Document:

Exhibit
10.3

 

SUBSIDIARY GUARANTY

 

This SUBSIDIARY
GUARANTY is entered into as of March 1, 2005 by the undersigned
(each a “Guarantor”, and together
with any future Subsidiaries executing this Guaranty, being collectively
referred to herein as the “Guarantors”)
in favor of and for the benefit of DEUTSCHE BANK TRUST COMPANY AMERICAS, as
agent for and representative of (in such capacity herein called “Guarantied Party”) the financial
institutions (“Lenders”) party to
the Credit Agreement referred to below and any Swap Counterparties (as
hereinafter defined).

 

RECITALS.

 

A.                                   Hexcel
Corporation, a Delaware corporation (“Company”),
has entered into that certain Credit Agreement dated as of March 1, 2005
with Lenders and Guarantied Party, as Administrative Agent for Lenders (said
Credit Agreement, as it may hereafter be amended, restated, supplemented or
otherwise modified from time to time, being the “Credit Agreement”; capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined).

 

B.                                     Company
may from time to time enter, or may from time to time have entered, into one or
more Interest Rate Agreements or Currency Agreements (collectively, the “Lender Swap Agreements”) with one or more
Persons that are Lenders or Affiliates of Lenders at the time such Lender Swap
Agreements are entered into (in such capacity, collectively, “Swap Counterparties”) in accordance with
the terms of the Credit Agreement, and it is desired that the payment
obligations of Company under the Lender Swap Agreements, including without
limitation the obligation of Company to make payments thereunder in the event
of early termination thereof, together with all obligations of Company under
the Credit Agreement and the other Loan Documents, be guarantied hereunder.

 

C.                                     Guarantied
Party, Lenders and each Swap Counterparty for which Guarantied Party has
received the notice required by Section 18 hereof are sometimes referred
to herein as “Beneficiaries”.

 

D.                                    The
Guarantied Obligations (as hereinafter defined) are being incurred for and will
inure to the benefit of Guarantors (which benefits are hereby acknowledged).

 

E.                                      It
is a condition precedent to the making of the initial Loans under the Credit
Agreement that Company’s obligations thereunder be guarantied by Guarantors.

 

F.                                      Guarantors
are willing irrevocably and unconditionally to guaranty such obligations of
Company.

 

NOW, THEREFORE,
based upon the foregoing and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and in order to induce
Lenders and Guarantied Party to enter into the Credit Agreement and to make
Loans and other extensions of credit thereunder and to induce Swap
Counterparties to enter into the Lender Swap Agreements, Guarantors hereby
agree as follows:

 

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1.                                      Guaranty.                                          (a)
Guarantors jointly and severally irrevocably and unconditionally guaranty, as
primary obligors and not merely as sureties, the due and punctual payment in
full of all Guarantied Obligations (as hereinafter defined) when the same shall
become due, whether at stated maturity, by acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code).  The term “Guarantied
Obligations” means any and all Obligations of Company and all
payment obligations of Company under Lender Swap Agreements, now or hereafter
made, incurred or created, whether absolute or contingent, liquidated or
unliquidated, whether due or not due, and however arising under or in
connection with the Credit Agreement, the Lender Swap Agreements, this Guaranty
and the other Loan Documents, including those arising under successive
borrowing transactions under the Credit Agreement which shall either continue
such obligations of Company or from time to time renew them after they have
been satisfied.

 

Each Guarantor acknowledges that a portion of the
Loans may be advanced to it, that Letters of Credit may be issued for the
benefit of its business and that the Guarantied Obligations are being incurred
for and will inure to its benefit.

 

Any interest on any portion of the Guarantied
Obligations that accrues after the commencement of any proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership,
reorganization, liquidation or arrangement of Company (or, if interest on any
portion of the Guarantied Obligations ceases to accrue by operation of law by
reason of the commencement of said proceeding, such interest as would have
accrued on such portion of the Guarantied Obligations if said proceeding had
not been commenced) shall be included in the Guarantied Obligations because it
is the intention of each Guarantor and Guarantied Party that the Guarantied
Obligations should be determined without regard to any rule of law or order
that may relieve Company of any portion of such Guarantied Obligations.

 

In the event that all or any portion of the Guarantied
Obligations is paid by Company, the obligations of each Guarantor hereunder
shall continue and remain in full force and effect or be reinstated, as the
case may be, in the event that all or any part of such payment(s) is rescinded
or recovered directly or indirectly from Guarantied Party or any other
Beneficiary as a preference, fraudulent transfer or otherwise, and any such
payments that are so rescinded or recovered shall constitute Guarantied
Obligations.

 

Subject to the other provisions of this Section 1,
upon the failure of Company to pay any of the Guarantied Obligations when and
as the same shall become due, each Guarantor will upon demand pay, or cause to
be paid, in cash, to Guarantied Party for the ratable benefit of Beneficiaries,
an amount equal to such amounts that have become due.

 

(b)                                 Anything
contained in this Guaranty to the contrary notwithstanding, the obligations of
each Guarantor under this Guaranty and the other Loan Documents shall be
limited to a maximum aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States
Code or any applicable provisions of comparable state law (collectively, the “Fraudulent Transfer Laws”), in each case
after giving effect to all other liabilities of such Guarantor, contingent or
otherwise, that are relevant under the Fraudulent

 

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Transfer Laws
(specifically excluding, however, any liabilities of such Guarantor (x) in
respect of intercompany indebtedness to Company or other affiliates of Company
to the extent that such indebtedness would be discharged in an amount equal to
the amount paid by such Guarantor hereunder and (y) under any guaranty of
Subordinated Indebtedness which guaranty contains a limitation as to maximum
amount similar to that set forth in this Section 1(b), pursuant to which
the liability of such Guarantor hereunder is included in the liabilities taken
into account in determining such maximum amount) and after giving effect as
assets to the value (as determined under the applicable provisions of the
Fraudulent Transfer Laws) of any rights to subrogation, reimbursement,
indemnification or contribution of such Guarantor pursuant to applicable law or
pursuant to the terms of any agreement.

 

(c)                                  Each
Guarantor under this Guaranty desires to allocate among themselves
(collectively, the “Contributing Guarantors”),
in a fair and equitable manner, their obligations arising under this
Guaranty.  Accordingly, in the event any
payment or distribution is made on any date by a Guarantor under this Guaranty,
each such Guarantor or such other guarantor shall be entitled to a contribution
from each of the other Contributing Guarantors in the maximum amount permitted
by law so as to maximize the aggregate amount of the Guarantied Obligations
paid to Beneficiaries.

 

2.                                      Guaranty
Absolute; Continuing Guaranty.  The
obligations of each Guarantor hereunder are irrevocable, absolute, independent
and unconditional and shall not be affected by any circumstance which
constitutes a legal or equitable discharge of a guarantor or surety other than
payment in full of the Guarantied Obligations. 
In furtherance of the foregoing and without limiting the generality
thereof, each Guarantor agrees that:  (a) this
Guaranty is a guaranty of payment when due and not of collectibility;
(b) Guarantied Party may enforce this Guaranty upon the occurrence and
during the continuance of an Event of Default under the Credit Agreement or the
occurrence of an early termination date or similar termination event under any
Lender Swap Agreements notwithstanding the existence of any dispute between
Company and any Beneficiary with respect to the existence of such event;
(c) the obligations of each Guarantor hereunder are independent of the
obligations of Company under the Loan Documents or the Lender Swap Agreements
and the obligations of any other guarantor of obligations of Company and a
separate action or actions may be brought and prosecuted against each Guarantor
whether or not any action is brought against Company or any of such other
guarantors and whether or not Company is joined in any such action or actions;
and (d) a payment of a portion, but not all, of the Guarantied Obligations
by one or more Guarantors shall in no way limit, affect, modify or abridge the
liability of such or any other Guarantor for any portion of the Guarantied
Obligations that has not been paid.  This
Guaranty is a continuing guaranty and shall be binding upon each Guarantor and
its successors and assigns, and each Guarantor irrevocably waives any right to
revoke this Guaranty as to future transactions giving rise to any Guarantied
Obligations.

 

3.                                      Actions
by Beneficiaries.  Any Beneficiary
may from time to time, without notice or demand and without affecting the
validity or enforceability of this Guaranty or giving rise to any limitation,
impairment or discharge of any Guarantor’s liability hereunder, (a) renew,
extend, accelerate or otherwise change the time, place, manner or terms of
payment of the Guarantied Obligations, (b) settle, compromise, release or
discharge, or accept or refuse any offer of performance with respect to, or
substitutions for, the Guarantied Obligations or any

 

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agreement relating
thereto and/or subordinate the payment of the same to the payment of any other
obligations, (c) request and accept other guaranties of the Guarantied
Obligations and take and hold security for the payment of this Guaranty or the
Guarantied Obligations, (d) release, exchange, compromise, subordinate or
modify, with or without consideration, any security for payment of the
Guarantied Obligations, any other guaranties of the Guarantied Obligations, or
any other obligation of any Person with respect to the Guarantied Obligations,
(e) enforce and apply any security now or hereafter held by or for the
benefit of any Beneficiary in respect of this Guaranty or the Guarantied
Obligations and direct the order or manner of sale thereof, or exercise any other
right or remedy that Guarantied Party or the other Beneficiaries, or any of
them, may have against any such security, as Guarantied Party in its discretion
may determine consistent with the Credit Agreement, the Lender Swap Agreements
and any applicable security agreement, including foreclosure on any such
security pursuant to one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable, and (f) exercise
any other rights available to Guarantied Party or the other Beneficiaries, or
any of them, under the Loan Documents or the Lender Swap Agreements.

 

4.                                      No
Discharge.  This Guaranty and the
obligations of Guarantors hereunder shall be valid and enforceable and shall
not be subject to any limitation, impairment or discharge for any reason (other
than payment in full of the Guarantied Obligations), including without
limitation the occurrence of any of the following, whether or not any Guarantor
shall have had notice or knowledge of any of them:  (a) any failure to assert or enforce or
agreement not to assert or enforce, or the stay or enjoining, by order of
court, by operation of law or otherwise, of the exercise or enforcement of, any
claim or demand or any right, power or remedy with respect to the Guarantied Obligations
or any agreement relating thereto, or with respect to any other guaranty of or
security for the payment of the Guarantied Obligations, (b) any waiver or
modification of, or any consent to departure from, any of the terms or
provisions of the Credit Agreement, any of the other Loan Documents, the Lender
Swap Agreements or any agreement or instrument executed pursuant thereto, or of
any other guaranty or security for the Guarantied Obligations, (c) the
Guarantied Obligations, or any agreement relating thereto, at any time being
found to be illegal, invalid or unenforceable in any respect, (d) the
application of payments received from any source to the payment of indebtedness
other than the Guarantied Obligations, even though Guarantied Party or the
other Beneficiaries, or any of them, might have elected to apply such payment
to any part or all of the Guarantied Obligations, (e) any failure to
perfect or continue perfection of a security interest in any collateral which
secures any of the Guarantied Obligations, (f) any defenses, set-offs or
counterclaims which Company may assert against Guarantied Party or any
Beneficiary in respect of the Guarantied Obligations, including but not limited
to failure of consideration, breach of warranty, payment, statute of frauds,
statute of limitations, accord and satisfaction and usury, and (g) any
other act or thing or omission, or delay to do any other act or thing, which
may or might in any manner or to any extent vary the risk of a Guarantor as an
obligor in respect of the Guarantied Obligations.

 

5.                                      Waivers.  Each Guarantor waives, for the benefit of
Beneficiaries:  (a) any right to
require Guarantied Party or the other Beneficiaries, as a condition of payment
or performance by such Guarantor, to (i) proceed against Company, any
other guarantor of the Guarantied Obligations or any other Person,
(ii) proceed against or exhaust any security held from Company, any other
guarantor of the Guarantied Obligations or any other Person, (iii) proceed
against or have resort to any balance of any deposit account or credit on the
books

 

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of any Beneficiary in
favor of Company or any other Person, or (iv) pursue any other remedy in
the power of any Beneficiary; (b) any defense arising by reason of the
incapacity, lack of authority or any disability or other defense of Company
including, without limitation, any defense based on or arising out of the lack
of validity or the unenforceability of the Guarantied Obligations or any agreement
or instrument relating thereto or by reason of the cessation of the liability
of Company from any cause other than payment in full of the Guarantied
Obligations; (c) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor
in other respects more burdensome than that of the principal; (d) any
defense based upon Guarantied Party’s or any other Beneficiary’s errors or
omissions in the administration of the Guarantied Obligations, except behavior
that amounts to bad faith; (e) (i) any principles or provisions of
law, statutory or otherwise, that are or might be in conflict with the terms of
this Guaranty and any legal or equitable discharge of such Guarantor’s
obligations hereunder, (ii) the benefit of any statute of limitations
affecting such Guarantor’s liability hereunder or the enforcement hereof,
(iii) any rights to set-offs, recoupments and counterclaims, and
(iv) promptness, diligence and any requirement that any Beneficiary
protect, secure, perfect or insure any Lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of protest, notices
of dishonor and notices of any action or inaction, including acceptance of this
Guaranty, notices of default under the Credit Agreement, notices of default or
early termination under any Lender Swap Agreement or any agreement or
instrument related thereto, notices of any renewal, extension or modification
of the Guarantied Obligations or any agreement related thereto, notices of any
extension of credit to Company and notices of any of the matters referred to in
Sections 3 and 4 and any right to consent to any thereof; and (g) to the
fullest extent permitted by law, any defenses or benefits that may be derived
from or afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms of this Guaranty.

 

6.                                      Guarantors’
Rights of Subrogation, Contribution, Etc.; Subordination of Other Obligations.  Until the Guarantied Obligations (other than
Unasserted Obligations) shall have been paid in full and the Commitments shall
have terminated and all Letters of Credit shall have expired or been cancelled,
each Guarantor shall withhold exercise of (a) any claim, right or remedy,
direct or indirect, that such Guarantor now has or may hereafter have against
Company or any of its assets in connection with this Guaranty or the
performance by such Guarantor of its obligations hereunder, in each case
whether such claim, right or remedy arises in equity, under contract, by
statute, under common law or otherwise and including without limitation
(i) any right of subrogation, reimbursement or indemnification that such
Guarantor now has or may hereafter have against Company with respect to the
Guarantied Obligations, (ii) any right to enforce, or to participate in,
any claim, right or remedy that any Beneficiary now has or may hereafter have
against Company, and (iii) any benefit of, and any right to participate
in, any collateral or security now or hereafter held by any Beneficiary and
(b) any right of contribution with respect to the Guarantied Obligations
that such Guarantor now has or may hereafter have against any other guarantor
of any of the Guarantied Obligations. 
Each Guarantor further agrees that, to the extent the agreement to
withhold the exercise of its rights of subrogation, reimbursement,
indemnification and contribution as set forth herein is found by a court of
competent jurisdiction to be void or voidable for any reason, any such rights
of subrogation, reimbursement or indemnification such Guarantor may have
against Company or against any collateral or security, and any rights of
contribution such Guarantor may have against any such other guarantor, shall be
junior and subordinate to any rights Guarantied Party or the

 

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other Beneficiaries may
have against Company, to all right, title and interest Guarantied Party or the
other Beneficiaries may have in any such collateral or security, and to any
right Guarantied Party or the other Beneficiaries may have against such other
guarantor.

 

Any indebtedness of Company to a Guarantor collected
or received by such Guarantor after an Event of Default has occurred and is
continuing, and any amount paid to a Guarantor on account of any subrogation,
reimbursement, indemnification or contribution rights referred to in the
preceding paragraph when all Guarantied Obligations have not been paid in full,
shall be held in trust for Guarantied Party on behalf of Beneficiaries and
shall forthwith be paid over to Guarantied Party for the benefit of
Beneficiaries to be credited and applied against the Guarantied Obligations.

 

7.                                      Expenses.  Guarantors jointly and severally agree to
pay, or cause to be paid, on demand, and to save Guarantied Party and the other
Beneficiaries harmless against liability for, (i) any and all costs and
expenses (including reasonable fees, costs of settlement, and disbursements of
counsel) incurred or expended by Guarantied Party or any other Beneficiary in
connection with the enforcement of or preservation of any rights under this
Guaranty and (ii) any and all costs and expenses (including those arising
from rights of indemnification) required to be paid by Guarantors under the
provisions of any other Loan Document.

 

8.                                      Financial
Condition of Company.  No Beneficiary
shall have any obligation, and each Guarantor waives any duty on the part of
any Beneficiary, to disclose or discuss with such Guarantor its assessment, or
such Guarantor’s assessment, of the financial condition of Company or any
matter or fact relating to the business, operations or condition of
Company.  Each Guarantor has adequate
means to obtain information from Company on a continuing basis concerning the financial
condition of Company and its ability to perform its obligations under the Loan
Documents and the Lender Swap Agreements, and each Guarantor assumes the
responsibility for being and keeping informed of the financial condition of
Company and of all circumstances bearing upon the risk of nonpayment of the
Guarantied Obligations.

 

9.                                      Set
Off.  Upon the occurrence and during
the continuation of an Event of Default, in addition to any other rights any
Beneficiary may have under applicable law, if any amount shall at any time be
due and owing by a Guarantor to any Beneficiary under this Guaranty, such
Beneficiary is authorized at any time or from time to time, without notice to
any Person other than Administrative Agent (any such notice being expressly waived),
to set off and to appropriate and to apply any and all deposits (general or
special, including but not limited to indebtedness evidenced by certificates of
deposit, whether matured or unmatured) and any other indebtedness of such
Beneficiary owing to a Guarantor or for the credit or the account of such
Guarantor against and on account of the Guarantied Obligations and liabilities
of such Guarantor to any Beneficiary under this Guaranty.

 

10.                               Amendments
and Waivers.  No amendment,
modification, termination or waiver of any provision of this Guaranty, and no
consent to any departure by any Guarantor therefrom, shall in any event be
effective without the written concurrence of Guarantied Party and, in the case
of any such amendment or modification, Guarantors.  Any such waiver or

 

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consent shall be
effective only in the specific instance and for the specific purpose for which
it was given.

 

11.                               Miscellaneous.  It is not necessary for Beneficiaries to
inquire into the capacity or powers of any Guarantor or Company or the
officers, directors or any agents acting or purporting to act on behalf of any
of them.

 

The rights, powers and remedies given to Beneficiaries
by this Guaranty are cumulative and shall be in addition to and independent of
all rights, powers and remedies given to Beneficiaries by virtue of any statute
or rule of law or in any of the Loan Documents or the Lender Swap Agreements or
any agreement between one or more Guarantors and one or more Beneficiaries or
between Company and one or more Beneficiaries. 
Any forbearance or failure to exercise, and any delay by any Beneficiary
in exercising, any right, power or remedy hereunder shall not impair any such
right, power or remedy or be construed to be a waiver thereof, nor shall it
preclude the further exercise of any such right, power or remedy.

 

In case any provision in or obligation under this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

 

THIS GUARANTY AND THE RIGHTS AND
OBLIGATIONS OF GUARANTORS, GUARANTIED PARTY AND THE OTHER BENEFICIARIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CHOICE OF LAW RULES (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW OF THE STATE OF NEW YORK).

 

This Guaranty shall inure to the benefit of
Beneficiaries and their respective successors and permitted assigns under the
Credit Agreement or Lender Swap Agreement, as the case may be.

 

ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR
OR GUARANTIED PARTY ARISING OUT OF OR RELATING TO THIS GUARANTY MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW
YORK, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY GUARANTIED PARTY AND EACH
GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY
AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS GUARANTY.  Guarantied Party and each Guarantor agrees
that service of all process in any such proceeding in any such court may be
made by registered or certified mail, return receipt requested, to such party
at its address set forth below its signature hereto, such service being
acknowledged by such party to be sufficient for personal jurisdiction in any
action against such party in any such court and to be otherwise effective and
binding

 

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service in every
respect.  Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of any party hereto or any Beneficiary to bring proceedings against such
other party hereto or any Beneficiary in the courts of any other jurisdiction.

 

EACH GUARANTOR AND, BY ITS ACCEPTANCE
OF THE BENEFITS HEREOF, GUARANTIED PARTY EACH AGREES TO WAIVE ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS GUARANTY OR ANY DEALINGS BETWEEN THEM RELATED HERETO.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND
THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF,
GUARANTIED PARTY EACH (I) ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT FOR SUCH GUARANTOR AND GUARANTIED PARTY TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT SUCH GUARANTOR AND GUARANTIED PARTY HAVE ALREADY RELIED ON
THIS WAIVER IN ENTERING INTO THIS GUARANTY OR ACCEPTING THE BENEFITS THEREOF,
AS THE CASE MAY BE, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR
RELATED FUTURE DEALINGS, AND (II) FURTHER WARRANTS AND REPRESENTS THAT
EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.  THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY
A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS PROVISION AND EXECUTED
BY GUARANTIED PARTY AND EACH GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF THIS GUARANTY.  In the event of litigation, this Guaranty may
be filed as a written consent to a trial by the court.

 

12.                               Additional
Guarantors.  The initial Guarantor(s)
hereunder shall be such of the Subsidiaries of Company as are signatories
hereto on the date hereof.  From time to
time subsequent to the date hereof, Subsidiaries of Company may become parties
hereto, as additional Guarantors (each an “Additional
Guarantor”), by executing a counterpart of this Guaranty.  A form of such a counterpart is attached as
Exhibit A.  Upon delivery of any such
counterpart to Guarantied Party, notice of which is hereby waived by Guarantors,
each such Additional Guarantor shall be a Guarantor and shall be as fully a
party hereto as if such Additional Guarantor were an original signatory
hereof.  Each Guarantor expressly agrees
that its obligations arising hereunder shall not be affected or diminished by
the addition or release of any other Guarantor hereunder, nor by any election
of the Guarantied Party not to cause any Subsidiary of Company to become an
Additional Guarantor hereunder.  This
Guaranty shall be fully effective as to any Guarantor that is or becomes a
party hereto regardless of whether any other Person becomes or fails to become
or ceases to be a Guarantor hereunder.

 

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13.                               Counterparts;
Effectiveness.  This Guaranty and any
amendments, waivers, consents or supplements hereto or in connection herewith may
be executed in any number of counterparts and by the different parties hereto
in separate counterparts, each of which when so executed and delivered,
including by facsimile, shall be deemed to be an original for all purposes; but
all such counterparts together shall constitute but one and the same
instrument; signature pages may be detached from multiple separate counterparts
and attached to a single counterpart so that all signature pages are physically
attached to the same document.  This
Guaranty shall become effective upon the execution of a counterpart hereof by
each of the parties hereto and receipt by each Guarantor and the Guarantied
Party of written or telephonic notification of such execution and authorization
of delivery thereof.

 

14.                               Guarantied
Party as Agent.

 

(a)                                  Guarantied
Party has been appointed to act as Guarantied Party hereunder by Lenders.  Guarantied Party shall be obligated, and
shall have the right hereunder, to make demands, to give notices, to exercise
or refrain from exercising any rights, and to take or refrain from taking any
action, solely in accordance with this Guaranty and the Credit Agreement; provided
that Guarantied Party shall exercise, or refrain from exercising, any remedies
under or with respect to this Guaranty in accordance with the instructions of
(i) Requisite Lenders, or (ii) after payment in full of all
Obligations under the Credit Agreement and the other Loan Documents (other than
Unasserted Obligations), the cancellation or expiration of all Letters of
Credit and the termination of the Commitments, the holders of a majority of the
aggregate amount then due and payable (exclusive of expenses and similar
payments but including any early termination payments then due) under Lender
Swap Agreements (including Lender Swap Agreements that have been terminated)
(Requisite Lenders or, if applicable, such holders being referred to herein as “Requisite Obligees”).

 

(b)                                 Guarantied
Party shall at all times be the same Person that is Administrative Agent under
the Credit Agreement.  Written notice of
resignation by Administrative Agent pursuant to subsection 9.5 of the
Credit Agreement shall also constitute notice of resignation as Guarantied
Party under this Guaranty; and appointment of a successor Administrative Agent
pursuant to subsection 9.5 of the Credit Agreement shall also constitute
appointment of a successor Guarantied Party under this Guaranty.  Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a
successor Administrative Agent, that successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Guarantied Party under this Guaranty, and the
retiring Guarantied Party under this Guaranty shall promptly (i) transfer
to such successor Guarantied Party all sums held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Guarantied Party under this
Guaranty, and (ii) take such other actions as may be necessary or
appropriate in connection with the assignment to such successor Guarantied
Party of the rights created hereunder, whereupon such retiring Guarantied Party
shall be discharged from its duties and obligations under this Guaranty.  After any retiring Guarantied Party’s
resignation hereunder as Guarantied Party, the provisions of this Guaranty
shall inure to its benefits as to any actions taken or omitted to be taken by
it under this Guaranty while it was Guarantied Party hereunder.

 

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15.                               Notice
of Lender Swap Agreements. 
Guarantied Party shall not be deemed to have any duty whatsoever with
respect to any Swap Counterparty until it shall have received written notice in
form and substance satisfactory to Guarantied Party from Company, a Guarantor
or the Swap Counterparty as to the existence and terms of the applicable Lender
Swap Agreement.

 

16.                               Termination
and Discharge.

 

(a)                                  Upon
the latest of (i) payment in full in cash of the Guarantied Obligations (other
than in respect of any and all Unasserted Obligations) then owing to the
Guarantied Party or any other Person (including without limitation, any other
Beneficiary), (ii) the Revolving Loan Commitment Termination Date, to the
extent that there exists Revolving Loan Exposure, (iii) the Tranche B
Term Loan Maturity Date, to the extent that there exists Term Loan Exposure,
(iv) the termination or expiration of all Letters of Credit and (v) the
cancellation or termination of all Commitments, this Guaranty shall immediately
and automatically terminate, and the obligations (other than in respect of any
and all Unasserted Obligations) of the Guarantors hereunder with respect to the
Guarantied Party and any other Person (including without limitation, any
Beneficiary) shall automatically be discharged and released, in each case,
without any further action by the Guarantied Party or any other such Person.

 

(b)                                 While
the Credit Agreement is in effect, if (A) all or a majority of the stock of a
Guarantor or any of its successors in interest under this Guaranty shall be
sold or otherwise disposed of (including by merger or consolidation) in
accordance with the terms of the Loan Documents or (B) a Guarantor shall
liquidate or dissolve in accordance with the terms of the Loan Documents, then,
in each case the obligations of such Guarantor or such successor in interest,
as the case may be, hereunder shall automatically be discharged and released
without any further action by the Guarantied Party or any other Person
(including any other Beneficiary) effective as of the time of such sale,
merger, liquidation or dissolution.

 

(c)                                  Upon
any termination of the Guaranty or any discharge and release of a Guarantor’s
obligations hereunder, in each case as described in subsections (a) and (b) of
this Section 16, the Guarantied Party will, at the applicable Guarantor’s
expense, execute and deliver to such Guarantor such documents as such Guarantor
shall reasonably request to evidence such termination, discharge or release.

 

10

 

IN WITNESS WHEREOF,
each Guarantor and Guarantied Party have caused this Guaranty to be duly
executed and delivered by their respective officers thereunto duly authorized
as of the date first written above.

 

	
   

  	
  CLARK-SCHWEBEL HOLDING CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ira J.
  Krakower

  	
   

  
	
   

  	
  Title:
  Secretary

  
	
   

  	
  Address:

  	
  c/o Hexcel
  Corporation

  
	
   

  	
   

  	
  Two Stamford
  Plaza

  
	
   

  	
   

  	
  281 Tresser
  Blvd.

  
	
   

  	
   

  	
  Stamford, CT
  06901

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HEXCEL REINFORCEMENTS CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ira J.
  Krakower

  	
   

  
	
   

  	
  Title:
  Secretary

  
	
   

  	
  Address:

  	
  c/o Hexcel
  Corporation

  
	
   

  	
   

  	
  Two Stamford
  Plaza

  
	
   

  	
   

  	
  281 Tresser
  Blvd.

  
	
   

  	
   

  	
  Stamford, CT
  06901

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK TRUST COMPANY AMERICAS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Susan
  LeFevre

  	
   

  
	
   

  	
  Title:
  Director

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul O’Leary

  	
   

  
	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  60 Wall Street

  
	
   

  	
   

  	
  MS NYC60-4305

  
	
   

  	
   

  	
  New York, NY 10005

  
	
   

  	
   

  	
  Attn: Marguerite Sutton

  
	
   

  	
   

  	
  (212) 280-6150

  
							

 

 

EXHIBIT A

 

[FORM OF COUNTERPART FOR ADDITIONAL GUARANTORS]

 

This COUNTERPART (this “Counterpart”), dated               ,
20    , is delivered pursuant to Section 15 of the
Guaranty referred to below.  The
undersigned hereby agrees that this Counterpart may be attached to the
Guaranty, dated as of                           ,
20       (as it may be from time to time amended,
restated, modified or supplemented, the “Guaranty”;
capitalized terms used herein not otherwise defined herein shall have the
meanings ascribed therein), among the Guarantors named therein and                   ,
as Guarantied Party.  The undersigned, by
executing and delivering this Counterpart, hereby becomes an Additional
Guarantor under the Guaranty in accordance with Section 15 thereof and
agrees to be bound by all of the terms thereof.

 

IN WITNESS WHEREOF,
the undersigned has caused this Counterpart to be duly executed and delivered
by its officer thereunto duly authorized as of                             ,
20    .

 

	
   

  	
  [NAME OF ADDITIONAL GUARANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  [Title:

  	
   

  	
  ]

  
	
   

  	
  Address:<PAGE>

                                                                    Exhibit 10.1

                 [NAME OF RELEVANT NET ROYALTY INTEREST HOLDER]
                       (AS THE "RELEVANT INTEREST HOLDER")

                                       AND

                         DOCUMENT SECURITY SYSTEMS, INC.
                               (AS THE "ASSIGNEE")

                       SURRENDER AND ASSIGNMENT AGREEMENT

                                  relating to:

the surrender and assignment of certain interests in various intellectual
property rights

                         DOCUMENT SECURITY SYSTEMS, INC.
                               FIRST FEDERAL PLAZA
                                   SUITE 1525
                               28 EAST MAIN STREET
                                    ROCHESTER
                                 NEW YORK 14614

<PAGE>

                                TABLE OF CONTENTS

                                                                            PAGE

1.       Definitions and Interpretation........................................1

2.       Surrender and Assignment of Interests.................................4

3.       Representations, Warranties and Indemnities...........................5

4.       Further Assurance.....................................................7

5.       Non-Competition.......................................................7

6.       Legal Advice..........................................................8

7.       Confidentiality.......................................................8

8.       Governing Law.........................................................9

Schedule 1....................................................................10

Schedule 2....................................................................12

Schedule 3....................................................................14

Schedule 4....................................................................17

Schedule 5....................................................................19

                                      -i-
<PAGE>

THIS AGREEMENT is made

BETWEEN:

(1)      [NAME OF RELEVANT NET ROYALTY INTEREST HOLDER], of [INSERT RELEVANT
         ADDRESS DETAILS], (the "RELEVANT INTEREST HOLDER"); and

(2)      DOCUMENT SECURITY SYSTEMS, INC., a company incorporated in the State of
         New York whose principal place of business is at First Federal Plaza,
         Suite 1525, 28 East Main Street, Rochester, New York 14614, (the
         "ASSIGNEE").

WHEREAS:

(A)      The Relevant Interest Holder is the holder of certain Interests (as
         defined below) in the Relevant IPR (as defined below).

(B)      The Relevant Interest Holder is willing to and has agreed to surrender
         and assign to the Assignee and the Assignee wishes and has agreed to
         accept the surrender and assignment of all right, goodwill, title and
         interest in and to the Interests of the Relevant Interest Holder in
         accordance with the terms and conditions of this Agreement.

IT IS AGREED THAT:

1.       DEFINITIONS AND INTERPRETATION

1.1      In this Agreement the following words and expressions shall have the
         following meanings unless the context otherwise requires:

         1.1.1    "ASSIGNORS" shall mean the Estate, Mary Wicker, Thomas Wicker,
                  Christine Wicker, Kenneth Wicker, David Wicker and Michael
                  Caton;

         1.1.2    "DEED OF ASSIGNMENT" shall mean the deed of assignment in
                  respect of the Assignors' Interests in the Relevant IPR from
                  the Assignors to the Assignee;

         1.1.3    "ESTATE" shall mean collectively Ralph C. Wicker and the
                  Estate of Ralph C. Wicker;

         1.1.4    "FELKER GROUP" shall mean Thomas S. Felker, Cord Harms Zum
                  Spreckel, Nathaniel Whiteside (personally and as the assignee
                  of the Midwest Bank Note Company), T&T Associates, Inc. and
                  Midwest Bank Note Company;

         1.1.5    "FELKER IPR" shall mean those patents, patent applications and
                  other rights, details of which are included at Schedule 2 to
                  this Agreement;

         1.1.6    "FELKER IPR INTERESTS" shall mean the interests in the Felker
                  IPR owned by the Felker Group and the Estate;

         1.1.7    "FELKER ROYALTIES" shall mean the royalties or payments due or
                  payable in respect of the Felker IPR, or arising by reason of
                  an Interest in the Felker IPR;

                                       1
<PAGE>

         1.1.8    "FELKER ROYALTY INTEREST HOLDERS" shall mean the Felker Group
                  and the Wicker Patents Owners (except for Moore North America,
                  Inc.);

         1.1.9    "FELKER ROYALTY INTERESTS" shall mean the percentage interests
                  in the Felker Royalties owned by each of the Felker Royalty
                  Interest Holders respectively;

         1.1.10   "GROSS ROYALTIES" shall mean the gross royalties or payments
                  due or payable in respect of the Relevant IPR;

         1.1.11   "GROSS ROYALTY INTEREST HOLDERS" shall mean the Estate, SMW
                  Patent Corp., the Assignee, the Felker Group, Thomas Wicker,
                  Neal Eckhardt, Thomas A. Gruber, J. Casey Randall, Jerry
                  Poluch, Michael McDonough, Christine Wicker, Kenneth Wicker,
                  David Wicker and Michael Caton;

         1.1.12   "GROSS ROYALTY INTERESTS" shall mean the percentage interests
                  in the Gross Royalties owned by each of the Gross Royalty
                  Interest Holders respectively;

         1.1.13   "INTELLECTUAL PROPERTY RIGHTS" shall mean all copyrights
                  (including rights in computer software), moral rights, patents
                  and patent applications, rights in inventions (whether
                  patentable or not), utility models, trade marks (whether
                  registered or unregistered and including any goodwill in such
                  trade marks), service marks, trade names, business names,
                  internet domain names, e-mail address names, design rights
                  (whether registered or unregistered), database rights,
                  semiconductor topography rights, proprietary information
                  rights, rights in know how, rights in confidential information
                  and all other intellectual property rights, whether registered
                  or unregistered and including applications for any of the same
                  and all other similar or equivalent proprietary rights and
                  intellectual property rights as may exist anywhere in the
                  world;

         1.1.14   "INTEREST HOLDERS" shall mean the Estate, the Wicker Patent
                  Owners, the Felker Group, the Gross Royalty Interest Holders,
                  the Net Royalty Interest Holders, the Felker Royalty Interest
                  Holders, Michael Caton, SDS and the Wicker Family, further
                  details of which are set out at Schedule 4 to this Agreement;

         1.1.15   "INTERESTS" shall mean the various rights and interests held
                  by the Interest Holders variously in and to the Wicker
                  Patents, the Felker IPR, the Gross Royalties, the Net
                  Royalties and the Felker Royalties, as the case may be,
                  including, without limitation the Wicker Patents Interests,
                  the Felker IPR Interests, the Gross Royalty Interests, the Net
                  Royalty Interests, the Felker Royalty Interests, the SDS
                  Interest and the Wicker Family Interests, certain further
                  details of which are set out at Schedule 3 to this Agreement,
                  together with any additional rights, economic or otherwise,
                  whether beneficial interests, rights held in trust, rights
                  howsoever arising to grant licences and/or sub-licences or
                  otherwise benefit from licences and/or sub-licences, rights to
                  receive monies, or rights to monies arising from the use or
                  sale of any of the Relevant IPR and any other rights or
                  interests of the Interest Holders variously in and to the
                  Wicker Patents, the Felker IPR, the Gross Royalties, the Net
                  Royalties, the Felker Royalties, any other Relevant IPR and
                  any of the Wicker Patents Interests, the Felker IPR Interests,
                  the Gross Royalty Interests, the Net Royalty Interests, the
                  Felker Royalty Interests, the SDS Interest and/or the Wicker
                  Family Interests;

                                       2
<PAGE>

         1.1.16   "NET ROYALTIES" shall mean the net royalty payments or
                  payments due or payable in respect of the Relevant IPR;

         1.1.17   "NET ROYALTY INTEREST HOLDERS" shall mean the Estate, Thomas
                  O' Donaghue, Estate of Lawrence Decker, Charles Girthler, II,
                  Charles Girthler, III, Ralph Tipple, Robert Ford, CPA, Michael
                  O'Hara, Denise Shaw, Michael O'Donaghue, Richard Saur, Judy
                  Solaro Graves, Alexander Picozzi, Joseph Cameron, David
                  Scheftic, Patrick White(1), James Hartman, Esq., Jerome
                  Halbert, Tina and Anthony D'Angelo, Estate of Clark Snyder,
                  David Andolina, Electa Daniels, Robert Gardner, Raymond
                  McHargue, Loren Edward Osborn, Thomas Monks, Ann Young, Alex
                  Chiosa, Gerald Laraby, Bradley Harcourt, Douglas Dublin,
                  Richard Johnson, Richard Kintz, Gary Maneeley, Jill Warren,
                  Dorothy Gans Herrera and Nancy Dimmick;

         1.1.18   "NET ROYALTY INTERESTS" shall mean the percentage interests in
                  the Net Royalties owned by each of the Net Royalty Interest
                  Holders respectively;

         1.1.19   "RELEVANT IPR" shall mean any and all rights in and to the
                  Wicker Patents and the Felker IPR and all rights in know how,
                  trade secrets and other Intellectual Property Rights
                  associated with or relating to the actual or potential use of
                  the Wicker Patents and/or the Felker IPR;

         1.1.20   "SDS" shall mean Secured Document Systems, Inc., its
                  shareholders and Harry Gersey, and in each case, their
                  respective successors and assigns;

         1.1.21   "SDS INTEREST" shall mean all Interests of SDS including,
                  without limitation, all Interests of SDS not specifically
                  referred to within Schedule 3 to this Agreement in respect of
                  the Wicker Patents, the Felker IPR, the Gross Royalties, the
                  Net Royalties, the Felker Royalties and any other Relevant
                  IPR;

         1.1.22   "SHARES" shall mean the fully paid up issued common shares of
                  the Assignee;

         1.1.23   "SMW PATENT CORP." shall mean SMW Patent Corp. and its
                  shareholders and in each case, their respective successors and
                  assigns;

         1.1.24   "WICKER FAMILY" shall mean all living members of the family of
                  Ralph C. Wicker including, without limitation, Mary Wicker,
                  Thomas Wicker, Christine Wicker, Kenneth Wicker and David
                  Wicker;

         1.1.25   "WICKER FAMILY INTERESTS" shall mean all Interests of the
                  Wicker Family including, without limitation, Interests of the
                  Wicker Family not specifically referred to within Schedule 3
                  to this Agreement in respect of the Wicker Patents, the Felker
                  IPR, the Gross Royalties, the Net Royalties, the Felker
                  Royalties, and any other Relevant IPR;

-----------------------------
(1) The Net Royalty Interest of Patrick White has been previously acquired by
    the Assignee in July 2002.

                                       3
<PAGE>

         1.1.26   "WICKER PATENTS" shall mean all of those patents and patent
                  applications details of which are included at Schedule 1 to
                  this Agreement;

         1.1.27   "WICKER PATENTS INTERESTS" shall mean the percentage interests
                  in the Wicker Patents owned by each of the Wicker Patents
                  Owners respectively; and

         1.1.28   "WICKER PATENTS OWNERS" shall mean the Estate, SMW Patent
                  Corp., Thomas Wicker, Frederic T. Morelle, Moore North
                  America, Inc. and the Assignee.

2.       SURRENDER AND ASSIGNMENT OF INTERESTS

2.1      In consideration of the allotment of [INSERT RELEVANT NUMBER OF SHARES
         TO BE ALLOCATED TO THE RELEVANT INTEREST HOLDER] Shares to the Relevant
         Interest Holder, the receipt and sufficiency of which the Relevant
         Interest Holder hereby acknowledges, the Relevant Interest Holder
         agrees as set out at Clauses 2.2 through 2.5 below.

2.2      The Relevant Interest Holder HEREBY SURRENDERS AND ASSIGNS and shall
         procure the surrender and assignment of with full title guarantee to
         the Assignee or its nominee absolutely any and all of the Relevant
         Interest Holder's rights, title and interest in and to:

         2.2.1    the Net Royalty Interests, any other Relevant IPR and any
                  Interests; and

         2.2.2    all and any rights, privileges and advantages of the Relevant
                  Interest Holder in and to the Net Royalty Interests, any other
                  Relevant IPR and any Interests and any common law rights
                  attaching to the Net Royalty Interests, other Relevant IPR and
                  any Interests in accordance with the terms and conditions of
                  this Agreement.

2.3      This surrender and assignment referred to in Clause 2.2 above shall
         include the right for the Assignee to bring proceedings against any
         third party in respect of the Net Royalty Interests, other Relevant IPR
         and/or any Interests (including proceedings against any third party for
         infringement of the Net Royalty Interests, other Relevant IPR and/or
         any Interests, or for otherwise infringing the rights of the Relevant
         Interest Holder in the Net Royalty Interests, other Relevant IPR and/or
         Interests, whether such infringement occurred before or after the date
         of this Agreement) and so claim damages and other forms of relief
         therefore in its own name. The Relevant Interest Holder agrees and
         undertakes to provide, and procure the provision of, to the Assignee
         (at its request) all such assistance with any proceedings which may be
         brought by or against the Assignee against or by any third party in
         relation to the Net Royalty Interests, other Relevant IPR and/or
         Interests.

2.4      The Shares to be transferred to the Relevant Interest Holder pursuant
         to Clause 2.1 above shall only be issued to the Relevant Interest
         Holder once the following have occurred: (a) each member of the Felker
         Group except for Nathaniel Whiteside and the Midwest Bank Note Company
         has executed a copy of an agreement on substantially the same terms as
         this Agreement and the rights in the Interests of each member of the
         Felker Group have been assigned to the Assignee and such assignments
         have been completed and perfected, (b) SMW Patent Corp. and each of its
         shareholders has executed a copy of an agreement on substantially the
         same terms as this Agreement and the rights in the Interests of SMW
         Patent Corp. and each of its shareholders have been assigned to the
         Assignee and such assignments have been completed and perfected, (c)
         each Assignor has executed the Deed of Assignment and the rights in the
         Interests of each Assignor have been assigned to the Assignee and such
         assignments have been completed and perfected, and (d) at least fifty
         percent (50%) of the Interest Holders holding Net Royalty Interests and
         Gross Royalty Interests (other than members of the Felker Group, SMW
         Patent Corp. and its shareholders and the Assignors) shall have
         executed a copy of an agreement on substantially the same terms as this
         Agreement, and the rights in the Interests of such Interest Holders
         have been assigned to the Assignee and such assignment has been
         completed and perfected.

                                       4
<PAGE>

2.5      The Relevant Interest Holder hereby surrenders, releases and assigns to
         the Assignee all claims of any nature that the Relevant Interest Holder
         may have in respect of the Relevant IPR, the Interests, the Assignee,
         the Assignors, the Wicker Family and/or the Estate in any way and
         acknowledges and agrees that, following execution of this Agreement,
         the Relevant Interest Holder shall have no right or interest in respect
         of the Relevant IPR, the Interests, the Assignee (other than the Shares
         allotted under Clause 2.1 above), the Assignors, the Wicker Family
         and/or the Estate, or any rights arising out of any of them and that no
         person owes any money to the Relevant Interest Holder in respect of any
         earlier transaction or exploitation in connection with the Relevant
         IPR, the Interests, the Assignee, the Assignors, the Wicker Family
         and/or the Estate.

3.       REPRESENTATIONS, WARRANTIES AND INDEMNITIES

3.1      The Relevant Interest Holder hereby represents and warrants to the
         Assignee that:

         3.1.1    upon execution of this Agreement the Relevant Interest Holder
                  shall have surrendered, released and/or assigned, as the case
                  may be, to the Assignee all of the Relevant Interest Holder's
                  respective rights, title and interests in all of the Relevant
                  Interest Holder's Interests, the Relevant IPR and the Estate;

         3.1.2    so far as the Relevant Interest Holder is aware, the details
                  of the Interest Holders and the Interests included in this
                  Agreement are full, complete and accurate and are a full,
                  complete and accurate reflection of the ownership of all
                  Interests in any and all of the Relevant IPR, as the case may
                  be;

         3.1.3    the Relevant Interest Holder has not assigned, transferred,
                  licensed or sub-licensed any of the Relevant Interest Holder's
                  Interests to any third party or parties at any time or in any
                  way whatsoever;

         3.1.4    details in respect of all past, present and potential future
                  liabilities of which the Relevant Interest Holder is aware in
                  respect of the Relevant IPR, the Interests, the Estate, and/or
                  any third party claims which may reasonably be expected to
                  affect the Relevant Interest Holder's Interests in the
                  Relevant IPR are set out at Schedule 5 to this Agreement;

                                       5
<PAGE>

         3.1.5    the Relevant Interest Holder does not have any knowledge of
                  any party whose rights are not expressly referred to in this
                  Agreement, who has asserted, claimed or otherwise alleged to
                  the Relevant Interest Holder that such party has any interest
                  in any of the Relevant IPR, the Interests and/or the Estate;

         3.1.6    so far as the Relevant Interest Holder is aware, the list of
                  the Interest Holders identified herein is a complete list of
                  any Interest Holders in any of the Relevant IPR and/or the
                  Interests that fully, completely and accurately reflects the
                  present knowledge of the Relevant Interest Holder as to any
                  party who has asserted, claimed or otherwise alleged that such
                  party has any interest in any of the Relevant IPR and/or the
                  Interests; and

         3.1.7    the Interests of the Relevant Interest Holder are not subject
                  to any options, charges, mortgages, liens, security interests,
                  taxes, claims, liabilities or other encumbrances
                  ("ENCUMBRANCES") and will be assigned to the Assignee free and
                  clear of any and all such Encumbrances.

3.2      Subject to the provisions of Clause 3.3 below, the Relevant Interest
         Holder shall indemnify and keep indemnified the Assignee in respect of
         any loss or damage suffered or incurred by the Assignee resulting from
         or otherwise arising in respect of:

         3.2.1    a breach of any of the representations or warranties included
                  at Clause 3.1 above;

         3.2.2    any claim made or loss incurred at any time with respect to,
                  relating to or attributable to the period during which the
                  Relevant Interest Holder held any Interest in respect of the
                  Relevant IPR, including, without limitation, any claims based
                  upon any failure to pay licence or royalty fees or any claims
                  or loss incurred in respect of the liabilities referred to at
                  Clause 3.1.4 above; and/or

         3.2.3    any claim of any governmental taxing authority for taxes due
                  and upon which claim the governmental taxing authority claims
                  or imposes a lien or encumbrance upon the Relevant IPR (other
                  than taxes imposed on royalties accrued with respect to the
                  Relevant IPR on or prior to the date hereof but collected by
                  the Assignee after the date hereof).

3.3      The Relevant Interest Holder's obligation to indemnify the Assignee as
         set out at Clause 3.2 above shall be limited to an amount equal to
         one-half (1/2) the fair market value of the Shares delivered to the
         Relevant Interest Holder under Clause 2.1 above (which fair market
         value shall be determined as of the date a notice of claim is delivered
         with respect to such indemnification obligation), provided, however,
         that any obligation to indemnify the Assignee arising as a result of a
         breach of representations and warranties set forth in Clauses 3.1.1,
         3.1.3 and 3.1.7 and/or any obligation to indemnify the Assignee under
         Clause 3.2.3 shall be limited to the full fair market value of the
         Shares delivered to the Relevant Interest Holder under Clause 2.1 above
         (which fair market value shall be determined as of the date a notice of
         claim is delivered with respect to such indemnification obligation).

3.4      The Assignee may set off against any money or allotment of Shares that
         would otherwise be payable or owing by the Assignee to the Relevant
         Interest Holder under or pursuant to this Agreement and/or any other
         agreement or arrangement unless and until the Relevant Interest Holder
         has paid, satisfied or discharged all moneys, debts or liabilities due
         or owing to the Assignee pursuant to this Agreement including, without
         limitation, pursuant to Clause 3.2 above and has satisfied all of the
         Relevant Interest Holder's other obligations to the Assignee (however,
         no setoff shall be applied against the Relevant Interest Holder with
         respect to royalties accrued on or prior to the date hereof with
         respect to the Relevant IPR that are collected by the Assignee after
         the date hereof).

                                       6
<PAGE>

4.       FURTHER ASSURANCE

4.1      The Relevant Interest Holder hereby covenants that at the request of
         the Assignee at any time and from time to time the Relevant Interest
         Holder will execute and procure the execution of such deeds or
         documents and do and procure the doing of such acts and/or things as
         may be necessary or desirable:

         4.1.1    to give effect to the provisions of this Agreement; and

         4.1.2    to assign and transfer all right, title and interest in and to
                  the Relevant IPR to the Assignee.

4.2      The Relevant Interest Holder agrees and undertakes with the Assignee
         that, to the extent the Relevant Interest Holder has any information
         relevant to the enforcement or validity of any of the Relevant IPR, the
         Relevant Interest Holder will give the Assignee such assistance in any
         enforcement or validity proceedings as the Assignee may reasonably
         request.

5.       NON-COMPETITION

5.1      Following the date of execution of this Agreement:

         5.1.1    until the date that it two (2) years from the date hereof, the
                  Relevant Interest Holder shall not directly or indirectly,
                  engage or invest in, own, manage, operate, finance, control or
                  participate in ownership, management, operation, financing or
                  control of, be concerned or interested in, be employed by,
                  lend the Relevant Interest Holder's name to, lend credit to,
                  render services or advice to or serve as director, officer or
                  consultant to any business that is in competition or in
                  conflict with the Assignee, or is similar to the business of
                  the Assignee;

         5.1.2    until the date that it two (2) years from the date hereof, the
                  Relevant Interest Holder shall not directly or indirectly,
                  invest in, own, finance, control or participate in ownership,
                  utilisation, financing, or control of or be concerned or
                  interested in any Intellectual Property Rights which are
                  similar to any of the Relevant IPR, in any way whatsoever; and

         5.1.3    except as otherwise agreed by the Assignee in writing, in
                  consideration of the payments and other considerations to the
                  Relevant Interest Holder by the Assignee pursuant to this
                  Agreement and free of any additional obligations of the
                  Assignee to make additional payments to the Relevant Interest
                  Holder, the Relevant Interest Holder agrees to irrevocably
                  assign to the Assignee any and all inventions, software,
                  manuscripts, documentation, improvements, trade secrets or
                  other Intellectual Property Rights relating to the present
                  anti-theft and anti-fraud document security business of the
                  Assignee, (the "RIGHTS") developed by the Relevant Interest
                  Holder, either alone or jointly with others. The Relevant
                  Interest Holder agrees that all Rights shall be and remain the
                  exclusive property of the Assignee. The Relevant Interest
                  Holder hereby agrees to execute such assignments and other
                  documents as the Assignee may consider appropriate to vest all
                  right, title and interest in the Rights in the Assignee.

                                       7
<PAGE>

5.2      Following the date of execution of this Agreement, the Relevant
         Interest Holder agrees not to enter into any licensing or sub-licensing
         agreement, or other arrangement or agreement, with respect to any of
         the Relevant IPR or to amend or modify the terms of any existing
         licence or sub-licence agreement with respect to the Relevant IPR, or
         to hold itself out to the public as the owner of the Relevant IPR.
         Further, all future inquiries received by the Relevant Interest Holder
         from licensees or sub-licensees, or potential licensees or
         sub-licensees shall be forwarded to the Assignee.

5.3      The Relevant Interest Holder agrees that the restrictions set forth in
         this Clause 5 are reasonable in the circumstances of this Agreement and
         necessary to protect the Assignee's right, goodwill, title and interest
         in and to the Relevant IPR in accordance with the terms and conditions
         of this Agreement, the Agreement to Assign Certain Interests in
         Intellectual Property Rights between the Assignors and the Assignee and
         the Deed of Assignment. Further, the Relevant Interest Holder agrees
         that, if a court of competent jurisdiction determines that any portion
         of this Clause 5 is in violation of statute or public policy, only the
         portions of this Clause 5 that violate statute or public policy shall
         be stricken and all other portions of this Clause that do not violate
         statute or public policy shall continue in full force and effect. If
         any one or more provisions contained in this Clause 5 is determined by
         a court of competent jurisdiction to be excessively broad as to
         duration, scope, activity or subject, or is unreasonable or
         unenforceable under applicable laws, such provisions will be construed
         by limiting, reducing, modifying or amending them so as to be
         enforceable to the maximum extent permitted by law.

6.       LEGAL ADVICE

6.1      The Relevant Interest Holder hereby acknowledges and agrees that the
         Relevant Interest Holder has been advised by the Assignee to seek full
         and independent legal advice in respect of this Agreement and has
         sought such advice.

7.       CONFIDENTIALITY

7.1      The Relevant Interest Holder agrees that the Relevant Interest Holder
         shall keep this Agreement and the terms thereof confidential. The
         Relevant Interest Holder hereby acknowledges and understands that the
         Assignee is a public company which files reports under the Securities
         and Exchange Commission which become public knowledge and the Assignee
         may therefore be required to disclose this Agreement and the terms
         thereof in its filings with the Securities and Exchange Commission.

                                       8
<PAGE>

8.       GOVERNING LAW

8.1      This Agreement shall be governed by and construed in accordance with
         the laws of the State of New York. The Parties hereto submit to the
         exclusive jurisdiction of the federal and state Courts located in the
         Borough of Manhattan, City of New York. Each of the Parties hereto
         hereby waives any and all defenses based upon personal jurisdiction or
         venue, including defenses based on forum non conveniens. Further, the
         Parties agree that, in any dispute regarding an alleged breach of this
         Agreement, any finding by a court of competent jurisdiction of a
         material breach of this Agreement shall entitle the prevailing Party to
         recover its or their costs and fees, including attorneys' fees,
         incurred as a result of the other Party's material breach of this
         Agreement.

                                       9
<PAGE>

                                   SCHEDULE 1
                               THE WICKER PATENTS

<TABLE>
<CAPTION>
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
  DESCRIPTION OF       STATUS        APPLICATION/      DATE OF       DATE OF       REGISTERED      JURISDICTION
      PATENT                         REGISTRATION       GRANT        EXPIRY        PROPRIETOR
                                        NUMBER
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
<S>                 <C>            <C>               <C>          <C>            <C>             <C>
Counterfeit         Granted        US 5,018,767 -    28 May 1991  18 January     Ralph C.        USA
Protected Document                 A NUMBER OF                    2009           Wicker/ SMW
                                   CLAIMS OF THIS                                Patent Corp./
Process Patent                     PATENT HAVE                                   Thomas M.
                                   BEEN                                          Wicker/
                                   INVALIDATED.
                                                                                 Document
                                                                                 Security
                                                                                 Systems,
                                                                                 Inc.
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Anti-Photo-copying  Granted        US 5,735,547      April 7,     Jan. 3, 2017   Frederic T.     USA
Imaging                                              1998                        Morelle/
                                                                                 Ralph C.
Product & Process                                                                Wicker/
Patent                                                                           Document
                                                                                 Security
                                                                                 Systems, Inc.
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Counterfeit         Granted        CA 2,045,580      24 Nov 1999  16 January     Ralph C.        Canada
Protected Document                                                2010           Wicker

Process Patent
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Method of Making    Granted        EP 0455750        24 Nov 1999  16 January     Ralph C.        France
a Non Replicable                                                  2010           Wicker
Document
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Method of Making    Granted        EP 0455750        24 Nov 1999  16 January     Ralph C.        Austria
a Non Replicable                                                  2010           Wicker
Document                           E 186876
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Method of Making    Granted        EP 0455750        24 Nov 1999  16 January     Ralph C.        Liechtenstein
a Non Replicable                                                  2010           Wicker
Document
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Method of Making    Granted        EP 0455750        24 Nov 1999  16 January     Ralph C.        UK
a Non Replicable                                                  2010           Wicker
Document
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Method of Making    Granted        EP 0455750        24 Nov 1999  16 January     Ralph C.        Germany
a Non Replicable                                                  2010           Wicker
Document                           DE 69033362
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Method of Making    Granted        EP 0455750        24 Nov 1999  16 January     Ralph C.        Switzerland
a Non Replicable                                                  2010           Wicker
Document
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Method of Making    Granted        EP 0455750        24 Nov 1999  16 January     Ralph C.        The Netherlands
a Non Replicable                                                  2010           Wicker
Document
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
Security            Granted        US 5,707,083      13 January   22 August      Moore North     USA
Documents With                                       1998         2016           America,
Multi-Angled Voids                                                               Inc./Estate
                                                                                 of Ralph C.
                                                                                 Wicker/
                                                                                 Thomas Wicker/
                                                                                 Document
                                                                                 Security
                                                                                 Systems, Inc.
------------------- -------------- ----------------- ------------ -------------- --------------- -----------------
</TABLE>

                                       10
<PAGE>

                                   SCHEDULE 2
                                 THE FELKER IPR

Pursuant to an Assignment, Consultation and Technical Development Agreement
Dated 17 July 1991, Ralph C Wicker granted to the Felker Group:

1.       an assignment of any patent application corresponding to Patent
         Application Serial Nos. 07/298,020 and 07/473,903 filed in any foreign
         countries other than the USA, the UK, Canada, France, Germany, the
         Netherlands, Switzerland, Lichtenstein and Austria and any patent
         issuing therefrom and any divisions, renewals, continuations and
         continuations in part thereof. Details of the relevant patent
         applications and patent registrations are set out in the table below:

<TABLE>
<CAPTION>
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
  DESCRIPTION OF       STATUS          APPLICATION/       DATE OF     DATE OF        REGISTERED       JURISDICTION
      PATENT                           REGISTRATION        GRANT      EXPIRY         PROPRIETOR
                                          NUMBER
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
<S>                 <C>              <C>                <C>        <C>             <C>              <C>
Method of Making    Ceased/          AU 640,370B2       24 Nov     16 January      Thomas S.        Australia
a Non Replicable    Expired as of                       1999       2010            Felker (and
Document            04/09/97                                                       possibly
                                                                                   others)
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
Method of Making    Unknown          JP 4504543 T       24         16 January      Ralph C. Wicker  Japan
a Non Replicable                                        November   2010
Document                                                1999
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
Method of Making    Withdrawn as     EP 0938981 A3                                 Ralph Wicker
a Non Replicable    of 16/10/02
Document
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
Method of Making    Registered and   EP 0455750         24         16 January      Ralph Wicker     Belgium
a Non Replicable    in force                            November   2010            (confirmed up
Document                                                1999                       to 30 June
                                                                                   2004)
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
Method of Making    Registered and   EP 0455750         24         16 January      Ralph Wicker     Denmark
a Non Replicable    in force                            November   2010
Document                                                1999
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
Method of Making    Registered and   EP 0455750         24         16 January      Ralph Wicker     Italy
a Non Replicable    in force                            November   2010
Document                             67478 BE/2000      1999
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
Method of Making    Registered and   EP 0455750         24         16 January      Ralph Wicker     Luxembourg
a Non Replicable    in force                            November   2010            (confirmed up
Document                                                1999                       to 30 June
                                                                                   2004)
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
Method of Making    Registered and   EP 0455750         24         16 January      Ralph Wicker     Spain
a Non Replicable    in force                            November   2010
Document                             ES 2140377         1999
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
Method of Making    Registered and   EP 0455750         24         16 January      Ralph Wicker     Sweden
a Non Replicable    in force                            November   2010            (confirmed up
Document                                                1999                       to 30 June
                                                                                   2004)
------------------- ---------------- ------------------ ---------- --------------- ---------------- -------------------
</TABLE>

                                       11
<PAGE>

2.       a paid up exclusive licence to all of Ralph Wicker's rights in the
         Invention (an invention generally described as non-replicable document
         and method for making same in respect of which Patent Application
         Serial Nos. 07/298,020 (issued as US Patent 5,018,767) and 07/473,903
         and patent applications generally described as non-photographic patent
         application and PCT application US90/00221, (together with any
         divisions, continuations and continuations in part) have been filed),
         know how and improvements therein, including at least 84% of the
         Invention and patent rights described above for use in foreign
         countries where the Assignees have filed patent applications under the
         patent and patent applications described above; and

3.       a right to receive 10% of all royalties received on the manufacture
         of legal tender or currency produced in accordance with the Invention.

The Parties also agreed that where products are printed in their respective
countries, but are shipped for first use into the other party's country the
Parties are each entitled to their respective percentages of the royalty from
first use of the product in the country the product was shipped into.

                                       12
<PAGE>

                                   SCHEDULE 3
                                  THE INTERESTS

1.       WICKER PATENTS
The Wicker Patent Owners own the following Interests in the Wicker Patents:

<TABLE>
<CAPTION>
---------------------------------------------------------------- --------------------------------------------------------
WICKER PATENT OWNER                                              OWNERSHIP INTEREST IN WICKER PATENTS
---------------------------------------------------------------- --------------------------------------------------------
<S>                                                              <C>
The Estate                                                       69.5% of the `767 Patent and of all the foreign patents
---------------------------------------------------------------- --------------------------------------------------------
The Estate                                                       25% of the `083 Patent
---------------------------------------------------------------- --------------------------------------------------------
The Estate                                                       43% of the `547 Patent
---------------------------------------------------------------- --------------------------------------------------------
SMW Patent Corp.                                                 23.5% of the `767 Patent and of all the foreign patents
---------------------------------------------------------------- --------------------------------------------------------
SMW Patent Corp.                                                 50% of the `547 Patent
---------------------------------------------------------------- --------------------------------------------------------
Document Security Systems, Inc.                                  6.0% of the `767 Patent and of all the foreign  patents
                                                                 and of the `547 Patent
---------------------------------------------------------------- --------------------------------------------------------
Document Security Systems, Inc.                                  24% of the `083 Patent
---------------------------------------------------------------- --------------------------------------------------------
Thomas Wicker                                                    1.0% of all the Wicker Patents
---------------------------------------------------------------- --------------------------------------------------------
Moore North America, Inc.                                        50% of the `083 Patent
---------------------------------------------------------------- --------------------------------------------------------
</TABLE>

2.       FELKER IPR
The Felker Group and the Estate own an Interest of 100% of the Felker IPR.

3.       GROSS ROYALTY INTERESTS
The Gross Royalty Interest Holders own the following Gross Royalty Interests in
the Gross Royalties:

<TABLE>
<CAPTION>
---------------------------------------------------------------- --------------------------------------------------------
GROSS ROYALTY INTEREST HOLDER                                    GROSS ROYALTY INTEREST IN GROSS ROYALTIES
---------------------------------------------------------------- --------------------------------------------------------
<S>                                                              <C>
The Estate                                                       33.195015%
---------------------------------------------------------------- --------------------------------------------------------
SMW Patent Corp                                                  23.50000%
---------------------------------------------------------------- --------------------------------------------------------
Thomas Wicker                                                    8.00000%
---------------------------------------------------------------- --------------------------------------------------------
Document Security Systems, Inc.                                  6.00000%
---------------------------------------------------------------- --------------------------------------------------------
Felker Group                                                     10.00000%(2)
---------------------------------------------------------------- --------------------------------------------------------
Neal Eckhardt                                                    2.36300%
---------------------------------------------------------------- --------------------------------------------------------
Thomas A. Gruber                                                 1.53000%
---------------------------------------------------------------- --------------------------------------------------------
J. Casey Randall 0.38250%
---------------------------------------------------------------- --------------------------------------------------------
Jerry Poluch                                                     0.22935%
---------------------------------------------------------------- --------------------------------------------------------
Michael McDonough                                                0.80000%
---------------------------------------------------------------- --------------------------------------------------------
Christine Wicker                                                 6.00000%
---------------------------------------------------------------- --------------------------------------------------------
Kenneth Wicker                                                   6.00000%
---------------------------------------------------------------- --------------------------------------------------------
David Wicker                                                     6.00000%
---------------------------------------------------------------- --------------------------------------------------------
Michael Caton                                                    6.00000%
---------------------------------------------------------------- --------------------------------------------------------
</TABLE>

-----------------------------
(2) The Felker Group is entitled to 10% of all royalties received on the
    manufacture of legal tender or currency in respect of the Wicker Patents.

                                       13
<PAGE>

4.       NET ROYALTY INTERESTS
The Net Royalty Interest Holders own the following Net Royalty Interests in the
Net Royalties:

<TABLE>
<CAPTION>
---------------------------------------------------------------- --------------------------------------------------------
NET ROYALTY INTEREST HOLDER                                      NET ROYALTY INTEREST IN NET ROYALTIES
---------------------------------------------------------------- --------------------------------------------------------
<S>                                                              <C>
The Estate                                                       41.924%
---------------------------------------------------------------- --------------------------------------------------------
Thomas O' Donaghue                                               10.0000%
---------------------------------------------------------------- --------------------------------------------------------
Estate of Lawrence Decker                                         4.8850%
---------------------------------------------------------------- --------------------------------------------------------
Charles Girthler, II                                              3.9300%
---------------------------------------------------------------- --------------------------------------------------------
Charles Girthler, III                                             3.7600%
---------------------------------------------------------------- --------------------------------------------------------
Ralph Tipple                                                      3.7600%
---------------------------------------------------------------- --------------------------------------------------------
Robert Ford, CPA                                                  4.2500%
---------------------------------------------------------------- --------------------------------------------------------
Michael O'Hara                                                    1.0000%
---------------------------------------------------------------- --------------------------------------------------------
Denise Shaw                                                       0.0125%
---------------------------------------------------------------- --------------------------------------------------------
Michael O'Donaghue                                                1.0000%
---------------------------------------------------------------- --------------------------------------------------------
Richard Saur                                                      1.0000%
---------------------------------------------------------------- --------------------------------------------------------
Judy Solaro Graves                                                2.1250%
---------------------------------------------------------------- --------------------------------------------------------
Alexander Picozzi                                                 2.0000%
---------------------------------------------------------------- --------------------------------------------------------
Joseph Cameron                                                    0.7000%
---------------------------------------------------------------- --------------------------------------------------------
David Scheftic                                                    1.3125%
---------------------------------------------------------------- --------------------------------------------------------
Patrick White3                                                    4.1250%
---------------------------------------------------------------- --------------------------------------------------------
James Hartman, Esq.                                               1.0000%
---------------------------------------------------------------- --------------------------------------------------------
Jerome Halbert                                                    0.1250%
---------------------------------------------------------------- --------------------------------------------------------
Tina and Anthony D'Angelo                                         0.1250%
---------------------------------------------------------------- --------------------------------------------------------
Estate of Clark Snyder                                            0.5000%
---------------------------------------------------------------- --------------------------------------------------------
David Andolina                                                    0.1250%
---------------------------------------------------------------- --------------------------------------------------------
Electa Daniels                                                    0.1250%
---------------------------------------------------------------- --------------------------------------------------------
Robert Gardner                                                    0.5000%
---------------------------------------------------------------- --------------------------------------------------------
Raymond McHargue                                                  0.0100%
---------------------------------------------------------------- --------------------------------------------------------
Loren Edward Osborn                                               0.4000%
---------------------------------------------------------------- --------------------------------------------------------
Thomas Monks                                                      3.0000%
---------------------------------------------------------------- --------------------------------------------------------
Ann Young                                                         1.7500%
---------------------------------------------------------------- --------------------------------------------------------
Alex Chiosa                                                       3.0500%
---------------------------------------------------------------- --------------------------------------------------------
Gerald Laraby                                                     1.0000%
---------------------------------------------------------------- --------------------------------------------------------
Bradley Harcourt                                                  1.0000%
---------------------------------------------------------------- --------------------------------------------------------
Douglas Dublin                                                    1.0000%
---------------------------------------------------------------- --------------------------------------------------------
Richard Johnson                                                   0.1250%
---------------------------------------------------------------- --------------------------------------------------------
Richard Kintz                                                     0.0100%
---------------------------------------------------------------- --------------------------------------------------------
Gary Maneeley                                                     0.0250%
---------------------------------------------------------------- --------------------------------------------------------
Jill Warren                                                       1.0000%
---------------------------------------------------------------- --------------------------------------------------------
Dorothy Gans Herrera                                              0.0925%
---------------------------------------------------------------- --------------------------------------------------------
Nancy Dimmick                                                     0.0625%
---------------------------------------------------------------- --------------------------------------------------------
</TABLE>

-----------------------------
(3) The Net Royalty Interest of Patrick White has been previously acquired by
    the Assignee in July 2002.

                                       14
<PAGE>

5.       FELKER ROYALTY INTERESTS

The Felker Royalty Interest Holders own the following Felker Royalty Interests
in the Felker Royalties:

<TABLE>
<CAPTION>
---------------------------------------------------------------- --------------------------------------------------------
FELKER ROYALTY INTEREST HOLDER                                   FELKER ROYALTY INTEREST IN FELKER ROYALTIES
---------------------------------------------------------------- --------------------------------------------------------
<S>                                                              <C>
Felker Group                                                     98.5%
---------------------------------------------------------------- --------------------------------------------------------
Wicker Patents Owners (other than Moore North America, Inc.)      1.5%(4)
---------------------------------------------------------------- --------------------------------------------------------
</TABLE>

6.       SDS INTEREST
SDS owns an Interest of 100% of the SDS Interest.

7.       WICKER FAMILY INTERESTS
The Wicker Family own  an Interest of 100% of  the Wicker Family Interests.

(4) The Wicker Patent Owners are entitled to 1.5% of the purchase price (i.e.,
    production cost plus mark-up) of any documents produced in respect of the
    Felker IPR or one-half of any royalties paid to the Felker Group by third
    parties with respect thereto, whichever is less.

                                       15
<PAGE>

                                   SCHEDULE 4
                              THE INTEREST HOLDERS

1. THE WICKER PATENT OWNERS

The Estate
SMW Patent Corp.
Thomas Wicker
Document Security Systems, Inc.
Frederic T. Morelle
Moore North America, Inc.

2. THE FELKER GROUP

Thomas S. Felker
Cord Harms Zum Spreckel
Nathaniel Whiteside (personally, and as the assignee of the Midwest Bank Note
  Company)
T&T Associates, Inc.
Midwest Bank Note Company

3. THE GROSS ROYALTY INTEREST HOLDERS

The Estate
SMW Patent Corp.
Thomas Wicker
Document Security Systems, Inc.
Felker Group (c/o Thomas S. Felker)
Neal Eckhardt
Thomas A. Gruber
J. Casey Randall
Jerry Poluch
Michael Mc Donough
Christine Wicker
Kenneth Wicker
David Wicker
Michael Caton

                                       16
<PAGE>

4. THE NET ROYALTY INTEREST HOLDERS

The Estate
Thomas O' Donaghue
Estate of Lawrence Decker
Charles Girthler, II
Charles Girthler, III
Ralph Tipple
Robert Ford, CPA
Michael O'Hara
Denise Shaw
Michael O'Donaghue
Richard Saur
Judy Solaro Graves
Alexander Picozzi
Joseph Cameron
David Scheftic
Patrick White(5)
James Hartman, Esq.
Jerome Halbert
Tina and Anthony D'Angelo
Estate of Clark Snyder
David Andolina
Electa Daniels
Robert Gardner
Raymond McHargue
Loren Edward Osborn
Thomas Monks
Ann Young
Alex Chiosa
Gerald Laraby
Bradley Harcourt
Douglas Dublin
Richard Johnson
Richard Kintz
Gary Maneeley
Jill Warren
Dorothy Gans Herrera
Nancy Dimmick

5. THE FELKER ROYALTY INTEREST HOLDERS

The Felker Group (c/o Thomas S. Felker)
The Wicker Patents Owners (other than Moore North America, Inc.)

6. SDS

Secured Document Systems, Inc.

7. THE WICKER FAMILY

Thomas Wicker
Mary Wicker
Christine Wicker
Kenneth Wicker
David Wicker

-----------------------------
(5) The Net Royalty Interest of Patrick White has been previously acquired by
    the Assignee in July 2002.

                                       17
<PAGE>

                                   SCHEDULE 5
                                   LIABILITIES

If any, to be inserted by Relevant Interest Holder:

                                       18
<PAGE>

AS WITNESS the hands of the Parties or their duly authorised representatives the
day and year set forth below.

RELEVANT INTEREST HOLDER:

[NAME]

______________________________

DATE:  _______________________

ASSIGNEE:

DOCUMENT SECURITY SYSTEMS, INC.

By:______________________________
      Name:
      Title:

                                       20

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