CFC APPLIED HOLOGRAPHICS RESEARCH
PARTNERSHIP AGREEMENT
This agreement (the "Agreement")is made and entered into on October 28,
1998 (but is effective as of October 1, 1998), by and between Applied
Holographics Corporation, a Delaware corporation ("AH"), and CFC Management,
Inc., a Delaware corporation ("CFC"). Applied Holographics PLC ("Applied
Holographics"), a company organized and existing under the laws of England and
Wales, and CFC International, Inc. ("CFC International"), a Delaware
corporation, are also parties to this Agreement not as partners but for the
limited purposes set forth below.
Recitals
AH is a wholly-owned subsidiary of Applied Holographics and CFC is a
wholly-owned subsidiary of CFC International.
AH and CFC desire to form a general partnership for the purpose of
performing research and development for the business of developing,
manufacturing, marketing and selling holographic originations and embossed
holographic foils and films, and for carrying on research and development
projects for related products or technology as may be agreed from time to time
among the parties hereto.
Covenants
In consideration of the premises and the mutual covenants of the
parties set forth herein, the parties hereto agree as follows:
1. Definitions
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings given them below:
"1998 License Agreement" shall mean the License Agreement of even date
herewith effective October 1, 1998, among the parties hereto and the
Partnership.
"Act" shall mean the Uniform Partnership Act of the State of Delaware,
as amended from time to time.
"Affiliate" shall mean any entity or person that directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with any other entity or person. "Control" (including with
correlative meanings, the terms "controlled by" and "under common control with")
means the ownership or control of securities possessing more than 50% of the
voting power of all outstanding voting securities of an entity or person or the
power to otherwise direct or cause the direction of the management and policies
of such entity or person, whether through the ownership of voting stock or
similar rights or the holding of office in such entity or person, by contract or
otherwise.
"Business" shall mean the business of performing research and development
for the business of developing, manufacturing, marketing and selling holographic
originations and embossed holographic foils and films, as well as related
products or technology, all as agreed from time to time between the
Partners.
"Capital Account" shall mean, with respect to any Partner, such Partner's
capital account maintained in accordance with the provisions of
Section 8.5.
"Capital Contribution" shall mean, with respect to any Partner, the amount
of money and the fair market value of any property other than money (as
determined by the Partners) contributed to the Partnership by such Partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Controlling Affiliate" shall mean, with respect to any Partner, any
Affiliate of such Partner which controls (within the meaning of "control" set
forth in the definition of "Affiliates" above) such Partner.
"Distribution" shall mean, with respect to any Partner, the amount of
money and the fair market value of any property other than money (as determined
by the Partners) distributed to such Partner by the Partnership.
"Interest in the Partnership" shall mean, with respect to any Partner,
such Partner's interest in the capital of the Partnership, and the Net Income
and Net Loss of the Partnership.
"Net Income" shall mean, with respect to any period, the net income, if
any, of the Partnership for such period as determined for Federal income tax
purposes, provided that such income shall be increased by the amount of all
income of the Partnership during such period that is exempt from Federal income
tax and decreased by the amount of all expenditures of the Partnership during
such period which are not deductible in computing the Partnership's income for
Federal income tax purposes and which do not constitute capital expenditures of
the Partnership.
"Net Loss" shall mean, with respect to any period, the net loss, if
any, of the Partnership for such period as determined for Federal income tax
purposes, provided that such loss shall be decreased by the amount of all income
of the Partnership during such period that is exempt from Federal income tax and
increased by the amount of all expenditures of the Partnership during such
period which are not deductible in computing the Partnership's income for
Federal income tax purposes and which do not constitute capital expenditures of
the Partnership.
"Oxnard Assets" shall mean the assets of the Prior Operating Partnership
located in or directly related to the Oxnard California research operations
of the Prior Operating Partnership as they existed on October 1, 1998.
"Partner" shall mean each of AH and CFC.
"Partnership" shall mean the Partnership created by the Partners under the
Act.
"Percentage Interest" shall mean the percentage interest of each Partner
in the Net Income and Net Loss of the Partnership set forth on the
signature pages hereto opposite the signature of such Partner.
"Prior Operating Partnership" means the partnership created by and under
the restated and amended CFC Applied Holographics Partnership Agreement
dated October 1, 1994, between AH and CFC.
"Purchase of Partnership and Termination Agreement" means the Purchase
of Partnership and Termination Agreement among the Partners, Applied
Holographics and CFC International dated as of October 1, 1998.
1.2 Other Definitions. The following terms as used in this Agreement
shall have the respective meanings specified in the Sections indicated below.
Term Section
---- -------
Acquired Partner 9.5
Arbitration 11.1
Arbitration Notice 11.1
Change in Control 9.5.3
Dispute 11.1
Independent Partner 9.5
Tax Matters Partner 8.7
Transfer 10.1
2. Formation of the Partnership
The Partners hereby form a general partnership under the Act. The Act
shall govern the rights and obligations of the Partners except as otherwise
expressly set forth herein.
3. General Provisions
3.1 Name. The name of the Partnership shall be "CFC Applied Holographics
Research Partnership."
3.2 Assumed Name Statements; Other Certificates. Following the execution
of this Agreement, the Partners shall execute and file assumed or fictitious
business name statements and such other certificates, notices and statements
as may be required by law for the operation of the Partnership in all
jurisdictions where the Partnership does business.
3.3 Principal Place of Business. The principal place of business of the
Partnership shall be at 000 Xxxxx Xxxxxx, Xxxxxxx Xxxxxxx, Xxxxxxxx 00000.
3.4 Purpose of the Partnership. The purpose of the Partnership shall be
to conduct the Business and to engage in such other activities as may be
necessary or convenient therefor.
3.5 Title to Partnership Property. Except as provided in the 1998 License
Agreement, all property owned by the Partnership, whether real or
personal, tangible or intangible, shall be deemed to be owned by the
Partnership, and no Partner, individually, shall have any interest in such
property. Each Partner hereby waives any right to partition of the Partnership
property.
3.6 Activities of the Partners. Subject to the agreements set forth in
the 1998 License Agreement, each Partner and its Affiliates may engage in or
hold an interest in other business ventures and activities of any nature,
including without limitation ventures and activities similar to those of the
Partnership, and neither the Partnership nor any Partner shall, by virtue of
this Agreement, have any interest or rights in or to such other ventures or
business or any liability or obligation with respect thereto.
4. Capital Contributions
4.1 Capital Contributions.
4.1.1 Working Capital. AH shall contribute 50% of the working capital
and ongoing expenses of the Partnership and CFC shall contribute
50% of the working capital and ongoing expenses of the Partnership all
as agreed in advance between the Partners. The parties hereto agree that
CFC International will offset royalties payable to AH or Applied
Holographics under the 1998 License Agreement (and thus pay directly to
the Partnership part or all of any royalty payment otherwise
payable to AH) to fund AH's 50% agreed upon Capital Contributions.
4.1.2 Prior Operating Partnership. AH and CFC will each contribute 50%
of the expenses incurred through September 30, 1998, by the Prior
Operating Partnership on the 3D research project and the Partnership
will reimburse the Prior Operating Partnership for these expenses. The
parties hereto agree that CFC International will offset royalties payable
to Applied Holographics under the 1998 License Agreement (and thus pay
directly to the Partnership part or all of any royalty payment otherwise
payable to AH) to fund AH's 50% Capital Contribution to fund these
expenses.
4.1.3 Rental of Oxnard Assets. As a result of the Purchase of
Partnership and Termination Agreement, effective October 1, 1998, CFC
International will be the owner of the Oxnard Assets. CFC International
agrees that it will rent the Oxnard Assets to the Partnership for a
monthly rental fee of $4,166.67 per month ($50,000 per year) for the
rest of their useful life and thereafter at such reduced rental as the
Partners may from time to time agree. If additional capital assets are
required by the Partnership, the parties will agree on how to finance
their purchase or rental.
4.1.4 Additional Capital Contributions. Notwithstanding the agreement
of CFC International to offset royalties payable to Applied Holographics
under the 1998 License Agreement (and thus pay directly to the Partnership
part or all of any royalty payment otherwise payable to AH) to fund to
AH's agreed upon Capital Contributions, if such royalties are less
than any amount due to the Partnership from AH, AH shall make up any such
deficit.
4.2 No Interest; No Return. No Partner shall be entitled to interest on
any Capital Contribution or Capital Account. No Partner shall have the right to
demand or receive the return of all or any part of any Capital Contribution or
Capital Account, except as may otherwise be expressly provided herein.
5. Allocations
Net Income and Net Loss of the Partnership shall be allocated to the
Partners in proportion to their respective Percentage Interests.
6. Distributions
Distributions to the Partners shall be declared at such time or times
and in such amounts as shall be determined by the Partners.
(a) Except as otherwise provided in Section 9 of this Agreement,
distributions shall be paid to the Partners in proportion to their respective
Percentage Interests.
(b) In the case of expiration, termination, dissolution or liquidation
of the Partnership, distributions shall be paid to the Partners in accordance
with the provisions of Section 9.
7. Management
7.1 Officers of the Partnership.
7.1.1 Offices. The officers of the Partnership shall consist of a
president and chief executive officer and a chairman. In addition, the
Partners may name one or more vice-presidents, a secretary, a
treasurer, assistant secretaries, assistant treasurers, or other officers
as may be determined from time to time by the Partners. Any two or more
offices may be held by the same person.
7.1.2 Annual Election. During the period from the effective date of
this Agreement through the end of calendar year 1999, CFC shall appoint the
president and chief executive officer and AH shall appoint the chairman.
AH shall appoint the president and chief executive officer and CFC
shall appoint the chairman in the year 2000, CFC shall appoint the
president and chief executive officer and AH shall appoint the chairman in
the year 2001, and the appointment of officers will continue to
alternate on an annual basis thereafter.
7.1.3 Term of Office and Vacancy. Each officer shall hold office
until a successor is elected and qualified or until the officer's
earlier resignation or removal. Election or appointment of an officer or
agent shall not of itself create contract rights.
7.1.4 Removal. Any officer or agent elected or appointed by either CFC
or AH may be removed by the party which elected or appointed such officer
or agent at its sole discretion, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Similarly, any officer or agent elected or appointed by the Partners may
be removed by the Partners at their sole discretion, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
7.1.5 President. The president shall be the chief executive officer of
the Partnership and shall in general supervise and control all of the
affairs of the Partnership. He shall have the power to execute all
documents that the Partners have authorized to be executed. He shall also,
in general perform all duties incident to the office of president and
chief executive officer of the Partnership.
7.1.6 Chairman. The chairman shall preside at all meetings of the
Partners and in general perform all duties incident to the office of
chairman of the Partnership.
7.1.7 General Manager. The general manager (a) shall be the chief
operating officer of the Partnership, (b) shall report to the president,
(c) shall have general and active management of the business and affairs
of the Partnership, and (d) shall see that all orders of the president
and the Partners are carried into effect.
7.1.8 Vice Presidents. The vice-president(s) shall perform such duties
and have such powers as the Partners, general manager or president may
from time to time prescribe.
7.1.9 Secretary. The secretary shall (a) be custodian of the corporate
records and of the seal of the Partnership, and (b) in general
perform all duties incident to the office of secretary and such other
duties and have such other powers as the Partners or the president
may from time to time prescribe.
7.1.10 Treasurer. The treasurer shall have custody of the funds and
securities of the Partnership and shall keep full and accurate
accounts of receipts and disbursements thereof except as otherwise
directed by the Partners. He shall in general perform all the duties
incident to the office of treasurer and such other duties as from time
to time may be assigned to him by the Partners or by the president.
The treasurer acting alone may exercise all the powers of the Partnership
with respect to the purchase and sale, investment and reinvestment, care,
custody and protection of the Partnership's property. No signature
other than that of the treasurer shall be necessary to make the act of
the Partnership valid with respect to the signing of checks, transfer of
securities, delegation of authority to fiscal agents, execution of proxies
and designation of depositaries, and all other fiscal matters which the
treasurer may deem necessary. The treasurer may vote in person or by
proxy all shares of stock owned by the Partnership and take any other
action in person or by proxy deemed advisable in connection with the
Partnership's personal property.
7.1.11 Initially Appointed Officers. The following persons shall
initially serve in the offices set forth below opposite their respective
names:
Xxxxx Xxxxxxxx Chairman
Xxxxx X. Xxxxx President/CEO
Xxxxx Xxxxxxxxxx General Manager
Xxxxx Xxxxxx Executive Vice President
Xxxxxx Xxxxxx Vice President, CFO
Treasurer and Secretary
Xxxxxxx Xxxxx Vice President
7.1.12 Access to Premises. Each of the Officers of the Partnership
shall have the right of access to the Partnership's premises at all
times.
8. Books and Records; Accounting Matters; Financial Statements; Maintenance of
Capital Accounts; Tax Matters; Bank Accounts
8.1 Books and Records. The Partnership shall maintain or cause to be
maintained complete and accurate books and records with respect to the business
of the Partnership. The books and records of the Partnership shall be kept at
the principal place of business of the Partnership. The books and records for
any taxable year shall be retained until such taxable year has been closed under
Federal and state income tax laws, by the running of the statute of limitations
or otherwise, for each of the Partners. Each Partner shall at all times have
access to such books and records for the purpose of inspecting, copying, or
auditing them.
8.2 Method of Accounting. The books and records of the Partnership shall be
maintained using the accrual method of accounting.
8.3 Fiscal Year. The Partnership's fiscal year shall be the year ending on
December 31.
8.4 Financial Statements. Within 45 days after the end of each calendar
quarter of each fiscal year, except the fourth fiscal quarter, and within 90
days after the end of each fiscal year, the Partnership will cause to be
furnished to each Partner a balance sheet of the Partnership as of the end of
such fiscal period, a statement of operations and a statement of changes in
financial position of the Partnership for the fiscal period then ended, all of
which shall be prepared in accordance with generally accepted accounting
principles applied on a consistent basis. Such financial statements will in each
case be accompanied by a statement of the Partners' Capital Accounts.
8.5 Capital Accounts. The Partnership shall prepare and maintain a Capital
Account for each Partner. Each Partner's Capital Account shall be
increased by (i) the amount of such Partner's Capital Contributions to the
Partnership, and (ii) the amount of the Net Income of the Partnership allocated
to such Partner, and it shall be decreased by (i) the amount of the
Partnership's Distributions to such Partner, and (ii) the amount of the Net Loss
of the Partnership allocated to such Partner. The provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in
a manner consistent with such regulations.
8.6 Tax Returns; Tax Accounting Methods; Tax Elections. CFC shall cause
the Federal and any required state income tax returns of the Partnership to be
prepared and filed on behalf of the Partnership. The Partners, or individuals
designated by each Partner for such purpose, shall select such tax accounting
methods and cause such tax elections to be made on behalf of the Partnership as
the Partners, or such individuals, shall determine.
8.7 Tax Matters Partner.
(a) CFC is hereby appointed as the tax matters partner of the Partnership
(the "Tax Matters Partner"). The Tax Matters Partner shall (i)furnish to
each Partner affected by an audit of the Partnership income tax returns a
copy of each notice or other communication received from the Internal Revenue
Service or applicable state authority, (ii) keep such Partner informed of any
administrative or judicial proceeding, as required by section 6623(g) of the
Code, (iii) allow such Partner an opportunity to participate in all such
administrative and judicial proceedings; and (iv) submit to the other Partner
all tax computations for approval and comment before they are submitted to the
Internal Revenue Service.
(b) Notwithstanding any right or power that may be granted to the Tax
Matters Partner hereunder or under the Code or any other provision of law, the
Tax Matters Partner shall not, without the approval of all of the Partners or
the individuals designated by each Partner for such purpose:
(i) extend the statute of limitations on behalf of the Partnership;
(ii) determine the Partnership's choice of the forum for the
litigation of any matter pertaining to the treatment of items of income,
deduction or credit;
(iii) determine whether to appeal or not appeal any administrative or
judicial determination;
(iv) enter into any settlement agreement with the Internal Revenue
Service which purports to bind a Partner other than the Tax Matters
Partners; or
(v) file any request for an administrative adjustment under Section
6228 of the Internal Revenue Code.
(c) The Partnership shall not be obligated to pay any fees or other
compensation to the Tax Matters Partner in its capacity as such. However, the
Partnership shall reimburse the expenses (including reasonable attorneys' and
other professional fees and disbursements) incurred by the Tax Matters Partner
in such capacity. Each Partner who elects to participate in Partnership
administrative tax proceedings will be responsible for its own expenses incurred
in connection with such participation. In addition, the cost of any adjustments
to a Partner and the cost of any resulting audits or adjustments of a Partner's
tax return will be borne solely by the affected Partner.
(d) The Partnership hereby agrees to indemnify and hold harmless the
Tax Matters Partner from and against any loss, liability, damage, cost or
expense (including reasonable attorneys' fees and disbursements) sustained or
incurred as a result of any act or decision concerning Partnership tax matters
and within the scope of such Partner's responsibilities as Tax Matters Partner,
so long as such act or decision was not the result of gross negligence, fraud,
bad faith or willful misconduct or knowing violation of the law by the Tax
Matters Partner. The Tax Matters Partner shall be entitled to rely on the advice
of legal counsel as to the nature and scope of its responsibilities and
authority as Tax Matters Partner, and any act or omission of the Tax Matters
Partner pursuant to such advice shall in no event subject the Tax Matters
Partner to liability to the Partnership or any Partner.
8.8 Bank Accounts. The Partnership shall maintain appropriate accounts
at one or more financial institutions for all funds of the Partnership. Such
accounts shall be used solely for the business of the Partnership. Withdrawal
from such accounts shall be made only upon the signature of those persons
authorized by the Partners.
9. Duration and Termination
9.1 Duration of the Partnership. The Partnership shall continue in
existence until June 30, 2098, unless sooner terminated in accordance with the
provisions of this Agreement.
9.2 Termination of the Partnership. The Partnership may be terminated:
(i) by either of the Partners as of December 31 or June 30 of any year
upon not less than twelve months' written notice;
(ii) by either of the Partners in the event of a material disagreement
between the Partners which prevents the continuation of the Business;
(iii) by either of the Partners in the event Xxxxx Xxxxxxxxxx is no
longer employed by the Partnership;
(iv) upon the mutual agreement of both of the Partners; or
(v) by either of the Partners, effective upon written notice by such
Partner to the other Partner, in the event
(a) the other Partner or a Controlling Affiliate of the other Partner shall
go into liquidation, whether voluntary or otherwise (not being for the purposes
of amalgamation or reconstruction) or has an administrative receiver or
manager of any of its assets appointed, or has an administrator appointed,
or if the Partner suffers any execution, legal or equitable to be levied on its
property or obtained against it;
or
(b) the other Partner or an Affiliate of the other Partner is in breach
of any material provision of this Agreement and such default continues
uncured for more than 60 days following notice from the Partner seeking
termination specifying the breach and indicating its intent to terminate.
9.3 Dissolution of the Partnership. In the event of the expiration or
termination of the Partnership as provided for in Section 9.1 or Section 9.2
without the appropriate actions having been taken to continue the business of
the Partnership, the Partnership shall be dissolved. Upon such dissolution,
unless the business of the Partnership is being continued as provided for in
Section 9.2, the continuing operation of the Partnership's business shall be
confined to those activities reasonably necessary to wind up the Partnership's
affairs, discharge its obligations, and preserve and distribute its assets.
9.4 Application of Proceeds. Upon the dissolution of the Partnership,
except as otherwise agreed by the Partners, the Partnership's assets shall be
liquidated and the cash proceeds therefrom shall be distributed and applied in
the following manner:
(i) to the costs of sale of the Partnership's assets and the
liquidation and dissolution of the Partnership, including accounting and
legal fees and other expenses;
(ii) to the payment of debts and liabilities of the Partnership,
including loans or other debts and liabilities of the Partnership to
Partners or to Affiliates of any Partner;
(iii) to Partners with positive Capital Account balances, in
proportion to the amounts of their respective Capital Accounts, to the extent of
their Capital Account balances; and
(iv) thereafter, to each of the Partners in proportion to the Percentage
Interests of each Partner.
9.5 Right to Purchase in the Event of a Change in Control. In the event
of a Change in Control of either Partner (the "Acquired Partner"), the other
Partner (the "Independent Partner") shall have the right to purchase the
Acquired Partner's interest in the Partnership for the Fair Market Value of the
Acquired Partner's Partnership Interest. If the Independent Partner does not
exercise its option to purchase the Acquired Partner's Partnership Interest
within 60 days following a Change in Control, the Acquired Partner shall have
during a second period of 60 days the right to purchase the Independent
Partner's interest in the Partnership for the Fair Market Value of the
Independent Partner's Partnership Interest.
9.5.1 Manner of Exercise. Exercise of the option by the Independent
Partner or Acquired Partner shall be effected by written notice to the
other Partner stating the closing date and place of closing which
shall be within 60 days of the date of notice. Payment of the purchase
price as hereinafter provided shall be tendered by the purchasing
Partner against delivery of duly executed bills of sale, assignments,
and documents of transfer (in a form to be agreed between the parties, such
agreement not to be unreasonably withheld or delayed by either of them) at
the time and place set forth in such written notice. If the selling
Partner does not deliver duly executed bills of sale, assignments, and
documents of transfer (in such agreed form) at the closing, the transfer
and sale of the selling Partner's Partnership Interest shall nonetheless
be deemed to be effective as of such date without any further action,
provided that the purchasing Partner shall hold the purchase price, without
interest, for payment at a subsequent date against delivery of duly
executed documents.
9.5.2 Purchase Price. The purchase price of a selling Partner's
Partnership Interest shall be the Fair Market Value of the selling
Partner's Partnership Interest. The purchase price shall be payable in
cash against delivery of duly executed bills of sale, assignments,
and documents of transfer, and shall be computed as of December 31 of
the year preceding the date on which the option is exercised by mutual
agreement of the parties. Failing such agreement, the Fair Market Value of
the Partnership shall be deemed to be equal to the greater of (i) the book
value of the Partnership as of the date of closing of the purchase, (ii)
eight times the pre-tax net income of the Partnership during the prior
calendar year; or (iii) $1,000.
9.5.3 Change in Control. For purposes of this Agreement, the term
"Change in Control" shall have the meaning ascribed to such term in the
1998 License Agreement.
9.6 Employment of Xxxxxxxxxx. Neither Partner (nor any Affiliate of
either Partner) shall employ Xxxxx Xxxxxxxxxx without the consent of the other
Partner during the term of the Partnership or for a period of two years
following the date of dissolution of the Partnership. This Section 9.6 shall
survive the termination of this Agreement.
10. Transfer of Interests in the Partnership
10.1 Restriction on Transfer. No Partner shall sell, assign, transfer,
exchange, mortgage, pledge, grant a security interest in, or otherwise dispose
of or encumber (any of the foregoing being herein referred to as a "Transfer")
all or any part of its Interest in the Partnership except in accordance with
this Agreement.
10.2 Permitted Transferees. Any Partner may make a Transfer of all or
any part of its Interest in the Partnership to an Affiliate of such Partner
provided that such Affiliate agrees in writing to be bound by this Agreement
together with such changes hereto as may be necessary or appropriate to give
effect to such Transfer and the addition of such Affiliate as a Partner, and
provided further that the Partner making a Transfer shall have given not less
than 60 days prior written notice of its intent to Transfer.
10.3 Effect of Transfer.
(a) No Transfer shall relieve the Transferring Partner of liability
under this Agreement for matters arising or events occurring prior to the
consummation of the Transfer. Upon the Transfer of all Interests in the
Partnership held by a Partner (except a Transfer by mortgage, lien, pledge or
other encumbrance but not excepting a Transfer resulting from a default in
connection with such mortgage, lien, pledge or other encumbrance), such Partner
shall have no further Interest in the Partnership or rights under this
Agreement.
(b) Any Affiliate to whom a Transfer is made pursuant to Section 10.2
may become an additional or substitute Partner in place of its assignor if the
following conditions are satisfied:
(i) the instrument of assignment sets forth the intention of the
assignor that the Affiliate shall succeed to the assignor's interest
as a substituted Partner in its place;
(ii) the assignor and Affiliate shall have executed such other
instruments as the Partners may reasonably require, including written
acceptance by the Affiliate of this Agreement and any ancillary
agreements to which the assignor is a party; and
(iii) the Affiliate shall have paid all reasonable fees and costs
incurred by the Partnership in connection with its substitution as a
Partner, as determined by the Partners.
No other person to whom a Transfer is made shall, by virtue of such Transfer,
have a right to be admitted to the Partnership as a substitute Partner, but
instead shall succeed only to the right of the Partner to receive distributions.
11. Dispute Resolution
11.1 Arbitration. In the event that a dispute on any matter arises
between or among the Partners, or between or among the Partnership and one or
more Partners or their Affiliates, in connection with any aspect of this
Agreement, the duties or responsibilities of the Partners or their performance
hereunder or the interpretation hereof (a "Dispute"), and such Dispute shall not
have been resolved pursuant to good faith discussions among the Partners, then
any Partner may elect by written notice (the "Arbitration Notice") to each other
Partner to have the Dispute subjected to arbitration as provided in this Section
11.1 (the "Arbitration"). Notwithstanding any provision of this Agreement to the
contrary, nothing in this Section 11.1 or in any other provision of this
Agreement shall preclude a Partner from (i) commencing and maintaining a
proceeding prior to the completion of the Arbitration if necessary to prevent
the expiration of any statute of limitations, provided that the commencing
Partner shall endeavor to have such proceeding stayed pending the completion of
the Arbitration, (ii) terminating this Agreement in accordance with the terms
hereof or thereof, (iii) pursuing its rights pursuant to Section 9.2 with
respect to the dissolution, winding up and liquidation of the Partnership, (iv)
commencing and maintaining a proceeding prior to completion of the Arbitration
seeking injunctive relief against the violation or breach of any provision of
Section 10.1, or (v) seeking an accounting among the Partners in an appropriate
court of equity. The arbitration shall be held in Chicago, Illinois under the
rules of the American Arbitration Association then in effect. The arbitral panel
shall consist of one arbitrator, appointed by mutual agreement of the Partners,
or failing such agreement by the American Arbitration Society. The facts and
circumstances of the Dispute and all other relevant matters shall be presented
to the arbitral panel within 60 days after the effective date of the Arbitration
Notice. The arbitrator shall consider the Dispute and issue a written decision
setting forth resolution of the Dispute or the method for determining the
resolution of the Dispute decided upon by them. The Arbitration shall be
completed within six months after its commencement. The fees and expenses of the
arbitrator and the other costs of the Arbitration shall be borne by the Partners
in the manner determined by the arbitrator.
11.2 Effect of Arbitration. The decision of the arbitrator pursuant to
Section 11.1 above shall be final and binding upon all Partners and the
Partnership and shall be enforceable as provided by law.
12. Miscellaneous
12.1 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
12.2 Amendment. This Agreement may be amended only by the written consent
of both of the Partners.
12.3 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
made and to be performed therein. Each of the Partners hereby expressly submits
itself generally and unconditionally to the personal jurisdiction of any U.S. or
state court which sits in the City of Chicago, State of Illinois which would
have jurisdiction over the subject matter of an action to enforce any or all of
the terms of this Agreement or to recover damages for a breach of any of its
provisions.
12.4 Governing Language. English shall be the governing language of
this Agreement and the English language version of this Agreement shall be
controlling for all purposes.
12.5 Severability. If any term, restriction or covenant of this Agreement
is deemed illegal or unenforceable under the laws of the State of Delaware
(or any other law deemed by a court of competent jurisdiction to be
controlling), all other terms, restrictions and covenants hereof and the
application thereof to all persons and circumstances subject hereto shall remain
unaffected to the extent permitted by law; and if any application of any term,
restriction or covenant of this Agreement to any person or circumstance is
deemed illegal or unenforceable, the application of such term, restriction or
covenant to other persons and circumstances shall remain unaffected to the
extent permitted by law.
12.6 Headings. The descriptive headings in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
12.7 Execution in Counterpart. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
12.8 Notices. Any notice, request, information or other document to be
given hereunder to any of the parties by any other party shall be in writing and
delivered personally or sent by Federal Express or other reliable courier,
transmitted by fax, or sent by certified or registered mail, postage prepaid, as
follows:
If to AH, addressed to:
Xxxxx X. Xxxxxxxx
Managing Director
Applied Holographics PLC
00 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 0, Xxxx & Xxxx
XX00 0XX Xxxxxxx
Telephone: 00 000 000 0000
Fax: 00 000 000 0000
With a copy to:
Xxxxx Pass, Esq.
Xxxxxxxxx Xxxx
St. Ann's Wharf
112 Quayside
Xxxxxxxxx xxxx Xxxx
XX00 0XX Xxxxxxx
Telephone: 00 000 000 0000
Fax: 00 000 000 0000
If to CFC, addressed to:
Xxxxx X. Xxxxx, Chairman
CFC International, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000
Telephone: 0 (000) 000-0000
Fax: 0 (000) 000-0000
with a copy to:
Xxxx, Xxxx & Xxxxx
Three First National Plaza
00 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: 0 (000) 000-0000
Fax: 0 (000) 000-0000
If to the Partnership, addressed to each of the Partners, as hereinabove
provided.
Any such notice delivered personally shall be deemed to have been given on the
date that it is so delivered, and any notice delivered by the other means
referred to above shall be deemed to have been given on the date it is received.
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice.
12.9 Further Assurances. Each of the Partners shall execute and deliver
any and all additional papers, documents and other assurances, and shall do any
and all acts and things reasonably necessary in connection with the performance
of its obligations hereunder and to carry out the intent of the parties hereto.
12.10 Assignment. No Partner may assign this Agreement or any of its
rights hereunder, including all or any part of its Interest in the Partnership,
or delegate the performance of any of its obligations hereunder.
12.11 Publicity. No press release or other public announcement related
to this Agreement or the Partnership or the transactions contemplated hereby
will be issued by any Partner without the prior approval of all of the Partners,
except that any Partner may make such public disclosure which it believes in
good faith to be required by law or by the terms of any listing agreement with a
securities exchange (in which case such Partner will consult with the other
Partners prior to making such disclosure).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Percentage
Partner Interest
APPLIED HOLOGRAPHICS 50.00%
CORPORATION
By____________________________________________
Xxxxx X. Xxxxxxxx, President
CFC MANAGEMENT, INC. 50.00%
By____________________________________________
Xxxxx X. Xxxxx, Chairman
Joinder Party
APPLIED HOLOGRAPHICS PLC
By____________________________________________
Xxxxx X. Xxxxxxxx, President
CFC INTERNATIONAL, INC.
By____________________________________________
Xxxxx X. Xxxxx, Chairman
LICENSE AGREEMENT
This License Agreement (the "Agreement") is made and entered into on
October 28, 1998 (but is effective as of October 1, 1998), by and among Applied
Holographics PLC, a company organized and existing under the laws of England and
Wales (together with its Controlled Affiliates herein referred to as "Applied
Holographics"), Applied Holographics Corporation, a Delaware corporation ("AH"),
CFC International, Inc., a Delaware corporation (together with its Controlled
Affiliates herein referred to as "CFC International"), CFC Management, Inc., a
Delaware corporation ("CFC"), and CFC Applied Holographics Research Partnership,
a Delaware general partnership (the "Research Partnership").
Recitals
The parties desire to provide for (i) the license to CFC, CFC
International and the Research Partnership of certain intellectual property
rights owned by AH and Applied Holographics, (ii) the license by each of the
parties hereto to each of the other parties of certain intellectual property
rights that may hereafter be developed, and (iii) certain other matters, all as
hereinafter provided.
Covenants
In consideration of the premises and the mutual covenants of the
parties set forth herein, the parties hereto agree as follows:
1. Definitions As used in this Agreement, the following terms shall have
the meanings given them below:
"1992 License Agreement" shall mean the License Agreement dated April
1, 1992, among Applied Holographics, AH, CFC International and CFC.
"1998 License Agreement," "License Agreement" and "Agreement" shall
mean this Agreement dated October 1, 1998, among Applied Holographics, AH, CFC
International, CFC and the Research Partnership.
"Affiliate" shall mean any entity or person that directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
common control with, any other entity or person. "Control" (including with
correlative meanings, the terms "controlled by" and "under common control with")
means the ownership or control of securities possessing more than 50% of the
voting power of all outstanding voting securities of an entity or person or the
power otherwise to direct or cause the direction of the management and policies
of such entity or person, whether through the ownership of voting stock or
similar rights or the holding of office in such entity or person, by contract or
otherwise.
"AH Future Holographic Product Development" shall mean a Future
Holographic Product Development developed, created, discovered, or otherwise
acquired during the term of this Agreement by Applied Holographics except as set
forth in Schedules A and B attached hereto and as to which additional
information is set forth in Schedule C attached hereto.
"AH Holographic Proprietary Rights" shall mean all of the patents,
trademarks, copyrights, technology, trade secrets and other intellectual
property rights of Applied Holographics (including, without limitation, those
owned by AH) relating to the development, manufacture, marketing and sale of
Holographic Products except as set forth in Schedules A and B and as to which
additional information is set forth in Schedule C.
"AH Worldwide Holographic Proprietary Rights" shall mean the AH
Holographic Proprietary Rights and the AH Future Holographic Product
Developments both within the Territory and outside the Territory.
"CFC Future Holographic Product Development" shall mean a Future
Holographic Product Development developed, created, discovered, or otherwise
acquired during the term of this Agreement by CFC International.
"CFC Holographic Proprietary Rights" shall mean all of the patents,
trademarks, copyrights, technology, trade secrets and other intellectual
property rights of CFC International relating to the development, manufacture,
marketing and sale of Holographic Products.
"CFC Worldwide Holographic Proprietary Rights" shall mean the CFC
Holographic Proprietary Rights and the CFC Future Holographic Product
Developments both within the Territory and outside the Territory.
"Change in Control" shall mean with respect to CFC International or
Applied Holographics (in either case, the "Company") the occurrence of any of
the following events:
(i) The acquisition, by new stockholders (being any person or group of
persons other than the current directors of the Company, their respective
families, estates, trusts and other Affiliates) acting in concert, of a
beneficial ownership interest in the Company, resulting in the total
beneficial ownership of such persons or group of persons equaling or
exceeding 30% of the outstanding common stock and warrants (or, in the
case of Applied Holographics, issued equity share capital) of the Company.
The Change in Control shall be deemed to occur on the date the beneficial
ownership of the acquiring person or group of persons first equals or
exceeds 30% of the outstanding common stock and warrants (or, in the case
of Applied Holographics, issued equity share capital) of the Company.
(ii) A merger, consolidation or other reorganization having
substantially the same effect, or the sale of all or substantially all
the consolidated assets of the Company in each case, with the result
that the persons or group of persons who were the respective beneficial
owners of the outstanding common stock immediately prior to such event
do not, following such event, beneficially own, directly or indirectly,
more than 70% of, respectively, the then outstanding voting stock of
the corporation resulting from such event or the corporation purchasing
or receiving assets pursuant to such event.
If more than one of the foregoing events shall occur, each such event
shall constitute a separate Change in Control.
"Confidential Information" shall have the meaning ascribed to it in
Section 7.1.
"Controlled Affiliate" shall mean any entity or person controlled by a
Controlling Affiliate.
"Controlling Affiliate" shall mean with respect to any entity or person
the ownership or control of securities possessing more than 50% of the voting
power of all outstanding voting securities of the entity or person or the power
otherwise to direct or cause the direction of the management and policies of
such entity or person, whether through the ownership of voting stock or similar
rights or the holding of office in such entity or person, by contract or
otherwise.
"Event of Default" shall mean the continuing and uncured occurrence of any
one of the following events:
(i) if CFC International fails to pay make any payment required to be
paid by it under this Agreement, the Purchase of Partnership
Agreement, the Installment Note issued pursuant thereto, or the Research
Partnership Agreement, when due and payable or validly declared due and
payable and such default continues for 15 days after notice and demand
for such payment has been made by Applied Holographics, provided
that CFC International may (provided that it is acting in good faith)
contest the validity or amount of any claim of breach, and such contest
on the part of CFC International shall not be a default hereunder;
provided, however, that during the pendency of any such contest CFC
International shall furnish to Applied Holographics an indemnity bond with
corporate surety (or other security acceptable to Applied Holographics)
in an amount equal to the amount being contested plus a reasonable
additional sum to cover possible costs, interest, and penalties, and
provided further that CFC International shall pay any amount finally
adjudged by a court of competent jurisdiction to be due, with all costs,
interest, and penalties thereon;
(ii) if a petition under the Bankruptcy Code or any similar law or
regulation shall be filed by CFC International or any Controlling
Affiliate of CFC International or if CFC International or any Controlling
Affiliate of CFC International shall make an assignment for the benefit of
its creditors or if any case or proceeding is filed by CFC International
for its dissolution or liquidation;
(iii) if CFC International or any Controlling Affiliate of CFC
International is enjoined, restrained or in any way prevented by court
order from conducting all or any material part of its business affairs
or if a petition under the Bankruptcy Code or any similar law or
regulation is filed against CFC International or any Controlling
Affiliate of CFC International or if any case or proceeding is filed
against CFC International or any Controlling Affiliate of CFC
International for its dissolution or liquidation and such injunction,
restraint, petition, case or proceeding is not dismissed or stayed
within 150 days after the entry or filing thereof and no motion to
dismiss is then pending.
"Future Holographic Product Development" shall mean any idea, concept,
design, name, xxxx, invention, improvement or process (whether or not patented,
patentable or registrable in any country) used or useable in the development,
manufacture, marketing or sale of any Holographic Products.
"Future Non-Holographic Product Development" shall mean any idea,
concept, design, name, xxxx, invention, improvement or process (whether or not
patented, patentable or registrable in any country) not used or useable in the
development, manufacture, marketing or sale of any Holographic Products.
"Holographic Products" shall mean holographic originations, films and
foils and other holographic products.
"Net Sales of Products" shall mean the net invoice price of all
Holographic Products less any amounts shown on the invoice being payable for
packaging, shipping charges, discounts, credits, allowances, bad debts and taxes
and less the invoice value of returned goods and all taxes and all discounts or
allowances actually taken off the invoice price by CFC International or CFC. If
a product sold combines a Holographic Product and a Non-Holographic Product, the
Net Sales of Products with respect to such product shall be a fair and
appropriate reduced percentage of the net sales of such product which reduced
percentage reflects the economic importance of the Holographic Products in the
respective product.
"Non-Holographic Product" shall mean a product other than a Holographic
Product.
"Partnership Future Holographic Product Development" shall mean a
Future Holographic Product Development developed, created, discovered, or
otherwise acquired during the term of this Agreement by the Research
Partnership.
"Partnership Future Non-Holographic Product Development" shall mean a
Future Non-Holographic Product Development developed, created, discovered, or
otherwise acquired during the term of this Agreement by the Research
Partnership.
"Prior Operating Partnership" shall mean CFC Applied Holographics, a
Delaware general partnership, existing pursuant to the restated Partnership
Agreement dated as of October 1, 1994, among Applied Holographics PLC, Applied
Holographics Corporation, CFC International, Inc., and CFC Management
Corporation.
"Purchase of Partnership Agreement" shall mean the Purchase of
Partnership and Termination Agreement of even date herewith and effective as of
October 1, 1998, among Applied Holographics PLC, Applied Holographics
Corporation, CFC International, Inc., and CFC Management Corporation.
"Research Partnership" shall mean the general partnership created by
the Research Partnership Agreement.
"Research Partnership Agreement" shall mean the CFC Applied Holographics
Research Partnership Agreement of even date herewith and effective as of
October 1, 1998, among Applied Holographics PLC, Applied Holographics
Corporation, CFC International, Inc., and CFC Management Corporation.
"Territory" shall mean the United States, Mexico and Canada.
2. License to CFC International and Royalties.
2.1 License of AH Holographic Proprietary Rights and AH Future
Holographic Developments. Subject to the terms of this Agreement, Applied
Holographics hereby grants to CFC International a perpetual exclusive license to
use the AH Holographic Proprietary Rights and the AH Future Holographic
Developments in the Territory. This license grant is (save as provided in this
Agreement) ongoing and includes all AH Future Holographic Developments
developed, created, discovered or otherwise acquired by Applied Holographics
during the term of this Agreement. Without limiting the generality of the
foregoing, CFC shall (save as provided in this Agreement) have the perpetual and
exclusive right to develop, manufacture, have manufactured, import, market,
sell, sublicense agents and distributors, and otherwise exploit Holographic
Products which incorporate any AH Holographic Proprietary Rights or AH Future
Holographic Developments in the Territory provided always that this license does
not authorize CFC International to manufacture and develop products which are
the subject of exclusive licensing agreements as set out in Schedules A and B.
Applied Holographics agrees that it will not use the AH Holographic Proprietary
Rights or the AH Future Holographic Developments in the Territory, or license
the AH Holographic Proprietary Rights or the AH Future Holographic Developments
for use by others in the Territory during the term of this Agreement except on
behalf, or for the benefit of, CFC International and except as described in
Schedules A and B.
2.2 Assignment and Sublicensing. CFC International shall have no right
to transfer or assign the license granted to it by Applied Holographics pursuant
to this Agreement or any of the AH Holographic Proprietary Rights or AH Future
Holographic Developments hereby licensed to it without the prior written consent
of Applied Holographics. Applied Holographics may, in its absolute discretion,
withhold such consent without being obliged to give to CFC International any
reasons for so doing.
2.3 Royalty Payments. CFC International agrees that it will pay to AH
(or as it may direct) a royalty of 6% of its Net Sales of Products during the
term of this Agreement. Such payments shall be accrued quarterly on the books
and records of CFC and will be paid within seventy-five (75) days after the
close of each fiscal quarter of CFC International. Payment shall be made in
immediately available funds in U.S. dollars by wire transfer to the account
designated from time to time by AH and, in the event of late payment, interest
at the base rate from time to time of Barclays Bank PLC plus four percent
calculated on a daily basis from the due date for payment until actual payment
(whether before or after any judgment) shall be payable in addition.
2.4 Right to Audit. Applied Holographics or AH, at its own expense,
shall have the right during normal business hours on 30 days' prior written
notice to CFC International and not more than once in any calendar year to have
a nationally recognized independent public accounting firm selected by Applied
Holographics (or, as the case may be, AH) and reasonably acceptable to CFC
International examine the relevant books and records of CFC International and
its Affiliates for the purpose of verifying the royalty payments due under this
Agreement. Such accounting firm shall not work on a contingency fee basis, shall
execute and deliver to CFC International a standard confidentiality agreement in
a form reasonably acceptable to CFC International and shall not disclose to
Applied Holographics any information relating to CFC International's business,
except whether CFC International royalty payments are correct or incorrect, and
if incorrect, the specific details concerning any discrepancies and the amounts
of the royalty payments due under this Agreement. If such examination reveals a
discrepancy, and CFC International does not dispute such discrepancy, CFC
International shall pay to AH (or as it or Applied Holographics may direct) any
additional royalty payment owed to AH (including interest as provided elsewhere
herein), or AH shall refund to CFC International any excess royalty payment made
by CFC International, as appropriate. In the event that the discrepancy amounts
to an underpayment by CFC International of 5% or more of the royalty payment due
under this Agreement, CFC International shall promptly reimburse Applied
Holographics (or, as the case may be, AH) for its out-of-pocket expenses
reasonably incurred in connection with such examination.
3. Royalty Free License to Applied Holographics.
3.1 License of CFC Holographic Proprietary Rights and CFC Future
Holographic Developments. Subject to the terms of this Agreement, CFC
International hereby grants to Applied Holographics a perpetual exclusive
royalty-free license to use the CFC Holographic Proprietary Rights and the CFC
Future Holographic Developments outside the Territory. This license grant is
(save as provided in this Agreement) ongoing and includes all CFC Future
Holographic Developments developed, created, discovered or otherwise acquired by
CFC International during the term of this Agreement. Without limiting the
generality of the foregoing, Applied Holographics shall (save as provided in
this Agreement) have the perpetual and exclusive right to develop, manufacture,
have manufactured, import, market, sell, sublicense agents and distributors, and
otherwise exploit Holographic Products which incorporate any CFC Holographic
Proprietary Rights or CFC Future Holographic Developments outside the Territory.
CFC agrees that it will not use the CFC Holographic Proprietary Rights or the
CFC Future Holographic Developments outside the Territory, or license the CFC
Holographic Proprietary Rights or the CFC Future Holographic Developments for
use by others outside the Territory during the term of this Agreement except on
behalf, or for the benefit of, Applied Holographics.
3.2 Assignment and Sublicensing. Applied Holographics shall have no
right to transfer or assign the license granted to it by CFC International
pursuant to this Agreement or any of the CFC Holographic Proprietary Rights or
the CFC Future Holographic Developments hereby licensed to it without the prior
written consent of CFC International. CFC International may, in its absolute
discretion, withhold such consent without being obliged to give Applied
Holographic any reasons for so doing.
4. Holographic Proprietary Rights and Licenses to the Research Partnership.
4.1 License of AH Holographic Proprietary Rights and Future Holographic
Developments. CFC International hereby grants to the Research Partnership a
royalty-free sublicense to use the AH Holographic Proprietary Rights, AH Future
Holographic Developments, CFC Holographic Proprietary Rights and CFC Future
Holographic Developments as contemplated by the Research Partnership Agreement,
and Applied Holographics hereby consents to such sublicense.
4.2 Ownership of Partnership Future Holographic Developments. Subject
to the Agreements described in Schedules A and B, Applied Holographics and CFC
International shall be the joint owners of the Partnership Future Holographic
Developments which the Research Partnership is creating for their account and on
their behalf, provided that during the term of this Agreement Applied
Holographics shall own the exclusive right to use all of the Partnership Future
Holographic Developments to develop, manufacture, market, sell, sublicense
agents and distributors, and otherwise in the entire world outside of the
Territory and during the term of this Agreement CFC International shall own the
exclusive right to use all of the Partnership Future Holographic Developments to
develop, manufacture, market, sell, sublicense agents and distributors, and
otherwise within the Territory.
4.3 Co-Ownership of Partnership Future Non-Holographic Developments.
CFC International and Applied Holographics shall be the joint owners of all
worldwide rights, titles and interests to any and all Partnership Future
Non-Holographic Developments. This ownership shall be without any restriction
whatsoever and each of CFC International and Applied Holographics will have the
right to sell, assign, transfer, or otherwise exploit its non-exclusive rights
to develop, manufacture, have manufactured, import, export, market, sell,
sublicense agents and distributors, and otherwise exploit any and all
Partnership Future Non-Holographic Developments.
4.4 Further Assurances of the Partnership.
4.4.1 Execution of Documents. Upon the request of either CFC
International or Applied Holographics, the Research Partnership shall
perform, execute, acknowledge and deliver all such further acts, deeds,
bills of sale, assignments, transfers, conveyances, powers of attorney
and assurances as may be required to convey and transfer to and vest in
CFC International and Applied Holographics and protect their rights,
titles and interests in all of the Partnership Future Holographic
Developments and Partnership Future Non-Holographic Developments, and
as may be appropriate to carry out the ownership provisions of this
Agreement.
4.4.2 Holographic Developments. Without limiting the generality of
the foregoing, the Research Partnership shall make application for
a patent or other statutory protection of any Partnership Future
Holographic Developments on behalf of CFC International in the
Territory and on behalf of Applied Holographics in any jurisdiction
outside of the Territory requested by CFC International or
Applied Holographics, respectively, provided that if the Research
Partnership does not make application for a patent or other statutory
protection, any of the other parties hereto shall have the right to make
such application on behalf of such party with the full cooperation of
the other parties hereto.
4.4.3 Non-Holographic Developments. Similarly, the Research
Partnership shall make application for a patent or other statutory
protection of any Partnership Future Non-Holographic Developments on
behalf of CFC International and on behalf of Applied Holographics in
any jurisdiction requested by CFC International or Applied
Holographics, respectively, provided that if the Research Partnership
does not make application for a patent or other statutory protection,
any of the other parties hereto shall have the right to make such
application on behalf of such party with the full cooperation of the
other parties hereto.
5. Technical and Other Assistance.
5.1 Applied Holographics. While this Agreement is in effect (and subject
to the agreements referred to in Schedules A and B), Applied
Holographics shall make available to CFC International the AH Holographic
Proprietary Rights and AH Future Holographic Developments for the purpose of
enabling CFC International to develop, manufacture, market and sell Holographic
Products in the Territory, including without limitation making available to CFC
International all drawings, specifications and other information in Applied
Holographics' possession.
5.2 CFC International. While this Agreement is in effect, CFC International
shall make available to Applied Holographics the CFC Holographic Proprietary
Rights and CFC Future Holographic Developments for the purpose of enabling
Applied Holographics to develop, manufacture, market and sell
Holographic Products outside the Territory, including without limitation making
available to Applied Holographics all drawings, specifications and other
information in the possession of CFC International.
5.3 Patent Application. Applied Holographics shall have the exclusive
right to make application for a patent or other statutory protection of all AH
Future Holographic Product Developments in any jurisdiction (provided that if
such party does not make application for a patent or other statutory protection
and does not have reasonable grounds for not doing so, any of the other parties
hereto shall have on giving not less than 60 days notice to such party the right
to make such application on behalf of such party with the full cooperation of
such party). Similarly CFC International shall have the exclusive right to make
application for a patent or other statutory protection of all CFC Future
Holographic Product Developments in any jurisdiction (provided that if such
party does not make application for a patent or other statutory protection and
does not have reasonable grounds for not doing so, any of the other parties
hereto shall have on giving not less than 60 days notice to such party the right
to make such application on behalf of such party with the full cooperation of
such party).
5.4 Execution of Documents. Upon the request of either CFC International
or Applied Holographics (the "Requesting Party"), Applied Holographics
or CFC International (the "Other Party") shall perform, execute, acknowledge
and deliver all such further acts, deeds, bills of sale, assignments,
transfers, conveyances, powers of attorney and assurances as may be required to
convey and transfer to and vest in the Requesting Party and protect its rights,
titles and interests in all of the Partnership Future Holographic Developments
and Partnership Future Non-Holographic Developments, as may be appropriate
to carry out the ownership provisions of this Agreement.
6. Limitations on Use of Proprietary Rights and Future Developments.
6.1 Restrictive Covenant of Applied Holographics. Applied Holographics
agrees that it will not during the term of this Agreement, except through the
Research Partnership or except as described in Schedules A and B, directly or
indirectly engage in the Territory in the business of developing, manufacturing,
marketing or selling any Holographic Products or acquire or retain any financial
interest having a value in excess of $10,000 in any business which is so
engaged.
6.2 Restrictive Covenant of CFC International. CFC International agrees
that it will not during the term of this Agreement directly or indirectly engage
outside of the Territory in the business of developing, manufacturing, marketing
or selling any Holographic Products or acquire or retain any financial interest
having a value in excess of $10,000 in any business which is so engaged.
6.3 Sales Outside of Respective Territories. Notwithstanding the other
provisions of this Agreement, if either Applied Holographics or CFC
International obtains a contract from a customer within its permitted area to
supply embossed holographic foils and films and the customer wishes to have
Applied Holographics or CFC International supply product for use and resale
outside its permitted area, each of Applied Holographics and CFC International
shall have the right to sell its products to such customer for use and resale by
the customer throughout the world. If such a situation arises, the contracting
party (Applied Holographics or CFC International) agrees to notify the other
party of its arrangement with the customer and to recommend to the customer that
it use the other party as a second supplier. However, for the avoidance of
doubt, neither Applied Holographics (or any Affiliate) or CFC International (or
any Affiliate) shall supply and invoice customers outside their respective
permitted areas for embossed holographic foils and films with the other's prior
written consent.
6.4 Enforcement of Provisions. If any provision of this Section, as
applied to any party or to any circumstances, is adjudged by a court to be
invalid or unenforceable, the same will in no way affect any other provision of
this Section, the application of such provision in any other circumstances or
the validity or enforceability of this Agreement. If any such provision, or any
part thereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, the parties agree that the court making
such determination will have the power to reduce the duration and/or area of
such provision, and/or to delete specific words or phrases, and in its reduced
form such provision will then be enforceable and will be enforced. Upon breach
of this Section, the non-breaching party will be entitled to injunctive relief,
since the remedy at law would be inadequate and insufficient. In addition, the
non-breaching party will be entitled to such damages as it can show it has
sustained by reason of such breach.
7. Confidentiality.
7.1 Protection of Proprietary Information. Each of the parties hereto
agrees that it shall maintain in confidence all confidential and proprietary
information and data disclosed to it by any other party hereto and identified in
writing as being confidential (the "Confidential Information"). Each of the
parties hereto further agrees that it shall not use the Confidential Information
for any purpose other than the exercise of its or their rights as contemplated
by this Agreement. The parties hereto shall take all reasonable measures
necessary to prevent any unauthorized disclosure of the Confidential Information
by any of their Affiliates, employees, agents or consultants.
7.2 Non-disclosure of Confidential Information. Nothing herein shall
prevent any party hereto, or any Affiliate, employee, agent or consultant of
such party from using, disclosing, or authorizing the disclosure of any
information which:
(i) becomes publicly available without default hereunder by the
receiving party;
(ii) is lawfully acquired by the receiving party from a source not
under any obligation to the disclosing party regarding disclosure
of such information;
(iii) is in the possession of the receiving party in written or other
recorded form at the time of its disclosure hereunder;
(iv) is non-confidentially disclosed to any third party by or with the
permission of the disclosing party; or
(v) the receiving party believes in good faith to be required to be
disclosed by law or by the terms of any listing agreement with a
securities exchange, provided that the receiving party consults with
the other parties prior to making such disclosure.
8. Change in Control.
8.1 Right to Terminate Upon Change in Control. In the event of a Change
in Control of either CFC International or Applied Holographics, each of CFC
International and Applied Holographics shall have the right for a period from
the date of the Change in Control expiring six weeks following receipt of the
required notice described in Section 8.4 below (the "Right to Terminate Election
Period") to terminate this 1998 License Agreement in accordance with the terms
hereof. Thus if Applied Holographics has a Change in Control, either Applied
Holographics or CFC International shall have the right to terminate this
Agreement. Similarly, if CFC International has a Change in Control, each of
Applied Holographics and CFC International shall have the right to terminate
this Agreement.
8.1.2 Manner of Termination. During the Right to Terminate Election
Period, each of Applied Holographics and CFC International shall have
the right to terminate this Agreement by giving written notice of
termination to the other parties hereto of its exercise of its right to
terminate, such termination to be effective not less than six weeks
following the date of the notice, or in the case of the exercise by
CFC International of its right to purchase joint and non-exclusive
ownership of the AH Worldwide Holographic Proprietary Rights in
accordance with this Agreement prior to the stated date of termination,
on the date of closing of such purchase.
8.1.3 Survival of Obligations. Upon such termination, the obligation
of CFC International to pay royalties on Net Sales of Products
through the day prior to the date of closing shall survive.
8.2 CFC Obligation to Purchase Worldwide Rights after Termination. If
this Agreement is terminated in accordance with its terms (including any
termination following a Change in Control in accordance with Section 8.1 or any
termination following an Event of Default in accordance with Section 9.3), then
CFC International will (unless Applied Holographics agrees otherwise in writing)
be obliged to purchase the joint and non-exclusive ownership of the AH Worldwide
Holographic Proprietary Rights then held by Applied Holographics, subject to the
terms and conditions hereinafter set forth.
8.2.1 Manner of Purchase and Notice of Closing. If a notice of
termination is given following a Change in Control, CFC International
shall be required to give Applied Holographics a notice of closing
within the Right to Terminate Election Period setting forth the closing
date of the required purchase by it of the joint and non-exclusive
ownership of the AH Worldwide Holographic Proprietary Rights, which
date of closing shall be within six weeks following the Right to
Terminate Election Period. If this Agreement is otherwise terminated,
except as otherwise agreed by the parties in writing, CFC International
shall be required to give Applied Holographics a notice of closing
within six weeks following the termination date setting forth the
closing date of the required purchase by it of the joint and
non-exclusive ownership of the AH Worldwide Holographic Proprietary
Rights, which date shall be within six weeks following the required
notice of closing.
8.2.1 Closing and Payment. Payment of the purchase price to Applied
Holographics as hereinafter provided shall be tendered to Applied
Holographics against delivery of duly executed bills of sale, assignments,
and documents of transfer (in a form to be agreed between the CFC
International and Applied Holographics, such agreement not to be
unreasonably withheld or delayed by either of them) at the time and
place set forth in such written notice. If Applied Holographics does
not deliver duly executed bills of sale, assignments, and documents of
transfer (in such agreed form) at the closing transferring joint
ownership in the AH Worldwide Holographic Proprietary Rights, free of
all adverse claims, the transfer and sale of the joint ownership in the
AH Worldwide Holographic Proprietary Rights shall nonetheless be deemed
to be effective as of such date without any further action, provided
that CFC International shall hold the purchase price, without interest,
for payment at a subsequent date against delivery of duly executed
documents.
8.2.2 Purchase Price. The purchase price, payable in cash except as
provided below against delivery of duly executed bills of sale,
assignments, and documents of transfer, shall be computed as of December
31 of the year preceding the date on which notice of closing is given and
shall be equal to the product of (a) eight times (b) six percent (6%)
times (c) the sum of the Net Sales of Products during the three preceding
calendar years (computed in the same way as defined herein for the
royalty payments to be made under this Agreement) of CFC International
(including consolidated sales for periods prior to the date of this
Agreement, thus including sales of the Prior Operating Partnership)
divided by three (3) (thus for example, for years beginning in
2002, eight times the average royalties payable by CFC International to
Applied Holographics under this Agreement during the three prior calendar
years).
8.2.3 Payment of Purchase Price in the Event of a Change in Control
of Applied Holographics. In the event of a termination following a
Change in Control of Applied Holographics, CFC shall have the right to
pay the required purchase price described in the preceding subsection 10%
in cash at the closing and 90% in a non-interest bearing promissory note
maturing nine months following the date of closing. This note will be in
a form agreed upon by the parties in substantially the form of the
Installment Note delivered pursuant to the Purchase of Partnership
Agreement.
8.2.4 Transfer of CFC Worldwide Holographic Proprietary Rights.
Concurrently with and as a condition to the purchase by CFC
International of the AH Worldwide Holographic Proprietary Rights, CFC
International will transfer free of charge to Applied Holographics the
joint and non-exclusive ownership in the CFC Worldwide Holographic
Proprietary Rights then held by CFC International. In connection with
such transfer, CFC International shall deliver duly executed bills of
sale, assignments and documents of transfer (in a form to be agreed
between CFC International and Applied Holographics, such agreement not
to be unreasonably withheld or delayed by either of them) in respect of
the transfer of the CFC Worldwide Holographic Proprietary Rights to
Applied Holographics.
8.2.5 Effect of Transfer. Following the closing of the purchase
provided for in this Section, CFC International and Applied
Holographics shall be the joint owners of all worldwide rights, titles
and interests to any and all AH Worldwide Holographic Proprietary
Rights and CFC Worldwide Holographic Proprietary Rights owned by either
or both of them prior to termination of this Agreement. This ownership
shall be without any restriction whatsoever and each of CFC
International and Applied Holographics will have the right to sell,
assign, transfer, sublicense, or otherwise exploit its non-exclusive
rights to develop, manufacture, have manufactured, import, export,
market, sell, sublicense agents and distributors, and otherwise exploit
Holographic Products in competition with each other anywhere in the
world.
8.2.6 Execution of Documents. Upon the request of either CFC
International or Applied Holographics (the "Requesting Party"), Applied
Holographics or CFC International (the "Other Party") shall perform,
execute, acknowledge and deliver all such further acts, deeds, bills of
sale, assignments, transfers, conveyances, powers of attorney and
assurances as may be required to convey and transfer to and vest in the
Requesting Party and protect its rights, titles and interests in all of
the AH Worldwide Holographic Proprietary Rights and CFC Worldwide
Holographic Proprietary Rights, as may be appropriate to carry out the
ownership provisions of this Agreement.
8.3 Obligations of Controlling Affiliate. In the event there occurs a
Change of Control of either CFC International or Applied Holographics thus
resulting in a situation where either CFC International or Applied Holographics
is a Controlled Affiliate of a Controlling Affiliate, and if following such
event neither CFC International nor Applied Holographics exercises its right to
terminate this Agreement and CFC International therefore does not purchase the
AH Worldwide Holographic Proprietary Rights, then the Controlled Affiliate shall
be required to cause its Controlling Affiliate to execute and deliver to the
other party an appropriate an agreement in which the Controlling Affiliate
agrees that the Controlled Affiliate will remain bound by and respect all of the
terms and conditions of this Agreement.
8.4 Obligation to Give Notice of Change in Control. If either CFC
International or Applied Holographics undergoes a Change in Control, it shall be
required to give the other notice as soon as practical and in no case more than
14 days following the Change in Control. The required notice shall include full
details describing the Change in Control.
9. Term and Termination
9.1 Perpetual Term. The term of this Agreement shall commence on the
date hereof and shall continue until terminated either by the agreement of each
of CFC International and Applied Holographics or in accordance with the terms
set forth herein or in some other agreement between CFC International and
Applied Holographics.
9.2 Optional Early Termination in the Event of a Change in Control.
This Agreement may be terminated by either party in the event of a Change in
Control as provided elsewhere herein.
9.3 Termination in the Event of Breach of CFC International. If an
Event of Default has occurred and is continuing, Applied Holographics shall have
the right to terminate this Agreement by 30 days prior written notice to CFC
International. Such termination shall be without prejudice to all other
available rights and remedies of Applied Holographics or CFC International under
applicable law and to the ongoing requirements of Section 8.2 hereof.
10. Miscellaneous
10.1 Amendment and Modification. The parties hereto may amend, modify
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
10.2 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, by operation of law or
otherwise, by any of the parties hereto without the prior written consent of the
other party. Such consent may be granted or withheld at the absolute discretion
of the party required to give it, and such party shall not be obliged to give
its reasons for granting or withholding its consent to any other party.
10.3 Headings. The descriptive headings in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
10.4 Execution in Counterpart. This Agreement may be executed in
counterparts each of which may deemed an original.
10.5 Notices. Any notice, request, information or other document to be
given hereunder to any of the parties by any other parties shall be in writing
and delivered personally or sent by Federal Express or other reliable courier,
transmitted by fax, or sent by registered or certified mail, postage prepaid, to
the intended recipient, as follows:
If to Applied Holographics or AH, addressed to:
Xxxxx X. Xxxxxxxx
Managing Director
Applied Holographics PLC
00 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 0, Xxxx & Xxxx
XX00 0XX Xxxxxxx
Telephone: 00 000 000 0000
Fax: 00 000 000 0000
With a copy to:
Xxxxx Pass, Esq.
Xxxxxxxxx Xxxx
St. Ann's Wharf
112 Quayside
Xxxxxxxxx xxxx Xxxx
XX00 0XX Xxxxxxx
Telephone: 00 000 000 0000
Fax: 00 000 000 0000
If to CFC or CFC International, addressed as follows:
Xxxxx X. Xxxxx, Chairman
and Chief Executive Officer
CFC International, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000
Telephone: 0 (000) 000-0000
Fax: 0 (000) 000-0000
with a copy to:
Xxxx, Xxxx & Xxxxx
Three First National Plaza
00 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: 0 (000) 000-0000
Fax: 0 (000) 000-0000
If to the Research Partnership, then to both AH and CFC as provided
above.
Any such notice delivered personally shall be deemed to have been given on the
date that it is so delivered, and any notice delivered by other means referred
to above shall be deemed to have been given on the date it is received. Any
party may change the address to which notices hereunder are to be sent to it by
giving written notice of such change of address in the manner herein provided
for giving notice.
10.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois applicable to contracts
made and to be performed therein, without regard to the conflict of laws
principles thereof, and the parties submit to the exclusive jurisdiction of the
United States Federal and Illinois State courts.
10.7 Governing Language. English shall be the governing language of
this Agreement and the English language version of this Agreement shall be
controlling for all purposes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
APPLIED HOLOGRAPHICS PLC
By________________________________________
Xxxxx X. Xxxxxxxx, Managing Director
APPLIED HOLOGRAPHICS CORPORATION
By________________________________________
Xxxxx X. Xxxxxxxx, President
CFC INTERNATIONAL, INC.
By________________________________________
Xxxxx X. Xxxxx, Chairman and
Chief Executive Officer
CFC MANAGEMENT, INC.
By________________________________________
Xxxxx X. Xxxxx, Chairman and
Chief Executive Officer
CFC APPLIED HOLOGRAPHICS RESEARCH PARTNERSHIP
By APPLIED HOLOGRAPHICS CORPORATION
By________________________________________
Xxxxx X. Xxxxxxxx, President
By CFC MANAGEMENT, INC.
By________________________________________
Xxxxx X. Xxxxx, Chairman and
Chief Executive Officer
Its General Partners
Schedule "A"
SUMMARY OF RESTRICTIVE OR CONFIDENTIALITY AGREEMENTS WITH THIRD PARTIES WHERE
CFC INTERNATIONAL MAY NOT BE THE SUPPLIER IN THE TERRITORY
It should be stressed that Applied Holographics has signed many confidentiality
agreements with third parties. Most of these, however, relate to information
provided or given and not to developments affecting intellectual property, the
products or markets.
Currently there are two main agreements or developments which have or will have
restrictions:
1) Portals/Bank of England
Holographic thread in paper. We work with both organizations to produce a high
security paper product. Since Portals hold a patent on the window thread
process, we had to concede the world marketing rights to them. They promote the
product to all their licensees.
2) Nimbus - Compact Discs
We worked with Nimbus to develop processes for incorporating holograms onto the
whole or part of the surface of a compact disc.
Applied Holographics and Nimbus own and are seeking to gain patents covering the
technologies they have jointly developed. These patents have been (or will be
when granted) transferred to the AH/Nimbus Joint Venture Company 3DCD LLC. This
joint venture company has the exclusive right to sell the CD technologies
worldwide.
Schedule "B"
SUMMARY OF AGREEMENTS WITH THIRD PARTIES RELATING TO THE USE OF CERTAIN
HOLOGRAPHIC PATTERNS
1. AH and Applied Holographics use certain patterns (EP53, 54, 55, 57, and
58) for which it pays a royalty of 5% under a non-exclusive license
agreement with it's former subsidiary based in Switzerland, now called
3D Holographics.
2. Applied Holographics sold the assets of it's Retail division based in
Bordon, England on April 9th 1991 to a company called Honeybatch,
subsequently Spectraflex, together with the non-exclusive, royalty free
rights to use any of the patterns supplied previously to that business
by Applied Holographics Plc as shown on the attached list and covered
by the Clauses 5.05 and 5.06 of the Purchase Agreement as follow:
5.05 "The Vendor agrees that the Purchaser shall have the right if
deemed necessary by the Purchaser to replicate or duplicate
for the Purchaser's own use, or have replicated or duplicated
any products or product designs which have previously been
supplied by the vendor to the Business excluding those designs
which are subject to a license from Xxxx Disney Limited dated
9th October 1990 and those designs which are subject to a
license from 3D Limited dated 14th August 1989 and it is
hereby understood that the Vendor by entering this agreement
does not grant any rights to the Purchaser in respect to those
designs which are subject to the aforementioned Licenses from
Xxxx Disney Limited dated 9th October 1990 and 3D Limited
dated 14th August 1989."
5.06 "The Vendor agrees that the Purchaser may use the copy nickel
holographic or diffraction shims referred to in Schedule 2
hereof provided that for a period of 12 months from the date
of completion, the Purchaser agrees to hold the shims and not
to permit any supplier other than the Vendor to use them to
manufacture materials unless the Vendor is unable to meet
orders placed by the Purchaser (at a price which is acceptable
to the Purchaser where product has not previously been
supplied according to the Vendor's price list) within a period
of 4 weeks from receipt of order."
Patterns subject to Agreement with Spectraflex Limited
Number Description
037 Fireworks }
038 Fish }
039 Confetti }
040 Happy Birthday Cocktail }
041 Parrots }
042 Tulips }
000 Xxxxxxxxx }
044 Flying High (aeroplanes) }
045 Blue Sax }
046 Kites }
047 Juke Box } Large designs
048 Sweet Hearts } used on
049 Change of Hearts } cards
050 Xxxxxx Xxxxxxx }
051 The Beach }
052 Ice Cream Soda }
053 Dove }
054 Clown }
055 Parcels }
056 Champagne Breakfast }
057 Cake }
058 Showing Off (Peacock) }
059 Catwalk }
060 Happy Birthday }
Alphabet stickers
Bells and Xxxxx }
Merry Christmas }
Stockings and Bells }
Santa, Tree, Parcel and Xxxxx }
}
EP 53 (Broken Glass }
}
Wedding Day } Gift Wrap
Congratulations } Patterns
Happy Birthday (Exploding Box) }
Pandas and Balloons }
}
Happy Birthday 2D/3D }
Wedding Day 2D/3D }
Pandas and Balloons 2D/3D }
Congratulations 2D/3D }
Schedule "C"
SUMMARY OF THE POSITION WITH REGARD TO POSSIBLE INFRINGEMENT OF APPLIED
HOLOGRAPHICS' AND THIRD PARTIES' PROPRIETARY RIGHTS
The field of holography is still relatively new and there have been, and
continue to be, many individuals or groups working on originations and
applications. There are many patent applications and patents granted, some of
which we regard as having validity, others we do not. There has also been
extensive litigation.
To the best of our knowledge we believe that we do not currently infringe any
third party rights or patents and we believe we have patents or copyright
protection for our intellectual property. However, much of this could only be
decided in a court of law since there is very little established case law or
precedent.
In this respect we have from time to time been asked to license the 2D/3D
origination technique from Xxxxx XxXxxx/Light Impressions. Along with others in
the industry we believe that the method we use to produce a 2D/3D image does not
infringe their patent and we have informed them accordingly, declining to pay a
royalty. We do acknowledge, however, that during the development of our current
2D/3D origination method, we were close to the Light Impressions' method and
could possibly have infringed their patent. We are confident that our current
method of production is quite different from theirs.
PURCHASE OF PARTNERSHIP AND TERMINATION AGREEMENT
This Purchase of Partnership and Termination Agreement (the
"Agreement") is made and entered into on October 28, 1998 (but is effective as
of October 1, 1998), by and among Applied Holographics PLC, a company organized
and existing under the laws of England and Wales ("Applied Holographics"),
Applied Holographics Corporation, a Delaware corporation wholly owned by
Applied Holographics ("AH"), CFC International, Inc., a Delaware
corporation ("CFC International"), and CFC Management Corporation, a Delaware
corporation wholly owned by CFC International ("CFC").
Recitals
Applied Holographics and AH (the "Sellers") desire to sell their
interest in the Prior Operating Partnership among the parties hereto and CFC
International and CFC (the "Purchasers") desire to purchase such interest, in
each case on the terms set out in this Agreement.
Covenants
In consideration of the premises and the mutual covenants of the
parties set forth herein, the parties hereto agree as follows
1. Definitions.
"1992 License Agreement" shall mean the License Agreement dated April
1, 1992, among Applied Holographics, AH, CFC International and CFC.
"1998 License Agreement" shall mean the License Agreement of even date
herewith effective October 1, 1998, among Applied Holographics, AH, CFC
International, CFC and the Research Partnership.
"Additional Agreements" shall mean the 1992 License Agreement, the
Formation Agreement, the Security Agreement, and the Representation Agreement.
"Affiliates" shall mean any entity or person that directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, any other entity or person. "Control" (including with
correlative meanings, the terms "controlled by" and "under common control with")
means the ownership or control of securities possessing more than 50% of the
voting power of all outstanding voting securities of an entity or person or the
power otherwise to direct or cause the direction of the management and policies
of such entity or person, whether through the ownership of voting stock or
similar rights or the holding of office in such entity or person, by contract or
otherwise.
"AH Proprietary Rights" shall mean all of the patents, trademarks,
copyrights, technology, trade secrets and other intellectual property rights of
AH and Applied Holographics relating to the development, manufacture, marketing
and sale of holographic originations, films and foils and other holographic
products except as set forth in Schedules A and B to the 1992 License Agreement
and as to which additional information is set forth in Schedule C to the 1992
License Agreement.
"Closing Time" shall mean the opening of business on October 1, 1998.
"Formation Agreement" shall mean the Formation Agreement dated April 1,
1992, among Applied Holographics and CFC International as amended as of October
1, 1994.
"Partnership Agreement" and "Prior Operating Partnership Agreement"
shall mean the restated Partnership Agreement dated as of October 1, 1994, by
and between AH and CFC.
"Partnership" and "Prior Operating Partnership" shall mean the general
partnership created pursuant to the Partnership Agreement.
"Products" shall mean all holographic products.
"Purchasers" shall mean CFC International and CFC.
"Representation Agreement" shall mean the Representation Agreement
dated as of April 1, 1992, between CFC International and the Partnership.
"Research Partnership" shall mean the general partnership created by
the Research Partnership Agreement.
"Research Partnership Agreement" shall mean the CFC Applied
Holographics Research Partnership agreement dated October 1, 1998, between the
Sellers and the Purchasers.
"Security Agreement" shall mean the Security Agreement dated as of
October 1, 1994, between Applied Holographics and CFC International.
"Sellers" shall mean Applied Holographics and AH.
"Territory" shall mean the United States, Mexico and Canada.
"Usual Selling Prices" shall mean the price at which the Sellers or
Purchasers offer to sell similar quantities of a Product. If the Seller or
Purchaser has recently offered or is offering a Product at different prices to
different customers, the "Usual Selling Price" for the Product shall be the
lowest price at which the Seller or Purchaser has offered to sell the Product
(taking due account of all relevant factors including the quantity of Product
ordered, packaging and delivery costs).
2. Purchase, Sale and Termination of Partnership Agreement.
2.1 Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, the Sellers hereby sell, transfer, convey and assign at and as
of the Closing Time to the Purchasers for the total purchase price specified in
Section 2.2, all of the Sellers', right title and interest in the Partnership.
Without limiting the foregoing, at the Closing Time CFC International shall
become a general partner of the Partnership replacing AH, with all of the
rights, powers and obligations of AH thereunder. For the avoidance of doubt,
this Agreement shall not result in the transfer of ownership of the AH
Proprietary Rights, ownership of which shall hereafter be subject to the
provisions of the 1998 License Agreement.
2.2 Purchase Price. The total purchase price (the "Purchase Price")
shall be paid in sixteen equal quarterly payments in the amount of $96,756.44
(totaling $1,548,103) on the first day of January, April, July and October
commencing January 1, 1999.
3. Product Supply and Transfer Pricing.
3.1 Product Supply. The parties all agree that it is their non-binding
intention to seek to satisfy all orders for Products which they may receive from
any other party to this Agreement, and undertake not unreasonably to decline any
such orders. However, it is hereby expressly agreed that no party to this
Agreement shall be obliged to supply any Products ordered by another party
pursuant to this Agreement if, in its sole opinion (which shall be final), it is
not in its best interests to supply such Products. For the avoidance of doubt,
this provision allows a party to this Agreement to decline an order for Products
from another party in order to perform its obligations to supply Products to a
third party, or in order to pursue business to supply Products on a more
profitable basis to a third party (provided that, in each case, any supply of
Products to a third party shall be in accordance with this Agreement and the
1998 License Agreement).
3.2 Prices Between Applied Holographics and CFC. Products sold by
Applied Holographics to CFC International and Products sold by CFC International
to Applied Holographics after the execution and delivery of this Agreement will
be priced at Usual Selling Prices of Applied Holographics or CFC International
(as the case may be) less 30% provided, however, that if the resulting price is
less than the fully absorbed manufactured cost (not including selling, general
and administrative expense), then the selling price shall be the selling party's
fully absorbed manufactured cost (not including selling, general and
administrative expense).
3.3 Payment Terms. All outstanding amounts owed to Applied Holographics
by CFC International and all outstanding amounts owed to CFC International by
Applied Holographics for Products supplied in a given month will be repaid on
the fifteenth (15th) following the second (2nd) month after that month ended.
For example, Products purchased in August will be paid for by the 15th of
November.
4. Van Leer License Agreement. The Purchasers and Sellers agree that they
will use their respective best efforts to cause Van Leer Metalized Products
(USA) Ltd. ("Van Leer") to split its royalty payments under the License
Agreement dated January 1, 1994, between the Partnership and Van Leer such
that payments are made to CFC International for sales into the Territory
and to Applied Holographics for sales outside the Territory. If Van Leer
does not split its royalty payments as contemplated, the parties agree to
allocate any payments received on the basis of their best estimate of where the
sales generating the payments were effected.
5. Research Partnership. The Purchasers and Sellers are entering into
the Research Partnership concurrently with the execution and delivery of
this Agreement.
6. 1998 License Agreement. The Purchasers and Sellers are entering into the
1998 License Agreement concurrently with the execution and delivery of
this Agreement.
7. Miscellaneous.
7.1 Assignment by CFC International. Neither CFC International nor CFC
shall assign, sublicense, transfer, hypothecate or otherwise alienate any of its
rights or obligations under this Agreement without the prior written consent of
Applied Holographics except to an Affiliate or successor by merger or any
purchaser of all or substantially all of the assets of CFC which Affiliate,
successor or purchaser agrees to execute a counterpart of this Agreement
agreeing to be fully bound by its terms. Applied Holographics may, in its
absolute discretion, withhold such consent without being obligated to give to
CFC International any reasons for so doing. Subject to this Section 7.1, this
Agreement shall be binding upon the parties hereto and their respective
successors and assigns.
7.2 Entire Agreement; Termination of Additional Agreements. This
Agreement, the Research Partnership Agreement and the 1998 License Agreement,
contain the entire agreement of the parties hereto with respect to the subject
matter hereof, supersede all prior understandings and agreements of the parties
with respect thereto, and are interdependent with each other. Without limiting
the generality of the foregoing, the Additional Agreements shall be deemed
terminated and of no further force and effect as of the Closing Time.
7.3 Amendment and Modification. The parties hereto may amend, modify
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
7.4 Binding Effect Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
7.5 Headings. The descriptive headings in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
7.6 Execution in Counterpart. This Agreement may be executed in
counterparts each of which may deemed an original.
7.7 Notices. Any notice, request, information or other document to be
given hereunder to any of the parties by any other parties shall be in writing
and delivered personally or sent by Federal Express or other reliable courier,
transmitted by fax, or sent by registered or certified mail, postage prepaid, to
the intended recipient, as follows:
If to Applied Holographics, addressed to
Xxxxx X. Xxxxxxxx
Managing Director
Applied Holographics PLC
00 Xxxxxxx Xxxx
Xxxxxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 0, Xxxx & Xxxx
XX00 0XX Xxxxxxx
Telephone: 00 000 000 0000
Fax: 00 000 000 0000
With a copy to:
Xxxxx Pass, Esq.
Xxxxxxxxx Xxxx
St. Ann's Wharf
112 Quayside
Xxxxxxxxx xxxx Xxxx
XX00 0XX Xxxxxxx
Telephone: 00 000 000 0000
Fax: 00 000 000 0000
If to CFC International, addressed as follows:
Xxxxx X. Xxxxx, Chairman
and Chief Executive Officer
CFC International, Inc.
000 Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx, Xxxxxxxx 00000
Telephone: 0 (000) 000-0000
Fax: 0 (000) 000-0000
with a copy to:
Xxxx, Xxxx & Xxxxx
Three First National Plaza
00 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention Xxxxxxx X. Xxxxx
Telephone: 0 (000) 000-0000
Fax: 0 (000) 000-0000
Any such notice delivered personally shall be deemed to have been given on the
date that it is so delivered, and any notice delivered by other means referred
to above shall be deemed to have been given on the date it is received. Any
party may change the address to which notices hereunder are to be sent to it by
giving written notice of such change of address in the manner herein provided
for giving notice.
7.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois applicable to contracts made
and to be performed therein, without regard to the conflict of laws principles
thereof, and the parties submit to the exclusive jurisdiction of the United
States Federal and Illinois State courts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
APPLIED HOLOGRAPHICS PLC
By________________________________________
Xxxxx X. Xxxxxxxx, Managing Director
APPLIED HOLOGRAPHICS CORPORATION
By________________________________________
Xxxxx X. Xxxxxxxx, President
CFC INTERNATIONAL, INC.
By________________________________________
Xxxxx X. Xxxxx, Chairman and
Chief Executive Officer
CFC MANAGEMENT CORPORATION
By________________________________________
Xxxxx X. Xxxxx, Chairman and
Chief Executive Officer
October 1, 1998 $1,444,738
INSTALLMENT NOTE
For value received, the undersigned CFC International, Inc., a Delaware
corporation ("CFC International"), promises to pay to the order of Applied
Holographics Corporation, a Delaware corporation ("AH"), by wire transfer in
immediately available funds in United States dollars to the account of AH at its
designated bank account, sixteen equal quarterly payments of $90,296.13 each
(aggregating $1,444,738) on the 1st day of January, April, July, and October
commencing on the 1st day of January, 1999, with the final payment due on the
1st day of October, 2001.
The parties agree that the payments made pursuant to this Note
include interest at the rate of 5.31% and principal as follows:
Date Due Quarterly Interest Principal Balance
Payment
January 1, 1999 $ 96,756.44 $ 18,405.78 $ 78,350.65 $1,308,149.12
April 1, 1999 $ 96,756.44 $ 17,365.68 $ 79,390.76 $1,228,758.37
July 1, 1999 $ 96,756.44 $ 16,311.77 $ 80,444.67 $1,148,313.70
October 1, 1999 $ 96,756.44 $ 15,243.86 $ 81,512.57 $1,066,801.12
January 1, 2000 $ 96,756.44 $ 14,161.78 $ 82,594.65 $ 984,206.47
April 1, 2000 $ 96,756.44 $ 13,065.34 $ 83,691.10 $ 900,515.37
July 1, 2000 $ 96,756.44 $ 11,954.34 $ 84,802.10 $ 815,713.28
October 1, 2000 $ 96,756.44 $ 10,828.59 $ 85,927.84 $ 729,785.43
January 1, 2001 $ 96,756.44 $ 9,687.90 $ 87,068.54 $ 642,716.90
April 1, 2001 $ 96,756.44 $ 8,532.07 $ 88,224.37 $ 554,492.53
July 1, 2001 $ 96,756.44 $ 7,360.89 $ 89,395.55 $ 465,096.98
October 1, 2001 $ 96,756.44 $ 6,174.16 $ 90,582.28 $ 374,514.70
January 1, 2002 $ 96,756.44 $ 4,971.68 $ 91,784.75 $ 282,729.95
April 1, 2002 $ 96,756.44 $ 3,753.24 $ 93,003.20 $ 189,726.75
July 1, 2002 $ 96,756.44 $ 2,518.62 $ 94,237.81 $ 95,488.94
October 1, 2002 $ 96,756.44 $ 1,267.62 $ 95,488.82 $ 0.11
Totals $1,548,103.00 $161,603.34 $1,386,499.66
Interest on any late payment shall be due and payable at the base rate
from time to time of Barclays Bank PLC plus four percent calculated on a daily
basis from the due date for payment until actual payment (whether before or
after any judgment).
This Installment Note is being delivered in connection with a Purchase
of Partnership and Termination Agreement among CFC International, CFC Management
Corporation, and Applied Holographics PLC and AH, and AH is entitled to the
benefits thereof.
CFC INTERNATIONAL, INC.
By_________________________________
Xxxxx X. Xxxxx, Chairman and
Chief Executive Officer
