique properties exhibited by the nanostructures. Multiple industries are approaching the point at which their ability to economically manufacture products with increasing levels of performance and functionality is being constrained by traditional technologies. Many companies are seeking to incorporate the potential benefits of

Nanotechnology and commercialization expertise. We have assembled an experienced business and technical team with development and commercialization expertise. This team has previously commercialized a number of products based on new technology. Our internal expertise is complemented by our scientific advisory board that includes prominent nanotechnology experts from a number of leading educational institutions and research centers.

Significant intellectual property position. We have a significant body of nanotechnology-related intellectual property, including patents and patent applications licensed to us on an exclusive basis, as well as our own patent applications and trade secrets. When combined with our technical expertise, we believe our intellectual property provides us with a strong competitive advantage in developing nanotechnology-enabled products.

Design and fabrication capabilities. Our proprietary computer modeling and development capabilities enable us to rapidly and efficiently design and fabricate nanostructures based on our knowledge of applicable principles in chemistry, physics and engineering. We are developing processes designed for the consistent and reliable manufacture of inorganic nanostructures with desired composition, size, shape and surface chemistry and their practical and rapid integration into products.

Leverage our core technology across multiple industries and applications. We seek to employ our core technology across multiple industries and applications through collaborations to accelerate the development of our products. We believe that our core technology can simultaneously address short, medium and long-term opportunities and will reduce our dependence on any particular industry, partner or application.

Support core technology development through commercial and government funding. We have been able to fund a significant amount of our technology development through agreements with commercial partners and United States government agencies. We intend to continue to leverage commercial and government funding to support the development of our core technology and products of interest to our partners, the government and us.

Build common manufacturing capabilities to achieve economies of scale. We believe our core technology enables us to utilize a common set of manufacturing capabilities to supply our partners and customers with a variety of nanotechnology-enabled products. By building proprietary manufacturing capabilities that can be applied to multiple products, we believe we can benefit from manufacturing economies of scale to provide cost effective, high quality products to our partners and customers.

Continue to expand and leverage our intellectual property position. We believe our significant intellectual property position provides us with a competitive advantage in developing nanotechnology-enabled products. We plan to continue to expand our intellectual property position through internally generated and licensed patent rights and other intellectual property and associations with leading experts in nanotechnology.

From our inception in July 2001 through March 31, 2004, we incurred net losses of approximately $20.9 million. Our technology and potential product applications are new and still in the early stages of development. To date, we have not successfully developed any commercially available products. We are currently in the investigation phase of all of our potential products. We do not anticipate that our first products will be commercially available for at least several years, if at all. Even if we raise additional capital from collaboration agreements, we may need additional funding for our operations and we cannot assure you that it will be available on commercially reasonable terms, if at all. Our ability to achieve profitability will depend upon many factors, including our ability to:


	•	further develop our technology to enable the development of our potential products;


	•	enter into investigation phase, development phase and commercialization phase agreements with appropriate partners;



	•	develop commercially viable products by designing and synthesizing nanostructures and determining how to manufacture them on a commercial scale;


	•	alone, or with our partners, convince customers of the benefits of our technology and products;

	•	establish a commercial scale manufacturing capability for our products;

	•	avoid infringing and successfully defend any allegations of infringing the intellectual property rights of others;

	•	enforce our intellectual property rights against others;

	•	comply with government and environmental regulations;

	•	address any legal restrictions due to ethical concerns or export regulations; and

	•	hire, train and retain qualified personnel.

We were incorporated in Delaware in July 2001. Our fiscal year ends on December 31. Our principal offices are located at 2625 Hanover Street, Palo Alto, California 94304. Our telephone number is (650) 331-2100. You can access our web site at www.nanosysinc.com. Information contained on our web site is not a part of this prospectus. In this prospectus, references to “Nanosys,” “we,” “us” and “our” refer to Nanosys, Inc., a Delaware corporation.

The number of shares of common stock to be outstanding upon completion of this offering is based on 15,570,011 shares outstanding as of March 31, 2004, which includes 12,649,317 shares of preferred stock that will convert to common stock immediately prior to the closing of this offering and excludes:


	•	330,527 shares of common stock issuable upon exercise of options outstanding at a weighted average exercise price of $0.48 per share as of March 31, 2004;

	•	279,778 shares of common stock issuable upon exercise of warrants outstanding at a weighted average exercise price of $0.50 per share as of March 31, 2004; and

	•	a total of 1,688,418 shares of common stock available for future issuance under our stock plans, including our 2004 stock plan which was adopted by our board in April 2004, excluding the annual increases in the number of shares authorized under our 2004 stock plan beginning January 1, 2005. See “Executive Compensation — Incentive Plans” for a description of how these annual increases are determined.


	•	assumes the completion of a reverse one for three split of our outstanding capital stock prior to the effective time of this offering;

	•	assumes the conversion of our preferred stock on a one for one basis into 12,649,317 shares of common stock immediately prior to the closing of this offering;

	•	assumes the filing of our amended and restated certificate of incorporation increasing the number of shares of our authorized common stock from 53,500,000 shares to 120,000,000 shares prior to the closing of this offering;

	•	assumes the filing of our amended and restated certificate of incorporation authorizing a class of 10,000,000 shares of undesignated preferred stock prior to the closing of this offering; and

	•	assumes no exercise by the underwriters of their option to purchase additional shares of our common stock in this offering.

The following table sets forth a summary of our financial data for the periods presented. This summary financial information should be read in conjunction with “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes contained elsewhere in this prospectus.


	•	on an actual basis; and

	•	on a pro forma basis to give effect to the automatic conversion of all outstanding shares of our preferred stock into common stock immediately prior to the closing of this offering; and

	•	on a pro forma as adjusted basis to reflect our receipt of the estimated net proceeds from the sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share, after deducting the underwriting discount and estimated offering expenses payable by us.

Any investment in our common stock involves a high degree of risk. You should consider the risks described below carefully and all of the information contained in this prospectus before deciding whether to purchase our common stock. If any of these risks actually occur, our business, financial condition and results of operations may suffer significantly. As a result, the trading price of our common stock could decline and you may lose all or part of your investment in our common stock.

We have a history of net losses, we expect to continue to incur net losses in the foreseeable future, and may never achieve profitability.

From our inception in July 2001 through March 31, 2004, we incurred net losses of approximately $20.9 million. Our losses have resulted principally from research and development and selling, general and administrative expenses associated with our operations. To date, we have not made any product sales and do not anticipate commercial product sales for the next several years. We expect our losses to continue for the foreseeable future. Our revenue to date has been generated from collaborative agreements with companies and governmental entities, as well as government grants. We cannot assure you that we will develop products or if developed, that these products will be commercially viable. We expect to incur substantial additional operating losses as a result of increases in expenses for research and product development, manufacturing and selling, general and administrative costs. In addition, upon the completion of this offering, we will incur substantial expenses to comply with our obligations as a public company. We may never achieve profitability. We may need additional funding for our operations and we cannot assure you that it will be available on commercially reasonable terms, if at all. Our ability to achieve profitability will depend upon many factors, including our ability to:


	•	further develop our technology to enable the development of our potential products;


	•	enter into investigation phase, development phase and commercialization phase agreements with appropriate partners;



	•	develop commercially viable products by designing and synthesizing nanostructures and determining how to manufacture them on a commercial scale;


	•	alone, or with our partners, convince our customers of the benefits of our technology and products;

	•	establish a commercial scale manufacturing capability for our products;

	•	avoid infringing and successfully defend any allegations of infringing the intellectual property rights of others;

	•	enforce our intellectual property rights against others;

	•	comply with government and environmental regulations;

	•	address any legal restrictions due to ethical concerns or export regulations; and

	•	hire, train and retain qualified personnel.

We may need to raise additional capital in the future and if we are unable to secure adequate funds on terms acceptable to us, we may be unable to support our business requirements or build our business.

We currently anticipate that the net proceeds of this offering, together with our current cash, cash equivalents and available-for-sale securities, will be sufficient to meet our anticipated operating and capital requirements for at least the next year. We anticipate that we will need to generate additional funding by entering into new collaboration agreements. Even if we receive funding from future collaboration agreements, we may need to raise additional capital in order to complete our development activities and to

build our commercial scale manufacturing facilities. We may raise additional capital through a variety of sources, including the public equity market, private financings and debt. If we raise additional capital through the issuance of equity or securities convertible into equity, our stockholders may experience dilution. Those securities may have rights, preferences or privileges senior to those of the holders of the common stock. Additional financing may not be available to us on favorable terms, if at all. If we are unable to obtain financing, or to obtain it on acceptable terms, we may be unable to successfully support our business requirements or build our business.

We are deploying new technology and, as a result, we may not be able to successfully develop our products.

Our technology is new and unproven and we are still in the early stages of investigating the feasibility of using our technology to develop our potential products. Our potential products require significant and lengthy product development efforts. To date, we have not developed any commercially available products. During our product development process, we may experience technological issues that we may be unable to overcome. For example, we must determine how to synthesize nanostructures for our potential products, how to design those potential products, whether we can use cost effective manufacturing processes, such as roll to roll manufacturing, to make our potential products, whether we can obtain collaborative partner or government support for the investigation and development of our products and whether there is likely to be a viable commercial market for our products. Because of these uncertainties, none of our potential products may be successfully developed. If we are not able to successfully develop nanotechnology-enabled products, we will be unable to generate product revenue or build a sustainable or profitable business.

In order to successfully develop our potential products, we believe that we have to design and synthesize our potential products to be composed of one or more inorganic materials, such as silicon, which can provide functional characteristics to the resulting device. We must determine which composition of the potential product will be cost effective, comply with environmental and human safety laws and provide the functionality we desire. Our potential products also depend on our ability to adequately determine the size of the appropriate nanostructure and our ability to recreate nanostructures of that size in large volume. For example, if we are unable to control the size of the nanostructure as intended, we may not be able to control the color of light emitted by the resulting product, which would impair our ability to participate in an end user product that requires a specific color, such as solid state lighting. Our ability to successfully design and synthesize our potential products also depends on our ability to select and control the shape of the nanostructures used in the potential product. If the shape of the nanostructure we select does not have the electromagnetic or mechanical characteristics we expect or does not conduct electricity as anticipated, we may not be able to commercialize our products in a cost effective manner. We must also be able to control the surface chemistry of the individual nanostructures incorporated in our potential products for those products to be commercially viable. If we cannot control surface chemistry, we will not be able to process the individual nanostructures into a form that is low cost and easy to manufacture. For example, if we cannot coat the nanostructures in our potential solar cell applications in a uniform manner, we may not be able to use the relatively low cost roll to roll manufacturing processes that we anticipate using.

We will need to achieve commercial acceptance of our products to obtain product revenue and achieve profitability.

Even if our products are technologically feasible, we may not successfully develop commercially viable products on a timely basis, if at all. It will be at least several years before our first products are commercially available and during this period, superior competitive technologies may be introduced or customer needs may change resulting in our products being unsuitable for commercialization. Our revenue growth and achievement of profitability will depend substantially on our ability to introduce new products into the marketplace that are widely accepted by customers. If we are unable to cost effectively achieve commercial acceptance of our products, our business will be materially and adversely affected.

We are developing nanotechnology-enabled products based on nanostructures that have integrated functional properties. To date, the markets we are targeting have generally not adopted nanotechnology-enabled products. We do not know when a market for these nanotechnology-enabled products will develop, if at all, and we cannot reasonably estimate the projected size of any market that may develop. In addition, nanotechnology-enabled products may achieve some degree of market acceptance in one industry but may not achieve market acceptance in other industries for which we are developing products. If the markets we are targeting fail to accept nanotechnology-enabled products or to determine that other products were superior, we may not be able to achieve commercial acceptance of our potential products. Even if our potential products achieve commercial acceptance, if the size of the potential markets for our products is not sufficient, we will be unable to generate significant revenue or achieve profitability.

We plan to concurrently develop a number of products and any one or all of them may fail to achieve commercial acceptance.

We plan to concurrently develop a number of potential products utilizing our technology and know how. We expect that one or more of our potential products will not be technologically feasible or will not achieve commercial acceptance, and we cannot predict which, if any, of our products will be successfully developed or commercialized.

We have limited resources and our focus on particular nanotechnology-enabled products may result in our failure to capitalize on other opportunities.

We have limited resources available to successfully develop and commercialize our nanotechnology-enabled products. As of June 30, 2004, we had 43 employees. There is a wide array of potential applications for nanotechnology-enabled products and our limited resources require us to focus on specific products and collaborations which may never result in commercially successful products and to forego other opportunities. We are also required, pursuant to our existing collaborations, to devote the efforts of a specified number of full-time employee equivalents toward those collaborations. If we are unable to adequately or appropriately manage our resources for existing collaborations, we may negatively impact our relationships with our partners. In addition, we are required to devote the efforts of certain of our employees to work on existing collaborations and, as a consequence, we may not have the resources to enter into additional collaborations with existing or new partners without the time and expense needed to identify, hire and train more personnel.

To develop products for certain target markets, we depend on entering into collaborations to offset cash used in operating activities and leverage our partners’ financial, research and development, manufacturing, marketing and sales capabilities. We may not be able to enter into new collaborations for our target markets, which would limit our access to important financial, research and development, marketing and sales resources. The collaborations we have entered into to date are limited to investigating the feasibility of developing products for certain applications. Our partners are not obligated to extend these agreements to the development or commercialization phases regardless of whether we demonstrate that our potential products are technologically feasible. One partner may also react negatively to the non-extension of our collaboration with another partner. We will need to convince our current and future partners of the feasibility and benefits of using our nanotechnology-enabled products as part of their end user products, which may be time consuming. If we are unable to persuade our partners to use our nanotechnology-enabled products, we may not be able to commercialize our products or to generate revenues from product sales.

Even if we successfully maintain or enter into new collaborations, we may have limited or no control over our partners’ development and commercialization schedule, their efforts to complete the end user products or their marketing of the end user products. Our partners may elect not to proceed with the development of our products for a variety of reasons, including their intention to develop a competing technology, changes in strategic focus or personnel, budgetary constraints, general economic conditions,

environmental concerns, changes in the marketplace, regulatory issues or other reasons. We cannot assure you that any of our partners will perform their development obligations in a timely manner or will devote sufficient resources to the collaborative effort. Even if our partners elect to proceed with the development of an end user product, they may not do so at the pace we would expect. Once end user products are commercially viable, our partners may not commit the time and resources to marketing and selling these products necessary to achieve widespread commercial acceptance. If our partners fail to provide sufficient resources to the development and commercialization of the end user products or elect not to proceed, our business will be harmed.

To use our nanotechnology-enabled products, our partners will be required to integrate these products into their final products and they may not do so successfully.

We anticipate that most of our products will be integrated into end user products by our partners. Although we intend to develop our products to be integrated with our partners’ existing manufacturing capabilities, our partners will be required to make modifications to or expand their manufacturing capabilities. Our current or future partners may not elect to integrate our products into their end user products or may not devote adequate resources to modifying their manufacturing capabilities so that our products can be successfully incorporated into their end user products.

In some cases, a partner may determine that in order to incorporate our nanotechnology-enabled products, it would be required to adopt a new manufacturing process or capability. The adoption of a new manufacturing process or capability is resource intensive and our current and future partners may not complete the adoption or devote adequate resources to the incorporation of our nanotechnology-enabled products into those new processes or capabilities.

We do not currently have the ability to manufacture nanotechnology-enabled products in volume and will not be able to sell products without developing volume manufacturing capabilities.

The manufacture of our potential nanotechnology-enabled products is unproven and will require long lead times to establish adequate facilities. We currently have one facility located in Palo Alto, California with limited manufacturing capabilities. Some of our potential products may require us to manufacture large volumes of materials that are substantially larger than our current capabilities in order to meet commercial demand. To date, we have not demonstrated the ability to manufacture nanotechnology-enabled products on a commercial scale. We may not be able to develop commercial scale manufacturing capabilities or produce products cost effectively. Unless we are able to economically manufacture or obtain our products in commercial quantities that meet acceptable performance and quality specifications, our business will be harmed.

Even if we develop commercially acceptable products, we cannot determine whether we can manufacture our products in a cost effective manner or achieve profitability.

Even if our technology and products gain commercial acceptance, we may not be able to manufacture our products at a cost that enables us to become and remain profitable. We believe that we can use modified commercially available equipment and commercially available raw materials to manufacture our products. However, we have not completed the design and set up of a commercial scale manufacturing facility. Even if we are able to manufacture our products on a commercial scale, the cost of manufacturing our products may be higher than we expect. If the costs associated with that manufacturing, together with our royalty obligations, are not significantly less than the prices at which we can sell our products, we will not be able to achieve profitability.

We do not have a sales force and must enter into distribution agreements and original equipment manufacturer agreements to sell our products.

We have not established, nor do we plan to establish, an end user product sales, marketing and support organization. We expect to enter into agreements with partners to incorporate our potential

products into their end user products or enter into distribution agreements with third parties to sell our internally developed end user products. We may be unable to enter into these agreements on commercially acceptable terms, if at all. To date we have not entered into any of these agreements and we have no assurance that we will receive an adequate economic return from the sales of our products by our partners or distributors. Our partners and distributors could also sell competitive products. If we do not enter into these agreements or our partners or distributors do not perform as expected, we may be required to establish our own end user product sales, marketing or support organization. We may not be able to accomplish this in a timely or a cost effective manner. Regardless of whether we establish an end user product sales, marketing or support organization, it is unlikely that we will have the access to the potential end user customers that our potential partners or distributors would have and our ability to generate revenue and become profitable may be significantly impaired.

We are also dependent on government grants and contracts to offset cash used in operating activities and we may not succeed if government funding priorities change or we are unable to renew our agreements.

Our strategy for developing certain aspects of our core technology and products depends in part on our ability to continue to receive government grants and enter into government contracts. We may not be awarded any future government grants or enter into future government contracts. To date, grants that we have been awarded or contracts we have entered into have been for the purpose of investigating the feasibility of nanotechnology for certain applications. The applicable government agencies are not obligated to extend these agreements and in certain cases, may terminate the funding prior to expiration, regardless of whether we have demonstrated technological feasibility or have met specified milestones. In addition, we may not be successful in securing future government contracts or grants. Government priorities regarding funding for nanotechnology may change and grant funding resources may no longer be available at previous levels. If we are unsuccessful in obtaining additional government grants and contracts or if government agencies decide to reduce or discontinue support of nanotechnology, we may be required to seek alternative sources of revenue or capital.

We may not be able to commercialize the technology we develop under government contracts.

If the applicable government agency determines that it controls the rights to the technology that we develop under government contracts, we may be unable to commercialize this technology. We may also be prohibited from commercially selling certain products that we develop under government contracts or related products based on the same core technology if the government determines that the commercial availability of those products could pose a risk to national security. Any of these determinations would limit our ability to generate product revenue.

The loss of key personnel or the inability to attract, train and retain additional personnel could have a negative effect on our business.

We believe our future success will depend upon our ability to retain highly skilled personnel, including Lawrence A. Bock, our executive chairman of the board of directors, Calvin Y. H. Chow, our chief executive officer, and J. Wallace Parce, Ph.D., our chief technical officer and vice president of research. Each of Messrs. Bock and Chow and Dr. Parce has extensive experience in assisting companies to develop and sell new products based on a technology platform. Mr. Bock has extensive expertise in the development of businesses based on new technologies. Mr. Chow has extensive experience in product development and operations. Dr. Parce has extensive experience in multidisciplinary technical product development. We do not have any key person life insurance for our employees. Our employees are at will and not subject to employment contracts.

As we seek to expand our operations, hiring of additional qualified technical and manufacturing personnel will be difficult due to the limited availability of qualified professionals. The number of people with experience in the field of nanotechnology is limited and we face intense competition for these types of employees. We may not be successful in attracting, training and retaining personnel in the future. Failure

We are dependent on the services of our scientific advisors for some of our development activities and our business could be harmed if we were unable to utilize their services or obtain the rights to the intellectual property they develop.

We depend on the services of members of our scientific advisory board to assist us with technical and business development activities. These individuals are generally employed by universities or research centers and act as consultants to us generally on an exclusive basis in a defined field relating to nanotechnology during the term of their agreements with us. However, we have permitted several of our scientific advisors to provide services to identified companies with whom they had pre-existing relationships. Some of these companies compete with us. Because they are not our employees, we do not have access to all of their time or work product and may have difficulty obtaining the amount of time and attention from these scientific advisors that we need. These scientific advisors may also have research interests that diverge from or conflict with ours or economic interests that are more closely aligned with our competitors to which they also provide services. In addition, we do not have any assurance that these scientific advisors will continue to provide services to us or, if not, that they will not provide services to our competitors. If we were unable to utilize the services of these individuals, our development efforts or our relationships with new or existing partners may be harmed. Because these individuals are employed by third parties, we also face the risk that their employers will attempt to assert that development efforts these scientific advisors have undertaken on our behalf belong to their employer. Any dispute over the ownership or rights to the intellectual property developed by these scientific advisors could disrupt our business, be costly to resolve and could prevent us from developing certain technology or applications.

We licensed a substantial portion of our core technology from educational institutions and research centers and our business could be harmed if these institutions develop important intellectual property to which we do not have rights.

We licensed a substantial portion of our core technology from educational institutions and research centers, including Columbia University, Ernest Orlando Lawrence Berkeley National Laboratory, Harvard University, the Massachusetts Institute of Technology and The Regents of the University of California. These licenses give us the right to use certain technology previously developed by researchers at these licensors. In certain cases we also have the right to practice improvements on the licensed technology to the extent they are encompassed by the licensed patents and within our field of use. Our licensors may currently own and may in the future obtain additional patents and patent applications that are necessary for the development, manufacture and commercial sale of our anticipated products. We may be unable to agree with one or more of these licensors that certain intellectual property developed by researchers at these licensors is covered by our existing licenses. In the event that the new intellectual property is not covered by our existing licenses, we would be required to negotiate a new license agreement. We may not be able to reach agreement with the licensors on the terms of the license and the terms may not permit us to sell our products at a profit after payment of royalties or on commercially reasonable terms, if at all, which could harm our business.

If we fail to meet our financial, technical or commercial diligence obligations under licenses granting us rights to our core technology, we may lose those rights.

Our licenses with the educational institutions and research centers require us to meet certain financial, technical or commercial diligence requirements in order to maintain our rights to a substantial portion of our technology. Our failure to meet those requirements could lead to various adverse consequences, including the loss of exclusive rights or loss of all rights to key aspects of our core technology. We depend substantially on our partners and scientific advisory board members for the development of our products and, therefore, to help to meet our diligence obligations. We cannot predict whether we will be able to meet all diligence requirements necessary to retain rights to our licensed

We may not be able to produce and sell our products on commercially reasonable terms if we are required to pay unanticipated royalties.

Our licenses with educational institutions and research centers include provisions intended to prevent us from having to pay multiple royalties at the full rate for the same product because the product utilizes more than one licensed patent. If these provisions do not operate as we anticipate and we are forced to pay royalties at the full rate on each patent we have licensed as it applies to a single product, we may not be able to sell our products for a profit. In addition, if our licensors were to conclude that the royalty limiting provisions did not apply to patents licensed from other licensors, we may be required to pay royalties at a higher rate to each licensor from which we have licensed technology. In either case, the cost of commercializing our products would increase.

We use hazardous materials in our business, and any claims relating to improper handling, storage or disposal of these materials could subject us to significant liabilities.

Our business involves the use of a broad range of hazardous chemicals and materials. Environmental laws impose stringent civil and criminal penalties for improper handling, disposal and storage of these materials. In addition, in the event of an improper or unauthorized release of or exposure of employees or others to hazardous materials, we could be subject to civil damages due to personal injury or property damage caused by the release or exposure. A failure to comply with environmental laws could result in fines and the revocation of environmental permits, which could prevent us from conducting our business. Accordingly, any violation of environmental laws, increase in the scope of environmental laws or failure to properly handle, store or dispose of hazardous materials could result in restrictions on our ability to operate our business and could require us to incur potentially significant costs for personal injuries, property damage and environmental cleanup and remediation.

We face competition from companies in multiple industries, as well as from the internal efforts of our current and potential partners and, if we fail to compete effectively, our business could suffer.

We compete in intensely competitive markets for end user products. The nanotechnology-enabled products we are currently developing will compete directly with products incorporating conventional materials and technologies, including traditional semiconductors manufactured on the nanoscale. We believe our potential products will face significant competition from existing manufacturers in our current target markets including:


	•	manufacturers of substrates for time of flight mass spectrometry equipment, such as Waters Corporation;

	•	manufacturers of solar cells, such as Sharp Electronics Corporation and BP plc;

	•	manufacturers of thin film electronics, such as Samsung Electronics Co., Ltd., NEC Corporation and Koninklijke Philips Electronics N.V.; and

	•	manufacturers of memory products, such as Advanced Micro Devices, Inc. and Samsung.

In addition, we may also face competition from focused nanotechnology companies, such as Evident Technologies, Inc., Konarka Technologies Inc., Nantero, Inc., NanoHorizons, Inc., Nanosolar, Inc., Quantum Dot Corporation, UltraDots, Inc. and ZettaCore, Inc. and other newly created nanotechnology companies.

We may also face significant competition from our current and future partners, such as E.I. DuPont de Nemours and Company, or DuPont, Intel and Matsushita Electric Works, which are assessing the feasibility of expanding their development and manufacturing capabilities and portfolio of intellectual

property to incorporate nanotechnology-enabled components into their end user products. If our current and future partners expand their product offerings to compete directly with our nanotechnology-enabled products or actively seek to participate as vendors in the nanotechnology-enabled product market, our revenue and operating results could be negatively affected.


	•	Size and resources. Our competitors, as well as our current and future partners, may have access to substantially greater financial, engineering, manufacturing and other resources than we do, which may enable them to react more effectively to new market opportunities.

	•	Name recognition. Many of our competitors and our current and future partners have greater name recognition and market presence than we do, which may allow them to market themselves more effectively to new customers or partners.

	•	Access to information. Our current and future partners may have better access to information regarding their own manufacturing processes, which may enable them to develop nanotechnology-enabled products that can be more easily incorporated into the partners’ products.

	•	Limits of product offerings. Although we intend to offer a broad range of nanotechnology-enabled products, a current or future partner may require nanotechnology-enabled products or functionalities that we do not offer. As a result, our competitors may exploit the areas in which we do not develop product offerings.

	•	Reliance on internal manufacturing. We intend to manufacture our products internally rather than license the manufacturing of those products to our current and future partners. Our partners may conclude that we will be unable to supply the volume or quality of products they need. In addition, those partners may want to control key steps in their manufacturing process and will therefore want to manufacture the nanotechnology-enabled products themselves. In order to successfully integrate our proposed products with theirs, we may be required to rely on our partners for access to their manufacturing process and capabilities. If this access is restricted or denied, our nanotechnology-enabled products may not be competitive with products internally developed by our partners or others.

	•	Scalability of development. A significant challenge in commercializing our nanotechnology-enabled products across multiple industries and end user products will be our ability to leverage our core technology and development efforts. Most nanotechnology-enabled products require custom development to meet application specific product requirements. To minimize custom development efforts, we will need to develop nanotechnology-enabled products that utilize our common set of our core technology and can benefit from our previous development efforts. If we are unable to achieve this, our development capabilities will be less competitive.

If we do not compete successfully, our ability to develop and sell our products could be harmed and our business could suffer.

Nanotechnology-enabled products are new and may be viewed as being harmful to human health or the environment.

We intend to develop and sell nanotechnology-enabled products composed of materials, such as silicon germanium, gallium arsenide, gallium nitride, cadmium selenide or indium phosphide, because of the functions and properties of nanostructures made with those materials. Nanotechnology-enabled products have no historical safety record. Because of the size or shape of the nanostructures or because they may contain harmful elements, such as arsenic and cadmium, our products could pose a safety risk to human health or the environment. In addition, some countries have adopted regulations prohibiting or limiting the use of certain products that contain certain chemicals, which may inhibit our ability to sell

Public perception of ethical and social issues may limit or discourage the use of nanotechnology-enabled products, which could reduce our revenue and harm our business.

The subject of nanotechnology has received negative publicity and has aroused public debate. Government authorities could, for social or other purposes, prohibit or regulate the use of nanotechnology. Ethical and other concerns about nanotechnology could adversely affect acceptance of our potential products or lead to government regulation of nanotechnology-enabled products.

We may be unable to export our proposed products or technology to other countries, convey information about our technology to citizens of other countries or sell certain products commercially, if the products or technology is subject to United States export or other regulations.

We are developing certain nanotechnology-enabled products that we believe the United States and other governments may be interested in using for military and information gathering or antiterrorism activities. United States government export regulations may restrict us from selling or exporting these products into other countries, exporting our technology to those countries, conveying information about our technology to citizens of other countries or selling these products to commercial customers. We may be unable to obtain export licenses for products or technology if necessary. We do not currently have the ability to assess whether national security concerns would affect nanotechnology-enabled products generally or our business in particular and, if so, what procedures and policies we would have to adopt to comply with any existing or future regulations that may apply to us.

If export controls affecting our products are expanded, our business will be adversely affected.

The United States government regulates the sale and shipment of numerous technologies by United States companies to foreign countries. If the United States government places expanded export controls on our technology or products, our business would be materially and adversely affected. If the United States government determines that we have not complied with the applicable export regulations, we may face penalties in the form of fines or other punishment.

Our inability to adequately protect our nanotechnology-related intellectual property could harm our business.

Our ability to achieve commercial success will depend in part on obtaining and maintaining our nanotechnology-related intellectual property as well as successfully defending our intellectual property against third party challenges. If we or our licensors are unable to obtain and maintain patent and trade secret protection of our technology and products, our business could be harmed. In addition, we will only be able to protect our technology from unauthorized use by third parties to the extent that valid and enforceable patents or trade secrets cover that use.

Patents and patent applications covering a substantial portion of our core technology are owned by third party licensors. While we have certain rights to participate in the prosecution, maintenance and enforcement of those patents and patent applications, in a majority of cases, the licensors have retained the right to prosecute, maintain and enforce the patents and patent applications. We cannot be certain that the licensors will do so in the best interests of our business. Any failure of the licensors to follow our advice or take certain actions with respect to the patents and patent applications, including prosecuting, maintaining, enforcing the patents and patent applications or in a timely manner converting provisional patent applications to regular utility applications, as well as our own failure to take such actions, could harm our business.

We are obligated to fund the prosecution and maintenance of the patents and applications we acquired under the license agreements that we have with various licensors. In addition, in some cases, we have also agreed to indemnify the licensors for any actions we take with respect to developing the technology we have licensed that becomes subject to a third party claim. Our obligations to indemnify these licensors may cause us to incur unanticipated expenses and divert our management’s attention from running our business.

Commercial application of nanotechnology is new and the scope and breadth of patent protection is uncertain. Consequently, the patent positions of nanotechnology companies have not been tested and complex legal and factual questions for which important legal principles will be developed or may remain unresolved. In addition, to date there has been relatively little litigation surrounding nanotechnology related patents, and, therefore, it is not clear whether such patents will be subject to interpretations or legal doctrines that differ from conventional patent law principles. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third party patents.

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep a competitive advantage. For example:


	•	we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications or issued patents;

	•	we or our licensors might not have been the first to file patent applications for these inventions;

	•	it is possible that none of our pending patent applications or none of the pending patent applications of our licensors will result in issued patents;

	•	our issued patents and issued patents of our licensors may not provide a basis for commercially viable products, may not provide us with any competitive advantages or may be challenged and invalidated by third parties;

	•	our and our licensors’ patent applications or patents may be subject to interference, opposition or similar administrative proceedings, which could result in the patent applications failing to issue or the patents deemed invalid;

	•	we may not develop additional proprietary technology that is patentable; or

	•	the patents of others may have an adverse effect on our business.

We also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. Trade secrets are difficult to protect. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, partners and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third party illegally obtained and is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know how.

Our patents and patent applications may cover technologies that have few or no commercial applications.

The patents and patent applications that we have licensed from academic or government institutions are directed to technologies that were invented in the course of academic or government research activities, and may not have been invented with a view toward commercial applications. As a result, these licensed patents and patent applications may only cover technologies that have few or no

We may become involved in litigation or other proceedings to defend against claims of infringement of intellectual property rights of others or enforce our intellectual property rights, the outcome of which could have a material adverse impact on our business.

While we are not currently involved in any legal proceedings related to intellectual property, the defense and prosecution of intellectual property suits, interferences, oppositions and related legal and administrative proceedings in the United States and elsewhere are costly, time consuming to pursue and could result in the diversion of our limited financial and managerial resources. An adverse ruling, including an adverse decision as to the infringement of any third party intellectual property rights or the enforceability or validity of our intellectual property rights could subject us to significant damages or prevent us from using the intellectual property or selling our products. Even if we prevail, we could incur substantial costs and our management’s attention may be diverted.

The industries for which we are investigating products are characterized by the existence of a large number of patents and frequent litigation based upon allegations of patent infringement. As our potential products progress toward commercialization in these markets, the possibility of an infringement claim against us or our partners increases. We may not possess rights to use all of the intellectual property required to develop, manufacture or commercialize our anticipated products. While we attempt to ensure that our products and the methods we employ to develop and manufacture them do not infringe other parties’ patents and other proprietary rights, competitors or other parties may assert that we infringe their proprietary rights and bring lawsuits against us seeking to enforce those proprietary rights.

In recent years, several thousand patent applications have been filed with the United States Patent and Trademark office that refer to nanoscale materials or structures. Information contained in patent applications is generally not publicly available. Consequently, we are unable to evaluate the underlying intellectual property until these patent applications become issued or published. The process to issue patents is long and certain innovations that have not yet resulted in issued patents could have been developed prior to our intellectual property. These patents, when issued, may predate our patents and may have superior rights and superior claims or otherwise be in conflict with our technology or business processes.

If a patent infringement suit were brought against us or our partners, we or they could be forced to stop or delay research, development, manufacturing or sales of the end user product or potential product that is the subject of the suit. We or our partners therefore may choose to seek, or be required to seek, a license from the third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our partners were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or forced to cease some aspect of our business operations, as a result of patent infringement claims. Alternatively, we could encounter delays in product introductions while we attempt to design around the patents. Our redesigned products may be inferior to our original designs or we may be unable to continue product development in the particular field.

We may become involved in litigation or other enforcement action not only as a result of alleged infringement of a third party’s intellectual property rights, but also to protect our own intellectual property rights. Under our licenses with educational institutions and research centers, we have certain rights to enforce our intellectual property rights covered by those licenses. We cannot guarantee that our licensors or their other licensees will assist us in enforcing these rights. The patent protection strategies of our licensors or their other licensees may conflict with ours. Additionally, by seeking to enforce our rights we may expose our patents to challenges, which could result in not only loss of any enforcement action or litigation proceeding, but invalidation of our patents or those of our licensors that are subject to dispute, which could have a material adverse impact on our business.

We may be subject to damages resulting from claims that we have wrongfully used the alleged trade secrets of our employees’ former employers.

Many of our employees were previously employed at universities or other companies, including our competitors or potential competitors. Although we have no current or pending claims against us, we may be subject to claims that we have relied on information that these employees have inadvertently or otherwise disclosed that represent the trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain potential products, which could severely harm our business. Even if we are successful, litigation could result in substantial costs and be a distraction to management.

A substantial portion of our technology is subject to government rights and retained rights of our licensors and we may not be able to prevent the loss of those rights or the grant of similar rights to third parties.

A substantial portion of our technology was licensed from educational institutions and research centers funded by various government agencies. Under these funding arrangements, a government agency may obtain rights over the technology including the right to require that a compulsory license be granted to one or more third parties selected by the government agency. The grant of a license for our core technology to a third party could have a material and adverse effect on our business. In addition, our licensors retained certain rights under the licenses including the right to grant additional licenses to a substantial portion of our core technology to third parties for noncommercial academic and research use. It is difficult to monitor and enforce these uses and we cannot predict whether the third party licensors would comply with the use restrictions of their licenses. We could incur substantial expenses to enforce our rights against them.

After the offering there will be few objective metrics by which our progress will be measured. Consequently, we expect that the market price of our common stock may fluctuate significantly. We do not expect to generate substantial revenue from the sale of our nanotechnology-enabled products for several years, if at all. In the absence of product revenue as a measure of our operating performance, we anticipate that investors and market analysts will assess our performance by considering factors such as:



	•	our ability to enter into or extend investigation phase, development phase, commercialization phase and other agreements with new and existing partners;


	•	announcements regarding the status of any or all of our collaborations or products;

	•	general and industry specific economic conditions, which may affect our partners’ development expenditures and commercialization of new products;

	•	the success or failure of our competitors’ efforts to develop competitive products;

	•	announcements regarding developments in the nanotechnology field in general;

	•	the issuance of competitive patents or disallowance or loss of our patent rights; and

	•	announcements regarding government funding and initiatives related to the development of nanotechnology.

We will not have control over many of these factors but expect that our stock price may be influenced by them. As a result, our stock price may be volatile and you may lose all or part of your investment.

If securities or industry analysts do not publish research reports about our business, of if they make adverse recommendations regarding an investment in our stock, our stock price and trading volume may decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about our business. We do not currently have and may never obtain research coverage by industry or securities analysts. If no industry or securities analysts commence coverage of our company, the trading price of our stock could be negatively impacted. In the event we obtain industry or security analyst coverage, if one or more of the analysts downgrade our stock or comment negatively on our prospects, our stock price would likely decline. If one of more of these analysts cease to cover us or our industry or fails to publish reports about our company regularly, our common stock could lose visibility in the financial markets, which could also cause our stock price or trading volume to decline.

Some of our existing stockholders can exert control over us and may not make decisions that are in the best interests of all stockholders.

After this offering, our officers, directors and holders of more than 5% of our common stock will together control approximately % of our outstanding common stock. As a result, these stockholders, if they act together, will be able to exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying or preventing a change in control of our company and might affect the market price of our common stock, even when such a change may be in the best interests of all stockholders.

Prior to this offering, there has been no public market for our common stock. We and the representatives of the underwriters will determine the initial public offering price of our common stock through negotiation. This price will not necessarily reflect the price at which investors in the market will be willing to buy and sell our shares following this offering. An active trading market for our common stock may not develop following this offering. You may not be able to sell your shares quickly or at prices acceptable to you if trading in our stock is not active.

We may be the subject of securities class action litigation due to future stock price volatility.

In the past, when the market price of a stock has been volatile, holders of that stock have often initiated securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention of our management.

We will have broad discretion in how we use the proceeds of this offering and we may not use these proceeds effectively, which may cause our stock price to decline.

Our management will have significant flexibility in using the proceeds we receive in this offering. Because substantially all of the proceeds are not required to be allocated to any specific investment or transaction, you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used in ways that will improve our business or market value.

We will incur increased costs as a result of complying with the laws and regulations affecting public companies.

Complying with existing, recently enacted and proposed changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes Oxley Act of 2002 and recently adopted rules of the Securities and Exchange Commission and the Nasdaq National Market, will result in significant costs to us. In addition to the significantly higher legal, accounting and internal costs, we will incur significant costs to obtain director and officer liability insurance. The impact of these laws and

regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on our board committees or as executive officers. We are presently reviewing existing and new laws and are evaluating and monitoring developments with respect to new and proposed rules and cannot predict or estimate the amount of additional costs we may incur to comply with these rules or the timing of such costs. If we are unable to successfully comply with the new laws, regulations and rules, we could be subject to enforcement proceedings by the Securities and Exchange Commission or our common stock might be delisted from the Nasdaq National Market, either of which would cause the market price for our common stock to decline.

Provisions of our charter documents may have anti-takeover effects that could prevent a change in our control, even if this would be beneficial to stockholders.

Provisions of our amended and restated certificate of incorporation, bylaws and Delaware law could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These provisions include:


	•	a classified board of directors, in which our board is divided into three classes with three year terms with only one class elected at each annual meeting of stockholders, which means that a holder of a majority of our common stock will need two annual meetings of stockholders to gain control of the board;

	•	a provision that prohibits our stockholders from acting by written consent without a meeting;

	•	a provision that permits only the board of directors, the chief executive officer, president or the chairman to call special meetings of stockholders; and

	•	a provision that requires advance notice of items of business to be brought before stockholders meetings.

These provisions can be amended only with the vote of the holders of 66 2/3% of our outstanding capital stock.

If you purchase common stock in this offering, you will pay more for your shares than the amounts paid by existing stockholders for their shares. As a result, you will experience immediate and substantial dilution of approximately $ per share, representing the difference between our pro forma net tangible book value per share as of March 31, 2004, after giving effect to this offering and an assumed initial public offering price of $ per share. In addition, you may experience further dilution to the extent that shares of our common stock are issued upon the exercise of stock options or warrants. As of March 31, 2004, we had outstanding options to purchase 330,527 shares of our common stock at a weighted average exercise price of $0.48 per share and warrants to purchase 279,778 shares of our redeemable convertible preferred stock at a weighted average exercise price of $0.50 per share. In addition, as of March 31, 2004, 1,688,418 shares (inclusive of our 2004 stock plan adopted in April 2004) were reserved for future issuance under our stock plans, excluding annual increases commencing on January 1, 2005. Substantially all of the shares issuable upon the exercise of currently outstanding stock options will be issued at a purchase price less than the public offering price per share in this offering.

Substantially all of our outstanding shares, other than the shares sold in this offering, will be restricted from immediate resale but may be sold into the market beginning 180 days after this offering. These future sales could cause the market price of our common stock to drop significantly.

Our current stock, option and warrant holders hold a substantial number of shares or rights to acquire shares, which they will be able to sell in the public market in the near future. If our existing securityholders sell, or are perceived to be prepared to sell, a substantial number of shares of our common stock in the public market following this offering, the market price of our common stock could fall. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional shares of stock.

After this offering, we will have outstanding shares of common stock. These shares will become eligible for resale in the public market as shown in the table below.

After the offering, the current holders of our preferred stock will have rights, subject to specified conditions, to require us to file registration statements covering our shares owned by them or to include shares owned by them in registration statements that we may file.

In addition, as of March 31, 2004, we had outstanding options to purchase 330,527 shares of our common stock and 279,778 shares of redeemable convertible preferred stock that could be purchased upon the exercise of outstanding warrants. Our available but unissued options were 1,688,418 as of March 31, 2004 (inclusive of our 2004 stock plan adopted in April 2004). If these options or warrants are granted, exercised and sold, you may experience additional dilution.

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our, our partners’ or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this prospectus. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined under “Risk Factors.” These factors may cause our actual results to differ materially from any forward-looking statement.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform our prior statements to actual results.

We estimate that the net proceeds from the sale of shares of common stock by us in this offering will be approximately $ million based on an assumed initial public offering price of $ per share and after deducting the underwriting discount and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that our net proceeds will be approximately $ million.

The primary purpose of this offering is to raise capital to fund the development of our core technology and potential nanotechnology-enabled products. We also expect to use the proceeds of this offering for general corporate purposes, including working capital, capital expenditures and potential acquisitions of complementary businesses, products and technologies. We have no present commitments or agreements with respect to any acquisitions. The amounts that we actually expend for working capital purposes will vary significantly depending on a number of factors, including future growth in revenue, if any, and the amount of cash we generate from operations. Pending these uses, we intend to invest the net proceeds in interest bearing, investment grade securities.

We have never declared or paid any dividends on our capital stock. We currently expect to retain future earnings, if any, to support the development of our business and do not anticipate paying any cash dividends in the foreseeable future. Subject to limited exceptions, we are restricted in our ability to pay dividends on or making distributions with respect to our capital stock by the covenants contained in our equipment line of credit with Silicon Valley Bank.

The following table sets forth our unaudited capitalization as of March 31, 2004. Our capitalization is presented:


	•	on an actual basis; and

	•	on a pro forma basis, to reflect the automatic conversion of all outstanding shares of our preferred stock into common stock immediately prior to the closing of this offering; and

	•	on a pro forma as adjusted basis to reflect our receipt of the estimated net proceeds from the sale of shares of common stock by us in this offering at an assumed initial public offering price of $ per share, after deducting the underwriting discount and estimated offering expenses payable by us.

We also consider as outstanding 1,069,154 shares of common stock, which are subject to our liability of $589,000 for early exercise of stock options and restricted stock purchase awards as of March 31, 2004, but these shares are not reflected in stockholders’ equity in the table above because they were subject to our right of repurchase. In addition to the shares of common stock to be outstanding after the offering, we may issue additional shares of common stock under the following plans and arrangements:


	•	330,527 shares of common stock issuable upon exercise of options and restricted stock purchase awards outstanding at a weighted average exercise price of $0.48 per share as of March 31, 2004;


	•	279,778 shares of common stock issuable upon exercise of warrants outstanding at a weighted average exercise price of $0.50 per share as of March 31, 2004;

	•	a total of 1,688,418 shares of common stock available for future issuance under our stock plans, including our 2004 stock plan which was adopted by our board of directors in April 2004, excluding the annual increases in the number of shares authorized under our 2004 stock plan beginning January 1, 2005. For a description of how these annual increases are determined see “Executive Compensation — Incentive Plans.”

You should read this table together with the sections of this prospectus entitled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the financial statements and related notes beginning on page F-1.

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma net tangible book value per share. Our historical net tangible book value as of March 31, 2004 was approximately $(18.6) million, or approximately $(10.04) per share. Historical net tangible book value per share represents our total tangible assets less total liabilities divided by the total number of shares of common stock outstanding on that date. Our pro forma net tangible book value as of March 31, 2004 was approximately $38.2 million, or approximately $2.63 per share. Pro forma net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of common stock outstanding including the automatic conversion of all outstanding shares of our preferred stock. Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the pro forma net tangible book value per share of common stock immediately after the completion of this offering. After giving effect to the sale of the shares of common stock offered by us at an assumed initial public offering price of $ per share, and after deducting the underwriting discount and estimated offering expenses payable by us, our pro forma net tangible book value as of December 31, 2003 would have been approximately $ million, or $ per share of common stock. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors of common stock. The following table illustrates this dilution on a per share basis:

If the underwriters exercise their over-allotment option in full, the pro forma net tangible book value as of March 31, 2004 would have been $ per share, representing an immediate increase to existing stockholders of $ per share and an immediate dilution of $ per share to new investors.

The following table summarizes after giving effect to the offering, based on an assumed initial public offering price of $ per share, as of March 31, 2004, the differences between the existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid.

The foregoing discussion and tables are based upon the number of shares issued and outstanding on March 31, 2004, assumes the automatic conversion of all shares of our preferred stock and assumes no exercise of options outstanding as of March 31, 2004. As of that date, there were 330,527 shares of our common stock issuable upon exercise of options outstanding and restricted stock awards at a weighted average exercise price of $0.48 per share. In addition, as of March 31, 2004, we had warrants outstanding to purchase 279,778 shares of our redeemable convertible preferred stock at a weighted average exercise

Assuming the exercise in full of all our outstanding options and warrants as of March 31, 2004, the average price per share paid by our existing stockholders would be reduced to $2.55 per share, representing an immediate dilution of $ per share to new investors. Assuming the exercise in full of all our outstanding options and warrants as of March 31, 2004, the percentage of shares held by existing stockholders will increase to approximately % of the total number of shares outstanding after this offering, and the percentage of shares of common stock held by new investors will decrease to approximately %.

The selected financial data set forth below should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our financial statements and related notes, and the other information contained elsewhere in this prospectus. We have derived our selected statement of operations data for the period from July 12, 2001 (inception) to December 31, 2001, and the years ended December 31, 2002 and December 31, 2003 and the selected balance sheet data as of December 31, 2002 and 2003 from the audited financial statements included elsewhere in this prospectus. We have derived our selected statement of operations data for the three months ended March 31, 2003 and 2004 and our selected balance sheet data as of March 31, 2004 from the unaudited condensed financial statements included elsewhere in this prospectus. The selected balance sheet data as of December 31, 2001 were derived from the unaudited financial statements not included in this prospectus. Historical results are not necessarily indicative of results to be expected for future periods.


(2)	The unaudited pro forma basic and diluted net loss per share calculation assumes the conversion of all outstanding shares of redeemable convertible preferred stock into shares of common stock using the as-if-converted method as of the date of issuance.

The following information should be read together with the audited financial statements and the notes thereto and other information included elsewhere in this prospectus.

We are in the early stages of investigative research to develop nanotechnology-enabled products based on our specialized expertise and intellectual property. We are applying this investigative research to develop potential products for multiple industries such as energy, defense, electronics, life sciences and information technology. Our technology and potential product applications are new and still in the early stages of development. To date, we have not successfully developed any commercially available products. Since our inception in July 2001 we have licensed patents from educational institutions and research centers and developed our technology internally. We are currently in the investigation phase of all of our potential products. We do not anticipate that our first products will be commercially available for at least several years, if at all.

To date, our revenue has resulted from collaborations with partners and government agencies to explore the feasibility of developing nanotechnology-enabled products. As part of our business strategy, we intend to enter into additional collaborations to enter multiple markets and expand our core technology across multiple industries and applications. We expect that we will continue to enter into investigative stage research under new collaborations, while other potential products and related collaboration arrangements proceed to development and commercialization phases. We may also generate revenue from research feasibility studies in the early stages of collaborative arrangements. Our product development activities and collaborations typically contemplate several phases, including an investigation phase, a development phase and a commercialization phase. We are currently generating revenue from the investigation phase of our collaborations with partners. We have also entered into arrangements with United States government agencies. Our strategy for pursuing government contracts and grants is to focus on opportunities that will enable us to further our core technology development. We intend to continue to pursue government contracts and grants that enable us to develop dual use products and technologies that may be sold in both the governmental and commercial markets. Our strategy for developing products and future product revenue depends on entering into collaborations to leverage our partners’ financial, research and development, manufacturing, marketing and sales capabilities. We are obligated to perform the objectives defined in our statement of work with our partners or government agencies on a reasonable efforts basis. If we are successful in completing an investigation phase agreement, our partner typically has the right to negotiate with us for a limited period of time to extend these agreements to the development or commercialization phases. In the near term, we will have a limited number of development or commercialization agreements, if any. Even if we receive additional funding from collaboration agreements, we may need additional capital for our operations and we cannot be assured it will be available on favorable terms if at all. We cannot predict how these agreements will be structured, how we will be able to recognize revenue under these agreements or the timing of any revenue recognition. As a result, our operating results could fluctuate significantly from period to period due to the timing of our revenue recognition.

In order to generate product sales, we will need to develop commercially viable products and the ability to manufacture those products in commercial quantities. The development and manufacture of nanotechnology-enabled products is unproven and we will need to devote substantial capital resources to establish our development and manufacturing capabilities including building of facilities, purchase and modification of equipment and hiring and training of additional personnel. In addition, we will need to avoid infringing the intellectual property rights of third parties.

Our research and development expense consists primarily of personnel salary costs, license and patent fees, facility costs, supplies and professional services. We expense all research and development costs as they are incurred including up front licensing fees. We expect that total expenses related to

research and development will increase in future periods as we continue to expand our headcount and facilities to address expansion of our existing and new product development activities. In addition, total research and development expenses are expected to increase in future periods as a result of the amortization of deferred compensation for employees and stock-based compensation expense related to awards to nonemployees.

Our selling, general and administrative expenses include personnel costs for finance, human resources, business development, legal and general management, as well as professional services, such as legal and accounting. We expect our selling, general and administrative expenses to increase in future periods as we continue to expand our business development headcount in an effort to generate additional collaborative partnerships. We also expect an increase in general and administrative headcount necessary to support regulatory compliance, investor relations and other costs associated with being a public company. In addition, total selling, general and administrative expenses are expected to increase in future periods as a result of our facilities expansion and the amortization of deferred compensation for employees and stock-based compensation expense related to awards to nonemployees.

From our inception on July 12, 2001 through March 31, 2004, we incurred net losses of approximately $20.9 million. We expect these losses to continue for the foreseeable future. In the next few years, we expect to incur substantial additional operating losses as a result of increases in expenses for research and development, manufacturing and selling, general and administrative costs.

In order to prepare financial statements in accordance with accounting principles generally accepted in the United States, we make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We have identified the following critical accounting estimates that involve a higher degree of subjectivity and judgment, are susceptible to change, and materially impact our financial condition or operating performance.

We have granted stock options and restricted stock purchase awards to employees and others. Given the absence of an active market for our common stock, we are required to estimate the fair value of our common stock based on a variety of company- and industry-specific factors for the purpose of measuring the cost of the transaction and properly reflecting it in our financial statements. The significant factors considered in the estimation of the fair value of our common stock are the anticipated initial public offering price, the price paid by third parties in cash for our redeemable convertible preferred stock in April 2003, the rights and privileges of the redeemable convertible preferred stock in comparison to our common stock, the risks and uncertainties involved with ownership of our common stock and, more recently, the anticipated initial public offering price.

We had no employee stock compensation expense reflected in our reported net loss in any period prior to 2003, as all options granted had an exercise price equal to the fair value of the underlying common stock on the date of the grant. In connection with the preparation of the financial statements necessary for the filing of our initial public offering, we have reassessed the fair value of our common stock and determined that some of the stock options and restricted stock purchase awards granted during 2003 were granted at exercise prices that were below the deemed fair value of the common stock on the date of grant. Accordingly, we recorded deferred compensation of approximately $1.1 million during 2003. The deferred compensation will be amortized on a straight-line basis over the vesting period of the related awards, generally five years. In 2003, we recorded expense for the amortization of deferred compensation of approximately $74,000 and we recorded stock-based compensation expense for nonemployees of approximately $964,000. In the three months ended March 31, 2004, additional stock options and restricted stock purchase awards were granted at exercise prices that were below the deemed fair value on the date of grant and we recorded additional deferred compensation of approximately $11.4 million. Subsequent to March 31, 2004, we granted additional stock options at exercise prices below the deemed

Our results of operations for future periods will include the amortization of deferred compensation and stock-based compensation expense for nonemployees. The amount of expense expected to be recorded in future periods related to the amortization of deferred stock-based compensation for employees is as follows (in millions):

Please note that the amount of expense recorded in future periods related to stock-based compensation expense for nonemployees will be dependent upon the valuation of our common stock at the date of vesting of the nonemployee award. As of March 31, 2004, we had approximately 450,000 unvested shares related to awards of stock options or restricted stock to nonemployees, at exercise or issuance prices ranging from $0.003 to $0.57 per share, which remained subject to remeasurement at fair value and may result in future nonemployee stock-based compensation expense.

We receive payments under research and development contracts and government grants. These payments are non-refundable but are reported as deferred revenue until they are recognizable as revenue. We follow the following principles in recognizing revenue:


	•	Fixed-fee research and development contracts generally provide us with an up-front fee and a contractually defined period of service. Fees for services we perform under fixed-fee research and development contracts are recognized ratably over the period we perform these services.

	•	Variable-fee research and development contracts generally provide us with fees based upon an agreed-upon rate for time incurred by full time equivalent research staff. Fees for services we perform under variable-fee research and development contracts are recognized based upon the full time equivalent time incurred.


	•	Government grants generally provide us with fixed payments and a contractually defined period of research. Payments received under grants are recognized as revenues ratably over the period we perform the research. We retain ownership and exclusive rights to all our inventions under these arrangements except for nonexclusive, nontransferable, irrevocable, paid-up licenses granted to the United States government to practice directly or indirectly the subject invention throughout the world.

Under all arrangements, we do not recognize revenue unless there is persuasive evidence of an arrangement, there are no uncertainties regarding customer acceptance, the sales price is fixed or determinable and the collection of the related receivable is probable. Upon the completion of each of our research and development contracts and government grants and submission of any final written reports, no further obligations exist under these arrangements. We retain the rights to commercialize the technology we developed under collaborative arrangements and government grants without any royalty obligations.

In September 2003, in connection with a revenue arrangement with a customer, we issued warrants for the purchase of Series C redeemable convertible preferred stock. In accordance with Emerging Issues Task Force Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products), we estimated the portion of the consideration received from the customer that related to the issuance of the warrants and the portion that related to revenue for the performance of research and development services. The warrants become exercisable by the customer as the customer makes milestone payments to us. Until the warrants are fully exercisable, they are subject to remeasurement at fair value. In 2003, we received $1.0 million in cash proceeds which were attributed entirely to the value of the warrants. Because the value of the warrant exceeded the estimated total cash proceeds under the arrangement, we did not recognize any revenue under the arrangement and therefore recorded $370,000 of research and development expense in 2003. As of March 31, 2004, the warrants remained unvested and were remeasured at fair value. Because the estimated fair value of our stock increased during the three months ended March 31, 2004, additional expense was recorded related to the warrants. Accordingly, we recorded $723,000 of research and development expense during the three months ended March 31, 2004. Subsequent to March 31, 2004, the remaining cash proceeds of $2 million were received and the warrants became fully exercisable. As a result, the remeasurement of the warrants to fair market value ceased. We expect to record approximately $200,000 of research and development expense related to the warrants in the three months ending June 30, 2004.

Our total revenue increased from $597,000 for the three months ended March 31, 2003 to $1.2 million for the three months ended March 31, 2004. This increase was primarily due to the addition of new research collaborations with commercial partners and United States government agencies. We generated a portion of our revenue from research feasibility studies we performed under our collaboration arrangements.

Revenue for the three months ended March 31, 2003 consisted primarily of $400,000, or 67% of revenue, from Matsushita Electric Works, which represented all of our non-United States revenue during the period, and $139,000, or 23% of revenue, from SAIC. Revenue recognized in the three months ended March 31, 2004 consisted primarily of $315,000, or 27% of revenue, from Matsushita Electric Works, which represented all of our non-United States revenue, $310,000, or 26% of revenue, from Intel, and $218,000, or 19% of revenue, from SAIC, and $149,000, or 13% of revenue, from DuPont. The remainder of revenue in each period was derived from grants from United States government agencies.

We receive revenue from contracts with commercial collaborators and contracts and grants with United States government agencies. We are currently in the investigation phase of all of our potential products, including pursuant to our collaborations with partners. Our ability to generate revenue in future periods will be dependent upon our ability to extend current collaborations or enter into new collaborations.

Research and development expenses increased from $2.0 million in the three months ended March 31, 2003 to $3.9 million in the three months ended March 31, 2004. The $1.9 million increase reflected the recruitment and hiring of additional research personnel which increased from 19 persons at March 31, 2003 to 23 persons at March 31, 2004, as well as an increase in stock-based compensation expense of approximately $1.2 million. We expect our research and development costs to increase in the future as we pursue our research and expand our staff to support these efforts.

Our research and development efforts span multiple industries and technology we develop for one industry can in many cases also be utilized in other industries. Our current development projects include disposable test plates, known as consumable substrates, for life sciences research, solar cells, electronic circuits on flexible film known as flexible electronics, and semiconductor memory devices that retain data in the absence of power, known as non-volatile memory. We have not tracked our historical research and development costs by project. Our technology and potential product applications are new and still in the early stages of investigative research. We are unable to predict the costs to complete any of our individual research and development projects or the anticipated completion date of any of our individual research and development projects.

General and administrative expenses increased from $643,000 in the three months ended March 31, 2003 to $1.3 million in the three months ended March 31, 2004. The $639,000 increase reflects the recruitment and hiring of additional administrative personnel which increased from eight persons at March 31, 2003 to 11 persons at March 31, 2004, as well as an increase in stock-based compensation expense of $346,000 and a $72,000 increase in professional fees.

Interest income (expense) and other income, net includes interest and other income offset by interest expense, if any. Interest income includes income earned on our cash and cash equivalents. Interest expense represents interest paid on our equipment line of credit. Our interest income (expense) and other income, net, increased from $0 in the three months ended March 31, 2003 to $105,000 in the three months ended March 31, 2004, due largely to an increase in interest income related to an increase in average investment balances resulting from our sale of redeemable convertible preferred stock in 2003.

Period from Inception (July 12, 2001) to December 31, 2001 and Years Ended December 31, 2002 and December 31, 2003

We did not have any revenue from inception to December 31, 2001. Our revenue for 2002 was $283,000 and revenue for 2003 was $3.0 million.

We recognized revenue from Matsushita Electric Works, a Japanese company, of $200,000, or 71% of revenue, in 2002, which represented all of our non-United States revenue in 2002. Revenue recognized in 2003 consisted primarily of $1.6 million, or 53% of revenue, from Matsushita Electric Works, which represented all of our non-United States revenue, $586,000, or 19% of revenue, from SAIC, and $340,000, or 11% of revenue, from Sciperio, Inc., for which we are a subcontractor under a United States government contract. The remainder of revenue in each year was derived from contracts with other corporate collaborators and United States government agencies.

Our research and development expenses increased from $237,000 in the period from inception to December 31, 2001 to $5.2 million in 2002. The research and development expenses in the period of inception to December 31, 2001 related to the establishment of our operations and initial licensing activities. In 2002, research and development expenses increased by $5.0 million to $5.2 million primarily due to an increase in research personnel from one person at the beginning of 2002 to 17 persons as of December 31, 2002 as we began development of our technology. Our 2002 expenses increased due to a $1.3 million increase in laboratory and facility costs incurred to initially establish our scientific laboratories, $1.2 million of personnel-related costs, $830,000 in fees to outside service providers and $702,000 for the licensing and patenting of our technology.

Our research and development expenses increased from $5.2 million in 2002 to $9.9 million in 2003. This increase of $4.8 million in 2003 was due primarily to an increase in our research and development headcount from 17 persons to 22 persons during 2003. Our 2003 expense increases included a $1.8 million increase in personnel related costs, $1.4 million of stock-based compensation expense, $613,000 in laboratory and facility related costs and $677,000 for the licensing and patenting of our technology.

Our selling, general and administrative expenses increased from $562,000 in the period from inception to December 31, 2001 to $2.3 million in 2002. Our selling, general and administrative expenses in the period of inception to December 31, 2001 related to the initial establishment of our operations. In 2002, selling, general and administrative expenses increased by $1.8 million to $2.3 million, primarily due to an $896,000 increase in personnel-related costs, a $224,000 increase in professional services, such as legal and accounting, and a $436,000 increase in facilities expenses.

Our selling, general and administrative expenses increased from $2.3 million in 2002 to $2.6 million in 2003. This increase of $228,000 in 2003 was primarily due to a $143,000 increase in personnel related costs.

Our interest income (expense) and other income, net, increased from $7,000 in the period from inception to December 31, 2001, to $126,000 in 2002. Our interest income (expense)and other income, net increased from $126,000 in 2002 to $294,000 in 2003. The increases were primarily due to interest income resulting from higher average investment balances as a result of receipt of proceeds from the sales of our redeemable convertible preferred stock that were partially offset by interest expense related to our equipment line of credit.

In the period from inception to March 31, 2004, we did not have any income tax expense, as we had net operating losses for all periods presented.

At December 31, 2003, we had approximately $13.9 million of net operating loss carryforwards and approximately $295,000 in federal research and development tax credit carryforwards available to offset any future taxable income we may generate. These net operating losses and tax credit carryforwards will expire beginning in 2013. Our deferred tax assets have been offset by a full valuation allowance, as the realization of such assets is uncertain. The Internal Revenue Code of 1986, as amended, places certain limitations on the annual amount of net operating loss and tax credit carryforwards that can be utilized in any particular year if certain changes in our ownership occur.

From inception through March 31, 2004, we raised $54.4 million in private equity financings, net of issuance costs. In addition to equity financings, our sources of cash include non-refundable payments received from collaborative partners and government agencies, as well as borrowings under an equipment line of credit. As of March 31, 2004, our cash, cash equivalents and available-for-sale investments totaled $37.7 million.

We believe that the net proceeds from this offering, together with our current cash, cash equivalents and available-for-sale securities will be sufficient to meet our anticipated operating and capital requirements for at least the next year. We have no current plans, nor are we currently negotiating, to obtain additional financing following the closing of this offering. Since we anticipate incurring substantial losses for the foreseeable future, we may need to raise additional capital in order to complete our development activities and to build our commercial scale manufacturing facilities. We may raise additional

capital through a variety of sources, including the public equity market, private financings, collaborative arrangements and debt. If we raise additional capital through the issuance of equity or securities convertible into equity, our stockholders may experience dilution. Those securities may have rights, preferences or privileges senior to those of the holders of the common stock. Additional financing may not be available to us on favorable terms, if at all. If we are unable to obtain financing, or to obtain it on acceptable terms, we may be unable to successfully support our business requirements.

The cash used in operating activities increased in each of the periods presented. The increase in operating expenditures was primarily a result of continued increases in our research and development activities, including the additions to headcount, fees to outside service providers and costs for the licensing and patenting of our technology. For example, our total number of employees increased from 24, as of December 31, 2002 to 34 as of March 31, 2004. We expect our cash used in operating activities to increase in future periods to support continued increases in personnel and related costs. Cash used in operating activities varies from our total operating expenses recorded in the statement of operations primarily as a result of non-cash charges for stock-based compensation, depreciation and amortization.

Cash used in operating activities was partially offset by non-refundable payments received from customers. To date, we have entered into a limited number of collaborations with commercial partners and government agencies. Our collaborations typically contemplate several phases, including an investigation phase, a development phase and a commercialization phase. Under these investigation phase agreements, we are responsible for performing investigative research and development at specified levels. We are obligated to perform the objectives defined in our statement of work with our partners or government agencies on a reasonable efforts basis. We typically receive research and development payments at specified periods and amounts per full time employee equivalent working on the project, payments on the achievement of specified milestones, or both. The payments received under these collaborations have been subject to significant volatility. For example, cash payments received from customers were approximately $2.1 million, $1.1 million, and $1.8 million in 2002, 2003, and the three months ended March 31, 2004, respectively. Cash payments received from customers are frequently in the form of up-front payments and may differ greatly from the amount of revenue recognized in the statement of operations. In addition, because of the short-term nature of our product development collaborations, our cash payments from our commercial partners, government grants and government contracts are subject to significant variability. Accordingly, our past performance may not be indicative of our future performance. In order to finance future operations, we may need to raise additional funding.

Net cash used in investing activities was $528,000 for the three months ended March 31, 2003 and $315,000 for the three months ended March 31, 2004. Net cash used in investing activities was $117,000 from the period from inception to December 31, 2001, and $2.5 million in 2002, and $35.7 million in 2003. From inception to December 31, 2002, investing activities were primarily for the purchase of equipment to support our expanding operations. In 2003, we also made an investment in marketable securities, net of maturities, of $33.2 million, which represented a portion of the proceeds of our series C redeemable preferred stock financing in addition to the purchase of equipment and leasehold improvements. In the three months ended March 31, 2003, we had purchases of equipment of $528,000. In the three months ended March 31, 2004, we had net maturities of investments of $125,000, offset by purchases of equipment of $440,000. We expect to continue to make significant additions to equipment and leasehold improvements when we begin the development of our manufacturing capabilities as we continue to support our research and development activities. However, we do not anticipate that a substantial portion of those investments will occur during 2004. In order to finance anticipated investments in manufacturing facilities, we may need to raise additional capital. Because our technology is in the early stages of development, we are unable to accurately estimate the amount of capital required to establish these manufacturing capabilities.

Financing activities provided cash of $1.6 million for the period from inception to December 31, 2001, $16.6 million in 2002 and $38.1 million in 2003. Financing activities provided cash of $601,000 for the three months ended March 31, 2003 and $440,000 during the three months ended March 31, 2004. These amounts were primarily the proceeds we received from the sale of convertible redeemable preferred stock, equipment line of credit and proceeds from the sale of common stock and exercise of stock options.

In 2002, we entered into an equipment line of credit, which provided for up to a maximum of $2.5 million to finance the purchases of equipment. We borrowed up to the maximum permitted under the equipment line of credit during the commitment period, which expired on March 1, 2003. Once we borrowed up to the maximum amount, no further borrowings were available. Borrowings under the equipment line of credit converted to notes payable that are repayable ratably over 36 months, bear interest at 5%, and are secured by our financed equipment. As of December 31, 2003 and March 31, 2004, there were $1.5 million and $1.3 million of outstanding notes payable under the equipment line of credit, respectively. We cannot borrow additional amounts under the line of credit. During the term of the outstanding notes, we are prohibited from making cash dividends or distributions with respect to our capital stock.

Our contractual obligations as of December 31, 2003 were as follows (in thousands):


*	Operating lease commitments exclude approximately $96,000 of rental income under a non-cancelable sublease that terminated in April 2004.

We have entered into several license agreements with educational institutions that provide us with the right to exploit technology developed by researchers at those institutions. In connection with those licenses, we will be obligated to pay specified royalties to our licensors from sales on applicable products if they are commercialized. If we do not have any sales from commercial products, we are obligated to pay minimum royalties under the agreements. In addition, in connection with the execution of a patent license agreement with the Ernest Orlando Berkley National Laboratory, we are obligated to pay a license milestone payment in cash. The dollar amount of the milestone payment will be 23,333 (subject to adjustments for splits, dividends and the like in our common stock) multiplied by the initial public offering price per share, which will be payable at various times over 26 months after the closing of our initial public offering. We expect to expense this license milestone when and if the milestone is achieved. The minimum royalty obligations are waived in certain license agreements through 2004 if our expenditures in selected areas of research and development exceed specified amounts. Assuming we are unable to obtain

On March 31, 2004, the Financial Accounting Standards Board issued its Exposure Draft, Share-Based Payment, which is a proposed amendment to FASB Statement No. 123, Accounting for Stock-Based Compensation. Generally, the approach in the Exposure Draft is similar to the approach described in Statement 123. However, the Exposure Draft would require all share based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The Financial Accounting Standards Board expects to issue a final standard late in 2004 that would be effective for 2005. The pro forma impact of the adoption of Statement 123 on our historical financial statements is included in the footnotes to the financial statements. We expect to continue to grant stock-based compensation to employees and the impact of the adoption of the new standard, when and if issued, may have a material impact on our future results of operations.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. We do not hold or issue financial instruments for trading purposes or have any derivative financial instruments. To date, all of our agreements with partners and government agencies have payments denominated in United States dollars. Our exposure to market risk is limited to interest rate fluctuations due to changes in the general level of United States interest rates, particularly because the majority of our investments are in short-term debt securities. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. To minimize risk, we maintain our portfolio of available-for-sale investments in a variety of interest-bearing instruments, including United States government and agency securities, high-grade United States corporate bonds, auction-rate securities issued by states of the United States, commercial paper and money market funds. The investment portfolio is subject to interest rate fluctuations and will fall in value in the event market interest rates increase. As of December 31, 2002, our cash reserves were maintained in money market investment accounts and were not exposed to material market risks. As of December 31, 2003 and March 31, 2004, a hypothetical 1% increase in interest rates would result in an adverse change of approximately $200,000 in the fair value of our available-for-sale investments.

We are in the early stages of investigative research to develop nanotechnology-enabled products based on our specialized expertise and intellectual property. We plan to sell our nanotechnology-enabled products to our partners and directly to end user customers. We are developing products based on our core technology that incorporate proprietary, inorganic nanostructures with integrated functionality. We are utilizing our technology to develop potential products for multiple industries such as energy, defense, electronics, life sciences and information technology. We have not yet developed any of these products and may not be able to do so for several years, if at all.

We expect that we will continue to enter into investigative stage research under new collaborations, while other potential products and related collaboration arrangements proceed to development and commercialization phases. We have also entered into arrangements with United States government agencies. We believe our strategy for pursuing government contracts and grants to focus on additional product opportunities will enable us to further our core technology development. We intend to continue to pursue government contracts and grants that enable us to develop dual use products and technologies that may be sold in both government and commercial markets. Upon the completion of each of our current research and development contracts and government grants and the submission of any final reports, we have no further obligations under these arrangements. We retain the rights to commercialize the technology we developed under collaborative arrangements and government grants without any royalty obligations.

Some of our nanotechnology-enabled product development efforts include consumables for life sciences research, solar cells, flexible electronics and non-volatile memory. We have assembled an experienced business and technical team, with development and commercialization expertise, which is supported by the members of our scientific advisory board who are recognized experts in the field of nanotechnology. We have over 200 patents and patent applications which we have licensed from educational institutions and research centers or developed internally. Our granted patents and patent applications derive from over 78 different patent families, each of which represents what we or our licensors believe is a distinct technological development, or in some cases, a collection of distinct technological developments. In addition, some of our patents or patent applications represent foreign patents or patent applications that relate to similar or identical technology to our United States patents and patent applications. We believe our strong team will enable us to deliver nanotechnology-enabled products for use in multiple industries.

Nanotechnology is the ability to control or manipulate materials on the atomic scale to create structures that have novel properties and functions because of their size, shape or composition. These structures are typically less than 100 nanometers in size. A nanometer is one billionth of a meter, which is approximately 100,000 times smaller than the width of a human hair and is up to 100 times smaller than geometries typically used in commercial semiconductor manufacturing today. By organizing atoms into

structures of different shapes and sizes on a nanoscale, important properties including electrical, optical and physical, can be controlled. At the nanoscale, these properties can be fundamentally different than the properties of the same materials at a larger, traditional scale. When nanostructures are engineered into end user products, these products benefit from the unique properties exhibited by the nanostructures. We believe that the application of nanotechnology to multiple industries will significantly improve the performance, cost and functionality of existing products and allow the development of products previously not possible. As an example, with certain traditional materials, color is varied by using different chemicals. At the nanoscale, variations in color can be achieved by varying the size of a nanostructure, rather than its chemical composition. This could improve performance and color flexibility in products, such as displays, solid state lighting and solar cells, while reducing their cost and manufacturing complexity.

Many of the unique properties of nanostructures arise at sizes for which traditional fabrication processes, such as those used in semiconductor manufacturing, are either impractical or not possible using today’s technologies. Scientists have therefore developed methods for forming these nanostructures from the bottom up, building them atom by atom with precise control. Innovative and novel technologies are required for the design and synthesis of nanostructures, their assembly into products and their interface into end user products.

Common materials used to create nanostructures can be organic, such as carbon, or inorganic, such as silicon. We believe that inorganic nanostructures can be created with consistent, desired characteristics in commercially required quantities in a cost effective manner. Inorganic materials are appealing for fabrication of nanostructures for several reasons:


	•	there is a broad range of inorganic materials, such as silicon, silicon germanium, gallium arsenide, gallium nitride, cadmium selenide and indium phosphide, from which to create nanostructures, enabling different product properties;

	•	inorganic materials can form structures in a consistent manner and allow the use of similar fabrication methods to create a wide variety of nanostructures with reproducible physical and functional characteristics;

	•	significant information and expertise exists in traditional industries regarding the techniques to manipulate and interface with inorganic materials; this provides a strong foundation on which to design and build products based on nanostructures formed from these same materials; and

	•	inorganic nanostructures can be synthesized atom by atom leveraging commercially available equipment, creating billions of precisely defined functional nanostructures per batch and potentially lowering the total cost of the end user product.

While the concept of nanotechnology started in the research community several decades ago, to date nanotechnology products have had limited applications in commercial products. Nanoscale materials, however, are being utilized in a variety of basic applications, such as sunscreens, water repellant fabrics, carbon fiber tennis rackets and antistatic mats. Recently, a number of factors have converged to act as catalysts for the development of more advanced and complex nanotechnology products. Analytical instruments, such as scanning probe and electron microscopes, have been significantly improved in recent years, allowing researchers to better understand electrical, chemical and physical properties at the nanoscale. At the same time, governments have made research and development of nanotechnology a priority. For example, in December 2003 the United States adopted the 21st Century Nanotechnology Research and Development Act, which allocated approximately $3.7 billion dollars to nanotechnology development over the next four years. Governments of other major industrialized countries have also committed to advance the progress of nanotechnology by providing substantial research and development funding. In addition, multiple industries are approaching the point at which their ability to economically manufacture products with increasing levels of performance and functionality is being constrained by traditional technologies. Nanotechnology provides the potential to address these challenges.

Many companies are seeking to incorporate the potential benefits of nanotechnology into their end user products on a timely and cost effective basis. We believe that these companies will be motivated to work with focused nanotechnology suppliers that have the expertise, infrastructure and intellectual property needed to allow them to incorporate nanotechnology cost effectively into their end user products. The development of nanotechnology-enabled products requires specialized expertise in chemistry, physics, engineering, materials science, quantum mechanics and advanced manufacturing, as well as access to intellectual property.

We are developing nanotechnology-enabled products for partners and customers in multiple industries based on our specialized expertise and intellectual property. We believe our strong team of technical and business experts and related development and commercialization capabilities will enable us to provide our partners and customers with nanotechnology-enabled products. We are utilizing our technology to develop potential products for multiple industries such as energy, defense, electronics, life sciences and information technology. The key elements of our solution include:

Broadly applicable technology. We intend to apply our core technology to develop and manufacture nanotechnology-enabled products for direct sale or incorporation into end user products across multiple industries or applications. Technology we develop for one product can in many cases also be utilized for other applications or products. For example, we are using technology that we initially developed for potential use in DNA microarrays, a DNA detection technology, in our consumable substrates that are intended for use with time of flight mass spectrometry testing. We believe this approach will enable our partners and customers to leverage the advantages of nanotechnology without requiring them to heavily invest in the resources necessary to develop in-house nanotechnology expertise and infrastructure.

Nanotechnology and commercialization expertise. We have assembled an experienced business and technical team with development and commercialization expertise. This team has previously commercialized a number of products based on new core technology. Our internal expertise is complemented by our scientific advisory board that includes prominent nanotechnology experts from a number of leading educational institutions and research centers.

Significant intellectual property position. We have a significant body of nanotechnology-related intellectual property, including patents and patent applications licensed to us on an exclusive basis, as well as our own patent applications and trade secrets. This intellectual property covers a variety of technologies applicable to nanostructure compositions and devices, as well as their design, manufacture and use. When combined with our technical expertise, we believe our intellectual property provides us with a strong competitive advantage in developing nanotechnology-enabled products.

Design and fabrication capabilities. Our proprietary computer modeling and synthesis capabilities enable us to rapidly and efficiently design and fabricate nanostructures based on our knowledge of applicable principles in chemistry, physics and engineering. We are developing processes designed for the consistent and reliable manufacture of inorganic nanostructures with desired composition, size, shape and surface chemistry and their practical and rapid integration into products.

Our objective is to become an industry leading nanotechnology company developing and manufacturing products that incorporate proprietary, inorganic nanostructures with integrated functionality for multiple industries. To facilitate the commercial adoption of our products, we have established and intend to continue to establish collaborations with partners and government agencies that we believe will benefit significantly from the incorporation of nanotechnology-enabled products into their end user products. In addition, there may be certain opportunities, such as the use of nanostructures in medical devices, that we do not have the resources, financial or otherwise, to pursue without a partner or government agency. In these instances, we may pursue other arrangements, which could include

Utilize collaborations to enter multiple markets. We plan to collaborate with partners to sell and, in many cases, co-develop products. We intend to sell to our partners nanotechnology-enabled products that they can integrate into their end user products. By leveraging our partners development, manufacturing, sales and market expertise and customer relationships, we believe the time to market of our products will be reduced. We intend to select partners who value nanotechnology solutions and have a development, manufacturing and sales and marketing capability to maximize the commercial potential of our nanotechnology-enabled products. Through this strategy, we can remain focused on our core expertise of developing and manufacturing products based on inorganic nanostructure technology.

Leverage our core technology across multiple industries and applications. We seek to employ our core technology across multiple industries and applications through collaborations in order to accelerate the development of our products. We believe that our core technology can simultaneously address short, medium and long-term opportunities and will reduce our dependence on any particular industry, partner or application. Each of our product development efforts is intended to leverage our technology, know how and manufacturing capabilities.

Support core technology development through commercial and government funding. We have been able to fund a significant amount of our technology development through agreements with commercial partners and government agencies. Through these collaborations, we have gained valuable knowledge about the markets for our potential products. We intend to continue to leverage commercial and government funding to support the development of our core technology and products of interest to our partners, the government and us.

Build common manufacturing capabilities to achieve economies of scale. We believe our core technology enables us to utilize a common set of manufacturing capabilities to supply our partners with a variety of nanotechnology-enabled products. By building proprietary manufacturing capabilities that can be applied to multiple products, we believe that we can benefit from manufacturing economies of scale to provide cost effective, high quality products to our partners and customers.

Continue to expand and leverage our intellectual property position. We believe our significant intellectual property position provides us with a competitive advantage in developing nanotechnology-enabled products. We believe our intellectual property position is a reason why our partners seek to collaborate with us. We plan to continue to expand our intellectual property position through internally generated and licensed patent rights and other intellectual property and associations with leading experts in nanotechnology.

All of our product development efforts are in the early stage, or in what we term the investigation phase. During this phase, we intend to assess the primary areas of technological risk of the potential product and the performance characteristics of our technology in the given application, as well as whether there is a viable commercial market for the potential product. The investigation phase allows us to evaluate whether or not there are any suitable commercial product opportunities that could take advantage of the performance characteristics of our technology. Until we complete the investigation phase, we will not identify the specific products we intend to develop or the specifications for those products. After the successful completion of an investigation phase that leads to the identification of a specific product opportunity and the required product specifications, we anticipate that each product, subject to mutually agreed terms with our collaborating partner, if any, will enter a development phase, followed by a commercial production phase. We anticipate that the investigation phase for each product may last from six months to two years. The length of each phase will be dependent upon the complexity of each product we anticipate developing. We cannot predict when or if we will complete development and commercialize any potential products identified in the investigation phase. In order to diversify our development risk, we

Consumable Substrates for Life Sciences Research. We are developing nanostructure coatings that have a wide variety of potential applications in life sciences research. We are developing a disposable plate, or substrate, coated with nanostructures for use in existing time of flight mass spectrometry instruments. We are using technology that we initially developed for microarrays, or biochips, for use in the detection of DNA to develop our consumable substrates that are intended for use with time of flight mass spectrometry testing. At this time, we are not actively pursuing the development of microarrays used for DNA detection but we may elect to pursue the development of microarrays used for DNA detection in the future if we determine that the potential product is technologically feasible and we believe that a viable commercial market for the potential product exists. Time of flight mass spectrometry is widely used in the pharmaceutical and biotechnology industries to analyze large molecules. Our substrates enable time of flight mass spectrometry to also potentially be used for the rapid and accurate analysis of small molecules for high throughput screening of potential drug candidates and synthetic chemistry. We plan to develop and manufacture this product and enter into a product marketing agreement with one or more distributors or mass spectrometry instrument manufacturers. This product is in the investigation phase and we have developed a technological evaluation prototype of this product. This technological evaluation prototype is a research material, not a product or product prototype that reflects a near to final form of our potential product. The criteria upon which we intend to evaluate the results of our investigation phase activities include sensitivity, repeatability and compatibility with a broad range of sample types.

Solar Cells. We are developing solar cells for use in building materials, aerospace applications and portable power generation to meet various performance requirements and simplify manufacturing processes to lower costs. We believe that because of the flexible and light weight nature of our solar cells and our ability to customize their optical properties, our solar cells could be used in a variety of products, such as architectural glass, roofing tiles, aerospace and portable power supplies. To develop nanotechnology-enabled solar cells, we are collaborating with Matsushita Electric Works and United States government agencies. We anticipate that we would manufacture the products resulting from these development efforts and would sell them to our partners or other customers for integration into their end user products. This product is in the investigation phase and we have developed a technological evaluation prototype of this product. This technological evaluation prototype is a research material, not a product or product prototype that reflects a near to final form of our potential product. The criteria upon which we intend to evaluate the results of our investigation phase activities include efficiency, cost per watt of power generated and manufacturability.

Flexible Electronics. We are developing high performance, flexible electronics to be used in a variety of application areas including large area and portable displays, low cost radio frequency identification tags and electronically steerable antenna arrays for wireless communications. Our thin film electronics technology may allow us to achieve the electronic performance of silicon wafers, over large areas on a light weight, flexible substrate. We expect this technology to be compatible with traditional thin film manufacturing equipment, as well as advanced printable electronics technologies. To develop our nanotechnology-enabled thin film electronics products, we are collaborating with DuPont and a United States government agency. We anticipate that we would manufacture the products resulting from these development efforts and would sell them to our partners or other customers for integration into their end user products. This product is in the investigation phase and we have developed a technological evaluation prototype of this product. This technological evaluation prototype is a research material, not a product or product prototype that reflects a near to final form of our potential product. The criteria upon which we intend to evaluate the results of our investigation phase activities include transistor performance, substrate compatibility and manufacturability.

Non-Volatile Memory. We are developing nanostructures for non-volatile memory products for anticipated use in applications such as digital cameras, MP3 players and mobile phones. To develop non-volatile memory products, we are collaborating with Intel. We anticipate that we would manufacture the

products resulting from these development efforts and would sell them to our collaborators or other customers for integration into a non-volatile memory device. This product is in the investigation phase and we have developed a technological evaluation prototype of this product. This technological evaluation prototype is a research material, not a product or product prototype that reflects a near to final form of our potential product. The criteria upon which we intend to evaluate the results of our investigation phase activities include storage density, speed and compatibility with existing manufacturing processes.

We seek to partner with leading companies across various industries to develop, manufacture and commercialize products based on our proprietary nanotechnology platform. We intend to leverage the development, manufacturing, sales and marketing capabilities of our partners. Initially, we intend to enter into product development agreements with commercial entities to explore the technical and market feasibility of developing products in specific areas of interest while at the same time expanding the underlying capability of our technology. Our collaborations typically contemplate several phases, including an investigation phase, a development phase and a commercialization phase, which may be covered in one or more agreements. We intend to enter into agreements in multiple industries simultaneously to accelerate the development of our technology across numerous product areas.

To date we have entered into several product development collaborations to evaluate the technical and market feasibility of potential products in specified fields of interest. Under these investigation phase agreements, we are responsible for performing investigative research and development at specified levels. We typically receive research and development funding at specified periods and amounts per full time employee equivalent working on the project, payments on the achievement of specified milestones, or both. We typically retain the exclusive rights to specified categories of nanotechnology inventions made by either party as a result of the investigation phase. Upon completion of an investigation phase, we and our partner typically have a given period in which to negotiate a related development, commercialization or supply agreement in a defined field. We have not yet entered into any of these agreements and we cannot be certain that we will be able to enter into such agreements in the future. In addition to relying upon partners to fund a portion of our research and development expenses for certain of our potential products, we also plan to fund development of potential products internally and with government funding.

We intend to expand existing collaborations and enter into new collaborations. Following successful product development either pursuant to a product development collaboration or our internal research programs, we intend to enter into original equipment manufacturer or distribution partnerships. These partnerships may be in the form of original equipment manufacturer agreements for products manufactured by us for integration by our partner into their end user products. We may also enter into distribution agreements for our partner to distribute end user products manufactured by us, in order to access the marketing expertise, customer relationships, distribution capabilities and sales force of our partner. To date, we have not entered into any original equipment manufacturer or distribution partnerships and we cannot be certain that we will be able to enter into any in the future.

In November 2002, we entered into a development agreement with Matsushita Electric Works to develop a proof of concept solar cell meeting certain specifications and incorporate nanotechnology-enabled solar cells into building materials pursuant to which Matsushita Electric Works paid us $2.0 million at the beginning of the investigation period. We also granted Matsushita an option to renegotiate the terms of additional investigational work by paying us an additional $500,000. In addition, Matsushita Electric Works agreed to spend at least $2.0 million internally on the project. In February 2004, we and Matsushita Electric Works amended the agreement to extend the investigation period until August 2004 and renegotiate certain terms of the agreement and Matsushita Electric Works paid us an additional $500,000.

Our agreement provides that during the investigation period, we and Matsushita Electric Works will exclusively work together on investigating these products for sale in certain Asian countries. Matsushita Electric Works also has the exclusive right to negotiate with us for a certain period following completion of the collaboration to enter into an agreement to develop and commercialize solar cells containing inorganic nanostructures for use in building materials in those countries.

In December 2003, we entered into a cooperative development agreement with Intel to investigate the feasibility of using our nanostructures in non-volatile memory devices pursuant to which Intel is obligated to pay us at least $1.9 million in exchange for performing research services unless the agreement is terminated by Intel. We granted Intel the right to exclusively negotiate with us for a specified period to enter into a development and commercialization agreement for the development of non-volatile memory devices using certain of our nanostructures, during which period we have agreed not to enter into any discussions regarding that type of product with any third party. Upon the payment of additional amounts, Intel may extend its exclusive negotiation period for additional three-month periods up to March 31, 2006.

In January 2004, we entered into a cooperative development agreement with DuPont to investigate the commercial feasibility of using nanostructures for thin film electronics applications pursuant to which DuPont paid us $325,000 in exchange for performing research services during the first three months of the agreement. The agreement was scheduled to terminate on May 17, 2004 unless the parties agreed to continue the collaboration. In May 2004, the parties agreed to continue the collaboration for the remainder of the one year term of the agreement and to negotiate mutually acceptable statements of work based on the results of the collaboration to date.

We have also entered into arrangements with United States government agencies. Our strategy for pursuing government contracts and grants is to focus on opportunities that will enable us to further our core technology development. We intend to pursue government contracts and grants that enable us to develop dual use products and technologies that may be sold in both government and commercial markets.

In September 2003, we entered into a development agreement with In-Q-Tel to investigate the application of our nanostructures to flexible, high performance electronics pursuant to which In-Q-Tel is obligated to pay us up to $3.0 million in exchange for performing research services. The project with In-Q-Tel is divided into two phases: a six month feasibility phase followed by a 12 month technical development and optimization phase. In-Q-Tel paid us $1.0 million at the commencement of the first phase. In April 2004, we received a notice from In-Q-Tel to proceed to the second phase and an additional payment of $1.0 million based on the achievement of specific milestones. In June 2004, we received the remaining cash payment of $1.0 million. In connection with the agreement, we issued In-Q-Tel warrants for 241,028 shares of our series C preferred stock at a price of $0.003 per share. The warrants are now fully exercisable and will expire if not exercised prior to the closing of this offering.

Master Marketing and Business Development Agreement with Science Applications International Corporation, or SAIC

In July 2003, we entered into a 24 month master marketing and business development agreement with SAIC to identify and jointly pursue United States government contracts or grant opportunities relating to nanoscience and nanotechnology. Our obligations to each other under the agreement are generally nonexclusive, provided that in certain circumstances we and SAIC have a right of first offer to pursue certain government contract or grant opportunities along with the other party. Under the agreement, SAIC is

obligated to pay us $1.6 million in exchange for performing research services. In addition, SAIC agreed to spend at least $600,000 internally on the project by dedicating the services of its employees. SAIC is entitled to receive the first $2.2 million in profit, after reimbursement of our actual expenses, not including any fees or profits, and SAIC’s costs, that we or SAIC receive under any United States government contract or grant arising out of work performed under our agreement. We and SAIC are not obligated to pursue any government contract or grant on a joint basis until such time as we and SAIC mutually agree to pursue the particular opportunity. To date, we have not entered into any agreement to pursue a government contract or grant with SAIC. We or SAIC may terminate the agreement beginning on September 30, 2004 by giving the other party 90 days prior notice. We currently do not intend to terminate the SAIC agreement and we have not received any request for termination and are not aware of any plans by SAIC to terminate the agreement.

Since August 2002, we have been awarded an aggregate of more than $1.7 million in grants from or contracts with United States government agencies to fund research relating to the development of our core technology and applications in the areas of biological detection, solar power, thin-film electronics and light emitting structures. We received these grants from and entered into contracts with several government agencies, including the Defense Advanced Research Projects Agency, the National Institute of Health and the National Aeronautics and Space Administration. We retain the rights to commercialize nanotechnology-enabled products developed using the research funded under these grants or contracts.

In June 2004, we entered into a one year agreement with DARPA to investigate and develop a solar cell that meets given efficiency, weight and cost specifications and incorporates nanotechnology-enabled devices for the potential use by the United States Air Force. DARPA has agreed to pay us up to $1.5 million during the first 12 months of the agreement and to pay our sub-contractors up to an additional $700,000 during that period. DARPA at its option may extend the agreement by paying us additional amounts.

We are developing our core technology, which is based on a proprietary class of inorganic nanostructures, to engineer and integrate the physical, functional and performance characteristics of nanostructures for the purpose of creating products. Unlike traditional materials which are used to fabricate devices, each nanostructure can incorporate device functionality. These nanostructures, which can be made with features as small as a few nanometers, are synthesized atom by atom in a controlled chemical environment, creating precisely defined functional nanostructures. To design products for different application areas, our nanostructure fabrication process enables us to define and control many of the important chemical and physical parameters of our nanostructures, such as composition, shape, size and surface chemistry.


	•	Composition: Our core technology allows us to fabricate nanostructures from one or more inorganic materials, including silicon, silicon germanium, gallium arsenide, gallium nitride, cadmium selenide and indium phosphide. Different inorganic materials can manifest different properties or perform different functions. For example, traditional integrated circuits are made from silicon, while light emitting diodes, or LEDs, are often made from gallium nitride. We can also incorporate two or more materials into each individual nanostructure, forming functional interfaces between the different materials that can provide unique electrical, optical or physical properties. Whether we are developing a solar cell, an LED or a memory device, the composition of the nanostructures can be selected to suit the application.

	•	Size: Our core technology allows us to control the size of the nanostructures. While the composition of a nanostructure largely defines its overall function, we can adjust the desired


		functional properties by controlling the size of the nanostructure. This feature allows us to further change the performance characteristics of our products in a way that is not possible using traditional technology. For example, when using a nanostructure to form an LED, we can tailor the size of the nanostructure to select the precise color of the emitted light.

	•	Shape: We can form nanostructures in a variety of shapes, including spheres, rods and wires, as well as more complex shapes. By controlling the shape, we can create additional functionality in our individual nanostructures and increase their performance, as well as, we believe, reduce the manufacturing complexity and cost of the products in which they are used.

	•	Surface chemistry: While functionality results from the nanostructures’ composition, size and shape, processability arises from the material filling the space between individual nanostructures. The interface between the nanostructures and the filling materials is formed through a surface chemistry that acts as a physical and functional connection between the nanostructures and the other components in the end user product. By controlling the surface chemistry independent of the composition, size and shape of the nanostructures, we potentially can separately define and optimize functional and manufacturing characteristics.

We have several core competencies that act as fundamental building blocks for developing applications from concept to product. Our core competencies include: synthesis, assembly, nano to macro interfaces, application specific formats and computer modeling and simulation. Developing our nanotechnology-enabled products requires the consistent synthesis, characterization and control of the nanostructures, which we then assemble in a directed fashion to achieve a desired function. The nano to macro interface allows us to integrate our nanostructures and their functionality into the rest of the system. Finally, the nanostructures must be incorporated into an application specific format that is compatible with the end user product. To direct nanostructure and product development throughout this process, we use computer modeling and simulation for multiple levels of the design, from the individual nanostructures to the end user application. As we develop products, we expect the resulting advances will expand and enhance our core technology, which in turn, can provide us with more application and collaboration opportunities.

We are currently applying our core competencies to develop potential products for various applications in multiple industries. One potential product is a new type of solar cell that performs like a traditional solar cell, but can be configured like a light weight, flexible plastic. In particular, this technology has the potential to provide low cost solar power through currently available, high volume and inexpensive manufacturing techniques based on roll to roll manufacturing. Roll to roll manufacturing is a well established technique used in the photographic film, plastics, printing and paper industries. Roll to roll manufacturing has been used for decades and it is a relatively inexpensive process as compared to traditional semiconductor manufacturing.

As an illustration of our development process, using the following steps, we have created a functioning solar cell:


	•	Synthesis: We developed tetrapod nanostructures for this application that are capable of light absorption, charge generation and charge conduction when incorporated into a polymer and thus act as a solar cell. We selected the composition and size and then constructed the nanostructure to absorb the sun’s light in an optimal manner and to separate resulting electrical charges.

	•	Assembly: To enable high volume, inexpensive manufacturing, it is desirable to process the nanostructures while suspended in a liquid and then harden the liquid into a film. We selected a plastic matrix from which a film is made. We also designed the specific surface chemistry on the nanostructures to allow their uniform mixing into the plastic matrix. To achieve good solar efficiency, it is also desirable to have each nanostructure closely positioned to the top and bottom of the film where the electricity from each nanostructure


		sized solar cell will be collected. We selected the shape of the nanostructure to orient itself naturally to provide a high conductivity electrical path across the film.

	•	Nano to macro interface: Each individual nanostructure generates electrical charges when it absorbs the sun’s rays. We designed the nanostructure’s surface chemistry to facilitate the transfer of electrical charges out of the nanostructure. We apply traditional electrodes to the top and bottom of the film, which is composed of trillions of nanostructure sized solar cells, to transfer electrical charges out of the film into an electrical system, such as a storage battery or electrical device.

	•	Application specific format: For a solar cell, there are several application specific requirements: the device must operate at an equal or higher level of efficiency and at a lower cost than current products, light must enter the device, the cell must be connected to a circuit to remove the electrical charges and the device must tolerate long-term environmental exposure. We plan to select electrodes and encapsulating films for our nanostructures to achieve the application specific requirements. For example, the layer on top of the film must be a clear conducting layer to allow light to enter the film while also conducting electricity away.

	•	Computer modeling and simulation: Throughout the development process, we use computer modeling and simulation. We calculate the necessary physical and functional properties of the individual nanostructures to guide synthesis. We model the solar spectrum to determine the optimum absorption characteristics of the nanostructures. We calculate the necessary physical and functional properties of the nanostructures so that they can act as solar cells. We model the surface chemistry to optimize electrical charge transfer from the nanostructure to the electrodes and model the electrodes for optimal electrical charge transport. By modeling and simulating throughout the process, we expect to minimize the number of design iterations, thereby accelerating the entire development cycle.

We use similar building blocks to develop and construct our other potential products as outlined above. In addition, we use similar methods to evaluate the applicability of our nanotechnology to prospective products.

Since our inception, we have devoted significant resources to the development of our products and technology. We conduct our research and development operations in Palo Alto, California. As of June 30, 2004, our research and development team consisted of 28 people.

We had research and development expenses of $237,000 in the period from inception to December 31, 2001, $5.2 million in 2002, $9.9 million in 2003, and $3.9 million in the three months ended March 31, 2004. Our partners funded none of our research and development activities from inception to December 31, 2001, $283,000 of our research and development activities in 2002, $3.0 million of our research and development activities in 2003 and $1.2 million in the three months ended March 31, 2004. We pursue our product development objectives by developing potential nanotechnology-enabled products internally and with those development partners identified above, but may from time to time acquire products, technologies and businesses complementary to ours or form alliances with other companies.

Our strategy is to seek patents on new and improvement inventions relating to our technology that we consider important to the development of our business. Our patents and patent applications are generally directed to nanomaterial compositions, processes for making nanomaterial compositions, processes, treatments and structures that allow incorporation of these nanomaterial compositions into useful forms and the application of these useful forms of nanomaterial compositions in what we believe are potentially useful commercial applications. We believe that the patents and patent applications that we own or have licensed will provide us with a competitive advantage in these areas by providing us with the

exclusive rights to the inventions that are claimed in these patents and patent applications. As of March 31, 2004, we owned or had exclusive rights to 36 issued United States patents, five issued or granted foreign patents and 196 additional pending United States and foreign patent applications. Some of these patents and patent applications derive from a common parent patent application or are foreign counterpart patent applications to United States patents or patent applications, and relate to a similar or identical technology. Our granted patents and patent applications derive from over 78 different patent families, each of which represents what we or our licensors believe is a distinct technological development, or in some cases, a collection of distinct technological developments, that were sufficiently related to warrant being grouped within a common patent family and are one or more patentably distinct inventions. In many cases, each patent family is or may be divided, either by the responsible patent office, or by us or our licensors, into separate patent applications that are intended to pursue claims to these patentably distinct inventions. Our owned or licensed issued or granted patents expire at various times between 2011 and 2020. Included in the patents and applications enumerated above are the 36 issued U.S. patents, the five issued or granted foreign patents and 129 pending patent applications that are licensed to us from research and educational institutions including:


	•	Columbia University;

	•	Ernest Orlando Lawrence Berkeley National Laboratory;

	•	Harvard University;

	•	The Massachusetts Institute of Technology; and

	•	The Regents of the University of California.

We acquired the exclusive rights to use specific patents of these educational institutions in fields that are relevant to our business. The Regents of the University of California act as the contract operator of the Ernest Orlando Lawrence Berkeley National Laboratory. Some of the patent and patent applications under our license from the Massachusetts Institute of Technology are jointly owned by Lumileds Lighting, U.S. LLC. One family of patent applications under our licenses with Harvard is a co-exclusively licensed to Nantero and Nantero also has patent rights from certain other Harvard licenses as necessary to protect its rights under the co-exclusive license. Our agreements with these parties expire upon the expiration of the related patents.

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of our technology and products as well as successfully defending these patents against third party challenges. If we or our licensors are unable to obtain and maintain patent and trade secret protection of our technology and products, our business could be harmed. In addition, we will only be able to protect our technology from unauthorized use by third parties to the extent that valid and enforceable patents or trade secrets cover that use. Some of our patent applications, as well as the patent applications that we have licensed, are provisional patent applications. For any inventions described in these provisional patent applications to undergo examination before the United States Patent and Trademark Office, a prerequisite to issuance of any patent, they must be converted from a provisional patent application to a regular utility patent application. This conversion must take place within one year of the filing date of the provisional patent application. While we expect to convert these provisional patent applications to regular utility patent applications, failure by us or our licensors to convert any of these provisional patent applications to regular utility patent applications in a timely fashion could result in the loss of our ability to obtain patent protection to some or all of the inventions described in these provisional patent applications.

Patents and patent applications covering a substantial portion of our core technology are owned by our third party licensors. While we have certain rights to participate in prosecution, maintenance and enforcement of those patents and patent applications, in the majority of cases these licensors have retained the right to prosecute, maintain and enforce those patents and patent applications. We cannot be certain they will do so in the best interests of our business. Any failure on the part of the licensors to follow our

Our licensors may currently own and may in the future obtain additional patents and patent applications that are necessary for the development, manufacture and commercial sale of our anticipated products. These additional patents and patent applications may not be licensed to us under our existing licenses and we may be unable to obtain licenses to these patents or patent applications on commercially reasonable terms, if at all, which could harm our business.

Commercial application of nanotechnology is new and the scope and breadth of patent protection is uncertain. Consequently, the patent positions of nanotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles may remain unresolved. In addition, to date there has been relatively little litigation surrounding nanotechnology related patents, and, therefore, it is not clear whether such patents will be subject to interpretations or legal doctrines that differ from conventional patent law principles. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third party patents.


	•	we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications or issued patents;

	•	we or our licensors might not have been the first to file patent applications for these inventions;

	•	it is possible that none of our pending patent applications or none of the pending patent applications of our licensors will result in issued patents;

	•	our issued patents and issued patents of our licensors may not provide a basis for commercially viable products, may not provide us with any competitive advantages or may be challenged and invalidated by third parties;

	•	our and our licensors’ patent applications or patents may be subject to interference, opposition or similar administrative proceedings, which could result in those patent applications failing to issue as patents or those patents being held invalid;

	•	we may not develop additional proprietary technologies that are patentable; or

	•	the patents of others may have an adverse effect on our business.

We also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. Trade secrets are difficult to protect. While we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, partners or other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third party illegally obtained and is using our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know how.

While we are not currently involved in any legal proceedings related to our intellectual property, the defense and prosecution of intellectual property suits, interferences, oppositions and related legal and administrative proceedings in the United States and elsewhere are costly, time consuming to pursue and could result in the diversion of our limited financial and managerial resources. The outcome of these proceedings is uncertain and could significantly harm our business. The industries for which we are investigating products are characterized by the existence of a large number of patents and frequent litigation based upon allegations of patent infringement. As our potential products progress toward commercialization in these markets, the possibility of an infringement claim against us or our collaborators increases. While we attempt to ensure that our products and the methods we employ to develop and manufacture them do not infringe other parties’ patents and other proprietary rights, competitors or other parties may assert that we infringe their proprietary rights.

In recent years, several thousand patent applications have been filed with the United States Patent and Trademark office that refer to nanoscale materials or structures. Information contained in patent applications is generally not publicly available. Consequently, we are unable to evaluate the underlying intellectual property until these patent applications become issued or published. The process to issue patents is long and certain innovations that have not yet resulted in issued patents could have been developed prior to our intellectual property. These patents, when issued, may predate our patents and may have superior claims or superior rights or otherwise be in conflict with our technology or business processes.

If a patent infringement suit were brought against us or our partners, we or they could be forced to stop or delay research, development, manufacturing or sales of the end user product or potential product that is the subject of the suit. We or our partners therefore may choose to seek, or be required to seek, a license from the third party and would most likely be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we or our partners were able to obtain a license, the rights may be nonexclusive, which would give our competitors access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or forced to cease some aspect of our business operations, as a result of patent infringement claims, which could have a material adverse impact on our business. Alternatively, we could encounter delays in product introductions while we attempt to design around the patents. Our redesigned products may be inferior to our original designs or we may be unable to continue product development in the particular field.

We compete in intensely competitive markets for end user products. The nanotechnology-enabled products we are currently developing will compete directly with products incorporating conventional materials and technologies, including traditional semiconductors manufactured on the nanoscale. We believe our nanotechnology-enabled products will face significant competition from existing manufacturers in our target markets including:


	•	manufacturers of substrates for time of flight mass spectrometry equipment, such as Waters;

	•	manufacturers of solar cells, such as Sharp and BP;

	•	manufacturers of thin film electronics, such as Samsung, NEC and Philips; and


	•	manufacturers of memory products, such as Advanced Micro Devices and Samsung.

In addition, we may also face competition from focused nanotechnology companies, such as Evident Technologies, Konarka, Nantero, NanoHorizons, Nanosolar, Quantum Dot, UltraDots, ZettaCore and other newly created nanotechnology companies.

We may also face significant competition from our current and future partners, such as DuPont, Intel and Matsushita Electric Works, which are assessing the feasibility of expanding their development and manufacturing capabilities and portfolio of intellectual property to incorporate nanotechnology-enabled components into their end user products. Nanotechnology-enabled products developed by our current and future partners are designed to utilize the qualities of the partner’s own manufacturing process and may benefit from certain capacity, informational, cost and technical advantages. If our current and future partners expand their product offerings to compete directly with our nanotechnology-enabled products or actively seek to participate as vendors in the nanotechnology-enabled product market, our revenue and operating results could be negatively affected.


	•	Size and resources. Our competitors, as well as our current and future partners, may have access to substantially greater financial, engineering, manufacturing and other resources than we do, which may enable them to react more effectively to new market opportunities.

	•	Name recognition. Many of our competitors and our current and future partners have greater name recognition and market presence than we do, which may allow them to market themselves more effectively to new customers or partners.

	•	Access to information. Our current and future partners may have better access to information regarding their own manufacturing processes, which may enable them to develop nanotechnology-enabled products that can be more easily incorporated into the customers’ or partners’ products.

	•	Limits of product offerings. Although we intend to offer a broad range of nanotechnology-enabled products, a current or future partner may require nanotechnology-enabled products or functionalities that we do not offer. As a result, our competitors may exploit the areas in which we do not develop product offerings.

	•	Reliance on internal manufacturing. We intend to manufacture our products internally rather than license the manufacturing of those products to our current and future partners. Our partners may conclude that we will be unable to supply the volume or quality of products they need. In addition, those partners may want to control key steps in their manufacturing process capabilities and will therefore want to manufacture the nanotechnology-enabled products themselves. In order to successfully integrate our proposed products with theirs, we may be required to rely on our partners for access to their manufacturing process and capabilities. If this access is restricted or denied, our nanotechnology-enabled products may not be competitive with products internally developed by our partners or others.

	•	Scalability of development. A significant challenge in commercializing our nanotechnology-enabled products across multiple industries and end user products will be our ability to leverage our core technology and development efforts. Most nanotechnology-enabled products require custom development to meet application specific product requirements. To minimize custom development efforts, we will need to develop nanotechnology-enabled products that utilize our common set of our core technology and can benefit from our previous development efforts. If we are unable to achieve this, our development capabilities will be less competitive.

If we do not compete successfully, our ability to develop and sell our products could be harmed and our business could suffer.

As of June 30, 2004, we had 43 employees, including 28 in research and development and 15 in selling, general and administrative functions. None of our employees are represented by a labor union or are the subject of a collective bargaining agreement. We have never experienced a work stoppage and believe that our employee relations are good. We believe our future success will depend in large part upon our ability to attract and retain highly skilled managerial, research and development, sales and marketing personnel.

Our principal offices are located in Palo Alto, California. Our facility is occupied under a lease that expires in 2005. At June 30, 2004, our leased space approximated 21,000 square feet.

We believe that our facilities are adequate for our current needs and that suitable additional or substitute space will be available as needed to accommodate expansion of our operations.

We are not currently a party to any material legal proceedings. From time to time, we may become subject to legal proceedings, including those requiring us to defend the parties which have licensed intellectual property to us.

We recruited a number of leading researchers in nanoscience to serve as members of our scientific advisory board. These advisors have entered into agreements with us to serve for fixed terms ranging from one to five years. In general, they serve on an exclusive basis within a defined field of collaboration. These advisors have received option grants and restricted stock purchase awards to purchase our common stock. In addition, some may receive cash compensation in connection with services rendered, and they receive reimbursement for expenses.

Members of our scientific advisory board provide research and/or advice to us in their area of specialization including:


	•	nanostructure design and fabrication;

	•	nanostructure surface chemistry and processing;

	•	nanostructure integration and interface technology;

	•	theoretical modeling and simulation of nanostructures and systems into which they are integrated;

	•	concepts for nanotechnology-based products and applications; and

	•	identifying emerging technologies related to research and development programs.

The following persons served on our scientific advisory board and their primary affiliations were as follows as of June 30, 2004:


(1)	The term may be renewed for successive one year terms by the written agreement of both parties, and may be terminated at any time by the written agreement of both parties or upon 30 days notice by the advisory board member and may be terminated by us for intentional misconduct or gross negligence upon 30 days written notice.

(2)	The term may be renewed for successive one year terms and may be terminated at any time upon written notice by either party.

Our directors and executive officers and certain information about them as of June 30, 2004 are as follows:


(1)	Member of the Audit Committee.

(2)	Member of the Compensation Committee.

(3)	Member of the Grant Committee.

(4)	Member of the Nominating and Governance Committee.

Mr. Bock has served as executive chairman of our board of directors since October 2003. Mr. Bock acted as our chief executive officer, president and a director from July 2001 to October 2003. Mr. Bock also acted as our chief financial officer from July 2001 to September 2001. Mr. Bock was a managing general partner of CW Group, a life sciences venture capital fund from June 1998 to April 2004 and from June 1998 to present has served as a general partner. From 1988 to June 1998, Mr. Bock was general partner of Avalon Ventures, a seed stage venture capital firm. Mr. Bock was the founder and initial chief executive officer of Metro Biosystems, Inc., Neurocrine Biosciences, Inc., Pharmacopeia, Inc., Argonaut Technologies, Inc. and Caliper Technologies Corp. Mr. Bock was also a co-founder of ARIAD Pharmaceuticals, Inc., Athena Neurosciences, Inc., GenPharm International, Vertex Pharmaceuticals, Inc., Onyx Pharmaceuticals, Inc. and Illumina, Inc. Mr. Bock holds a B.A. in Liberal Arts from Bowdoin College and an M.B.A. from the Anderson School at the University of California, Los Angeles.

Mr. Chow has served as our chief executive officer since October 2003 and as a director since February 2002. From November 2001 to October 2003, Mr. Chow served as our chief operating officer and, from November 2001 to June 2002, he served as our acting vice president of development. From October 1995 to September 2001, Mr. Chow, co-founded Caliper and served in various capacities, including most recently as its chief operating officer. From October 1985 to September 1995, Mr. Chow was a co-founder of and last served as vice president of engineering and operations at Molecular Devices Corporation. Mr. Chow holds a B.S.E.E. from the Illinois Institute of Technology and an M.S. in Electrical Engineering from Stanford University.

Dr. Parce has served as our chief technical officer and vice president of research since June 2002. Dr. Parce served on our Scientific Advisory Board from January 2002 to June 2002. From September 1995 to December 2002, Dr. Parce was a co-founder of and served as vice president of research at Caliper. Prior to joining Caliper, Dr. Parce spent 12 years with Molecular Devices Corporation as a co-founder,

Mr. Murphy has served as our vice president of intellectual property since April 2002. From March 1997 to March 2002, Mr. Murphy served in various capacities at Caliper, the most recent of which was vice president of intellectual property. From August 1994 to March 1997, Mr. Murphy was an associate at the law firm of Townsend and Townsend and Crew LLP. Mr. Murphy holds a B.S. in Microbiology from the University of California, Davis and a Juris Doctorate from the University of San Francisco.

Ms. Vergura has served as our vice president of finance since December 2001. From September 2001 to December 2001, Ms. Vergura provided services to us as a consultant. From August 1998 to April 2001 she served as the corporate controller and from January 2001 to April 2001 as director of financial planning at Convergent Networks, Inc., a broadband infrastructure company. From July 1997 to August 1998, Ms. Vergura served as the corporate controller at New Oak Communications, an extranet switching company that was acquired by Bay Networks. Ms. Vergura holds a B.S. in Business Administration from the University of Vermont.

Mr. Bybee has served as a member of our board of directors since October 2001. Since December 1996, Mr. Bybee has served as a managing director of ARCH Venture Partners, a venture capital company, and as a general partner of its related funds. From January 1994 to November 1996, he served as a vice president of ARCH Venture Partners. Mr. Bybee holds a B.S. in Engineering from Texas A&M University and an M.B.A. from the University of Chicago.

Mr. McKenna has served as a member of our board of directors since April 2002. Mr. McKenna has served as a marketing consultant to technology companies since 1970. He is chairman of Regis McKenna, Inc., a private firm specializing in the development of marketing information and network-based business strategies. Mr. McKenna has served as a general partner of McKenna Ventures, L.P., an investment partnership specialized in investments in early stage companies, since November 1998. Mr. McKenna holds a B.A. in Liberal Arts from Duquesne University.

Dr. Roberts has served as a member of our board of directors since May 2003. He joined Venrock Associates, a venture capital firm, in October 1997 and is now a general partner. Dr. Roberts worked at the investment banking firm Kidder Peabody & Co., Inc. in corporate finance from 1989 to 1992. Dr. Roberts also serves as a member of the Board of Directors of Sirna Therapeutics, Inc. Dr. Roberts holds a B.A. from Dartmouth College and a Ph.D. in Chemistry and Chemical Biology from Harvard University.

Dr. Somekh has served as a member of our board of directors since December 2003. Dr. Somekh has served as the president of Novellus, a manufacturer of semiconductor fabrication equipment, since February 2004. Dr. Somekh served in various capacities at Applied Materials, Inc. from 1980 to February 2004, the most recent of which was executive vice president, to which he was appointed in December 2000 and chairman, global executive committee, which took the place of the office of the president, to which he was appointed in October 2002. Dr. Somekh also serves as a member of the board of directors of Synopsys, Inc., an electronic design automation company. Dr. Somekh holds a B.S. in Physics from Tel Aviv University, an M.S. in Electrical Engineering from the California Institute of Technology and a Ph.D. in Electrical Engineering from the California Institute of Technology.

Mr. Young has served as a member of our board of directors since March 2004. Mr. Young is retired. He served as president and chief executive officer of Hewlett-Packard Company from 1978 to 1992 and served in other capacities at Hewlett-Packard from 1958 to 1978. Mr. Young currently serves as the chairman of the board of Ciphergen Biosystems, Inc. He also serves on the boards of directors of Affymetrix Inc., Perlegen Sciences, Inc., Fluidigm Corporation and Lucent Technologies, Inc. Mr. Young holds a B.S.E.E. from Oregon State University and an M.B.A. from the Stanford Graduate School of Business.

Dr. Yurek has served as a member of our board of directors since February 2004. Since 1988, Dr. Yurek has served in various capacities at American Superconductor Corporation, an electricity solutions company that he founded in 1987, and currently serves as its chief executive officer and chairman of the board of directors. From 1976 to 1988, Dr. Yurek was professor of materials science and engineering at the Massachusetts Institute of Technology. Dr. Yurek holds a B.S. and an M.S. in Metallurgy from Pennsylvania State University and a Ph.D. in Metallurgical Engineering from Ohio State University.

Our board of directors currently consists of eight members. Prior to the closing of this offering, our board of directors will be divided into three classes, with each director serving a three year term and one class being elected at each year’s annual meeting of stockholders. Dr. Yurek, Mr. Bybee and Dr. Roberts will be in the class of directors whose initial term expires at the 2005 annual meeting of stockholders. Mr. McKenna, Dr. Somekh and Mr. Chow will be in the class of directors whose initial term expires at the 2006 annual meeting of the stockholders. Mr. Bock and Mr. Young will be in the class of directors whose initial term expires at the 2007 annual meeting of stockholders. Mr. Chow, Mr. Bybee, Dr. Roberts and Dr. Yurek were appointed to our board of directors pursuant to an agreement among our current investors and us that will terminate upon completion of this offering.

Our board of directors currently has an audit committee, a compensation committee, a nominating and governance committee and a grant committee. Dr. Yurek, Mr. Young and Dr. Roberts are currently members of the audit committee. The audit committee reviews our internal accounting procedures and consults with and reviews the services provided by our independent accountants. Mr. Bybee, Mr. McKenna and Dr. Somekh are currently members of the compensation committee. The compensation committee reviews and recommends to the board of directors the compensation and benefits for all of our officers and establishes and reviews general policies relating to compensation and benefits for our other employees. Mr. Bybee, Mr. McKenna and Dr. Yurek are currently members of the nominating and governance committee. The nominating and governance committee assists our board of directors in the areas of membership selection, evaluation of overall effectiveness of the board of directors and the review of developments in corporate governance practices. Mr. Chow is the sole member of the grant committee. The grant committee approves option grants and other equity awards to our non-officer employees pursuant to guidelines set forth by the board of directors.

We reimburse our directors for reasonable travel expenses in connection with attendance at board and committee meetings. Under our 2001 stock plan, nonemployee directors are eligible to receive stock option grants at the discretion of the board of directors. In addition, in 2004, we granted restricted stock purchase rights to purchase our common stock to two of our nonemployee directors. For a description of these options, see “Our Relationships and Arrangements with Our Stockholders, Our Officers and Our Directors.” After this offering is completed, nonemployee directors will receive stock options pursuant to the 2004 stock plan. Each nonemployee director appointed to the board after the completion of this offering will receive an initial option to purchase 15,000 shares upon such appointment. Beginning in 2005, nonemployee directors who have been directors for at least six months will receive a subsequent option to purchase 3,000 shares following each annual meeting of our stockholders. Also, beginning in 2005, nonemployee directors who are members of the audit committee or compensation committee who have been members of such committee for at least six months will receive a subsequent option to purchase 1,000 shares following each annual meeting of our stockholders for each such committee upon which they serve, provided that the chairman of the audit committee and the chairman of the compensation committee will instead receive a subsequent option to purchase 1,500 shares. All such options shall have an exercise price equal to fair market value on the date of grant. Each initial option becomes exercisable as to one-third of the shares on each anniversary of the date of the grant, provided the nonemployee director remains a service provider on such dates. Each subsequent option becomes exercisable as to all of

the shares subject to the subsequent option on the one year anniversary of the date of grant, provided the nonemployee director remains a service provider on such date. In addition, upon the effective date of this offering, each nonemployee director will receive options for a number of shares equal to the number of shares granted to directors and audit and compensation committee members, with respect to the committees upon which the nonemployee director is then serving, at each annual meeting of stockholders, provided that the exercise price per share for each grant shall be equal to the price of our common stock in this offering. These options will also become exercisable as to all of the shares subject to the options on the one year anniversary of the date of grant. The term of such option is 10 years. Our board may also grant additional options to our directors under our 2004 stock plan, which became effective upon its adoption by our board of directors in April 2004.

Our board of directors established its compensation committee in October 2001. Prior to establishing the compensation committee, our board of directors as a whole performed the functions delegated to the compensation committee. No interlocking relationship exists between any member of our compensation committee and any member of any other company’s board of directors or compensation committee.

The following table sets forth all compensation awarded, earned or paid for services rendered in all capacities to us during 2003, to each person who acted as chief executive officer during 2003 and our next most highly compensated executive officers, to whom we refer to collectively as the named executive officers in this prospectus, each of whose compensation exceeded $100,000 in 2003.

The following table sets forth certain information concerning grants of stock options to each of our named executive officers during 2003.

The stock option granted to the named executive officer in 2003 vests as to 1/60 of the total number of shares subject to the option one month from the vesting commencement date and as to 1/60 of the total number of shares subject to the option each full month thereafter. Under the 2001 stock plan, our board retains discretion to modify the terms of outstanding options. The percentage of total options granted was based on an aggregate of options to purchase 58,331 shares of common stock granted to our employees and executive officers in 2003.

Options were granted at an exercise price equal to the fair market value of our common stock on the grant date, as determined by our board of directors. As there was no public market for our stock prior to this offering, the board of directors determined the fair market value of our common stock by considering a number of factors, including, but not limited to, our current financial performance and prospects for future growth and profitability, the status of product releases and product integration, the absence of a resale market for our common stock and comparisons of certain of our key valuation metrics with similar metrics for comparable publicly traded companies, including measures of market capitalization based on revenue multiples, price to earning ratios and operating margins.

The table sets forth the hypothetical gains or “option spreads” that would exist for the option at the end of their respective ten year terms based on assumed annualized rates of compound stock price appreciation of 5% and 10% from the dates the options were granted until the expiration of the ten year option term. The 5% and 10% assumed rates are promulgated by the Securities and Exchange Commission and do not represent our estimate or projection of future common stock prices or stock price growth.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values

The following table sets forth certain information regarding the exercise of stock options in 2003 by the named executive officers and the value of options held by these individuals at December 31, 2003.


(1)	Based on the assumed public offering price of $ per share, minus the exercise price, multiplied by the number of shares issued or issuable upon the exercise of the options.

The value received is calculated as the market value of our common stock at the exercise date minus the exercise price. The value of unexercisable in the money options is deemed to be the market value of our common stock at fiscal year end minus the exercise price. The fair market value of our common stock on December 31, 2003, as determined by our board of directors, was $0.57 per share. However, we have used the estimated initial public offering price of $ per share for purposes of this computation.

Employment Contracts, Change of Control Arrangements and Separation Agreements

We do not have any employment contracts, change of control arrangements or separation agreements with our officers.

Our board of directors adopted and our stockholders initially approved the 2001 stock plan in September and October of 2001, respectively. Our board of directors has decided not to grant any additional awards under the plan following the effective date of this offering. However, the plan will continue to govern the terms and conditions of the outstanding options and stock purchase rights previously granted under the plan.

A total of 3,045,666 shares of our common stock are authorized for issuance under the 2001 stock plan. As of March 31, 2004, options to acquire a total of 323,194 shares of our common stock were issued and outstanding, and a total of 2,034,055 shares of our common stock had been issued upon the exercise of options or stock purchase rights granted under the plan.

The plan provides for the grant of nonstatutory stock options and stock purchase rights to our employees, directors and consultants, and for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to our employees. Our board of directors administers the 2001 stock plan. The administrator has the authority to determine the terms and conditions of the options and stock purchase rights granted under the plan.

The term of the options granted under the 2001 stock plan is set forth in the option agreement The exercise price for options granted under the 2001 stock plan is determined in the option agreement. However, in the case of options granted to an optionee who owns stock representing more than 10% of the voting power of all classes of voting stock of our company, parent or subsidiaries, the exercise price may be no less than 110% of the fair market value of a share of our common stock at the time of the grant. For all other optionees, the exercise price may not be less than fair market value of our common stock on the date of grant for an incentive stock option and may not be less than 85% of the fair market value on the date of grant for a non-incentive stock option. Generally, options granted under the 2001 stock plan to new service providers vest as to 20% of the shares subject to the option on the first anniversary of the vesting commencement date and as to 1/60 of the shares subject to the option per month thereafter.

To the extent incentive stock options granted to an optionee become exercisable in any calendar year for more than an aggregate fair market value in excess of $100,000 (determined on the date any such option was granted), such options will not be treated as incentive stock options for the amounts in excess of $100,000.

The administrator determines the exercise price of stock purchase rights granted under our 2001 stock plan. However, in the case of stock purchase rights granted to an optionee who owns stock representing more than 10% of the voting power of all classes of voting stock of our company, parent or subsidiaries, the purchase price may be no less than 100% of the fair market value of a share of our common stock at the time of the grant. For all other employees, the exercise price may not be less than 85% of the fair market value of our common stock on the date of grant. Unless the administrator determines otherwise, the restricted stock purchase agreement will grant us a repurchase option that we may exercise upon the voluntary or involuntary termination of the purchaser’s service with us for any reason (including death or disability). The purchase price for shares we repurchase will generally be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to us. The administrator determines the rate at which our repurchase option will lapse, provided that for stock purchase rights granted to service providers other than officers, directors and consultants, the repurchase right must lapse as to 20% of the shares subject to the award each year from the date of grant.

Our 2001 stock plan provides that in the event of our merger with or into another corporation or our change of control, the successor corporation will assume or substitute each outstanding award. If the outstanding awards are not assumed or substituted, the administrator will provide notice to the optionee that he or she has the right to exercise the award as to all of the shares subject to the award, including shares that would not otherwise be exercisable, for a period of 15 days from the date of notice. The award will terminate upon the expiration of the 15-day period.

Our board of directors adopted our 2004 stock plan in April 2004 and we expect our stockholders to approve it on or before the effective time of this offering. Our 2004 stock plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to our employees and our parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, stock purchase rights, restricted stock, stock appreciation rights, performance units and performance shares to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants.

As of April 15, 2004, a total of 1,000,000 shares of our common stock were reserved for issuance pursuant to the 2004 stock plan, of which no awards were issued and outstanding as of that date. The 2004 stock plan became effective on the date our board of directors adopted it. In addition, the shares reserved for issuance under our 2004 stock plan will be increased by the number of shares reserved but unissued under our 2001 stock plan as of the effective date of this offering, any shares returned to the 2001 stock plan as the result of termination of options or the repurchase of shares issued under such plan. As of March 31, 2004, 688,418 shares of our common stock were reserved for issuance under our 2001 stock plan that could be rolled into the 2004 stock plan. In addition, the 2004 stock plan provides for annual increases in the number of shares available for issuance on the first day of each fiscal year beginning with January 1, 2005, equal to the lesser of:


	•	5% of the outstanding shares of common stock on the first day of our fiscal year,

	•	2,000,000 shares, or

	•	an amount our board may determine.

Our board of directors or a committee of our board administers our 2004 stock plan. In the case of options intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code, the committee will consist of two or more outside directors within the meaning of Section 162(m) of the Internal Revenue Code. The administrator has the power to determine the terms of the awards, including the exercise price, the number of shares subject to each such award, the exercisability of the awards and the form of consideration, if any, payable upon exercise. The administrator also has the authority to institute an exchange program by which outstanding awards may be surrendered in exchange for awards with a lower exercise price.

The administrator determines the exercise price of options granted under our 2004 stock plan, but with respect to nonstatutory stock options intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code and all incentive stock options, the exercise price must at least be equal to the fair market value of our common stock on the date of grant. The term of an incentive stock option may not exceed ten years, except that with respect to any participant who owns 10% of the voting power of all classes of our outstanding stock, the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. The administrator determines the term of all other options.

No optionee may be granted an option to purchase more than 750,000 shares in any fiscal year. However, in connection with his or her initial service, an optionee may be granted an additional option to purchase up to 1,500,000 shares.

After termination of an employee, director or consultant, he or she may exercise his or her option for the period of time stated in the option agreement. Generally, if termination is due to death or disability, the option will remain exercisable for 12 months. In all other cases, the option will generally remain exercisable for three months. However, an option generally may not be exercised later than the expiration of its term.

Stock purchase rights, which represent the right to purchase our common stock, may be issued under our 2004 stock plan. The administrator determines the purchase price of stock purchase rights. Unless the administrator determines otherwise, we will retain a repurchase option that we may exercise

Stock appreciation rights may be granted under our 2004 stock plan. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of our common stock between the exercise date and the date of grant. The administrator determines the terms of stock appreciation rights, including when such rights become exercisable and whether to pay the increased appreciation in cash or with shares of our common stock, or a combination thereof.

Restricted stock may be granted under our 2004 stock plan. Restricted stock awards are shares of our common stock that vest in accordance with terms and conditions established by the administrator. The administrator will determine the number of shares of restricted stock granted to any employee. The administrator may impose whatever conditions to vesting it determines to be appropriate. For example, the administrator may set restrictions based on the achievement of specific performance goals. Shares of restricted stock that do not vest are subject to our right of repurchase or forfeiture.

Performance units and performance shares may be granted under our 2004 stock plan. Performance units and performance shares are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved or the awards otherwise vest. The administrator will establish organizational or individual performance goals in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants. Performance units shall have an initial dollar value established by the administrator prior to the grant date. Performance shares shall have an initial value equal to the fair market value of our common stock on the grant date.

Our 2004 stock plan also provides for the automatic grant of options to our non-employee directors. Each non-employee director appointed to the board after the completion of this offering will receive an initial option to purchase 15,000 shares upon such appointment. Beginning in 2005, non-employee directors who have been directors for at least six months will receive a subsequent option to purchase 3,000 shares following each annual meeting of our stockholders. Also, beginning in 2005, non-employee directors who are members of the audit committee or compensation committee who have been members of such committee for at least six months will receive a subsequent option to purchase 1,000 shares following each annual meeting of our stockholders for each such committee upon which they serve, provided that the chairman of the audit committee and the chairman of the compensation committee will instead receive a subsequent option to purchase 1,500 shares. All such options shall have an exercise price equal to fair market value on the date of grant. Each initial option becomes exercisable as to one-third of the shares on each anniversary of the date of the grant, provided the non-employee director remains a service provider on such dates. Each subsequent option becomes exercisable as to all of the shares subject to the subsequent option on the one-year anniversary of the date of grant, provided the non-employee director remains a service provider on such date. In addition, upon the effective date of this offering, each nonemployee director will receive options for a number of shares equal to the number of shares granted to directors and audit and compensation committee members, with respect to the committees upon which the nonemployee director is then serving, at each annual meeting of stockholders, provided that the exercise price per share for each grant shall be equal to the price of our common stock in this offering. These options will also become exercisable as to all of the shares subject to the options on the one year anniversary of the date of grant.

Our 2004 stock plan generally does not allow for the transfer of awards and only the recipient of an award may exercise an award during his or her lifetime.

Our 2004 stock plan provides that in the event of our change of control, the successor corporation will assume or substitute an equivalent award for each outstanding award. If there is no assumption or substitution of outstanding awards, the administrator will provide notice to the recipient that he or she has the right to exercise his or her awards as to all of the shares subject to the awards, including shares which would not otherwise be exercisable, for a period of time as the administrator may determine from the date of the notice. The awards will terminate upon the expiration of such period. In addition, all restrictions and

rights of repurchase on restricted stock will lapse and, with respect to performance awards all performance goals will be deemed achieved at target levels, and all other terms and conditions met in the event of a change of control and these awards are not assumed. In the event an outside director is terminated on or following a change in control, other than pursuant to a voluntary resignation, his or her awards will fully vest and become immediately exercisable and, with respect to such director’s performance awards, all performance goals will be deemed achieved at target levels, and all other terms and conditions met.

Our 2004 stock plan will automatically terminate in 2014, unless we terminate it sooner. In addition, our board of directors has the authority to amend, suspend or terminate the 2004 stock plan provided such action does not impair the rights of any participant.

In 2001, we adopted the Nanosys 401(k) plan, which covers all of our eligible employees who have attained the age of 21 and have completed one month of service with us. The 401(k) plan is intended to qualify under Sections 401(a), 401(m) and 401(k) of the Internal Revenue Code and the 401(k) plan trust is intended to qualify under Section 501(a) of the Internal Revenue Code. All contributions to the 401(k) plan by eligible employees, and the investment earnings thereon, are not taxable to these employees until withdrawn and are 100% vested immediately. Our eligible employees may elect to reduce their current compensation up to the maximum statutorily prescribed annual limit, and to have these salary reductions contributed on their behalf to the 401(k) plan. We have not made any matching contributions to our 401(k) plan.

We have adopted provisions in our certificate of incorporation that will limit the liability of our directors and executive officers for monetary damages for breach of their fiduciary duties to the maximum extent permitted by Delaware law. Under Delaware laws a certificate of incorporation may provide that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:


	•	any breach of their duty of loyalty to our company or our stockholders;

	•	acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;

	•	unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

	•	any transaction from which the director derived an improper personal benefit.

The limits on a director or officer’s liability in our certificate of incorporation will not apply to liabilities arising under the federal securities laws and will not affect the availability of equitable remedies such as injunctive relief or rescission.

Our certificate of incorporation together with our bylaws will provide that we must indemnify our directors and executive officers and may indemnify our other officers and employees and other agents to the fullest extent permitted by law. We believe that indemnification under our bylaws covers at least negligence and gross negligence on the part of indemnified parties. Our bylaws will also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity, regardless of whether our bylaws would otherwise permit indemnification. We believe that the indemnification provisions of our certificate of incorporation and bylaws are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by the board of directors. These agreements provide for indemnification for related expenses including attorneys’ fees, judgments, fines and settlement amounts

At present we are not aware of any pending litigation or proceeding involving any director, officer, employee or agent of our company in such person’s capacity with our company where indemnification will be required or permitted. We are also not aware of any threatened litigation or proceedings that might result in a claim for indemnification.

The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of March 31, 2004 and as adjusted to reflect the sale of shares of common stock by us in this offering, by the following:


	•	each stockholder known by us to own beneficially more than 5% of our common stock;

	•	each of our executive officers named in the compensation table above;

	•	each of our directors; and

	•	all directors and executive officers as a group.

Except as otherwise noted below, the address is c/o Nanosys, Inc., 2625 Hanover Street, Palo Alto, California 94304.

We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed below, based on the information furnished by these owners, have sole voting power and investment power with respect to these shares, subject to applicable community property laws. We have based our calculation of the percentage of beneficial ownership of 15,570,011 shares of common stock outstanding as of March 31, 2004, after giving effect to the conversion of our outstanding preferred stock, and shares of common stock outstanding upon completion of this offering.

In computing the number of shares of common stock beneficially owned by a person and the percent ownership of that person, we deemed outstanding shares of common stock subject to options held by that person that are currently exercisable within 60 days of March 31, 2004. We did not deem these shares outstanding for purposes of computing the percent ownership of any other person.


	(1)	Represents: (a) 2,100,809 shares held by ARCH Venture Fund V, L.P., (b) 178,539 shares held by Healthcare Focus Fund, L.P. and (c) 12,780 shares held by ARCH V Entrepreneurs Fund, L.P. The people who have investment control of the ARCH Venture Fund V, L.P., ARCH V Entrepreneurs Fund, L.P., and the Healthcare Focus Fund, L.P. shares are Robert T. Nelsen, Steven Lazarus, Mr. Bybee, Patrick Ennis, Karen Kerr and Keith Crandell, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

	(2)	Represents: (a) 1,573,608 shares held by CW Ventures III, L.P., (b) 275,009 shares held by CW Ventures III — A Co-Investment Fund, L.P. and (c) 264,973 shares held by JP Morgan/ CW Ventures III (Nanosys), L.P. The people who have investment control of the CW Ventures III, L.P., CW Ventures III — A Co-Investment Fund, L.P. and J.P. Morgan/ CW Ventures III (Nanosys), L.P. shares are Mr. Bock, Walter Channing, Charles Hartman and Barry Weinberg, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

	(3)	Represents: (a) 2,028,932 shares held by Polaris Venture Partners III, L.P., (b) 52,680 shares held by Polaris Venture Partners Entrepreneurs Fund III, L.P., and (c) 31,978 shares held by Polaris Venture Partners Founders’ Fund III, L.P. The people who have investment control of the Polaris Venture Partners III, L.P., Polaris Venture Partners Entrepreneurs Fund III, L.P. and Polaris Venture Partners Founders’ Fund III, L.P. shares are Steve Arnold, John Flint, Terry McGuire and Alan Spoon, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

	(4)	Represents: (a) 1,690,873 shares held by Venrock Associates III, L.P., (b) 380,446 shares held by Venrock Associates and (c) 42,271 shares held by Venrock Entrepreneurs Fund III, L.P. The people who have investment control of the Venrock Associates, Venrock Associates III, L.P. and Venrock Entrepreneurs Fund III, L.P. shares are Michael Brooks, Eric Copeland, Anthony Evnin, Linda Hanauer (Venrock Associates III, L.P. only), Dr. Roberts, Anthony Sun and Michael Tyrrell, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

	(5)	Represents: (a) 316,666 shares held by The Bock Family Trust and in trust for the benefit of Mr. Bock’s children, of which 311,389 shares are subject to our right of repurchase upon Mr. Bock’s termination as our service provider, (b) 47,916 shares held by the Bock Family Trust, of which 24,757 of the shares remain subject to a repurchase right upon Mr. Bock and CW Group affiliates no longer remaining available to provide services to us, (c) 1,573,608 shares held by CW Ventures III, L.P., (d) 275,009 shares held by CW Ventures III — A Co-Investment Fund, L.P. and (e) 264,973 shares held by J.P. Morgan/ CW Ventures III (Nanosys), L.P. Mr. Bock is a general partner of CW Ventures IV, LLC which is the general partner of CW Ventures III, L.P., CW Ventures III — A Co-Investment Fund, L.P. and J.P. Morgan/ CW Ventures III (Nanosys), L.P. The people who have investment control of the CW Ventures III, L.P., CW Ventures III — A Co-Investment Fund, L.P. and J.P. Morgan/ CW Ventures III (Nanosys), L.P. shares are Walter Channing, Charles Hartman, Mr. Bock and Barry Weinberg, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

	(6)	Represents 578,332 shares held by Mr. Chow, of which 376,665 shares are subject to our right of repurchase upon termination of Mr. Chow as a service provider.

	(7)	Represents: (a) 243,333 shares held by Dr. Parce, of which 160,492 shares are subject to our right of repurchase upon termination of Dr. Parce as a service provider and (b) the right to acquire 7,777 shares exercisable within 60 days of March 31, 2004.

	(8)	Represents: (a) 31,774 shares held by Mr. Murphy, of which 4,834 are subject to our right of repurchase upon termination of Mr. Murphy as a service provider, and (b) 6,891 shares underlying options held by Mr. Murphy that are exercisable within 60 days of March 31, 2004.

	(9)	Represents 95,832 shares held by Ms. Vergura, of which 47,833 shares are subject to our right of repurchase upon termination of Ms. Vergura as a service provider.


(10)	Represents: (a) 2,100,809 shares held by ARCH Venture Fund V, L.P., (b) 178,539 shares held by Healthcare Focus Fund, L.P. and (c) 12,780 shares held by ARCH V Entrepreneurs Fund, L.P. Mr. Bybee is a managing director of ARCH Venture Partners V, LLC, which is the general partner of ARCH Venture Partners V, L.P. ARCH Venture Partners V, L.P. is the general partner of ARCH Venture Fund V, L.P., ARCH V Entrepreneurs Fund, L.P., and Healthcare Focus Fund, L.P. The people who have investment control of the ARCH Venture Fund V, L.P., ARCH V Entrepreneurs Fund, L.P., and the Healthcare Focus Fund, L.P. shares are Robert T. Nelsen, Steven Lazarus, Mr. Bybee, Patrick Ennis, Karen Kerr and Keith Crandell, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

(11)	Represents: (a) 41,666 shares held by Mr. McKenna, of which 33,333 shares are subject to our right of repurchase upon termination of Mr. McKenna as a service provider and (b) 45,699 shares held by McKenna Ventures L.P. Mr. McKenna disclaims beneficial ownership of the shares held by McKenna Ventures L.P. except to the extent of his proportionate interest.

(12)	Represents: (a) 1,690,873 shares held by Venrock Associates III, L.P., (b) 380,446 shares held by Venrock Associates and (c) 42,271 shares held by Venrock Entrepreneurs Fund III, L.P. Dr. Roberts is a general partner of Venrock Associates. Dr. Roberts is also a member of Venrock Management III LLC, the general partner of Venrock Associates III, L.P. and a member of VEF Management III LLC, the general partner of Venrock Entrepreneurs Fund III, L.P. The people who have investment control of the Venrock Associates, Venrock Associates III, L.P. and Venrock Entrepreneurs Fund III, L.P. shares are Michael Brooks, Eric Copeland, Anthony Evnin, Linda Hanauer (Venrock Associates III, L.P. only), Dr. Roberts, Anthony Sun and Michael Tyrrell, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

(13)	Represents: 33,333 shares held by Dr. Somekh, all of which are subject to our right of repurchase upon his termination as a service provider.

(14)	Represents: 33,332 shares held by Dr. Yurek, all of which are subject to our right of repurchase upon his termination as a service provider.

(15)	See notes 5 through 14.

In October 2001, we sold 1,833,329 shares of our series A preferred stock at $0.90 per share. In January and February 2002, we sold 4,166,661 shares of our series B preferred stock at $3.60 per share. In April and May 2003 and April 2004, we sold 6,693,962 shares of our series C preferred stock at $5.601 per share. Our series A, series B and series C preferred stock is convertible into shares of our common stock on a one for one basis.

Upon the closing of this offering, all shares of our outstanding preferred stock will be automatically converted into shares of common stock. We have entered into an agreement pursuant to which these and other preferred stockholders will have registration rights with respect to their shares of common stock following this offering. For a description of these registration rights, see “Description of Capital Stock.”

Since our inception, we have from time to time sold shares of our common stock pursuant to option exercises and restricted stock purchase rights at per share prices ranging from $0.003 per share to $3.00 to our directors, officers, founders and consultants, subject to repurchase rights in our favor that lapse over specified periods, usually five years. The repurchase right entitles us to repurchase unvested shares at their original purchase price on termination of a purchaser’s services with us.

Listed below are those persons who participated in the transactions described above who are our executive officers or directors or who beneficially own five percent or more of our securities.


(1)	Represents: (a) 414,295 shares of series A preferred stock, 863,116 shares of series B preferred stock and 823,399 shares of series C preferred stock held by ARCH Venture Fund V, L.P., (b) 178,539 shares of series C preferred stock held by Healthcare Focus Fund, L.P., and (c) 2,371 shares of series A preferred stock, 4,939 shares of series B preferred stock, and 5,470 shares


	of series C preferred stock held by ARCH V Entrepreneurs Fund, L.P. The people who have investment control of the ARCH Venture Fund V, L.P., ARCH V Entrepreneurs Fund, L.P., and the Healthcare Focus Fund, L.P. shares are Robert T. Nelsen, Steven Lazarus, Mr. Bybee, Patrick Ennis, Karen Kerr and Keith Crandell, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

(2)	Represents: (a) 308,750 shares of series A preferred stock, 643,229 shares of series B preferred stock and 621,629 shares of series C preferred stock held by CW Ventures III, L.P., (b) 53,958 shares of series A preferred stock, 112,413 shares of series B preferred stock and 108,638 shares of series C preferred stock held by CW Ventures III — A Co-Investment Fund, L.P. and (c) 53,958 shares of series A preferred stock, 112,413 shares of series B preferred stock and 98,602 shares of series C preferred stock held by J.P. Morgan/ CW Ventures III (Nanosys), L.P. The people who have investment control of the CW Ventures III, L.P., CW Ventures III — A Co-Investment Fund, L.P. and J.P. Morgan/ CW Ventures III (Nanosys), L.P. shares are Mr. Bock, Walter Channing, Charles Hartman and Barry Weinberg, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

(3)	Represents: (a) 399,977 shares of series A preferred stock, 833,285 shares of series B preferred stock and 795,670 shares of series C preferred stock held by Polaris Venture Partners III, L.P., (b) 10,385 shares of series A preferred stock, 21,636 shares of series B preferred stock, and 20,659 shares of series C preferred stock held by Polaris Venture Partners Entrepreneurs’ Fund III, L.P. and (c) 6,304 shares of series A preferred stock, 13,133 shares of series B preferred stock, and 12,541 shares of series C preferred stock held by Polaris Venture Partners Founders’ Fund III, L.P. The people who have investment control of the Polaris Venture Partners III, L.P., Polaris Venture Partners Entrepreneurs Fund III, L.P. and Polaris Venture Partners Founders’ Fund III, L.P. shares are Steve Arnold, John Flint, Terry McGuire and Alan Spoon, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

(4)	Represents: (a) 333,333 shares of series A preferred stock, 694,444 shares of series B preferred stock and 663,096 shares of series C preferred stock held by Venrock Associates III, L.P., (b) 75,000 shares of series A preferred stock, 156,250 shares of series B preferred stock and 149,196 shares of series C preferred stock held by Venrock Associates, and (c) 8,333 shares of series A preferred stock, 17,361 shares of series B preferred stock and 16,577 shares of series C preferred stock held by Venrock Entrepreneurs Fund III, L.P. The people who have investment control of the Venrock Associates, Venrock Associates III, L.P. and Venrock Entrepreneurs Fund III, L.P. shares are Michael Brooks, Eric Copeland, Anthony Evnin, Linda Hanauer (Venrock Associates III, L.P. only), Dr. Roberts, Anthony Sun and Michael Tyrrell, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

(5)	Represents: (a) 297,916 shares of common stock held by the Bock Family Trust, (b) 66,666 shares of common stock held by trusts for the benefit of Mr. Bock’s children, (c) 308,750 shares of series A preferred stock, 643,229 shares of series B preferred stock, and 621,629 shares of series C preferred stock held by CW Ventures III, L.P., (d) 53,958 shares of series A preferred stock, 112,413 shares of series B preferred stock and 108,638 shares of series C preferred stock held by CW Ventures III — A Co-Investment Fund, L.P. and (e) 53,958 shares of series A preferred stock, 112,413 shares of series B preferred stock and 98,602 shares of series C preferred stock held by J.P. Morgan/ CW Ventures III (Nanosys), L.P. Mr. Bock is a general partner of CW Ventures IV, LLC which is the general partner of CW Ventures III, L.P., CW Ventures III — A Co-Investment Fund, L.P. and J.P. Morgan/ CW Ventures III (Nanosys), L.P. The people who have investment control of the CW Ventures III, L.P., CW Ventures III — A Co-Investment Fund, L.P. and J.P. Morgan/ CW Ventures III (Nanosys), L.P. shares are Walter Channing, Charles Hartman, Mr. Bock and Barry Weinberg, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

(6)	Represents: (a) 578,332 shares of common stock held by Mr. Chow and (b) 88,611 shares of series B preferred stock held in trust for the benefit of Mr. Chow’s children. Mr. Chow disclaims beneficial ownership with respect to the shares held in trust for the benefit of his children.


(7)	Represents: (a) 414,295 shares of series A preferred stock, 863,116 shares of series B preferred stock and 823,399 shares of series C preferred stock held by ARCH Venture Fund V, L.P. (b) 178,539 shares of series C preferred stock held by Healthcare Focus Fund, L.P., and (c) 2,371 shares of series A preferred stock, 4,939 shares of series B preferred stock, and 5,470 shares of series C preferred stock held by ARCH V Entrepreneurs Fund, L.P. Mr. Bybee is a managing director of ARCH Venture Partners V, LLC, which is the general partner of ARCH Venture Partners V, L.P. ARCH Venture Partners V, L.P. is the general partner of ARCH Venture Fund V, L.P., ARCH V Entrepreneurs Fund, L.P., and Healthcare Focus Fund, L.P. The people who have investment control of the ARCH Venture Fund V, L.P., ARCH V Entrepreneurs Fund, L.P., and the Healthcare Focus Fund, L.P. shares are Robert T. Nelsen, Steven Lazarus, Mr. Bybee, Patrick Ennis, Karen Kerr and Keith Crandell, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

(8)	Represents: (a) 41,666 shares of common stock held by Mr. McKenna and (b) 27,778 shares of series B preferred stock and 17,921 shares of series C preferred stock held by McKenna Ventures L.P. Mr. McKenna disclaims beneficial ownership of the shares held by McKenna Ventures except to the extent of his proportionate interest.

(9)	Represents: (a) 333,333 shares of series A preferred stock, 694,444 shares of series B preferred stock and 663,096 shares of series C preferred stock held by Venrock Associates III, L.P., (b) 75,000 shares of series A preferred stock, 156,250 shares of series B preferred stock and 149,196 shares of series C preferred stock held by Venrock Associates and (c) 8,333 shares of series A preferred stock, 17,361 shares of series B preferred stock and 16,577 shares of series C preferred stock held by Venrock Entrepreneurs Fund III, L.P. Dr. Roberts is a general partner of Venrock Associates. Dr. Roberts is also a member of Venrock Management III LLC, the general partner of Venrock Associates III, L.P. and a member of VEF Management III LLC, the general partner of Venrock Entrepreneurs Fund III, L.P. The people who have investment control of the Venrock Associates, Venrock Associates III, L.P. and Venrock Entrepreneurs Fund III, L.P. shares are Michael Brooks, Eric Copeland, Anthony Evnin, Linda Hanauer (Venrock Associates III, L.P. only), Dr. Roberts, Anthony Sun and Michael Tyrrell, each of whom disclaims beneficial ownership except to the extent of their pecuniary interest therein.

Since our inception we have issued the following options and restricted stock purchase rights to our current officers and directors under our 2001 stock plan and they have exercised options and stock purchase rights to acquire our common stock as follows:


(1)	Represents a restricted stock purchase right. Such shares purchased by Mr. Bock are subject to our repurchase right upon the termination of Mr. Bock as a service provider that lapses monthly over a five year period beginning February 10, 2004. As of March 31, 2004, 311,389 shares remained subject to our repurchase right.

(2)	Represents the early exercise in full of a non-statutory option pursuant to a restricted stock purchase agreement. Such shares purchased by Mr. Chow are subject to our repurchase right upon the termination of Mr. Chow as a service provider that lapses monthly over a five year period beginning November 12, 2001. As of March 31, 2004, 88,887 shares remained subject to our repurchase right.

(3)	Represents the early exercise in full of a non-statutory option pursuant to a restricted stock purchase agreement. Shares purchased by Mr. Chow were subject to our repurchase right upon the termination of Mr. Chow as a service provider that lapsed according to the achievement by Mr. Chow of annual milestones determined in the discretion of our board of directors. As of March 31, 2004, none of such shares remained such to our repurchase right.

(4)	Represents a restricted stock purchase right. Such shares purchased by Mr. Chow are subject to our repurchase right upon the termination of Mr. Chow as a service provider that lapses monthly over a five year period beginning November 14, 2002. As of March 31, 2004, 123,444 shares remained subject to our repurchase right.

(5)	Represents a restricted stock purchase right. Such shares purchased by Mr. Chow are subject to our repurchase right upon the termination of Mr. Chow as a service provider that lapses monthly over a five year period beginning January 1, 2004. As of March 31, 2004, 164,334 shares remained subject to our repurchase right.


(6)	Represents the early exercise in full of a non-statutory option pursuant to a restricted stock purchase agreement. Such shares purchased by Dr. Parce are subject to our repurchase right upon the termination of Dr. Parce as a service provider that lapses monthly over a five year period beginning January 11, 2002. As of March 31, 2004, 5,667 shares remained subject to our repurchase right.

(7)	Represents a restricted stock purchase right. Such shares purchased by Dr. Parce are subject to our repurchase right upon the termination of Dr. Parce as a service provider that lapses monthly over a five year period beginning June 1, 2002. As of March 31, 2004, 154,825 shares remained subject to our repurchase right.

(8)	Represents incentive stock option. Such option vests as to 1/60th of the shares subject to such option each month over a five year period beginning January 1, 2004. As of March 31, 2004, 112,778 shares remained unvested.

(9)	Represents an incentive stock option that was partially exercised. Such option vested as to 20% of the shares subject to such option one year after April 29, 2002 and continued vesting as to 1/60th of the shares each month thereafter. As of March 31, 2004, 45,222 shares remained unvested.


(10)	Represents an incentive stock option that was partially exercised. Such option vests as to 1/60th of the shares subject to such option each month over a five year period beginning January 1, 2003. As of March 31, 2004, 8,944 shares remained unvested.

(11)	Represents a restricted stock purchase right. Such shares purchased by Mr. Murphy are subject to our repurchase right upon the termination of Mr. Murphy as a service provider that lapses monthly over a five year period beginning January 1, 2004. As of March 31, 2004, 4,834 shares remained subject to our repurchase right.

(12)	Represents the early exercise in full of a non-statutory option pursuant to a restricted stock purchase agreement. Such shares purchased by Ms. Vergura are subject to our repurchase right upon the termination of Ms. Vergura as a service provider that lapses monthly over a five year period beginning December 13, 2001. As of March 31, 2004, 36,666 shares remained subject to our repurchase right.

(13)	Represents a restricted stock purchase right. Such shares purchased by Ms. Vergura are subject to our repurchase right upon the termination of Ms. Vergura as a service provider that lapses monthly over a five year period beginning December 17, 2002. As of March 31, 2004, 8,750 shares remained subject to our repurchase right.

(14)	Represents a restricted stock purchase right. Such shares purchased by Ms. Vergura are subject to our repurchase right upon the termination of Ms. Vergura as a service provider that lapses monthly over a five year period beginning January 1, 2004. As of March 31, 2004, 2,417 shares remained subject to our repurchase right.

(15)	Represents the early exercise in full of a non-statutory option pursuant to a restricted stock purchase agreement. Such shares purchased by Mr. McKenna are subject to our repurchase right upon the termination of Mr. McKenna as a service provider that lapses as to 20% of such shares on each anniversary of April 2, 2002. As of March 31, 2004, 33,333 shares remained subject to our repurchase right.

(16)	Represents a restricted stock purchase right. Such shares purchased by Dr. Somekh are subject to our repurchase right upon the termination of Dr. Somekh as a service provider that lapses as to 20% of such shares on each anniversary of November 18, 2003. As of March 31, 2004, all such shares remained subject to our repurchase right.

(17)	Represents a restricted stock purchase right. Such shares purchased by Mr. Young are subject to our repurchase right upon the termination of Mr. Young as a service provider that lapses as to 20% of such shares on each anniversary of March 18, 2004. As of March 31, 2004, all such shares remained subject to our repurchase right.


(18)	Represents a restricted stock purchase right. Such shares purchased by Dr. Yurek are subject to our repurchase right upon the termination of Dr. Yurek as a service provider that lapses as to 20% of such shares on each anniversary of February 10, 2004. As of March 31, 2004, all such shares remained subject to our repurchase right.

(19)	Represents a restricted stock purchase right. Such shares purchased by Dr. Yurek are subject to our repurchase right upon the termination of Dr. Yurek as a service provider that lapses as to 20% of such shares on each anniversary of March 15, 2004. As of March 31, 2004, all such shares remained subject to our repurchase right.

In connection with the purchase by Dr. J. Wallace Parce of 233,333 shares of our common stock on August 12, 2002, we provided Dr. Parce with a loan, secured by such shares, under a full recourse promissory note dated August 12, 2002, in the amount of $84,000 and an interest rate of 6.0% per annum. Dr. Parce repaid us the principal and interest accrued to date under such promissory note in March 2004.

In connection with the purchase by Calvin Chow of 168,333 shares of our common stock on November 11, 2002, we provided Mr. Chow with a loan, secured by such shares, under a full recourse promissory note dated November 11, 2002, in the amount of $60,600 and an interest rate of 6.0% per annum. Mr. Chow repaid us the principal and interest accrued to date under such promissory note in March 2004.

In March 2004, we entered an agreement with CW Group, Inc., certain entity and individual affiliates of CW Group, Inc. and Mr. Bock. In accordance with the terms of this agreement, we issued 16,666 shares of common stock to each of Charles Hartman, Barry Weinberg and Walter Channing, affiliates of CW Group, Inc., and 316,666 shares of common stock to Mr. Bock. We also granted to CW Group, Inc. board observation rights that terminate upon an initial public offering of our common stock, agreed to discuss with a new entity that could be formed in connection with a potential spinout transaction of some of our current technology the possibility of such new entity granting CW Group, Inc. the ability to invest in such new entity’s initial venture capital funding, stated our intention to offer Lawrence Bock an offer of employment with us and agreed to reimburse Mr. Bock for COBRA payments in connection with Mr. Bock’s maintenance of health insurance coverage with CW Group, Inc., Mr. Bock’s former employer, and the entity of which Mr. Bock remains a general partner. CW Group, Inc., in turn, agreed to terminate its rights to designate a member of our board of directors pursuant to a voting agreement, the terms of which will terminate upon an initial public offering of our common stock, fully vest Mr. Bock in his interests in CW Group, Inc. and that CW Group, Inc., and its entities, would not have any further rights to cash or equity amounts issued or granted by us to Mr. Bock or otherwise. Mr. Bock is currently an employee and serves as the executive chairman of our board of directors. Although we agreed to discuss a potential spinout transaction of some of our technology with CW Group, we have not made any agreements with any third parties to consummate a spinout. We are currently exploring whether some product opportunities, such as the use of our nanostructures in medical devices, would be opportunities that we would like to pursue internally or externally through a spinout into a separate entity for development or other arrangement.

On August 17, 2001, Dr. Charles Lieber purchased 183,333 shares of our common stock at a price per share of $0.003. Such shares purchased by Mr. Lieber are subject to our repurchase right upon the termination of Mr. Lieber as a service provider that lapsed as to 5% of such shares on October 3, 2001, with the repurchase right lapsing as to the remaining shares monthly over a five year period beginning October 3, 2001. As of March 31, 2004, 89,988 shares remained subject to our repurchase right. Dr. Lieber is a member of our scientific advisory board, was a holder of more than 5% of our voting securities for a period of time after such purchase, and a member of our board of directors from September 2001 to June 2003.

On August 17, 2001, Dr. Hongkun Park purchased 150,000 shares of our common stock at a price per share of $0.003. Such shares purchased by Dr. Park are subject to our repurchase right upon the termination of Dr. Park as a service provider that lapsed as to 5% of such shares on October 3, 2001, with the repurchase right lapsing as to the remaining shares monthly over a five year period beginning October 3, 2001. As of March 31, 2004, 73,627 shares remained subject to our repurchase right. Dr. Park is a member of our scientific advisory board, and was a holder of more than 5% of our voting securities for a period of time after such purchase.

Dr. Park and Dr. Lieber are professors at Harvard University. As such, Dr. Park and Dr. Lieber may receive compensation from Harvard University in respect of inventions Dr. Park and Dr. Lieber may have assigned to such university, including certain patent rights that we licensed from Harvard University in October 2001 and January 2003. In connection with such licenses, Harvard acquired 53,333 shares of our common stock in October 2001, 6,666 shares of our common stock in February 2003 and 3,333 shares of our common stock in June 2003. In addition to the compensation Dr. Park and Dr. Lieber may receive as described above, Dr. Park and Dr. Lieber may be entitled to receive a portion of such shares of common stock or the proceeds that Harvard University may recognize upon the disposition of such shares.

On September 20, 2001, Dr. A. Paul Alivisatos purchased 128,333 shares of our common stock at a price per share of $0.003. Such shares purchased by Dr. Alivisatos are subject to our repurchase right upon the termination of Dr. Alivisatos as a service provider that lapses monthly over a five year period beginning September 4, 2001. As of March 31, 2004, 64,166 shares remained subject to our repurchase right. Dr. Alivisatos is a member of our scientific advisory board, and was a holder of more than 5% of our voting securities for a period of time after such purchase.

Dr. Alivisatos is head of the Molecular Design Institute and a Director of the Material Science Division at Lawrence Berkeley Laboratories. As such Dr. Alivisatos may receive compensation from Lawrence Berkeley Laboratories in respect of inventions Dr. Alivisatos may have assigned to such institution, including certain patent rights that we licensed from Lawrence Berkeley Laboratories in October 2002.

In March 2002, we entered into a sublease with Optobionics Corporation for certain real property located at our principal offices at 2625 Hanover Street, Palo Alto, California. Our rental payments from Optobionics under this sublease were approximately $24,000 per month. Alan Chow, M.D., is a founder and an executive officer of Optobionics, and is the brother of Calvin Y.H. Chow, our chief executive officer, and Calvin Chow is a member of the board of directors of Optobionics. The sublease terminated in April 2004.

We are authorized to issue 53,500,000 shares of common stock, $0.001 par value. Upon the closing of this offering, we will be authorized to issue 120,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of undesignated preferred stock, $0.001 par value.

As of March 31, 2004, we had 2,920,694 shares of common stock outstanding that were held of record by approximately 90 stockholders and 12,649,317 shares of preferred stock outstanding that were convertible to 12,649,317 shares of common stock and held of record by approximately 41 persons.

The holders of common stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of common stock are entitled to receive ratably any dividends that may be declared from time to time by the board of directors out of funds legally available for that purpose. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock then outstanding. The common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and nonassessable, and the shares of common stock to be issued upon the closing of this offering will be fully paid and nonassessable.

Upon the closing of this offering, our board of directors will have the authority, without action by our stockholders, to designate and issue preferred stock in one or more series. The board of directors may also designate the rights, preferences and privileges of each series of preferred stock, any or all of which may be greater than the rights of the common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of the common stock until the board of directors determines the specific rights of the holders of the preferred stock. However, these effects might include:


	•	restricting dividends on the common stock;

	•	diluting the voting power of the common stock;

	•	impairing the liquidation rights of the common stock; and

	•	delaying or preventing a change in control of our company without further action by the stockholders.

As of March 31, 2004, we had the following warrants outstanding to purchase a total of 279,778 shares of our capital stock:


	•	25,000 shares of our series B preferred stock at an exercise price of $3.60 per share, which are fully exercisable and will terminate in March 2012.

	•	13,750 shares of our series B preferred stock at an exercise price of $3.60 per share, which are fully exercisable and will terminate in May 2012.

	•	241,028 shares of our series C preferred stock at an exercise price of $0.003 per share, which become exercisable when we receive milestone payments from the holder and which expire upon the earlier to occur of 2008 or the completion of this offering.

We have reserved shares of our preferred stock for issuance upon exercise of these warrants, as well as the common stock into which such preferred stock may be converted. After the completion of this offering, any remaining warrants may only be exercised for common stock.

Holders of Registration Rights Can Require Us to Register Shares of Our Stock for Resale

The holders of 12,649,317 shares of common stock and 279,778 shares of common stock issuable upon the exercise of warrants or their permitted transferees are entitled to rights with respect to registration of these shares under the Securities Act of 1933, as amended. These rights are provided under the terms of our agreement with the holders of registrable securities. Under these registration rights, holders of the then outstanding registrable securities may require on two occasions that we register their shares for public resale. Each such registration requires the election of the holders of registrable securities holding at least 40% of the registrable securities to register at least 40% of the registrable securities held by such group of electing holders or a lesser percentage with an expected aggregate offering price to the public of at least $5,000,000. Holders of registrable securities may require that we register their shares for public resale on Form S-3 or similar short-form registration, if we are eligible to use Form S-3 or similar short-form registration, and the value of the securities to be registered is at least $1,000,000. In addition, if we elect to register any of our shares of common stock for any public offering, the holders of registrable securities are entitled to include shares of common stock in the registration. We may reduce the number of shares proposed to be registered in view of market conditions. We will pay all expenses in connection with any registration, other than underwriting discounts and commissions. None of the holders of registrable securities may require that we include shares in this offering.

Certain provisions of Delaware law and our certificate of incorporation and bylaws could make the acquisition of our company through a tender offer, a proxy contest or other means more difficult and could make the removal of incumbent officers and directors more difficult. We expect these provisions to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company to first negotiate with our board of directors. We believe that the benefits provided by our ability to negotiate with the proponent of an unfriendly or unsolicited proposal outweigh the disadvantages of discouraging these proposals. We believe the negotiation of an unfriendly or unsolicited proposal could result in an improvement of its terms.

We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging under certain circumstances, in a “business combination” with an “interested stockholder” for a period of three years following the date the person became an interested stockholder, unless:


	•	prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

	•	upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

	•	on or subsequent to the date of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.

Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting securities. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate that Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.

Our amended and restated certificate of incorporation to be in effect upon the closing of this offering provides for our board of directors to be divided into three classes serving staggered terms. Approximately one-third of the board of directors will be elected each year. The provision for a classified board could prevent a party who acquires control of a majority of the outstanding voting stock from obtaining control of the board of directors until the second annual stockholders meeting following the date the acquirer obtains the controlling stock interest. The classified board provision could discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company and could increase the likelihood that incumbent directors will retain their positions. Our amended and restated certificate of incorporation to be in effect upon the closing of this offering provides that directors may be removed with cause by the affirmative vote of the holders of the outstanding shares of common stock.

Our bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to the board of directors. At an annual meeting, stockholders may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of the board of directors. Stockholders may also consider a proposal or nomination by a person who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to our Secretary timely written notice, in proper form, of his or her intention to bring that business before the meeting. The bylaws do not give the board of directors the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting of the stockholders. However, our bylaws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

Under Delaware law, a special meeting of stockholders may be called by the board of directors or by any other person authorized to do so in the certificate of incorporation or the bylaws. Only a majority of our board of directors, the chairman of the board, our chief executive officer or president (in the absence of a chief executive officer) are authorized under our bylaws to call a special meeting of stockholders. Because our stockholders do not have the right to call a special meeting, a stockholder could not force stockholder consideration of a proposal over the opposition of the board of directors by calling a special meeting of stockholders prior to the time as a majority of the board of directors believed or the chief executive officer believed the matter should be considered or until the next annual meeting provided that the requestor met the notice requirements. The restriction on the ability of stockholders to call a special meeting means that a proposal to replace the board could be delayed until the next annual meeting.

Delaware law provides that stockholders may execute an action by written consent in lieu of a stockholder meeting. However, Delaware law also allows us to eliminate stockholder actions by written consent. Elimination of written consents of stockholders may lengthen the amount of time required to take stockholder actions since actions by written consent are not subject to the minimum notice requirement of a stockholder’s meeting. However, we believe that the elimination of stockholders’ written consents may deter hostile takeover attempts. Without the availability of stockholder’s actions by written consent, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove

directors without holding a stockholders meeting. The holder would have to obtain the consent of a majority of the board of directors, the chairman of the board or the chief executive officer to call a stockholders’ meeting and satisfy the notice periods determined by the board of directors. Our certificate of incorporation provides for the elimination of actions by written consent of stockholders upon the closing of this offering.

We have applied to have our common stock listed on the Nasdaq National Market for quotation under the symbol “NNSY.”

The transfer agent and registrar for our common stock is EquiServe Trust Company, N.A. and its address is 150 Royall Street, Canton, Massachusetts 02021 and its telephone number is 816-843-4299.

Prior to this offering, there has been no public market for our stock. Future sales of substantial amounts of our common stock in the public market following this offering or the possibility of these sales occurring could adversely affect prevailing market prices for our common stock or could impair our ability to raise capital through an offering of equity securities.

After this offering, we will have outstanding shares of common stock, based upon 15,570,011 shares outstanding as of March 31, 2004, assuming no exercise of outstanding options or warrants after March 31, 2004. All of the shares sold in this offering will be freely tradable without restriction under the Securities Act except for any shares purchased by our affiliates as that term is defined in Rule 144 under the Securities Act. The remaining 15,570,011 shares of common stock held by existing stockholders are restricted shares as that term is defined in Rule 144 under the Securities Act. We issued and sold the restricted shares in private transactions in reliance upon exemptions from registration under the Securities Act. Restricted shares may be sold in the public market only if they are registered under the Securities Act or if they qualify for an exemption from registration, such as the exemptions provided under Rule 144 under the Securities Act, which is summarized below.

Our officers, directors, employees and stockholders, who collectively hold an aggregate of restricted shares, and the underwriters entered into lock-up agreements in connection with this offering. These lock-up agreements provide that, with certain limited exceptions, our officers, directors, certain of our employees, and certain other stockholders have agreed not to offer, sell, contract to sell, grant any option to purchase or otherwise dispose of any of our shares for a period of 180 days after the effective date of this offering. Merrill Lynch may, in its sole discretion and at any time upon prior notice, release all or any portion of the shares subject to these lock-up agreements. We have also entered into an agreement with Merrill Lynch that, with certain exceptions, we will not offer, sell or otherwise dispose of our common stock until 180 days after the date of this prospectus.

Taking into account the lock-up agreements, the number of shares that will be available for sale in the public market under the provisions of Rules 144 and 144(k) will be as follows:

Following the expiration of the initial 180 day lockup period, shares issued upon exercise of options granted by us prior to the completion of this offering will also be available for sale in the public market pursuant to Rule 701 under the Securities Act unless those shares are held by one of our affiliates, directors or officers.

Beginning 181 days after the date of this prospectus, approximately 76,794 additional shares subject to vested options will become available for sale in the public market in reliance on Rule 701 or pursuant to a registration statement on Form S-8.

Our stockholders who acquired the shares of our common stock they hold between July 2001 and April 2004 may resell the shares pursuant to Rule 144 under the Securities Act. Unless the shareholder who acquired shares from us upon exercise of stock options prior to the filing of our registration statement on Form S-8 is currently our officer, director or affiliate, that shareholder will be able to sell all of the shares they acquired as soon as their contractual lockup period expires.

We issued warrants to purchase an aggregate of 279,778 shares of our preferred stock, which will be available for resale in the public market 180 days after the offering, assuming those warrants are

In addition, after the 180th day after this prospectus, our officers, directors and other affiliates will be eligible to sell shares of our common stock they hold under Rule 144. In general, under Rule 144 as currently in effect, a person, or persons whose shares are required to be aggregated, who has beneficially owned restricted shares for at least one year, including the holding period of any prior owner except an affiliate, would be entitled to sell within any three month period a number of shares that does not exceed the greater of:


	•	one percent of the number of shares of common stock then outstanding, which will equal approximately shares immediately after the offering, or

	•	the average weekly trading volume of our common stock during the four calendar weeks preceding the date on which notice of the sale is filed.

Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been an affiliate of our company at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years including the holding period of any prior owner except an affiliate, is entitled to sell the shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.

Any of our employees or consultants who purchased his or her shares pursuant to a written compensatory plan or contract is entitled to rely on the resale provisions of Rule 701, which permits nonaffiliates to sell their Rule 701 shares without having to comply with the public information, holding period, volume limitation or notice provisions of Rule 144 and permits affiliates to sell their Rule 701 shares without having to comply with the Rule 144 holding period restrictions, in each case commencing 90 days after the date of this prospectus.

We intend to file a registration statement on Form S-8 under the Securities Act to register shares of our common stock that are subject to outstanding options or reserved for issuance under our 2001 stock plan and our 2004 stock plan promptly after the date of this prospectus, thus permitting the resale of these shares by nonaffiliates in the public market without restriction under the Securities Act.

Additionally, subject to limitations in our stockholders agreement, we granted demand registration rights, rights to participate in offerings that we initiate and Form S-3 registration rights to the former holders of our preferred stock and warrants to acquire our preferred stock. See “Description of Capital Stock — Holders of Registration Rights Can Require Us to Register Shares of Our Stock for Resale.”

The following is a general discussion of material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock by a beneficial owner thereof that is a non-U.S. holder.” A non-U.S. holder is a person or entity that, for U.S. federal income tax purposes, is a non-resident alien individual, a foreign corporation or a foreign estate or trust. The test for whether an individual is a resident of the U.S. for federal estate tax purposes differs from the test used for federal income tax purposes. Some individuals, therefore, may be non-U.S. holders for purposes of the federal income tax discussion below, but not for purposes of the federal estate tax discussion, and vice versa.

This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, judicial decisions and administrative regulations and interpretations in effect as of the date of this prospectus, all of which are subject to change, including changes with retroactive effect. This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant to non-U.S. holders in light of their particular circumstances, including, without limitation, non-U.S. holders who are pass-through entities or who hold their common stock through pass-through entities, and does not address any tax consequences arising under the laws of any state, local or non-U.S. jurisdiction. Prospective holders should consult their own tax advisors with respect to the federal income and estate tax consequences of holding and disposing of our common stock in light of their particular situations and any consequences to them arising under the laws of any state, local or non-U.S. jurisdiction.

Subject to the discussion below, distributions, if any, made to a non-U.S. holder of our common stock out of our current or accumulated earnings and profits generally will constitute dividends for U.S. tax purposes and will be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. To obtain a reduced rate of withholding under a treaty, a non-U.S. holder generally will be required to provide us with a properly-executed Internal Revenue Service, or IRS, Form W-8BEN certifying the non-U.S. holder’s entitlement to benefits under that treaty. IRS regulations provide special rules to determine whether, for purposes of determining the applicability of a tax treaty, dividends paid to a non-U.S. holder that is an entity should be treated as paid to the entity or to those holding an interest in that entity. To the extent such distributions exceed our current and accumulated earnings and profits for U.S. tax purposes, they will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock.

There will be no withholding tax on dividends paid to a non-U.S. holder that are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is provided to us. Instead, the effectively connected dividends will be subject to regular U.S. income tax, generally in the same manner as if the non-U.S. holder were a U.S. citizen or resident alien or a domestic corporation, as the case may be, unless a specific treaty exemption applies. A corporate non-U.S. holder receiving effectively connected dividends may also be subject to an additional “branch profits tax”, which is imposed, under certain circumstances, at a rate of 30%, or such lower rate as may be specified by an applicable treaty, of the corporate non-U.S. holder’s effectively connected earnings and profits, subject to certain adjustments. If you are eligible for a reduced rate of withholding tax pursuant to a tax treaty, you may obtain a refund of any excess amounts currently withheld if you file an appropriate claim for refund with the IRS.

A non-U.S. holder generally will not be subject to U.S. federal income tax with respect to gain realized on a sale or other disposition of our common stock unless:


	•	the gain is effectively connected with a trade or business of such holder in the United States and a specific treaty exemption does not apply to eliminate the tax;


	•	if a tax treaty would otherwise apply to eliminate the tax, the gain is attributable to a permanent establishment of the non-U.S. holder in the U.S.;

	•	in the case of Non-U.S. Holders who are nonresident alien individuals and hold our common stock as a capital asset, such individuals are present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met;

	•	the non-U.S. holder is subject to tax pursuant to the provisions of the Code regarding the taxation of U.S. expatriates; or

	•	we are or have been a United States real property holding corporation within the meaning of Internal Revenue Code Section 897(c)(2) at any time within the shorter of the five year period preceding such disposition or such holder’s holding period.

We believe that we are not, and do not anticipate becoming, a United States real property holding corporation. Even if we are treated as a United States real property holding corporation, gain realized by a non-U.S. holder on a disposition of our common stock will not be subject to U.S. federal income tax so long as: (a) the non-U.S. holder owned directly or indirectly, no more than five percent of our common stock at all times within the shorter of (x) the five year period preceding the disposition or (y) the holder’s holding period; and (b) our common stock is regularly traded on an established securities market. There can be no assurance that our common stock will continue to qualify as being regularly traded on an established securities market.

If you are a non-U.S. holder described in the first and second bullets above, you will be required to pay tax on the net gain derived from the sale at regular graduated U.S. federal income tax rates, and corporate non-U.S. holders described in the first and second bullets above may be subject to the branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. If you are an individual non-U.S. holder described in the third bullet above, you will be required to pay a flat 30% tax on the gain derived from the sale, which tax may be offset by U.S. source capital losses (even though you are not considered a resident of the United States).

Generally, we must report to the IRS the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.

Backup withholding will generally not apply to payments of dividends made by us or our paying agents to a non-U.S. holder if the holder has provided its federal taxpayer identification number, if any, or the required certification that it is not a U.S. person (which is generally provided by furnishing a properly-executed IRS Form W-8BEN), unless the payor otherwise has knowledge or reason to know that the payee is a U.S. person.

Under current U.S. federal income tax law, information reporting and backup withholding will apply to the proceeds of a disposition of our common stock effected by or through a U.S. office of a broker unless the disposing holder certifies as to its non-U.S. status or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding will not apply to a payment of disposition proceeds where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. However, U.S. information reporting requirements, but not backup withholding, will apply to a payment of disposition proceeds where the transaction is effected outside the United States by or through an office outside the United States of a broker that fails to maintain documentary evidence that


	•	a U.S. person;

	•	a foreign person which derived 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States;

	•	a “controlled foreign corporation” for U.S. federal income tax purposes; or

	•	a foreign partnership (a) at least 50% of the capital or profits interest in which is owned by U.S. persons, or (b) that is engaged in a U.S. trade or business.

Backup withholding will apply to a payment of disposition proceeds if the broker has actual knowledge that the holder is a U.S. person.

Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is furnished to the IRS.

The estates of nonresident alien individuals are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a Delaware corporation, our common stock will be the U.S. situs property and therefore will be included in the taxable estate of a nonresident alien decedent. This U.S. federal estate tax liability of the estate of a nonresident alien may be affected by a tax treaty between the United States and the decedent’s country of residence.

The preceding discussion of U.S. federal tax consequences is for general information only. It is not tax advice. Each prospective holder should consult its own tax advisor regarding the particular U.S. federal, state, local and non-U.S. tax consequences of purchasing, holding and disposing of our common stock.

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc., CIBC World Markets Corp. and Needham & Company, Inc. are acting as representatives of each of the underwriters named below. Subject to the terms and conditions set forth in a purchase agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the number of shares of common stock set forth opposite its name below.

Subject to the terms and conditions set forth in the purchase agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the purchase agreement if any of these shares are purchased. If an underwriter defaults, the purchase agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the purchase agreement may be terminated.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the purchase agreement, such as the receipt by the underwriters of officer’s certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

The representatives have advised us that they propose initially to offer the shares to the public at the initial public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $ per share. The underwriters may allow, and the dealers may reallow, a discount not in excess of $ per share to other dealers. After the initial public offering, the public offering price, concession and discount may be changed.

The following table shows the initial public offering price, underwriting discount and proceeds before expenses to us. The information assumes either no exercise or full exercise by the underwriters of their overallotment option.

The total expenses of the offering, not including the underwriting discount, are estimated at $1.9 million and are payable by us.

We have granted an option to the underwriters to purchase up to additional shares at the initial public offering price, less the underwriting discount. The underwriters may exercise this option for 30 days from the date of this prospectus solely to cover any overallotments. If the underwriters exercise this option, each will be obligated, subject to conditions contained in the purchase agreement, to purchase a number of additional shares proportionate to that underwriter’s initial amount reflected in the above table.

We, our executive officers and directors and approximately 98% of our existing security holders have agreed not to sell or transfer any common stock or securities convertible into, exchangeable for exercisable for, or repayable with common stock, for 180 days after the date of this prospectus without first obtaining the written consent of Merrill Lynch. Specifically, we and these other persons have agreed not to directly or indirectly:


	•	offer, pledge, sell or contract to sell any common stock;

	•	sell any option or contract to purchase any common stock;

	•	purchase any option or contract to sell any common stock;

	•	grant any option, right or warrant for the sale of any common stock;

	•	lend or otherwise dispose of or transfer any common stock; or

	•	enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of any common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise.

We have applied to have our common stock approved for quotation on the Nasdaq National Market under the symbol “NNSY.”

Before this offering, there has been no public market for our common stock. The initial public offering price was determined through negotiations among us and the representatives. In addition to prevailing market conditions, the factors considered in determining the initial public offering price were:


	•	the valuation multiples of publicly traded companies that the representatives believe to be comparable to us;

	•	our financial information;

	•	the history of, and the prospects for, our past and present operations, and the prospects for, and timing of, our future revenues;

	•	an assessment of our management, our past and present operations, and the prospects for, and timing of, our future revenues;

	•	the present state of our development; or

	•	the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.

An active trading market for our shares of common stock may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price. The underwriters do not expect to sell more than five percent of the shares being offered in this offering to accounts over which they exercise discretionary authority.

Until the distribution of the shares is completed, Securities and Exchange Commission rules may limit the underwriters and selling group members from bidding for and purchasing our common stock. However, the representatives may engage in transactions that stabilize the price of our common stock, such as bids or purchases to peg, fix or maintain that price.

The underwriters may purchase and sell our common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. “Covered” short sales are sales made in an amount not greater than the underwriters’ option to purchase additional shares from the issuer in the offering. The underwriters may close out any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the overallotment option. “Naked” short sales are any sales in excess of such option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common shares in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of shares of common stock made by the underwriters in the open market prior to the completion of the offering.

The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.

Similar to other purchase transactions, the underwriters’ purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the representatives make any representation that the representatives will engage in these transactions. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on the Nasdaq National Market, in the over-the-counter market or otherwise.

In connection with this offering, underwriters and selling group members may engage in passive market making transactions in the common stock on the Nasdaq National Market in accordance with Rule 103 of Regulation M under the Securities Exchange Act of 1934 during a period beginning with the commencement of offers or sales of common stock and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, that bid must then be lowered when specified purchase limits are exceeded.

At our request, the underwriters have reserved for sale, at the initial public offering price, up to five percent of the total number of shares of our common stock offered hereby to be sold to certain partners, employees, officers, directors and other persons associated with us. The number of shares of common stock available for sale to the general public in the offering will be reduced to the extent these persons purchase the reserved shares. Any reserved shares which are not orally confirmed for purchase

Merrill Lynch will be facilitating internet distribution for this offering to certain of its Internet subscription customers. Merrill Lynch intends to allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the web site maintained by Merrill Lynch. Other than the prospectus in electronic format, the information on the Merrill Lynch web site is not part of this prospectus.

The validity of the common stock offered hereby will be passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation and for the underwriters by Latham & Watkins LLP. Investment partnerships comprised of members and persons associated with Wilson Sonsini Goodrich & Rosati and members of Wilson Sonsini Goodrich & Rosati own shares of our common stock representing less than 1% of our outstanding shares of common stock as of March 31, 2004.

Ernst & Young LLP, an independent registered public accounting firm, has audited our financial statements at December 31, 2002 and 2003, and for the period from inception (July 12, 2001) to December 31, 2001 and for each of the two years in the period ended December 31, 2003, as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.

We have filed with the Securities and Exchange Commission, or SEC, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules filed as part of the registration statement. For further information with respect to us and our common stock, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The reports and other information we file with the SEC can be read and copied at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington D.C. 20549. Copies of these materials can be obtained at prescribed rates from the Public Reference Section of the SEC at the principal offices of the SEC, 450 Fifth Street, N.W., Washington D.C. 20549. You may obtain information regarding the operation of the public reference room by calling 1(800) SEC-0330. The SEC also maintains a web site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Once we undertake this offering, we will become subject to the information and periodic reporting requirements of the Securities Exchange Act and, in accordance therewith, file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available for inspection and copying at the SEC’s public reference rooms and the web site of the SEC referred to above. Our Internet address is http://www.nanosysinc.com.

We intend to provide our stockholders with annual reports containing, among other information, financial statements audited by an independent public accounting firm and we intend to make available to our stockholders quarterly reports containing unaudited financial data for the first three quarters of each fiscal year. We also intend to furnish other reports as we may determine or as required by law.

We have audited the accompanying balance sheets of Nanosys, Inc. as of December 31, 2002 and 2003, and the related statements of operations, redeemable convertible preferred stock and stockholders’ deficit and cash flows for the period from inception (July 12, 2001) to December 31, 2001 and for each of the two years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nanosys, Inc. at December 31, 2002 and 2003, and the results of its operations and its cash flows for the period from inception (July 12, 2001) to December 31, 2001 and for each of the two years in the period ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.

The foregoing report is in the form that will be signed upon the completion of the restatement of the capital accounts described in Note 1 to the financial statements.

STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT



		Redeemable Convertible
		Preferred Stock				Common Stock					Additional
											Paid-In
		Shares		Value		Shares			Par Value		Capital


		(In thousands, except share amounts)
Sale of common stock to founders for cash			—	$	—		63,334		$	—	$	—
Sale of restricted stock to nonemployees for cash			—		—		700,000			1		1
Exercise of stock options for restricted stock in exchange for cash			—		—		321,667			—		29
Issuance of stock for services rendered			—		—		33,333			—		—
Issuance of stock in connection with technology license agreement			—		—		53,333			—		1
Sale of Series A redeemable convertible preferred stock, net of issuance costs of $102			1,833,333		1,548		—			—		—
Net loss and comprehensive loss			—		—		—			—		—

Balance at December 31, 2001			1,833,333		1,548		1,171,667			1		31
Sale of Series B redeemable convertible preferred stock, net of issuance costs of $51			4,166,667		14,949		—			—		—
Issuance of Series B redeemable convertible preferred stock warrants in connection with a line of credit agreement			—		40		—			—		—
Issuance of Series B convertible preferred stock warrants in connection with a operating lease agreement			—		73		—			—		—
Sale of stock for cash in connection with technology license agreements			—		—		3,333			—		1
Exercise of stock options and issuance of restricted stock in exchange for cash and notes receivable			—		—		535,000			1		155
Vesting of common stock from early exercises of stock options			—		—		1,772			—		1
Compensation related to grant of stock options to non- employees			—		—		—			—		41
Net loss and comprehensive loss			—		—		—			—		—

Balance at December 31, 2002			6,000,000		16,610		1,711,772			2		229
Sale of Series C redeemable convertible preferred stock, net of issuance costs of $159			6,649,341		37,084		—			—		—
Issuance of Series C redeemable convertible preferred stock warrants in connection with a research and development agreement			—		1,370		—			—		—
Sale of stock in connection with technology license agreements for cash below fair market value			—		—		30,000			—		12
Exercise of stock options for restricted stock in exchange for cash			—		—		5,000			—		2
Vesting of common stock from early exercises of stock options			—		—		72,558			—		27
Repurchase of unvested common stock from terminated employee			—		—		(45,555	)		—		(4	)
Deferred compensation related to options and restricted stock granted to employees			—		—		—			—		1,107
Amortization of employee deferred stock compensation			—		—		—			—		—
Compensation related to options and restricted stock issued to non-employees			—		—		—			—		964
Comprehensive loss:
	Net loss		—		—		—			—		—
	Unrealized gain on available-for-sale investments		—		—		—			—		—
Comprehensive loss

Balance at December 31, 2003 (carried forward)			12,649,341		55,064		1,773,775			2		2,337

[Continued from above table, first column(s) repeated]


								Accumulated
					Deferred			Other					Total
		Notes Receivable			Stock			Comprehensive		Accumulated			Stockholders’
		from Stockholders			Compensation			Income		Deficit			Deficit


		(In thousands, except share amounts)
Sale of common stock to founders for cash		$	—		$	—		$	—	$	—		$	—
Sale of restricted stock to nonemployees for cash			—			—			—		—			2
Exercise of stock options for restricted stock in exchange for cash			—			—			—		—			29
Issuance of stock for services rendered			—			—			—		—			—
Issuance of stock in connection with technology license agreement			—			—			—		—			1
Sale of Series A redeemable convertible preferred stock, net of issuance costs of $102			—			—			—		—			—
Net loss and comprehensive loss			—			—			—		(792	)		(792	)

Balance at December 31, 2001			—			—			—		(792	)		(760	)
Sale of Series B redeemable convertible preferred stock, net of issuance costs of $51			—			—			—		—			—
Issuance of Series B redeemable convertible preferred stock warrants in connection with a line of credit agreement			—			—			—		—			—
Issuance of Series B convertible preferred stock warrants in connection with a operating lease agreement			—			—			—		—			—
Sale of stock for cash in connection with technology license agreements			—			—			—		—			1
Exercise of stock options and issuance of restricted stock in exchange for cash and notes receivable			(145	)		—			—		—			11
Vesting of common stock from early exercises of stock options			—			—			—		—			1
Compensation related to grant of stock options to non- employees			—			—			—		—			41
Net loss and comprehensive loss			—			—			—		(7,088	)		(7,088	)

Balance at December 31, 2002			(145	)		—			—		(7,880	)		(7,794	)
Sale of Series C redeemable convertible preferred stock, net of issuance costs of $159			—			—			—		—			—
Issuance of Series C redeemable convertible preferred stock warrants in connection with a research and development agreement			—			—			—		—			—
Sale of stock in connection with technology license agreements for cash below fair market value			—			—			—		—			12
Exercise of stock options for restricted stock in exchange for cash			—			—			—		—			2
Vesting of common stock from early exercises of stock options			—			—			—		—			27
Repurchase of unvested common stock from terminated employee			—			—			—		—			(4	)
Deferred compensation related to options and restricted stock granted to employees			—			(1,107	)		—		—			—
Amortization of employee deferred stock compensation			—			74			—		—			74
Compensation related to options and restricted stock issued to non-employees			—			—			—		—			964
Comprehensive loss:
	Net loss		—			—			—		(9,169	)		(9,169	)
	Unrealized gain on available-for-sale investments		—			—			6		—			6

Comprehensive loss														(9,163	)

Balance at December 31, 2003 (carried forward)			(145	)		(1,033	)		6		(17,049	)		(15,882	)



		Redeemable Convertible
		Preferred Stock				Common Stock				Additional
										Paid-In
		Shares		Value		Shares		Par Value		Capital


		(In thousands, except share amounts)
Balance at December 31, 2003 (brought forward)			12,649,341	$	55,064		1,773,775	$	2	$	2,337
Issuance of Series C redeemable convertible preferred stock warrants in connection with a research and development agreement (unaudited)			—		1,723		—		—		—
Exercise of stock options for restricted stock in exchange for cash (unaudited)			—		—		44,136		—		17
Vesting of common stock from early exercises of stock options (unaudited)			—		—		33,682		—		16
Deferred compensation related to options and restricted stock granted to employees (unaudited)			—		—		—		—		11,413
Reversal of deferred stock compensation for cancellation of restricted stock granted to employees (unaudited)			—		—		—		—		(88	)
Amortization of employee deferred stock compensation (unaudited)			—		—		—		—		—
Compensation related to options and restricted stock issued to non-employees (unaudited)			—		—		—		—		503
Payment of notes receivable (unaudited)			—		—		—		—		—
Comprehensive income (loss):
	Net loss (unaudited)		—		—		—		—		—
	Unrealized gain on available-for-sale investments (unaudited)		—		—		—		—		—
Comprehensive loss (unaudited)

Balance at March 31, 2004 (unaudited)			12,649,341	$	56,787		1,851,593	$	2	$	14,198

[Continued from above table, first column(s) repeated]


								Accumulated
					Deferred			Other					Total
		Notes Receivable			Stock			Comprehensive		Accumulated			Stockholders’
		from Stockholders			Compensation			Income		Deficit			Deficit


		(In thousands, except share amounts)
Balance at December 31, 2003 (brought forward)		$	(145	)	$	(1,033	)	$	6	$	(17,049	)	$	(15,882	)
Issuance of Series C redeemable convertible preferred stock warrants in connection with a research and development agreement (unaudited)			—			—			—		—			—
Exercise of stock options for restricted stock in exchange for cash (unaudited)			—			—			—		—			17
Vesting of common stock from early exercises of stock options (unaudited)			—			—			—		—			16
Deferred compensation related to options and restricted stock granted to employees (unaudited)			—			(11,413	)		—		—			—
Reversal of deferred stock compensation for cancellation of restricted stock granted to employees (unaudited)						88			—		—			—
Amortization of employee deferred stock compensation (unaudited)			—			477			—		—			477
Compensation related to options and restricted stock issued to non-employees (unaudited)			—			—			—		—			503
Payment of notes receivable (unaudited)			145			—			—		—			145
Comprehensive income (loss):
	Net loss (unaudited)		—			—			—		(3,886	)		(3,886	)
	Unrealized gain on available-for-sale investments (unaudited)		—			—			15		—			15

Comprehensive loss (unaudited)														(3,871	)

Balance at March 31, 2004 (unaudited)		$	—		$	(11,881	)	$	21	$	(20,935	)	$	(18,595	)

Nanosys, Inc. (the “Company”) was incorporated in Delaware on July 12, 2001 and is currently engaged in the early stages of investigative research to develop nanotechnology-enabled systems. The Company is applying this investigative research to develop products based on its core technology that incorporate proprietary, high performance inorganic nanostructures with integrated functionality for multiple industries. The Company is utilizing its technology to develop products in multiple industries such as energy, defense, electronics, life sciences and information technology. The Company has established collaborations with partners and government agencies that the Company believes could benefit significantly from the incorporation of nanotechnology-enabled products into their end user products. The Company’s product development activities and collaborations typically contemplate several phases, including an investigation phase, a development phase and a commercialization phase. The Company is currently in the investigation phase of all of its potential products, including those pursuant to collaborations with partners. As part of its business strategy, the Company intends to enter into additional collaborations to enter multiple markets and expand its core technology across additional multiple industries and applications. The Company expects that it will continue to enter into investigative stage research under new collaborations, while other potential products and related collaboration arrangements proceed to development and commercialization phases. The Company has also entered into arrangements with United States government agencies. The Company believes its strategy for pursuing government contracts and grants to focus on opportunities will enable the Company to further its core technology development. The Company intends to continue to pursue government contracts and grants that enable it to develop dual use products and technologies that may be sold in both government and commercial markets. In prior years, the Company was considered to be in the development stage for accounting purposes.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying. Actual results could differ from those estimates.

The financial statements and related notes thereto as of March 31, 2004 and for the three months ended March 31, 2003 and 2004 are unaudited and, in the opinion of management, include all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of results for such interim periods. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results expected for the entire year.

In June 2004, the Board of Directors approved, subject to stockholder approval, a 1 for 3 reverse split of its redeemable convertible preferred stock and common stock. An amended and restated certificate of incorporation will be filed prior to the closing of this offering effecting the 1 for 3 reverse stock split and setting the authorized common stock and authorized preferred stock to 120,000,000 and 10,000,000 shares, respectively. All share and per share amounts for all periods presented in the accompanying financial statements have been retroactively adjusted to give effect to the stock split.

Financial instruments that potentially subject the Company to credit risk consist of investments and accounts receivable to the extent of the amounts recorded on the balance sheets. The Company’s investments are placed with high credit-quality financial institutions and issuers. The Company generally does not require collateral to support the financial instruments subject to credit risk.

The Company performs credit evaluations of its customers and generally does not require collateral. The Company has not recorded material losses due to customer nonpayment.

During 2002 approximately 71% and 29% of the Company’s revenue was derived from two companies. For 2003, the Company derived 53%, 19% and 11% of its revenue from three companies. For the three months ended March 31, 2003, the Company derived 67% and 23% of its revenue from two companies. For the three months ended March 31, 2004, the Company derived 27%, 26%, 19% and 13% of its revenue from four companies. The Company’s largest customer in 2002 and 2003 was located in Japan. All other customers were located in the United States.

The Company considers all highly liquid investments with an original maturity of 90 days or less at the date of purchase to be cash equivalents. Investments in debt securities and marketable equity securities are classified as “available-for-sale”. The Company views its available-for-sale portfolio as available for use in current operations. Accordingly, the Company has classified all investments as current assets, even though the stated maturity may be more than one year beyond the current balance sheet date. Available-for-sale investments are carried at fair value based on quoted market prices, with unrealized gains and losses reported in accumulated other comprehensive income, as a separate component of stockholders’ equity (deficit).

The cost basis of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. This amortization and accretion is included in interest income (expense) and other income, net. Realized gains and losses are also included in interest income (expense) and other income, net. The cost of all securities sold is based on the specific identification method.

Financial instruments consist principally of cash, available-for-sale investments and notes payable. The carrying value of notes payable approximates its fair value, as determined from information obtained from market sources and management estimates.

The Company receives payments under research and development contracts and government grants. These payments are non-refundable but are reported as deferred revenue until they are recognizable as revenue. The Company follows the following principles in recognizing revenue:


	•	Fixed-fee research and development contracts generally provide the Company with an up-front fee and a contractually defined period of service. Fees for services the Company performs under fixed-fee research and development contracts are recognized ratably over the period the Company performs these services.

	•	Variable-fee research and development contracts generally provide the Company with fees based upon an agreed-upon rate for time incurred by full time equivalent (“FTE”) research staff. Fees for services the Company performs under variable-fee research and development contracts are recognized based upon the FTE time incurred.

Under all arrangements, revenue is not recognized unless there is persuasive evidence of an arrangement, there are no uncertainties regarding customer acceptance, the sales price is fixed or determinable and the collection of the related receivable is probable. Upon the completion of each of the Company’s current research and development contracts and government grants, no further obligations exist under these arrangements. The Company retains the rights to commercialize the technology it developed under research and development contracts and government grants without any royalty obligations or material license grants.

In September 2003, in connection with a revenue arrangement with a customer, the Company issued warrants for the purchase of Series C redeemable convertible preferred stock. In accordance with Emerging Issues Task Force (“EITF”) Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products), management estimated the portion of the consideration received from the customer that related to the issuance of the warrants and the portion that related to revenue for the performance of research and development services. The warrants become exercisable by the customer as the customer makes milestone payments to the Company. Until the warrants are fully exercisable, they are subject to remeasurement at fair value. In 2003, the Company received $1.0 million in cash proceeds which were attributed entirely to the value of the warrants. Because the value of the warrant exceeded the estimated total cash proceeds under the arrangement, the Company did not recognize any revenue under the arrangement and therefore recorded $370,000 of stock-based compensation in research and development expense in 2003. As of March 31, 2004, the warrants remained unvested and were remeasured at fair value. Because the estimated fair value of the Company’s stock increased during the three months ended March 31, 2004, additional expense was recorded related to the warrants. Accordingly, the Company recorded $723,000 of stock-based compensation in research and development expense during the three months ended March 31, 2004. Additional expense may be recorded in future periods if the estimated fair value of the warrants increases further. The warrants will expire if not exercised prior to the closing of the Company’s initial public offering.

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization is provided using the straight-line method over the estimated useful lives of the related assets. Property and equipment are generally depreciated over a useful life of three years, except leasehold improvements, which are amortized over the term of the lease.

Research and development costs are expensed as incurred. Research and development costs consist of salaries, employee benefits, license fees, and payments to research organizations and professional service providers.

The Company accounts for employee stock options using the intrinsic-value method in accordance with Accounting Principles Board (“APB”) Opinion No. 25, and related interpretations, and has adopted

the disclosure-only provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-Based Compensation. The pro forma net loss disclosure has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The resulting effect on net loss pursuant to SFAS No. 123 is not likely to be representative of the effects on net loss pursuant to SFAS No. 123 in future years, since future years are likely to include additional grants and the impact of future years’ vesting.

The Company estimates the fair value of stock options using the Black-Scholes model. The following table illustrates the weighted average assumptions for the Black-Scholes model used in determining the fair value of options granted to employees:

The following table illustrates the effect on net loss had the Company applied the fair value provisions of SFAS No. 123 to employee stock compensation (in thousands, except per share amounts):

Comprehensive income (loss) is comprised of net loss and other comprehensive income. Other comprehensive income includes unrealized gains and losses on the Company’s available-for-sale securities.

The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 144, Accounting for Impairment or Disposal of Long Lived Assets. This statement requires that long-lived assets

and certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As of December 31, 2003, the Company has not identified any impairment of its long-lived assets.

The Company utilizes the liability method of accounting for income taxes as required by SFAS No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax reporting bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be recovered. Currently, there is no provision for income taxes as the Company has incurred operating losses to date.

On March 31, 2004, the Financial Accounting Standards Board (the “FASB”) issued its Exposure Draft, Share-Based Payment, which is a proposed amendment to FASB Statement No. 123, Accounting for Stock-Based Compensation. Generally, the approach in the Exposure Draft is similar to the approach described in Statement 123. However, the Exposure Draft would require all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The FASB expects to issue a final standard late in 2004 that would be effective for our 2005 fiscal year. The pro forma impact of the adoption of Statement 123 on the Company’s historical financial statements is included in the footnotes to the financial statements. The Company expects to continue to grant stock-based compensation to employees and the impact of the adoption of the new standard, when and if issued, may have a material impact on its future results of operations.

As of December 31, 2002, the Company’s cash and cash equivalents of $10,828,000 included deposits in money market investment accounts. The table below outlines the Company’s available-for-sale investments as of December 31, 2003 (in thousands):

There were no material realized gains or losses on sales of available-for-sale investments in any of the periods presented. The amortized cost and estimated fair value of available-for-sale investments in debt securities at December 31, 2003, by contractual maturity, were as follows (in thousands):

In 2002, the Company entered into an equipment line of credit, which provided for up to a maximum of $2,500,000 to finance the purchases of equipment. Borrowings under the equipment line of credit convert to notes payable that are repayable ratably over 36 months, starting in the month following the borrowing. Borrowings outstanding bear interest at a rate of 5% per annum, and are secured by the financed property and equipment of the Company. At December 31, 2003, there was $1,543,000 outstanding under the equipment line of credit, which was secured by related property and equipment. Subject to limited exceptions, the Company is restricted in its ability to pay dividends on or making distributions to its capital stock by the covenants contained in the equipment line of credit. There were no further borrowings available under the equipment line of credit as of December 31, 2003. Subject to limited exceptions, the Company may not pay dividends on or make distributions with respect to its capital stock by the covenants contained in the equipment line of credit.

In May 2002, in connection with the equipment line of credit, the Company issued warrants to purchase 13,750 shares of Series B redeemable convertible preferred stock to the lender. The warrants are immediately exercisable at an exercise price of $3.60 per share at the option of the holder and expire in 2012. The Company ascribed a fair value of $40,000 to these warrants, as determined by the Black-Scholes option pricing model, using the following assumptions: a ten-year term, volatility of 0.75, no dividend yield and a 4% risk free rate. The Company recorded the fair value of the warrants, and amortized the value into interest expense on a straight-line basis over the commitment period of the equipment line of credit. During 2002 and 2003, the Company recorded $32,000 and $8,000, respectively, of interest expense related to the amortization of these warrants.

Future minimum annual principal payments due under the equipment line of credit are as follows at December 31, 2003 (in thousands):

The Company has several patent license agreements with various institutions for the right of the Company to use certain technology incorporated in the Company’s potential products. The Company can terminate these agreements at anytime, or the agreements expire upon the expiration or abandonment of

the related licensed patents. The Company is also obligated to pay specified royalty fees on sales of licensed products, as defined. In the event that the Company does not obtain waivers of any minimum royalty obligation, the following table reflects the Company’s minimum royalties to the institutions (in thousands):

In connection with the execution of a patent license agreement, the Company is obligated to pay a license milestone payment in cash. The dollar amount of the milestone payment will be 23,333 (subject to adjustment for splits, dividends and the like of the Company’s capital stock) multiplied by the initial public offering price, which will be payable at various times over twenty-six months after the closing of an initial public offering. The Company is expected to expense this license milestone when and if the milestone is achieved.

The Company leases a facility under an operating lease that expires in December 2005. In connection with entering into the operating lease, the Company issued warrants to purchase 25,000 shares of Series B redeemable convertible preferred stock to the landlord in March 2002. The warrants are immediately exercisable at an exercise price of $3.60 per share at the option of the holder and expire in 2012. The Company ascribed a fair value of $73,000 to these warrants, as determined by the Black-Scholes option pricing model using the following assumptions: a ten-year term, volatility of 0.75, no dividend yield and a 4% risk free interest rate. The Company recorded the fair value of the warrants and is amortizing the fair value of the warrants into rent expense on a straight-line basis over the term of the operating lease. During the years ended December 31, 2002 and 2003, the Company recorded $16,000 and $19,000 related to the amortization of these warrants.

The Company entered into a sublease agreement with a related party for a portion of its current rented space. The sublease expires in April 2004.

Rent expense for the period from inception to December 31, 2001, and for 2002 and 2003, was $0, $711,000 and $1,194,000, respectively. Total sublease income was $0, $86,000 and $282,000 for the period from inception to December 31, 2001, and for 2002 and 2003, respectively. At December 31, 2003, the minimum future rental payments and sublease income, under operating lease arrangements, were as follows (in thousands):


	The Company has consulting arrangements with members of its scientific advisory board guaranteeing minimum cash payments of $178,000 per year in 2004, 2005 and 2006.

As disclosed in Note 5, the Company has entered into a sublease arrangement that expires in April 2004 with a related party. The related party is a company for which the chief executive officer of Nanosys serves on the Board of Directors. The amount of sublease income recorded under this sublease arrangement was $86,000 and $282,000 in 2002 and 2003, respectively. The amount of sublease income was $60,000 and $69,000 for the three months ended March 31, 2003 and 2004, respectively. As security for the sublease, the Company required a security deposit from the subtenant of approximately $23,000 in cash. The security deposit is classified in accrued expenses as a current liability on the balance sheet as of December 31, 2003 and March 31, 2004.

At December 31, 2003, the Company held two full recourse stockholder notes receivable in the amount of $145,000 from two officers in consideration for the exercise of stock options for 401,667 shares of common stock. The shares issued are subject to a repurchase agreement under which the shares can be repurchased at the lower of the shares original issuance price or the fair market value of the shares at the date of repurchase. The notes accrued interest at a rate of 6% per annum and were reflected as a reduction of stockholders’ equity. The notes were repaid in full in cash in March 2004.

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, less outstanding shares subject to repurchase. Outstanding shares subject to repurchase are not included in the computation of basic net loss per share until the Company’s time-based repurchase rights have lapsed. The Company has excluded all common stock subject to repurchase by the Company, preferred stock and stock options from the calculation of historical diluted net loss per common share because all such securities are antidilutive for all periods presented. The

following table sets forth the common stock equivalents outstanding as of December 31, 2003 and March 31, 2004 that may be included in diluted earnings per share in future periods:

The unaudited pro forma basic and diluted net loss per share calculations assume the conversion of all outstanding shares of redeemable convertible preferred stock into shares of common stock using the as-if-converted method as of the date of issuance.

The redeemable convertible preferred stock is redeemable upon the liquidation or winding up of the Company, a greater than 50% change of control or sale of substantially all of the assets of the Company. As the redemption event is outside the control of the Company, all shares of redeemable convertible preferred stock have been presented outside of permanent equity. Further, the Company has not adjusted the carrying values of the Series A, B, or C redeemable convertible preferred stock to the redemption value of such shares, since it is uncertain whether or when a redemption event will occur. If it becomes certain that the redeemable convertible preferred stock will become redeemable, the amount reclassified from equity will be equal to the fair value of the instrument on the date that the contingent event becomes certain.

The Board of Directors is authorized to determine the rights, preferences and terms of each series of redeemable convertible preferred stock. Collectively, Series A, B and C are referred to as “redeemable convertible preferred stock” and have similar rights and preferences as outlined below (in thousands, except share amounts):

Each series of redeemable convertible preferred stock is convertible at the stockholders’ option at any time on a one-for-one basis, subject to adjustment for antidilution. Conversion is automatic upon the closing of a firm commitment underwritten public offering of common stock registered under the Securities Act of 1933, with aggregate offering proceeds exceeding $30,000,000 and an offering price of at least $16.80 per share (appropriately adjusted for any stock splits, stock dividends, recapitalization, or similar events) or upon agreement of the majority of holders of the outstanding shares.

Holders of the Series A, B and C redeemable convertible preferred stock, in preference to the holders of common stock, are entitled to receive, when and as declared by the Board of Directors, cash dividends at the rate of $0.072, $0.288, and $0.447, respectively, on each outstanding share of redeemable convertible preferred stock. Such dividends are noncumulative. Upon conversion to common stock, the holder is entitled to receive any declared and unpaid dividends on the shares of redeemable convertible preferred stock being converted. No dividends have been declared through December 31, 2003.

In the event of a liquidation or winding up of the Company, holders of the Series A, B and C redeemable convertible preferred stock have a liquidation preference of $0.90, $3.60, and $5.601 per share, respectively, together with any declared but unpaid dividends, over holders of common shares. If the assets of the Company available for distribution are insufficient to pay each holder of the redeemable convertible preferred stock the full amount of the preference payment, then the shareholders are entitled to share ratably in the distribution. After payment of the full liquidation preference of the redeemable convertible preferred stock, the remaining assets of the Company shall be distributed among the holders of the preferred and common stock pro rata based on the number of shares of stock held. The redeemable convertible preferred stockholders’ distribution is limited to 225% of their respective initial investment.

Each share of redeemable convertible preferred stock has voting rights equal to the number of common shares into which the preferred stock is convertible at the record date.

As of December 31, 2003 the Company had issued a total of 38,750 warrants to purchase Series B redeemable convertible preferred stock at $3.60 per share, in connection with an equipment line of credit and an operating lease.

The Company has also issued 241,028 warrants for the purchase of Series C redeemable convertible preferred stock at an exercise price of $0.003 per share in connection with a research and development agreement signed in September 2003. The warrants expire in 2008, or upon the closing of an initial public offering. The warrants become exercisable by the collaborative partner as the collaborative partner makes milestone payments to the Company. In accordance with EITF 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products), the Company has allocated the portion of the consideration received from the collaborative partner that relates to the issuance of the warrants and the portion that relates to the revenue for the performance of research and development services. Until the warrants are fully exercisable, they are subject to remeasurement at fair value. Because of the increase in the estimated fair value of the Company’s Series C redeemable convertible preferred stock subsequent to September 2003, the amount of consideration allocated to the equity component of this arrangement exceeds the cash consideration received. As a result of this condition, no revenue was recognized for research and development services performed under this collaborative arrangement and $370,000 of additional research and development expense was recorded in 2003. As of March 31, 2004, the warrants remained unvested and were remeasured at fair value. Because the estimated fair value of the Company’s stock increased during the three months ended March 31, 2004, additional expense was recorded related to the warrants. Accordingly, the Company recorded $723,000 of research and development expense related to the warrants during the three months ended March 31, 2004. Additional expense may be recorded in future periods until the warrants are fully exercisable if the fair value of the Series C redeemable convertible preferred stock increases further.

Under the 2001 Stock Plan (“the Plan”), as amended, the Company may grant restricted stock, incentive and nonqualified stock options to employees, officers, directors, advisors, scientific advisory board members and consultants of the Company. All option grants are issued at an exercise price equal to 100% of the estimated fair value of common stock, as established by the Board of Directors on the date of grant; provided, however, that an individual who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company shall be granted options with a purchase price of at least 110% of the estimated fair value of the common stock on the date of grant.

Certain options granted under the Plan may be exercisable immediately and all options vest over periods determined by the Board of Directors, generally up to 5 years, and expire no more than 10 years after the date of grant. Stock which is purchased prior to the option vesting is subject to the Company’s right of repurchase, which lapses over the vesting period. Stock option activity for the period from inception (July 12, 2001) through March 31, 2004 is as follows:

Options presented as exercised in the table above for the year ended December 31, 2003 and the three months ended March 31, 2004 include the vesting of restricted common stock associated with the early exercise of stock options in previous periods.

The following table summarizes information concerning options outstanding as of December 31, 2003:

The weighted-average fair value of options granted for the period from inception to December 31, 2001 and during 2002 and 2003 was $0.06, $0.18, and $5.61 per share, respectively. The weighted-average fair value of options granted for the three months ended March 31, 2004 was $13.77 per share.

No employee stock compensation expense was reflected in the Company’s reported net loss in any period prior to December 31, 2002, as all options granted had an exercise price equal to the fair value of the underlying common stock on the date of the grant. During 2003, stock options were granted with exercise prices that were at the fair value of the common stock at the date of grant as determined by the Board of Directors. Subsequent to the commencement of the initial public offering process, the Company reevaluated the fair value of its common stock and determined that certain of the stock options granted during 2003 were granted at exercise prices that were below the reassessed fair value of the common stock on the date of grant. Accordingly, deferred stock compensation of $1,107,000 was recorded during 2003 in accordance with APB Opinion No. 25. The deferred compensation will be amortized straight-line over the vesting period of the related awards, generally five years. For 2003 the Company recorded employee stock compensation expense of $74,000. During the three months ended March 31, 2004, deferred stock compensation of $11.4 million was recorded and total employee stock compensation expense of $477,000 was recorded.

Stock-based compensation arrangements for nonemployees are accounted for in accordance with SFAS No. 123, as amended by SFAS No. 148, and EITF Issue No. 96-18, Accounting for Equity Instruments that Are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, using a fair value approach. Compensation expense associated with these arrangements is subject to periodic remeasurement over the vesting terms as earned.

During 2002 and 2003, the Company granted options and restricted stock purchase awards of 21,000 shares and 44,000 shares, respectively, to acquire shares of common stock to non-employees. Stock compensation expense of $41,000 and $964,000 was recorded for the years ended December 31, 2002, and 2003, respectively. For the three months ended March 31, 2004, the Company issued 80,000 options and restricted stock purchase awards to acquire shares of common stock to nonemployees. Stock compensation expense of $503,000 was recorded for the three months ended March 31, 2004. The deferred compensation expense represented the difference between the fair market value and the exercise price of the common stock options for shares vesting during the period.

The following table illustrates the weighted average assumptions for the Black-Scholes model used in determining the fair value of options granted to nonemployees:

The Company has issued restricted common stock to employees, consultants, officers and directors of the Company. Shares issued pursuant to a restricted stock purchase agreement are subject to repurchase by the Company solely at its option. In the event of termination of services, the Company has the right to repurchase unvested shares at the original purchase price. The restrictions generally lapse over a five year vesting period.

In accordance with EITF Issue No. 00-23, Issues Related to the Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44, the shares issued pursuant to the early exercise of stock options or restricted stock purchase awards are not deemed to be issued until those shares vest. Therefore, payments received by the Company for the exercise price of stock options or restricted stock purchase awards that were early-exercised after March 21, 2002 are recorded as a liability for early exercise of stock options and restricted stock purchase awards on the balance sheet, and will be transferred into common stock and additional paid-in capital as the shares vest. A summary of activity related to restricted common stock, excluding restricted shares issued after March 21, 2002, from inception to March 31, 2004 is set forth below:

At December 31, 2003, the Company held two full recourse notes receivable in the amount of $145,000 from two officers in consideration for the exercise of stock options for 401,667 shares of common stock. The shares issued are subject to a repurchase agreement under which the shares can be repurchased

at the lower of the shares original issuance price or the fair market value of the shares at the date of repurchase. The notes accrue interest at a rate of 6% per annum and are reflected as a reduction of stockholders’ equity. The notes were repaid in full in cash in March 2004.

The Company is required to reserve and keep available out of its authorized but unissued shares of common stock a number of shares sufficient to effect the conversion of all outstanding shares of redeemable convertible preferred stock, plus shares granted and available for grant under the Company’s stock option plans. The Company had reserved shares of common stock for future issuance as of December 31, 2003 and March 31, 2004 as follows:

The Company sponsors an employee benefit plan under Section 401(k) of the Internal Revenue Code. The plan allows employees to make pretax contributions of up to the maximum allowable amount set by the Internal Revenue Service. In addition, the Company may make discretionary contributions to the plan. To date, the Company has not made any contributions to the plan.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):

Realization of deferred tax assets is dependent upon future taxable income, if any, the amount and timing of which are uncertain. Accordingly, deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $0.3 million, $2.8 million and $3.4 million during the period from inception to December 31, 2001 and 2002 and 2003, respectively.

As of December 31, 2003, the Company had net operating loss carryforwards for federal income tax purposes of approximately $13.9 million which will expire beginning in 2021 and California net operating loss carryforwards of approximately $10.1 million which will expire beginning in 2013. The Company also has federal and California research and development tax credit carryforwards of approximately $295,000 and $279,000 respectively. The federal research tax credits will begin to expire in 2021, and the California research tax credits have no expiration date.

Utilization of the Company’s net operating loss and research tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Such an annual limitation could result in the expiration of net operating losses and credits before utilization.

The Company has certain agreements with customers and collaborators that contain indemnification provisions. In such provisions, the Company typically agrees to indemnify the customer or collaborator against certain types of third-party claims. The Company would accrue for known indemnification issues if a loss were probable and could be reasonable estimated. The Company would also accrue for estimated incurred but unidentified issues based on historical activity. There was no accrual for or expense related to indemnification issues for any period presented.

In April 2004, the Company’s Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission in connection with the Company’s proposed initial public offering of its common stock. If the offering is completed upon the terms presently contemplated, all outstanding shares of redeemable convertible preferred stock outstanding as of March 31, 2004 will automatically convert into 12,649,341 shares of common stock immediately prior to the closing of the proposed offering. Unaudited pro forma stockholders’ equity at March 31, 2004 reflects the automatic conversion of outstanding shares of redeemable convertible preferred stock that would occur upon completion of the offering as if that conversion had happened as of the balance sheet date.

In March 2004, the Board of Directors increased the number of shares of common stock available for future grant under the 2001 Stock Plan by 1,033,333 shares. In April 2004, the Company granted employees options to acquire 88,000 shares of common stock at a weighted average exercise price of $3.00 per share. In May and June 2004, the Company granted employees options to acquire 64,000 shares of common stock at a weighted average exercise price of $4.68 per share. As a result, the Company estimates that it will recognize $1.8 million in employee deferred stock compensation that will be amortized to expense over the five-year vesting period.

In April 2004, the Company issued 44,635 shares of Series C redeemable convertible preferred stock for $5.601 per share to a member of its board of directors resulting in aggregate net cash proceeds of $250,000. The Company will record stock-based compensation of approximately $540,000, based on the difference between the issuance price and the deemed fair value on the transaction date.

In April 2004, the Board of Directors adopted the 2004 Stock Plan. The 2004 Stock Plan provides for the grant of incentive and nonstatutory stock options to employees, directors and consultants. As of April 15, 2004, a total of 1,000,000 shares of common stock were reserved for issuance pursuant to the 2004 Stock Plan. In addition, shares reserved under the 2004 Stock Plan will also include (a) shares reserved but unissued under the 2001 Stock Plan as of the effective date of the proposed initial public offering, (b) shares returned to the 2001 Stock Plan as the result of termination of options or the repurchase of shares issued under such plan, and (c) annual increases in the number of shares available for issuance on the first day of each fiscal year beginning on January 1, 2005, equal to the lesser of:


	•	5% of the outstanding shares of common stock on the first day of the Company’s fiscal year.

	•	2,000,000 shares, or

	•	an amount the Company’s board may determine.

Subsequent to March 31, 2004, the remaining cash proceeds of $2 million were received and the warrants for the purchase of Series C redeemable convertible preferred stock have become fully exercisable. As a result, the remeasurement of the warrants at fair value has ceased. The Company expects to record approximately $200,000 of research and development expense during the three months ended June 30, 2004.

Through and including , 2004 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

The following table sets forth the costs and expenses, other than the underwriting discounts, payable by the registrant in connection with the sale of the securities being registered. All amounts are estimates except the SEC registration fee, the NASD filing fee and the Nasdaq/ National Market listing fee.

As permitted by Section 145 of the Delaware General Corporation Law, the registrant’s amended and restated certificate of incorporation includes a provision that eliminates the personal liability of its directors for monetary damages for breach or alleged breach of their duty of care. In addition, as permitted by Section 145 of the Delaware General Corporation Law, the bylaws of the registrant provide that: (1) the registrant is required to indemnify its directors and executive officers and persons serving in these capacities in other business enterprises at the registrant’s request, to the fullest extent permitted by Delaware law, including in those circumstances in which indemnification would otherwise be discretionary; (2) the registrant may, in its discretion, indemnify employees and agents in those circumstances where indemnification is not required by law; (3) the registrant is required to advance expenses, as incurred, to its directors and executive officers in connection with defending a proceeding, except that it is not required to advance expenses to a person against whom the registrant brings a claim for breach of the duty of loyalty, failure to act in good faith, intentional misconduct, knowing violation of law or deriving an improper personal benefit; (4) the rights conferred in the bylaws are not exclusive, and the registrant is authorized to enter into indemnification agreements with its directors, executive officers and employees; and (5) the registrant may not retroactively amend the bylaw provisions in a way that it adverse to our directors, executive officers and employees in these matters.

The registrant’s policy is to enter into indemnification agreements with each of its directors and executive officers that provide the maximum indemnity allowed to directors and executive officers by Section 145 of the Delaware General Corporation Law and the bylaws, as well as certain additional procedural protections. In addition, the indemnification agreements provide that the registrant’s directors and executive officers will be indemnified to the fullest possible extent not prohibited by law against all expenses, including attorney’s fees, and settlement amounts paid or incurred by them in any action or proceeding, including any derivative action by or in the right of the registrant, on account of their services as directors or executive officers of the registrant or as directors or officers of any other company or enterprise when they are serving in these capacities at the request of the registrant. The registrant will not be obligated pursuant to the indemnification agreements to indemnify or advance expenses to an indemnified party with respect to proceedings or claims initiated by the indemnified party and not by way of defense, except with respect to proceedings specifically authorized by the registrant’s board of directors or brought to enforce a right to indemnification under the indemnification agreement, the registrant’s bylaws or any statute or law. Under the

agreements, the registrant is not obligated to indemnify the indemnified party (1) for any expenses incurred by the indemnified party with respect to any proceeding instituted by the indemnified party to enforce or interpret the agreement, if a court of competent jurisdiction determines that each of the material assertions made by the indemnified party in any proceeding was not made in good faith or was frivolous; (2) for any amounts paid in settlement of a proceeding unless the registrant consents to such settlement; (3) with respect to any proceeding brought by the registrant against the indemnified party for willful misconduct, unless a court determines that each of such claims was not made in good faith or was frivolous; (4) on account of any suit in which judgment is rendered against the indemnified party for an accounting of profits made from the purchase or sale by the indemnified party of securities of the registrant pursuant to the provisions of §16(b) of the Securities Exchange Act of 1934, and related laws; (5) on account of the indemnified party’s conduct which is finally adjudged to have been knowingly fraudulent or deliberately dishonest, or to constitute willful misconduct or a knowing violation of the law; (6) an account of any conduct from which the indemnified party derived an improper personal benefit; (7) on account of conduct the indemnified party believed to be contrary to the best interests of the registrant or its stockholders; (8) on account of conduct that constituted a breach of the indemnified party’s duty of loyalty to the registrant or its stockholders; or (9) if a final decision by a court having jurisdiction in the matter shall determine that such indemnification is not lawful.

The indemnification provision in the bylaws and the indemnification agreements entered into between the registrant and its directors and executive officers may be sufficiently broad to permit indemnification of the registrant’s officers and directors for liabilities arising under the Securities Act of 1933.

Reference is made to the following documents filed as exhibits to this registration statement regarding relevant indemnification provisions described above and elsewhere herein:

(1) In October 2001, the Registrant sold an aggregate of 1,833,329 shares of its series A preferred stock to investors at a price of $0.90 per share for an aggregate purchase price of $1,649,999.

(2) In January and February 2002, the Registrant sold an aggregate of 4,166,661 shares of its series B preferred stock to investors at a price of $3.60 per share for an aggregate purchase price of $15,000,004.

(3) In April and May 2003 and April 2004, the Registrant sold an aggregate of 6,693,962 shares of its series C preferred stock to investors at a price of $5.601 per share for an aggregate purchase price of $37,492,958.

The sales of the above securities were deemed to be exempt from registration in reliance on Section 4(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving any public offering. All recipients were either accredited or sophisticated investors, as those terms are defined in the Securities Act and the regulations promulgated thereunder. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about the Registrant or had access, through employment or other relationships, to such information.

Since inception in July 2001, the Registrant issued an aggregate of 2,039,724 shares of the Registrant’s common stock to employees, consultants and directors pursuant to the exercise of stock options and stock purchase rights under the Registrant’s 2001 Amended Stock Plan, for aggregate consideration of $833,337.

The sales of the above securities were deemed to be exempt from registration in reliance on Rule 701 promulgated under Section 3(b) under the Securities Act as transactions pursuant to a compensatory benefit plan or a written contract relating to compensation.

(1) In August and September 2001, the Registrant sold an aggregate of 763,325 shares of common stock at a price of $0.003 per share to certain founders, employees and members of the Registrant’s Scientific Advisory Board for an aggregate purchase price of $2,290.

(2) In October 2001, the Registrant sold an aggregate of 53,333 shares of common stock at a price of $0.003 per share to The President and Fellows of Harvard College in connection with the license of certain patent rights for an aggregate purchase price of $160.

(3) In October 2001, the Registrant issued an aggregate of 33,333 shares of common stock to an individual in connection with a settlement agreement and mutual release with an aggregate value of $100.

(4) In April 2002, the Registrant sold an aggregate of 3,333 shares of common stock at a price of $0.36 per share to Shellwater & Co. (as nominee of the Regents of the University of California) in connection with the license of certain patent rights for an aggregate purchase price of $1,200.

(5) In January 2003, the Registrant sold an aggregate of 6,666 shares of common stock at a price of $0.36 per share to The President and Fellows of Harvard College in connection with the license of certain patent rights for an aggregate purchase price of $2,400.

(6) In April 2003, the Registrant sold an aggregate of 3,333 shares of common stock at a price of $0.45 per share to an individual and WS Investment Company, LLC for an aggregate purchase price of $1,500.

(7) In April 2003, the Registrant sold an aggregate of 16,666 shares of common stock at a price of $0.36 per share to the Massachusetts Institute of Technology in connection with the license of certain patent rights for an aggregate purchase price of $6,000.

(8) In June 2003, the Registrant sold an aggregate of 3,333 shares of common stock at a price of $0.57 per share to The President and Fellows of Harvard College in connection with the license of certain patent rights for an aggregate purchase price of $1,900.

(9) In December 2003, the Registrant sold an aggregate of 3,333 shares of common stock at a price of $0.57 per share to the Trustees of Columbia University in the City of New York in connection with the license of certain patent rights for an aggregate purchase price of $1,900.

The sales of the above securities were deemed to be exempt from registration in reliance on Section 4(2) of the Securities Act as transactions by an issuer not involving any public offering. All recipients were either accredited or sophisticated investors, as those terms are defined in the Securities Act and the regulations promulgated thereunder. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. All recipients either received adequate information about the Registrant or had access, through employment or other relationships, to such information.

a. Exhibits. The following exhibits are included herein or incorporated herein by reference:


(1)	Pursuant to a request for confidential treatment, portions of the Exhibit have been redacted from the publicly filed document and have been furnished separately to the SEC as required by Rule 406 under the Securities Act.

Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes to provides to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names, as required by the underwriter to permit prompt delivery to each purchaser.


	(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

	(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment number 5 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto, State of California on July 6, 2004.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:


(1)	Pursuant to a request for confidential treatment, portions of the Exhibit have been redacted from the publicly filed document and have been furnished separately to the SEC as required by Rule 406 under the Securities Act.

EX-3.1.2 2 f97636a5exv3w1w2.txt EXHIBIT 3.1.2 EXHIBIT 3.1.2 FORM OF FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF NANOSYS, INC. Nanosys, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: A. The name of the corporation is Nanosys, Inc. The corporation was originally incorporated under the same name and the date of filing the original Certificate of Incorporation of this corporation with the Secretary of State of the State of Delaware is July 12, 2001. B. Pursuant to sections 242 and 245 of the General Corporation Law of the State of Delaware, this Amended and Restated Certificate of Incorporation amends and restates the provisions of the Third Certificate of Incorporation of this corporation filed on April 10, 2003 and supersedes the Certificates of Amendment filed on June 4, 2003 and March 18, 2004. C. The Certificate of Incorporation, as amended to date, of this corporation is hereby amended and restated to read as follows: ONE. The name of the corporation is Nanosys, Inc. (the "Corporation" or the "Company"). TWO. The address of the registered office of the Corporation in the State of Delaware is the Corporation Trust Company, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801 and the name of the registered agent at that address is The Corporation Trust Company. THREE. The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware. FOUR. The filing of this Amended and Restated Certificate of Incorporation shall result in the following, effective on the date this Fourth Amended and Restated Certificate of Incorporation is filed with the Delaware Secretary of State (the "Effective Date"): a. By the filing of this Fourth Amended and Restated Certificate of Incorporation and no further action on the part of the Corporation or holders of the Common Stock or Preferred Stock of the Corporation, each: (i) three (3) shares of Common Stock of this Corporation outstanding as of immediately prior to the Effective Date shall be combined and converted into one (1) share of Common Stock; (ii) three (3) shares of Series A Preferred Stock (the "Series A Preferred") outstanding as of immediately prior to the Effective Date shall be combined and converted into one (1) share of Series A Preferred; (iii) three (3) shares of Series B Preferred Stock (the "Series B Preferred") outstanding as of immediately prior to the Effective Date shall be combined and converted into one (1) share of Series B Preferred; and (iv) three (3) shares of Series C Preferred Stock (the "Series C Preferred") outstanding as of immediately prior to the Effective Date shall be combined and converted into one (1) share of Series C Preferred (the "Reverse Split"). Such Reverse Split shall be effected on a certificate-by-certificate basis and the Corporation shall pay cash in lieu of any fractional shares resulting from such combination. b. This Corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares that the Corporation is authorized to issue is 66,916,667, 53,500,000 of which are designated Common Stock and 13,416,667 shares of which are designated Preferred Stock. Of the Preferred Stock, 1,833,333 shares are designated Series A Preferred, 4,333,334 shares are designated Series B Preferred and 7,250,000 shares are designated Series C Preferred. The Preferred Stock shall have a par value of one tenth of one cent ($0.001) per share and the Common Stock shall have a par value of one tenth of one cent ($0.001) per share. c. All actions contemplated by these Paragraphs (a) through (c) of this preamble to Article FOUR shall be deemed to occur simultaneously. All numbers of shares, and all amounts stated on a per share basis contained in this Fourth Amended and Restated Certificate of Incorporation, including, without limitation, the numbers set forth in this preamble to Article FOUR, are stated after giving effect to the Reverse Split and no further adjustment shall be made as a consequence thereof. The rights, preferences, privileges and restrictions granted to or imposed upon the Common Stock and the Preferred Stock are as follows: A. Dividends. The holders of the Preferred Stock shall be entitled to receive dividends out of funds legally available therefor, at the annual rates of $0.072, $0.288 and $0.447 per share of Series A Preferred, Series B Preferred or Series C Preferred, respectively, held by them, as adjusted for stock splits, stock dividends, recapitalizations, and similar events, prior and in preference to the declaration or payment of any dividend or other distribution (payable other than in Common Stock) with respect to the Common Stock, when, as and if declared by the Board of Directors. Such dividends shall not be cumulative and no right to such dividends shall accrue to holders of Preferred Stock unless declared by the Board of Directors. No dividends or other distributions shall be made with respect to the Common Stock, other than dividends payable solely in Common Stock, unless (i) dividends shall have been paid or declared and set apart for payment, on account of all shares of Preferred Stock then issued and outstanding, at the aforesaid rates for such calendar year, and (ii) the Corporation shall declare and pay at the same time to each holder of Preferred Stock a dividend equal to the dividend that would have been payable to -2- such holder if the shares of Preferred Stock held by such holder had been converted into Common Stock on the record date for the determination of holders of Common Stock entitled to receive such dividend. B. Liquidation Preference. 1. Preferred Stock Preference. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary (each a "Liquidation Event"), the holders of Series A Preferred, Series B Preferred and Series C Preferred shall be entitled to receive on a pari passu basis and prior and in preference to any distribution of any of the assets or surplus funds of the Corporation to the holders of Common Stock by reason of their ownership thereof, the amount of $0.90 (the "Original Series A Issue Price"), $3.60 (the "Original Series B Issue Price") or $5.601 (the "Original Series C Issue Price") per share (each as adjusted for Preferred Stock splits, Preferred Stock dividends, recapitalizations, and similar events relating to the Preferred Stock) for each share of Series A Preferred, Series B Preferred or Series C Preferred then held and, in addition, an amount equal to all declared but unpaid dividends on the Series A Preferred, Series B Preferred or Series C Preferred, as applicable. If the assets and funds thus distributed among the holders of the Series A Preferred, Series B Preferred and Series C Preferred are insufficient to permit the payment to such holders of their full preferential amounts, then the entire assets and funds of the Corporation legally available for distribution shall be distributed among the holders of Series A Preferred, Series B Preferred and Series C Preferred in proportion to the full preferential amount each such holder is otherwise entitled to receive under this Section B(1). No payment shall be made with respect to the Common Stock unless and until full payment has been made to the holders of the Series A Preferred, Series B Preferred and Series C Preferred of the amounts they are entitled to receive under this Section B(1). 2. Remaining Assets. After payment to the holders of the Preferred Stock of the amounts set forth in Section B(1) above, the remaining assets and funds of the Corporation legally available for distribution, if any, to stockholders shall be distributed among the holders of Preferred Stock and Common Stock pro rata and based on the number of shares of Common Stock held by each (assuming conversion of all such Preferred Stock), provided that the maximum distribution that a holder of Preferred Stock may receive pursuant to Sections B(1) and (2) is 225% of the sum of (i) Original Series A Issue Price multiplied by the number of shares of Series A Preferred then held by such holder, (ii) Original Series B Issue Price multiplied by the number of shares of Series B Preferred then held by such holder, and (iii) Original Series C Issue Price multiplied by the number of shares of Series C Preferred then held by such holder. All remaining assets and funds after the maximum distribution to the holders of Series A Preferred, Series B Preferred and Series C Preferred shall be distributed to the holders of Common Stock. 3. Reorganization or Merger. A reorganization, merger or consolidation of the Corporation with or into any other corporation or entity or a sale, conveyance or encumbrance of all or substantially all of the assets of the Corporation, in which transaction or series of related transactions the Corporation's stockholders immediately prior to such transaction own immediately after such transaction less than 50% of the equity securities of the surviving corporation or its parent, shall be deemed to be a Liquidation Event within the meaning of this Section B, unless the holders of two-thirds in voting power of the then outstanding shares of -3- Preferred Stock (voting on an as-converted basis) elect to the contrary; such election to be made by giving written notice thereof to the Corporation at least three days before the effective date of such event. If such notice is given with respect to the Preferred Stock, the provisions of Section C.6(d) shall apply. Unless such election is made with respect to the Preferred Stock, any amounts received by the holders of such Preferred Stock as a result of such merger or consolidation shall be deemed to be applied toward, and all consideration received by the Corporation in such asset sale together with all other available assets of the Corporation shall be distributed toward, the preferred liquidation distributions of the holders of Preferred Stock. 4. Non-Cash Consideration. If any assets of the Corporation distributed to stockholders in connection with any Liquidation Event are other than cash, then the value of such assets shall be their fair market value as determined in good faith by the Board of Directors, except that any securities to be distributed to stockholders in a Liquidation Event shall be valued as follows: a. The method of valuation of securities not subject to investment letter or other similar restrictions on free marketability shall be as follows: (i) if the securities are then traded on a national securities exchange or the Nasdaq National Market (or a similar quotation system), then the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the 30-day period ending three (3) days prior to the distribution; and (ii) if actively traded over-the-counter, then the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three (3) days prior to the distribution; and (iii) if there is no active public market, then the value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the Corporation. b. The method of valuation of securities subject to investment letter or other restrictions on free marketability shall be to make an appropriate discount from the market value determined as above in subsections (a)(i), (ii) or (iii) of this Section B.4 to reflect the approximate fair market value thereof, as determined in good faith by the Board of Directors. 5. Notice and Opportunity to Exercise Conversion Rights. Notwithstanding anything to the contrary that may be inferred from the provisions of this Section B, each holder of Preferred Stock shall be entitled to receive notice from the Corporation of any proposed liquidation, dissolution or winding-up of the Corporation at least ten (10) days prior to the date on which any such liquidation, dissolution or winding-up of the Corporation is scheduled to occur and, at any time prior to any such liquidation, dissolution or winding-up of the Corporation, to convert any or all of such holder's shares of Series A Preferred, Series B Preferred or Series C Preferred into shares of Common Stock pursuant to Section C hereof. C. Conversion. The holders of Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): -4- 1. Right to Convert. Each share of Preferred Stock shall be convertible, at the option of and without the payment of any additional consideration by the holder thereof, at any time into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Issuance Price (as defined below) by the Conversion Price (as defined below) in effect at the time of conversion. The Issuance Prices for the Series A Preferred, Series B Preferred and Series C Preferred shall be $0.90, $3.60 and $5.601, respectively. The Conversion Prices for the Series A Preferred, Series B Preferred and Series C Preferred, shall initially be $0.90, $3.60 and $5.601, respectively, subject to adjustment as provided below. The number of shares of Common Stock into which a share of Series A Preferred, Series B Preferred or Series C Preferred is convertible is hereinafter referred to as the "Conversion Rate" of such series of Preferred Stock, as appropriate. 2. Automatic Conversion. Each share of Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Conversion Rate (i) immediately prior to the closing of a firm commitment underwritten public offering pursuant to an effective registration statement on Form S-1 under the Securities Act of 1933 (the "Act") covering the offer and sale of Common Stock for the account of the Corporation to the public with gross proceeds to the Corporation of more than $30,000,000; or (ii) upon the consent of holders of at least Sixty-Six and Two-Thirds percent (66 2/3%) of the Preferred Stock then outstanding voting on an as-converted basis. 3. Mechanics of Conversion. Before any holder of Preferred Stock shall be entitled to convert the same into full shares of Common Stock and to receive certificates therefor, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Corporation or of any transfer agent for the Series A Preferred, Series B Preferred or Series C Preferred, and shall give written notice to the Corporation at such office that such holder elects to convert the same; provided, however, that in the event of an automatic conversion pursuant to Section C.2 above, the outstanding shares of Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the Corporation or its transfer agent, and provided further that the Corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates evidencing such shares of Preferred Stock are either delivered to the Corporation or its transfer agent as provided above, or the holder notifies the Corporation or the Corporation's transfer agent that such certificates have been lost, stolen or destroyed and executes an affidavit to such effect, in a form reasonably satisfactory to the Corporation. The Corporation shall, as soon as practicable after such delivery, or such affidavit in the case of a lost certificate, issue and deliver at such office to such holder of Series A Preferred, Series B Preferred or Series C Preferred, a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred, Series B Preferred or Series C Preferred to be converted, or in the case of automatic conversion in connection with an underwritten public offering, immediately prior to the closing of the offering, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. -5- 4. Adjustments to Conversion Price of Preferred Stock for Dilutive Issues: a. Special Definitions. For purposes of this Section C.4, the following definitions shall apply: (i) "Options" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire either Common Stock or Convertible Securities. (ii) "Convertible Securities" shall mean any evidences of indebtedness, shares of capital stock (other than the Common Stock) or other securities convertible into or exchangeable for Common Stock. (iii) "Additional Shares of Common Stock" shall mean all shares of Common Stock issued (or, pursuant to Section C.4(b), deemed to be issued) by the Corporation, other than: (A) shares of the Corporation's Common Stock issued upon conversion of the Preferred Stock; (B) shares of the Corporation's capital stock issued pursuant to bone fide, arms-length acquisitions, mergers, technology licenses or purchases, corporate partnering agreements or other similar transactions approved by the Board of Directors; (C) shares of the Corporation's capital stock (or related options) issued to employees, officers, directors, consultants, or other persons performing services for the Corporation (including, but not by way of limitation, distributors and sales representatives) (collectively, "Service Providers"), or (at the request of a Service Provider) issued to third parties on behalf of any such Service Provider, pursuant to any stock offering plan or arrangement approved by the Board of Directors; (D) shares of the Corporation's capital stock issued to financial institutions in connection with the extension of credit to the Corporation, or to lessors in connection with the lease of equipment or real property, which issuances are approved by the Board of Directors; (E) shares of the Corporation's Common Stock issued in connection with any stock split, stock dividend, or combination thereof by the Corporation; (F) all shares of Common Stock issued or issuable upon conversion of Convertible Securities issued and outstanding on the date this document is filed with the Delaware Secretary of State; or (G) shares issued in a public offering in which all of the Preferred Stock will be converted. b. Deemed Issue of Additional Shares of Common Stock. -6- (i) Options and Convertible Securities. In the event the Corporation at any time or from time to time after the original issuance date for the Series C Preferred shall issue any Options or Convertible Securities or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares (as set forth in the instrument relating thereto assuming the satisfaction of any conditions to exercisability, including, without limitation, the passage of time and without regard to any provisions contained therein for a subsequent adjustment of such number) of Common Stock issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section C.4(d) hereof) of such Additional Shares of Common Stock would be less than the Conversion Price for the Series A Preferred, Series B Preferred or Series C Preferred, as applicable, in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and, provided further, that in any such case in which Additional Shares of Common Stock are deemed to be issued: (A) no further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities; (B) if such Options or Convertible Securities by their terms provide, with the passage of time or otherwise, for any increase or decrease in the consideration payable to the Corporation, or in the number of shares of Common Stock issuable, upon the exercise, conversion or exchange thereof, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon any such increase or decrease becoming effective, be recomputed to reflect such increase or decrease insofar as it affects such Options or the rights of conversion or exchange under such Convertible Securities; (C) upon the expiration of any such Options or any rights of conversion or exchange under such Convertible Securities which shall not have been exercised, the Conversion Price computed upon the original issue thereof (or upon the occurrence of a record date with respect thereto), and any subsequent adjustments based thereon, shall, upon such expiration, be recomputed as if; (i) in the case of Convertible Securities or Options for Common Stock, the only Additional Shares of Common Stock issued were the shares of Common Stock, if any, actually issued upon the exercise of such Options or the conversion or exchange of such Convertible Securities and the consideration received therefor was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration actually received by the Corporation upon such exercise, or for the issue of all such Convertible Securities which were actually converted or exchanged, plus the additional consideration, if any, actually received by the Corporation upon such conversion or exchange, and -7- (ii) in the case of Options for Convertible Securities, only the Convertible Securities, if any, actually issued upon the exercise thereof were issued at the time of issue of such Options, and the consideration received by the Corporation for the Additional Shares of Common Stock deemed to have been then issued was the consideration actually received by the Corporation for the issue of all such Options, whether or not exercised, plus the consideration deemed to have been received by the Corporation upon the issue of the Convertible Securities with respect to which such Options were actually exercised; (D) no readjustment pursuant to clause (B) or (C) above shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price on the original adjustment date, or (ii) the Conversion Price that would have resulted from any issuance of Additional Shares of Common Stock between the original adjustment date and such readjustment date; and (E) in the case of any Options which expire by their terms not more than 90 days after the date of issue thereof, no adjustment of the Conversion Price shall be made until the expiration or exercise of all such Options. c. Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event this Corporation shall issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section C.4(b)(i)) after the original issuance date for the Series C Preferred without consideration or for consideration per share less than the Conversion Price for the Series A Preferred, Series B Preferred or Series C Preferred, as applicable, in effect on the date of and immediately prior to such issue (a "Dilutive Issuance"), then and in such event, the Conversion Price for the Series A Preferred, Series B Preferred or Series C Preferred, as applicable, shall be reduced, concurrently with such issue, to a price determined by multiplying such Series A Preferred Conversion Price, Series B Preferred Conversion Price or Series C Preferred Conversion Price by a fraction, as applicable, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue (including shares issuable upon conversion of the outstanding Preferred Stock and shares issuable upon exercise, conversion or exchange of Options, convertible securities or warrants for Preferred Stock) plus the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of Additional Shares of Common Stock so issued would purchase at such Series A Preferred Conversion Price, Series B Preferred Conversion Price or Series C Preferred Conversion Price, as applicable; and the denominator of which shall be the number of shares of Common Stock outstanding immediately prior to such issue (including shares issuable upon conversion of the outstanding Preferred Stock and shares issuable upon exercise, conversion or exchange of Options, convertible securities or warrants for Preferred Stock) plus the number of such Additional Shares of Common Stock so issued. d. Determination of Consideration. For purposes of this Section C.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows: (i) Cash and Property: Such consideration shall: -8- (A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation. (B) insofar as it consists of property other than cash, be computed at the fair value thereof at the time of such issue, as determined in good faith by the Board of Directors irrespective of any accounting treatment; and (C) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (A) and (B) above, as determined in good faith by the Board of Directors. (ii) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section C.4(b), relating to Options and Convertible Securities, shall be determined by dividing: (A) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities by (B) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities. 5. Fractional Shares. In lieu of any fractional shares to which the holder of Preferred Stock would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of one share of Series A Preferred, Series B Preferred or Series C Preferred, as applicable, as determined by the Board of Directors of the Corporation. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock of each holder at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. 6. Adjustment of Conversion Price; Cash Dividends; Merger Consideration. a. The Conversion Price of each share of Series A Preferred, Series B Preferred and Series C Preferred shall be subject to adjustment from time to time as follows: (i) if the number of shares of Common Stock outstanding at any time after the date hereof is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, on the date such payment is made or such change is effective, the Conversion Prices of the Series A Preferred, Series B Preferred and Series C Preferred shall -9- be appropriately decreased so that the number of shares of Common Stock issuable on conversion of any shares of Series A Preferred, Series B Preferred and Series C Preferred shall be increased in proportion to such increase of outstanding shares; or (ii) if the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, on the effective date of such combination, the Conversion Prices of the Series A Preferred, Series B Preferred and Series C Preferred shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of any shares of Series A Preferred, Series B Preferred and Series C Preferred shall be decreased in proportion to such decrease in outstanding shares. b. In case the Corporation shall declare a cash dividend upon its Common Stock payable otherwise than out of retained earnings or shall distribute to holders of its Common Stock shares of its capital stock (other than Common Stock), stock or other securities of other persons, evidences of indebtedness issued by the Corporation or other persons, assets (excluding cash dividends) or options or rights (excluding options to purchase and rights to subscribe for Common Stock or other securities of the Corporation convertible into or exchangeable for Common Stock), then, in each such case, the holders of the Series A Preferred, Series B Preferred and Series C Preferred shall, concurrent with the distribution to holders of Common Stock, receive a like distribution based upon the number of shares of Common Stock into which such Series A Preferred, Series B Preferred and Series C Preferred is then convertible. c. In the event that the Common Stock issuable upon the conversion of the Series A Preferred, Series B Preferred and Series C Preferred shall be changed into the same or a different number of shares of any class or series of stock or other securities or property, whether by capital reorganization, reclassification, recapitalization or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a merger, consolidation, or sale of assets provided for below), then and in each such event the holder of any shares of Preferred Stock shall have the right thereafter to convert such shares into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification, recapitalization or other change by the holder of a number of shares of Common Stock equal to the number of shares of Common Stock into which such shares of Preferred Stock might have been converted immediately prior to such reorganization, reclassification, recapitalization or change, all subject to further adjustment as provided herein. d. In the event that the Corporation shall merge or consolidate with or into another entity or sell all or substantially all of its assets, and such consolidation, merger or sale is not treated as a liquidation under Section B.3, each share of Series A Preferred, Series B Preferred and Series C Preferred shall thereafter be convertible into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of such Series A Preferred, Series B Preferred or Series C Preferred would have been entitled to receive upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions set forth in this Section C with respect to the rights and interest thereafter of the holders of shares of such Preferred Stock, to the end that the provisions set forth in this Section C (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other securities -10- or property thereafter deliverable upon the conversion of such Preferred Stock. The provisions of this Section C.6(d) shall similarly apply to successive reorganizations, reclassification, consolidations, mergers, sales or other dispositions. e. All calculations under Section C.4 and this Section C.6 shall be made to the nearest one hundredth (1/100) of one cent or to the nearest one hundredth (1/100) of a share, as the case may be. 7. Minimal Adjustments. No adjustment in the Conversion Price for the Series A Preferred, Series B Preferred or Series C Preferred need be made if such adjustment would result in a change in the Conversion Price of less than $0.001. Any adjustment of less than $0.001 which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.001 or more in the Conversion Price. 8. No Impairment. The Corporation shall not, by amendment of its Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section C and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of Preferred Stock against impairment. This provision shall not restrict the Corporation's right to amend its Certificate of Incorporation with the requisite stockholder consent. 9. Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of any Conversion Rate pursuant to Section C, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series A Preferred, Series B Preferred or Series C Preferred, as applicable, a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon written request at any time from any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) all such adjustments and readjustments, (ii) the applicable Conversion Rates at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such holder's shares of Preferred Stock. 10. Notices of Record Date. In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property or to receive any other right, the Corporation shall mail to each holder of Preferred Stock at least twenty (20) days prior to such record date, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution or right, and the amount and character of such dividend, distribution or right. -11- 11. Notices. Any notice required by the provisions of this Section C.4 to be given to any holder of Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder's address appearing on the Corporation's books. 12. Common Stock Reserved. The Corporation shall reserve and keep available, free from pre-emptive rights, out of its authorized but unissued Common Stock, solely for the purpose of effecting the conversion of the Preferred Stock, such number of shares of Common Stock as shall from time to time be sufficient to effect conversion of the Preferred Stock. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all the then outstanding shares of Preferred Stock, the Corporation shall promptly take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose. 13. Certain Taxes. The Corporation shall pay any issue or transfer taxes payable in connection with the conversion of Preferred Stock, provided, however, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer to a name other than that of the holder of the Preferred Stock. 14. Closing of Books. The Corporation shall at no time close its transfer books against the transfer of any Preferred Stock or of any shares of Common Stock issued or issuable upon the conversion of any shares of Preferred Stock in any manner which interferes with the otherwise permissible timely conversion or transfer of such Preferred Stock or Common Stock. 15. Validity of Shares. The Corporation agrees that it will from time to time take all such actions as may be required to assure that all shares of Common Stock which may be issued upon conversion of any Preferred Stock will, upon issuance, be legally and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof. D. Voting Rights. 1. Generally. The holder of each share of Preferred Stock shall be entitled to the number of votes equal to the number of shares of Common Stock into which each share of such Preferred Stock could be converted on the record date for the vote or written consent of stockholders and, except as otherwise required by law, shall have voting rights and powers equal to the voting rights and powers of the Common Stock. The holder of each share of Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the bylaws of the Corporation and shall vote with holders of the Common Stock upon all matters submitted to a vote of stockholders, except with respect to those matters required pursuant to Section E or by law to be submitted to a class or series vote. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares of Common Stock into which shares of Preferred Stock held by each holder could be converted) shall be disregarded. The holder of each share of Common Stock shall have the right to one vote, and shall be entitled to notice of any stockholders' meeting in accordance with the bylaws -12- of the Corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. 2. Directors. a. Number of Directors. Except as reduced by Section D.2(c), there shall be eight (8) directors of the Corporation, provided that such number of directors may be increased with the affirmative vote or written consent of the holders of a majority of Common Stock and the holders of a majority of the Preferred Stock (voting on an as-converted basis), each voting as a separate class. b. Election by Class. The directors shall be elected as follows: (i) One director (the "Series B Director") shall be elected by the holders of a majority of the outstanding shares of Series B Preferred voting together as a single class; (ii) Two directors (the "Series A Directors") shall be elected by the holders of a majority of the outstanding shares of Series A Preferred voting together as a single class; (iii) Two directors (the "Common Directors") shall be elected by the holders of a majority of the outstanding shares of Common Stock voting together as a single class; (iv) Any remaining directors (the "Joint Directors") shall be elected by the holders of a majority of the outstanding Common Stock and Preferred Stock voting together as a single class, on an as-converted-to-Common Stock basis. c. Removal of Directors, Reduction of Number of Directors . (i) If at any time there are fewer than 100,000 shares (appropriately adjusted for stock splits, stock dividends, recapitalizations and similar events) of Series B Preferred outstanding (i) the right of the holders of the shares of Series B Preferred to elect the Series B Preferred Director will terminate, (ii) a voting shift shall be effected and the term of office of the Series B Director will automatically terminate, and (iii) the authorized number of directors shall be reduced by one. In addition, the Series B Director may be removed by vote or written consent of a majority of the shares of Series B Preferred then outstanding, voting as a single class. (ii) If at any time there are fewer than 33,333 shares (appropriately adjusted for stock splits, stock dividends, recapitalizations and similar events) of Series A Preferred outstanding (i) the right of the holders of the shares of Series A Preferred to elect Series A Preferred Directors will terminate, (ii) a voting shift shall be effected and the term of office of the Series A Directors will automatically terminate, and (iii) the authorized number of directors shall be reduced by two. In addition, the Series A Directors may be removed by vote or written consent of a majority of the shares of Series A Preferred then outstanding, voting as a single class. -13- (iii) The Common Directors may be removed by vote or written consent of a majority of the shares of Common Stock then outstanding, voting as a single class. (iv) The Joint Directors may be removed by vote or written consent of a majority of the shares of Common Stock and Preferred Stock then outstanding, voting together as a single class on an as-converted-to-Common Stock basis. d. Vacancies. (i) In the event of a vacancy on the Board of Directors created by the resignation, death, or removal of a Series B Director, such vacancy shall be filled: (i) by the Corporation's Board of Directors upon receipt by the Board of Directors of, and in accordance with, written consents specifying the new director to fill such vacancy and signed by the holders of a majority of the shares of the Series B Preferred then outstanding, or (ii) by vote or written consent of the holders of a majority of the Series B Preferred then outstanding. (ii) In the event of a vacancy on the Board of Directors created by the resignation, death, or removal of a Series A Director, such vacancy shall be filled: (i) by the Corporation's Board of Directors upon receipt by the Board of Directors of, and in accordance with, written consents specifying the new director to fill such vacancy and signed by the holders of a majority of the shares of the Series A Preferred then outstanding, or (ii) by vote or written consent of the holders of a majority of the Series A Preferred then outstanding. (iii) In the event of a vacancy on the Board of Directors created by the resignation, death, or removal of a Common Director, such vacancy shall be filled: (i) by the Corporation's Board of Directors upon receipt by the Board of Directors of, and in accordance with, a written consent specifying the new director to fill such vacancy and signed by the holders of a majority of the shares of Common Stock then outstanding, or (ii) by vote or written consent of the holders of a majority of the Common Stock then outstanding. (iv) In the event of a vacancy on the Board of Directors created by the resignation, death, or removal of a Joint Director, such vacancy shall be filled: (i) by the Corporation's Board of Directors upon receipt by the Board of Directors of, and in accordance with, a written consent specifying the new director to fill such vacancy and signed by the holders of a majority of the shares of Common Stock and Preferred Stock then outstanding, voting as a single class on an as-converted-to-Common Stock basis, or (ii) by vote or written consent of the holders of a majority of the Common Stock and Preferred Stock then outstanding, voting together as a single class on an as-converted-to-Common Stock basis. e. Committees of Board of Directors. No audit committee or compensation committee of the Board of Directors may include any director who is an officer, employee or consultant of the Corporation. f. Right to Call Meetings. In addition to any rights which may be available under the Corporation's Bylaws or otherwise under law, the holders of not less than twenty percent (20%) in voting power of the outstanding Preferred Stock shall be entitled to call meetings of the stockholders of the Corporation. Within five (5) business days after written application by the holders of not less than twenty percent (20%) in voting power -14- of the outstanding Preferred Stock, the President or Secretary, or such other officer of the Corporation as may be authorized in the Bylaws of the Corporation to give notice of meetings of stockholders of the Corporation, shall notify each stockholder of the Corporation entitled to such notice of the date, time, place and purpose of such meeting. No meeting of stockholders called pursuant to this Section D(2) shall take place more than ten (10) days after the date notice of such meeting is given. E. Protective Provisions. In addition to any other rights provided by law, so long as 100,000 shares of Preferred Stock shall be outstanding, this Corporation shall not, without first obtaining the affirmative vote or written consent of the holders of at least Sixty-Six and Two-Thirds percent (66 2/3%) of the then outstanding shares of Preferred Stock voting together as a single class: 1. materially and adversely alter or change the express rights, preferences, privileges or restrictions on the Preferred Stock; 2. increase or decrease the aggregate number of authorized shares of Preferred Stock; 3. authorize or create any series or class of capital stock having rights, preferences or privileges senior to, or pari passu with, the Series A Preferred, Series B Preferred or Series C Preferred; 4. authorize (i) a merger or consolidation after which the stockholders of the Corporation shall own less than a majority of the outstanding voting stock of the surviving corporation or (ii) a sale of all or substantially all of the assets of the Corporation; 5. authorize a liquidation or dissolution of the Corporation; and 6. declare or pay any cash dividend or redeem or repurchase any shares of capital stock of the Corporation (other than redemption or repurchase from terminated employees or service providers pursuant to contractual rights of repurchase or redemption). F. Status of Converted Stock. No shares of Preferred Stock acquired by the Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be cancelled, retired and eliminated from the shares which the Corporation shall be authorized to issue. G. Residual Rights. All rights accruing to the outstanding shares of capital stock not expressly provided for to the contrary herein shall be vested in the Common Stock. FIVE. The Corporation is to have perpetual existence. SIX. In furtherance and not in limitation of the powers conferred by statute, the Bylaws of the Corporation may be altered, amended or repealed by the Board of Directors of the Corporation, with, and only with, the approval of a majority of the directors then in office. -15- SEVEN. The election of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide. EIGHT. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provisions contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. NINE. The Corporation shall indemnify each person who at any time is, or shall have been, a director or officer of the Corporation and was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement incurred in connection with any such action, suit or proceeding, to the maximum extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended. In furtherance of and not in limitation of the foregoing, the Corporation shall advance expenses, including attorneys' fees, incurred by an officer or director of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such advances if it shall be ultimately determined that he is not entitled to be indemnified by the Corporation. The foregoing right of indemnification shall in no way be exclusive of any other rights of indemnification to which any such director or officer may be entitled, under any Bylaw, agreement, vote of directors or stockholders or otherwise. No amendment to or repeal of the provisions of this Article NINE shall deprive a director or officer of the benefit hereof with respect to any act or failure to act occurring prior to such amendment or repeal. TEN. No director of the Corporation shall be personally liable to the Corporation or to any of its stockholders for monetary damages arising out of such director's breach of his fiduciary duty as a director of the Corporation, except to the extent that the elimination or limitation of such liability is not permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended. No amendment to or repeal of the provisions of this Article TEN shall deprive any director of the Corporation of the benefit hereof with respect to any act or failure to act of such director occurring prior to such amendment or repeal. ELEVEN.Advance notice of new business and stockholder nomination for the election of directors shall be given in the manner and to the extent provided in the Bylaws of the Corporation. TWELVE.The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Fourth Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. -16- A. This Fourth Amended and Restated Certificate of Incorporation has been duly approved by the Board of Directors of this Corporation. B. This Fourth Amended and Restated Certificate of Incorporation has been duly adopted in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. -17- IN WITNESS WHEREOF, Nanosys, Inc. has caused this Fourth Amended and Restated Certificate of Incorporation to be signed by the Chief Executive Officer on _______ __, 2004. Nanosys, Inc. By: _________________________ Calvin Y. H. Chow Chief Executive Officer ATTEST: By:__________________________________ Michael J. O'Donnell Secretary (Signature Page to Fourth Amended and Restated Certificate of Incorporation) EX-10.11 3 f97636a5exv10w11.txt EXHIBIT 10.11 EXHIBIT 10.11 PATENT LICENSE AGREEMENT BETWEEN THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK AND NANOSYS, INC. This Agreement is entered into this 20th day of May, 2003 (the "Effective Date") by and between Nanosys, Inc. ("Licensee"), a Delaware Corporation having its principal place of business at 2625 Hanover Street, Palo Alto, California, 94304, and The Trustees of Columbia University in the City of New York, ("Licensor"). Licensee and Licensor are hereafter referred to herein individually as "Party" and collectively as "Parties." WHEREAS, Licensor is the owner by assignment of the right title and interest to certain U.S. and foreign patents and/or patent applications related to nanocrystal based photoelectric devices; WHEREAS, Licensor desires to have the technology described and claimed in such certain patents and applications developed for commercial and other useful applications; and WHEREAS, Licensee desires to obtain exclusive rights to practice the inventions described and claimed in such certain U.S. and foreign patents and applications, and to develop and commercialize nanocrystal based photoelectric devices; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Parties, the Parties agree as follows: 1.0 DEFINITIONS 1.1 "Affiliate" means any entity which controls or is controlled by a party to this Agreement. An entity shall be regarded as in control of another entity for purposes of this Agreement if it owns or controls at least fifty percent (50%) of the shares entitled to vote in the election of directors of such entity (or in the case of an entity that is not a corporation, for the election of a corresponding managing authority). 1.2 "Combination Product" means a product sold by Licensee, where a Licensed Product is sold, in combination with another product that can reasonably be deemed to be a separate product, and which is not itself a Licensed Product. 1.3 "Licensed Patents" means U.S. Patent No. 6,239,355, entitled "Solid-State Photoelectric Device", all reissues (including the Reissue Patent), reexaminations, or other related U.S. patent filings directed to the same subject matter, and any foreign counterparts that claim priority to U.S. Patent No. 6,239,355 or other related U.S. filings directed to the same subject matter. 1.4 "Licensed Process" means any process, procedure or method, the practicing of which in a given country, practices any Valid Claim of the Licensed Patents existing in such country. 1.5 "Licensed Product" means any device, apparatus, composition of matter, or article of manufacture the existence, production or use of which in a given country practices any Valid Claim of the Licensed Patents existing in such country. 1.6 "Licensee" means Nanosys and its Affiliates. 1.7 "Net Sales" means amounts, and/or all other consideration (including any debt or equity securities or instruments), received by Licensee for the sale of Licensed Products in any country in which Patent Rights are granted or being prosecuted in good faith, less (i) customary trade, quantity, or cash discounts to the extent actually allowed and taken; (ii) amounts repaid or credited by reason of rejection or return; (iii) an allowance for actual bad debt having occurred during the reporting period, said allowance being no greater than [*** Redacted]%; (iv) to the extent separately stated on purchase orders, invoices, or other documents of sale, any taxes or other governmental charges levied on the production, sale, transportation, delivery, or use of a Licensed Product or Licensed Process which is paid by or on behalf of Licensee; and (v) outbound transportation costs prepaid or allowed and costs of insurance in transit. In the case of Combination Products Net Sales shall be determined by either(1) the formula [*** Redacted] where A is the [*** Redacted] of the Licensed Product components of the Combination Product during such period when sold individually, and B is the [*** Redacted] price of the separate product component(s) of the Combination Product when sold individually; or, if all components of the Combination Product were not sold individually during the same or immediately preceding reporting period then (2) the formula [*** Redacted] where C is the [*** Redacted] of the Licensed Product components during the prior reporting period and D is the [*** Redacted] during the prior reporting period, with such costs being determined in accordance with generally accepted accounting principles. 1.8 "Reissue Patent" a reissue of U.S. Patent No. 6,293,355 entitled "Solid State Photoelectric Device," under 35 U.S.C. Section 251 by the United States Patent and Trademark Office, in which at least the broadest reissue claim has [*** Redacted]. 1.9 "Sublicense Revenue" means all amounts and/or all other consideration (including any debt and/or equity securities or instruments) received by Licensee from its Sublicensee's in consideration for the granting of a sublicense to the Licensed Patents. In the case where the Licensed Patents are sublicensed by Licensee, Sublicense Revenue specifically excludes payments made to Licensee by its Sublicensees for bona fide research *** 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. - 2 - and/or development funding, or those specified payments made in consideration for the licensing or sublicensing of Licensee's own intellectual property or third party intellectual property for which Licensee has rights to sublicenses (but not including any intellectual property rights granted to Licensee hereunder). 1.10 "Valid Claim" means any issued claim of the Licensed Patents that has not expired, or been finally held as invalid or unenforceable by a court or administrative body of competent jurisdiction, as well as any pending claim of the Licensed Patents that is being prosecuted in good faith, and that has not been finally and conclusively rejected. 2.0 LICENSE GRANT 2.1 Except as expressly provided in sections 2.2, 2.3 and 2.4 Licensor hereby grants to Licensee an exclusive worldwide license, with a right to grant sublicenses, in all fields under the Licensed Patents, to make, have made, use, sell, offer for sale and import Licensed Products and to use Licensed Processes. 2.2 Notwithstanding the foregoing, Licensor shall retain a right to practice the Licensed Patents solely for noncommercial, academic research purposes. 2.3 Licensor grants to Licensee the right to grant sublicenses to third parties, provided that: (i) the Sublicensee agrees to abide by all the terms and provisions of this Agreement; (ii) the Licensee remains fully liable for the performance of its and its Sublicensee's obligations hereunder; (iii) each such sublicense is royalty-bearing at [*** Redacted], or provides or is supported by equivalent consideration; (iv) the Licensee notifies Licensor of any grant of a sublicense and provides to Licensor, upon request, a copy of any sublicense agreement; and (v) no such sublicense or attempt to obtain a sublicensee shall relieve the Licensee of its obligations under section 6 hereof to exercise its own best efforts, directly or through a sublicense, to discover, develop and market Licensed Product, nor relieve Licensee of its obligations to pay Licensor any and all license fees, royalties and other payments due under this Agreement. 2.4 All rights and licenses granted by Licensor to Licensee under this Agreement are subject to: (i) any limitations imposed by the terms of any government grant, government contract or government cooperative agreement applicable to the technology that is the subject of this Agreement, and/or (ii) applicable requirements of 35 U.S.C. Sections 200 et seq., as amended, and implementing regulations and policies. Without limitation of the foregoing, the Licensee agrees that, to the extent required under 35 U.S.C. Section 204, any Licensed Product used, sold, distributed, rented or leased by the Licensee, an Affiliate or a Sublicensee in the United States will be manufactured substantially in the United States. 3.0 LICENSE FEE *** 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. - 3 - 3.1 Within thirty (30) days of the effective date of this Agreement, Licensee shall pay to Licensor a non-refundable License Issue Fee in the amount of [*** Redacted]. 3.2 Licensee also hereby grants to Licensor an option (the "Initial Option") to purchase 10,000 shares of Licensee's common stock at the price of $0.19 per share (the "Exercise Price"), which is the current fair market value of the common stock. The Initial Option shall become exercisable upon the Effective Date of this Agreement. 3.3 Licensee also hereby grants to Licensor a contingent option (the "Contingent Option"; the Contingent Option and the Initial Option are sometimes hereinafter referred to singly as an "Option" and collectively as the "Options") to purchase an additional 15,000 shares of Licensee's common stock at the Exercise Price. The Contingent Option shall become exercisable upon the earliest of: (i) the issuance of a Reissue Patent based upon the Patent Rights; or (ii) Licensee's written notification to Licensee prior to May 29, 2003 that it does not wish to seek a Reissue Patent; or (iii) the business day immediately prior to the consummation of a merger, consolidation, other business combination or other transaction constituting an acquisition of the securities, assets or business of Licensee (or, if earlier, on the business day immediately prior to any applicable record date with respect thereto) as a result of which the shares of the class for which the Contingent Option is exercisable immediately prior to such event are to be changed or converted into or exchanged for any securities of another entity or other property (including cash) (an "Acquisition Transaction"). 3.4 Either Option may be exercised for a period of six months following the date that it first becomes exercisable in accordance with Section 3.2 or 3.3 (other than pursuant to clause (iii) of Section 3.3), as the case may be (the "Exercise Period"), by (i) Licensor's payment of an amount equal to the aggregate Exercise Price for the shares subject to such Option (A) by check payable to the order of the Licensee or by wire transfer to an account of Licensee, (B) at Licensor's election by offsetting against such payment, any Milestone Fee due pursuant to Section 4.0 or (C) in accordance with Section 3.6(d); and (ii) Licensor's furnishing to Licensee (in the manner provided for the giving of notice hereunder) a counterpart, executed on behalf of Licensor, of each of (1) the Common Stock Purchase Agreement (substantially in the form of the agreement attached hereto as Appendix A) (the "Purchase Agreement"); and (2) in the case of the Initial Option only, a Voting Agreement by and among Licensee and Licensor and certain other holders of common stock as of the Effective Date (substantially in the form of the agreement attached hereto as Appendix B) (the "Voting Agreement"); provided, however, that in the event of any exercise of an Option pursuant to Section 3.6(d), the Purchase Agreement shall be executed by the parties within 30 days following the consummation of an Acquisition Transaction. 3.5 Upon the exercise of either Option, Licensor shall be deemed to be the holder of record of the shares subject to such Option, notwithstanding that the transfer books of Licensee shall then be closed or certificates representing such shares shall not then have *** 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. - 4 - been actually delivered to Licensor. Subject to the proviso contained in the last sentence of Section 3.4, as soon as practicable (and in any event within 10 days) after each such exercise of an Option, Licensee shall issue and deliver to Licensor (in the manner provided for the giving of notice hereunder) a certificate or certificates representing the shares issuable upon such exercise, registered in the name of Licensor, together with a counterpart, executed on behalf of each of the signatories thereto (other than Licensor) of each of the Purchase Agreement and, in the case of the Initial Option only, the Voting Agreement. 3.6 The Exercise Price and the number of shares issuable upon exercise of each of the Options, shall be subject to adjustment, as follows: (a) In the event that Licensee shall, at any time after the date hereof, declare a dividend or distribution on the outstanding shares of the class issuable upon exercise of an Option, payable in such shares, or subdivide or combine such shares or issue any such shares by reclassification of such shares (including any such reclassification in connection with a consolidation or merger in which Licensee is the continuing corporation), then, in each case, the Exercise Price per share in effect at the time of the record date for the determination of stockholders entitled to receive such dividend or distribution or upon the effective date of such subdivision, combination, or reclassification shall be adjusted so that it shall equal the price determined by multiplying such Exercise Price by a fraction, the numerator of which shall be the number of shares of such class outstanding immediately prior to such action, and the denominator of which shall be the number of shares of such class outstanding after giving effect to such action. The number of shares issuable upon exercise of each of the Options shall simultaneously be adjusted by multiplying the number of shares theretofore issuable upon exercise of each such Option by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (b) In the event of any transaction, including, without limitation, any conversion of Licensee or a recapitalization or reorganization of the class of shares issuable upon exercise of an Option, in which the previously outstanding shares of such class shall be changed or converted into or exchanged for different securities of Licensee, or if any dividend or distribution shall be declared in respect of the class of shares issuable upon exercise of an Option or any combination of any of the foregoing (but excluding any Acquisition Transaction and any transaction covered by Section 3.6(a)) (each such transaction being herein referred to as a "Non-Acquisition Transaction" and the date of consummation of the Non-Acquisition Transaction being herein referred to as the "Consummation Date"), then, lawful and adequate provision shall be made so that Licensor, upon the exercise of either or both of the Options at any time on or after the Consummation Date, shall be entitled to receive, in lieu of the shares issuable upon such exercise prior to the Consummation Date, the amount of securities or other property to which Licensor would actually have been entitled as a stockholder upon the consummation of the Non-Acquisition - 5 - Transaction if Licensor had exercised such Option immediately prior thereto (or, if earlier, immediately prior to any applicable record date with respect thereto) and (if applicable) had carried out the terms for the receipt of securities and/or property in connection with such Non-Acquisition Transaction. In each such case, appropriate adjustment shall be made in the application of the provisions herein set forth herein with respect to the Exercise Price and the number of shares or other securities or property issuable upon the exercise of an Option. (c) The provisions of this Section 3.6 shall similarly apply to successive events of the type described in subsection (a) or (b) above. (d) On the business day immediately prior to the consummation of an Acquisition Transaction, (or, if earlier, on the business day immediately prior to any applicable record date with respect thereto), Licensor shall be deemed to have exercised the Contingent Option and shall receive the amount of securities other property to which it was entitled as a stockholder holding the class of shares for which the Contingent Option was exercisable upon such date and as if it had carried out the terms for the receipt of such securities and/or property in connection with such Acquisition Transaction. Upon exercise of the Contingent Option in accordance with this Section 6(d), Licensor shall be deemed to have paid the aggregate Exercise Price for such exercise to Licensee by offsetting against such payment Licensee's obligation to pay the milestone fee due pursuant to Section 4.0; provided, that if such milestone fee has been paid prior to such date, Licensor shall be indebted to Licensee in the amount of such Exercise Price, shall receive the securities and other property in accordance with the preceding sentence and shall pay such Exercise Price to Licensee within 30 days following the consummation of any Non-Acquisition Transaction. 3.7 Promptly after any adjustment in accordance with Section 3.6, Licensee shall give written notice thereof to the Licensor setting forth in reasonable detail the adjustment, the method of calculation thereof and the facts upon which such adjustment and calculation are based. 4.0 MILESTONE FEE Upon the issuance of a Reissue Patent, Licensee shall pay to Licensor a Milestone Fee in the amount of [*** Redacted]. Such Milestone Fee shall be payable within thirty(30) days of Licensee's written notification to Licensee of such Reissue Patent. Prior to May 29, 2003, if Licensee notifies Licensor that it does not wish to cause Licensor to seek a Reissue Patent, then such notification shall trigger the milestone fee, requiring Licensee to pay to Licensor the Milestone Fee. In addition, [*** Redacted] of such Milestone Fee shall be payable to Licensor (if not previously paid) in the event that the Contingent Option is exercised pursuant to Section 3.6(d) of this Agreement, and any such payment shall reduce any Milestone Fee payable to Licensor under the preceding sentence of this Section 4.0; provided, however, in no event shall Licensee make any such payment to Licensor if 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. - 6 - Licensee has previously paid Licensor the Milestone Fee in full asset forth in said preceding sentence. Notwithstanding the foregoing, Licensor shall have the sole discretion and right regarding the decision as to whether to submit U.S. Patent Office No. 6,239,355 for reissuance pursuant to 37 C.F.R. Section 1.178. 5.0 ROYALTIES 5.1 Licensee shall pay to Licensor a running royalty of [*** Redacted]% of Net Sales by Licensee. In the event that Licensee's making, use, sale, offer for sale or importation of Licensed Products requires Licensee to pay any amount to secure any necessary third party intellectual property rights to engage in such activity in view of such third party's intellectual property, including without limitation payment of royalties to such third parties, costs associated with establishing that such rights are not necessary or that such third party intellectual property is invalid or unenforceable, then Licensee shall be entitled to credit such amounts against royalties due hereunder up to [*** Redacted]% of the royalties due for any reporting period, but in no event shall the royalty rate paid to Licensor be less than [*** Redacted]% of Net Sales by Licensee. 5.2 Licensee shall pay to Licensor a royalty of [*** Redacted]% of Sublicense Revenue (hereafter termed a "Sublicense Royalty") where the Patent Rights are sublicensed to a third party ("Sublicensee") in conjunction with the granting of substantial intellectual property rights other than under the Licensed Patents, which other intellectual property rights are licensable by Licensee, including but not limited to patents, copyrights, trade marks, trade secrets and know-how. In the event that no other substantial intellectual property rights are included in a sublicense of the Patent Rights ("a Naked Sublicense"), then the Sublicense Royalty payable by Licensee to Licensor shall be [*** Redacted]% of Sublicense Revenues. 5.3 Royalty payments shall be made quarterly in accordance with and concurrent with the royalty reporting obligations set forth in sections 7.2 and 7.3, below. 6.0 DILIGENCE 6.1 Licensee shall use commercially reasonable efforts, or shall cause its Affiliates and/or Sublicensees to use commercially reasonable efforts to develop Licensed Products or Licensed Processes and to introduce Licensed Products or Licensed Processes into the commercial market. Specifically, Licensee, its Affiliates or Sublicensees shall: 6.1.1 apply funding to development of nanocomposite photovoltaic devices at least the following levels: *** 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. - 7 - ~~2003: $ [*** Redacted] 2004: $ [*** Redacted] 2005: $ [*** Redacted] 2006 and after: $ [*** Redacted]; and~~

6.1.2 make a first commercial sale of a Licensed Product by [*** Redacted]. 6.2 In the event that Licensor determines that Licensee has failed to meet its obligations under section 6.1(a) of this Agreement, then Licensor shall notify Licensee of such determination and provide Licensee 60 days to refute such determination. In the event Licensee is unable to refute such determination, then Licensor may request an updated funding plan from Licensee, which funding plan shall include one and one half times the amounts set forth herein, to be funded in the years following such determination. Failure by Licensee to meet such updated funding plan may be treated by Licensor as a material breach of this Agreement. 6.3 In the event that Licensee fails to make a first commercial sale by the date provided in Section 6.1(b), Licensee shall be obligated to pay to Licensor a minimum royalty in the amount specified below, for each year subsequent to 2007, until such time as Licensee makes a first commercial sale.
Year Minimum Royalty ~~2008 [*** Redacted] 2009 [*** Redacted] 2010 and thereafter [*** Redacted]~~
Minimum royalty payments shall be due within 30 days of the last day of the calendar year in which they are due. 7.0 REPORTING 7.1 Prior to the first commercial sale of a Licensed Product, and within 30 days after the end of each calendar year, Licensee shall provide Licensor with a written report of progress in the development and commercialization of Licensed Products or Licensed Processes, in accordance with the obligations set forth in Section 6.1, above. 7.2 Within 60 days of the end of each calendar quarter following the first commercial sale of a Licensed Product, Licensee shall provide Licensor with a royalty report that provides, in reasonable detail: (i) the selling price of each type of Licensed Product sold by Licensee; (ii) the number of each type of Licensed Product sold; (iii) the royalties, in U.S. dollars, payable under this Agreement on those sales *** 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. - 8 - 7.3 Within 60 days of the end of each calendar quarter following the granting of any sublicenses hereunder, Licensee shall provide Licensor with a Sublicense Royalty report (such Sublicense Royalty report may be combined with the royalty report identified in Section 7.2) which provides, in reasonable detail: (i) the identity of any such Sublicensee; (ii) amount of Sublicense Revenue received from each such Sublicensee; and (iii) the amount of Sublicense Royalty due to Licensor under this Agreement. 8.0 RECORD KEEPING Licensee shall keep books and records accurately showing all Licensed Products manufactured, used, sold, imported or otherwise disposed of under the terms of this Agreement. Licensee shall preserve those books and records for at least five years from the date of the royalty payment to which they pertain and shall open them to inspection by representatives or agents of Licensor at reasonable times at Licensee's facilities. In the event that such inspection shows that Licensee has underpaid royalties by five percent (5%) or more with respect to any calendar quarter, the Licensee shall pay, within ten days after demand by Licensor, the costs and expenses of such review. If such underpayment is in excess of $5,000.00 for any calendar quarter, or an aggregate of $10,000 during the inspection period, Licensee shall also reimburse Licensor for the costs of such inspection. In the event of a licensing inspection, Licensee is required to provide auditors with detailed information including detailed sales, inventory, manufacturing, purchasing, transfer records, customer lists, access to invoices, purchase orders, sales orders, shipping documentation, cost information, pricing policies, etc. 9.0 PATENT FILING AND MAINTENANCE 9.1 Licensee shall pay to Licensor all of Licensors actual past and future out of pocket expenses for the preparation, filing and maintenance of the Licensed Patents. As of the Effective Date of this Agreement, such past out of pocket expenses were approximately $24,872.26. All payments by Licensee for Licensor's actual out of pocket expenses in accordance with this section shall be due within thirty(30) days of Licensee's receipt of an invoice reasonably detailing such expenses. 9.2 Licensor shall bear responsibility for filing, maintenance and prosecution of the Licensed Patents. Notwithstanding the foregoing, in consideration of Licensee's payment of prosecution and maintenance costs, Licensee shall have the right to review and comment upon all material communications to and/or from any patent offices, which Licensor shall use reasonable efforts, subject to its reasonable discretion, to incorporate Licensee's comments into any such communications. 9.3 In the event that Licensee notifies Licensor that it does not wish to support the filing, continued prosecution or maintenance of Licensed Patents in any individual country, then Licensee's obligations to reimburse costs for such filing, prosecution or maintenance - 9 - shall terminate upon such notification. In the event that Licensor chooses to continue such filing, prosecution and/or maintenance in such country, then any patent issuing thereon shall not be included in Licensed Patents. Notwithstanding the foregoing, Columbia shall have the sole discretion and right regarding the decision as to whether to submit U.S. Patent Office No. 6,239,355 for reissuance pursuant to 37 C.F.R. Section 1.178. 10.0 INFRINGEMENT 10.1 Licensor will protect its Patents from infringement and prosecute infringers at its own expense when in its sole judgment such action maybe reasonably necessary, proper, and justified. 10.2 If Licensee shall have supplied Licensor with written evidence demonstrating prima facie infringement of a claim of the Patent Rights by a third party selling products in competition with the Licensee or any of its Affiliates or Sublicensees, Licensee may by notice request that Licensor take steps to assert the Patent Rights against such third party. Unless Licensor shall within three(3) months of receipt of such notice either (i) cause such infringement to terminate or (ii) initiate legal proceedings against the infringer, Licensee, upon written notice to Licensor, may initiate legal proceedings against the infringer at the Licensee's expense. Any settlement of a legal proceeding to enforce any Patent Rights against an alleged infringer shall be subject to Licensor's prior written approval. 10.3 Any recovery by a party that initiates and/or bears the of legal proceedings to enforce any Patent Rights against an alleged infringer shall first be used to reimburse such party for its reasonable costs and legal fees incurred to conduct such proceedings. The balance shall be divided 75% to the party that initiates legal proceedings and 25% to the other party. 10.4 In the event one party shall initiate or carry on legal proceedings to enforce any Patent Rights against an alleged infringer, the other party shall use its best efforts to reasonably cooperate fully with and shall supply all assistance (including legally joining the action) reasonably requested by the party initiating or carrying on such proceedings. The party that institutes any proceeding to protect or enforce Patent Rights shall have sole control of that proceeding and shall be responsible for the reasonable expenses incurred by said other party in providing such assistance and cooperation as is requested pursuant to this paragraph. 11.0 TERMINATION OF AGREEMENT 11.1 Unless terminated earlier in accordance with this Section 11.0, this Agreement shall expire on a country-by-country basis in each country where the Patent Rights exist, upon the expiration of the last to expire patent in such country, or in the event - 10 - the patent in such country is held to be invalid and/or unenforceable (by a court or government body of competent jurisdiction) or admitted to be invalid and/or unenforceable. 11.2 Licensee may terminate this license upon sixty(60) days written notice to Licensor, and shall pay to Licensor any and all royalties and costs that have accrued under Sections 5, 6 and 9 of this Agreement, up to the date of actual termination. 11.3 Subject to the dispute resolution provisions provided in Section 15.2, in the event Licensee fails to pay any amounts due and payable to Licensor hereunder, and fails to make such payments within sixty(60) days after receiving written notice of such failure, Licensor may terminate this Agreement immediately upon written notice to Licensee. 11.4 Subject to the dispute resolution provisions provided in Section 15.2, in the event Licensee commits a material breach of this Agreement, and fails to cure that breach within sixty (60) days after receiving written notice thereof, Licensor may terminate this Agreement immediately upon written notice to Licensee. 11.5 Upon early termination of this Agreement for any reason, Licensee shall provide Licensor with a written inventory of Licensed Products still owned by Licensee. Licensee shall be permitted to dispose of such inventory by sale, within 180 days following such early termination. Notwithstanding the termination of this Agreement, any disposal by sale of such inventory shall be subject to the terms of this Agreement relating, inter alia, to royalties and reporting. 11.6 Upon any termination of this Agreement pursuant to Section 11.2, 11.3 or 11.4, any Sublicensees of Licensee under this Agreement shall become a direct licensee of Licensor, provided as a condition precedent, that Licensors obligations to any such Sublicensees are no greater than Licensor's obligations to Licensee under this Agreement. Licensee shall provide written notice of such to each Sublicensee with a copy of such notice provided to Licensor. 12.0 REPRESENTATIONS AND WARRANTIES 12.1 Licensor represents and warrants that it has the right to enter into this Agreement. 12.2 EXCEPT AS MAY OTHERWISE BE EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, INCLUDING BUT NOT LIMITED TO THE PATENT RIGHTS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT, VALIDITY OF PATENT RIGHTS CLAIMS, WHETHER ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. Specifically, and not to limit the - 11 - foregoing, Licensor makes no warranty or representation (i) regarding the validity or scope of the Licensed Patents, and (ii) that the exploitation of the Licensed Patents or any Licensed Product or Licensed Process will not infringe any patents or other intellectual property of any third party. 12.3 IN NO EVENT SHALL LICENSOR, ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES AND AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGES OR INJURY TO PERSON OR PROPERTY AND LOST PROFITS, RESULTING FROM LICENSEE'S PRACTICE OF THE LICENSED PATENTS. 12.4 IN NO EVENT SHALL LICENSER'S LIABILITY TO THE LICENSEE EXCEED THE PAYMENTS MADE TO LICENSOR BY LICENSEE UNDER THIS AGREEMENT. 12.5 The parties hereto acknowledge that the limitations and exclusions of liability and disclaimers of warranty set forth in this Agreement form an essential basis of the bargain between the parties. 13.0 INDEMNIFICATION AND INSURANCE 13.1 The Licensee will indemnify, defend and hold Licensor harmless from and against any and all actions, suits, claims, demands, prosecutions, liabilities, costs, expenses, damages, deficiencies, losses or obligations (including attorneys fees) based on or arising out of this Agreement, including, without limitation, (i) the discovery, development, manufacture, packaging, use, sale, rental or lease of Licensed Products, even if altered for use for a purpose not intended, (ii) the use of Licensed Patents, by the Licensee, its Affiliates, its Sublicensees or its (or their) customers, (iii) any representation made or warranty given by the Licensee, its Affiliates or Sublicensees with respect to Licensed Products or Licensed Patents, (iv) any infringement claims relating to Licensed Products or Licensed Patents, and (v) any asserted violation of the Export Laws (as defined in Section 15.5 hereof) by the Licensee, its Affiliates or Sublicensees. The Licensee will reimburse Licensor for the cost of enforcing this provision. 13.2 The Licensee shall maintain, during the term of this Agreement, commercial general liability insurance (including product liability and contractual liability insurance) with reputable and financially secure insurance carriers acceptable to Licensor to cover the activities of the Licensee, its Affiliates and its Sublicensees, for minimum limits of [*** Redacted] combined single limit for bodily injury and property damage per occurrence and in the aggregate; provided further that before administration of any Licensed Product to any humans, for clinical, research, or any other use, Licensee, its Affiliates and its Sublicensees will increase such minimum limits to no less than [*** Redacted]. Such insurance shall include Licensor, its trustees, faculty, officers, employees and agents as additional insureds. The Licensee shall furnish a certificate of insurance evidencing such coverage, with thirty days *** 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. - 12 - written notice to Licensor of cancellation or material change in coverage. The minimum amounts of insurance coverage required herein shall not be construed as creating any limitation on the Licensee's indemnity obligation under Section 12(a) of this Agreement. 13.3 The Licensee's insurance shall be primary coverage; any insurance Licensor may purchase shall be excess and noncontributory. The Licensee's insurance shall be written to cover claims incurred, discovered, manifested, or made during or after the expiration of this Agreement. 14.0 NOTICES Any payment, notice or other communication this Agreement requires or permits either party to give must be in writing to the appropriate address given below, or to such other address as one party designates by written notice to the other party. The parties deem payment, notice or other communication to have been properly given and to be effective (a) on the date of delivery if delivered in person; (b) on the fourth day after mailing if mailed by first-class mail, postage paid; (c) on the second day after delivery to an overnight courier service such as Federal Express, if sent by such a service; or (d) upon confirmed transmission by telecopier. The parties' addresses are as follows: For Licensor: Executive Director Science & Technology Ventures Columbia Innovation Enterprises Columbia University Engineering Terrace, Suite 363 500 West 120th Street, Mail Code 2206 New York, New York 10027 with a copy to: Office of General Counsel Columbia University 412 Low Memorial Library 535 West 116th Street New York, New York 10027 For Licensee: Nanosys, Inc. 2625 Hanover St. Palo Alto, Ca 94304 Attention: Vice President, Intellectual Property - 13 - Fax: 650/ 846-2501 Telephone: 650/ 331-2100 15.0 PATENT MARKING Licensee shall include appropriate patent marking on all Licensed Products made, sold, or otherwise disposed of by Licensee, which patent marking shall be in accordance with appropriate patent marking laws of the country in which such products are made, sold or otherwise disposed of. Licensee shall cause its Affiliates and/or Sublicensees to similarly mark any Licensed Products made, sold or otherwise disposed of by such Affiliates or Sublicensees. 16.0 GENERAL 16.1 Confidentiality. All information provided to Licensor by Licensee under this agreement, including but not limited to progress and royalty reports, and other financial, business and/or technical information, is deemed to be Confidential Information. 16.1.1 Licensor will maintain the confidentiality of the Confidential Information and will not disclose the Confidential Information to any third party, and will not use the Confidential Information for any purpose other than as necessary to administer this Agreement. 16.1.2 The obligations of Licensor with respect to Confidential Information will not apply to information disclosed under this agreement to the extent such information: (a) is generally known to the public at the time of disclosure or becomes generally known through no wrongful act on the part of Licensor; (b) is in Licensor's possession at the time of disclosure other than as a result of prior disclosure by Licensee or a breach of any legal obligation by Licensor or a third party; (c) becomes known to Licensor through disclosure by sources other than Licensee having no duty of confidentiality to Licensee, whether direct or indirect, with respect to such information and having the legal right to disclose such information; (d) is independently developed by Licensor without reference to or reliance upon the information as can be documented by written records; or - 14 - (e) is required to be disclosed by Licensor to comply with applicable laws or governmental regulations, provided that the Licensor provides prior written notice of such disclosure to the Licensee and takes reasonable and lawful actions to avoid and/or minimize the extent of such disclosure. 16.1.3 The provisions of this Article 16 relating to confidentiality shall be in force and effect until at least 5 years following the termination of this Agreement. 16.2 Dispute Resolution. Any dispute arising between the Parties shall be first addressed by a meeting between the Parties to discuss, and in good faith, attempt to negotiate a settlement of such dispute. Pending the outcome of such discussions, which discussions shall not exceed 180 days unless mutually agreed to by the Parties, and attempts at settlement of such dispute, the Parties shall continue to perform in accordance with all provisions of this Agreement to the extent such terms are not in dispute, including but not limited to the maintenance of Licensee's rights to practice the Licensed Patents, and obligations to pay royalties under this Agreement. 16.3 Assignment. This Agreement and all rights and obligations hereunder may not be assigned by either party without the written consent of the other party, except in conjunction with a sale of all or substantially all of one Party's assets. 16.4 Waiver. The failure of either Party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that Party thereafter of the right to insist upon strict adherence to that term or any other term of this Agreement. All waivers must be in writing and signed by an authorized representative of the Party against which such waiver is being sought. 16.5 Compliance with Laws and Government Regulations. 16.5.1 Licensee shall observe all applicable United States and foreign laws and regulations with respect to the research, development, manufacture, marketing and transfer of Licensed Products and related technical data, including, without limitation, the International Traffic in Arms Regulations (ITAR) and the Export Administration("Export Laws"). To this end, the Licensee shall cooperate with Licensor as reasonably necessary to permit Licensor to comply with the Export Laws. The Licensee hereby represents and covenants that the Licensee: (a) is neither a national of nor controlled by a national of any country to which the United States prohibits the export or re-export of goods, services, or technology; (b) is not a person specifically designated as ineligible to export from the United States or deal in U.S.-origin goods, services, or technologies; (c) will not export or re-export, directly or indirectly, any goods, services, or technology, to any country or person (including juridical persons) to which the United States prohibits the export of goods, technology, or services; and (d) in the event that a U.S. government license or authorization is required for an export or re-export of goods, services, or technology (including technical information - 15 - acquired from Licensor under this Agreement and/or any products created by using such technical information or any part thereof), the Licensee shall obtain any necessary U.S. government license or other authorization prior to undertaking the export or re-export. 16.5.2 Notwithstanding any provision in this Agreement, Licensor disclaims any obligation or liability arising under the license provisions of this Agreement if the Licensee is charged in a governmental action for not complying with or fails to comply with governmental regulations in the course of taking steps to bring any Product to a point of practical application. The Licensee shall comply upon reasonable notice from Licensor with all governmental requests directed to either Licensor or the Licensee and provide all information and assistance necessary to comply with the governmental requests. 16.6 Governing Law. This Agreement and all disputes arising out of or related to this Agreement, or the performance, enforcement, breach or termination hereof, and any remedies relating thereto, shall be construed, governed, interpreted and applied in accordance with the laws of the State of New York, U.S.A., without regard to conflict of laws principles, except that questions affecting the construction and effect of any patent shall be determined by the law of the country in which the patent shall have been granted. 16.7 Force Majeure. Neither party will be responsible for delays resulting from causes beyond the reasonable control of such party, including without limitation fire, explosion, flood, war, strike, or riot, provided that the nonperforming party uses commercially reasonable efforts to avoid or remove such causes of nonperformance and continues performance under this Agreement with reasonable dispatch whenever such causes are removed. 16.8 Amendment. This Agreement may be amended, supplemented, or otherwise modified only by means of a written instrument signed by both parties. 16.9 Severability. In the event that any provision of this Agreement shall be held invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect any other provision of this Agreement, and the parties shall negotiate in good faith to modify the Agreement to preserve (to the extent possible) their original intent. If the parties fail to reach a modified agreement within thirty (30) days after the relevant provision is held invalid or unenforceable, then the dispute shall be resolved in accordance with the procedures set forth in Article 13. While the dispute is pending resolution, this Agreement shall be construed as if such provision were deleted by agreement of the parties. 16.10 Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns. 16.11 Headings. All headings are for convenience only and shall not affect the meaning of any provision of this Agreement. - 16 - 16.12 Non-use of Licensor's Name. Licensee will not use the name, insignia, or symbols of Licensor, its faculties or departments, or any variation or combination thereof, or the name of any trustee, faculty member, other employee, or student of Licensor for any purpose without Licensor's prior written consent. Notwithstanding the foregoing, Licensee may use Licensor's name in a factual context only referring to the existence of this Agreement, and the Licensed Patents in conjunction with Licensee's disclosure obligations in any private or public equity financing, or in seeking corporate collaborations for the development and commercialization of the Licensed Patents, but for no promotional, publicity or endorsement purposes whatsoever. 16.13 Entire Agreement. This Agreement, which may be executed in one or more counterparts, constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior agreements or understandings between the parties relating to its subject matter. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives. THE TRUSTEES OF COLUMBIA NANOSYS, INC. UNIVERSITY IN THE CITY OF NEW YORK By: /s/ Michael J. Cleare, PhD. By: /s/ J.W. Parce ---------------------------------- ------------------------ Name: Michael J. Cleare, PhD. Name: J.W. Parce Title: Executive Director Title: CTO Science and Technology Ventures - 17 - APPENDIX A NANOSYS, INC. COMMON STOCK PURCHASE AGREEMENT THIS AGREEMENT is made as of __________ (the "Effective Date") between Nanosys, Inc., a Delaware corporation (the "Company"), and ______________________ ("Purchaser"). WHEREAS in order to provide Purchaser an opportunity to acquire an equity interest in the Company, the Company is willing to sell to Purchaser and Purchaser desires to purchase shares of Common Stock according to the terms and conditions hereof. THEREFORE, the parties agree as follows: 1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions of this Agreement, the Company hereby agrees to issue to Purchaser _________shares of the Company's Common Stock (the "Stock") valued at a price of $0.19 per share, for an aggregate value of $_____, as part of the consideration to be paid by the Company pursuant to the License Agreement between the Company and the Purchaser dated as of the date here with (the "License Agreement"). Upon execution of this Agreement, the Company shall issue a duly executed certificate evidencing the Stock in the name of the Purchaser. 2. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS. a) LEGENDS. The share certificate evidencing the Stock issued hereunder shall be endorsed with the following legend (in addition to any legends required under applicable state securities laws): "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES. THESE TRANSFER RESTRICTIONS ARE BINDING UPON ALL TRANSFEREES OF THE SHARES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD OR TRANSFERRED FOR A PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT FILED BY THE COMPANY FOR ITS INITIAL PUBLIC OFFERING." b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 3. PURCHASER'S REPRESENTATIONS AND COVENANTS. In connection with the purchase of the Stock, Purchaser hereby represents and warrants to the Company as follows: a) INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS. Purchaser is purchasing the Stock solely for Purchaser's own account for investment and not with a view to or for sale in connection with any distribution of the Stock or any portion thereof and not with any present intention of selling, offering to sell or otherwise disposing of or distributing the Stock or any portion thereof. Purchaser also represents that the entire legal and beneficial interest of the Stock is being purchased, and will be held, for Purchaser's account only, and neither in whole or in part for any other person. Purchaser either (i) has a pre-existing business or personal relationship with the Company or at least one of its officers, directors or controlling persons, or (ii) by reason of Purchaser's business or financial experience (or the business or financial experience of Purchaser's professional advisors who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly), can be reasonably assumed to have the capacity to evaluate the merits and risks of an investment in the Company and to protect Purchaser's own interests in connection with this transaction. b) ADDRESS. Purchaser's place of business address is located at the address indicated beneath the signature of Purchaser's authorized representative, below. c) INFORMATION CONCERNING COMPANY. Purchaser has discussed the Company and its plans, operations and financial condition with the Company's officers and has received all such information as Purchaser has deemed necessary and appropriate to enable Purchaser to evaluate the financial risk inherent in making an investment in the Stock. Purchaser has received satisfactory and complete information concerning the business and financial condition of the Company in response to all inquiries in respect thereof. d) ECONOMIC RISK. Purchaser realizes that the purchase of the Stock will be a highly speculative investment and involves a high degree of risk. Purchaser is able, without impairing Purchaser's financial condition, to hold the Stock for an indefinite period of time and to suffer a complete loss on Purchaser's investment. e) RESTRICTED SECURITIES. Purchaser understands and acknowledges that: i) The Stock has not been registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser's investment intent as expressed herein. In this connection, Purchaser understands that, in the view of the Securities and Exchange Commission ("SEC"), the statutory basis for such exemption may be unavailable if Purchaser's representation was predicated solely upon a present intention to hold the Stock for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Stock, or for a period of one year or any other fixed period in the future. ii) The Stock must be held indefinitely unless it is subsequently registered under the Securities Act or unless an exemption from such registration is otherwise available. Purchaser further acknowledges and understands that the Company is under no obligation to register the Stock. In addition, Purchaser understands that the certificate evidencing the Stock will be imprinted with a legend which prohibits the transfer of the Stock unless it is registered or such registration is not required in the opinion of counsel satisfactory to the Company. f) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting Purchaser's representations set forth above, Purchaser further agrees that Purchaser shall in no event make any disposition of all or any portion of the Stock unless and until: i) Either: (A) There is then in effect a Registration Statement under the Securities Act covering such proposed disposition, and such disposition is made in accordance with said Registration Statement; or (B) (1) Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition; (2) Purchaser shall have furnished the Company with an opinion of Purchaser's counsel to the effect that such disposition will not require registration of such shares under the Securities Act; and (3) such opinion of Purchaser's counsel shall have been concurred in by counsel for the Company, and the Company shall have advised Purchaser of such concurrence; and, ii) Purchaser shall have complied with the Standoff Agreement set forth in Section 5 hereof, and The proposed transferee executes an agreement with the Company to be bound by the restrictions on transfer contained herein, and in specific the Standoff Agreement contained in Section 5 hereof. g) VALUATION OF COMMON STOCK. Purchaser understands that the Stock has been valued by the Company's Board of Directors and that the Company believes this valuation represents a fair attempt at reaching an accurate appraisal of its worth. Purchaser understands, however, that the Company can give no assurances that such price is in fact the fair market value of the Stock, and that it is possible that, with the benefit of hindsight, the Internal Revenue Service would successfully assert that the value of the Stock on the date of purchase is substantially greater than so determined. If the Internal Revenue Service were to succeed in a tax determination that the Stock had a value greater than that upon which this transaction is based, the additional value would constitute ordinary income to Purchaser as of the date of its receipt. The additional taxes (and interest) due would be payable by Purchaser. There is no provision for the Company to reimburse Purchaser for that tax liability, and Purchaser assumes all responsibility therefor. h) ACCREDITED INVESTOR. The Purchaser is an accredited investor as defined in Rule 501 (a) of Regulation D promulgated under the Securities Act. 4. COMPANY'S REPRESENTATIONS AND COVENANTS. Company hereby represents and warrants to the Purchaser as follows: a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business, to execute and deliver this Agreement, to issue and sell the Stock, and to carry out the provisions of this Agreement. b) AUTHORIZATION. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder and the authorization, issuance and delivery of the Stock has been taken, and this Agreement, when executed and delivered by the Company, shall constitute valid and legally binding obligations of the Company, enforceable against the Company in accordance with its terms except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application affecting enforcement of creditors' rights generally, and as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies. c) VALID ISSUANCE OF SECURITIES. The Stock that is being issued to the Purchaser hereunder, when issued, sold and delivered in accordance with the terms hereof for the consideration expressed herein, will be duly and validly issued, fully paid and nonassessable and free of restrictions on transfer other than restrictions on transfer under this Agreement and applicable state and federal securities laws. Based in part upon the representations of the Purchasers in this Agreement and subject to the provisions of subsection (d) below, the Stock will be issued in compliance with all applicable federal and state securities laws. d) GOVERNMENTAL CONSENTS. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state or local governmental authority on the part of the Company is required in connection with the consummation of the transactions contemplated by this Agreement, except for applicable state securities laws. 5. STANDOFF AGREEMENT. Purchaser agrees, in connection with an initial public offering of the Company's equity securities, upon request of the Company or the underwriters managing such offering, (i) not to sell, make any short sale of, loan, grant any option for the purchase of or otherwise dispose of any shares of Stock (other than those included in the registration, if any) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration) as may be requested by the Company or such underwriters, and (ii) to execute any agreement regarding (i) above as may be requested by the Company or underwriters at the time of the public offering; provided, that the officers and directors of the Company who own stock of the Company also agree to such restrictions. 6. MISCELLANEOUS a) GOVERNING LAW. This Agreement shall be governed and construed by the laws of the Commonwealth of Massachusetts. b) NOTICES. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery (including by express courier) or upon deposit in the United States Post Office, by First Class mail with postage and fees prepaid, addressed to Purchaser and to the Company at the addresses provided below or at such other address as such party may designate by ten (10) days' advance written notice to the other party. For Purchaser: Executive Director Science and Technology Ventures Columbia Innovation Enterprises Columbia University Engineering Terrace, Suite 363 500 West 120th Street, Mail Code 2206 New York, New York 10027 For Company: Nanosys, Inc. 2625 Hanover Street Palo Alto, California 94304 Attn: President and CEO c) ASSIGNMENT. The Company may assign its rights and delegate its duties under this Agreement. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser, his/her heirs, executors, administrators, successors and assigns. The rights of Purchaser under this Agreement may be assigned only with the prior written consent of the Company. d) WAIVER. Either party's failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party thereafter from enforcing each and every other provision of this Agreement. The rights granted both parties herein are cumulative and shall not constitute a waiver of either party's right to assert all other legal remedies available to it under the circumstances. e) ENTIRE AGREEMENT. This Agreement and the License Agreement represent the entire agreement between the parties with respect to the purchase of Common Stock by Purchaser, may be modified or amended only in writing signed by both parties, and satisfy all of the Company's obligations to Purchaser with regard to the issuance or sale of securities. f) COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original and all of which together shall constitute one instrument. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. THE COMPANY: PURCHASER: NANOSYS, INC. a Delaware corporation By: __________________________ By: ________________________ Name: ________________________ Name: ______________________ Title: _______________________ Title: _____________________ Address: _____________________ Address: ___________________ ______________________________ ____________________________ APPENDIX B NANOSYS, INC. VOTING AGREEMENT This Voting Agreement (the "Agreement") is made as of the ___ day of ________, by and among Nanosys, Inc. (the "Company"), _________________ ("________") and the holders of the Company's Common Stock listed on Exhibit A attached hereto (the "Investors"). RECITALS WHEREAS, the Company and _______ have entered into a certain License Agreement, each dated as of even date hereof (the "License Agreement") which calls for the execution and delivery of this Agreement by Company and _______ for the purpose of setting forth the terms and conditions pursuant to which _______ will vote shares of the Company's securities now or in the future held by _______ (the "Shares"); NOW THEREFORE, in consideration of the mutual promises and covenants set forth herein and in the License Agreements, the Company, _________ and the Investors each desire to facilitate the arrangements set forth in this Agreement, and the sale and the transactions and obligations set forth in the License Agreement, by agreeing to the terms and conditions set forth below: AGREEMENT The parties agree as follows: 1. VOTING OF THE SHARES. The Shares shall be voted (including in any stockholder action by written consent) in a manner determined by the Board of Directors in the Board of Directors' sole discretion. 2. ADDITIONAL REPRESENTATIONS AND COVENANTS. 2.1 NO REVOCATION. The voting agreements contained herein are coupled with an interest and may not be revoked during the term of this Agreement. 2.2 LEGENDS. Each certificate representing shares of the Company's capital stock held by ________ or any assignee of ________ shall bear the following legend: "THE SHARES EVIDENCED HEREBY ARE SUBJECT TO A VOTING AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN STOCKHOLDERS OF THE COMPANY (A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SAID VOTING AGREEMENT." 2.3 TRANSFER OF SHARES. If ________ transfers any of the Shares in accordance with the provisions of the applicable Common Stock Purchase Agreement by and among the Company and ________ (each a "Stock Purchase Agreement"), each transferee must, as a condition precedent to the validity of such transfer under the Common Stock Purchase Agreement, acknowledge in writing to the Company that such transferee is bound by the provisions of this Agreement. 3. TERMINATION. 3.1 TERMINATION EVENTS. This Agreement shall terminate upon the earlier of: (a) A firm commitment underwritten public offering by the Company of shares of its Common Stock pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended; or (b) The sale, conveyance, disposal, or encumbrance of all or substantially all of the Company's property or business or the Company's merger into or consolidation with any other corporation (other than a wholly-owned subsidiary corporation) or if the Company effects any other transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of, provided that this Section 3.1 (b) shall not apply to a merger effected exclusively for the purpose of changing the domicile of the Company or to a preferred stock financing of the Company in which a majority of the preferred stock issued by the Company is purchased by venture capital investors. 3.2 REMOVAL OF LEGEND. At any time after the termination of this Agreement in accordance with Section 3.1, any holder of a stock certificate legended pursuant to Section 2.2 may surrender such certificate to the Company for removal of the legend, and the Company will duly reissue a new certificate without the legend. 4. MISCELLANEOUS. 4.1 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 4.2 AMENDMENTS AND WAIVERS. Any term hereof may be amended or waived only with the written consent of the Company, ________ and the Investors holding a majority of the shares of Common Stock held by such Investors. Any amendment or waiver effected in accordance with this Section 4.2 shall be binding upon the Company, ________, the Investors and each of their respective successors and assigns. 4.3 NOTICES. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient on the date of delivery, when delivered personally or by overnight courier or sent by telegram or fax, or seventy-two (72) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such patty's address or fax number as set forth on the signature page, or as subsequently modified by written notice. 4.4 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of the Agreement shall. be enforceable in accordance with its terms. 4.5 GOVERNING LAW. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without giving effect to principles of conflicts of law. 4.6 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. 4.7 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. [Signature Page Follows] The parties hereto have executed this ________ Voting Agreement as of the date first written above. COMPANY: Nanosys, Inc. By:______________________________ Title: Lawence A. Bock, President Address:__________________ __________________ ________ VOTING AGREEMENT _____________: By:___________________________ Title:________________________ Address:______________________ ______________________ ______________________ Fax Number:___________________ ________ VOTING AGREEMENT INVESTORS: ______________________________ ________ VOTING AGREEMENT EX-10.12 4 f97636a5exv10w12.txt EXHIBIT 10.12 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 Page 1 of 14 7/7/2003 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. Page 2 of 14 7/7/2003 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. Page 3 of 14 7/7/2003 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 100% of such funds will be applied to the reimbursement until satisfied and the balance will be allocated between the parties at a to-be negotiated rate dependent upon the relative contributions and responsibilities of the parties for a given Contract. Unless otherwise agreed by the Parties in writing, Nanosys shall reimburse SAIC net 30 days after receipt of payment from its prime customer under the applicable Contract. (d) With the exception of income taxes imposed on the Parties, each Party agrees to pay all sales, use, value added, personal property or other taxes of any type that are imposed by any governmental authority on the payments due by such Party to the other Party under this Section 2. Any payment or part of a payment due under this Agreement that is not paid when due shall bear interest at the rate of 1.5% per month, or at the highest rate allowed by law, whichever is less, from its due date until paid. (e) Each Party shall have the right, at its sole expense, to inspect the books and records of the other Party for the purpose of verifying the amounts funded by SAIC and that Nanosys has complied with the payment obligations of this Section 2. Such inspections may be made not more than semi-annually, on not less than fifteen (15) days prior written notice to the other Party, during regular business hours. (f) To fund the Nanosys Resources, SAIC ASG will implement a purchase order with Nanosys which will be incrementally funded, against which Nanosys will submit monthly invoices in accordance with the terms of the purchase order. Invoices will be paid net 30 days. A proper invoice may be in Nanosys standard commercial format but must include, at a minimum, detailed costs for the period covered by the invoice and accumulated costs. Detailed costs are defined as hours by individual labor categories, fully burdened labor and other fully burdened expenses such as are described in general in 2a above and not including any fee or profit. To provide participation insight to Nanosys, SAIC ASG will prepare financial statements on an SAIC "financial-period" basis , to be made available to Nanosys, by the 5th working day after the close of the four-week accounting period for which the financial statement is prepared.. Financial statements will identify current and cumulative total costs for Labor and ODC's as defined in paragraphs 2(a) and 2(b) above. 3. Term and Termination. (a) This Agreement shall have an initial term of twenty-four (24) months commencing on the Effective Date (the "Initial Term"). Following the Initial Term, this Agreement may be extended only by the written, signed, mutual agreement of both Parties for an additional period of twelve (12) months (each, a "Renewal Term"), which such written mutual commitment shall be executed at least ninety (90) days prior to the end of the Term immediately preceding such Renewal Term. For purposes of this Agreement, the Initial Term and any Renewal Terms shall be known as the Term. (b) Either Party may terminate this Agreement as of the last day of each calender quarter including and after the first anniversary of the Effective Date, provided that such termination must be communicated to the other party in writing at least ninety (90) days prior to such termination date. Page 4 of 14 7/7/2003 (c) Upon the termination or expiration of this Agreement, each Party will destroy or return to the other Party all drawings, specifications, manuals and other printed or reproduced material (including information stored on machine readable media) provided by the disclosing Party to the receiving Party and shall use commercially reasonable efforts to destroy all backup copies of such information made by the receiving Party or its employees, wherever located. The obligations of this section do not apply to any materials and/or information of the disclosing Party that is necessary for the perfection and/or enforcement of any rights to Intellectual Property developed under this Agreement that is owned in whole or in part by the receiving Party. Any Confidential Information retained by the receiving Party hereunder shall remain subject to the provisions of the Non-Disclosure Agreement attached a Exhibit A. (d) The Parties acknowledge that termination or expiration of this Agreement shall terminate each Marketing Exhibit executed hereunder, unless the Parties expressly agree to the contrary in writing. However, any definitive agreements entered into between the Parties as a result of their efforts hereunder shall not be terminated upon the termination or expiration of this Agreement and shall survive according to their terms. Additionally, the obligations of paragraph 2(c) shall survive any termination. 4. Intellectual Property. (a) The Parties shall each retain ownership of and all right, title and interest in and to their respective pre-existing Intellectual Property (as that term is defined in Article 4(c) below), and no license or right to use therein, whether express or implied, is granted by this Agreement or as a result of the work performed by either Party hereunder or in pursuit hereof. To the extent the Parties wish to grant to the other rights or interests in pre-existing Intellectual Property, separate license agreements on mutually acceptable terms will be executed. (b) For all Intellectual Property developed under this Agreement by the Parties (hereinafter referred to as "Collaboration Intellectual Property"), all Nanotechnology Related Collaboration Intellectual Property shall be solely owned by Nanosys, regardless of inventorship. For purposes of this Agreement, "Nanotechnology Related Collaboration Intellectual Property" is Intellectual Property in [*** Redacted] nanomaterials having at least [*** Redacted] of [*** Redacted], including [*** Redacted] of such materials, composites including such materials, nano to macro world interface technology for such materials, and the fabrication and processing of such materials. All non-Nanotechnology Related Collaboration Intellectual Property such as systems, use, and applications shall be owned according to U.S. laws of intellectual property inventorship and ownership with Collaboration Intellectual Property that is solely conceived by the employees, agents or contractors of one Party being solely owned by that Party with all rights appurtenant thereto, and with non-Nanotechnology related Collaboration Intellectual Property that is jointly conceived by the employees, agents or contractors of both Parties being jointly owned, with all joint rights appurtenant thereto and without obligation to obtain consent or account to the other Party to exploit, license or transfer jointly owned Intellectual Property. (c) As used herein the term "Intellectual Property" shall mean patents, copyrights, trade marks, trade names, inventions (whether or not patentable), works of authorship, trade secrets, techniques, know-how, ideas, concepts, algorithms and all other forms of intellectual property rights. As used herein the term "pre-existing Intellectual Property" means any Intellectual Property previously conceived, developed or reduced to tangible medium as demonstrated by written documentation. 5. Warranty Disclaimer and Limitation of Liability. Neither Party makes any warranties whatsoever to the other Party, express or implied, with regard to the products or services of that Party or any matter relating to this Agreement and any Marketing Exhibits, and each Party specifically disclaims all such *** 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. Page 5 of 14 7/7/2003 warranties and conditions, including any warranty of title, merchantability, and fitness for a particular purpose. In no event shall either Party be liable to the other for any punitive, exemplary, special, indirect, incidental or consequential damages (including, but not limited to, lost profits, lost revenues, lost business opportunities, loss of use or equipment down time, and loss of or corruption to data) arising out of or relating to this Agreement or any Marketing Exhibit, regardless of the legal theory under which such damages are sought, and even if the Parties have been advised of the possibility of such damages or loss. The liability of either Party to the other for any claims, liabilities, actions or damages arising out of or relating to this Agreement or any Marketing Exhibit, howsoever caused and regardless of the legal theory asserted, including breach of contract or warranty, tort, strict liability, statutory liability or otherwise, shall not, in the aggregate, exceed the amount of out-of-pocket costs incurred by the other Party in connection with the specific Marketing Exhibit or opportunity under which such claim arose. 6. Confidentiality. In the performance of this Agreement and any Marketing Exhibits executed hereunder, certain information may be exchanged between the Parties that is proprietary and confidential in nature. This proprietary and confidential information is exchanged solely for the purposes set forth in this Agreement and any such Marketing Agreement. This proprietary and confidential information shall remain the property of the disclosing Party and shall be subject to the terms and conditions of the Non-Disclosure Agreement attached hereto as Exhibit A. Prior to any transfer of materials under this Agreement, the Parties agree that they will execute a Materials Transfer Agreement that will be separately agreed to by the Parties. 7. Export Control. The Parties to this Agreement shall comply with all applicable United States export and foreign import laws, rules, and regulations in the performance of the Parties' responsibilities and obligations under this Agreement. Without limiting the generality of the foregoing, the Parties shall not disclose any U.S.-origin products, know-how, technical data, documentation, or other products or materials furnished to it pursuant to this Agreement, to any person or in any manner which would constitute a violation of the export control regulations of the United States then in effect. 8. Disputes. Any controversy, claim or dispute ("Dispute") arising out of or relating to this Agreement shall be resolved by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect. Before commencing any such arbitration, the Parties agree to enter into negotiations to resolve the Dispute. If the Parties are unable to resolve the Dispute by good faith negotiation within Sixty (60) days of entering into such negotiations, then either Party may refer the matter to arbitration. The arbitration shall take place in the County of San Diego, State of California. The arbitrator(s) shall be bound to follow the provisions of this Agreement in resolving the dispute, and may not award any damages which are excluded by this Agreement. The decision of the arbitrator(s) shall be final and binding on the Parties, and any award of the arbitrator(s) may be entered or enforced in any court of competent jurisdiction. Any request for arbitration of a claim by either Party against the other relating to this Agreement must be filed no later than one (1) year after the date on which this Agreement expires or terminates, or such claim shall be time barred. 9. Notices. All notices, certificates, acknowledgments or other written communications (hereinafter referred to as "Notices") required to be given under this Agreement shall be in writing and shall be deemed to have been given and properly delivered if duly mailed by certified or registered mail to the other Party at its address as follows, or to such other address as either Party may, by written notice, designate to the other. Additionally, Notices sent by any other means (i.e., facsimile, overnight delivery, courier, and the like) are acceptable subject to written confirmation of both the transmission and receipt of the Notice. Page 6 of 14 7/7/2003 Larry Bock Janet V. LaFever President and CEO Vice President for Administration Nanosys, Incorporated Science Applications 2625 Hanover Street International Corporation Palo Alto, CA 94304 1710 SAIC Drive, M/S 2-3-1 Telephone (650) 331-2105 McLean, VA 22102 Fax (650) 331-2101 Telephone 703-676-4031 e-mail lbock@nanosysinc.com Fax (703)-676-2298 e-mail Janet.v.lafever@saic.com 10. Assignment. This Agreement may not be assigned, novated or otherwise transferred by operation of law or otherwise by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Any change of control of a Party shall be deemed an assignment of this Agreement that does not require the prior written consent of the other Party. For purposes of this Agreement, "change of control" means any merger, consolidation, sale of all or substantially all of the assets or sale of a substantial block of stock, of a Party. Any such assignment, novation or transfer by one Party not in accordance with this provision shall be a material breach of this Agreement and shall be grounds for immediate termination thereof by the non-breaching Party, in addition to any other remedies that may be available at law or in equity to the non-breaching Party. 11. Waiver or Modification. This Agreement may be modified, or part(s) hereof waived, only by an instrument in writing specifically referencing this Agreement and signed by an authorized representative of the Party against whom enforcement of the purported modification or waiver is sought. 12. Relationship of Parties. The Parties are acting as independent contractors in all respects with regard to this Agreement. Nothing contained in this Agreement shall be deemed or construed to create a partnership, joint venture, agency, or otherwise as participants in a joint or common undertaking. Nothing in this Agreement shall be deemed to give either Party any power to direct or control any activities of the other, including marketing activities, or any power to bind or obligate the other. No employee of one Party shall be deemed an employee of the other. 13. Publicity. Neither Party may issue a press release or make any disclosure to any other person or entity regarding the existence of or the subject matter of this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, either Party may reasonably disclose the terms of this Agreement to the extent necessary to comply with any laws or government regulations, provided that the Party that is required to disclose the Agreement gives the other Party notice of such required disclosure and takes reasonable steps to minimize the extent of such disclosure. 14. Applicable Law. This Agreement shall be governed by and construed under the laws of the State of California, without regard to its laws relating to conflict or choice of laws. 15. Entire Agreement. This Agreement, including any and all Exhibits attached hereto, which are hereby incorporated by reference, constitutes the entire agreement and understanding between the Parties and supersedes and replaces any and all prior or contemporaneous proposals, agreements, understandings, commitments or representations of any kind, whether written or oral, relating to the subject matter hereof. 16. Multiple Copies or Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the Page 7 of 14 7/7/2003 same instrument. This Agreement shall not be effective until the execution and delivery between each of the parties of at least one (1) set of the counterparts. 17. Headings. The headings and titles of the various sections of this Agreement are intended solely for convenience of reference and are not intended to define, limit, explain, expand, modify or place any construction on any of the provisions of this Agreement. IN WITNESS WHEREOF, the Parties represent and warrant that this Agreement is executed by duly authorized representatives of each Party as set forth on the date indicated below. SCIENCE APPLICATIONS NANOSYS, INCORPORATED INTERNATIONAL CORPORATION /s/ Larry Bock /s/ Janet V. LaFever ________________________________ ________________________________________ Larry Bock Janet V. LaFever ________________________________ ________________________________________ Name Name President and CEO Vice President for Administration ________________________________ ________________________________________ Title Title 9 July 03 ________________________________ ________________________________________ Date Date Page 8 of 14 7/7/2003 ATTACHMENT A AREAS OF RESPONSIBILITY 1. SAIC is anticipated to perform activities in the area of systems integration. 2. Nanosys is anticipated to perform activities in the areas of nanotechnology and module development. 3. SAIC and Nanosys are anticipated to jointly perform activities in the areas of prototype development and marketing support. 4. Nanosys agrees to make its facilities, equipment, materials, etc., available at no additional cost above Nanosys' fully burdened FTE rate, as reasonably needed to support the joint prototype development and marketing support activities. 5. SAIC agrees to make its procurement and contract preparation and administration infrastructure, and its facilities, equipment materials, etc., available at no additional cost above SAIC's fully burdened FTE rate, as reasonably needed to support the joint prototype development and marketing support activities. 6. The Advanced Systems Group will promote its relationship with Nanosys within SAIC and act as a liaison to encourage and facilitate the development of additional Marketing Exhibits among Nanosys and other organizations within SAIC. Nanosys will reasonably support such additional efforts. Page 9 of 14 7/7/2003 MARKETING EXHIBIT NO. 1 Page 10 of 14 7/7/2003 EXHIBIT A NON-DISCLOSURE AGREEMENT Page 11 of 14 7/7/2003 NOTE: Each Party has a hardcopy of the signed NDA. SAIC STANDARD NON-DISCLOSURE (CONFIDENTIALITY) AGREEMENT (PAGE 1 OF 3) NON-DISCLOSURE AGREEMENT PROPRIETARY INFORMATION This is an Agreement, effective 4 June 2003 between Science Applications International Corporation, a Delaware Corporation (hereinafter referred to as "SAIC") and Nanosys Inc., a Delaware Corporation (hereinafter referred to as "Nanosys"). It is recognized that it may be necessary or desirable to exchange information between SAIC and Nanosys regarding inorganic semiconductor nanomaterials and their applications for the purpose of using the information to discuss potential marketing areas and for marketing the opportunities identified under the SAIC/Nanosys Master Marketing Agreement. With respect to the information exchanged between the parties subsequent to this date, the parties agree as follows: (1) "Proprietary Information" shall include, but not be limited to, performance, sales, financial, contractual and special marketing information, ideas, technical data and concepts originated by the disclosing party, not previously published or otherwise disclosed to the general public, not previously available without restriction to the receiving party or others, nor normally furnished to others without compensation, and which the disclosing party desires to protect against unrestricted disclosure or competitive use, and which is furnished pursuant to this Non-Disclosure Agreement and appropriately identified as being proprietary when furnished. (2) In order for proprietary information disclosed by one party to the other to be protected in accordance with this Non-Disclosure Agreement, it must be: (a) in writing; (b) clearly identified as proprietary information at the time of its disclosure by each page thereof being marked with an appropriate legend indicating that the information is deemed proprietary by the disclosing party; and (c) delivered by letter of transmittal to the individual designated in Paragraph 3 below, or his designee. Where the proprietary information has not been or cannot be reduced to written form at the time of disclosure and such disclosure is made orally and with prior assertion of proprietary rights therein, such orally disclosed proprietary information shall only be protected in accordance with this Non-Disclosure Agreement provided that complete written summaries of all proprietary aspects of any such oral disclosures shall have been delivered to the individual identified in Paragraph 3 below, within 20 calendar days of said oral disclosures. Neither party shall identify information as proprietary which is not in good faith believed to be confidential, privileged, a trade secret, or otherwise entitled to such markings or proprietary claims. (3) In order for either party's proprietary information to be protected as described herein, it must be submitted in written form as set forth in Paragraph 2 above to the individuals identified below: SCIENCE APPLICATIONS NANOSYS INC. INTERNATIONAL CORPORATION Name: Martin Fritts, Ph.D. Name: Stephen Empedocles, Ph.D. Title: Senior Scientist Title: Director of Business Development Address 2111 Eisenhower Avenue Address: Corporate Headquarters Suite 303 2625 Hanover Street Alexandria, VA 22314 Palo Alto, CA 94304 Telephone No: 703-842-2606 Telephone No: 650-776-8530 FAX No: 703-842-2618 FAX No: 650-745-1273

*** 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. Page 12 of 14 7/7/2003 SAIC STANDARD NON-DISCLOSURE (CONFIDENTIALITY) AGREEMENT (PAGE 2 OF 3) (4) Each party covenants and agrees that it will, notwithstanding that this Non-Disclosure Agreement may have terminated or expired, keep in confidence, and prevent the disclosure to any person or persons outside its organization or to any unauthorized person or persons, any and all information which is received from the other under this Non-Disclosure Agreement and has been protected in accordance with paragraphs 2 and 3 hereof; provided however, that a receiving party shall not be liable for disclosure of any such information if the same: A. Was in the public domain at the time it was disclosed, or ____________ B. Becomes part of the public domain without breach of this Agreement, or C. Is disclosed with the written approval of the other party, or D. Is disclosed after three years from receipt of the information, or E. Was independently developed by the receiving party, or F. Is or was disclosed by the disclosing party to a third party without restriction, or G. Is disclosed pursuant to the provisions of a court order. As between the parties hereto, the provisions of this Paragraph 4 shall supersede the provisions of any inconsistent legend that may be affixed to said data by the disclosing party, and the inconsistent provisions of any such legend shall be without any force or effect. Any protected information provided by one party to the other shall be used only in furtherance of the purposes described in this Agreement, and shall be, upon request at any time, returned to the disclosing party. If either party loses or makes unauthorized disclosure of the other party's protected information, it shall notify such other party immediately and take all steps reasonable and necessary to retrieve the lost or improperly disclosed information. (5) The standard of care for protecting Proprietary Information imposed on the party receiving such information, will be that degree of care the receiving party uses to prevent disclosure, publication or dissemination of its own proprietary information. (6) Neither party shall be liable for the inadvertent or accidental disclosure of Proprietary Information if such disclosure occurs despite the exercise of the same degree of care as such party normally takes to preserve its own such data or information. (7) In providing any information hereunder, each disclosing party makes no representations, either express or implied, as to the information's adequacy, sufficiency, or freedom from defect of any kind, including freedom from any patent infringement that may result from the use of such information, nor shall either party incur any liability or obligation whatsoever by reason of such information, except as provided under Paragraph 4, hereof. (8) Notwithstanding the termination or expiration of any Teaming Agreement executed in conjunction with this Agreement, the obligations of the parties with respect to proprietary information shall continue to be governed by this Non-Disclosure Agreement. Page 13 of 14 7/7/2003 SAIC STANDARD NON-DISCLOSURE (CONFIDENTIALITY) AGREEMENT (PAGE 3 OF 3) (9) This Non-Disclosure Agreement contains the entire agreement relative to the protection of information to be exchanged hereunder, and supersedes all prior or contemporaneous oral or written understandings or agreements regarding this issue. This Non-Disclosure Agreement shall not be modified or amended, except in a written instrument executed by the parties. (10) Nothing contained in this Non-Disclosure Agreement shall, by express grant, implication, estoppel or otherwise, create in either party any right, title, interest, or license in or to the inventions, patents, technical data, computer software, or software documentation of the other party. (11) Nothing contained in this Non-Disclosure Agreement shall grant to either party the right to make commitments of any kind for or on behalf of any other party without the prior written consent of that other party. (12) The effective date of this Non-Disclosure Agreement shall be the date stipulated at the beginning of this Agreement. (13) This Non-Disclosure Agreement shall be governed and construed in accordance with the laws of the State of California. SCIENCE APPLICATIONS NANOSYS INC. INTERNATIONAL CORPORATION Signature: _____________________________ Name: Name: Janet V. LaFever Title: Deputy Group Director of Contracts Title: Address: 1710 SAIC Drive, M/S 2-3-1 Address: 2625 Hanover Street McLean, VA 22102 Palo Alto, CA 94304 Telephone No: (703) 676-4031 Telephone No: FAX No: (703) 676-2298 FAX No.

*** 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. Page 14 of 14 7/7/2003 EX-10.14 5 f97636a5exv10w14.txt EXHIBIT 10.14 EXHIBIT 10.14 COOPERATIVE DEVELOPMENT AGREEMENT This Cooperative Development Agreement (the "Agreement") is entered into as of December 15, 2003 (the "Effective Date") by and between Nanosys Inc. ("Nanosys"), a Delaware corporation with a place of business at 2625 Hanover Street, Palo Alto, California 94304 and Intel Corporation ("Intel"), a Delaware corporation with a place of business at 2200 Mission College Boulevard, Santa Clara, California 95052. RECITALS Whereas: A. Intel has expertise with respect to memory devices and the development, design, and manufacture thereof, and Nanosys has expertise with respect to the design and synthesis of nanomaterials and the development of nanotechnology-enabled systems. B. Intel and Nanosys desire to enter into an agreement to cooperate to investigate the feasibility of using [*** Redacted] in memory devices. AGREEMENT NOW, THEREFORE, the parties agree as follows: 1. DEFINITIONS. In this Agreement, the following words and expressions shall have the following meanings: 1.1 "Background IP" of a party means any and all intellectual property rights that such party either (i) owned, controlled, or had rights with respect to prior to the Effective Date; or (ii) develops, or acquires ownership, control, or rights with respect to, during the term of this Agreement but which is not Collaboration IP. 1.2 "CNDA" means the parties' October 11, 2002 Corporate Non-Disclosure Agreement #5085138. 1.3 "Collaboration" means the research and development work set forth in Exhibit A hereto. 1.4 "Collaboration Commencement Date" means the date of commencement of the Collaboration under Section 2.1 below. 1.5 "Collaboration IP" shall mean (i) all Intellectual Property rights in Collaboration Technology, which Intellectual Property rights were created by the parties' Listed Representatives (solely or jointly) in the course of working on the Collaboration and (ii) all Intellectual Property of either party conceived or created by or for either party ("Party") prior to the termination or *** 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. expiration of the Collaboration based on the other party's Confidential Information disclosed to such Party in connection with the Collaboration. 1.6 "Collaboration Right" means any patent, patent right (or similar right under foreign law), utility model, copyright or mask work right issued or registered as a result of a Filing. 1.7 "Collaboration Technology" means (i) any and all Technology that either party's Listed Representatives conceive (solely or jointly) in the course of working on the Collaboration, and (ii) any and all Technology conceived (solely or jointly) prior to the termination or expiration of the Collaboration by or for either party ("Party") based on Confidential Information of the other party disclosed to such Party in connection with the Collaboration, but, in each case, excluding Technology resulting from University/Government Activities. 1.8 "Confidential Information" is defined in the CNDA, as set forth in Section 6 below. 1.9 "Conventional Processes" means standard semiconductor manufacturing processes (where "standard" semiconductor manufacturing processes may include Intel proprietary semiconductor manufacturing processes) and reasonable incremental improvements (e.g. standard processes) thereof, including those resulting in one or more features of [*** Redacted] of [*** Redacted], and the resultant devices fabricated using such standard semiconductor manufacturing processes (but excluding such resultant devices incorporating Deposited Nanomaterials). 1.10 "Deposited Nanomaterials" means shape or size controlled [*** Redacted], such as [*** Redacted], and [*** Redacted], having at least one cross sectional dimension of less than 500 nanometers and such that the size related properties of the nanomaterials are advantageous to their function, that are subsequently [*** Redacted] as such nanomaterials [*** Redacted] 1.11 "Exclusivity Date" means the earlier of (i) the Collaboration Commencement Date or (ii) March 31, 2004. 1.12 "Exclusivity Period" means the period from the Effective Date until the earlier of (i) March 31, 2006, (ii) the Exclusivity Expiration (as defined in Section 3.3 below), or (iii) any termination of this Agreement. 1.13 "Field of Interest" means memory devices based on [*** Redacted] used primarily as [*** Redacted] (e.g. this would not include [*** Redacted] devices, [*** Redacted], or [*** Redacted]). 1.14 "Filing" means any application for or registration of a patent, patent right (or similar right under foreign law), utility model, copyright or mask work right with respect to Collaboration Technology. 1.15 "Intel's Exclusive Field" means (i) compositions, devices, articles and methods involving or involved in memory and logic devices, but only if such compositions, devices, *** 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. -2- articles or methods are outside of Nanosys' Exclusive Field, and in each case excluding Conventional Processes, and (ii) all Conventional Processes other than Conventional Processes used in conjunction with Deposited Nanomaterials. For the avoidance of doubt, (i) Conventional Processes used in conjunction with Deposited Nanomaterials are not in Intel's Exclusive Field nor in Nanosys' Exclusive Field and (ii) devices incorporating Deposited Nanomaterials are in Nanosys' Exclusive Field. 1.16 "Intellectual Property" shall mean patents (and similar rights under foreign law, and applications therefor), trade secrets, copyrights and mask works. 1.17 "Listed Representatives" of a party means, at any time, that party's employees, agents, and contractors then working on the Collaboration on behalf of that party, as such individuals are identified by that party by written notice to the other party. A party's notice of Listed Representatives shall be in effect until a subsequent such notice by that party modifying the list. Each party shall at all times in good faith maintain an accurate list of Listed Representatives. At commencement, Intel's Listed Representatives shall include [*** Redacted], and Nanosys' Listed Representatives shall include [*** Redacted]. 1.18 "Nanosys' Exclusive Field" means compositions, devices, articles and methods involving or involved in Deposited Nanomaterials, but excluding Conventional Processes. 1.19 "Nanosys Facility" means and includes Nanosys' operations at 2625 Hanover Street in Palo Alto, CA, any ancillary engineering facilities owned or controlled by Nanosys, and any successor facilities owned or controlled by Nanosys during the term of this Agreement.. 1.20 "Nanosys IP" shall mean Nanosys' Intellectual Property Rights including Background IP and Collaboration IP. 1.21 "Technology" means any and all developments, ideas, designs, inventions, information, know-how, and technology. 1.22 "University/Government Activities" means any and all research, development, and other activities performed either (i) with any university (or other educational institution) funding or any government or government agency (U.S. or otherwise) funding, (ii) in collaboration with any university (or other educational institution) or with any government or government agency (U.S. or otherwise), or (iii) with a primary purpose of obtaining government funding. 2. COLLABORATION WORK. 2.1 Each party shall use its commercially reasonable efforts to perform its Collaboration obligations as set forth in Exhibit A. It is understood and agreed that the Collaboration is in the nature of research, that successful completion of the research is not assured, and that, so long as a party uses its commercially reasonable efforts as set forth in the preceding sentence, that party will not be in default for any failure to achieve any particular result or to complete any particular deliverable. The parties shall commence the Collaboration December 15, 2003, provided that on one or more written notices to Nanosys received by Nanosys at least fifteen *** 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. -3- [*** Redacted] prior to the date when the Collaboration is then scheduled to commence (provided that if this Agreement is signed by Intel after November 30, 2003, Intel shall be entitled to provide the initial such notice on the date of such signature, but only if such signature date is on or before December 10, 2003), Intel shall be entitled to delay commencement of the Collaboration to any date on or before March 31, 2004. Delays resulting in commencement of the Collaboration after December 31, 2003 shall be subject to the payments in Section 3.2 below. It is understood and agreed that commencement of the Collaboration may not be delayed past March 31, 2004. 2.2 Nanosys agrees to allocate to the Collaboration at least [*** Redacted] full-time equivalent individuals during the first quarter of the Collaboration, at least [*** Redacted] full-time equivalent individuals during the second quarter of the Collaboration, at least [*** Redacted] full-time equivalent individuals during the third quarter of the Collaboration, and at least "X" full-time equivalent individuals (FTEs) during the fourth quarter of the Collaboration, where "X" is a number between [*** Redacted] and [*** Redacted], inclusive, chosen by Intel by written notice to Nanosys at least [*** Redacted] days prior to the beginning of such fourth quarter. If Intel fails to provide such notice, "X" will be deemed to equal [*** Redacted]. 2.3 It is the parties' mutual intent that most of the work and deliverable creation under this Agreement to investigate [*** Redacted] memory feasibility shall occur at the Nanosys Facility. Nanosys shall host Intel's Listed Representatives on a mutually agreed upon basis, such agreement not to be unreasonably withheld, on site at the Nanosys Facility to work on this project and get deeply involved in complementary collaborative activities (e.g., device integration and characterization, but not the synthesis of Deposited Nanomaterials). Information on the design and modeling of Deposited Nanomaterials, as well as [*** Redacted], [*** Redacted], and [*** Redacted] related to Deposited Nanomaterials, shall be provided to Intel's Listed Representatives, but in each case only as reasonably required for device integration and characterization for the purpose of the Collaboration, including but not limited to, making an informed decision about the complexity of integrating Deposited Nanomaterials with Conventional Processes. Nanosys' Listed Representatives may also be invited to work at Intel's facilities, for circumstances including but not limited to, using a metrology tool that may not be available at the Nanosys Facility. The parties shall adhere to the following guidelines in connection with Listed Representatives working at the site of the other party: (a) all employees of one party visiting the other party's facility shall comply with the rules and regulations applicable at that facility as communicated to such employees, and each party retains the right to reasonably refuse admittance for violation of these rules; (b) the hosting party shall maintain reasonable firewall procedures so that employees of a visiting party are not exposed to the confidential information of a third party; (c) each party shall maintain reasonable firewall procedures so that third parties at a party's site are not exposed to the confidential information of the other party or non-public information about the status of this Collaboration; and (d) in the case of Nanosys only, cubicle space, secure Internet access, and badge access shall be made available for use by Intel's Listed Representatives when such a person or persons are working on site at the Nanosys Facility. 2.4 Except as set forth in Section 5, any and all materials supplied by one party to the other party shall be used by the recipient only to perform its Collaboration obligations. *** 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. -4- 2.5 Except as set forth in Section 3 below, each party shall bear its own costs and expenses in carrying out the Collaboration. 2.6 Except for University/Government Activities, each party agrees to work exclusively with the other party in the Field of Interest during the Exclusivity Period. 2.7 The following persons ("Collaboration Managers") shall be appointed to direct the conduct of the parties with respect to the Collaboration: (a) For Intel: Eric Hannah Sector Director, Intel Research Intel Corporation 2200 Mission College Blvd. Mail Stop RN6-661 Santa Clara, CA 95052 Phone: 408-765-4441 Fax: 408-765-6271 E-mail: eric.hannah@intel.com (b) For Nanosys: Calvin Y.H. Chow Chief Executive Officer Nanosys Inc. 2625 Hanover Street Palo Alto, CA 94304 Phone: (650) 331-2102 Fax: (650) 331-2101 E-mail: cchow@nanosysinc.com The Collaboration Managers shall have the authority to approve in writing changes to Exhibit A, including, as applicable, specifications, scope of work, and milestones. The Collaboration Managers shall have no other authority to amend this Agreement. Each party may change its Collaboration Manager on written notice to the other party, provided that the replacement Collaboration Manager is at a similar level of authority at the party making the replacement, or as otherwise agreed by the parties. 2.8 If either party desires to propose changes to the Collaboration, it shall notify the other party in writing of such proposal and the reasons for such proposal. The other party will give each such proposal its prompt attention. If Intel and Nanosys agree to any such change, the change shall be evidenced by a written confirmation signed by the Collaboration Managers of both parties. Such a written confirmation shall amend the terms of Exhibit A. 2.9 If the Collaboration is completed successfully (i.e., neither party has terminated this Agreement under Section 10, and the parties agree that the subject technology is promising and warrants pursuing further), then it is the parties' intent that, at Intel's request, the parties will negotiate, in good faith, during the Exclusivity Period to enter into a follow-on development agreement (the "Development Agreement") to further develop and commercialize the technology -5- which is the subject of this Agreement If Intel requests such a negotiation, then, for the duration of the Exclusivity Period, Nanosys agrees that Nanosys will not enter into any discussions regarding the subject of the Collaboration with any third party. The parties further intend that any such Development Agreement would reflect that, if the development and commercialization of this technology are successful, and Intel has a good-faith intent to use the Collaboration Materials in anticipation of a high-volume manufacturing ramp, then: (a) It is the parties' mutual intent that the parties would negotiate in good faith a supply agreement that reasonably assures the supply of Deposited Nanomaterials and any related Nanosys enabling technology or rights to Intel (for use in the Field of Interest, the "Collaboration Materials"). Upon Intel's request to commence such negotiations, the parties would negotiate diligently and in good faith to reach agreement. Further, if at the expiration of the Development Agreement the parties have not reached agreement, notwithstanding their diligent and good faith efforts, then Nanosys would not enter into any supply agreement, within six (6) months after the expiration of the Development Agreement, to supply Collaboration Materials to any third party, in the Field of Interest, on terms which are more favorable to that third party than the terms last offered by Nanosys to Intel during this negotiation. In the first instance, the parties would use reasonable efforts to qualify Nanosys as a supplier to Intel of the Collaboration Materials. Nanosys acknowledges that, in order to be selected as an Intel qualified supplier, Nanosys must demonstrate supply capability (in areas including, but not limited to, cost, quality, and availability). Nanosys further acknowledges that the supply agreement would include a "most favored customer" provision which guarantees that, at any time, Nanosys' price to Intel for Collaboration Materials is no higher than the price charged by Nanosys to any third party for Collaboration Materials, in the Field of Interest, on similar terms and conditions. Further, if the parties enter into a supply agreement, the supply agreement will include provisions to help ensure a reliable supply of Collaboration Materials to Intel, which may include (i) safety stock and (ii) if Nanosys is unable to reasonably provide Intel with the Collaboration Materials, then upon notice from Intel, Nanosys' would take prompt action to arrange for such supply, which may include designating a subcontractor, subject to Intel's consent of such subcontractor (which shall not be unreasonably withheld), to manufacture such quantity of Collaboration Materials that cannot be obtained from Nanosys, providing such subcontractor agrees to pay Nanosys a reasonable royalty and agrees to reasonable confidentiality, intellectual property protection, and commercial provisions. Nanosys agrees to fully reasonably cooperate with Intel and the chosen subcontractor in the transfer of technology and sufficient collaborative engineering resources necessary to allow the subcontractor to produce Collaboration Materials for Intel's intended use as soon as practicable after Intel's request. Nanosys reserves the right to seek any and all legal recourse against the subcontractor if confidentiality or other provisions of the agreement between Nanosys and the subcontractor are violated. (b) It is the parties' mutual intent that, if the parties have not entered into a supply agreement as set forth in Section 2.9(a), notwithstanding their diligent and good faith efforts, then upon Intel's request within [*** Redacted] after the expiration of the Development Agreement, Nanosys would designate a contract manufacturer, subject to Intel's consent of such contract manufacturer (which would not be unreasonably withheld), to manufacture Collaboration Materials, licensing such contract manufacturer to applicable Nanosys intellectual property on reasonable and non-discriminatory terms, provided that such contract manufacturer agrees to pay Nanosys a reasonable royalty and agrees to reasonable confidentiality, intellectual property *** 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. -6- protection, and commercial provisions. Nanosys shall fully and reasonably cooperate with Intel and the chosen contract manufacturer in the transfer of technology and sufficient collaborative engineering resources necessary to allow the contract manufacturer to produce Collaboration Materials for Intel's intended use as soon as practicable after Intel's request. Nanosys reserves the right to seek all legal recourse against the contract manufacturer if confidentiality or other provisions of the license between Nanosys and the contract manufacturer are violated. If Nanosys fails to enter into a license with a contract manufacturer as contemplated in this Section 2.9(b) within [*** Redacted] after Intel's request to Nanosys, then Nanosys would be deemed not to be entering the business of high-volume supply of Collaboration Materials. (c) The parties further intend that if Nanosys chooses not to enter into the business of supply of Collaboration Materials, and Nanosys does not license the necessary enabling technology to a third party manufacturer as provided in Section 2.9(b) above, then Nanosys would provide to Intel a royalty-bearing, capped fee, worldwide, perpetual, non-exclusive license under Nanosys IP, to have made Collaboration Materials and to make, have made, use, sell, offer to sell and import, products using or incorporating Collaboration Materials. 3. PAYMENTS TO NANOSYS. 3.1 Intel shall pay to Nanosys the following payments at the following times:
TIME OF PAYMENT AMOUNT OF PAYMENT - ---------------------------------------- ------------------------ Collaboration Commencement Date $ [*** Redacted]. Three (3) months after the Collaboration $ [*** Redacted]. Commencement Date Six (6) months after the Collaboration $ [*** Redacted]. Commencement Date Nine (9) months after the Collaboration $ [*** Redacted]*. Commencement Date
* $[*** Redacted] per FTE, according to the number of FTEs chosen by Intel, pursuant to Section 2.2 above, for the fourth quarter of the Collaboration. For the avoidance of doubt, the latter two payments (of $[*** Redacted] and ([*** Redacted])) will not be due if Intel terminates this Agreement under Section 10.2 below. 3.2 For each month (or portion thereof) that Intel delays the Collaboration Commencement Date, pursuant to Section 2.1 above, to a date after December 31,2003, Intel shall pay to Nanosys [*** Redacted] dollars ($[*** Redacted]) (prorated on a day for day basis for partial months). Such payment shall be due and payable within thirty (30) days after Intel's notice of delay. (By way of example only, if upon execution of this Agreement Intel notified Nanosys of a Collaboration Commencement Date delay to January 15, 2004, Intel would pay Nanosys $[*** Redacted] within thirty (30) days after such notice date. If on December 15,2003 Intel then notified Nanosys of a further delay *** 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. -7- in the Collaboration Commencement Date, until March 10, 2004, Intel would pay to Nanosys an additional $[*** Redacted] by January 14, 2004 (i.e., in this example, a total of $[*** Redacted]).) 3.3 As of the Effective Date, the "Exclusivity Expiration" shall be fifteen (15) months after the Exclusivity Date. (i) Intel shall be entitled to extend the Exclusivity Expiration by three (3) months, to eighteen (18) months after the Exclusivity Date, by written notice to Nanosys no later than fourteen (14) months after the Exclusivity Date, and payment to Nanosys of [*** Redacted] dollars ($[*** Redacted]). This payment shall be due and payable no later than fifteen (15) months after the Exclusivity Date. (ii) If Intel has extended the Exclusivity Expiration pursuant to paragraph (i) hereinabove, then Intel shall be entitled to further extend the Exclusivity Expiration by an additional three (3) months, to twenty-one (21) months after the Exclusivity Date, by written notice to Nanosys no later than seventeen (17) months after the Exclusivity Date, and payment to Nanosys of [*** Redacted] dollars ($[*** Redacted]). This payment will be due and payable no later than eighteen (18) months after the Exclusivity Date. (iii) If Intel has extended the Exclusivity Expiration pursuant to paragraph (ii) hereinabove, then Intel shall be entitled to further extend the Exclusivity Expiration by an additional three (3) months, to twenty-four (24) months after the Exclusivity Date, by written notice to Nanosys no later than twenty (20) months after the Exclusivity Date, and payment to Nanosys of [*** Redacted] dollars ($[*** Redacted]). This payment will be due and payable no later than twenty-one (21) months after the Exclusivity Date. Amounts paid by Intel pursuant to this Section 3.3 may, at Intel's option, be credited to any payment of Intel to Nanosys under any development collaboration by the parties, in the Field of Interest, entered into prior to termination of the Exclusivity Period. 4. OWNERSHIP. 4.1 Each party shall retain its ownership of its Background IP. No rights are granted pursuant to this Agreement with respect to any Background IP. 4.2 Subject to the licenses set forth in Section 5 below, Nanosys shall own all Collaboration IP. Subject to the licenses set forth in Section 5 below, Intel irrevocably hereby agrees to, and hereby does, transfer, convey and assign to Nanosys all of Intel's right, title, and interest in the Collaboration IP, including without limitation all Intellectual Property rights with respect thereto. Intel agrees to execute such documents, render such assistance, and take such other action as Nanosys may reasonably request to apply for, register, perfect, confirm, and protect Nanosys' rights in the Collaboration IP. Subject to Sections 5, 6, and 7 below, ownership of Collaboration Technology shall vest in Nanosys the exclusive right to determine whether and how the Collaboration IP is to be protected and exercised throughout the world. 5. LICENSES. *** 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. -8- 5.1 Subject to the terms and conditions of this Agreement, Nanosys agrees to grant, and hereby grants, to Intel a worldwide, nonexclusive (except as set forth in Section 5.1(i) hereinbelow), nontransferable (except as set forth in Section 11.7 below), royalty free license, only under Collaboration IP, to design, develop, make, have made, use, import, offer to sell, and sell or distribute any product or item and to practice any method or process, provided that: (i) this license shall be exclusive (including as to Nanosys) for use of the Collaboration IP in Intel's Exclusive Field, and (ii) no license is granted by Nanosys for use of any Collaboration IP in Nanosys' Exclusive Field. 5.2 Intel shall have the right to grant sublicenses (and authorize the granting of further sublicenses) under the license granted to it in Section 5.1 above. 5.3 No party shall be obligated to provide any Technology or deliverable in connection with the licenses granted in this Section 5; all deliverables under this Agreement are specified exclusively in Exhibit A. 5.4 Notwithstanding this Section 5 or Section 2.4, nothing in this Agreement shall be construed as preventing Intel or Nanosys employees from using [*** Redacted] of the Confidential Information of the other party, provided that such use of [*** Redacted] shall not grant to Intel or Nanosys any implied license to any of the other party's [*** Redacted]. [*** Redacted] means information in [*** Redacted] which is [*** Redacted]. An [*** Redacted] if the [*** Redacted] the information for the purpose of [*** Redacted]. 5.5 For purposes of this Section 5.5, the following definitions apply: "Applicable Intel Patents" means those claims of Intel patents which claim inventions conceived by Intel during the 24 months following the termination or expiration of the Collaboration, which inventions were based on Nanosys' Confidential Information. "Applicable Nanosys Patents" means those claims of Nanosys patents which claim inventions conceived by Nanosys during the 24 months following the termination or expiration of the Collaboration, which inventions were based on Intel's Confidential Information. "Applicable Intel Sublicensable Patents" means those claims of Intel patents which claim inventions conceived by Intel during the 12 months following the termination or expiration of the Collaboration, which inventions were based on Nanosys' Confidential Information. "Applicable Nanosys Sublicensable Patents" those claims of Nanosys patents which claim inventions conceived by Nanosys during the 12 months following the termination or expiration of the Collaboration, which inventions were based on Intel's Confidential Information. *** 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. -9- (a) Subject to the terms and conditions of this Agreement, Nanosys agrees to grant, and hereby grants, to Intel a worldwide, nonexclusive, nontransferable (except as set forth in Section 11.7 below), royalty free license, only under the Applicable Nanosys Patents, to design, develop, make, have made, use, import, offer to sell, and sell or distribute any product or item and to practice any method or process, provided that this license shall be limited to use within Intel's Exclusive Field and the Field of Interest. Intel shall have the right to grant sublicenses (and authorize the granting of further sublicenses) under the license granted to it in this Section 5.5(a), as provided in Section 5.5(b) below. (b) Under the licenses granted under Section 5.5(a) above, but only under Applicable Nanosys Sublicensable Patents, and only outside of the Field of Interest, Intel shall have the right to grant sublicenses (and authorize the granting of further sublicenses). (c) Subject to the terms and conditions of this Agreement, Intel agrees to grant, and hereby grants, to Nanosys a worldwide, nonexclusive, nontransferable (except as set forth in Section 11.7 below), royalty free license, only under the Applicable Intel Patents, to design, develop, make, have made, use, import, offer to sell, and sell or distribute any product or item and to practice any method or process, provided that this license shall be limited to use within Nanosys' Exclusive Field and the Field of Interest. Nanosys shall have the right to grant sublicenses (and authorize the granting of further sublicenses) under the license granted to it in this Section 5.5(c), as provided in Section 5.5(d) below. (d) Under the licenses granted under Section 5.5(c) above, but only under Applicable Intel Sublicensable Patents, and only outside of the Field of Interest, Nanosys shall have the right to grant sublicenses (and authorize the granting of further sublicenses). 6. CONFIDENTIAL INFORMATION. 6.1 The CNDA shall apply to this Agreement, provided that, for purposes of this Agreement: (i) "Confidential Information" shall also include information disclosed as a result of access to the other party's premises or property, which information relates to any information in tangible form subject to clause (i) of Section 1 of the CNDA, whether such disclosure or access occurs prior to, concurrent with, or following the disclosure of such information in tangible form. (ii) In Section 2 of the CNDA, "a need to know" means a need to know for the purposes of this Agreement. (iii) The third sentence of Section 6 of the CNDA shall not apply to this Agreement; rather, the Termination and Survival sections of this Agreement shall govern the disposition of Confidential Information. (iv) If the CNDA is terminated, the terms and conditions of the CNDA shall continue to apply to disclosures in connection with this Agreement. -10- (v) In addition, each party shall be entitled to disclose the other party's Confidential Information to the extent such disclosure is required by the order or requirement of a court, administrative agency, or other governmental body; provided, that the party required to make the disclosure shall provide at least fifteen (15) days (or such lesser period as may apply if the party required to make the disclosure received fewer than fifteen (15) days notice of the disclosure obligation), advance written notice thereof to enable the other party to seek a protective order or otherwise prevent such disclosure. 7. INTELLECTUAL PROPERTY PROTECTION. 7.1 Nanosys IP. Nanosys shall have the sole right at its expense to prepare, file and prosecute Filings related to any Collaboration Technology, subject to Section 7.2 below. 7.2 Protection of Collaboration Technology. The parties shall confer on (i) protection of Collaboration Technology (other than Collaboration Technology developed solely by Nanosys) through Filings and/or through maintenance of the Collaboration IP as a trade secret, and (ii) preparation, filing, prosecution and maintenance of Filings and Collaboration Rights related to Collaboration Technology (other than Collaboration Technology developed solely by Nanosys). Nanosys shall be responsible for all Filing(s) in all jurisdictions for Collaboration IP. Provided however, if only Intel wants to protect a Collaboration development through a Filing on that development, then Intel shall be entitled to do so, at its sole expense, and in such a case shall be deemed sole owner of the affected Collaboration Right and Filing. In such event, Intel shall be deemed to have granted to Nanosys a nonexclusive (except as set forth hereinbelow), irrevocable, perpetual, fully paid, royalty free license, with right to sublicense (and authorize the granting of further sublicenses), only under such Collaboration Right, without restriction, including to practice any process or method, and to design, develop, make, use, have made, offer to sell, and sell or distribute any product or item, provided that (A ) this license shall be exclusive (including as to Intel) for use of the Collaboration Right in Nanosys' Exclusive Field and (B) no license is granted by Intel for use of the Collaboration Right in Intel's Exclusive Field. 7.3 Infringement Prosecution. (i) Nanosys shall have the sole right to prosecute claims of infringement or misappropriation of Collaboration IP, where such infringement or misappropriation is primarily in Nanosys' Exclusive Field. In each such case, Intel shall, at Nanosys' expense, take all actions reasonably requested by Nanosys in such prosecution, subject to indemnification by Nanosys of Intel for any liability to third parties resulting from such participation. (ii) Intel shall have the sole right to prosecute claims of infringement or misappropriation of Collaboration IP where such infringement or misappropriation is primarily in Intel's Exclusive Field. In each such case, Nanosys shall, at Intel's expense, take all actions reasonably requested by Intel in such prosecution (which may include participation as a named plaintiff, subject to indemnification by Intel of Nanosys for any liability to third parties resulting from such participation as a plaintiff). -11- 7.4 Further Assurances. At any time or from time to time on and after the date of this Agreement, each party shall at the request of the other party (i) execute, and deliver or cause to be delivered, all such consents, documents or further instruments of license, assignment, and transfer, and (ii) take or cause to be taken all such other actions, in each case at the other party's expense and as the other party may reasonably deem necessary or desirable in order for the other party to obtain the full benefits of Section 4.2 and this Section 7 and the activities contemplated thereby. 8. WARRANTY DISCLAIMER. NEITHER NANOSYS NOR INTEL MAKES ANY WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. WITHOUT LIMITING THE FOREGOING, ALL DELIVERABLES AND OTHER ITEMS ARE PROVIDED BY EACH PARTY "AS IS," AND ALL LICENSES GRANTED BY EACH PARTY ARE GRANTED "AS IS." 9. LIMITATION OF LIABILITY. NEITHER PARTY SHALL HAVE ANY LIABILITY FOR COSTS OF SUBSTITUTE PRODUCTS OR SERVICES, OR FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL OR INDIRECT DAMAGES OR LIABILITIES, INCLUDING WITHOUT LIMITATION SUCH DAMAGES OR LIABILITIES FOR LOSS OF REVENUE, LOSS OF BUSINESS, FRUSTRATION OF ECONOMIC OR BUSINESS EXPECTATIONS, LOSS OF PROFITS, OR COST OF CAPITAL, REGARDLESS OF THE FORM OF THE ACTION, WHETHER IN CONTRACT OR OTHERWISE, EVEN IF ANY REPRESENTATIVE OF A PARTY HERETO HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL EITHER PARTY'S LIABILITY UNDER THIS AGREEMENT EXCEED THE AMOUNTS PAID OR PAYABLE BY INTEL TO NANOSYS UNDER THIS AGREEMENT, provided that, as to Intel, this shall be in addition to Intel's obligation to pay such amounts. These limitations, however, shall not apply to either party's liability, if any, (i) for contribution or indemnity with respect to liability to third parties for personal injury, death, or damage to tangible property, (ii) exceeding the scope of the licenses in Section 5 (Licenses), (iii) breach of Section 6 (Confidential Information), or (iv) infringement of the other party's intellectual property rights. 10. TERM AND TERMINATION. 10.1 Term. This Agreement shall commence as of the Effective Date and shall continue until the expiration of the Exclusivity Period, unless earlier terminated as set forth herein. 10.2 Q2 Checkpoint. Intel shall be entitled to terminate this Agreement, for its convenience, on notice to Nanosys at any time within ten (10) days after completion of the "Q2 Formal Review Meeting" milestone in Exhibit A. 10.3 Termination Due to Bankruptcy, etc. In the event a party: (i) becomes insolvent; (ii) voluntarily files or has filed against it a petition under applicable bankruptcy or insolvency laws which such party fails to have released within thirty (30) days after filing; -12- (iii) proposes any dissolution, composition or financial reorganization with credit ors or if a receiver, trustee, custodian or similar agent is appointed or takes possession with respect to all or substantially all property or business of such party; or (iv) such party makes a general assignment for the benefit of creditors; then the other party may terminate this Agreement by notice to the non-terminating party. 10.4 Termination Due to Breach. Either party shall have the right to terminate this Agreement if the other party is in material breach of any material term or condition of this Agreement and fails to remedy such breach within thirty (30) days after receipt of written notice of such breach given by the non-breaching party. To terminate this Agreement, the nonbreaching party must provide further written notice of such termination to the breaching party prior to a cure of the breach. 10.5 Survival. Neither the termination nor expiration of this Agreement shall relieve either party from its obligations to pay the other any sums accrued hereunder. Upon the termination or expiration of this Agreement, (i) Intel shall promptly return to Nanosys all Nanosys Confidential Information and (ii) Nanosys shall promptly return to Intel all Intel Confidential Information. The parties agree that their respective rights, obligations and duties under Sections 1, 2.9, 4 (Ownership), 5 (Licenses), 6 (Confidential Information), 7 (Intellectual Property Protection), 8 (Warranty Disclaimer), 9 (Limitation of Liability), 10.5 (Survival), and 11 (Miscellaneous) shall survive any termination or expiration of this Agreement. 11. MISCELLANEOUS. 11.1 Announcement. On or after the Effective Date, Nanosys shall be entitled to issue a press release pertaining to this Agreement, upon written consent from Intel to the content of the press release. 11.2 Notices. All notices, requests, demands and other communications given or made in accordance with the provisions of this Agreement shall be in writing and shall be deemed to have been given (i) three days after mailing when mailed (by registered or certified mail, postage paid, only), (ii) on the date sent when made by facsimile transmission with confirmation of receipt (with hard copy to follow by registered or certified mail, postage paid, only), and (iii) on the date received when delivered in person or by courier, provided that notices and communications with respect to administrative and project matters (e.g., changes in meeting times and dates, program specifications, and specific program development activities) (but not legal matters or matters pertaining to or establishing rights under this Agreement), may be provided by e-mail and will be deemed given when sent. All notices shall be provided to the address set forth below or such other place as such party may from time to time designate in writing. Each party may alter its address set forth below by notice in writing to the other party, and such notice shall be considered to have been given three (3) days after the sending thereof: If to Nanosys: Nanosys Inc. 2625 Hanover Street Palo Alto, California 94304 Fax:(650)331-2101 *** 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. -13- Attn: Calvin Y.H. Chow E-mail: cchow@nanosysinc.com with a copy, for matters pertaining to intellectual property, to: Nanosys Inc. 2625 Hanover Street Palo Alto, California 94304 Fax: (650) 331-2101 Attn: Matt Murphy E-mail: mmurphy@nanosysinc.com If to Intel: Intel Corporation 2200 Mission College Blvd. Santa Clara, CA 95052 ATTN: General Counsel 11.3 Amendment; Waiver. This Agreement may be amended, modified or supplemented only by a writing that is signed by duly authorized representatives of both parties and that specifically identifies the provision or provisions of this Agreement being amended, modified or supplemented. No term or provision hereof will be considered waived by either party, and no breach excused by either party, unless such waiver or consent is in writing signed on behalf of the party against whom the waiver is asserted. Without limiting the foregoing, no consent by either party to, or waiver of, a breach by either party, whether express or implied, will constitute a consent to, waiver of, or excuse of any other, different, or subsequent breach by either party. 11.4 Severability. If any provision hereof should be held invalid, illegal or unenforceable in any jurisdiction, the parties shall negotiate in good faith a valid, legal and enforceable substitute provision that most nearly reflects the original intent of the parties and all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the parties hereto as nearly as may be possible. Such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. 11.5 Governing Law. This Agreement shall be governed by and construed under the laws of the United States and the State of California, not including its conflict of law provisions. 11.6 Force Majeure. Except for the payment of sums accrued, neither party will be liable for any failure or delay in performance under this Agreement due to fire, explosion, earthquake, storm, flood or other weather, unavailability of necessary utilities or raw materials, war, insurrection, riot, act of God or the public enemy, law, act, order, proclamation, decree, regulation, ordinance, or instructions of government or other public authorities, or any other event beyond the reasonable control of the party whose performance is to be excused. If, however, a party's performance is prevented for sixty (60) days, then the other party shall be entitled to terminate this Agreement on written notice to the party suffering the force majeure at any time prior to resumption of performance by the party suffering the force majeure. *** 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. -14- 11.7 Assignment. Neither party may transfer or assign this Agreement, whether by operation of law or otherwise, without the prior written consent of the other party and any attempt to do so without such consent will be void. This Agreement will bind and inure to the benefit of the parties and their respective permitted successors and permitted assigns. Notwithstanding anything in this Agreement, however, either party may assign this Agreement without the other party's prior written consent to a successor to all or substantially all of its assets pertaining to the Collaboration (e.g., the surviving entity in a merger or consolidation in which it participates or to a purchaser of all or substantially all of its assets pertaining to the Collaboration), so long as such surviving entity or purchaser shall assume (expressly in writing or by operation of law) the performance of all of the terms of this Agreement. 11.8 No Third Party Beneficiaries. No person or entity other than Intel and Nanosys will have any rights or obligations pursuant to this Agreement. 11.9 Relationship of the Parties. The parties to this Agreement are independent contractors. There is no relationship of agency, partnership, joint venture, employment, or franchise between the parties and this Agreement is negotiated at arm' s length with both sides represented by counsel of their choice. Neither party has the authority to bind the other or to incur any obligation on its behalf. Any such act will create a separate liability in the party so acting to any and all third parties affected thereby. 11.10 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. If this Agreement is executed in counterparts, no signatory hereto shall be bound until both the parties named below have duly executed or caused to be duly executed a counterpart of this Agreement. 11.11 Confidentiality of Agreement. Subject to Section 6.1(v) and Section 11.1, each party agrees that the existence of and the terms and conditions of this Agreement shall be treated as confidential, provided, however, that each party may disclose the terms and conditions of this Agreement: (i) as required by any court or other governmental body; (ii) as otherwise required by law; (iii) to legal counsel of the parties; (iv) in connection with the requirements of a public offering or securities filing; (v) in confidence, to accountants, banks, and financing sources and their advisors; (vi) in confidence, in connection with the enforcement of this Agreement or rights under this Agreement; or (vii) in confidence, in connection with a merger or acquisition or proposed merger or acquisition, or the like. 11.12 Authority. Each party represents and warrants to the other party at the Effective Date (i) that it has the legal right, power, and authority to enter into this Agreement and to fully perform its obligations under this Agreement, and (ii) that the performance of such obligations will not conflict with any agreements, contracts or other arrangements to which it is a party or by which it is bound. 11.13 Entire Agreement. This Agreement, including all Exhibits to this Agreement, together with the CNDA (as set forth in Section 6 above), constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, -15- discussions, negotiations, letters of intent, and agreements, whether written or oral, with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the dates set forth below effective as of the Effective Date. NANOSYS INC. INTEL CORPORATION By: /s/ CALVIN CHOW By: /s/ PATRICK P GELSINGER ----------------------------- ----------------------------- Print Name: CALVIN CHOW Print Name: PATRICK P GELSINGER Title: CEO Title: Sr VP / CTO LEGAL OK ---------- p 12/8/03 -16- EXHIBIT A Collaboration Statement of Work (SOW) Summary Construction of [*** Redacted] devices (similar to the concept figure below) to evaluate key technical areas required for a [*** Redacted] memory unit and to project the performance limits of the technology. [*** Redacted] Device will have an [*** Redacted] and will be utilized to evaluate: - [*** Redacted] and [*** Redacted]. - [*** Redacted] characteristics (e.g. [*** Redacted], etc.) - [*** Redacted] - including [*** Redacted] characteristics. - Effects of [*** Redacted], and [*** Redacted] modifications. - Variations of [*** Redacted]. - [*** Redacted] (e.g. [*** Redacted]) - Variations of processing means. and to construct a model for [*** Redacted] of a [*** Redacted] or [*** Redacted] device. In Q1 and Q2, the project would focus on modeling and generating/testing [*** Redacted] in order to reconcile the validity of the model. Q3 and Q4 would focus on a [*** Redacted] to better select [*** Redacted]. The [*** Redacted] work would be done on [*** Redacted] devices in a [*** Redacted]. A more detailed plan of activities will be generated by the Collaboration team upon Commencement of the Collaboration. *** 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. The parties will hold a Q2 Formal Review Meeting no later than two weeks after the end of Q2. -2- EX-10.16 6 f97636a5exv10w16.txt EXHIBIT 10.16 EXHIBIT 10.16 EXCLUSIVE LICENSE AGREEMENT between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA and NANOSYS INC. for METHODS OF FABRICATING NANOSTRUCTURES AND NANOWIRES AND DEVICES FABRICATED THEREFROM UC Case No. 2001-190 U.C. AGREEMENT CONTROL NUMBER 2002-04-0782 TABLE OF CONTENTS Article No. Title Page BACKGROUND................................................................... 2 1. DEFINITIONS.............................................................. 3 2. LIFE OF PATENT EXCLUSIVE GRANT........................................... 5 3. SUBLICENSES.............................................................. 5 4. PAYMENT TERMS............................................................ 8 5. LICENSE ISSUE FEE......................................................... 9 6. EARNED ROYALTIES AND MINIMUM ANNUAL ROYALTIES............................ 9 7. DUE DILIGENCE............................................................ 11 8. PROGRESS AND ROYALTY REPORTS............................................. 12 9. BOOKS AND RECORDS........................................................ 14 10. LIFE OF THE AGREEMENT.................................................... 14 11. TERMINATION BY THE REGENTS............................................... 15 12. TERMINATION BY LICENSEE.................................................. 15 13. DISPOSITION OF LICENSED PRODUCT ON HAND UPON TERMINATION................. 15 14. USE OF NAMES AND TRADEMARKS.............................................. 16 15. LIMITED WARRANTY......................................................... 16 16. PATENT PROSECUTION AND MAINTENANCE....................................... 17 17. PATENT MARKING........................................................... 19 18. PATENT INFRINGEMENT...................................................... 19 19. INDEMNIFICATION.......................................................... 20 20. NOTICES.................................................................. 21 21. ASSIGNABILITY............................................................ 22 22. NO WAIVER................................................................ 23 23. FAILURE TO PERFORM....................................................... 23 24. GOVERNING LAWS........................................................... 23 25. PREFERENCE FOR U.S. INDUSTRY............................................. 23 26. GOVERNMENT APPROVAL OR REGISTRATION...................................... 23 27. EXPORT CONTROL LAWS...................................................... 23 28. SECRECY.................................................................. 24 29. MISCELLANEOUS............................................................ 25 1 EXCLUSIVE LICENSE AGREEMENT for METHODS OF FABRICATING NANOSTRUCTURES AND NANOWIRES AND DEVICES FABRICATED THEREFROM This exclusive license agreement ("Agreement") is made effective May 31, 2002 ("Effective Date"), between The Regents of the University of California, a California corporation, having its statewide administrative offices at 1111 Franklin Street, 12th Floor, Oakland, California 94607-5200 ("The Regents"), and Nanosys, Inc, a Delaware corporation, having a principal place of business at 200 Boston Avenue, Suite 4700, Medford, MA 02155 ("Licensee"). BACKGROUND A. Certain inventions, generally characterized as Methods of Fabricating Nanostructures and Nanowires and Devices Fabricated Therefrom (collectively "Invention"), were made in the course of research at the University of California, Berkeley, the University of California, Santa Cruz, and the Lawrence Berkeley National Laboratory and are covered by Regents' Patent Rights as defined below. B. The development of the Invention was sponsored in part by the National Science Foundation and the Department of Energy and, as a consequence, this license is subject to overriding obligations to the United States ("U.S.") Federal Government under 35 U.S.C. Sections 200-212 and applicable regulations including a non-exclusive paid up license for or on behalf of the United States throughout the world. C. Licensee and The Regents have executed a Letter of Intent (UC Control No. 2002-30-0126) dated September 13, 2001. D. Licensee and The Regents have executed a Secrecy Agreement (UC Control No. 2002-20-0444) effective February 8, 2002. E. Licensee wishes to obtain rights from the Regents for the exclusive commercial development, use and sale of products from the Invention, and the Regents is willing to grant those U.C. AGREEMENT CONTROL NUMBER 2002-04-0782 2 rights so that the Invention may be developed to its fullest and the benefits enjoyed by the general public. F. Licensee is a "small business firm" as defined in 15 U.S.C. Section 632. G. Both parties recognize and agree that royalties due under this Agreement on products and methods will be paid by Licensee on both pending patent applications and issued patents. -- oo 0 oo -- In view of the foregoing, the parties agree: 1. DEFINITIONS 1.1 "Affiliate" means any corporation or other business entity in which Licensee owns or controls, directly or indirectly, at least fifty percent (50%) of the outstanding stock or other voting rights entitled to elect directors or in which Licensee is owned or controlled directly or indirectly by at least fifty percent (50%) of the outstanding stock or other voting rights entitled to elect directors; but in any country where the local law does not permit foreign equity participation of at least fifty percent (50%), then an "Affiliate" includes any company in which Licensee owns or controls, or is owned or controlled by, directly or indirectly, the maximum percentage of outstanding stock or voting rights permitted by local law. 1.2 "Licensed Method" means any method, the use of which would constitute, but for the license granted to Licensee under this Agreement, an infringement of any Valid Claim within Regents' Patent Rights. 1.3 "Licensed Product" means any material that is produced by the Licensed Method or that the sale of which would constitute, but for the license granted to Licensee under this Agreement, an infringement of any Valid Claim within Regents' Patent Rights. 1.4 "Net Sales" means the total amounts received by Licensee or its Affiliates from the Final Sale of Licensed Product or Licensed Method to an independent, unaffiliated third party, less the sum of the following actual and customary deductions where applicable; [*** Redacted], [*** Redacted]; [*** Redacted], [*** Redacted], [*** Redacted], [*** Redacted] or other [*** Redacted] or [*** Redacted] on particular sales (excepting [*** Redacted] on that portion of the [*** Redacted] by Licensee or its Affiliates, or [*** Redacted]; and in no case will the [*** Redacted] deducted be greater than [*** Redacted]); [*** Redacted]; and [*** Redacted] to customers because of [*** Redacted]. Final Sale means the sale which is the [*** Redacted] of Regents' Patent Rights performed by Licensee or an Affiliate, regardless of whether Licensee or an Affiliate had control over prior infringing acts. *** 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. 3 For purposes of calculating Net Sales, any distribution or transfer between Licensee (or an Affiliate) and a sublicensee for end use by the recipient (which event is the last act of infringement of Regents' Patent Rights) will be considered a Final Sale at the price normally charged to independent, unaffiliated third parties. In the event that a Licensed Product is sold as a combination product containing Licensed Product and one or more other components not covered by Regents' Patent Rights, Net Sales shall be calculated by multiplying the amounts received from the Final Sale of the combination product to an independent, unaffiliated third party by the fraction [*** Redacted] where A is the [*** Redacted] of Licensed Product sold separately by Licensee and B is the [*** Redacted] of such other components of the combination product sold separately by Licensee during the relevant royalty payment period. In the event a substantial number of such separate sales were not made during the relevant royalty payment period, the Net Sales of such combinations shall be [*** Redacted] between such Licensed Product and such other product(s), service(s) and component(s) based on their relative importance or value. If the Licensed Product is a part or an optional component of a system, Licensee agrees that any discounting of price will be done uniformly and equally across the system so that the Licensed Product is not discounted any more than the system as a whole. 1.5 "Regents' Patent Rights" means The Regents' interest in the following subject matter:
UC Case Number U.S. Application Number Filing Date - -------------- ----------------------- ----------- 2001-190-1 60/280,676 March 30, 2001 2001-190-2 60/349,206 January 15, 2002 2001-190-3 10/112,578 March 29, 2002 2001-190-4 10/112,698 March 29, 2002
and continuing applications thereof including divisions, continuations, continued prosecution applications, or substitutions, and continuation-in-part applications or patents of additions (to the extent claims of such continuations-in-part or patents of additions are supported by the parent application); any patents on said applications including reissues, reexaminations, registrations, renewals and extensions; any corresponding foreign applications or patents; and any other patents *** 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. 4 and patent applications worldwide based upon and claiming any inventions described in the above patents and patent applications. 1.6 "Valid Claim" shall mean either (i) a claim of an issued patent that has not expired or been held unenforceable or invalid by a final judgment or decision of a court or other government agency of competent jurisdiction from which no appeal has or can be taken, and which has not been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise, or (ii) a claim of a pending patent application that is being prosecuted in good faith consistent with customary patent practice, which has not been abandoned or finally rejected without the possibility of appeal or refiling and has been pending for less than [*** Redacted] ([*** Redacted]) [*** Redacted] in the United States or [*** Redacted] ([*** Redacted]) [*** Redacted] in foreign countries after its earliest priority date. 2. LIFE OF PATENT EXCLUSIVE GRANT 2.1 Subject to the limitations set forth in this Agreement, The Regents grants to Licensee a world-wide license under Regents' Patent Rights to make, have made, use, sell, offer to sell and import Licensed Products and to practice Licensed Methods to the extent permitted by law, in each case for any and all fields of use. 2.2 Except as otherwise provided in this Agreement, the license granted in Paragraph 2.1 is exclusive for the life of the Agreement. 2.3 The license granted in Paragraphs 2.1 and 2.2 is subject to all the applicable provisions of any license to the U.S. Government executed by The Regents prior to the Effective Date and is subject to the overriding obligations to the U.S. Government under 35 U.S.C. Sections 200-212 and applicable governmental implementing regulations. 2.4 The Regents reserves the right to use the Invention and technology of the Patent Rights for educational and non-commercial research purposes including publication of research results and sharing such research results, such Invention and technology with other educational and non-profit institutions for their use of similar scope. 3. SUBLICENSES 3.1 The Regents also grants to Licensee the right to issue sublicenses to third parties to make, have made, use, sell, offer to sell and import Licensed Product and to practice Licensed Method, and other sublicenses of or within the scope of the license granted under Article 2, as long as Licensee has current exclusive rights thereto under this Agreement. To the extent applicable, *** 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. 5 sublicenses must include all of the rights of and obligations due to The Regents and, if applicable, the U.S. Government contained in this Agreement. 3.2 Licensee shall promptly provide The Regents with a copy of the relevant portion of each sublicense issued (which shall include but not be limited to information with an impact on financial terms or other requirements of this Agreement), collect and guarantee payment of all payments due The Regents from sublicensees and summarize and deliver all reports due The Regents from sublicensees. All such information shall be deemed the Confidential Information of Licensee pursuant to the terms of Article 28 (Secrecy). 3.3 (a) If after five (5) years from the Effective Date, The Regents becomes aware of any field of use that Licensee is not pursuing with respect to the Regents' Patent Rights, and a third party has an interest and a detailed plan for pursuing such field of use (which is not overlapping or competitive with any field pursued by Licensee for Regent's Patent Rights), The Regents may notify Licensee of such third party's interest (such third party, the "Potential Sublicensee", and such field, the "New Field"). (b) In the event of a notice under Section 3.3(a), Licensee shall have a period of ninety (90) days thereafter to notify The Regents (such notice, its "New Field Plans") if: (i) it or its sublicensees are then currently pursuing the New Field (or an overlapping or competitive field of use for Regent's Patent Rights); or (ii) it or its sublicensees are planning to pursue the New Field (or an overlapping or competitive field of use for Regent's Patent Rights) in the future; or (iii) it desires to directly sublicense such Potential Sublicensee. If Licensee notifies The Regents of case (i) or (ii) above, Licensee or its sublicensee shall provide The Regents with its development plan therefor within four (4) months thereafter. If Licensee notifies The Regents of case (iii) above, The Regents shall direct the Potential Sublicensee to negotiate in good faith with Licensee for a sublicense. (c) If (i) Licensee has not notified The Regents of its New Field Plans within the above ninety (90) day period or Licensee has not provided The Regents with a development plan therefor within the above four (4) month period, as required in Section 3.3(b), or (ii) Licensee and the Potential Sublicensee are unable to reach a sublicense agreement, and the Potential Sublicensee has negotiated in good faith with Licensee, or (iii) Licensee fails to diligently proceed in good faith with the development, manufacture, and sale of Licensed Product in New Field according to the development plan of 3.3(b), as updated from time to time with the approval of The Regents, then The Regents may issue a non-exclusive sublicense to the Potential Sublicensee, limited to the New 6 Field; provided that Licensee does not notify The Regents that it owns or controls issued patent claims, which patent claims are valid and would dominate use of the Regents' Patent Rights in the New Field. Such sublicense to the Potential Sublicensee shall have royalty rate(s) (including with respect to sublicensing revenue) which are no more favorable than those set forth herein. 3.4 Upon termination of this Agreement for any reason, all sublicenses of The Regents' Patent Rights not then currently in material breach, will be assigned to The Regents, at the request of the sublicensee; provided that the duties of The Regents under the assigned sublicenses will not be greater than the duties of The Regents under this Agreement, and the rights of The Regents under the assigned sublicenses will not be less than the rights of The Regents under this Agreement. 3.5 Payment to The Regents for sublicenses of Regent's Patent Rights issued by Licensee to non-Affiliate third parties shall include payment of [*** Redacted]% of all fees, royalties and other revenues obtained by the Licensee from such sublicense, but excluding (a) income received by Licensee as payment or reimbursement for research, development or costs incurred by or for Licensee associated with materials, equipment or clinical testing or patent expenses (as reasonably allocated, and according to fair market value if readily available); (b) amounts received for securities (equity or debt), or services, products, equipment (as reasonably allocated, and according to fair market value if readily available); (c) amounts in consideration for licenses or other rights under intellectual property other than Regents' Patent Rights, as reasonably allocated; (d) amounts in consideration for the sale of all or substantially all of the business or assets of Licensee, whether by merger, acquisition of stock or assets or otherwise; and (e) any governmental charges, including withholding or other taxes (but not income taxes), paid or payable by Licensee on amounts received in consideration for a sublicense under Regents' Patent Rights. In the event that such payment to Licensee for issuance of a sublicense includes a non-cash component, including but not limited to equipment and cross-licenses, the Regents shall be paid [*** Redacted]% of the value of the non-cash component (excluding deductions (a) to (e) above). Upon request, Licensee shall provide the Regents with its calculation of the above amounts, along with supporting documentary evidence. 3.6 Implicit in the [*** Redacted]% figure of Paragraph 3.5 above is the assumption that Licensee will add significant value to Regents' Patent Rights through its own development efforts. In the event that Licensee issues a sublicense that does not include a contribution of Licensee's development or Licensee has not added significant value, payment to The Regents for that sublicense shall be [*** Redacted]% rather than [*** Redacted]%. Without limiting the generality of such language, Licensee shall be deemed to have *** 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. 7 contributed development or added significant value if Licensee sublicenses other patent rights or provides other substantive intellectual property or technology (e.g. manufacturing know-how, prototypes, breadboards, components or tools) in connection with sublicensing the Regents' Patent Rights, or Licensee has spent at least seven hundred and fifty thousand dollars ($750,000) developing Licensed Products or Licensed Methods (within the meaning stated in Section 7.3), which development efforts are in or applicable to the field of use being sublicensed. 4. PAYMENT TERMS 4.1 Paragraphs 1.2, 1.3 and 1.5 define Licensed Method, Licensed Product and Regents' Patent Rights, so that royalties are payable on products and methods covered by Valid Claims of both pending patent applications and issued patents. Royalties will accrue in each country for the duration of Regents' Patent Rights in that country and are payable to The Regents in the next royalty report after payment for the Licensed Product is received by Licensee or Affiliate. 4.2 Licensee shall pay to The Regents earned royalties quarterly on or before February 28, May 31, August 31 and November 30 of each calendar year. Each payment will be for earned royalties accrued within Licensee's most recently completed calendar quarter. 4.3 All monies due The Regents are payable in U.S. dollars. Licensee is responsible for all bank transfer charges. When Licensed Product is sold for monies other than U.S. dollars, Licensee shall first determine the earned royalty in the currency of the country in which Licensed Product was sold and then convert the amount into equivalent U.S. funds, using the exchange rate quoted in The Wall Street Journal on the last business day of the reporting period. 4.4 Royalties earned on sales occurring in any country outside the U.S. may not be reduced by any taxes, fees or other charges imposed by the government of such country on the payment of royalty income. Notwithstanding the foregoing, all payments made by Licensee in fulfillment of The Regents' tax liability in any particular country will be credited against earned royalties or fees due The Regents for that country. 4.5 If at any time legal restrictions prevent the prompt remittance of royalties by Licensee from any country where a Licensed Product is sold, then Licensee shall convert the amount owed to The Regents into U.S. funds and shall pay The Regents directly from its U.S. source of funds for as long as the legal restrictions apply. 4.6 If any patent or patent claim within Regents' Patent Rights is held invalid in a final decision by a court of competent jurisdiction and last resort and from which no appeal has or can be 8 taken, then all obligation to pay royalties based on that patent or claim or any claim patentably indistinct therefrom will cease as of the date of final decision. Licensee will not, however, be relieved from paying any royalties that accrued before the final decision or that are based on another patent or claim not involved in the final decision. 4.7 No royalties may be collected or paid on Licensed Product sold to the account of the U.S. Government, or any agency thereof, as provided for in the license to the Government. 4.8 In the event payments, rebillings or fees are not received by The Regents when due, Licensee shall pay to The Regents interest charges at a rate of ten percent (10%) per annum. Interest is calculated from the date payment was due until actually received by The Regents. 5. LICENSE ISSUE FEE Licensee shall pay to The Regents a license issue fee of [*** Redacted] ([*** Redacted]) within thirty (30) days after the Effective Date. Licensee shall, as a one-time payment, pay The Regents an additional [*** Redacted] ($[*** Redacted]) within thirty (30) days after the first issuance of a patent within the Regents' Patent Rights. These fees are non-refundable, non-cancelable and are not an advance against royalties. 6. EARNED ROYALTIES AND MINIMUM ANNUAL ROYALTIES 6.1 Licensee shall also pay to The Regents an earned royalty of [*** Redacted] percent ([*** Redacted]%) of the Net Sales of Licensed Product or Licensed Method. 6.2 In the event that Licensee must pay additional royalties on the sale of a Licensed Product or Licensed Method to one or more independent, unaffiliated third parties (who have patent rights that are required to make or sell the Licensed Product or Licensed Method), and the sum of royalties to be paid by Licensee (prior to any reductions) to all such third parties (such royalty for each individual third party, a "Third Party Royalty" and the sum, the "Total Royalties") would exceed [*** Redacted] percent ([*** Redacted]%), then The Regents will agree to reduce the royalties due on that Licensed Product or Licensed Method by multiplying with the ratio [*** Redacted], where X is the percentage value of the Total Royalties; provided that each such third party also agrees to a reduction of its royalty rate to an amount equal to or less than Y, where Y is equal to the corresponding Third Party Royalty multiplied with the ratio [*** Redacted]. If any such third party does not reduce its royalty rate to at least Y, then The Regents shall reduce its royalty rate by a percentage equal to the minimum reduction *** 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. 9 (percentage wise) agreed to by such third parties. However, in no case shall royalties due The Regents according to Paragraph 6.1 be reduced to less than [*** Redacted] percent ([*** Redacted]%). For example: If Licensee licenses intellectual property rights from two other entities E1 and E2 for use in Licensed Products, at the respective royalty rates of [*** Redacted]% and [*** Redacted]%, the total royalties before a proportionate reduction is equal to [*** Redacted]. The Regents will then agree to reduce its royalty rate at a ratio of [*** Redacted], i.e. to [*** Redacted]%, if the other licensing entities E1 and E2 agree to reduce their royalty rate to [*** Redacted]% or below.
Licensing entity Initial royalty rate ratio Reduced royalty rate The Regents [*** Redacted]% [*** Redacted] [*** Redacted]% E1 [*** Redacted]% [*** Redacted] [*** Redacted]% E2 [*** Redacted]% [*** Redacted] [*** Redacted]% Total: [*** Redacted]% [*** Redacted] [*** Redacted]%
6.3 To implement a reduction in royalties due under Paragraph 6.2, Licensee will provide written evidence of license agreements with third parties that include the third parties' agreement to a reduction in royalties due to them sufficient under Paragraph 6.2. Licensee shall provide written evidence of payments made to such third parties under such license agreements. 6.4 Licensee shall pay to The Regents a minimum annual royalty as follows: - [*** Redacted] dollars ($[*** Redacted]) in [*** Redacted]; - [*** Redacted] dollars ($[*** Redacted]) in [*** Redacted]; - [*** Redacted] dollars ($[*** Redacted]) in [*** Redacted]; - [*** Redacted] dollars ($[*** Redacted]) in [*** Redacted]; - [*** Redacted] dollars ($[*** Redacted]) in [*** Redacted]; - [*** Redacted] dollars ($[*** Redacted]) in [*** Redacted]; - and beginning in [*** Redacted] and for the remaining life of Regents' Patent Rights, Licensee shall pay to The Regents a minimum annual royalty of [*** Redacted] dollars ($[*** Redacted]). The minimum annual royalty will be paid to The Regents by November 30 of each year and will be credited against the earned royalty due for the calendar year in which the minimum payment was made. *** 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. 10 6.5 In no event shall more than one royalty be payable hereunder with respect to any particular Licensed Product unit or practice of Licensed Method. No royalty shall be payable under this Agreement with respect to sales of Licensed Products among Licensee, its Affiliates or sublicensees for resale; nor shall a royalty be payable hereunder with respect to the practice of Licensed Methods or the sale or provision of Licensed Products as samples, for research and development efforts by or for Licensee, or transactions that are not a full commercial sale (i.e. for transactions that are at fully burdened cost or for which there is no profit). 6.6 The amounts payable under this Agreement are based on the parties' understanding that The Regents owns or controls sufficient right, title and interest in each of the patent rights listed in the table of Section 1.5 to grant Licensee an exclusive license thereunder apart from the license to the government hereunder. In the event The Regents breaches this Section 6.6 (i.e. it does not have such ownership or control), then the parties shall negotiate in good faith to appropriately reduce the amounts payable under this Agreement, in addition to any other remedies which may be available. 7. DUE DILIGENCE 7.1 Licensee, upon execution of this Agreement, shall diligently proceed with the development, manufacture and sale of Licensed Product and shall earnestly and diligently endeavor to market the same within a reasonable time after execution of this Agreement and in quantities sufficient to meet market demands, each to the extent commercially sound and technically viable. 7.2 Licensee shall endeavor to obtain all necessary governmental approvals for the manufacture, use and sale of Licensed Product. 7.3 Licensee shall: 7.3.1 Employ one (1) employee (or the equivalent if employees' time is devoted to multiple projects) to work solely on Invention by December 31, 2003; 7.3.2 Employ three (3) employees (or the equivalent if employees' time is devoted to multiple projects) to work solely on Invention by December 31, 2004; 7.3.3 use commercially reasonable efforts to achieve a first commercial sale of a Licensed Product or Licensed Method by December 31, 2008; 7.3.4 reasonably fill the market demand for Licensee's Licensed Products following commencement of marketing and at any time during the exclusive period of this Agreement, to the extent commercially sound and technically viable; 11 7.3.5 spend at least two hundred fifty thousand dollars ($250,000) on development of Licensed Product or Licensed Method by December 31, 2003; 7.3.6 spend at least five hundred thousand dollars ($500,000) annually on development of Licensed Product or Licensed Method starting in 2004, until the first commercial sale of a Licensed Product or Licensed Method. It is understood that "working solely on" the Invention and "developing" Licensed Products or Licensed Methods shall include working on, developing or acquiring technology reasonably necessary for the commercial and/or technical viability of the Regent's Patent Rights or any Licensed Product or Licensed Method (e.g. interface, electronic packaging, device integration, materials and/or fabrication technologies). 7.4 If Licensee is unable to perform Sections 7.1, 7.2 or 7.3, then The Regents has the right to reduce Licensee's exclusive license to a nonexclusive license (in the event Licensee is unable to perform Sections 7.3.1, 7.3.2, 7.3.5, 7.3.6, The Regents may, at its option, terminate the license under Section 11 or render the license non-exclusive) upon written notice; provided in each case, that The Regents' has notified Licensee of its breach of such Sections, and has negotiated in good faith with Licensee with respect to a mutually acceptable plan to remedy such breach, and Licensee then fails to perform such mutually acceptable plan. If the parties cannot reach agreement on a mutually acceptable plan, the mutually acceptable plan shall be for Licensee to thereafter: (a) continue to be subject to all of its diligence requirements, and (b) spend an extra fifty percent (50%) of the amounts it is obligated to spend over the same period under Sections 7.3.5 and 7.3.6. Licensee's compliance with the mutually acceptable plan shall be subject, as a minimum, to Regents' verification six (6) months thereafter of Licensee's progress. This right, if exercised by The Regents, supersedes the rights granted in Article 2 (Life of Patent Exclusive Grant). 8. PROGRESS AND ROYALTY REPORTS 8.1 Beginning September 30, 2003, and semi-annually thereafter, Licensee shall submit to The Regents a written progress report covering Licensee's (and any Affiliate's or sublicensee's) activities related to the development and testing of Licensed Products and the obtaining of the governmental approvals necessary for marketing. Progress reports are required until the first commercial sale of a Licensed Product occurs in the U.S. and shall be again required if commercial sales of all Licensed Products are suspended or discontinued. All reports under this Article 7 shall be deemed the Confidential Information of Licensee pursuant to the terms of Article 28 (Secrecy). 12 8.2 Progress reports submitted under Paragraph 8.1 shall include, but are not limited to, the following topics: 8.2.1 a statement specifically addressing each diligence requirement of Article 7 (DUE DILIGENCE), 8.2.2 summary of work completed, 8.2.3 key scientific discoveries; 8.2.4 summary of work in progress, 8.2.5 current schedule of anticipated events or milestones, 8.2.6 market plans for introduction of Licensed Product, and 8.2.7 a summary of resources (dollar value) spent in the reporting period. 8.3 Licensee has a continuing responsibility to keep The Regents informed of the large or small business entity status (as defined by the U.S. Patent and Trademark Office) of itself and its sublicensees and Affiliates. 8.4 Licensee shall report to The Regents in its immediately subsequent progress and royalty report the date of first commercial sale of a Licensed Product in each country. 8.5 After the first commercial sale of a Licensed Product anywhere in the world, Licensee shall make quarterly royalty reports to The Regents on or before each February 28 (for the quarter ending December 31) May 31 (for the quarter ending March 31), August 31 (for the quarter ending June 30) and November 30 (for the quarter ending September 30) of each year. Each royalty report will cover Licensee's most recently completed calendar quarter and will show: 8.5.1 the gross sales and Net Sales of Licensed Product sold during the most recently completed calendar quarter; 8.5.2 the number of each type of Licensed Product sold; 8.5.3 the royalties, in U.S. dollars, payable with respect to sales of Licensed Product; 8.5.4 the method used to calculate the royalty; 8.5.5 the exchange rates used; 8.5.6 a justification in writing for the values of A and B along with the method of their calculation if combination products are sold and Licensee wishes to apply the fraction [*** Redacted] as discussed in Paragraph 1.4 "Net Sales"; and 8.5.7 written evidence of license agreements with third parties that include the third parties' agreement to a proportional reduction in royalties due, evidence of payments made to such third *** 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. 13 parties under such license agreements, and the method of calculation of the reduced royalty rate if Licensee wishes to implement a reduction in royalties due under Paragraph 6.2. 8.6 If no sales of Licensed Product have been made during any reporting period, then a statement to this effect is required. 9. BOOKS AND RECORDS 9.1 Licensee shall keep accurate books and records showing all Licensed Product manufactured, used and/or sold under the terms of this Agreement. Books and records must be preserved for at least five (5) years from the date of the royalty payment to which they pertain. 9.2 Books and records pertaining to this Agreement must be open to inspection by representatives or agents of The Regents at reasonable times, no more than once in any twelve (12) month period and under reasonable conditions of confidentiality. The Regents shall bear the fees and expenses of examination but if it is discovered in any examination that Licensee has underpaid by more than five percent (5%) the royalties due for any year, then Licensee shall bear the fees and expenses of that examination. 10. LIFE OF THE AGREEMENT 10.1 Unless otherwise terminated by operation of law or by acts of the parties in accordance with the terms of this Agreement, this Agreement will be in force from the Effective Date until the date of expiration of the last-to-expire patent licensed under this Agreement; or until the last patent application licensed under this Agreement is abandoned and no patent in Regents' Patent Rights ever issues. 10.2 Any termination of this Agreement will not affect the rights and obligations set forth in the following Articles: Article 9 Books and Records Article 13 Disposition of Licensed Product on Hand Upon Termination Article 14 Use of Names and Trademarks Article 19 Indemnification Article 23 Failure to Perform Article 28 Secrecy 14 11. TERMINATION BY THE REGENTS If Licensee materially breaches this Agreement, then The Regents may give written notice of default ("Notice of Default") to Licensee. If Licensee fails to cure the breach within ninety (90) days of the effective date of Notice of Default, then The Regents may terminate this Agreement and its licenses by a second written notice ("Notice of Termination"); provided that if Licensee in good faith disputes The Regents' right to terminate this Agreement during the foregoing ninety (90) day period, then termination of this Agreement shall not become effective unless and until (i) the parties have met and attempted to resolve their dispute by good faith negotiations for at least a period of ninety (90) days after the Notice of Termination (the "Resolution Period"), and are unable to do so, and (ii) in the event Licensee files a legal action prior to the end of the Resolution Period challenging such termination, unless and until it has been finally determined by a court of competent jurisdiction that The Regents has the right to terminate this Agreement due to a material breach by License, and Licensee fails to perform its obligations within ninety (90) days after such determination. Such termination will not relieve Licensee of its obligation to pay any fees owing at the time of termination and will not impair any accrued right of The Regents. These notices are subject to Article 20 (Notices). 12. TERMINATION BY LICENSEE 12.1 Licensee has the right at any time to terminate this Agreement in whole or as to any portion of Regents' Patent Rights by giving notice in writing to The Regents. Such notice of termination will be subject to Article 20 (Notices) and termination of this Agreement will be effective sixty (60) days from the effective date of such notice. 12.2 Any termination under the above Paragraph 13.1 does not relieve Licensee of any obligation or liability accrued under this Agreement prior to termination or rescind any payment made to The Regents or anything done by Licensee prior to the time termination becomes effective. Termination does not affect in any manner any rights of The Regents arising under this Agreement prior to termination. 13. DISPOSITION OF LICENSED PRODUCT ON HAND UPON TERMINATION Upon termination of this Agreement, Licensee is entitled to dispose of all previously made or partially made Licensed Product, but no more, within a period of one hundred and twenty (120) days 15 provided that the sale of Licensed Product is subject to the terms of this Agreement, including, but not limited to, the rendering of reports and payment of royalties required under this Agreement. 14. USE OF NAMES AND TRADEMARKS 14.1 Nothing contained in this Agreement confers any right to use in advertising, publicity or other promotional activities any name, trade name, trademark or other designation of either party hereto (including contraction, abbreviation or simulation of any of the foregoing). Unless required by law, the use by Licensee of the name "The Regents of the University of California" or the name of any campus of the University of California is prohibited. 14.2 The Regents is free to release to the inventors and senior administrators employed by The Regents the terms and conditions of this Agreement. If such release is made, then The Regents shall give notice of the confidential nature and shall request that the recipient does not disclose such terms and conditions to others. If a third party inquires whether a license to Regents' Patent Rights is available, then The Regents may disclose the existence of this Agreement and the extent of the grant in Article 2 (Life of Patent Exclusive Grant) to such third party, but will not disclose the name of Licensee or any other terms or conditions of this Agreement, except where The Regents is required to release information under either the California Public Records Act, a governmental audit requirement or other applicable law. Licensee may disclose this Agreement to its advisors, actual or potential investors or business or acquisition partners, and others on a need-to-know basis under reasonable conditions of confidentiality. 15. LIMITED WARRANTY 15.1 The Regents warrants to Licensee that it has the lawful right to grant this license. 15.2 This license and the associated Invention are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT LICENSED PRODUCT OR LICENSED METHOD WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT. 15.3 IN NO EVENT SHALL THE REGENTS OR LICENSEE BE LIABLE FOR ANY INCIDENTAL, SPECIAL, INDIRECT, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS OR REVENUES) RESULTING FROM EXERCISE OF THIS LICENSE OR THE USE OF THE INVENTION OR LICENSED PRODUCT OR 16 OTHERWISE FROM THIS AGREEMENT, WHETHER IN CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR OTHERWISE, EXCEPT TO THE EXTENT LICENSEE MAY BE REQUIRED TO INDEMNIFY THE REGENTS FROM SUCH DAMAGES CLAIMED BY THIRD PARTIES UNDER ARTICLE 19, AND EXCEPT FOR AN INTENTIONAL BREACH OF ARTICLE 28. 15.4 This Agreement does not: 15.4.1 express or imply a warranty or representation as to the validity or scope of any of Regents' Patent Rights; 15.4.2 express or imply a warranty or representation that anything made, used, sold, offered for sale or imported or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents of third parties; 15.4.3 obligate The Regents to bring or prosecute actions or suits against third parties for patent infringement except as provided in Article 18 (Patent Infringement); 15.4.4 confer by implication, estoppel or otherwise any license or rights under any patents of The Regents other than Regents' Patent Rights as defined in this Agreement, regardless of whether those patents are dominant or subordinate to Regents' Patent Rights; or 15.4.5 obligate The Regents to furnish any know-how not provided in Regents' Patent Rights. 16. PATENT PROSECUTION AND MAINTENANCE 16.1 As long as Licensee has paid patent costs as provided for in this Article 17 (Patent Prosecution and Maintenance), The Regents shall diligently endeavor to prosecute and maintain the U.S. and foreign patents comprising Regents' Patent Rights using counsel of its choice, and The Regents shall provide Licensee in advance (sufficient to provide Licensee with a reasonable opportunity to review and comment prior to submission thereof) with drafts and copies of all relevant documentation so that Licensee may be informed of the continuing prosecution, and Licensee agrees to keep the documentation confidential pursuant to Article 28 (Secrecy). The Regents' counsel will take instructions only from The Regents, and all patents and patent applications under this Agreement will be assigned solely to The Regents. 17 16.2 The Regents shall use reasonable efforts to include, or amend to include, in any patent application claims reasonably requested by Licensee to protect the products contemplated to be sold under this Agreement, and to otherwise reasonably consider any comments with respect to the prosecution of Regents' Patent Rights provided by Licensee. 16.3 Licensee shall bear the out-of-pocket costs of preparing, filing, prosecuting and maintaining all U.S. and foreign patent applications within Regents' Patent Rights contemplated by this Agreement. Costs billed by The Regents' counsel will be rebilled to Licensee and are due within thirty (30) days of rebilling by The Regents. These costs include patent prosecution costs for the Invention incurred by The Regents prior to the execution of this Agreement and any patent prosecution costs that may be incurred for patentability opinions, re-examination, re-issue, interferences or inventorship determinations. Prior prosecution costs will be due upon execution of this Agreement and billing by The Regents. The Regents acknowledge that certain prosecution costs have already been paid by Licensee pursuant to the parties' Letter of Intent, dated September 13, 2001. 16.4 Licensee may request The Regents to obtain patent protection on the Invention in foreign countries if available and if it so desires. Licensee shall notify The Regents of its decision to obtain or maintain foreign patents not less than sixty (60) days prior to the deadline for any payment, filing or action to be taken in connection therewith. This notice concerning foreign filing must be in writing, must identify the countries desired and must reaffirm Licensee's obligation to underwrite the costs thereof. The absence of such a notice from Licensee to The Regents will be considered an election not to obtain or maintain foreign rights. 16.5 Licensee's obligation to underwrite and to pay patent prosecution costs will continue for so long as this Agreement remains in effect, but Licensee may terminate its obligations with respect to any given patent application or patent upon three (3) months written notice to The Regents. The Regents will use its best efforts to curtail patent costs when a notice of termination is received from Licensee. The Regents may prosecute and maintain such application(s) or patent(s) at its sole discretion and expense, but Licensee will have no further right or licenses thereunder. Nonpayment of patent costs may be deemed by The Regents as an election by Licensee not to maintain application(s) or patent(s); provided that The Regents' notify Licensee of such nonpayment and its intent to deem Licensee to have made such election, and Licensee does not make the required payment within thirty (30) days thereafter. 18 16.6 The Regents may file, prosecute or maintain patent applications at its own expense in any country in which Licensee has not elected to file, prosecute or maintain patent applications in accordance with this Article 16 (Patent Prosecution and Maintenance) and those applications and resultant patents will not be subject to this Agreement. 17. PATENT MARKING Licensee shall mark all Licensed Product made, used or sold under the terms of this Agreement, or their containers, in accordance with the applicable patent marking laws. 18. PATENT INFRINGEMENT 18.1 If Licensee learns of the substantial infringement of any patent licensed under this Agreement, then Licensee shall call The Regents' attention thereto in writing and provide The Regents with reasonable evidence of infringement of which Licensee is aware. Neither party will notify a third party of the infringement of any of Regents' Patent Rights without first obtaining consent of the other party, which consent will not be unreasonably denied. Both parties shall use their best efforts in cooperation with each other to terminate infringement without litigation. It is understood that nothing in this Article 18 shall obligate the Licensee to sublicense any third party. 18.2 Licensee may request that The Regents take legal action against the infringement of Regents' Patent Rights. Such request must be in writing and must include reasonable evidence of infringement and damages to Licensee. If the infringing activity has not abated within ninety (90) days following the effective date of request, then The Regents has the right to: 18.2.1 commence suit on its own account; or 18.2.2 refuse to participate in the suit, and The Regents shall give notice of its election in writing to Licensee by the end of the one-hundredth (100th) day after receiving notice of written request from Licensee. Licensee may thereafter bring suit for patent infringement, at its own expense, if and only if The Regents elects not to commence suit, or does not respond to Licensee within such 100 day period, and if the infringement occurred during the period and in a jurisdiction and field of use where Licensee had exclusive rights under this Agreement apart from the license to the government hereunder. If, however, Licensee elects to bring suit in accordance with this Paragraph 19.2, then The Regents may thereafter join that suit at its own expense. Licensee agrees not to bring suit for patent infringement without following the procedures of this Paragraph, and both parties agree to be bound by an order 19 of a court for patent infringement, patent infringement issues and patent infringement defenses raised through the pendency of such a suit under this Paragraph 19.2. 18.3 Legal action, as is decided on, will be at the expense of the party bringing suit and all damages recovered thereby will belong to the party bringing suit, but legal action brought jointly by The Regents and Licensee and fully participated in by both will be at the joint expense of the parties and all recoveries will be shared jointly by them in proportion to the share of expense paid by each party. If The Regents brings suit solely in their own name without participation by Licensee, then Licensee shall have the option, up to six (6) months after the filing of the suit, to pay one half (1/2) of The Regents' attorneys fees and all costs, including internal costs, directly related to the suit and share equally with The Regents' in The Regents' recoveries attributable to a period and jurisdiction in which Licensee's rights are exclusive. The Regents shall keep Licensee informed of its internal costs directly related to the suit and its accounting thereof from time to time as requested by Licensee. 18.4 Each party shall cooperate with the other (including participate, but only to the extent necessary) in litigation proceedings instituted hereunder at the expense of the party bringing suit. Litigation will be controlled by the party bringing the suit, except that The Regents may be represented by counsel of its choice in any suit brought by Licensee. 19. INDEMNIFICATION 19.1 Licensee shall indemnify, hold harmless and defend The Regents, its officers, employees and agents, the sponsors of the research that led to the Invention, in their role as sponsors, and the inventors of the patents and patent applications in Regents' Patent Rights and their employers, in their role as investors and employers thereof, against any and all third party claims, suits, losses, liabilities, damages, costs, fees and expenses ("Claims") resulting from or arising out of exercise of this license or any sublicense, except to the extent resulting solely from willful misconduct or a breach of this Agreement by The Regents; provided that Licensee is promptly notified in writing of such Claims, has sole control of the defense and settlement thereof, and obtains full cooperation and information from the indemnitee. Licensee shall have no obligation for fees, costs or expenses incurred without Licensee's prior written consent, not unreasonably withheld. It is understood that only The Regents may claim indemnity under Article 19 (on its own behalf or on behalf of the other above listed indemnitees), and other above listed indemnitees may not directly 20 claim indemnity hereunder. This indemnification includes, but is not limited to, any product liability. 19.2 Licensee, at its sole cost and expense, shall insure its activities in connection with the work under this Agreement and obtain, keep in force and maintain insurance as follows or an equivalent program of self-insurance. 19.3 Comprehensive or commercial form general liability insurance (contractual liability included ) with limits as follows: - Each Occurrence $[*** Redacted] - Products/Completed Operations Aggregate $[*** Redacted] - Personal and Advertising Injury $[*** Redacted] - General Aggregate (commercial form only) $[*** Redacted] The coverage and limits referred to under the above do not in any way limit the liability of Licensee. Licensee shall furnish The Regents with certificates of insurance showing compliance with all requirements. Certificates must: - Provide for thirty (30) days' advance written notice to The Regents of any modification. - Indicate that The Regents has been endorsed as an additional Insured under the coverage referred to under the above. - Include a provision that the coverage will be primary and will not participate with nor will be excess over any valid and collectable insurance or program of self-insurance carried or maintained by The Regents. 19.4 The Regents shall notify Licensee in writing of any claim or suit brought against The Regents in respect of which The Regents intends to invoke the provisions of this Article 19 (Indemnification). Licensee shall keep The Regents informed on a current basis of its defense of any claims under this Article 20 (Indemnification). 20. NOTICES 20.1 Any notice or payment required to be given to either party shall be deemed to have been properly given and to be effective as of the date specified below if delivered to the respective address given below or to another address as designated by written notice given to the other party: 20.1.1 on the date of delivery if delivered in person; *** 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. 21 20.1.2 on the date of mailing if mailed by first-class certified mail, postage paid; or 20.1.3 on the date of mailing if mailed by any global express carrier service that requires recipient to sign the documents demonstrating the delivery of such notice or payment. In the case of Licensee: Nanosys, Inc. 2625 Hanover St. Palo Alto, CA 94304 Attention: President with a copy to: Wilson, Sonsini, Goodrich & Rosati 650 Page Mill Road Palo Alto, California 94304 Attention: Michael J. O'Donnell, Esq. In the case of The Regents: The Regents of the University of California Office of Technology Transfer 1111 Franklin Street, 5th Floor Oakland, CA 94607-5200 Attention: Executive Director Research Administration and Technology Transfer RE: UC Case No. 2001-190 21. ASSIGNABILITY This Agreement may be assigned by The Regents, but is personal to Licensee and assignable by Licensee only with the written consent of The Regents, which consent will not be unreasonably withheld; provided, however, that Licensee shall be entitled to assign this Agreement and all rights hereunder, upon notice but without the consent of The Regents, in connection with a merger, consolidation, sale or transfer of all or substantially all of the Licensee's assets or business pertaining hereto, or its equity. 22 22. NO WAIVER No waiver by either party of any default of this Agreement may be deemed a waiver of any subsequent or similar default. A suspension of duty under this Agreement due to force majeure shall not be for a period longer than one (1) year. 23. FAILURE TO PERFORM If either party finds it necessary to undertake legal action against the other on account of failure of performance due under this Agreement, then the prevailing party is entitled to reasonable attorney's fees in addition to costs and necessary disbursements. 24. GOVERNING LAWS THIS AGREEMENT WILL BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICT OF LAWS OR TO WHICH PARTY DRAFTED PARTICULAR PROVISIONS OF THIS AGREEMENT, but the scope and validity of any patent or patent application will be governed by the applicable laws of the country of the patent or patent application. Disputes between the parties regarding this Agreement will utilize only trial courts within California for disputes that go to court. 25. PREFERENCE FOR U.S. INDUSTRY Because this Agreement grants the exclusive right to use or sell the Invention in the U.S., Licensee agrees that any products sold in the U.S. embodying this Invention or produced through the use thereof will be manufactured substantially in the U.S., to the extent required by law. 26. GOVERNMENT APPROVAL OR REGISTRATION Licensee shall notify The Regents if it becomes aware that this Agreement is subject to any U.S. or foreign government reporting or approval requirement. Licensee shall make all necessary filings and pay all costs including fees, penalties and all other out-of-pocket costs associated with such reporting or approval process. 27. EXPORT CONTROL LAWS Licensee shall observe all applicable U.S. and foreign laws with respect to the transfer of Licensed Product and related technical data to foreign countries, including, without limitation, the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations. 23 28. SECRECY 28.1 With regard to confidential information, which can be oral or written or both, received hereunder by either party from the other party, which are marked "Confidential" if disclosed in written or other tangible form, or designated as confidential at the time of first disclosure and confirmed in a written notice provided within thirty (30) days thereafter, if disclosed orally (the "Confidential Information"), each party agrees: 28.1.1 not to use the Confidential Information of the other party except for the sole purpose of performing or exercising rights under the terms of this Agreement; 28.1.2 to safeguard the Confidential Information of the other party against disclosure to others with the same degree of care as it exercises with its own data of a similar nature, but in no event less than reasonable care; 28.1.3 not to disclose the Confidential Information of the other party to third parties (except to its employees, agents or consultants who are bound by a like obligation of confidentiality) without the express written permission of the other party 28.2 Notwithstanding the foregoing, Confidential Information shall not include any information that the receiving party can demonstrate: 28.2.1 was previously known to it; 28.2.2 is now or becomes in the future, public knowledge other than through acts or omissions of the receiving party; or 28.2.3 is lawfully obtained by the receiving party from sources independent of the other party, and without restrictions on its use; 28.2.4 was independently developed by the receiving party, without use of or reference to the Confidential Information of the other party; or 28.2.5 is required to be disclosed by law; provided that the receiving party promptly notifies the disclosing party and removes the actual trade secrets of the disclosing party upon request. 28.3 The secrecy obligations of Licensee and The Regents with respect to the Confidential Information will continue for a period ending five (5) years from the termination date of this Agreement. 24 29. MISCELLANEOUS 29.1 The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 29.2 This Agreement is not binding on the parties until it has been signed below on behalf of each party. It is then effective as of the Effective Date. 29.3 No amendment or modification of this Agreement is valid or binding on the parties unless made in writing and signed on behalf of each party. 29.4 This Agreement embodies the entire understanding of the parties and supersedes all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof. The Letter of Intent (UC Control No. 2002-30-0126) dated September 13, 2001 and its extension and the Secrecy Agreement (UC Control No. 2002-20-0444 effective February 8, 2002 are hereby terminated. 29.5 In case any of the provisions contained in this Agreement is held to be invalid, illegal or unenforceable in any respect, that invalidity, illegality or unenforceability will not affect any other provisions of this Agreement and this Agreement will be construed as if the invalid, illegal or unenforceable provisions had never been contained in it. 29.6 None of the provisions of this Agreement is intended to create any form of joint venture between the parties, rights in third parties or rights that are enforceable by any third party. IN WITNESS WHEREOF, both The Regents and Licensee have executed this Agreement, in duplicate originals, by their respective and duly authorized officers on the day and year written. NANOSYS, INC. THE REGENTS OF THE UNIVERSITY OF CALIFORNIA By: /s/ Lawrence A. Bock By: /s/ Alan B. Bennett --------------------------------- ----------------------------------- (Signature) (Signature) Name: Lawrence A. Bock Name: Alan B. Bennett ------------------------------- (Please Print) Title: PRESIDENT AND CEO Title: Executive Director ------------------------------ Research Administration and Technology Transfer Date: 06-10-02 Dated: June 17, 2002 ------------------------------- -------------------------------- Approved as to legal form: /s/ Sandra S. Schultz 6/29/02 ------------------------ ------------- Sandra S. Schultz Date University Counsel Office of General Counsel 25 EX-10.18 7 f97636a5exv10w18.txt EXHIBIT 10.18 . . . EXHIBIT 10.18 - ------------------------------------------------------------------------------------------------------------------------------------ 1. THIS CONTRACT 18 A RATED ORDER RATING PAGE of PAGES AWARD / CONTRACT UNDER DPAS (15 CFR 350) - DO-A1 1 17 - ------------------------------------------------------------------------------------------------------------------------------------

2. CONTRACT (PROC. INST. IDENT.) NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQUEST/PROJECT NO. FA8650-04-C-6473 See Section G - ------------------------------------------------------------------------------------------------------------------------------------

5. ISSUED BY PKH CODE FA8650 6. ADMINISTERED BY (IF OTHER THAN ITEM 5) CODE S0507A ------ ------ USAF/AFMC DCMA NORTHERN CALIFORNIA DET 1 AF RESEARCH LABORATORY P.O. BOX 232 2310 EIGHTH STREET, BUILDING 167 700 E ROTH ROAD, BLDG. 330 (LATHRO WRIGHT-PATTERSON AFB OH 45433-7801 FRENCH CAMP CA 95231-0232 KRISTINA J. CROAKE (937)656-6274 DCM-SFEXECTEAM@DCMA.MIL kristina.croake@woafb.af.mil SCD: C PAS: (NONE) - ------------------------------------------------------------------------------------------------------------------------------------

7. NAME AND ADDRESS OF CONTRACTOR (NO., STREET, CITY, COUNTY, STATE AND ZIP CODE) 8. DELIVERY NANOSYS INC [ ] FOR Origin [X] Other (see below) ---------------------------------------- 2625 HANOVER ST MAILED 9. DISCOUNT FOR PROMPT PAYMENT PALO ALTO CA 94304-1118 JUN 30 2004 N (650)331-2106 - ------------------------------------------------------------------------------------------------------------------------------------ 10. SUBMIT INVOICES ITEM (4 COPIES UNLESS OTHERWISE SPECIFIED) TO See Block CAGE CODE 3MVR5 FACILITY CODE THE ADDRESS SHOWN IN - 12 - ------------------------------------------------------------------------------------------------------------------------------------ 11. SHIP TO/MARK FOR CODE 12. PAYMENT WILL BE MADE BY CODE HQ0339 ------ See Section F DFAS COLUMBUS CENTER DFAS-CO/WEST ENTITLEMENT OPS P.O. BOX 182381 COLUMBUS OH 43218-2381 EFT: T - ------------------------------------------------------------------------------------------------------------------------------------ 13. AUTHORITY FOR OTHER THAN FULL AND OPEN COMPETITION 14. ACCOUNTING AND APPROPRIATION DATA See Section G

15A. ITEM NO 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT See Section B - ------------------------------------------------------------------------------------------------------------------ 15G. TOTAL AMOUNT OF CONTRACT - $ 2,228,445.00 - ------------------------------------------------------------------------------------------------------------------

16. Table of Contents - ------------------------------------------------------------------------------------------------------------------------------------ SEC DESCRIPTION PAGE(S) SEC DESCRIPTION PAGE(S) - ------------------------------------------------------------------------------------------------------------------------------------ PART I - THE SCHEDULE PART II - CONTRACT CLAUSES - ------------------------------------------------------------------------------------------------------------------------------------ - - A SOLICITATION/CONTRACT FORM 1 - I CONTRACT CLAUSES 13 - ------------------------------------------------------------------------------------------------------------------------------------ - - B SUPPLIES OR SERVICES AND PRICES/COSTS 2 PART III - LIST OF DOCUMENTS, EXHIBITS & ATTACHMENTS - ------------------------------------------------------------------------------------------------------------------------------------ - - C DESCRIPTION/SPECS./WORK STATEMENT 4 - J LIST OF ATTACHMENTS 17 - ------------------------------------------------------------------------------------------------------------------------------------ - - D PACKAGING AND MARKING 5 PART IV - REPRESENTATIONS AND INSTRUCTIONS - ------------------------------------------------------------------------------------------------------------------------------------ - - E INSPECTION AND ACCEPTANCE 6 K REPRESENTATIONS, CERTIFICATIONS - ------------------------------------------------------------- - - F DELIVERIES OR PERFORMANCE 7 OTHER STATEMENTS OF OFFERORS - ------------------------------------------------------------------------------------------------------------------------------------ - - G CONTRACT ADMINISTRATION DATA 10 L INSTRS., CONDS., AND NOTICES TO - ------------------------------------------------------------------------------------------------------------------------------------ - - H SPECIAL CONTRACT REQUIREMENTS 12 M EVALUATION FACTORS FOR AWARD - ------------------------------------------------------------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE - ------------------------------------------------------------------------------------------------------------------------------------ 17. [X] CONTRACTOR'S NEGOTIATED AGREEMENT 16. [ ] AWARD (Contractor is not raquired to sign this document). (Contractor is required to sign this document and return 1 Your offer on solicitation number________ including the addition copies to issuing office). Contractor agrees to furnish and or changes made by you which additions or changes set forth in full deliver all Items or perform all services set forth or above is hereby accepted as to items listed above and on any otherwise identified above and on any continuation sheets continuation sheets. This award consummates the contract which for the consideration stated herein. The rights and consists of the following documents: (a) the Government's obligations of the parties to this contract shall be solicitation and your offer, and (b) this award/contract. No further subject to and governed by the following documents: contractual document is necessary. (a) this award/contract, (b) the solicitation, if any, and (c) such provisions, representations, certifications, and specifications, as are attached or incorporated by reference herein. (Attachments are listed herein.)

- ------------------------------------------------------------------------------------------------------------------------------------ 19A. NAME AND TITLE OF SIGNER (TYPE OR PRINT) 20A. NAME OF CONTRACTING OFFICER Calvin Chow, Chief Executive Ofcr STEPHEN C. DAVIS - ------------------------------------------------------------------------------------------------------------------------------------

19B. Name of Contractor 19C. Date Signed 20B. United Sates of Amarica 20C. Date Signed Nanosys, Inc. 6/30/2004 30 JUN 04 by /s/ Calvin Chow by /s/ Stephen C. Davis ------------------------------------------------ ------------------------------------------- (signature of person authorized to sign) (signature of Contracting Officer) - ------------------------------------------------------------------------------------------------------------------------------------

NSN 7540-01-152-8069 STANDARD FORM 26 (Rev 4-85) Previous Editions unusable Prescribed by GSA FAR (48 CFR) 53.214(a) ConWrite Version 6-1.5 Created 30 Jun 2004 2:42 PM

PART I - THE SCHEDULE SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
Qty Unit Price ITEM SUPPLIES OR SERVICES Purch Unit Total Item Amount - ---- -------------------- ---------- ----------------- 0001 1 $ 2,228,445.00 Each $ 2,228,445.00 Noun: RESEARCH AND DATA ACRN: 9 NSN: N - Not Applicable DD1423 is Exhibit: A Contract type: U - COST PLUS FIXED FEE Inspection: DESTINATION Acceptance: DESTINATION FOB: DESTINATION Descriptive Data: Conduct Research entitled "Flexible Nanocomposite Photovoltaics" in accordance with Section C, Description/Specifications dated 8 Apr 2004. Deliver data in accordance with Exhibit A, Contract Data Requirements List, DD Form 1423, dated 1 Apr 2004. 000101 Noun: Funding Info Only ACRN: AA $1,114,108.00 PR/MIPR: GWSHE047201159 $ 1,114,108.00 0002 1 $ 0.00 Each $ 0.00 Noun: HARDWARE ACRN: U NSN: N - Not Applicable Contract type: U - COST PLUS FIXED FEE Inspection: DESTINATION Acceptance: DESTINATION FOB: DESTINATION Descriptive Data: Deliver hardware in accordance with Section C Description/Specifications entitled, "Flexible Nanocomposite Photovoltaics", dated 8 Apr 2004. 0003 OPTION CLIN (service) Noun: OPTION 1 DD1423 is Exhibit: A Descriptive Data: Conduct research entitled "Flexible Nanocomposite Photovoltaics" in accordance with Sections 3.2 through 3.2.6 of the Contractor's Statement of Work (SOW), Attachment 1 to Section J. Deliver data, hardware, software, and related documentation in accordance with the SOW and CDRLs, dated 8 Apr 2004 and 1 Apr 2004, respectively.
SECTION B FA8650-04-C-6473 PAGE 2 OF 17 Exhibit 10.18 PART I - THE SCHEDULE SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS NOTICE: The following contract clauses pertinent to this section are hereby incorporated in full text: OTHER CONTRACT CLAUSES IN FULL TEXT B049 OPTIONS (APR 2000) The Government may require performance of the work required by CLIN(s) 0003. The Contracting Officer shall provide written notice of intent to exercise this option to the Contractor on or before 30 days prior to the exercise date. If the Government exercises this option(s) by 14 Apr 2005 (11 MARO), the Contractor shall perform at the estimated cost and fee, if applicable, set forth as follows: Option 1: Cost: $[*** Redacted] Fee: $[*** Redacted] Total:$2,250,939,00 B054 IMPLEMENTATION OF LIMITATION OF FUNDS (FEB 2003) (TAILORED) (a) The sum allotted to this contract and available for payment of costs under CLINs 0001-0003 through 31 Dec 04 in accordance with the clause in Section I entitled "Limitation of Funds" is $ 1,114,000.00. B058 PAYMENT OF FEE (CPFF) (FEB 2003) The estimated cost and fee for this contract are shown below. The applicable fixed fee set forth below may be increased or decreased only by negotiation and modification of the contract for added or deleted work. As determined by the contracting officer, it shall be paid as it accrues, in regular installments based upon the percentage of completion of work (or the expiration of the agreed-upon period(s) for term contracts). Estimated Cost $[*** Redacted] Fee $[*** Redacted] SECTION B FA8650-04-C-6473 PAGE 3 OF 17 *** 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. PART I - THE SCHEDULE SECTION C - DESCRIPTION/SPECS./WORK STATEMENT NOTICE: The following contract clauses pertinent to this section are hereby incorporated in full text: OTHER CONTRACT CLAUSES IN FULL TEXT C003 INCORPORATED DOCUMENTS/REQUIREMENTS (APR 1998) Contractor's Statement of Work (SOW), entitled "Flexible Nanocomposite Photovoltaics", dated 8 Apr 2004, Attachment 1 to Section J SECTION C FA8650-04-C-6473 PAGE 4 OF 17 PART I - THE SCHEDULE SECTION D - PACKAGING AND MARKING NO CLAUSES OR PROVISIONS IN THIS SECTION SECTION D FA8650-04-C-6473 PAGE 5 OF 17 PART I - THE SCHEDULE SECTION E - INSPECTION AND ACCEPTANCE I. NOTICE: The following contract clauses pertinent to this section are hereby incorporated by reference: A. FEDERAL ACQUISITION REGULATION CONTRACT CLAUSES 52.246-08 INSPECTION OF RESEARCH AND DEVELOPMENT -- COST-REIMBURSEMENT (MAY 2001) B. DEFENSE FEDERAL ACQUISITION REGULATION SUPPLEMENT CONTRACT CLAUSES 252.246-7000 MATERIAL INSPECTION AND RECEIVING REPORT (MAR 2003) II. NOTICE: The following contract clauses pertinent to this section are hereby incorporated in full text: OTHER CONTRACT CLAUSES IN FULL TEXT E006 RECEIVING REPORT (DD FORM 250) MAILING ADDRESS (APR 1998) (a) Submit original DD Form(s) 250 for all items deliverable under this contract (e.g. hardware, software, exhibit line items, status reports, services, etc.) to the following address: Air Force Research Laboratory, AFRL/HECV ATTN: Dr. Darrel Hopper 2255 H Street, Building 248 Wright-Patterson AFB OH 45433-7022 (b) In addition, a copy of the DD Form 250 shall accompany each shipment for all deliverable items. Shipment addresses are specified in Section F of the schedule and/or on the Contract Data Requirements List. (c) PROCESSING STATUS. Any inquiry as to the processing status of a DD Form 250 should be made to the following office: AFRL/HECV E007 INSPECTION AND ACCEPTANCE AUTHORITY (APR 1998) Inspection and acceptance for all Contract and Exhibit Lines or Subline Items shall be accomplished by the Program Manager, Air Force Research Laboratory, AFRL/HECV, ATTN: [***Redacted], 2255 H Street, Building 248, Wright-Patterson AFB OH 45433-7022. SECTION E FA8650-04-C-6473 PAGE 6 OF 17 *** 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. PART I - THE SCHEDULE SECTION F - DELIVERIES OR PERFORMANCE
SHIP MARK TRANS ITEM SUPPLIES SCHEDULE DATA QTY TO FOR PRI DATE - ---- ---------------------- --- -- --- --- ---- 0001 1 FY1456 12 MARO NOUN: RESEARCH AND DATA ACRN: 9 Descriptive Data: The scheduled delivery date for the approved final technical report is 12 months after mailing date. All data shall be delivered in accordance with Exhibit A, Contract Data Requirements List, DO Form 1423, dated 1 Apr 2004. The technical effort must be completed no later than ten months after mailing date. Sea F0007 for mailing address. 0002 1 FY1456 12 MARO Noun: HARDWARE ACRN: U Descriptive Data: The scheduled delivery date for hardware is 12 months after mailing date of the contract. The shipping address is: FY1456, Det 1 AFRL/WS, Bldg 198, Area B, 2231 Monohan Way, WPAFB, OH 45433-7034, M/F: FA8650-04-C-6473, ATTN: [*** Redacted], AFRL/HECV, [*** Redacted].
SECTION F FA8650-04-C-6473 PAGE 7 OF 17 *** 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. PART I - THE SCHEDULE SECTION F - DELIVERIES OR PERFORMANCE I NOTICE: The following contract clauses pertinent to this section are hereby incorporated by reference: FEDERAL ACQUISITION REGULATION CONTRACT CLAUSES 52.242-15 STOP-WORK ORDER (AUG 1989) - ALTERNATE I (APR 1984) 52.247-34 F.O.B. DESTINATION (NOV 1991) II. NOTICE: The following contract clauses pertinent to this section are hereby incorporated in full text: OTHER CONTRACT CLAUSES IN FULL TEXT F003 CONTRACT DELIVERIES (FEB 1997) The following terms, if used within this contract in conjunction with contract delivery requirements (including data deliveries), are hereby defined as follows: (a) "MAC" and "MARO" mean "months after the effective date for award of the contractual action (as shown in block 3, Section A, SF 26)". (b) "WARO" means "weeks after the effective date for award of the contractual action". (c) "DARO" means "days after the effective date for award of the contractual action". (d) "ASREQ" means "as required". Detailed delivery requirements are then specified elsewhere in Section F. F005 DELIVERY OF REPORTS (OCT 1998) (a) All data shall be delivered in accordance with the delivery schedule shown on the Contract Data Requirements List, attachments, or as incorporated by reference. (b) All reports and correspondence submitted under this contract shall include the contract number and project number and be forwarded prepaid. A copy of the letters of transmittal shall be delivered to the Procuring Contracting Officer (PCO) and Administrative Contracting Officer (ACO). The addresses are set forth on the contract award cover page. All other address(es) and code(s) for consignee(s) are as set forth in the contract or incorporated by reference. F007 SHIPMENT ADDRESS (SEP 1997) FY1456 Det 1 AFRL/WS Building 198, Area B, 2231 Monohan Way Wright-Patterson AFB, OH 45433-7034 Mark For: GOVERNMENT PROGRAM MANAGER ATTN: [***Redacted] (AFRL/HECV) 2255 H Street, Bldg. 248, Room 300 Wright-Patterson AFB OH 45433-7022 [***Redacted] [***Redacted] SECTION F FA8650-04-C-6473 PAGE 8 0F 17 *** 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. PART I - THE SCHEDULE SECTION F - DELIVERIES OR PERFORMANCE PROCURING CONTRACTING OFFICER ATTN: [*** Redacted] (AFRL/PKD) 2310 Eighth Street, Bldg. 167 Wright-Patterson AFB OH 45433-7801 [*** Redacted] [*** Redacted] ADMINISTRATIVE CONTRACTING OFFICER DCMA San Francisco P.O. Box 232 700 E. Roth Road, Bldg. 330, French Camp, CA 95231-0232 dcm-sfexecteam@dcma.mil Defense Advanced Research Projects Agency Program Manager ATTN: [*** Redacted] (DARPA/MTO) 3701 North Fairfax Drive Arlington VA 22203-1714 [*** Redacted] [*** Redacted] Air Force Research Laboratory ATTN: [*** Redacted] (AFRL/HEOR) 2610 Seventh Street, Bldg. 441 Wright-Patterson AFB OH 45433-7921 [*** Redacted] [*** Redacted] Air Force Research Laboratory ATTN: [*** Redacted] (AFRL/HEC) 2255 H Street, Bldg. 248 Wright-Patterson AFB OH 45433-7022 [*** Redacted] [*** Redacted] Air Force Research Laboratory ATTN: [*** Redacted] (AFRL/HEF) 2245 Monahan Way, Bldg. 029 Wright-Patterson AFB OH 45433-7008 [*** Redacted] [*** Redacted] SECTION F FA8650-04-C-6473 PAGE 9 OF 17 *** 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. PART I - THE SCHEDULE SECTION G - CONTRACT ADMINISTRATION DATA
Obligation ACRN Appropriation/Lmt Subhead/Supplemental Accounting Data Amount - ---- ------------------------------------------------------ ------ AA $1,114,108.00 97 40400 1302 D14 47A8 4H2000 6HCV00 OS836 63739E 503000 F03000 Funding breakdown: On CLIN 000101: $1,114,108.00 PR/MIPR: GWSHE047201159 $1,114,108.00 JON: 71841130 ARPA Order Number: S836/00 dated 10 May 2004 Descriptive data: PR COMPLETE
SECTION G FA8650-04-C-6473 PAGE 10 OF 17 PART I - THE SCHEDULE SECTION G - CONTRACT ADMINISTRATION DATA NOTICE: The following contract clauses pertinent to this section are hereby incorporated in full text: OTHER CONTRACT CLAUSES IN FULL TEXT G002 PROGRAM MANAGER (MAY 1997) Program Manager: [*** Redacted], [*** Redacted] G005 PAYMENT INSTRUCTIONS FOR MULTIPLE ACCOUNTING CLASSIFICATION CITATIONS (MAR 2001) Payment for all effort under this contract should be made in the order and amounts shown in the informational subline item(s) in Section B, CLIN 0001 of the contract and recapped below. Exhaust the funds in each ACRN before using funds from the next listed ACRN.
ACRN SUBCLIN NO. TOTAL OBLIGATED ~~AA 000101 $1,114,108.00~~
a. This contract will be funded by multiple accounting classification citations. Payment shall be made from ACRNs in alphabetical order (AA,AB,etc). DO NOT USE A PRORATED METHOD to pay, disburse and liquidate funds. Do not liquidate any funds from an ACRN unless the preceding ACRNs have been fully liquidated, or if revised payment instructions are provided per paragraph b. below. b. Additional ACRNs will be assigned when new accounting classifications are available. When adding new ACRNs or changing existing ACRNs, the above payment instructions shall apply, unless specific revised payments instructions are provided as part of a contract modification. G006 INVOICE AND PAYMENT - COST REIMBURSEMENT (FEB 1997) Invoices (or public vouchers), supported by a statement of cost for performance under this contract, shall be submitted to the cognizant Defense Contract Audit Agency (DCAA) office. Under the provisions of DFARS 242.803(b), the DCAA auditor, is designated as the authorized representative of the contracting officer (CO) for examining vouchers received directly from the contractor. G014 IMPLEMENTATION OF PATENT RIGHTS CLAUSE (SEP 1999) All documents and information required by the patent rights and/or patent reporting clauses set forth in Section I of this contract shall be submitted to the Administrative Contracting Officer and to the Staff Judge Advocate, AFMC LO/JAZI, 2240 B Street, Bldg. 11, Room 100, Wright-Patterson AFB OH 45433-7019 or submit via email to afmclo.jaz@wpafb.af.mil. Please include contract number, followed by the words "Invention Reporting". The AFMC LO/JAZI patent administrator can be reached at (937) 255-2872. This notice also constitutes a request (see FAR 52.227-12(f)(10) or DFARS 252.227-7039(c), as applicable) for submission of a copy of the patent application; when filed, along with the patent application serial number, filing date, subsequent U.S. patent number and issue date, as received. SECTION G FA8650-04-C-6473 PAGE 11 OF 17 *** 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. PART I - THE SCHEDULE SECTION H - SPECIAL CONTRACT REQUIREMENTS NOTICE: The following contract clauses pertinent to this section are hereby incorporated in full text: OTHER CONTRACT CLAUSES IN FULL TEXT H001 OPTIONS (MAY 1997) The Government reserves the right to exercise the following option(s) subject to the stated conditions. In the event an option is exercised, the affected sections of the contract, e.g., Section B, Section F, Section G, etc., will be modified as appropriate. H025 INCORPORATION OF SECTION K (OCT 1998) Section K of the solicitation is hereby incorporated by reference. H033 SOLICITATION NUMBER (APR 1998) Solicitation Number: BAA 03-32 H055 INSURANCE CLAUSE IMPLEMENTATION (FEB 2003) The Contractor shall obtain and maintain the minimum kinds and amounts of insurance during performance of this contract as specified by FAR 28.307-2, Liability, and contemplated by FAR 52.228-5, Insurance--Work on a Government Installation, and/or 52.228-7, Insurance--Liability to Third Persons. SECTION H FA8650-04-C-6473 PAGE 12 OF 17 PART II - CONTRACT CLAUSES SECTION I - CONTRACT CLAUSES CONTRACT CLAUSES IN THIS SECTION ARE FROM THE FAR, DEFENSE FAR SUP, AIR FORCE FAR SUP, AND THE AIR FORCE MATERIEL COMMAND FAR SUP, AND ARE CURRENT THROUGH THE FOLLOWING UPDATES: DATABASE_ VERSION: 6.1.x.700; ISSUED: 6/22/2004; FAR: FAC 2001-24 (PARTIAL); DFAR: DCN20040608; DL.: DL 98-021; CLASS DEVIATIONS: CD 2003o0003; AFFAR: 2002 EDITION; AFMCFAR: AFMCAC 02-04; AFAC: AFAC 2004-0419; IPN: 98-009 I. NOTICE: The following contract clauses pertinent to this section are hereby incorporated by reference: A. FEDERAL ACQUISITION REGULATION CONTRACT CLAUSES 52.202-01 DEFINITIONS (DEC 2001) 52.203-03 GRATUITIES (APR 1984) 52.203-05 COVENANT AGAINST CONTINGENT FEES (APR 1984) 52.203-06 RESTRICTIONS ON SUBCONTRACTOR SALES TO THE GOVERNMENT (JUL 1995) 52.203-07 ANTI-KICKBACK PROCEDURES (JUL 1995) 52.203-08 CANCELLATION, RESCISSION, AND RECOVERY OF FUNDS FOR ILLEGAL OR IMPROPER ACTIVITY (JAN 1997) 52.203-10 PRICE OR FEE ADJUSTMENT FOR ILLEGAL OR IMPROPER ACTIVITY (JAN 1997) 52.203-12 LIMITATION ON PAYMENTS TO INFLUENCE CERTAIN FEDERAL TRANSACTIONS (JUN 2003) 52.204-04 PRINTED OR COPIED DOUBLE-SIDED ON RECYCLED PAPER (AUG 2000) 52.204-07 CENTRAL CONTRACTOR REGISTRATION (OCT 2003) 52.209-06 PROTECTING THE GOVERNMENT'S INTEREST WHEN SUBCONTRACTING WITH CONTRACTORS DEBARRED, SUSPENDED, OR PROPOSED FOR DEBARMENT (JUL 1995) 52.211-05 MATERIAL REQUIREMENTS (AUG 2000) 52.215-02 AUDIT AND RECORDS -- NEGOTIATION (JUN 1999) 52.215-08 ORDER OF PRECEDENCE--UNIFORM CONTRACT FORMAT (OCT 1997) 52.215-11 PRICE REDUCTION FOR DEFECTIVE COST OR PRICING DATA--MODIFICATIONS (OCT 1997) 52.215-13 SUBCONTRACTOR COST OR PRICING DATA--MODIFICATIONS (OCT 1997) 52.215-14 INTEGRITY OF UNIT PRICES (OCT 1997) 52.215-15 PENSION ADJUSTMENTS AND ASSET REVERSIONS (JAN 2004) 52.215-18 REVERSION OR ADJUSTMENT OF PLANS FOR POSTRETIREMENT BENEFITS (PRB) OTHER THAN PENSIONS (OCT 1997) 52.215-19 NOTIFICATION OF OWNERSHIP CHANGES (OCT 1997) 52.215-21 REQUIREMENTS FOR COST OR PRICING DATA OR INFORMATION OTHER THAN COST OR PRICING DATA--MODIFICATIONS (OCT 1997) 52.216-07 ALLOWABLE COST AND PAYMENT (DEC 2002) 52.216-08 FIXED FEE (MAR 1997) 52.219-08 UTILIZATION OF SMALL BUSINESS CONCERNS (MAY 2004) 52.222-01 NOTICE TO THE GOVERNMENT OF LABOR DISPUTES (FEB 1997) 52.222-02 PAYMENT FOR OVERTIME PREMIUMS (JUL 1990) Para (a), Dollar amount is '$0.00' 52.222-03 CONVICT LABOR (JUN 2003) 52.222-21 PROHIBITION OF SEGREGATED FACILITIES (FEB 1999) 52.222-26 EQUAL OPPORTUNITY (APR 2002) 52.222-35 EQUAL OPPORTUNITY FOR SPECIAL DISABLED VETERANS, VETERANS OF THE VIETNAM ERA, AND OTHER ELIGIBLE VETERANS (DEC 2001) 52.222-36 AFFIRMATIVE ACTION FOR WORKERS WITH DISABILITIES (JUN 1998)

SECTION I FA8650-04-C-6473 PAGE 13 OF 17 PART II - CONTRACT CLAUSES SECTION I - CONTRACT CLAUSES 52.222-37 EMPLOYMENT REPORTS ON SPECIAL DISABLED VETERANS, VETERANS OF THE VIETNAM ERA, AND OTHER ELIGIBLE VETERANS (DEC 2001) 52.223-06 DRUG-FREE WORKPLACE (MAY 2001) 52.223-14 TOXIC CHEMICAL RELEASE REPORTING (AUG 2003) 52.225-13 RESTRICTIONS ON CERTAIN FOREIGN PURCHASES (DEC 2003) 52.227-01 AUTHORIZATION AND CONSENT (JUL 1995) - ALTERNATE I (APR 1984) 52.227-02 NOTICE AND ASSISTANCE REGARDING PATENT AND COPYRIGHT INFRINGEMENT (AUG 1996) 52.227-11 PATENT RIGHTS -- RETENTION BY THE CONTRACTOR (SHORT FORM) (JUN 1997) Para (1), Communications: '"The contractor shall forward the invention reports called for by the Patents Rights clause through the Administrative Contracting Office addressed through AFMC LO/JAZI, 2240 B Street, Room 100, Wright-Patterson AFB, OH 45433-7109. Invention reports may be e-mailed to: afmclo.jaz@wpafb.af.mil . Ensure e-mail includes your contract number, followed by the words "Invention Reporting" on the subject line." "The contractor shall forward the invention reports called for by the Patents Rights clause through the Administrative Contracting Office addressed through AFMC LO/JAZI, 2240 B Street, Room 100, Wright-Patterson AFB, OH 45433-7109. Invention reports may be e-mailed to: afmclo.jaz@wpafb.af.mil , Ensure e-mail includes your Contract number, followed by the words "Invention Reporting" on the subject line"' 52.228-07 INSURANCE -- LIABILITY TO THIRD PERSONS (MAR 1996) 52.232-09 LIMITATION ON WITHHOLDING OF PAYMENTS (APR 1984) 52.232-17 INTEREST (JUN 1996) 52.232-22 LIMITATION OF FUNDS (APR 1984) 52.232-23 ASSIGNMENT OF CLAIMS (JAN 1986) -- ALTERNATE I (APR 1984) 52.232-25 PROMPT PAYMENT (OCT 2003) 52.232-33 PAYMENT BY ELECTRONIC FUNDS TRANSFER--CENTRAL CONTRACTOR REGISTRATION (OCT 2003) 52.233-01 DISPUTES (JUL 2002) 52.233-03 PROTEST AFTER AWARD (AUG 1996) - ALTERNATE I (JUN 1985) 52,242-01 NOTICE OF INTENT TO DISALLOW COSTS (APR 1984) 52.242-03 PENALTIES FOR UNALLOWABLE COSTS (MAY 2001) 52.242-04 CERTIFICATION OF FINAL INDIRECT COSTS (JAN 1997) 52.242-13 BANKRUPTCY (JUL 1995) 52.243-02 CHANGES -- COST-REIMBURSEMENT (AUG 1987) - ALTERNATE V (APR 1984) 52.243-06 CHANGE ORDER ACCOUNTING (APR 1984) 52.243-07 NOTIFICATION OF CHANGES (APR 1984) Para (b), Number of calendar days is (insert 30 for RDSS/C) '30 days' Para (d), Number of calendar days is (insert 30 for RDSS/C) '30 days' 52.244-02 SUBCONTRACTS (AUG 1998) - ALTERNATE I (AUG 1998) Para (e), Contractor shall obtain the Contracting Officer's written consent before placing the following subcontracts: 'None' Para (k), Insert subcontracts which were evaluated during negotiations: 'University of California Berkeley; Battelle Memorial Institute, Pacific NW; and Science Applications International Corporation (SAIC)' 52.244-05 COMPETITION IN SUBCONTRACTING (DEC 1996) 52.244-06 SUBCONTRACTS FOR COMMERCIAL ITEMS (MAY 2004) 52.245-05 GOVERNMENT PROPERTY (COST-REIMBURSEMENT, TIME-AND-MATERIAL, OR LABOR-HOUR CONTRACTS) (DEVIATION) (MAY 2004) 52.246-23 LIMITATION OF LIABILITY (FEB 1997) 52.247-01 COMMERCIAL BILL OF LADING NOTATIONS (APR 1984) 52.247-67 SUBMISSION OF COMMERCIAL TRANSPORTATION BILLS TO THE GENERAL SERVICES ADMINISTRATION FOR AUDIT (JUN 1997) 52.249-06 TERMINATION (COST-REIMBURSEMENT) (MAY 2004) 52.249-14 EXCUSABLE DELAYS (APR 1984) 52.253-01 COMPUTER GENERATED FORMS (JAN 1991)

SECTION I FA8650-04-C-6473 PAGE 14 OF 17 PART II - CONTRACT CLAUSES SECTION I - CONTRACT CLAUSES B. DEFENSE FEDERAL ACQUISITION REGULATION SUPPLEMENT CONTRACT CLAUSES 252.203-7001 PROHIBITION ON PERSONS CONVICTED OF FRAUD OR OTHER DEFENSE- CONTRACT-RELATED FELONIES (MAR 1999) 252.204-7003 CONTROL OF GOVERNMENT PERSONNEL WORK PRODUCT (APR 1992) 252.204-7004 ALTERNATE A TO FAR 52.204-7, CENTRAL CONTRACTOR REGISTRATION (NOV 2003) 252.205-7000 PROVISION OF INFORMATION TO COOPERATIVE AGREEMENT HOLDERS (DEC 1991) 252.209-7000 ACQUISITION FROM SUBCONTRACTORS SUBJECT TO ON-SITE INSPECTION UNDER THE INTERMEDIATE-RANGE NUCLEAR FORCES (INF) TREATY (NOV 1995) 252.209-7004 SUBCONTRACTING WITH FIRMS THAT ARE OWNED OR CONTROLLED BY THE GOVERNMENT OF A TERRORIST COUNTRY (MAR 1998) 252.215-7000 PRICING ADJUSTMENTS (DEC 1991) 252.225-7004 REPORTING OF CONTRACT PERFORMANCE OUTSIDE THE UNITED STATES (APR 2003) 252.225-7012 PREFERENCE FOR CERTAIN DOMESTIC COMMODITIES (JUN 2004) 252.225-7014 PREFERENCE FOR DOMESTIC SPECIALTY METALS (APR 2003) 252.225-7025 RESTRICTION ON ACQUISITION OF FORGINGS (APR 2003) 252.225-7030 RESTRICTION ON ACQUISITION OF CARBON, ALLOY, AND ARMOR STEEL PLATE (APR 2003) 252,225-7031 SECONDARY ARAB BOYCOTT OF ISRAEL (APR 2003) 252.226-7001 UTILIZATION OF INDIAN ORGANIZATIONS, INDIAN-OWNED ECONOMIC ENTERPRISES, AND NATIVE HAWAIIAN SMALL BUSINESS CONCERNS (OCT 2003) 252.227-7013 RIGHTS IN TECHNICAL DATA--NONCOMMERCIAL ITEMS (NOV 1995) 252.227-7014 RIGHTS IN NONCOMMERCIAL COMPUTER SOFTWARE AND NONCOMMERCIAL COMPUTER SOFTWARE DOCUMENTATION (JUN 1995) 252.227-7016 RIGHTS IN BID OR PROPOSAL INFORMATION (JUN 1995) 252.227-7019 VALIDATION OF ASSERTED RESTRICTIONS--COMPUTER SOFTWARE (JUN 1995) 252.227-7030 TECHNICAL DATA -- WITHHOLDING OF PAYMENT (MAR 2000) 252.227-7034 PATENTS--SUBCONTRACTS (APR 1984) 252.227-7037 VALIDATION OF RESTRICTIVE MARKINGS ON TECHNICAL DATA (SEP 1999) 252.227-7039 PATENTS--REPORTING OF SUBJECT INVENTIONS (APR 1990) 252.231-7000 SUPPLEMENTAL COST PRINCIPLES (DEC 1991) 252.232-7003 ELECTRONIC SUBMISSION OF PAYMENT REQUESTS (JAN 2004) 252.235-7010 ACKNOWLEDGMENT OF SUPPORT AND DISCLAIMER (MAY 1995) Para (a), name of contracting agency(ies): 'United States Air Force' Para (a), contract numbers): 'FA8650-04-C-6473' Para (b), name of contracting agency(ies): 'United States Air Force' 252.235-7011 FINAL SCIENTIFIC OR TECHNICAL REPORT (SEP 1999) 252.242-7000 POSTAWARD CONFERENCE (DEC 1991) 252.243-7002 REQUESTS FOR EQUITABLE ADJUSTMENT (MAR 1998) 252.244-7000 SUBCONTRACTS FOR COMMERCIAL ITEMS AND COMMERCIAL COMPONENTS (DOD CONTRACTS) (MAR 2000) 252.245-7001 REPORTS OF GOVERNMENT PROPERTY (MAY 1994) 252.247-7023 TRANSPORTATION OF SUPPLIES BY SEA (MAY 2002) 252.247-7024 NOTIFICATION OF TRANSPORTATION OF SUPPLIES BY SEA (MAR 2000)

II. NOTICE: The following contract clauses pertinent to this section are hereby incorporated in full text: SECTION I FA8650-04-C-6473 PAGE 15 OF 17 PART II - CONTRACT CLAUSES SECTION I - CONTRACT CLAUSES FEDERAL ACQUISITION REGULATION CONTRACT CLAUSES IN FULL TEXT 52.211-15 DEFENSE PRIORITY AND ALLOCATION REQUIREMENTS (SEP 1990) This is a rated order certified for national defense use, and the Contractor shall follow all the requirements of the Defense Priorities and Allocations System regulation (15 CFR 700). 52.252-02 CLAUSES INCORPORATED BY REFERENCE (FEB 1998) This contract incorporates one or more clauses by reference, with the same force and effect as if they were given in full text. Upon request, the Contracting Officer will make their full text available. Also, the full text of a clause may be accessed electronically at this/these address(es): http://farsite.hill.af.mil/ 52.252-06 AUTHORIZED DEVIATIONS IN CLAUSES (APR 1984) (a) The use in this solicitation or contract of any Federal Acquisition Regulation (48 CFR Chapter 1) clause with an authorized deviation is indicated by the addition of "(DEVIATION)" after the date of the clause. (b) The use in this solicitation or contract of any Defense Federal Acquisition Regulation Supplement (48 CFR Chapter 2) clause with an authorized deviation is indicated by the addition of "(DEVIATION)" after the name of the regulation. SECTION I FA8650-04-C-6473 PAGE 16 OF 17 PART III - LIST OF DOCUMENTS, EXHIBITS & ATTACHMENTS SECTION J - LIST OF ATTACHMENTS
DOCUMENT PGS DATE TITLE - ------------ --- ----------- ---------------------------------------- EXHIBIT A 9 01 APR 2004 CONTRACT DATA REQUIREMENTS LIST (CDRL), DD FORM 1423-1 ATTACHMENT 1 5 08 APR 2004 "FLEXIBLE NANOCOMPOSITE PHOTOVOLTAICS" ATTACHMENT 2 4 30 JUN 2004 DFARS 252.227-7017, "IDENTIFICATION AND ASSERTION OF USE, RELEASE OR DISCLOSURE RESTRICTIONS (JUN 1995)" AND CONTRACTOR'S LIST OF TECHNICAL DATA OR COMPUTER SOFTWARE TO BE DELIVERED WITH RESTRICTIONS
SECTION J FA8650-04-C-6473 PAGE 17 OF 17 CONTRACT DATA REQUIREMENTS LIST FORM APPROVED (1 DATA ITEM) OMB NO. 0704-0188 Public reporting burden for this collection of information is estimated to average 110 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503. Please DO NOT RETURN your form to either of these addresses. Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. listed in Block E. A. CONTRACT LINE ITEM NO. B. EXHIBIT C. CATEGORY: N/A REF: DOD 5010.12-M 0001 A TDP______ TM______ OTHER________ D. SYSTEM/ITEM E. CONTRACT/PR NO. F. CONTRACTOR 71841130 FA8650-04-C-6473 NANOSYS, INC 1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE A001 SCIENTIFIC AND TECHNICAL REPORTS Final Report ~~4. AUTHORITY (Data Acquisition Document No.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE DI-MISC-80711A/T CSOW AFRL/HECV~~

7. DD 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12.DATE OF FIRST SUBMISSION 14. DISTRIBUTION REQUIRED ONE/R ** XX B b. COPIES ----------------------- 8. APP CODE 11. AS OF DATE 13. DATE OF SUBSEQUENT a. ADDRESSEE Final SUBMISSION Draft -------------- A * *** Reg Repro - -------------------------------------------------------------------------------------------------------------------------------- 16. REMARKS AFRL/HECV 2 2 2 Tailored to require the official AFRL and DARPA emblems to be placed in the upper right hand corner of the front cover with affected entries adjusted as required (AFRL will supply a copy of the emblem); Block 10, is clarified so that, "Pursuant to DFARS 252.235-7011, the Government will forward the approved final report to the Defense Technical Information Center (DTIC) to fulfill the DTIC submission requirement. The Contractor shall not submit the final report directly to DTIC." * 12MAC for Base Effort 24MAC after option 1 exercised ** 30 days after Block 11 time Approval/disapproval by letter from the Air Force Program Manager within 60 days after receipt. ***Disapproval requires correction/resubmission within 30 days after receipt of Air Force comments. Draft report shall be unbound, in standard size type, double-spaced and single-sided. Reproducibles shall be 1). a CAMERA READY, unbound, suitable for offset reproduction, and 2). on 3.5" floppy disk (or CD-ROM, or ZIP drive disk) compatible with MS-Office for Windows, and both shall incorporate all changes made in the corrected draft. All photos shall be glossy finished. Submit the reproducible(s) with the final corrected version only. The contractor is reminded that the National Industrial Security Program Operating Manual, DOD 5220.22-M, Chapter 4, Paragraph 4-208 (a), dated January 1995 requires that records be maintained when documents derive classified from multiple sources. 15. TOTAL 2 2 2 - --------------------------------------------------------------------------------------------------------------------------------

17. PRICE GROUP 18. ESTIMATED TOTAL PRICE G. PREPARED BY H. DATE I. APPROVED BY J. DATE [***Redacted] 22-MAR-04 /s/ [***Redacted] 01-APR-04 AFRL/HECV, [***Redacted] [***Redacted] Data Manager Det 1 AFRL/WSC DD FORM 1423-1, JUN 90 Previous editions are obsolete PAGE 1-A of 8 Pages *** 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. CONTRACT DATA REQUIREMENTS LIST FORM APPROVED (1 DATA ITEM) OMB No. 0704-0188 Public reporting burden for this collection of information is estimated to average 110 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503. Please DO NOT RETURN your form to either of these addresses. Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. listed in Block E. A. CONTRACT LINE ITEM NO. B. EXHIBIT C. CATEGORY: N/A REF: DOD 5010.12-M 0001 A TOP______ TM______ OTHER________ D. SYSTEM/ITEM E. CONTRACT/PR NO. F. CONTRACTOR 71841130 FA8650-04-C-6473 NANOSYS, INC 1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE A002 SCIENTIFIC AND TECHNICAL REPORTS Contractor's Billing Voucher ~~4. AUTHORITY (Data Acquisition Document No.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE DI-MISC-80711A/T CSOW AFRL/HECV~~

7. DD 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12. DATE OF FIRST SUBMISSION 14. DISTRIBUTION LT REQUIRED MTHLY * B b. COPIES ----------------------- 8. APP CODE 11. AS OF DATE 13. DATE Of SUBSEQUENT a. ADDRESSEE Final SUBMISSION Draft -------------- N/A * * Reg Repro - -------------------------------------------------------------------------------------------------------------------------------- 16. REMARKS AFRL/HEC 0 1 0 AFRL/HECV 0 1 0 Tailored 1.) to require only a photocopy of the contractor's billing voucher AFRL/HEF 0 1 0 which is prepared by the contractor to receive payment for this contract's work, AFRL/PRKA 0 1 0 and 2.) to require the reporting of current Earned, Billed and Paid funds as DARPA/MTO 0 l 0 defined herein. Block 10 is clarified so that distribution to DTIC shall only be DCMA/ACO 0 1 0 through Air Force distribution channels. Earned means amount of funds earned by the contractor and the suppliers or subcontractor's through labor or material purchases. Billed means amount of funds that have been billed to the government by the contractor. Paid means the amount of funds paid by the government to the contractor. Submit via e-mail. * At the close of the contractor's monthly accounting period. ** 25 days after Block 11 time. 15. TOTAL 0 6 0 - --------------------------------------------------------------------------------------------------------------------------------

17. PRICE GROUP 18. ESTIMATED TOTAL PRICE G. PREPARED BY H. DATE I. APPROVED BY J. DATE [***Redacted] 22-MAR-04 [***Redacted] 01-APR-04 AFRL/HECV, [***Redacted] [***Redacted] Data Manager Det 1 AFRL/WSC DD FORM 1423-1, JUN 90 Previous editions are obsolete PAGE 2-A of 8 Pages *** 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. CONTRACT DATA REQUIREMENTS LIST FORM APPROVED (1 Data Item) OMB NO. 0704-0188 Public reporting burden for this collection of information is estimated to average 110 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of Information. Send comments regarding this burden estimate or any other aspect of this collection of information including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503. Please DO NOT RETURN your form to either of these addresses. Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. listed in Block E. A. CONTRACT LINE ITEM NO. B. EXHIBIT C. CATEGORY: N/A REF: DOD 5010,12-M 0001 A TDP______ TM______ OTHER________ D. SYSTEM/ITEM E. CONTRACT/PR NO. F. CONTRACTOR 71841130 FA8650-04-C-6473 NANOSYS, INC 1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE A003 FUNDS AND MAN-HOUR EXPENDITURE REPORT ~~4. AUTHORITY (Data Acquisition Document No.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE DI-FNCL-80331/T CSOW AFRL/HECV~~

7. DD 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12.DATE OF FIRST SUBMISSION 14. DISTRIBUTION REQUIRED MTHLY ** LT B b. COPIES ----------------------- 8. APP CODE 11. AS OF DATE 13. DATE OF SUBSEQUENT a. ADDRESSEE Final SUBMISSION Draft -------------- N/A * ** Reg Repro - -------------------------------------------------------------------------------------------------------------------------------- 16. REMARKS AFRL/HEC 0 1 0 Tailored to allow contractor's format AFRL/HECV 0 1 0 AFRL/HEF 0 1 0 Submit via e-mail. AFRL/PRKA 0 1 0 DARPA/MTO 0 l 0 * At the close of the contractor's monthly accounting period. DCMA/ACO 0 1 0 ** 25 days after Block 11 time. 15. TOTAL 0 6 0 - --------------------------------------------------------------------------------------------------------------------------------

17. PRICE GROUP 18. ESTIMATED TOTAL PRICE G. PREPARED BY H. DATE I. APPROVED BY J. DATE [*** Redacted] 22-MAR-04 /s/ [*** Redacted] 01-APR-04 AFRL/HECV, [*** Redacted] [*** Redacted] Data Manager Det 1 AFRL/WSC DD FORM 1423-1, JUN 90 Previous editions are obsolete PAGE 3-A of 8 Pages *** 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. CONTRACT DATA REQUIREMENTS LIST FORM APPROVED (1 DATA ITEM) OMB NO. 0704-0188 Public reporting burden for this collection of information is estimated to average 110 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503. Please DO NOT RETURN your form to either of these addresses. Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. listed in Block E. A. CONTRACT LINE ITEM NO. B. EXHIBIT C. CATEGORY: N/A REF: DOD 5010.12-M 0001 A TOP______ TM______ OTHER________ D. SYSTEM/ITEM E. CONTRACT/PR NO. F. CONTRACTOR 71841130 FA8650-04-C-6473 NANOSYS, INC 1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE A004 CONTRACT FUNDS STATUS REPORT (CFSR) ~~4. AUTHORITY (Data Acquisition Document No.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE DI-MGMT-81468/T CSOW AFRL/HECV~~

7. DD 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12. DATE OF FIRST SUBMISSION 14. DISTRIBUTION LT REQUIRED QTRLY ** B b. COPIES ----------------------- 8. APP CODE 11. AS OF DATE 13. DATE OF SUBSEQUENT a. ADDRESSEE Final N/A * SUBMISSION Draft -------------- ** Reg Repro - -------------------------------------------------------------------------------------------------------------------------------- 16. REMARKS AFRL/HEC 0 1 0 Tailored so that the report contains forecasts by month for the next six months, AFRL/HECV 0 1 0 by quarter for the remaining fiscal year, and by year for the remaining fiscal AFRL/HEF 0 1 0 years. CFSR data shall be reconciled to the Government fiscal year end at 30 AFRL/PRKA 0 1 0 September if the contractor's fiscal year end does not coincide with the DARPA/MTO 0 l 0 Government's fiscal year end. DCMA/ACO 0 1 0 Submit via e-mail * The last day of the contractor's monthly accounting period nearest the end of the governments fiscal year quarter. ** The initial submission shall be within 25 calendar days after the close of the contractor's monthly accounting period nearest the end of the first government fiscal year quarter after contract award. Subsequent submissions shall be 25 calendar days after Block 11 time. 15. TOTAL 0 6 0 - --------------------------------------------------------------------------------------------------------------------------------

17. PRICE GROUP 18. ESTIMATED TOTAL PRICE G. PREPARED BY H. DATE I. APPROVED BY J. DATE [*** Redacted) 22-MAR-04 /s/ [*** Redacted] 01-APR-04 AFRL/HECV, [*** Redacted] [*** Redacted] Data Manager Det 1 AFRL/WSC DD FORM 1423-1, JUN 90 Previous editions are obsolete PAGE 4-A of 8 Pages *** 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. CONTRACT DATA REQUIREMENTS LIST FORM APPROVED (1 DATA ITEM) OMB NO. 0704-0188 Public reporting burden for this collection of information is estimated to average 110 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503. Please DO NOT RETURN your form to either of these addresses. Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. listed in Block E. A. CONTRACT LINE ITEM NO. B. EXHIBIT C. CATEGORY: N/A REF: DOD 5010.12-M 0001 A TOP______ TM______ OTHER________ D. SYSTEM/ITEM E. CONTRACT/PR NO. F. CONTRACTOR 71841130 FA8650-04-C-6473 NANOSYS, INC 1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE A005 STATUS REPORTS ~~4. AUTHORITY (Data Acquisition Document No.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE DI-MGMT-80368/T CSOW AFRL/HECV~~

7. DD 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12. DATE OF FIRST SUBMISSION 14. DISTRIBUTION REQUIRED MTHLY * LT B b. COPIES ----------------------- 8. APP CODE 11. AS OF DATE 13. DATE Of SUBSEQUENT a. ADDRESSEE Final SUBMISSION Draft -------------- N/A * * Reg Repro - -------------------------------------------------------------------------------------------------------------------------------- 16. REMARKS AFRL/HEC 0 1 0 AFRL/HECV 0 1 0 Tailored to allow contractor's format and to delete Block 10, para 10.2.2.3. AFRL/HEF 0 1 0 AFRL/PRKA 0 1 0 Submit via email, except when final report is due to be submitted, then omit DARPA/MTO 0 l 0 this item. DCMA/ACO 0 1 0 * At the close of the contractor's monthly accounting period. ** 25 days after Block 11 time. 15. TOTAL 0 6 0 - --------------------------------------------------------------------------------------------------------------------------------

17. PRICE GROUP 18. ESTIMATED TOTAL PRICE G. PREPARED BY H. DATE I. APPROVED BY J. DATE [*** Redacted] 22-MAR-04 [*** Redacted] 01-APR-04 AFRL/HECV, [*** Redacted] [*** Redacted] Data Manager Det 1 AFRL/WSC DD FORM 1423-1, JUN 90 Previous editions are obsolete PAGE 5-A of 8 Pages *** 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. CONTRACT DATA REQUIREMENTS LIST FORM APPROVED (1 DATA ITEM) OMB NO. 0704-0188 Public reporting burden for this collection of information is estimated to average 110 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503. Please DO NOT RETURN your form to either of these addresses. Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. listed in Block E. A. CONTRACT LINE ITEM NO. B. EXHIBIT C. CATEGORY: N/A REF: DOD 5010, 12-M 0001 A TDP______ TM______ OTHER________ D. SYSTEM/ITEM E. CONTRACT/PR NO. F. CONTRACTOR 71841130 FA8650-04-C-6473 NANOSYS, INC 1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE A006 PRESENTATION MATERIAL ~~4. AUTHORITY (Data Acquisition Document No.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE DI-ADMN-81373/T CSOW AFRL/HECV~~

7. DD 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12. DATE OF FIRST SUBMISSION 14. DISTRIBUTION REQUIRED ASREQ * LT B b. COPIES ----------------------- 8. APP CODE 11. AS OF DATE 13. DATE OF SUBSEQUENT a. ADDRESSEE Final SUBMISSION Draft -------------- N/A * * Reg Repro - -------------------------------------------------------------------------------------------------------------------------------- 16. REMARKS AFRL/HECV 0 1 1 Tailored to require view graphs and hardcopy or computer generated file. ASREQ means as required to document topics under discussion at briefings and reviews. * Submit at each briefing or review as appropriate. Maximum # of view graphs shall not exceed 210 per each quarterly review for this contract. Submit reproducible on media compatible with MS-Office for Windows. 15. TOTAL 0 1 1 - --------------------------------------------------------------------------------------------------------------------------------

17. PRICE GROUP 18. ESTIMATED TOTAL PRICE G. PREPARED BY H. DATE I. APPROVED BY J. DATE [*** Redacted] 22-MAR-04 /s/ [*** Redacted] 01-APR-04 AFRL/HECV, [*** Redacted] [*** Redacted] Data Manager Det 1 AFRL/WSC DD FORM 1423-1, JUN 90 Previous editions are obsolete PAGE 6-A of 8 Pages *** 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. CONTRACT DATA REQUIREMENTS LIST FORM APPROVED (1 DATA ITEM) OMB NO. 0704-0188 Public reporting burden for this collection of information is estimated to average 110 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503. Please DO NOT RETURN your form to either of these addresses. Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. listed in Block E. A. CONTRACT LINE ITEM NO. B. EXHIBIT C. CATEGORY: N/A REF: DOD 5010.12-M 0001 A TOP______ TM______ OTHER________ D. SYSTEM/ITEM E. CONTRACT/PR NO. F. CONTRACTOR 71841130 FA8650-04-C-6473 NANOSYS, INC 1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE A007 SCIENTIFIC AND TECHNICAL REPORTS Technical Management Report (TMR)

~~4. AUTHORITY (Data Acquisition Document No.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE DI-MISC-80711A/T CSOW AFRL/HECV~~

7. DD 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12. DATE OF FIRST SUBMISSION 14. DISTRIBUTION REQUIRED QRTLY * LT B b. COPIES ----------------------- 8. APP CODE 11. AS OF DATE 13. DATE Of SUBSEQUENT a. ADDRESSEE Final SUBMISSION Draft -------------- N/A N/A ** Reg Repro - -------------------------------------------------------------------------------------------------------------------------------- 16. REMARKS AFRL/HECV 0 1 0 Tailored to allow contractor's format, and Block 10 is clarified so that distribution to DTIC shall only be through Air Force distribution channels. * 4MAC and every 90 days thereafter except when final report is due, then omit this item. ** Every 90 days through out the life of the contract. Submit via email. 15. TOTAL 0 1 0 - --------------------------------------------------------------------------------------------------------------------------------

17. PRICE GROUP 18. ESTIMATED TOTAL PRICE G. PREPARED BY H. DATE I. APPROVED BY J. DATE [*** Redacted] 22-MAR-04 /s/ [*** Redacted] 01-APR-04 AFRL/HECV, [*** Redacted] [*** Redacted} Data Manager Det 1 AFRL/WSC DD FORM 1423-1, JUN 90 Previous editions are obsolete PAGE 7-A of 8 Pages *** 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. CONTRACT DATA REQUIREMENTS LIST FORM APPROVED (1 DATA ITEM) OMB NO. 0704-0188 Public reporting burden for this collection of information is estimated to average 110 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20503. Please DO NOT RETURN your form to either of these addresses. Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. listed in Block E. A. CONTRACT LINE ITEM NO. B. EXHIBIT C. CATEGORY: N/A REF: DOD 5010.12-M 0001 A TOP______ TM______ OTHER________ D. SYSTEM/ITEM E. CONTRACT/PR NO. F. CONTRACTOR 71841130 FA8650-04-C-6473 NANOSYS, INC 1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE A008 SCIENTIFIC AND TECHNICAL REPORTS Hardware Manual ~~4. AUTHORITY (Data Acquisition Document No.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE DI-MISC-80711A/T CSOW AFRL/HECV~~

7. DD 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12. DATE OF FIRST SUBMISSION 14. DISTRIBUTION REQUIRED ONE/R ** LT B b. COPIES ----------------------- 8. APP CODE 11. AS OF DATE 13. DATE Of SUBSEQUENT a. ADDRESSEE Final SUBMISSION Draft -------------- A * *** Reg Repro - -------------------------------------------------------------------------------------------------------------------------------- 16. REMARKS AFRL/HECV 1 1 1 Tailored to allow contractor's format, and Block 10 is clarified so that distribution to DTIC shall only be through Air Force distribution channels. * 12MAC for Base Effort 24MAC after Option 1 exercised ** 30 days after Block 11 time Approval/disapproval by letter form the Air Force Program Manager within 60 days after receipt. *** Disapproval requires correction/resubmission within 30 days after receipt of Air Force comments. Submit via email. Submit reproducible on media compatible with MS-Office for Windows. 15. TOTAL 0 1 0 - --------------------------------------------------------------------------------------------------------------------------------

17. PRICE GROUP 18. ESTIMATED TOTAL PRICE G. PREPARED BY H. DATE I. APPROVED BY J. DATE [*** Redacted] 22-MAR-04 /s/ [*** Redacted] 01-APR-04 AFRL/HECV, [*** Redacted] [*** Redacted] Data Manager Det 1 AFRL/WSC DD FORM 1423-1, JUN 90 Previous editions are obsolete PAGE 8-A of 8 Pages *** 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. INSTRUCTIONS FOR COMPLETING DD FORM 142 (See DoD 5010.12-M for detailed instructions.) FOR GOVERNMENT PERSONNEL Item A. Self-explanatory. Item B. Self-explanatory. Item C. Mark (X) appropriate category: TDP - Technical Data Package; TM-Technical Manual; Other - other category of data, such as "Provisioning," "Configuration Management", etc. Item D. Enter name of system/item being acquired that data will support. Item E. Self-explanatory (to be filled in after contract award). Item F. Self-explanatory (to be filled in after contract award). Item G. Signature of preparer of CDRL. Item H. Date CDRL was prepared. Item I. Signature of CDRL approval authority. Item J. Date CDRL was approved. Item 1. See DoD FAR Supplement Subpart 4.71 for proper numbering. Item 2. Enter title as it appears on data acquisition document cited in Item 3. Enter subtitle of data item for further definition of data item (optional entry). Item 4. Enter Data Item Description (DID) number, military specification number, or military standard number listed in DoD 5010.12-L (AMSDL), or one-time DID number, that defines data content and formal requirements. Item 5. Enter reference to tasking in contract that generates requirement for the data item (e.g., Statement of Work paragraph number). Item 6. Enter technical office responsible for ensuring adequacy of the data item. Item 7. Specify requirement for inspection/acceptance of the data item by the Government. Item 8. Specify requirement for approval of a draft before preparation of the final data item. Item 9. For technical data, specify requirement for contractor to mark the appropriate distribution statement on the data (ref. DoDD 5230.24). Item 10. Specify number of times data items are to be delivered. Item 11. Specify as-of-data item, when applicable. Item 12. Specify when first submittal is required. Item 13. Specify when subsequent submittals are required, when applicable. Item 14. Enter addressees and number of draft/final copies to be delivered to each addressee. Explain reproducible copies in item 16. Item 15. Enter total number of draft/final copies to be delivered. Item 16. Use for additional/clarifying information for items 1 through 15, Examples are: Tailoring of documents cited in item 4; Clarification of submittal dates in items 12 and 13; Explanation of reproducible copies in item 14; Desired medium for delivery of the data item. FOR THE CONTRACTOR Item 17. Specify appropriate price group from one of the following groups of effort in developing estimated prices for each data item listed on the DD Form 1423. a. Group I. Definition - Data which is not otherwise essential to the contractor's performance of the primary contracted effort (production, development, testing, and administration) but which is required by DD Form 1423. Estimated Price - Costs to be included under Group I are those applicable to preparing and assembling the data item in conformance with Government requirements, and the administration and other expenses related to reproducing and delivering such data items to the Government. b. Group II. Definition - Data which is essential to the performance of the primary contracted effort but the contractor is required to perform additional work to conform to Government requirements with regard to depth of content, format, frequency of submittal, preparation, control, or quality of the data item. Estimated Price - Costs to be included under Group II are those incurred over and above the cost of the essential data item without conforming to Government requirements, and the administrative and other expenses related to reproducing and delivering such data item to the Government. c. Group III. Definition - Data which the contractor must develop for his internal use in performance of the primary contracted effort and does not require any substantial change to conform to Government requirements with regard to depth of content, format, frequency of submittal, preparation, control, and quality of the data item. Estimated Price - Costs to be included under Group III are the administrative and other expenses related to reproducing and delivering such data item to the Government. d. Group IV. Definition - Data which is developed by the contractor as part of his normal operating procedures and his effort in supplying these data to the Government is minimal. Estimated Price - Group IV items should normally be shown on the DD Form 1423 at no cost. Item 18. For each data item, enter an amount equal to that portion of the total price which is estimated to be attributable to the production or development for the Government of that item of data. These estimated data prices shall be developed only from those costs which will be incurred as a direct result of the requirement to supply the data, over and above those costs which would otherwise be incurred in performance or the contract if no data were required. The estimated data prices shall not include any amount for rights of data. The Government's right to use the data shall be governed by the pertinent provisions of the contract. D FORM 1423-1 REVERSE. JUN 90 FA8650-04-C-6473 (NANOSYS) ATTACHMENT #1 FLEXIBLE SHAPED-NANOCRYSTAL NANOCOMPOSITE PHOTOVOLTAICS STATEMENT OF WORK 8 APRIL 2004 1. SCOPE This program is to research, develop, and demonstrate innovative light-weight low-cost flexible nanostructured devices to efficiently convert solar radiation into electricity and, thereby, provide power generation solutions for the warfighter that have not been possible up until now. All materials, methods, tools and procedures shall be consistent with a generic methodology and not a point solution for a single application. The program contemplates a four-phase, 60-month development including prototype demonstration of a military-relevant application. The research shall take place over a period of 12 months for Phase 1 (basic effort) and 12 months for Phase 2 (Option 1 effort). Option exercise will be based on the achievement of performance goals (defined below in SOW Section 3, REQUIREMENTS) and the potential for production, insertion, transition or overall benefit provision to the Department of Defense (DoD). 2. BACKGROUND Nanoscience has created new materials and structures with novel electro-optical properties. The time has come to initiate exploratory research to discover how to harness these materials and properties into useful electronic and photonic devices. Techniques for harvesting nanoscience concepts and materials to control electro-optical processes are anticipated which will enable a range of new micro-electronics systems, including battery chargers integrated into blankets or clothing or radio shells, airship/satellite solar arrays, self-powered display screens imbedded at the pixel level with photovoltaic functionality, and solid state image intensifier devices. This project focuses on the new organic nanocomposite materials and nano-structures enabled by nanoscience rather than the well known approach of inorganic materials or thin film structures. Once developed for photovoltaic applications, these new nano-structures may also be applied to other electro-optic devices as noted above. Organic materials offer opportunities to create devices with properties not available in inorganic. Phenomena to transform electrical current into photons (e.g. displays) or to transform photon fluxes into electrical current or voltage (photovoltaics, sensors) both involve excitons when the material is solid state. Excitons can generate photons, current, or heat. Controlling the fate of excitons is a matter of structure on the nanoscale as the mean distance they travel before quenching into lattice heating is about 20 nm. For organic light emitting diodes carefully tailored structures know as thin films are used to force current to transform to excitons only in a well defined emission layer where hole injection current from the one side is in balance with electron injection current from the other; layers about the emission layer also serve to confine the excitons. For organic photovoltaic cells, novel nano-structures must be invented that control the locations of exciton creation and generate an electromotive force to force their evolution into holes and electrons which are separated to produce current from incident light (infrared + visible + ultraviolet). Page 1 of 5 FA8650-04-C-6473 (NANOSYS) ATTACHMENT #1 Areas of interest important to meeting the performance goals include (but are not limited to) high electron and hole mobility materials, designs for the efficient charge separation, improvements in excition diffusion properties, methods to reduce recombination, materials to maximize solar absorption efficiency, materials and designs to significantly reduce resistive loses, improvements in flexible, transparent, high conductivity electrodes, and materials to enhance the stability of organic solar cells to environmental conditions. Other areas of interest include the control of three-dimensional nanostructures, new methods to image resulting nanocomposite structures, and new approaches for fabrication and manufacture of organic-based solar cells. Well-coordinated, interdisciplinary research and development activities will be needed to take into consideration all significant and relevant engineering tradeoffs and optimizations. Specifically excluded from this program are evolutionary improvements to the existing state-of-practice, including approaches that utilize aqueous or gel-based electrolytes and traditional, inorganic-based, thin film photovoltaics. While conventional, inorganic, solar cells have improved over the years they remain costly and energy intensive to manufacture. This program is to demonstrate significant advances in organic, nanocomposite, photovoltaic cells that perform competitively with inorganic semiconductor cells (high efficiency, high carrier mobilities, efficient charge separation, and high photochemical stability), but that will be flexible, lightweight, and low cost and processed like a polymer. Nanocomposite materials are attractive for photovoltaics because of the potential of high throughput, non-vacuum processes using reel-to-reel, spray deposition, or other low cost processes. These material systems also offer the potential for very thin and flexible photovoltaic devices with high energy densities. Furthermore, with a flexible substrate, the electronics package might be folded or rolled up for storage when not operational. For the purposes of this program, the term nanocomposite will include organic nano-materials in organic matrices or inorganic nano-particles in organic matrices with an unspecified format (thin films, bulk mixtures, etc). The organic matrix may be an active electronic/photonic material or an inactive binder containing the active components. The results of this effort are expected to be applied to solar cells for military applications. Among the potential DoD applications are solar powered battery chargers (for dismounts, vehicles, aircraft, spacecraft), direct solar powered electronics, direct aircraft power for propulsion, avionics, communications (strato-based transponder farms), satellites, multifunction electronics blankets for dismounts integrating sensors and antennae (EO, RF, audio) with power-generation blankets. To meet the requirements for any of these DoD applications the solar cells must be flexible, lightweight, durable, and low cost. For example, Special Operations teams now use batteries to power mission-critical equipment such as encrypted radios, laser designators, GPS navigation sets, etc. On a mission of several days, these batteries can make up about half the weight carried by a team. Current mission planning must trade off the heavier weight of rechargeable batteries versus the greater number of expendable batteries required. In logistics studies for a typical desert reconnaissance mission, a recharging system powered by efficient solar cells would allow battery weight to be reduced by more than a factor of two. The weight savings would allow greater amounts of ammunition, water, clothing, or food to be carried by the Page 2 of 5 FA8650-04-C-6473 (NANOSYS) ATTACHMENT #1 Special Operations team. When teams operate for extended periods in denied areas, efficient solar cells increase the level of covertness by allowing less frequent re-supply. 3. REQUIREMENTS The overall performance goal for this program is to demonstrate solar cell technology having, in the same device, the following characteristics: external photovoltaic (PV) cell efficiency > or = [*** Redacted]%; flexibility (bend around [*** Redacted] radius); light weight ([*** Redacted] g/m(2)), and environmental stability ([*** Redacted] continuous operation). The performance goal for the basic effort is a coupon size [*** Redacted] ([*** Redacted]) device fabricated on a flexible substrate with PV cell efficiency > or = [*** Redacted]%. The performance goal for Option 1 is a [*** Redacted] ([*** Redacted]) device fabricated on a plastic substrate with PV cell efficiency > or = [*** Redacted]%. Meeting the performance goals defined above for each phase will be required for the program to continue to the next phase. The photovoltaic cell efficiency will be measured using standard test conditions that include a cell temperature of [*** Redacted] degrees C, total irradiance of [*** Redacted] kW/m(2), and a spectrum defined by the American Society for Testing and Materials (ASTM) document "G173-03 Standard Tables for Reference Solar Irradiance (at Air Mass 1.5): Direct Normal and Hemispherical on 37 degrees Tilted Surface," ASTM- 173-03 (January 2003), www.astm.org or www.rredc.nrel.gov/solar/spectra/am 1.5). The cell efficiency will be independently verified by a DARPA-sponsored Government laboratory. Relevant materials and device design and characterization data, simulations and cell test data to support the conclusions shall be reported. 3.1. PHASE 1 (BASE EFFORT) During Phase 1 the Contractor shall evaluate various alternatives to best meet the overall performance goal of the program and shall achieve of the specific goal given above for Phase 1. 3.1.1. TASK 1.1: DEVELOPMENT OF NANOCOMPOSITE LAYER-1 The Contractor shall develop [*** Redacted] nanocrystal nanocomposite films for Phase 1 devices by 9MAC. 3.1.2. TASK 1.2: ADVANCE MATERIAL SYNTHESIS - [*** Redacted] NANOCRYSTALS-1 The Contractor shall develop improved [*** Redacted] nanocrystals. 3.1.3. TASK 1.3: SUBSTRATE SELECTION AND DEVELOPMENT OF FLEXIBLE ELECTRODES-1 The contractor shall develop flexible substrate material and tailored electrode. 3.1.4. TASK 1.4; INTEGRATION, PROCESSING, FABRICATION AND TESTING-1 The contractor shall demonstrate shaped-nanocrystal nanocomposite PV cell meeting the Phase 1 performance goal by 12 MAC. Page 3 of 5 *** 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. FA8650-04-C-6473 (NANOSYS) ATTACHMENT #1 3.1.5. TASK 1.5: APPLICATION ANALYSIS-1 The contractor shall develop preliminary performance specifications for applications in the form of a systems performance specification document and an emulator. 3.1.6. TASK 1.6: PROGRAM MANAGEMENT-1 The contractor shall manage the program and provide oversight of all program activities including those of its subcontractors, and provide all items listed in Section 4. DELIVERABLES. 3.2. PHASE 2 (OPTION 1 EFFORT) During Phase 2 the Contractor shall evaluate various alternatives to best meet the overall performance goal of the program and shall achieve of the specific goal given above for Phase 2. 3.2.1. TASK 2.1: DEVELOPMENT OF NANOCOMPOSITE LAYER-2 The Contractor shall develop [***Redacted] nanocrystal nanocomposite films for Phase 2 PV devices. 3.2.2. TASK 2.2: ADVANCE MATERIAL SYNTHESIS - [***Redacted] NANOCRYSTALS-2 The Contractor shall develop optimized [***Redacted] nanocrystals for preliminary PV testing. 3.2.3. TASK 2.3: ELECTRODE DEVELOPMENT-2 The Contractor shall develop matched flexible electrodes for both anode and cathode. 3.2.4. TASK 2.4: INTEGRATION, PROCESSING, FABRICATION AND TESTING-2 The contractor shall demonstrate nanocomposite PV cell meeting the Phase 2 performance goal by 24MAC. 3.2.5. TASK 2.5: APPLICATION ANALYSIS-2 The contractor shall conduct preliminary testing for customer-specific applications. 3.2.6. TASK 2.6: PROGRAM MANAGEMENT-2 The contractor shall manage the program and provide oversight of all program activities including those of its subcontractors, and provide all items listed in Section 4. DELIVERABLES. 4. DELIVERABLES 4.1 PHASE 1 (BASE EFFORT) Final Report for Phase 1 Quarterly: Technical Management Report, Contract Funds Status Report, Presentation Material Monthly: Status Report, Contractor's Billing Voucher*, Funds & Man-Hour Expenditure Report Demos of materials, devices, processes, circuits and applications developed in Phase 1. Three (3) coupon-sized devices with characteristics and performance required for Phase 1 4.2 PHASE 2 (OPTION 1 EFFORT) Final Report for Phase 2 Quarterly: Technical Management Report, Contract Funds Status Report, Presentation Material Page 4 of 5 *** 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. FA8650-04-C-6473 (NANOSYS) ATTACHMENT #1 Monthly: Status Report, Contractor's Billing Voucher*, Funds & Man-Hour Expenditure Report Demos of materials, devices, processes, circuits and applications developed in Phase 2. Three (3) small-sized devices with characteristics and performance required for Phase 2 Page 5 of 5 ATTACHMENT 2, CONTRACT FA8650-04-C-6473, "FLEXIBLE NANOCOMPOSITE PHOTOVOLTAICS" IDENTIFICATION AND ASSERTION OF USE, RELEASE, OR DISCLOSURE RESTRICTIONS (JUN 1995) (a) The terms used in this provision are defined in following clause or clauses contained in this solicitation-- (1) If a successful offeror will be required to deliver technical data, the Rights in Technical Data--Noncommercial Items clause, or, if this solicitation contemplates a contract under the Small Business Innovative Research Program, the Rights in Noncommercial Technical Data and Computer Software--Small Business Innovative Research (SBIR) Program clause. (2) If a successful offeror will not be required to deliver technical data, the Rights in Noncommercial Computer Software and Noncommercial Computer Software Documentation clause, or, if this solicitation contemplates a contract under the Small Business Innovative Research Program, the Rights in Noncommercial Technical Data and Computer Software--Small Business Innovative Research (SBIR) Program clause. (b) The identification and assertion requirements in this provision apply only to technical data, including computer software documentation, or computer software to be delivered with other than unlimited rights. For contracts to be awarded under the Small Business Innovative Research Program, the notification and identification requirements do not apply to technical data or computer software that will be generated under the resulting contract. Notification and identification is not required for restrictions based solely on copyright. (c) Offers submitted in response to this solicitation shall identify, to the extent known at the time an offer is submitted to the Government, the technical data or computer software that the Offeror, its subcontractors or suppliers, or potential subcontractors or suppliers, assert should be furnished to the Government with restrictions on use, release, or disclosure. (d) The Offeror's assertions, including the assertions of its subcontractors or suppliers or potential subcontractors or suppliers, shall be submitted as an attachment to its offer in the following format, dated and signed by an official authorized to contractually obligate the Offeror: Identification and Assertion of Restrictions on the Government's Use, Release, or Disclosure of Technical Data or Computer Software. The Offeror asserts for itself, or the persons identified below, that the Government's rights to use, release, or disclose the following technical data or computer software should be restricted:
Technical Data Computer Software Name of Person to be Furnished Basis for Asserted Rights Asserting With Restrictions* Assertion** Category*** Restrictions**** - ------------------ ----------- ----------- ---------------- ~~(LIST)***** (LIST) (LIST) (LIST)~~
*For technical data (other than computer software documentation) pertaining to items, components, or processes developed at private expense, identify both the deliverable technical data and each such item, component, or process. For computer software or computer software documentation identify the software or documentation. **Generally, development at private expense, either exclusively or partially, is the only basis for asserting restrictions. For technical data, other than computer software documentation, development refers to development of the item, component, or process to which the data pertain. The Government's rights in computer software documentation generally may not be restricted. For computer software, development refers to the software. Indicate whether development was accomplished exclusively or partially at private expense. If development was not accomplished at private expense, or for computer software documentation, enter the specific basis for asserting restrictions. ***Enter asserted rights category (e.g., government purpose license rights from a prior contract, rights in SBIR data generated under another contract, limited, restricted, or government purpose rights under this or a prior contract, or specially negotiated licenses). ****Corporation, individual, or other person, as appropriate. *****Enter "none" when all data or software will be submitted without restrictions. NOTE: SEE ATTACHED FOR CONTRACTOR'S SIGNATURE AND LIST OF TECHNICAL DATA OR COMPUTER SOFTWARE TO BE DELIVERED WITH LIMITED RIGHTS. PART IV - REPRESENTATIONS AND INSTRUCTIONS SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF OFFERORS ***Enter asserted rights category (e.g., government purpose license rights from a prior contract, rights in SBIR data generated under another contract, limited, restricted, or government purpose rights under this or a prior contract, or specially negotiated licenses). ****Corporation, individual, or other person, as appropriate. *****Enter "none" when all data or software will be submitted without restrictions. Date June 21, 2004. Printed Name and Title Karen L. Vergura VP Finance Signature /s/ Karen L. Vergura -------------------------- (End of identification and assertion) (e) An offerer's failure to submit, complete, or sign the notification and identification required by paragraph (d) of this provision with its offer may render the offer ineligible for award. (f) If the Offeror is awarded a contract, the assertions identified in paragraph (d) of this provision shall be listed in an attachment to that contract. Upon request by the Contracting Officer, the Offeror shall provide sufficient information to enable the Contracting Officer to evaluate any listed assertion. 252.247-7022 REPRESENTATION OF EXTENT OF TRANSPORTATION BY SEA (AUG 1992) (a) The Offeror shall indicate by checking the appropriate blank in paragraph (b) of this provision whether transportation of supplies by sea is anticipated under the resultant contract. The term "supplies" is defined in the Transportation of Supplies by Sea clause of this solicitation. (b) Representation, The Offerer represents that it-- [ ] Does anticipate that supplies will be transported by sea in the performance of any contract or subcontract resulting from this solicitation. [X] Does not anticipate that supplies will be transported by sea in the performance of any contract or subcontract resulting from this solicitation. (c) Any contract resulting from this solicitation will include the Transportation of Supplies by Sea clause. If the Offeror represents that it will not use ocean transportation, the resulting contract will also include the Defense FAR Supplement clause at 252.247-7024, Notification of Transportation of Supplies by Sea. SECTION K PA8650-04-C-6473 PAGE K- 11 of 11 Nanosys, Inc. Addendum A 252.227-7017 Identification and Assertion of Use, elease or Disclosure Restrictions (June 1995)
Technical Data or Computer Software to be Delivered with Assorted Rights Name of Person Asserting Restrictions Basis for Assertion Category Restrictions - -------------------------------------------------------- ---------------------- ------------------- ------------------------ (List) (List) (List) (List) ------ ------ ------ ------ [***Redacted] Pre-existing Limited Rights Data Matthew Murphy intellectual property developed with private funds [***Redacted] Pre-existing Limited Rights Data Matthew Murphy intellectual property developed with private funds [***Redacted] Pre-existing Limited Rights Data Matthew Murphy intellectual property developed with private funds [***Redacted] Pre-existing Limited Rights Data Matthew Murphy intellectual property developed with private funds [***Redacted] Pre-existing Limited Rights Data Matthew Murphy intellectual property developed with private funds
*** 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. EX-23.1 8 f97636a5exv23w1.txt EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the reference to our firm under the caption "Experts" and to the use of our report dated March 25, 2004 (except for the fourth paragraph of Note 1, as to which the date is July --, 2004) in Amendment No. 5 to the Registration Statement on Form S-1 (No. 333-114735) and related Prospectus of Nanosys, Inc. for the registration of shares of its common stock. Ernst & Young LLP Palo Alto, California July --, 2004 The foregoing report is in the form that will be signed upon the completion of the restatement of the capital accounts described in Note 1 to the financial statements. /s/ Ernst & Young LLP Palo Alto, California July 6, 2004 GRAPHIC 10 f97636a5f9763602.gif GRAPHIC begin 644 f97636a5f9763602.gif M1TE&.#EA_0`P`+/_`/___QD@)8R/DL7'R%)76Y"HT%A\N2%1HL?3YZ"HH$%1 M0L_3SW!\<7]_?[^_OS\_/RP`````_0`P```$_Q#(2:N]..O-NPZ@,!!@&0[; M:)J$\)WD&KBI((,$6M\"7?6Z3.\R$,18/H]RR6PZ`:7C+1"T2*>$S%26%6ZC MFBO7&NAB;`$+>FM^NM_PSE=VGH,O]KLZ7ZZ?*$8X%0,@83.#)2*`,6UQCH]O M7#T]*TD3E4,]4AB2DRN<2)-K(1GG\"/(/\-5"OXQ,3$>8-$B3K"4<\S?28S'*%WJ@.:/37)O?$( MLN=I\__ M&M\UAE)URT"6D`N[T;,!-(#1%Y!]$AB(WQ0*[B?5>!4`2(9DBPG87C&[B"/, M@Y2A8<-W4:$H0802_@3/A5B`P]]];Y6AD@S,/>04CY-<<4\]_^D5%7P)RE0( MC#%F0^&,-'*A7Q,W3G96'CV^Q9&%;!0Y0Q5%Q)!A71?A8$EA!##9Y`%/EA@E M9N!MZ!^47(`(8F7M56@'BWOQQ4%5'`P'QIH3IO`FG(]4665A)BABIU-X9LAH MHU-.FLB448VIE&=?IC;.H3)@ZNFHI#:!8*F/"/JF!`DHX*H""2R`ZJRT&J)I MK1ZH>N$`"[SJJP*RXBHLK0T.ZX:NQ&7!P*^^&NNL_Z>G/NL$LGP,T"JSKR8@ M[;8VYLEMKJ"FL2RVKWYK;AS7G;L$M5]D06ZSZL;+Q(KR-L%NC>^66^^^&P#! M[[JK7OONOP07#,>]H?;ZKK8&-^PPN!DQ.VV&27C?;<::_-M6E>=_$VT(-=<';513MPMMUJ\]SEWH2V:<'?``@^ M-^%KX_VF"XBO&3?DF'O`Z4)I?:D9H^*9AV[3A92+C4W?HJ>NA*584.XY?:BK H+OOJG%Z57=2QSZX['/Z83MKNP//3N]@B71[\\4K(O&8UQB/O:00`.S\_ ` end -----END PRIVACY-ENHANCED MESSAGE-----


	Per Share	Total

Public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to Nanosys, Inc.	$	$


Common stock offered by Nanosys		shares

Shares to be outstanding after this offering		shares

Use of proceeds		To fund the development of our core technology and potential nanotechnology-enabled products, as well as general corporate purposes, including working capital, capital expenditures and potential acquisitions of complementary businesses, products and technologies.

Risk Factors		See “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in shares of our common stock.

Proposed Nasdaq National Market symbol		NNSY



										Three Months Ended
	Period from Inception			Years Ended December 31,						March 31,
	(July 12, 2001) to
	December 31, 2001			2002			2003			2003			2004


	(In thousands)

										(Unaudited)
Statement of Operations Data:
Revenue	$	—		$	283		$	3,039		$	597		$	1,171
Operating expenses*		799			7,497			12,502			2,597			5,162

Loss from operations		(799	)		(7,214	)		(9,463	)		(2,000	)		(3,991	)
Net loss	$	(792	)	$	(7,088	)	$	(9,169	)	$	(2,000	)	$	(3,886	)

* Includes stock-based compensation of	$	—		$	41		$	1,408		$	116		$	1,703



	March 31, 2004

						Pro Forma
	Actual			Pro Forma		As Adjusted


	(Unaudited)

	(In thousands)
Balance Sheet Data:
Cash, cash equivalents and available-for-sale investments	$	37,657		$	37,657	$
Working capital		35,872			35,872
Total assets		43,195			43,195
Long-term liabilities		1,102			1,102		1,102
Redeemable convertible preferred stock		56,787			—		—
Total stockholders’ equity (deficit)		(18,595	)		38,192


Number of shares/% of total
outstanding shares after the offering		Date of availability for resale into public market

	/ %	Prior to 180 days after the date of this prospectus due to an agreement these stockholders have with us or the underwriters.
	14,350,229/ %	181 days after the date of this prospectus to the date that is 365 days after the date of this prospectus.
	1,219,782/ %	366 days after the date of this prospectus or later due to the lapse of various rights of repurchase.


Delaware (State or other jurisdiction of incorporation or organization)		3674 (Primary Standard Industrial Classification Code Number)		13-4182327 (I.R.S. Employer Identification Number)


Michael J. O’Donnell, Esq. Mark L. Reinstra, Esq. Julia Reigel, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, CA 94304 (650) 493-9300		Patrick A. Pohlen, Esq. Mark V. Roeder, Esq. Edward F. Vermeer, Esq. Latham & Watkins LLP 135 Commonwealth Drive Menlo Park, CA 94025 (650) 328-4600


	Page

Prospectus Summary		1
Risk Factors		6
Special Note Regarding Forward-Looking Statements		21
Use of Proceeds		22
Dividend Policy		22
Capitalization		23
Dilution		25
Selected Financial Data		27
Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Business		38
Management		54
Executive Compensation		58
Principal Stockholders		65
Our Relationship and Arrangements with our Stockholders, our Officers and our Directors		68
Description of Capital Stock		75
Shares Eligible for Future Sale		79
Material United States Federal Tax Consequences for Non-United States Holders		81
Underwriting		84
Legal Matters		87
Experts		87
Where You Can Find Additional Information		87
Financial Statements		F-1
EXHIBIT 3.1.2
EXHIBIT 10.11
EXHIBIT 10.12
EXHIBIT 10.14
EXHIBIT 10.16
EXHIBIT 10.18
EXHIBIT 23.1


Assumed initial public offering price per share					$
	Historical net tangible book value per share as of March 31, 2004	$	(10.04	)
	Increase per share attributable to pro forma adjustments		12.67

	Pro forma net tangible book value per share as of March 31, 2004	$	2.63
	Increase per share attributable to new investors

Pro forma net tangible book value per share after this offering

Dilution per share to new investors					$



		Shares Purchased					Total Consideration
												Average Price
		Number		Percent			Amount		Percent			Per Share

Existing stockholders			15,570,011			%	$	54,742,000			%	$	3.52
New investors												$

	Total				100	%				100	%


				Period from
				Inception									Three Months Ended
				(July 12, 2001) to			Years Ended December 31,						March 31,
				December 31,
				2001			2002			2003			2003			2004


				(In thousands, except share and per share amounts)
Statement of Operations Data:
Revenue
	Commercial collaborations			$	—		$	200		$	1,997		$	477		$	992
	Government grants				—			83			457			58			179
	Government contracts				—			—			585			62			—

		Total revenue			—			283			3,039			597			1,171

Operating expenses:
	Research and development(1)				237			5,153			9,930			1,954			3,880
	Selling, general and administrative(1)				562			2,344			2,572			643			1,282

		Total operating expenses			799			7,497			12,502			2,597			5,162

Loss from operations					(799	)		(7,214	)		(9,463	)		(2,000	)		(3,991	)
Interest income (expense) and other income, net					7			126			294			—			105

Net loss				$	(792	)	$	(7,088	)	$	(9,169	)	$	(2,000	)	$	(3,886	)

Basic and diluted net loss per share				$	(11.62	)	$	(26.82	)	$	(14.17	)	$	(4.22	)	$	(4.03	)

Weighted average shares used to compute basic and diluted net loss per share					68,151			264,236			647,114			473,786			965,068
Pro forma basic and diluted net loss per share(2)										$	(0.81	)				$	(0.29	)

Weighted average shares used to compute pro forma basic and diluted net loss per share(2)											11,359,397						13,614,409

(1) Includes stock-based compensation of the following:
			Research and development	$	—		$	41		$	1,375		$	113		$	1,354
			Selling, general and administrative		—			—			33			3			349

			Total stock-based compensation	$	—		$	41		$	1,408		$	116		$	1,703



	As of

	December 31,			December 31,			December 31,			March 31,
	2001			2002			2003			2004


	(In thousands)
Balance Sheet Data:
Cash, cash equivalents and available-for-sale investments	$	1,065		$	10,828		$	38,883		$	37,657
Working capital		676			7,335			36,679			35,872
Total assets		1,194			13,532			43,040			43,195
Long-term liabilities		—			1,115			858			1,102
Redeemable convertible preferred stock		1,548			16,610			55,064			56,787
Total stockholders’ deficit		(760	)		(7,794	)		(15,882	)		(18,595	)


Year ending December 31,

2004	$	2.6
2005		2.9
2006		2.9
2007		2.9
2008		2.8
2009		0.3


				Less than		1 to 3
		Total		1 Year		Years

Operating lease commitments*		$	1,640	$	806	$	834
Notes payable under equipment line of credit			1,543		837		706
Contractual commitments to scientific advisors			533		178		355

	Total	$	3,716	$	1,821	$	1,895


	Future
	Minimum
Year ending December 31,	Royalties

2004	$	95
2005		140
2006		293
2007		436
2008		464
2009		605
2010		685
Each year thereafter		735


Merrill Lynch & Co.	Lehman Brothers


CIBC World Markets	Needham & Company, Inc.


	*Stock-Based Compensation*


	*Recognition of Revenue*


	*Grants from and Contracts with United States Government Agencies*


	*Agreement with Defense Advanced Research Projects Agency, or DARPA*


Name	Position	Term

A. Paul Alivisatos, Ph.D.	Professor of Chemistry, University of California Berkeley Head of Molecular Design Institute, Lawrence Berkeley Laboratories	9/04/01 — 9/04/06(1)
Uri Banin, Ph.D.	Associate Professor of Institute of Chemistry and Co- Director, Institute for Nanoscience and Nanotechnology at Hebrew University of Jerusalem	9/30/03 — 9/30/04(2)
Moungi Bawendi, Ph.D.	Professor of Chemistry, Massachusetts Institute of Technology	11/08/01 — 11/08/06(1)
Louis Brus, Ph.D.	Professor of Chemistry, Columbia University	12/10/03 — 12/10/04(2)
Philippe Guyot-Sionnest, Ph.D.	Professor of Chemistry and Physics, University of Chicago	1/06/04 — 1/06/05(2)
James R. Heath, Ph.D.	Professor of Chemistry, California Institute of Technology Scientific Director, California Nanosystems Institute	9/10/03 — 9/10/04(2)
Charles M. Lieber, Ph.D.	Professor of Chemistry, Harvard University	7/30/01 — 7/30/06(1)
Paul L. McEuen, Ph.D.	Professor of Physics, Cornell University Principal Investigator, Lawrence Berkeley Laboratories	7/23/03 — 7/23/04(2)
Hongkun Park, Ph.D.	Professor of Chemistry, Harvard University	7/30/01 — 7/30/06(1)
Peidong Yang, Ph.D.	Assistant Professor of Chemistry, University of California, Berkeley	7/14/03 — 7/14/04(2)


				Director
				or
				Executive
				Officer
Name	Age		Position	Since

Lawrence A. Bock		44	Executive Chairman of the Board		2001
Calvin Y. H. Chow(3)		49	Chief Executive Officer and Director		2001
J. Wallace Parce, Ph.D.		54	Chief Technical Officer and Vice President of Research		2002
Matthew Murphy, Esq.		39	Vice President, Intellectual Property		2002
Karen L. Vergura		46	Vice President, Finance		2001
Clinton W. Bybee(2)(4)		41	Director		2001
Regis P. McKenna(2)(4)		64	Director		2002
Bryan E. Roberts, Ph.D.(1)		37	Director		2003
Sasson Somekh, Ph.D.(2)		58	Director		2003
John A. Young(1)		72	Director		2004
Gregory J. Yurek, Ph.D.(1)(4)		57	Director		2004


	*Compensation Committee Interlocks and Insider Participation*



											Long-Term
											Compensation Awards
				Annual
				Compensation							Restricted		Securities
								Other Annual			Stock		Underlying
Name and Principal Position		Year		Salary		Bonus		Compensation			Award(s)		Options(1)

Calvin Y.H. Chow			2003	$	299,717		—	$	3,539	(2)		—		—
	Chief Executive Officer
Lawrence A. Bock(3)			2003		—		—		—			—		—
	Executive Chairman of the Board and former Chief Executive Officer and President
J. Wallace Parce, Ph.D.			2003		287,020		—		3,181	(2)		—		—
	Chief Technical Officer and Vice President of Research
Matthew Murphy			2003		217,077		—		2,593	(2)		—		11,666
	Vice President, Intellectual Property
Karen L. Vergura			2003		157,944		—		68,858	(4)		—		—
	Vice President, Finance


(1)	The stock options listed in the table represent options to purchase our common stock. See “— Executive Compensation — Option Grants in 2003” for additional information regarding options to purchase our stock granted during 2003.

(2)	Consisted of payment for group term life insurance premiums.

(3)	Mr. Bock was our chief executive officer and president from July 2001 to October 2003. He was not an employee of our company and we did not pay him any compensation for his services to us.

(4)	Consisted of payment for group term life insurance premiums of $1,859 and $66,999 for payment of relocation expenses.



										Potential
			% of Total							Realizable
			Options							Value at
			Granted to							Assumed
			Employees							Annual Rates
	Number of		and							of Stock Price
	Securities		Executive							Appreciation for
	Underlying		Officers in			Exercise or				Option Term
	Options		Fiscal			Base Price		Expiration
Name	Granted		Year			Per Share		Date		5%		10%

Calvin Y.H. Chow		—		—			—		—		—		—
Lawrence A. Bock		—		—			—		—		—		—
J. Wallace Parce		—		—			—		—		—		—
Matthew Murphy		11,666		20	%	$	0.45		1/09/13	$		$
Karen L. Vergura		—		—			—		—		—		—



					Number of Securities
					Underlying
					Unexercised				Value of Unexercised
	Number of				Options at				in-the-Money Options
	Shares		Value		December 31, 2003				at December 31, 2003(1)
	Acquired on		Received
Name	Exercise		($)		Exercisable		Unexercisable		Exercisable		Unexercisable

Calvin Y.H. Chow		—		—		—		—		—		—
Lawrence A. Bock		—		—		—		—		—		—
J. Wallace Parce		—		—		—		—		—		—
Matthew Murphy		—		—		26,582		58,417	$		$
Karen L. Vergura		—		—		—		—		—		—



		Before Offering					After Offering

Name and Address of Beneficial Owner		Number		Percentage			Number		Percentage

5% Stockholders
Entities affiliated with ARCH Venture Partners(1)			2,292,129		14.7	%		2,292,129		%
	8725 West Higgins Road, Suite 290
	Chicago, IL 60631
Entities affiliated with CW Group(2)			2,113,590		13.6			2,113,590
	1041 Third Avenue, 2nd Floor
	New York, NY 10021
Entities affiliated with Polaris Venture Partners(3)			2,113,590		13.6			2,113,590
	1000 Winter Street, Suite 3350
	Waltham, MA 02451
Entities affiliated with Venrock Associates(4)			2,113,590		13.6			2,113,590
	30 Rockefeller Plaza, #5508
	New York, NY 10112
Executive Officers and Directors
Lawrence A. Bock(5)			2,478,172		15.9			2,478,172
Calvin Y. H. Chow(6)			578,332		3.7			578,332
J. Wallace Parce, Ph.D.(7)			251,110		1.6			251,110
Matthew Murphy(8)			38,666		*			38,666
Karen L. Vergura(9)			95,833		*			95,833
Clinton W. Bybee(10)			2,292,129		14.7			2,292,129
	8725 West Higgins Road, Suite 290
	Chicago, IL 60631
Regis P. McKenna(11)			87,365		*			87,365
Bryan E. Roberts, Ph.D.(12)			2,113,590		13.6			2,113,590
	30 Rockefeller Plaza, #5508
	New York, NY 10112
Sasson Somekh, Ph.D.(13)			33,333		*			33,333
John A. Young			—		*			—
Gregory J. Yurek, Ph.D.(14)			33,333		*			33,333
All directors and executive officers as a group (11 persons)(15)			8,001,863		51.3			8,001,863



	Common Stock				Convertible Preferred Stock

			Aggregate								Aggregate
Name of Purchaser	Shares (#)		Consideration ($)		Series A (#)		Series B (#)		Series C (#)		Consideration ($)

5% Stockholders
Entities affiliated with ARCH Venture Partners(1)		—		—		416,666		868,055		1,007,408	$	9,142,504
Entities affiliated with CW Group(2)		—		—		416,666		868,055		828,869		8,142,503
Entities affiliated with Polaris Venture Partners(3)		—		—		416,666		868,055		828,869		8,142,503
Entities affiliated with Venrock Associates(4)		—		—		416,666		868,055		828,869		8,142,503
Executive Officers and Directors
Lawrence A. Bock(5)		364,582	$	180,644		416,666		868,055		828,869		8,142,503
Calvin Y. H. Chow(6)		578,332		179,100		—		88,611		—		319,000
J. Wallace Parce, Ph.D.		243,333		84,900		—		—		—		—
Matthew Murphy		31,774		12,699		—		—		—		—
Karen L. Vergura		85,832		11,640		—		10,000		—		36,000
Clinton W. Bybee(7)		—		—		416,666		868,055		1,007,408		9,142,504
Regis P. McKenna(8)		41,666		15,000		—		27,778		17,921		200,380
Bryan E. Roberts, Ph.D.(9)		—		—		416,666		868,055		828,869		8,142,503
Sasson Somekh, Ph.D.		33,333		19,000		—		—		44,635		250,001
John A. Young		33,333		40,000		—		—		—		—
Gregory J. Yurek, Ph.D.		33,332		19,000		—		—		—		—


		Number
Underwriter		of Shares

Merrill Lynch, Pierce, Fenner & Smith Incorporated
Lehman Brothers Inc.
CIBC World Markets Corp.
Needham & Company, Inc.

Total


Report of Ernst & Young LLP, Independent Registered Public Accounting Firm			F-2
Balance Sheets			F-3
Statements of Operations			F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit			F-5
Statements of Cash Flows			F-7
Notes to Financial Statements			F-8



						Years Ended						Three months ended
			Period from Inception			December 31,						March 31,
			(July 12, 2001) to
			December 31, 2001			2002			2003			2003			2004

												(Unaudited)			(Unaudited)

			(In thousands)
Cash flows from operating activities
Net loss			$	(792	)	$	(7,088	)	$	(9,169	)	$	(2,000	)	$	(3,886	)
Adjustments to reconcile net loss to net cash used in operating activities:
	Depreciation and amortization			5			537			1,323			256			374
	Stock-based compensation expense			—			41			1,408			116			1,703
	Changes in assets and liabilities:
		Accounts receivable		—			(77	)		(495	)		69			176
		Prepaid expenses and other assets		(17	)		(386	)		206			(58	)		(491	)
		Deferred revenue		—			1,912			(1,400	)		(478	)		450
		Accounts payable and other liabilities		406			736			539			236			433

Net cash used in operating activities				(398	)		(4,325	)		(7,588	)		(1,859	)		(1,241	)
Cash flows from investing activities
	Purchases of available-for-sale investments			—			—			(35,370	)		—			(10,890	)
	Maturities of available-for-sale investments			—			—			2,200			—			11,015
	Purchases of property and equipment			(117	)		(2,536	)		(2,487	)		(528	)		(440	)

Net cash used in investing activities				(117	)		(2,536	)		(35,657	)		(528	)		(315	)
Cash flows from financing activities
	Proceeds from equipment line of credit, net of issuance costs			—			1,774			727			722			—
	Payments on equipment line of credit			—			(195	)		(763	)		(158	)		(205	)
	Proceeds from sales of redeemable convertible preferred stock, net of issuance costs			1,548			14,949			37,084			—			—
	Proceeds attributed to redeemable convertible preferred stock warrant			—			—			1,000			—			—
	Proceeds from sales of common stock and exercise of stock options			32			12			14			37			32
	Proceeds from the early exercise of stock options and restricted stock			—			84			66			—			468
	Proceeds from repayment of notes receivable			—			—			—			—			145
	Payment to repurchase restricted common stock			—			—			(4	)		—			—

Net cash provided by financing activities				1,580			16,624			38,124			601			440

Net increase (decrease) in cash and cash equivalents				1,065			9,763			(5,121	)		(1,786	)		(1,116	)
Cash and cash equivalents at beginning of period				—			1,065			10,828			10,828			5,707

Cash and cash equivalents at end of period			$	1,065		$	10,828		$	5,707		$	9,042		$	4,591

Supplemental disclosure of cash flow information Cash paid for interest			$	—		$	23		$	90		$	20		$	18


	•	Government grants generally provide the Company with fixed payments and a contractually defined period of research. Payments received under grants are recognized as revenues ratably over the period the Company performs the research. The Company retains ownership and exclusive rights to all inventions made under these arrangements except for nonexclusive, nontransferable, irrevocable, paid-up licenses granted to the United States government to practice directly or indirectly the subject invention throughout the world.


			Gross		Gross
			Unrealized		Unrealized			Estimated
	Amortized Cost		Gains		Losses			Fair Value

United States government and agency securities	$	10,526	$	10	$	(1	)	$	10,535
Auction rate securities issued by states of the United States		14,550		—		—			14,550
Money market funds		1,913		—		—			1,913
Corporate debt investments		8,094		3		(6	)		8,091

Total available-for-sale investments	$	35,083	$	13	$	(7	)	$	35,089

Classified as cash and cash equivalents									(1,913	)

Classified as available-for-sale investments								$	33,176


		Operating Lease		Sublease
Year Ending December 31,		Payments		Income

2004		$	806	$	96
2005			834		—

	Total	$	1,640	$	96



	Period from Inception									Three Months Ended
	(July 12, 2001)			Year Ended December 31,						March 31,
	to
	December 31, 2001			2002			2003			2003			2004

										(Unaudited)			(Unaudited)

	(In thousands, except share and per share amounts)
Historical
Numerator:
Net loss	$	(792	)	$	(7,088	)	$	(9,169	)	$	(2,000	)	$	(3,886	)

Denominator:
Weighted-average common shares outstanding		649,907			1,418,963			1,749,195			1,716,899			1,824,972
Less: Weighted-average unvested common shares subject to repurchase		(581,756	)		(1,154,727	)		(1,102,081	)		(1,243,113	)		(859,904	)

Denominator for basic and diluted net loss per share		68,151			264,236			647,114			473,786			965,068

Basic and diluted net loss per share	$	(11.62	)	$	(26.82	)	$	(14.17	)	$	(4.22	)	$	(4.03	)

Pro forma
Net loss							$	(9,169	)				$	(3,886	)

Pro forma basic and diluted net loss per share							$	(0.81	)				$	(0.29	)

Denominator for pro forma basic and diluted net loss per share:
Shares used above								647,114						965,068
Pro forma adjustments to reflect assumed weighted-average effect of conversion of preferred stock								10,712,283						12,649,341

Shares used to compute pro forma basic and diluted net loss per share								11,359,397						13,614,409



		December 31, 2002

								Aggregate
				Shares Issued and				Liquidation
		Shares Authorized		Outstanding		Carrying Amount		Preference

Series A			1,833,333		1,833,333	$	1,548	$	1,650
Series B			4,333,334		4,166,667		14,949		15,000

	Total		6,166,667		6,000,000	$	16,497	$	16,650



		December 31, 2003 and March 31, 2004

								Aggregate
				Shares Issued and				Liquidation
		Shares Authorized		Outstanding		Carrying Amount		Preference

Series A			1,833,333		1,833,333	$	1,548	$	1,650
Series B			4,333,334		4,166,667		14,949		15,000
Series C			7,250,000		6,649,341		37,084		37,243

	Total		13,416,667		12,649,341	$	53,581	$	53,893