Exhibit 10.1

CERTAIN PORTIONS OF THIS EXHIBIT HAVE BEEN AFFORDED CONFIDENTIAL TREATMENT UNDER
RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934.  THE OMITTED MATERIALS HAVE
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

AMENDMENT NO. 2 TO
DEVELOPMENT, SUPPLY AND SUBCONTRACTING AGREEMENT

This Amendment No. 2 to the Development, Supply and Subcontracting Agreement,
dated as of May 30, 2001, as amended pursuant to Amendment No. 1 dated January
4, 2006 (the “Agreement”), by and between American Bank Note Holographics, Inc.,
a Delaware corporation (“ABNH”), with its principal place of business at 2
Applegate Drive, Robbinsville, NJ 08691, and CFC International, Inc., a Delaware
corporation (“CFC”), with its principal place of business at 500 State Street,
Chicago Heights, IL 60411, is entered into as of July 26, 2006.  Capitalized
terms used herein and not otherwise defined shall have the meaning ascribed to
such terms in the Agreement.

WHEREAS, ABNH and CFC are parties to the Agreement, under which ABNH currently
purchases from CFC, and CFC sells to ABNH, the HoloMag Foils as described in
Amended Schedule A of the Agreement;

WHEREAS, ABNH has invented a solution (the “Invention”) to address electrostatic
discharge (“ESD”) involving discontinuities in a conductor such as the metal
layer of HoloMag, and CFC and ABNH have collaborated to incorporate the
Invention into the manufacturing process for HoloMag,  and all HoloMag products
incorporating the Invention shall be referred to by the parties as Generation 2
HoloMag or Generation 2 Product;

WHEREAS, in accordance with Section 20 of the Agreement, ABNH has notified CFC
of its requirement for changes in certain processes relating to the production
of its existing HoloMag product in order to produce the Generation 2 Product;
and ABNH and CFC have used their best efforts to cooperate on incorporating this
change into the current CFC structure, chemistries and processes;

WHEREAS, the parties are entering into this Amendment in order to give effect to
the obligation of CFC to produce the [*] for a Generation 2 Product, and the
obligation of ABNH to purchase such [*], in accordance with the terms of the
Agreement.

 

NOW, THEREFORE, the parties covenant and agree as follows:

1.0                                 The parties agree that the Generation 2
Product are HoloMag foils under the Agreement, and that the obligations of ABNH
and CFC under the Agreement with respect to HoloMag Foils shall apply to the
Generation 2 Product, except as otherwise provided herein.

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2.0                                 The Generation 2 Product will incorporate
[*].  The [*] will be implemented in one of three scenarios, at ABNH’s option:

·                  Scenario  1 — ABNH will [*].  CFC will [*], and ABNH will [*]
as described below.

·                  Scenario 2 — CFC will [*].  CFC will [*], and ABNH will [*]
as described below.

·                  Scenario 3 — CFC will [*].

CFC will use its reasonable commercial efforts to implement Scenario 1, 2 and 3
as promptly as possible. ABNH will provide certain information to CFC [*] upon
CFC’s request in order to assist CFC in the implementation of Scenarios 1, 2 and
3.  Notwithstanding the foregoing, CFC is responsible for delivering the
finished HoloMag Foils in accordance with the Amended Schedule A pursuant to
purchase orders submitted by ABNH to CFC for any of the three scenarios listed
above.

3.0                                 If Scenario 1 is implemented, then Section 1
of Amended Schedule A of the Agreement shall be amended to re-designate
paragraphs (f), (g), (h), (i) and (j) as paragraphs (h), (i), (j), (k) and (l),
and shall be further amended by including the following provision as new
paragraph (f):  “(f) CFC will supply ABNH with [*] (either [*] at ABNH’s
choice), and ABNH will [*]. CFC will continue to be responsible for supplying
the finished reels to ABNH in accordance with this Amended Schedule A.  CFC will
supply ABNH with [*] in accordance with the specifications set forth in Schedule
D to this Agreement.  ABNH will return the materials to CFC after [*] in
accordance with the specifications set forth in Schedule E to this Agreement. 
ABNH will notify CFC in the event any of the materials CFC supplies do not
conform to the specifications set forth in Schedule D to this Agreement.  CFC
will notify ABNH in the event any of the materials ABNH returns to CFC do not
conform to the specifications set forth in Schedule E to this Agreement.  [*]. 
Amended Schedule A shall be further amended by including the following provision
as new paragraph (g): “CFC will have to add an in-coming inspection step to the
existing process to examine and test any incoming materials from ABNH before
further [*] steps are performed.”

4.0                                 If Scenario 1 is implemented, then the
Agreement is hereby further amended by adding the following new Section 22
thereto:  “As CFC’s sole remedy, ABNH will pay CFC a price of $[*] per tape inch
for any material that CFC supplies to ABNH that conforms to the specifications
set forth in Schedule D of this Agreement, and that (i) ABNH does not return to
CFC after [*], (ii) ABNH returns to CFC and CFC rejects  upon receipt and
inspection at CFC before further processing only if CFC provides evidence
satisfactory to ABNH that such materials do not conform with the specifications
set forth in Schedule E of this Agreement,  or (iii)  ABNH returns to CFC and
CFC rejects after additional

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processing at CFC only if CFC provides evidence satisfactory to ABNH that such
materials do not conform with the specifications set forth in Schedule E of this
Agreement. Any material that CFC supplies to ABNH that does not conform to the
specifications set forth in Schedule D of this Agreement shall be quarantined by
ABNH, and upon ABNH providing CFC with evidence satisfactory to CFC that the
material does not comply with the specifications set forth in Schedule D, the
material may be destroyed or returned to CFC, without any payment to CFC. Any
material that ABNH supplies to CFC that CFC believes does not conform to the
specifications set forth in Schedule E of this Agreement shall be quarantined by
CFC, at which time CFC shall notify ABNH of its observations, and ABNH will
inspect the material at CFC and determine its disposition. Notwithstanding the
foregoing, if ABNH and CFC mutually agree after inspection at CFC that greater
than [*]%, or such other percentage as may be determined in accordance with
Section 9.0 below, of the surface area of a bulk roll ([*] in length and [*]
nominal width) is determined to not be in conformance with the specifications in
Schedule E then, at ABNH’s sole determination, the roll will either be scrapped
at CFC and ABNH will pay $[*] per tape inch for the roll or the roll will be
processed at CFC and ABNH will pay the price per Amendment No. 2 Schedule B for
all good finished reels and [*]% of that price for all finished reels which were
rejected as a result of ABNH’s processing.”  Reference procedure #[*] and form
#[*] for detailed instructions in preparation of a discrepant material report
and form to be utilized in case of rejection of materials.

5.0                                 If Scenario 2 is implemented, then Section 1
of Amended Schedule A of the Agreement shall be amended to re-designate
paragraphs (f), (g), (h), (i) and (j) as paragraphs (h), (i), (j), (k) and (l),
and shall be further amended by including the following provision as new
paragraph (f):  “(f) CFC will [*].  CFC will supply ABNH with [*], and ABNH will
[*]. CFC will continue to be responsible for supplying the finished reels to
ABNH in accordance with this Amended Schedule A.  CFC will supply ABNH with
materials in accordance with the specifications set forth in Schedule F to this
Agreement.  ABNH will return the materials to CFC after [*] in accordance with
the specifications set forth in Schedule G to this Agreement.  ABNH will notify
and provide evidence satisfactory to CFC in the event any of the materials CFC
supplies do not conform to the specifications set forth in Schedule F to this
Agreement.  CFC will notify ABNH in the event any of the materials ABNH returns
to CFC do not conform to the specifications set forth in Schedule G to this
Agreement. [*].”  Amended Schedule A shall be further amended by including the
following provision as new paragraph (g): “CFC will have to add an in-coming
inspection step to the existing process to examine and test any incoming
materials from ABNH before further [*] steps are performed.”

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6.0                                 If Scenario 2 is implemented, then the
Agreement is hereby further amended by adding the following new Section 22
thereto:  “As CFC’s sole remedy, ABNH will pay CFC a price of $[*] per tape inch
for any material that CFC supplies to ABNH that conforms to the specifications
set forth in Schedule F of this Agreement, and that (i) ABNH does not return to
CFC after [*], (ii) ABNH returns to CFC and CFC rejects  upon receipt and
inspection at CFC before further processing only if CFC provides evidence
satisfactory to ABNH that such materials do not conform with the specifications
set forth in Schedule G of this Agreement,  or (iii)  ABNH returns to CFC and
CFC rejects after additional processing at CFC only if CFC provides evidence
satisfactory to ABNH that such materials do not conform with the specifications
set forth in Schedule G of this Agreement. Any material that CFC supplies to
ABNH that does not conform to the specifications set forth in Schedule F of this
Agreement shall be quarantined by ABNH, and upon ABNH providing CFC with
evidence satisfactory to CFC that the material does not comply with the
specifications set forth in Schedule F, the material may be destroyed or
returned to CFC, without any payment to CFC. Any material that ABNH supplies to
CFC that CFC believes does not conform to the specifications set forth in
Schedule G of this Agreement shall be quarantined by CFC, at which time CFC
shall notify ABNH of its observations, and ABNH will inspect the material at CFC
and determine its disposition.”

7.0                                 If Scenario 3 is implemented, then Section 1
of Amended Schedule A of the Agreement shall be amended to re-designate
paragraphs (f), (g), (h), (i) and (j) as paragraphs (h), (i), (j), (k) and (l),
and shall be further amended by including the following provision as new
paragraph (f):  “(f) CFC will [*] specified by ABNH in consultation with CFC.
Amended Schedule A shall be further amended by including the following provision
as new paragraph (g):  “CFC will [*].”  Amended Schedule A shall be further
amended by inserting the provisions of Schedule F, Section 3.12 into Schedule A
as a new Section 2(e).

8.0                                 (a) The Agreement is hereby further amended
by deleting Amended Schedules B and B1 of the Agreement and replacing them with
the attached Amended Schedules B and B1.

(b) The Agreement is hereby further amended by adding the attached Schedules D,
E, F and G hereto to the Agreement as new Schedules D, E, F and G.

9.0                                 ABNH and CFC agree to continue to work
closely together and collaborate on improvements to the production process and
the process of capturing relevant production and quality data which will be used
to review the procedures and specifications in Section 4.0 above and Schedules
D, E, F and G attached hereto within three to six months of the date of this
Amendment. With respect to Section 4.0 above, ABNH and CFC agree to review the
data from each [*] during the six-

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month period beginning with the date of this Amendment or initial production run
whichever is later to determine the percentage of surface area [*] in Schedule E
[*].

10.0                           CFC acknowledges that ABNH disclosed to CFC its
Invention, and a method of implementing the Invention through [*] as ABNH
Proprietary Information, and CFC and ABNH have collaborated to implement such
invention in the manufacturing process for HoloMag.  ABNH will provide certain
information to CFC regarding [*] upon CFC’s request in order to assist CFC in
the implementation of Scenarios 1, 2 and 3.    CFC shall not use [*] for any
applications that would infringe current enforceable unexpired ABNH patent
numbers [*] other than for products for ABNH.  ABNH has filed patent
applications on the Invention.  ABNH hereby grants to CFC a perpetual,
non-exclusive, irrevocable, limited, non-sublicensable, royalty-free license to
ABNH’s intellectual property rights related to the Invention including any
patents that ABNH may be issued on the Invention.  The aforementioned license
shall be limited to only those applications of CFC that are not competitive with
any product or market that ABNH participates in as of July 2006, and such
license shall specifically exclude any applications involving holograms on
financial transaction cards.  CFC hereby grants to ABNH a perpetual, exclusive,
irrevocable, unrestricted, non-sublicensable, royalty-free license to CFC’s
intellectual property rights related to any improvements CFC makes to the
Invention, including any patents that may be obtained by CFC thereon.  The
aforementioned license to improvements made by CFC shall be limited to only
those applications of ABNH that are not competitive with any product or market
that CFC participates in as of July 2006, but specifically includes all
applications which ABNH participates in as of July 2006.

11.0                           Governing Law. This Amendment shall be governed
by and construed and enforced in accordance with the internal laws of the State
of New York, without regard to principles of conflicts of laws.

12.0                           Counterparts. This Amendment may be executed in
counterparts and all counterparts shall constitute one document, notwithstanding
that all the parties may not be signatories to the same counterpart.

13.0                           Entire Agreement. Except as expressly provided
herein, the Agreement shall remain unchanged and in full force and effect.

[Signature page follows]

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IN WITNESS WHEREOF, the undersigned have hereby executed this Amendment as of
the date first set forth above.

AMERICAN BANK NOTE HOLOGRAPHICS, INC.

 

By:

/s/ Kenneth Traub

 

 

Name: Kenneth Traub

 

 

Title:President and CEO

 

 

 

 

 

 

 

 

 

 

CFC INTERNATIONAL, INC.

 

By:

/s/ Dennis Lakomy

 

 

Name: Dennis Lakomy

 

 

Title: CFO

 

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Amendment No. 2 Schedule B

If Scenario 1 is implemented:

 

½”

 

1/3”

 

 

Price/TI

 

Price/Roll

 

Price/TI

 

Price/Roll

HiCo Silver

 

[*]

 

[*]

 

[*]

 

[*]

HiCo Tinted

 

[*]

 

[*]

 

[*]

 

[*]

LoCo Silver

 

[*]

 

[*]

 

[*]

 

[*]

LoCo Tinted

 

[*]

 

[*]

 

[*]

 

[*]

 

If Scenario 2 is implemented:

 

½”

 

1/3”

 

 

Price/TI

 

Price/Roll

 

Price/TI

 

Price/Roll

HiCo Silver

 

[*]

 

[*]

 

[*]

 

[*]

HiCo Tinted

 

[*]

 

[*]

 

[*]

 

[*]

LoCo Silver

 

[*]

 

[*]

 

[*]

 

[*]

LoCo Tinted

 

[*]

 

[*]

 

[*]

 

[*]

 

If Scenario 3 is implemented:

 

½”

 

1/3”

 

 

Price/TI

 

Price/Roll

 

Price/TI

 

Price/Roll

HiCo Silver

 

[*]

 

[*]

 

[*]

 

[*]

HiCo Tinted

 

[*]

 

[*]

 

[*]

 

[*]

LoCo Silver

 

[*]

 

[*]

 

[*]

 

[*]

LoCo Tinted

 

[*]

 

[*]

 

[*]

 

[*]

 

The above prices apply to all orders.  Minimum order size is [*] reels for ½
inch or [*] reels for 1/3 inch.  The above four different types of magnetic
cannot be combined to arrive at the minimum order size.  Multiple ABNH customers
or different holographic patterns cannot be combined.  Different label copy
positions can be combined to arrive at the minimum.

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Amendment No. 2 Schedule B 1

If Scenario 1 is implemented and ABNH [*]:

 

1/2”

 

1/3”

 

 

Price/TI

 

Price/Roll

 

Price/TI

 

Price/Roll

HiCo Silver

 

[*]

 

[*]

 

[*]

 

[*]

HiCo Tinted

 

[*]

 

[*]

 

[*]

 

[*]

LoCo Silver

 

[*]

 

[*]

 

[*]

 

[*]

LoCo Tinted

 

[*]

 

[*]

 

[*]

 

[*]

 

ABNH  [*], CFC [*].  CFC [*].  ABNH may implement the arrangement in this
Amendment No. 2 Schedule B1 at any time for any proportion of its requirements
and will notify CFC accordingly.

The above prices apply to all orders.  The minimum order size is [*] reels for ½
inch wide or [*] reels for 1/3 inch wide.  The above four different types of
magnetic cannot be combined to arrive at the minimum order size.  Multiple ABNH
customers or different holographic images cannot be combined.  Different label
copy positions can be combined to arrive at the minimum order size.

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SCHEDULE D

(Scenario 1)

[*]

1.

SCOPE — This specification covers the requirements for the following attributes:

 

 

 

1.1

 

Functional properties.

 

1.2

 

Cosmetic properties.

 

1.3

 

Packaging and labeling.

 

 

 

 

2.

DESCRIPTION — [*]

 

 

3.

FUNCTIONAL PROPERTIES:

 

 

 

3.1

 

[*]

 

3.2

 

[*]

 

3.3

 

[*]

 

3.4

 

[*]

 

3.5

 

[*]

 

3.6

 

[*]

 

3.7

 

[*]

 

3.8

 

[*]

 

3.9

 

[*]

 

3.10

 

[*]

 

3.11

 

[*]

 

 

 

 

4.

PACKAGING AND LABELING:

 

 

 

4.1

 

[*]

 

4.2

 

[*]

 

4.3

 

[*]

 

4.4

 

[*]

 

4.5

 

[*]

 

4.6

 

[*]

 

4.7

 

[*]

 

 

 

 

5.

WARRANTY:

 

CFC will make every reasonable effort to generate materials that the [*]
conforms to the specifications set forth in this Schedule D. CFC agrees to
replace at its own expense any such material not in conformance with such
specifications.

 

 

 

 

 

 

 

 

 

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SCHEDULE E

(Scenario 1)

SPECIFICATIONS for [*]

 

1.0

 

Scope

 

 

 

 

1.1

 

The specifications listed herein have been established for the purpose of
outlining the parameters of acceptance for the [*] processed by ABNH and
returned to CFC as a component and for further conversion into a Generation 2
HoloMagTM.

 

 

 

 

2.0

Processes

 

 

 

2.1

 

[*]

 

 

 

 

3.0

[*]

 

 

 

 

 

 

 

3.1

 

[*]

 

3.2

 

[*]

 

3.3

 

[*]

 

3.4

 

[*]

 

3.5

 

[*]

 

3.6

 

[*]

 

3.7

 

[*]

 

3.8

 

[*]

 

 

 

 

4.0

[*]

 

 

 

 

 

 

 

4.1

 

[*]

 

4.2

 

[*]

 

4.3

 

[*]

 

 

 

 

5.0

 

 

[*]

 

 

 

 

 

5.1

 

[*]

 

5.2

 

[*]

 

 

 

 

 

 

 

 

 

 

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5.3

 

[*]

 

 

 

 

 

5.4

 

[*]

 

 

 

 

 

5.5

 

[*]

 

 

 

 

 

5.6

 

[*]

 

 

 

 

 

5.7

 

[*]

 

 

 

 

6.0

[*]

 

 

 

 

 

 

7.0

 

 

WARRANTY:

 

 

ABNH will make every reasonable effort to generate materials that the [*]
conforms to the specifications set forth in this Schedule E.

 

 

 

 

 

 

 

 

 

 

 

 

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SCHEDULE F

 

(Scenario 2)

[*]

 

1.

SCOPE — This specification covers the requirements for the following attributes:

 

 

 

 

 

1.1

 

Functional properties.

 

1.2

 

Cosmetic properties.

 

1.3

 

Packaging and labeling.

 

 

 

 

2.

DESCRIPTION — [*]

 

 

 

 

3.

FUNCTIONAL PROPERTIES:

 

 

 

 

 

3.1

 

[*]

 

3.2

 

[*]

 

3.3

 

[*]

 

3.4

 

[*]

 

3.5

 

[*]

 

3.6

 

[*]

 

3.7

 

[*]

 

3.8

 

[*]

 

3.9

 

[*]

 

3.10

 

[*]

 

3.11

 

[*]

 

3.12

 

[*]

 

 

 

 

4.

PACKAGING AND LABELING:

 

 

 

 

 

4.1

 

[*]

 

4.2

 

[*]

 

4.3

 

[*]

 

4.4

 

[*]

 

4.5

 

[*]

 

4.6

 

[*]

 

4.7

 

[*]

 

 

 

 

5.

 

 

WARRANTY:

 

 

CFC will make every reasonable effort to generate materials that the [*]
material conforms to the specifications set forth in this Schedule F. CFC agrees
to replace at its own expense any such material not in conformance with such
specifications.

 

 

 

 

 

 

 

 

 

 

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SCHEDULE G

(Scenario 2)

SPECIFICATIONS for [*]

1.0

Scope

 

 

 

 

1.1

The specifications listed herein have been established for the purpose of
outlining the parameters of acceptance for the [*] processed by ABNH and
returned to CFC as a component and for further conversion into a Generation 2
HoloMagTM.

 

 

 

2.0

Processes

 

 

 

 

2.1

[*]

3.0

 

[*]

 

3.1

[*]

 

3.2

[*]

 

3.3

[*]

 

3.4

[*]

 

3.5

[*]

 

3.6

[*]

 

3.7

[*]

 

3.8

[*]

4.0

 

[*]

 

4.1

[*]

 

4.2

[*]

5.0

 

[*]

 

5.1

[*]

 

5.2

[*]

 

 

 

 

 

 

 

 

 

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5.3

[*]

 

 

 

 

5.4

[*]

 

 

 

 

5.5

[*]

 

 

 

 

5.6

[*]

 

 

 

 

5.7

[*]

 

 

 

6.0

[*]

 

 

 

 

 

6.1

[*]

 

 

 

7.0

 

WARRANTY:

 

 

ABNH will make every reasonable effort to generate materials that the [*]
conforms to the specifications set forth in this Schedule G.

 

 

 

 

 

 

 

 

 

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