Exhibit 10.3
AGREEMENT
("Substitute CLA" to replace Agreement dated Feb. 25th 1992)
BY AND BETWEEN
AMERICAN BANK NOTE HOLOGRAPHICS,
INC. A DELAWARE CORPORATION ("ABNH")
AND
▇▇▇▇▇▇▇▇ ▇▇▇▇ GMBH & CO. KG ("LK")
A LIMITED PARTNERSHIP ORGANIZED UNDER THE LAWS OF THE
FEDERAL REPUBLIC OF GERMANY
ENTERED INTO ON July 01st, 2002
WITNESSETH
Whereas, the parties entered into an Agreement on February 25, 1992, sometimes
referred to as the "CLA" and have agreed to replace the CLA with this
"Substitute CLA", terminating and suspending the CLA entirely; and
Whereas, LK owns or has acquired the exclusive rights to those patents and
patent applications set forth on Schedule A hereto (the "LK Patents") and ABNH
and certain of its affiliates own or have acquired the exclusive rights to those
patents and patent applications set forth on Schedule B hereto (the "ABNH
Patents"); and
Whereas LK and ABNH are involved in ongoing discussions concerning the potential
infringement and coverage of their respective patents; and
Whereas, LK and ABNH desire to settle their differences and release each other
from any claims of infringement or invalidity of each other's patents; and
Whereas, LK and ABNH desire to collaborate in the technology of the LK and ABNH
Patents;
Now therefore, in consideration of the parties' mutual agreements contained
herein, the parties hereto agree as follows.
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TABLE OF CONTENTS:
1. DEFINITIONS ........................................................... 3
2. CROSS-LICENSE ......................................................... 3
3. ROYALTIES ............................................................. 4
4. ROYALTY PAYMENTS ...................................................... 6
5. PURCHASE .............................................................. 7
6. INVENTIONS ............................................................ 7
7. REPRESENTATIONS ....................................................... 8
8. CONFIDENTIALITY ....................................................... 8
9. TERMINATION ........................................................... 9
10. INDEPENDENT CONTRACTORS ............................................... 9
11. ASSIGNMENT AND SUBCONTRACTORS ......................................... 9
12. ENTIRE AGREEMENT ...................................................... 10
13. NOTICES ............................................................... 10
14. SUBSTANTIVE LAW ....................................................... 10
15. ARBITRATION ........................................................... 11
16. MISCELLANEOUS ......................................................... 11
17. SALVATORY CLAUSE ...................................................... 11
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1. DEFINITIONS
a) "Card Products" shall mean all Holomag Products used on or in
connection with credit, debit and ATM (Automatic Transaction
Machine) cards or card carriers corresponding to the size and shape
standards of currently used credit, debit and ATM cards (ISO 7810,
7811/1 and 7813 or such other successor organizations as may
thereafter certify size and shape standards for Card Products) as
such may be amended from time to time.
b) "Holomag Product" shall mean any magnetic particle layer
super-imposed or in an overlapping position with a hologram layer
regardless of positioning and as described in any of the LK Patents
or ABNH Patents of Schedules A and B hereto, whether incorporated
into a finished, semi-finished or unfinished product. (Holomag is a
trademark of ABNH.)
c) "Information" shall mean this Agreement and costs, pricing,
production matters and related information and materials, including
technical, financial and managerial information as well as any and
all information, know-how, including the know-how and data,
technical or non-technical, which relates to the technology of
Holographic Magstripe, whether written or oral, as well as samples
or specimens thereof, furnished by or on the behalf of a party,
either directly or indirectly.
d) "LK Territory" shall mean all countries as listed in Schedule C
hereto.
e) "Net Sales Price" shall mean the amount paid for the Holomag Product
by a party less quantity and/or cash discounts, freight, postage,
insurance, taxes, and duties. With respect to sales of Holomag
Products in combination with other components of a product the Net
Sales Price shall be limited to that portion of the total sales
price which will represent the fair market value of the Holomag
Products as if it were sold separately.
2. CROSS-LICENSE
a) LK hereby grants ABNH an exclusive, irrevocable license to make,
have made, use and sell Card Products under the LK Patents in the
territories of the United States, its territories and possessions
("United States") with no retained right to make, have made, use,
and sell by LK in the
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United States or to sell to United States based Card Product
authorizing organizations.
LK hereby grants ABNH a non-exclusive, irrevocable license to make,
have made, use, and sell products other than Card Products under the
LK Patents in the United States.
It is the intention of the parties that such licenses shall include
the right of ABNH or any of its United States customers to assemble
and distribute outside the United States and including in the LK
Territory including with respect to the first paragraph above for
United States Card Product authorizing organizations provided there
are used Holomag Products originating from ABNH.
b) ABNH hereby grants LK an exclusive, irrevocable license to make,
have made, use, and sell Holomag Products other than Card Products
under the ABNH Patents in the United States. ABNH shall retain the
full right under the ABNH Patents to make, have made, use, and sell
Holomag Products.
c) LK hereby grants to ABNH an exclusive, irrevocable worldwide license
to make, have made, use, and sell to Eurocard and Eurocheque or any
possible successor Holomag Products for Card Products under the LK
Patents with no retained right to use and sell by LK to Eurocard and
Eurocheque or any possible successor(s).
d) Neither party shall have any right to grant any sublicense or
assignment of any of the patents licensed to such party by the other
party to this Agreement without the express written consent of the
party which owns such patents.
e) In the event LK receives an inquiry for Card Products from a United
States Card Product authorizing organization, LK shall refer such
inquiry to ABNH.
3. ROYALTIES
a) Sales under Section 2a)
1. In consideration of the licenses granted ABNH shall pay to LK
royalties in accordance with the following schedule for all sales
pursuant to Section 2a) hereof:
i) Card Products
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- if ABNH purchases both the magnetic particle layer and the
holographic embossing film from LK, a sum equal to 0% of the Net
Sales Price.
- if ABNH purchases only the magnetic particle layer from LK, a sum
equal to 6% of the Net Sales Price.
- if ABNH purchases only the holographic embossing film from LK, a sum
equal to 10% of the Net Sales Price.
- if ABNH neither purchases the holographic embossing film nor the
magnetic particle layer from LK, a sum equal to 12% of the Net Sales
Price.
- if ABNH purchases the holographic embossing film from LK and the
magnetic particle layer from Malco Plastics, a sum equal to 6% of
the Net Sales Price, provided however, that the magnetic particle
layer purchased from Malco is for use exclusively on Malco
manufactured Card Products.
ii) Other Products
For products other than Card Products the respective royalties shall
amount to half of the above mentioned sums.
2. EUROCARD/EUROCHEQUE
If ABNH sells Holomag Products pursuant to Section 2c) hereof it
shall pay to LK a sum equal to 15% of the Net Sales Price where LK
shall provide the embossing, magnetic particle layer and holographic
embossing film for such purchases and in all other cases a sum equal
to 30% of the Net Sales Price. In addition ABNH agrees that it shall
not charge any fees for holographic originations provided to LK with
respect to orders pursuant to Section 2c).
3. NON-UNITED STATES SUBCONTRACTOR
In addition to the amount payable under Section 3a) 1. or 2. ABNH
shall, in the event ABNH uses any non-United States subcontractor in
connection with manufacture of the Holomag Product, pay to LK a sum
equal to 6% of the Net Sales Price.
b) LK
i) LK will purchase holographic originations from ABNH for all of its
use of Holomag Products in the United States, provided however, that
LK may purchase a holographic origination other than from ABNH for
any customer which
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objects in writing to the production of the origination by ABNH.
ii) For all sales of Holomag Products using originations produced by
ABNH LK shall pay to ABNH a sum equal to 6% of the Net Sales Price
for purchases throughout the world, provided, however, for
originations produced for sales of LK in Japan the sum shall be
equal to 7% of the Net Sales Price.
iii) In addition to the above, LK shall charge to its customer and pay to
ABNH after receipt from the customer the usual and customary initial
set-up charges of ABNH for the cost of producing the origination for
the customer unless ABNH and LK have agreed that the full cost
thereof cannot be charged to the LK customer by LK.
c) Royalties shall be deemed to accrue on the date that a party receives
payment for sales.
d) Royalties shall only be payable as long as any of the valid patents of
schedule A and B continue to apply to manufacture and sale of the licensed
products.
4. ROYALTY PAYMENTS
a) Within thirty (30) days after the end of each calendar quarter, the
parties shall remit any royalties payable pursuant to Section 3
hereof for all licensed products sold during such quarter. Royalties
shall be paid in US Dollars. If the Net Sales Price is in a currency
other than US Dollars, royalties shall be computed by converting the
royalty at the exchange rate for the currency prevailing at the date
of royalty payment as such exchange rate is published in the Wall
Street Journal.
b) Each payment of royalties hereunder shall be accompanied by a
statement certified by an officer of the party issuing such report
containing sufficient information to allow the recipient to permit
verification of the accuracy of all royalty calculations hereunder.
c) The parties shall each have the right, at their own cost and expense
to audit the books and records of the other party through
independent certified public accountants for the purposes of
verifying the accuracy of the royalty reports and payments. Such
audits shall be made during regular
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business hours and upon not less than thirty (30) days advance
written notice and shall be permitted not more frequently than once
per calendar year.
The accountants shall treat all Information received during the
audits as confidential Information pursuant to Section 8.
5. PURCHASE
a) LK agrees that the terms and conditions of sale individually for
substantially similar embossing foil, embossing and magnetic
particle layer, to ABNH for Card Products including but not limited
to price, shall not be less favorable than those terms and
conditions of sale to any third party when such materials are sold
to ABNH either individually or together for the purposes of this
Agreement, subject to required price increases reflecting actual
increased costs of materials and/or labor applicable to such
materials.
b) ABNH shall be at liberty to purchase the holographic embossing film,
embossing, and/or magnetic particle layer from any non-United
States; and such subcontractors are released from any claims of
infringement of any LK patents licensed hereunder per Schedule A. On
request by ABNH to ▇▇▇▇, ▇▇▇▇ shall confirm in writing to ABNH that
ABNH and the subcontractor have the licensing rights under the LK
patent listed in Schedule A.
6. INVENTIONS
Any methods, developments, inventions, discoveries, techniques and/or
improvements, whether or not patentable, made during the course of work
performed under this Agreement, shall be the property of the party whose
personnel made the invention, and that party may make application for
patents covering such invention. Any invention made jointly during the
course of work performed under this agreement and for a period of (6) six
months thereafter shall be the joint property of LK and ABNH, and any
applications made and patents obtained for such inventions or discoveries
shall be assigned jointly to LK and ABNH, each obtaining a 50% interest
therein. Each party shall aquire an irrevocable world wide non-exclusive
license to make, have made, use and sell under any such joint inventions.
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7. REPRESENTATIONS
LK hereby represents and warrants that it has the right and authority to
execute, deliver and perform the obligations of this Agreement required to
be performed by LK, that it has not entered any agreements which would
conflict with the rights granted ABNH pursuant to this Agreement and that
it knows of no potential infringements of third-party patents which would
result from the manufacture, sale or use of Holomag Products to be
produced hereunder.
ABNH hereby represents and warrants that it has the right and authority to
execute, deliver and perform the obligations of this Agreement required to
be performed by ABNH, that it has not entered any agreements which would
conflict with the rights granted LK pursuant to this Agreement and that it
knows of no potential infringements of third-party patents which would
result from the manufacture, sale or use of Holomag Products to be
produced hereunder.
8. CONFIDENTIALITY
The parties agree that any Information of the other party shall be
maintained in strict secrecy. Each party agrees that it will disclose
Information of the other party only to those of its officers and employees
who are subject to an agreement which provides similar restrictions on
disclosure as are provided herein and who are directly concerned with the
use of the Information for the purpose specified herein, and that it will
take all necessary and reasonable precautions to prevent such Information
from being disclosed to any unauthorized person, firm or company. Upon
disclosing any Information to its officers or employees, such officers and
employees shall be informed of the existence of this Agreement, will be
instructed to treat the Information confidentially, and the parties will
take all necessary and reasonable precautions to prevent the unauthorized
disclosure of such Information by such officers and employees. The
parties' nondisclosure obligations under this Agreement shall be limited
to a period ending the latest to occur of (i) five (5) years from the last
receipt of such Information, (ii) five (5) years following the termination
of any purchase or supply arrangements hereunder and (iii) five (5) years
from the termination of this Agreement
Recipient shall not have any obligation of confidentiality with respect to
any Information that:
a) was already in its possession prior to receipt from the other party
or is developed independently of Information received from the other
party as evidenced by the written
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records of such party;
b) is or hereafter becomes in the public domain by public use,
publication, general knowledge or the like through no fault of
receiving party; or
c) is properly obtained by the receiving party from a third party not
under any obligation to a party or any of its affiliates to keep
such information confidential.
Any and all Information in tangible form received by either party shall
remain the property of the disclosing party and all such Information, and
copies thereof, upon request, shall be promptly returned or destroyed.
The terms of this Section 8 shall survive the termination of this
Agreement for the periods set forth.
9. TERMINATION
This Agreement shall replace the Agreement of February 25th, 1992 and be
in full force and effect and shall terminate on the expiry of the latest
US-Patents as per Schedule 1 or Schedule 2. Upon expiry, this Agreement
shall cease to be binding on the Parties automatically without the
necessity for either Party to provide notice of termination.
10. INDEPENDENT CONTRACTORS
ABNH and LK shall each act as independent contractors and not as agent
for, partner of or joint venture with the other party hereto. Neither
party shall have any authority to bind or otherwise obligate the other
party except as specifically set forth herein.
11. ASSIGNMENT AND SUBCONTRACTORS
Neither this Agreement, nor any of the rights granted hereunder, may be
assigned or otherwise transferred, to any third party except as provided
hereunder or by operation of law, nor may any party subcontract its
obligations hereunder except with the prior written consent of the other
party or as provided under Section 3a3 hereof.
Notwithstanding the foregoing ABNH shall be permitted to subcontract any
of its requirements to produce Card Products to LK and agrees that it
shall charge not any fees for holographic originations provided to LK with
respect to such subcontracted work.
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12. ENTIRE AGREEMENT
This Agreement and the schedules hereto contain the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all previous and contemporaneous oral or written agreements and
no amendments to this Agreement shall be effective unless in writing
signed by the parties.
13. NOTICES
All notices, request, demands, and other communications required or
permitted to be given hereunder, shall be in writing and shall be deemed
to have been given at the time actually received by the party to whom
notice is sent at the address given below or to such changed address as
such party may have designated by notice:
If to ABNH:
American Bank Note Holographies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer,
▇▇▇▇▇▇▇ ▇▇▇▇▇
If to LK:
▇▇▇▇▇▇▇▇ ▇▇▇▇ GmbH & ▇▇.▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇. ▇▇▇
▇ - ▇▇▇▇▇ ▇▇▇▇▇/▇▇▇▇▇▇▇
Attention: Vice President of Security Concepts and
Member of the Board
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
14. SUBSTANTIVE LAW
All disputes shall be settled in accordance with the provisions of this
Agreement and all other agreements regarding its performance, otherwise in
accordance with the substantive law in force in Switzerland without
reference to other laws. The application of the United Nations Convention
on the International Sale of Goods shall be excluded.
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15. ARBITRATION
All disputes arising in connection with the present Agreement shall be
finally settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by 3 (three) arbitrators appointed in
accordance with the said Rules.
The place of arbitration shall be Zurich, Switzerland.
16. MISCELLANEOUS
a) In light of the joint research and development activities which the
parties anticipate will be required to commercially exploit Holomag
Products the parties agree that the benefits of this Agreement shall
be strictly limited to LK and its affiliates and ABNH and its
affiliates.
b) The parties acknowledge that this Agreement shall in no way be
interpreted to affect their ongoing business activities involving
holographic imaging, products or technology or magnetic stripe
products or technology other than with respect to Holomag Products
and that each party shall be free in every respect to conduct such
business and continue to develop such technology outside of this
Agreement.
c) LK shall be entitled to utilize any of its affiliated companies to
perform any of the activities contemplated to be performed by LK
under this Agreement in its sole discretion, provided however, that
LK shall remain responsible for the performance thereof.
17. SALVATORY CLAUSE
All provisions of this Agreement shall be considered several and if any of
the provisions of this Agreement are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, the remaining
provisions shall remain in effect, and if any provision is inapplicable to
any person or circumstance, it shall nevertheless remain applicable to all
other persons and circumstances.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date and year first above written.
Frankfurt, the 01.July.2002 Frankfurt, the 01.July.2002
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------- -------------------
AMERICAN BANK NOTE ▇▇▇▇▇▇▇▇ ▇▇▇▇
HOLOGRAPHICS, INC. GmbH & Co KG
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer Title: Vice President of
Security Concepts and
Member of the Board
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Schedule A to the Agreement dated 01.07.2002
LK PATENTS
COUNTRY PATENT NUMBER DATE OF PATENT
USA 4,232,077 Nov 8,1980
4,631,222 Dec 23,1986
UNITED KINGDOM 1,568,563 Aug 6,1980
GERMANY (FRG) 34 22 910 April 1,1985
JAPAN 1,588,749 May 16,1990
Application No
1,352,41/1985 pending
EUROPE 0,171,540 Aug 30,1989
Countries:
Germany (FRG)
Sweden
Switzerland
Liechtenstein
Austria
The Netherlands
Italy
France
United Kingdom
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Schedule B to the Agreement dated 01.07.2002
ABNH PATENTS
COUNTRY PATENT NUMBER DATE OF PATENT
-------------------------------------------------------------------------
USA 4,684,795 AUG 4 ▇▇▇▇
▇▇▇▇▇▇ 1,257,992 AUG 1, ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 2,129,739 ▇▇▇ ▇▇ ▇▇▇▇
▇▇▇▇▇▇ 2,535,864 ▇▇▇▇▇ ▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ 656,721 JULY 15 1986
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Schedule C to the Agreement dated 01.07.2002
LK TERRITORY
Federal Republic of Germany, Sweden, Switzerland, Liechtenstein, Austria, The
Netherlands, Italy, France, United Kingdom, Japan
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