Exhibit 10.18

HANKIN MANAGEMENT COMPANY

AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

LEASE AGREEMENT

      THIS AGREEMENT OF LEASE, made effective as of the 1st day of August 2002,
(the “Effective Date”) by and between MARK HANKIN and HANMAR ASSOCIATES, MLP, a
Pennsylvania limited partnership, as tenants in common, P.O. Box 26767, Elkins
Park, PA 19027 (“Lessor”) and AMERICAN BANK NOTE HOLOGRAPHICS, INC., a Delaware
corporation, 1448 County Line Road, Huntingdon Valley, PA 19006, (“Lessee”).

      Lessor and Lessee, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, and intending to be legally bound hereby agree as follows:

      1.     Lease and Premises.

      A.     Definitions

      (i) In the event Lessee leases only a portion of a building which is not a
condominium (the “Building”), whether or not any other portion of the Building,
not leased to Lessee, is then occupied by other tenants of Lessor:

        (a)     The term “Premises” shall be defined to include the interior
space and surface of the adjacent demising walls and the exterior walls adjacent
to the Premises leased to Lessee as shown on plan attached hereto as
Exhibit “B”, and all Systems (as hereinafter defined), equipment, and other
apparatus (including exterior stairs) appurtenant thereto or used in connection
therewith, together with (x) the non-exclusive right to park on the lot on which
the Building is located (the “Lot”); (y) full right of ingress and egress
through and across the exterior portions of the Lot to and from the Premises;
and (z) the non-exclusive right to use Common Elements (as hereinafter defined);
and           (b)     “Common Elements” shall be defined to include, but not be
limited to, driveways, sidewalks, non-structural components of the Building,
gutters and downspouts attached to the Building, surface of exterior walls of
the Building, landscaped areas, elevators, common hallways, common vestibules
and stairwells, if any situated in the Building or on the Lot.

      (ii)     In the event that Lessee leases an entire Building which is not a
condominium, the Term “Premises” shall mean the entire Building including all
walls, floors, structural (as hereinafter defined) and non-structural elements,
roof, all Systems and equipment situated therein and thereon, and the entire
Lot, including but not limited to, all paved areas and all land included on the
Lot, under and subject to any and all easements and rights-of-ways affecting the
Lot.

      (iii) “Pro Rata Basis” means a fraction, the numerator of which is the
total square footage of the Premises, Unit H and the denominator of which is the
total square footage of all occupied sections in the Building, which shall be a
maximum of 30,000 square feet, unless otherwise provided herein. In the case of
lease of an entire Building, the Pro Rata Basis shall be One Hundred (100%)
percent. In the case of lease of a condominium Unit or Units, the Pro Rata Basis
shall be a fraction, the numerator of which is the Percentage Interest of the
Premises and the denominator of which is the Percentage Interests of all
occupied Units in the condominium. In the case of limited Common Elements, Pro
Rata Basis shall be determined by the above formulae, substituting Units using
the particular limited Common Element in the denominator.

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

      (iv) A “Unit”: for non condominium Premises, only, is a portion of a
Building separated by demising walls, and for condominium Premises is the Unit
as defined in the applicable recorded Declaration of Condominium.

      (v) A “condominium” exists where the Building or Lot is the subject of a
Recorded Declaration of Condominium.

      B.     Lessor hereby demises and leases to Lessee and Lessee hereby hires
from Lessor that certain Premises situate in Lower Moreland Township, Montgomery
County, Pennsylvania, known as Condominium Unit “H”, 1448 County Line Road,
Huntingdon Valley, PA, including the Building containing approximately
30,000 sq. ft., more or less, and the other improvements constructed on the Lot.

      C.     The parties hereby mutually covenant and agree that the Premises is
accepted in its existing condition as of the date of execution of this Lease
subject to any conditions to the contrary in Exhibit “A” attached. Lessee
warrants that, prior to the execution of this Lease, it has completely inspected
the Premises and accepts same in the condition existing at the date of execution
thereof, except as otherwise provided in Exhibit “A”.

      D.     The Premises shall be occupied and used for light manufacturing and
related offices in accordance with applicable laws, ordinances and regulations.
Under no circumstances whatsoever may the Premises be used in Annual Rent,
installments on account of the annual Taxes and annual insurance premium whole
or in part for personal, family, residential or household purposes.

      2.     Term.

      A.     The term of this Lease shall be five (5) years beginning the
earlier of:

      (i) August 1, 2002: and terminating July 31, 2007;

      B.     For the purposes of this Lease the date of commencement of the term
of the Lease shall be termed “Lease Commencement Date”. For the purposes of this
Lease the date of expiration of the latest term, Renewal Term (as hereinafter
defined) or Extension Term (as hereinafter defined) of this Lease shall be
termed the “Lease Termination Date”.

      C.     If Lessee remains in possession of the Premises, (including failure
to restore the same to the condition required hereunder being deemed to
constitute possession of the Premises), after Lessor has cancelled the term of
the Lease, or Lessor has exercised its option under Article 25A(ii), infra,
after the Lease Termination Date, (a “Holding Over”), without the prior written
consent of Lessor, such Holding Over shall create a Holding Over tenancy from
month to month, commencing on the day after the Lease Termination Date (the
“Holdover Term”), with respect to the Premises on all of the same terms and
conditions as are in effect on the last day of the preceding term, except that
the monthly installment of Minimum Annual Rent payable during each Holdover Term
shall be increased to an amount equal to three times the monthly installment of
Minimum Annual Rent in effect on the last day of the preceding term (the
“Holdover Rent”). Notwithstanding anything set forth to the contrary, Lessor may
cancel the Holdover Term at any time within such Holding Over tenancy upon five
(5) days prior notice to Lessee, but such cancellation notwithstanding, Holdover
Rent shall accrue and shall be payable by Lessee until such time (“Restoration
Date”) as Lessee vacates fully the Premises and restores the same to the
condition required hereunder.

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

      D.     Lessor shall not be liable to Lessee in any respect in the event
that Lessor is unable to deliver possession of the Premises to Lessee, provided
Lessee shall not be required to pay rent and additional rent until such time as
Lessor delivers possession and during the period that Lessor is unable to give
possession, all rights and remedies of both parties hereunder shall be
suspended, and if Lessor is unable for any reason to give possession of the
Premises within thirty (30) days of Lessee’s written demand therefore, following
commencement of the term hereof, providing Lessee has not occupied any portion
of the Premises, Lessor shall have the option, by notice to Lessee, to cancel
this Lease Agreement and receive return of any prepaid rents and security
deposit in full and final settlement of any and all claims against Lessor,
whereupon this lease shall become null and void.

      E.     For purposes hereof, the term “Lease Year” shall mean each
consecutive period of twelve (12) months commencing on the Lease Commencement
Date (or the first day of the month after the Lease Commencement Date, if the
Lease Commencement Date occurs on any day other than the first day of the month)
and each yearly anniversary of such date during the term hereof, any Extension
Term, and any Renewal term.

      3.     Minimum Annual Rent.

      The minimum annual rent (“Minimum Annual Rent”) payable by Lessee to
Lessor shall be One Hundred Forty-Four Thousand and 00/100 Dollars ($144,000.00)
per Lease Year, lawful money of the United States of America, payable in monthly
installments in advance during the said term of this Lease in sums of Twelve
Thousand and 00/100 Dollars ($12,000.00) on the first day of each month, rent to
begin from the Lease Commencement Date, the first installment to be paid at the
time of signing this Lease. The first installment of Minimum Annual Rent to be
made during the occupancy of the Premises shall be adjusted to pro rate a
partial month of occupancy, if any, at the inception of this Lease at the rate
of Minimum Annual Rent in effect during the first Lease Year.

      4.     Additional Rent.

      As additional rent (“Additional Rent”), hereunder, Lessee shall pay to
Lessor the following on or before the date such additional payments shall become
due (which shall be ten (10) days after the date that any bill is posted in the
United States mail):

      A.     Non-Compliance Amounts. All sums which may become due by reason of
the failure of Lessee to comply with any of the terms, covenants and conditions
of this Lease to be kept and observed by Lessee, and any and all damages and
costs and expenses (including without limitation thereto, reasonable attorney’s
fees) which Lessor may suffer or incur by reason of any default of Lessee and
any damages to the Premises caused by any act or omission of Lessee together
with interest to the date of payment at a rate per annum equal to five hundred
(500) basis points above the prime interest rate (Prime + 5%) of Pennsylvania
Business Bank, Philadelphia, Pennsylvania, or its successor, in effect during
the period said payment is due or, if no successor, the prime interest as
reported in the Wall Street Journal newspaper during the period said payment is
due (“Wall Street Journal Prime”).

      B.     Taxes and Insurance Escrows. All “Taxes” (as hereinafter defined),
on a Pro-Rata Basis, assessed or imposed upon, or allocable to the Premises
and/or the Lot of which the Premises is a part during the term of this Lease and
any Extension Term, Renewal Term or Holdover Term. The building is located on
Tax Parcel #41-00-02426-00-8. This Tax Parcel is only for this particular
building.

      By Lease Agreement dated August 13, 1984, as amended and supplemented by
Lease Renewal Agreements dated March 23, 1989, March 24, 1992, January 22, 1993,
July 26, 1994 and

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

May 28, 1996 (collectively, the “Prior Lease”), Lessor demised and let to Lessee
or its predecessor or predecessors, and Lessee hired from Lessor, that certain
building known as Condominium Unit “H” erected at 1448 County Line Road, Lower
Moreland Township, Montgomery County, Pennsylvania (“Prior Premises”) for a term
expiring July 31, 2002. Lessor shall credit Lessee with the amount of any
unearned Additional Rent for Taxes paid by Lessee to Lessor under the Prior
Lease toward Additional Rent for Taxes due under this Lease.

      “Taxes” as utilized in this Lease shall mean all taxes, assessments and
charges of whatsoever nature levied upon or with respect to the Premises or
Lessor’s ownership interest in the Premises. “Taxes” shall include, without
limitation, all general real property taxes, including but not limited to,
municipality, county and school district real estate tax levies, and general and
special assessments, charges, fees, or assessments for transit, trash, housing,
police, fire, water, sewer, road, capital improvement district impositions, or
other governmental services or purported benefits inuring to the Premises, sewer
or water connection and/or tapping fees, service payments in lieu of taxes, and
any tax, fee or excise on the act of entering into and/or maintaining this Lease
or any other lease of space on the Premises, or the use or occupancy of the
Premises or any part thereof, or on the rent payable under any lease or in
connection with the business of leasing the Premises, including, but not limited
to, business privilege taxes that have been, or are now, or hereafter levied or
assessed against Lessor by the United States of America, the Commonwealth of
Pennsylvania or any political subdivision, political corporation, district or
other political or public entity, whether quasi in nature or otherwise, and
water and sewer rents, unless such water and sewer rents are billed based on
consumption, or as otherwise provided in paragraphs 5 and 35 of this Lease, but
shall not include any federal or state income tax levied solely on Lessor’s
income generally, or gift, Estate or Inheritance Taxes imposed on Lessor.

      The amount due hereunder on account of Taxes shall be apportioned for that
part of the first and last calendar years covered by the term hereof as regards
to county and township real estate taxes and for that part of the first and last
July 1st fiscal years covered by the term hereof, regarding school real estate
taxes or such other allocation, based on the actual fiscal year of the taxing
authority. Lessee shall, within ten (10) days of the posted date of a bill, pay
Lessor for all Taxes assessed or imposed upon or allocable to the Premises.

      (i) Upon execution of this Lease, or within ten (10) days of the posted
date of a bill therefore, Lessee shall pay Lessor the pro rated portion of all
Taxes assessed or imposed against the Premises for periods of the term hereof
included within bills for taxes received by Lessor prior to the Effective Date.

      (ii) Notwithstanding anything above to the contrary, Lessee shall also pay
to Lessor concurrently with payment of monthly installments of Minimums, as
defined in Paragraph 7 of this Lease, assessed against or allocable to the
Premises in an amount which shall be the product of the number of square feet of
the Premises leased to Lessee multiplied by Seven Cents ($.07) per square foot
for Taxes and Three Cents ($.03) per square foot for insurance premiums to
permit Lessor to pay said Taxes and insurance premiums as and when they become
due. These items of Additional Rent may be subsequently adjusted by Lessor to
accurately reflect actual Taxes and insurance premiums allocated to the Premises
for any Lease Year. Without limitation of the foregoing, should the sums paid by
Lessee to Lessor on account of Taxes and insurance premiums not be sufficient to
cover the assessed Taxes and insurance premiums on the Premises at the time of
presentation of said real estate tax bill and insurance premium bill to Lessee
by Lessor, Lessee shall pay to Lessor, within ten (10) days of posted date of
said bills from Lessor, the amount which is necessary to pay the full amount of
said bills. Such amounts shall be held by or transmitted to any Mortgagee
requiring such payments and applied on account of the real estate taxes and
insurance premiums as and when payments therefore are due. Any amounts held in
escrow by Lessor pursuant to this paragraph may be deposited in a non-interest
bearing account. Lessee hereby authorizes Lessor in its sole discretion to apply
such deposit, or any part thereof, against any

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

arrearage by Lessee in the payment of Minimum Annual Rent and/or Additional
Rent. In the event Lessor assigns its interest in this Lease, Lessor shall have
the right to pay the balance of such amounts then in its possession to the
assignee, and Lessor shall thereupon be completely released from any liability
with respect to such amounts.

      (iii) If the amount of Additional Rent for real estate taxes and insurance
premiums paid by Lessee during any Lease Year exceeds the amount paid by Lessor
for real estate taxes and insurance premiums in said Lease Year, the excess
shall either be refunded to Lessee by Lessor (upon termination of the Lease) or
credited against real estate taxes and insurance premiums due to be paid in the
next Lease Year, in Lessor’s discretion, provided Lessee is not otherwise in
default hereunder, in which event such excess shall be applied toward such
default.

      (iv) At all times, Lessee shall be responsible for and shall pay before
delinquency, all municipal, county, state or federal taxes (including water and
sewer rents or charges) assessed against any leasehold interest or any personal
property of any kind, owned, installed or used by Lessee. Lessee shall pay all
business privilege, mercantile, or occupational taxes and all other nuisance
taxes levied against Lessee for the Premises or arising by virtue of Lessee’s
use and occupancy thereof (including any taxes on Lessee’s payment of rent to
Lessor).

      (v) After written notice to Lessor, Lessee at its own expense, may contest
by appropriate legal proceedings promptly instituted and thereafter conducted in
good faith and with due diligence, the amount or validity, in whole or in part,
of any real estate taxes; provided Lessee shall have deposited with Lessor such
security for payment of the contested taxes with interest and penalties as may
be required by Lessor.

      (vi) At its own option, Lessor may contest or appeal by appropriate
proceedings the amount and/or validity of, in whole or in part, any real estate
assessment or taxes imposed upon the Premises or the building and/or the
property of which the Premises is a part and Lessee shall reimburse Lessor for
all of the reasonable direct and indirect costs thereof, including but not
limited to application, attorney and appraisal fees.

      C.     Assessments for Common Expenses. All invoices and assessments for
Common Expenses (as hereinafter defined) which may, from time to time, be levied
by the Lessor upon the Premises shall be allocated to the Premises, as
Additional Rent, on a Pro Rata Basis, with the exception of costs and expenses
related to Limited Common Elements associated with a specific Unit, or Units,
which shall be allocated only to tenants of that Unit, or those Units, in
proportions equal to a fraction, the numerator of which is the total square
footage of the Premises and the denominator of which shall be the total square
footage of the occupied Units in the Building. Provided, however, that Lessee
shall pay, as Additional Rent, amounts expended for maintenance, repair and
replacement of Common Elements due to the act or neglect of Lessee, its
employees, contractors or business visitors.

      Lessor shall credit Lessee with the amount of any unearned Additional Rent
for Common Expenses paid by Lessee to Lessor under the Prior Lease toward
Additional Rent for Common Expenses due under this Lease.

      The term “Common Expenses”, shall include, without limitation, the
following expenses: Maintenance, repair, replacement, renewal and additions to
all Common Elements, including but not limited to driveways, sidewalks,
non-structural components of the Premises and landscaped areas, (except as
otherwise provided in paragraph 6B hereof); rubbish and garbage removal; the
premiums for insuring the Building and Common Elements, including all
alterations, additions and improvements other than Lessee’s alterations,
additions and improvements, fixtures and equipment against loss or damage by
fire, all extended coverage, and rental value insurance (covering twelve (12)
months’ rental on a fully gross

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

basis) for the full, fair, insurable value thereof, exclusive of foundations,
excavations, and pavement, and insuring Lessor (and any industrial development
authority in title to the Premises) against liability for bodily injury
(including death), personal injury and property damage; the costs incurred in
policing and inspecting the Common Elements, maintaining security protection
from the Common Elements, which the Lessor deems to be reasonable, necessary and
appropriate, and expenses related thereto; the costs of maintenance of on-site
sanitary sewage facilities maintained by the Lessor, if applicable; the costs of
maintaining the sanitary and storm lines, the costs of maintaining the water
lines, the fire hydrant system and excess water charges relating to the
operation of the water and fire hydrant systems; the costs of maintaining the
electrical system and charges relating to the operations of the electrical
system, if any, condominium association assessments applicable to the Premises;
and the costs of professional services and any other costs incurred for the
operation of the Common Elements for the benefit of the Lessor. Provided,
however, that the costs of sewage disposal shall be paid by the Lessee in
accordance with the terms set forth in Paragraph 5 hereinbelow. A “Limited
Common Element” is one whose use is restricted by the applicable recorded
governing document, to less than the entire property, such as a walkway or
landing serving only specific rental units, but not all. To the extent that
Lessor, or any of its affiliates, performs any work or service, which is
included in the common area reimbursement cost, the price charge by Lessor, or
its affiliates, for such work or service shall not exceed the cost thereof
reasonably available from unrelated third parties on an arm’s length basis from
whom Lessor purchases such services.

      Common Expense shall specifically exclude expenditures for repairs
occasioned by Lessor’s or its agents or employee’s negligence; expenditures for
costs of advertising and leasing commissions, incurred by Lessor in connection
with efforts to obtain new tenants for the building; expenditures for salaries
or benefits of executive officers (or an officer or like position above the
level of building or project manager); cost of repair or replacement occasioned
by (i) casualty of an insurable nature of which insurance is required to be
carried by the Lessor (except for the deductible) or (ii) by any other tenant in
the building to the extent that the Lessor has a right to recover against such
other tenant; costs incurred in connection with the sale, financing or
refinancing of the building; costs incurred in connection with the late payment
by Lessor of taxes, utility bills and similar items; rent for any on-site
management offices; costs incurred by Lessor incurred as a result of correcting
defects in or inadequacy of the initial design or construction of the building
unless as a result of Lessee’s use, misuse or neglect of the Premises.

      The foregoing notwithstanding, Common Expense shall not include any single
item which (i) would be capitalized by Lessor under generally acceptable
accounting principles, and (ii) Lessee’s pro-rata portion of such item would
exceed $5,000.00 and (iii) it would increase the total Common Expenses by 25%
over the highest prior year unless such item of Common Expense is performed as a
result of Lessee’s use, misuse or neglect.

      (i) Notwithstanding anything contained herein to the contrary, Lessee
shall be responsible for any increase in Lessor’s property and/or liability
insurance premiums, if said increase is caused by any act or neglect of Lessee
or the nature of Lessee’s business. Lessee shall not be responsible for any
increase in said premiums, if said increase is caused by any act or neglect or
by nature of any business of any other tenant or section owner in the building
other than that of Lessee.

      (ii) The above notwithstanding, in the event that Lessee occupies the
whole building, Lessee shall be obligated to perform and pay for all the Common
Expenses and any other expenses relating to the Premises except for those
expenses specified in section 6.B. hereof.

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

      D.     Delinquent Payments.

      (i) If Lessee shall fail to make payments of any rent or other cash
payments due to Lessor within the time periods prescribed in the Lease, Lessee
shall pay to Lessor interest from the end of the payment period to the date of
Lessor’s receipt of such payment at an interest rate of Five Hundred (500) basis
points above the prime interest rate charged during the time of said delinquency
at the Wall Street Journal Prime. Payment period for installments of Minimum
Annual Rent, and Additional Rent and other payments hereunder shall be as
defined under Sections 3 and 4 herein above and payment period for all other
items shall be defined as ten (10) days from the date of any invoice from Lessor
to Lessee.

      (ii) If Lessee does not pay any installment of Minimum Annual Rent or any
item of Additional Rent on the day when the same shall become due and payable,
and such failure shall continue for a period of ten (10) days, Lessee shall pay
Lessor as Additional Rent a late charge at the rate of five cents ($.05) for
each dollar of such installment of Minimum Annual Rent or item of Additional
Rent for each month or a portion of a month that the same shall remain unpaid;
provided, however, that such charge shall in no event be less than Fifty Dollars
($50.00) for any month or a portion of a month that any installment of Minimum
Annual Rent or item of Additional Rent shall remain unpaid. Such charge shall be
in the form of Additional Rent for the purposes of defraying administrative
expenses of Lessor and is not intended as a penalty against Lessee. The
provision of this paragraph shall not preclude Lessor from exercising its
options as set forth in any other sections of this Lease, or as provided by law.

      E.     Service Charge. In addition to all Additional Rent provided herein,
Lessee shall pay to Lessor a service charge of Ten (10) percent of all amounts
billed (except service charges) to cover expenses for issuing all bills other
than the monthly installments of Minimum Annual Rent. Said charges shall not
exceed Twenty-five ($25.00) Dollars per invoice.

      5.     Utilities.

      Lessee shall heat the Premises at its own expense and shall also pay all
charges of suppliers, utility companies or public authorities (“Utility
Suppliers”) for electricity, gas, telephone, water, steam, sewer service or
other services or utilities furnished to the Premises. No payment by Lessee
shall be less than the minimum fee per user charged by any and all Utility
Suppliers. Under no circumstances shall Lessor be required to furnish any
utilities or any other service of any kind to the Premises or any part thereof.
However, if the Premises is not served by public sewer or water service and is
served by a holding tank or on-site sanitary sewage disposal system or private
water (“Private System”), Lessee shall pay the costs of same, based upon a
fraction, the numerator of which shall equal Lessee’s total water usage for the
billing period, and the denominator of which shall equal the total volume of all
water usage for the billing period of all owners and/or occupiers of the
Building, or Buildings, of which the Premises forms a part, served by the
particular Private System. In the event that utility service is furnished by
Lessor, Lessee agrees to pay for such service at the rates charged by Lessor as
permitted by the PUC or other applicable regulatory agencies, but such rates
shall be no less than those charged by the public utility company or other
Utility Supplier, servicing the area as if said public utility or Utility
Supplier, were furnishing the service, and said charges shall be due and payable
by Lessee with ten (10) days of the posted date of the bill presented by Lessor
or its agent. In the event that Lessor shall activate any of such services to
the Premises, Lessee shall reimburse Lessor for the costs thereof as Additional
Rent.

      6.     Repairs.

      A.     Except As Set Forth In paragraph 6(B) hereof or otherwise set forth
herein, Lessee, shall, at Lessee’s sole expense, in a timely manner as necessary
to protect the Premises from waste and

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

deterioration, make all necessary or appropriate repairs, replacements,
renewals, and additions, interior and exterior, non-structural, ordinary and
extraordinary, foreseen and unforeseen, required to keep and maintain the
Premises and all Systems (as hereinafter defined), equipment and apparatus
appurtenant thereto or used in connection therewith in good order and condition.
If, and only if, Lessee does not lease an entire Building, Lessor shall maintain
(at lessee’s expense in accordance with the provisions of Paragraph 4C, infra)
the non-roof and non-structural Common Elements.

      (i) With respect to the air conditioning, heating and ventilation systems
(“HVAC”), electrical, plumbing, mechanical, fire alarm, sprinkler and gas
(collectively, the “Systems”) or any thereof existing on the Premises, Lessee
agrees that it shall, at its own cost and expense, be required to maintain,
repair, and replace the Systems, in good operating condition, at its sole cost
and expense during the term of this Lease, and any Extension Term, Renewal Term
or Holdover Term. Lessee shall install any new or replacement Systems subject to
Lessor’s absolute prior written approval. With respect to the HVAC, Lessee shall
enter into and pay for a service/labor contract with O’Reilly and Associates of
Chestnut Hill, or an “All Embracing Service Contract” with HVAC Services, Inc.
of Philadelphia PA or other qualified HVAC service provider subject to Lessor’s
prior written approval (which approval shall not be unreasonably withheld),
beginning on the Lease Commencement Date, which contracts shall continue during
the term of this Lease, and any Extension Term, Renewal Term or Holdover Term
and will be subject to the prior written approval of Lessor. Failure of Lessee
to enter such contract shall be construed as a default under the terms of this
Lease. In addition to any rights or remedies which Lessor may have as set forth
in this Lease to cure such default, Lessor shall have the right to enter into
such maintenance contracts as required hereunder and Lessee shall reimburse
Lessor for the cost of such contracts plus Twenty-One Percent (21%) for service
charges thereon within ten (10) days of receipt of such bill. A copy of said
service/labor contract shall be deposited with Lessor within ten (10) days after
the date on which procurement of said service/labor contract shall be required
under the terms hereof.

        (a) The above notwithstanding and provided that Lessee has continually
maintained a Service/Labor Contract and continues its Service/Labor Contract
(“HVAC Contract”) with E.B. O’Reilly Servicing Corporation (“Contractor”), or
any of its related companies, for the proper and timely maintenance, repair
and/or restoration (“Maintenance”) of the existing, original roof-top mounted
HVAC system servicing part of the original existing offices from the initial
term of the Prior Lease between the predecessors of Lessor and Lessee (“HVAC
Unit”) and further provided that such Maintenance is and has been performed on a
continuing and timely basis and all such Maintenance is and has been performed
in a good and workmanlike manner, Lessee shall not be required to replace such
HVAC Unit, if such is considered not to be repairable by the Contractor. In such
instance, Lessor will replace such HVAC Unit provided Lessee is not then nor
ever has been in default under any of the terms and conditions of this Lease
beyond the applicable cure periods. In the event that Lessee has complied with
all of the conditions specified in this Subsection, and the HVAC Unit is deemed
to be no longer reasonably repairable by the Contractor, Lessor shall replace
such HVAC Unit at its sole cost and expense.

      (ii) Any repairs, replacements, renewals, maintenance and additions, and
any labor performed or materials furnished in, on or about the Premises shall be
performed and furnished by Lessee to the satisfaction of Lessor and in strict
compliance with all applicable laws, regulations, ordinances and requirements of
all duly constituted municipal authorities or other governmental bodies having
jurisdiction over the Premises and the requirements of any board of underwriters
having jurisdiction thereover. All material used in repair, replacement,
maintenance and renewal of the Premises shall be of equal or better quality to
the same material in the Premises on the Lease Commencement Date and meet the
same or better installation specifications. Prior to commencement of any work or
the ordering of any material, Lessee shall give notice thereof to Lessor and
prepare and file with the Prothonotary of The Court of Common Pleas of the
County in which the Premises is located, at Lessee’s sole cost and expense, a
waiver of mechanics’ lien, in form acceptable to Lessor, which shall be executed

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

by all contractors and subcontractors who are to perform work on the Premises;
Lessee shall present to Lessor, prior to the commencement of work, a
time-stamped copy of said waiver as filed with the Prothonotary and true and
correct copies of all building permits applicable to the Premises.

      (iii) Any repairs necessitated by holes or marks on the walls will be
billed directly, as Additional Rent, to the Lessee by Lessor during the term of
this Lease, and any Extension Term, Renewal Term or Holdover Term, or after
termination of this Lease and shall be paid within ten (10) days of receipt of
said bill.

      (iv) Off-Premises Restoration. At Lessee’s sole cost and expense, Lessee
shall restore promptly all damage to off-Premises roadways and other public or
private improvements installed by Lessor, or at Lessor’s expense, in the
industrial park or center in which the Premises is located (collectively, the
“Public Improvements”), resulting from the act or neglect of Lessee, its agents,
servants, contractors or subcontractors or business visitors (“Public
Improvement Damage”), to the satisfaction of Lessor and all applicable
governmental agencies. Lessee shall indemnify Lessor and save it harmless from
all liability, costs and expenses resulting from Public Improvement Damage,
including but not limited to reasonable counsel fees and expenses.

      B.      Roof and Structural Repairs. Upon receipt of written notice,
certified mail, return receipt requested, to Mark Hankin, personally, as the
authorized representative of Lessor, from Lessee, the Lessor agrees to proceed
with due diligence to repair any leaks in the roof, or make any repairs to the
structural walls (including exterior painting, gutters and downspouts, pent
eves, mansward roofs and siding), foundation and other structural portions of
the herein Premises or the Building of which the Premises is a part
(“Structural” defined as “load bearing elements and exterior curtain walls but
no interior walls”), at Lessor’s sole cost and expense provided such repairs are
not made necessary by the act or neglect of Lessee, and its employees,
contractors or business visitors, and in such case, at Lessee’s sole cost and
expense, as Additional Rent. In no event, however, shall Lessor be liable to
Lessee for damages, including consequential damages, for any loss or damage
sustained by Lessee due to, or alleged to be due to, failure of Lessor to make
such repairs in a timely or proper manner. In the event Lessor fails to make
said repairs within a reasonable time and in a proper manner, after notice by
Lessee by certified mail, return receipt requested, to Mark Hankin, personally,
as the authorized representative of Lessor, Lessee shall have the right to
proceed with said repairs, upon prior written notice to Lessor in compliance
with the terms and conditions of this Lease, at a reasonable cost and Lessor
shall repay Lessee the reasonable costs of said repairs, but Lessee may not set
off the amount of such costs against any rent or other charges due to Lessor
pursuant to the terms of this Lease. Provided, however, that Lessor may submit
the questions of the reasonableness of said bills and/or Lessor’s responsibility
to pay for same to court adjudication or arbitration in accordance with
Paragraph 38(A), infra.

      C.     Notice. Lessee is required to make all requests regarding the
Premises by notice, in writing, certified mail, return receipt requested to Mark
Hankin, personally, as authorized representative of Lessor, or assert any
allegations of breach of the Lease by Lessor in writing, certified mail, return
receipt requested to Mark Hankin, personally, as authorized representative of
Lessor, within thirty (30) days of the alleged occurrence. FAILURE TO DO SO
CONSTITUTES A WAIVER OF CLAIM AGAINST LESSOR FOR THAT REQUEST OR BREACH.

      D.     In the event of failure of Lessee to timely perform the maintenance
and repairs to the Premises required hereunder, or in the event Lessee shall
request Lessor to perform items of maintenance or repair or make improvements to
Premises, Lessor at its sole option, may without prior notification to Lessee,
enter the Premises and perform such repairs, the costs thereof together with
twenty-one percent

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

(21%) overhead to be charged by Lessor to Lessee as Additional Rent, which shall
be paid within ten (10) days of the date the bill thereof has been placed or
posted with the United States Postal Service.

      7.     Insurance.

      I.     LESSOR’S INSURANCE:

      A.     During the term of this Lease, Lessor shall keep all Units
(including the Premises) and Common Elements (except Alterations and
Improvements, as herein after defined, and such items as are not covered by
standard policies of insurance, such as foundation and paved and landscaped
areas), insured against loss or damage from all risks, including fire and
extended coverage, water damage, flood damage, (if required by Lessor’s
mortgage), for the full and fair replacement value (as may be revised by the
Lessor from time to time) of all Units and Common Elements, and rent insurance
in an amount sufficient to cover all rentals on a fully gross basis, as
prescribed by this Lease, for a duration of not less than Twelve (12) months.
All such policies of insurance shall be maintained with such companies as Lessor
may select having a rating with the Best’s Rating Guide of a minimum “A” policy
holders rating and “X” financial rating. Such policies of insurance shall be
made and taken out in the name of the Lessor (and any industrial development
authority and other appropriate parties designated by Lessor as additional
insured) with loss thereunder payable to Lessor or any mortgagee of Lessor as
their interests may appear and as Lessor shall direct. The above
notwithstanding, the Lessor accepts the Kemper Group of Insurance Companies as
an acceptable provider of the insurance coverage required by Lessee.

      B.     During the entire term hereof, Lessor may procure and maintain
Commercial General Liability Insurance covering the Premises and the Common
Elements with minimum limits of liability with respect to personal injury of One
Million Dollars ($1,000,000.00) for each occurrence, Two Million Dollars
($2,000,000.00) aggregate, with contingent liability coverage in an amount not
less than One Million Dollars ($1,000,000.00) in favor of Lessor, any Industrial
Development Authority in title to the Premises, any mortgagee of record and
other appropriate parties designated by Lessor as their interests may appear.
Such insurance shall be maintained with such companies and in such amounts as
the Lessor may from time to time designate, all such companies to be of the same
financial rating as required in Paragraph 7.I.A. hereinabove.

      C.     The premiums for such insurance as set forth in
Subparagraphs 7 (I) A and B hereinabove, shall be paid by Lessee, as Additional
Rent, on a Pro-Rata Basis, in accordance with the terms set forth in
Paragraph 4C hereof.

      II.     LESSEE’S INSURANCE:

      A.     Liability.

      Lessee shall provide and keep in force at its own cost and expense:

        (i) Commercial General Liability Insurance, including Personal Injury,
Bodily Injury Including Death, and Property Damage covering premises liability,
independent contractors liability, and contractual liability, with minimum
limits of coverage of One Million Dollars ($1,000,000.00) per occurrence and Two
Million Dollars ($2,000,000.00) aggregate applicable to the Premises only.    
      (ii) Worker’s Compensation Insurance in the full statutory amount.    
      (iii) All policies carried hereunder, providing liability coverage, will
include Lessor as an additional named insured with respect to ownership of the
Premises.

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

      B.     Lessee’s Personal Property. Lessee shall keep its personal
property, improvements, betterments and trade fixtures in the Premises insured
with “all risks” insurance in an amount to cover 100% of the replacement cost of
the personal property, improvements, betterments and trade fixtures.

      C.     Insurance policies required to be carried by Lessee under this
Lease shall:

        (i) Be issued by insurance companies licensed to do business in the
State of Pennsylvania, with general policyholder’s ratings of at least A and a
financial rating of at least XI in the most current Best’s Insurance Reports
available on the date of issuance. If the Best’s ratings are changed or
discontinued, the Lessor shall designate, by notice to Lessee, an equivalent
method of rating insurance companies;           (ii) Provide that the insurance
not be cancelled or materially changed in scope or amount of coverage unless
thirty (30) days advance notice is given to the Lessor;           (iii) Be
primary policies — not contributing with, or in excess of the coverage that the
Lessor may carry;           (iv) Be permitted to be carried under a “blanket
policy”. However, a specific minimum limit must be listed which is applicable to
the Premises and acceptable to the Lessor.           (v) Be maintained during
the entire term and any Extension Term, Renewal Term or Holdover Term of this
Lease.

      D.     By the Lease Commencement Date and prior to Lessee entering
possession of the Premises, and upon each renewal of its insurance policies,
Lessee shall provide certificates of insurance to Lessor by notice hereunder.
The certificates shall specify amounts, types of coverage, the waiver of
subrogation, specified in Paragraph 13 hereof, and the insurance criteria listed
in this subparagraph 7 (II). The policies shall be renewed or replaced and
maintained by Lessee. If Lessee fails to give any required certificate within
the time provided herein, Lessor may obtain and pay for that insurance and
receive reimbursement from Lessee as Additional Rent, any other provision of
this Lease notwithstanding.

      8.     Destruction of Premises.

      A.     Total Destruction of Premises. In the event the Premises are
totally destroyed or so damaged by fire or other casualty covered by a policy or
policies of insurance maintained by Lessor, that in Lessor’s opinion the same
cannot be repaired and restored within sixty (60) days from Lessor receiving
notice from Lessee of the happening of such casualty, this Lease shall
absolutely cease and terminate and the Minimum Annual Rent and Additional Rent
shall abate for the balance of the term. Nothing contained herein shall be
construed to affect Lessor’s right to collect the proceeds of rental value
insurance on the Premises. The above notwithstanding, in the event that Lessor
has another facility that is suitable for Lessee’s business operations and
Lessee and Lessor are able to negotiate a mutually satisfactory Lease, Lessor
shall make such facility available to Lessee and at the time of commencement of
the Lease for the other facility, this Lease shall terminate.

      B.     Partial Destruction of Premises. If such damage, covered by a
policy or policies of insurance maintained by Lessor, be only partial and such
that the Premises can be restored, in Lessor’s opinion, to approximately their
former condition within one hundred eighty (180) days from the date of Lessor
receiving notice from Lessee of the happening of such casualty, Lessor may, at
its sole option, restore the same with reasonable promptness, Lessee to pay the
amount of any deductible or other restoration cost not covered by the proceeds
of insurance, reserving the right to enter upon the Premises

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

for that purpose. Lessee shall pay the amount of any deductible or other
restoration costs not covered by the proceeds of insurance. The current
deductible on Lessor casualty insurance is $5,000.00. Lessor shall endeavor to
maintain such level of deductible provided that it remains available at
comparable prices. Lessor also reserves the right to enter upon the Premises
whenever necessary to repair damage caused by fire or other casualty to the
building of which the Premises is a part, whether the building is a single
tenant or a multi-tenant building, even though the effect of such entry is to
render the Premises or part thereof untenantable. In either event, the Minimum
Annual Rent and Additional Rent shall be apportioned and suspended during the
term Lessor is in possession, taking into account the portion of the Premises
rendered untenantable and the duration of said possession. Nothing contained
herein shall affect or limit Lessor’s right to collect the proceeds of any
rental value insurance on the Premises. If a dispute arises as to the amount of
rent due under the clause, Lessee agrees to pay the full amount claimed by
Lessor, but Lessee shall have the right, only, to proceed to recover the alleged
excess payment, if any, by final and binding Arbitration in accordance with the
terms of Paragraph 38(A), infra.

      C.     Lessor shall make such election to repair the Premises or terminate
this Lease by giving written notice thereof to Lessee within sixty (60) days
from the day Lessor receives written notice from Lessee that the Premises has
been destroyed or damaged by fire or other casualty.

      D.     Lessor shall not be liable for any damage, compensation or claim by
reason of the necessity of repairing any portion of the Premises, the
interruption of the use of the Premises, any inconvenience or annoyance arising
as a result of such repairs or interruption or the termination of this Lease by
reason of damage or destruction of the Premises or any part thereof.

      9.     Condemnation.

      A.     Total Condemnation. In the event the entire Premises are taken or
condemned by any public or quasi-public authority exercising the right of
eminent domain, this Lease shall terminate as of the date the condemning
authority takes possession of the Premises, with the same force and effect as
though such date were the date fixed herein for expiration of the term. The
entire amount of any award for such taking shall belong to the Lessor, Lessee
hereby expressly waiving any and all claims or rights to any portion of such
award. Lessee may separately pursue with the condemning authority, its own claim
for moving expenses, damages for business interruption or damages to Lessee’s
personal property.

      B.     Partial Condemnation. In the event that a portion of the Premises,
but not the entire Premises is taken or condemned for a public or quasi-public
use, the Minimum Annual Rent herein shall abate equitably in proportion to the
area of the building on the Premises condemned as of the date on which the
condemning authority shall take possession of the condemned property. Provided,
however, that if the condemnation were so extensive that the Premises is not
suitable for Lessee’s use as set forth herein, the taking shall be considered a
total taking and subparagraph A above will apply. The entire amount of any award
for such taking shall belong to Lessor except for moving, business interruption
expenses and damages to Lessee’s personal property, if any awarded directly to
Lessee and Lessee hereby waives any other right it may have to any portion of
such award. If the parties are unable to agree as to whether any taking is so
substantial as to constitute a total taking for the purposes of this Lease, or
as to the amount of abatement of rent after a partial taking, Lessee agrees to
pay the full amount claimed by Lessor, and Lessee shall only have the right to
promptly proceed to resolve any disputed excess payments to final and binding
Arbitration in accordance with Paragraph 38(A), infra.

      C.     If the condemning authority should take only the right to
possession for a fixed period of time or for the duration of an emergency or
other temporary condition, then, notwithstanding anything hereinabove provided,
this Lease shall continue in full force and effect without any abatement of
Minimum Annual rent and Additional Rent and the amounts payable by the
condemning authority with respect to any period of time prior to the expiration
or sooner termination of this Lease (not exceeding the

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

Minimum Annual Rent and Additional Rent paid by Lessee to Lessor during said
period of time) shall be paid by Lessor to Lessee out of the amount of any
condemnation award received by Lessor.

      10. Use and Compliance with Regulations.

      Lessee hereby covenants and agrees that it will at no time use the
Premises for any other use or purpose other than the use described in
subparagraph 1 (D), supra. Lessee further agrees that it will at no time use the
Premises in any manner which may be deemed a violation of any municipal
(including, but not limited to, municipal authorities, regulatory agencies and
water and sewer authorities), state or federal law or regulations. Lessee shall
comply at its sole cost and expense with any and all municipal, state and
federal regulations or laws covering Lessee’s occupancy and/or any additional
installations, other than those specifically provided for in this Lease, which
may be required, including, but not limited to, full compliance with the
Americans with Disabilities Act. Lessee shall also comply at its sole cost and
expense with any and all reasonable rules and regulations promulgated by Lessor
by notice hereunder. In the event the installation of a sprinkler system, an
emergency lighting system and/or a fire/smoke alarm or monitoring system or
public sewer or water connection or tapping fees are necessitated by any
governmental body for issuance of a building permit and/or occupancy permit for
the Premises, or generally after the Effective Date, the actual cost for the
providing and installing the system shall be paid by Lessee to Lessor within ten
(10) days of the posted date of a bill therefore. Twenty One Percent (21%) of
the cost thereof shall be paid prior to the commencement of any work and the
balance shall be escrowed by Lessee in a manner acceptable to Lessor. Lessor
shall not be responsible for obtaining occupancy or other permits for Lessee.
Responsibility for obtaining all necessary occupancy or other permits shall be
the obligation of Lessee, but Lessor shall provide all reasonable non-financial
assistance to Lessee.

      Lessee further agrees that it will use every reasonable precaution against
fire or other casualty; peaceably deliver up and surrender possession of the
Premises to the Lessor at the expiration or sooner termination of this Lease
promptly delivering to Lessor at Lessor’s office all keys for the Premises; and
give to Lessor prompt written notice of any fire or other casualty, or any
damage occurring on or to the Premises.

      Lessee further covenants and agrees that it will not, without first
obtaining the consent in writing of Lessor, and without providing Lessor with
reimbursement for any expenses incurred or incidental to Lessee’s proposed
action, do or suffer to be done, any act, matter or thing objectionable to the
property insurance companies whereby the property insurance or any other
insurance now in force or hereafter to be placed on the Premises, or any part
thereof, or on the building of which the Premises may be a part, shall become
void or suspended, or whereby the same shall be rated as a more hazardous risk
that at the date of execution of this Lease, or employ any person or persons
objectionable to the underwriting insurance companies or carry or have any
benzene or explosive matter of any kind in and about the Premises. In case of a
breach of this covenant (in addition to all other remedies given to Lessor in
case of the breach of any of the conditions of covenants of this lease) Lessee
agrees to pay to Lessor as Additional Rent any and all increase or increases of
premiums on insurance carried by Lessor on the Premises, or any part thereof, or
on the building of which the Premises may be a part, caused in any way by the
occupancy of Lessee.

      Lessee hereby agrees to protect, indemnify and save Lessor harmless from
and against any and all loss, damage, expense, cause of action, suits, demands,
judgments, and claims of any nature whatsoever arising as a result of Lessee’s
breach of the covenants contained in this paragraph, in addition to any other
indemnification provisions set forth in this Lease. Lessee shall deposit no
process wastes into the sanitary sewer system serving the Premises and agrees
that only sanitary waste shall be inserted into the sanitary sewer system.

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

      11. Indemnification.

      A. The Lessee shall keep, save and hold harmless the Lessor from any and
all losses, damages and liability for anything and everything whatsoever (i)
arising from or out of the occupancy of the Premises and use of abutting and
nearby common areas or any part thereof or any sidewalks, streets, driveways,
right of way or roadways, adjacent or nearby thereto, during the term of this
Lease, or any Holdover, Renewal, or Extension Term thereof, by or under the
Lessee, the Lessee’s agents, servants, contractors, sub-contractors, or business
visitors, and (ii) from any loss or damage or liability, as above described,
arising from any fault or negligence by the Lessee or any failure on the
Lessee’s part to comply with any of the covenants, terms and conditions
contained in this Lease, or regardless of Lessee’s fault to the extent of any
deductible in any policy of insurance covering the loss or damage. Provided,
however, that Lessee’s obligations hereunder shall be pro-ratably reduced to the
extent that a particular claim, liability, expense, loss, damage, demand, fine
or cause of action is a result of Lessor’s gross negligence or willful
misconduct.

      B. Notwithstanding anything set forth herein to the contrary, in the event
Lessor is held liable to an employee of Lessee (either an actual employee or one
deemed to be an employee by operation of law) on account of work-related
injuries sustained by such employee, Lessee shall be liable to Lessor for
damages, contribution and indemnity in any action at law or otherwise. This
subparagraph 11(B) shall constitute “a written contract” between Lessor and
Lessee pursuant to Section 303(b) of the Workmen’s Compensation Act, 77 P.S.
Section 481(b).

      12. Assignment and Subletting. Lessee covenants and agrees that it will
not, without first obtaining the consent, in writing of Lessor, which consent
shall not be unreasonably withheld, provided the business operations of such
assignee on the Premises shall be no more hazardous than that of Lessee’s
present business and shall comply with the zoning and all other governmental
regulations and regulations of insurance underwriters and without providing
Lessor with reimbursement for any reasonable expenses incurred or incidental to
Lessee’s proposed action, assign, mortgage or pledge this Lease, or under-let,
or sub-lease the Premises, or any part thereof, nor shall any assignee or
sub-lessee assign, mortgage or pledge this Lease or such sub-lease, without an
additional written consent by the Lessor, which consent may be withheld for any
reason whatsoever, or no reason, and without such consent no such assignment,
mortgage or pledge shall be valid. The above notwithstanding, Lessee shall not
mortgage or pledge this Lease without the prior approval of Lessor, which
approval may be withheld for any reason whatsoever, or no reason. If the Lessee
becomes insolvent, or makes an assignment for the benefit of creditors, or if a
petition in bankruptcy is filed by or against the Lessee or a bill in equity or
other proceeding for the appointment of a receiver for the Lessee is filed, or
if the real or personal property of the Lessee shall be sold or levied upon by
any Sheriff, Marshall or Constable, the same shall be a violation of this
covenant. Should the Lessor consent in writing to any such assignment or
subletting, the business of the assignee or the sublessee shall be no more
hazardous than that of Lessee’s present business and shall comply with the
zoning and all other governmental regulations and regulations of insurance
underwriters. Provided, however, Lessee shall not be relieved of any liability
or responsibility under the terms of this Lease by reason of such assignment or
subletting.

      An assignment of this Lease shall be deemed to have occurred if in a
single transaction or a related or unrelated series of transactions, and whether
Lessee is a corporation, partnership or other entity, more than fifty percent
(50%) or more of the ownership interests in Lessee (whether shares, partnership
interests, membership interests or other equity, and whether one or more classes
thereof) are transferred, diluted, reduced, or otherwise affected with the
result that the owners or holders on the date of this Lease of the ownership
interests in each class of equity of Lessee together cease to own fifty percent
(50%) or more of such equity. This section shall not apply to sale of shares of
stock on the NASDAQ National Listings or the New York or American Stock
Exchanges.

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

     13. Waiver of Subrogation.

     Lessor and Lessee hereby release each other and otherwise waive any claim
that each may have against the other for damage to property, which and to the
extent such damage is, should, or would be covered by property insurance
required by this Lease to be maintained by such party and further agree that all
insurance policies which each of them shall, should, or would carry to insure
the Premises and the contents therein against casualty loss shall contain
waivers of the right of subrogation against Lessor and Lessee herein, their
heirs, administrators, successors and assigns.

     14. Security Deposit.

     Lessee shall have deposited with Lessor upon execution hereof, the sum of
Eight Thousand Seven Hundred Fifty and 00/100 Dollars ($8,750.00) for Lessee’s
faithful performance of Lessee’s obligations hereunder. Lessee has on deposit
with Lessor a security deposit in the amount of Eight Thousand Seven Hundred
Fifty and 00/100 Dollars ($8,750.00) under the terms and conditions of its Prior
Lease, which shall be credited against the security deposit due hereunder.
Additionally, from time to time, as necessary, Lessee shall deposit with Lessor
amounts as determined by Lessor under paragraph 24(D), infra., to secure the
removal of Alterations and Improvements (as hereinafter defined) upon
termination of the Lease. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said security deposit for
the payment of any rent or other charge in default or for the payment of other
sums to which Lessor may become obligated by reason of Lessee’s default, or to
compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand thereof, deposit funds with Lessor, by
good check, in an amount sufficient to restore said deposit to the full amount
herein above stated and Lessee’s failure to do so shall be a material breach of
this Lease. If Lessee is in default under this Lease more two (2) times within
any twelve (12) month period, irrespective of whether or not such default is
cured, then, without limiting Lessor’s other rights and remedies provided for in
this Lease or at law or equity, or both, the Lessee, within ten (10) days of
notice from Lessor, shall deposit with Lessor such amount as is necessary to
increase the deposit held by Lessor to two (2) times the amount held at the time
of said notice. Lessor shall not be required to keep said deposit separate from
its general accounts. If Lessee performs all of Lessee’s obligations hereunder,
said deposit, or so much thereof as had not theretofore been applied by Lessor,
shall be returned to Lessee without interest (or at Lessor’s option, to the last
assignee, if any, of Lessee’s interest hereunder) at the expiration of the term
hereof, and after Lessee has vacated the Premises. No trust relationship is
granted herein between Lessor and Lessee with respect to said security deposit.

     15. Inspection - Access. Lessor may, at all reasonable times, by itself or
its duly authorized agents, go upon and inspect the Premise and every part
thereof and/or at their option to make repairs, alterations, and additions to
the Premises or the building of which the Premise is a part. Provided, however,
that Lessor agrees that they will not enter upon the Premise for repairs except
during normal business hours unless said repairs are of an emergency nature.

     16. Rights of Transferee or Assignee. All rights granted to Lessor
hereunder may be exercised by any transferee or assignee of Lessor’s right,
title and interest in this Lease in his, her, or its own name, any statute, rule
of court, custom or practice to the contrary notwithstanding. In addition, upon
such assignment, Lessor may pay over any security deposit hereunder to said
transferee or assignee and upon said payment, all obligations of Lessor to
Lessee pertaining to said security deposit shall terminate. In addition, upon
assignment or transfer of Lessor’s interest herein to an Assignee or a
Transferee, any

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat
 
obligations of Lessor hereunder shall cease and terminate and said Assignee or
Transferee shall be responsible therefore to Lessee.

      17. Restriction on Floor and Wall Loads and Machinery. Lessee shall not
place any weight upon any floor or wall of the Premises which is greater than
the floor load per square foot or wall load per square foot respectively, which
such floor or wall, respectively, was designed to bear and which is permitted by
law. In no event shall Lessee place any weight upon any portion of the Premises
beyond the safe carrying capacity of the structure. Lessee shall not use or
operate any machinery that, in Lessor’s sole opinion, is harmful to the building
or disturbing to other Section Owners or occupants of the other Sections.

      18. Signs.

      A. Lessee may erect reasonable signs which shall not detract from the
appearance of, or cause any damage to, the Premises, the building of which the
Premises is a part, the industrial center in which it is situated, and the
surrounding environment, having first obtained Lessor’s written permission as to
the location, installation and appearance of said signage. Lessee shall conform,
at its sole cost and expense, with all governmental and Lessor’s rules and
regulations with respect to Lessee’s signs and in no event shall Lessee’s signs
exceed the agreed percentage of the sign area permitted by said regulations on a
Pro Rata Basis. In addition, Lessee shall erect no signs on the Premises which
will in any way damage, injure or lessen the physical or structural integrity of
the roof or structure of the Premises or the building of which the Premises is a
part. With respect to Lessee’s signs, Lessee will save Lessor harmless from any
mechanic’s liens claims or claims for personal injury or property damage arising
from the erection, provision, installation, maintenance or removal of said
signs. At the termination of this Lease, Lessee shall remove all signs and shall
restore the portion of the Premises on which Lessee’s Sign were located to its
original good condition, without any allowance for wear and tear, at Lessee’s
sole cost and expense.

      B. In the event that the building of which the Premises forms a part is a
multi-tenant building, and Lessee does not lease the whole building, Lessor
agrees to cause the erection of a directory-type sign on the lot of which the
Premises is a part at a location to be selected by Lessor and Lessee shall
reimburse Lessor for the cost thereof in proportion to the area which Lessee’s
portion of said sign bears to total sign area plus Twenty One Percent (21%) of
the cost for placing Lessee’s name on the sign, as Additional Rent.

      C. The above notwithstanding, Lessor may at its sole discretion require
that Lessee conform to a standard sign design. Lessee shall be required to use
the design requirements of Lessor and to use the contractor designated by
Lessor. All other terms of this Paragraph shall remain in full force and effect.

      D. In addition, Lessor may require the installation of individual wall
plaque signs at the loading dock area of the premises. The cost of said signs to
be paid by Lessee to Lessor, as Additional Rent.

      19. Quiet Enjoyment. Notwithstanding anything herein contained to the
contrary, Lessee’s possession will not be interfered with by any person claiming
by, through, or under Lessor, or by any successor of Lessor, so long as Lessee
complies with the terms of this Lease and is not in default hereunder.

      20. Events of Default - Remedies.

      A. The following events or any one or more of them shall be events of
default under this Lease (See Subparagraph P for applicable grace and cure
periods):

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

           (i) Lessee shall fail to pay any Minimum Annual Rent, Additional Rent
or other sums payable hereunder when the same are due and payable; or    
     (ii) Lessee shall fail to perform or comply with any of the other terms,
covenants, agreements or conditions hereof; or          (iii) Lessee shall make
a general assignment for the benefit of creditors or shall admit in writing its
inability to pay its debts as they become due, or shall file a petition in
bankruptcy or shall be adjudged a bankrupt or insolvent, or shall file a
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, or shall file an answer admitting or not contesting the
material allegations of a petition against it in any such proceeding, or shall
seek or consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of Lessee or any material part of its property; or          (iv) If
within sixty (60) days after commencement of any proceedings against Lessee
seeking any reorganization, arrangement, composition, readjustment, liquidation
or dissolution or similar relief under any present or future statute, law or
regulation, such proceedings shall not have been dismissed or, if, within sixty
(60) days after the appointment without the consent or acquiescence of Lessee of
any trustee, receiver or liquidator of Lessee or any material part of its
properties, such appointment shall not have been vacated.          (v) Lessee
shall vacate the Premises in violation of Paragraph 28 hereof.        B. In the
event of any such event of default (regardless of the pendency of any proceeding
which has or might have the effect of preventing Lessee from complying with the
terms of this Lease) Lessor at any time thereafter may exercise any one or more
of the following remedies:          (i) [Reserved]          (ii) Termination of
Lease. Lessor may terminate this Lease, by notice to Lessee (the “Termination
Notice”) setting forth the Lease Termination Date, without any right by Lessee
to reinstate its rights by payment of rent due or other performance of the terms
and conditions hereof. On or before the Lease Termination Date, Lessee shall
surrender possession of the Premises to Lessor and restore the Premises to the
condition required by the terms and conditions of this Lease. Lessor shall
immediately become entitled to receive from Lessee all unpaid installments of
Minimum Annual Rent, Holdover Rent, Additional Rent, and other charges
hereunder, accruing up to and including the Restoration Date.    
     (iii) Re-leasing. Without terminating this Lease, Lessor may re-enter and
repossess the Premises or any part thereof, (which shall not constitute an
eviction or a surrender of the Lease by Lessee) and lease them to any other
person upon such terms as Lessor shall deem reasonable for a term within or
beyond the term of this Lease; provided, however, that any such re-leasing prior
to termination shall be for the account of Lessee, and Lessee shall remain
liable for:

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

               (1) All Minimum Annual Rent, Additional Rent and other sums which
would be payable under this Lease by Lessee in the absence of such expiration,
termination or repossession, less            (2) The net proceeds, if any, of
any re-leasing effective for the account of Lessee after deducting from such
process without limitation, all repossession costs, broker’s commissions,
attorneys’ commissions, attorneys’ fees and expenses, employees’ expenses,
alteration costs and expenses of preparation for such re-leasing.            If
the Premises are at the time of default sublet or leased by Lessee to others,
Lessor may, as Lessee’s agent, collect rents due from any subtenant or other
tenant and apply such rents to the rent and other obligations due hereunder
without in any way affecting Lessee’s obligations to Lessor hereunder. Such
agency, being given for security, is hereby declared to be irrevocable.    
     (iv) Acceleration of Rent. Lessor may declare rent and all items of
Additional Rent for the entire balance of the then current term immediately due
and payable, together with all other charges, payments, costs and expenses
payable by Lessee as though such amounts were payable in advance on the date of
the event of default occurred.  

      C. Except as expressly provided herein no repossession of the Premises or
any part thereof or exclusion of Lessee from the Premises pursuant to
subparagraph B above or otherwise shall relieve Lessee of its liabilities and
obligations hereunder, all of which shall survive such exclusion, expiration, or
repossession and Lessor may, at its option, sue for and collect rent and other
charges due hereunder at any time and from time to time as and when such charges
accrue or are accelerated or submit to Arbitration in accordance with the
provisions of subparagraph 38(A), infra.

      D. With respect to any portion of the Premises, which is vacant or which
is physically occupied by Lessee, Lessor may remove all persons and property
therefrom and store such property in a public warehouse or elsewhere at the cost
of and for the account of Lessee, without service of notice or resort to legal
process (all of which Lessee expressly waives) and without being deemed guilty
of trespass or becoming liable for any loss or damage which may be occasioned
thereby. Lessor shall have a lien for the payment of all sums agreed to be paid
by Lessee herein upon all Lessee’s property, which lien is to be in addition to
any landlord’s lien now or hereafter provided by law.

      E. The parties hereby waive trial by jury in any action, proceeding, or
counterclaim brought by either of them against the other on any matters arising
out of or in any way connected with this Lease, the relationship of Lessor and
Lessee, Lessee’s use or occupancy of the Premises and/or any claim of injury or
damages. In the event Lessor commences any proceedings for non-payment of rent
or Additional Rent, Lessee will not interpose any counterclaim of any nature or
description in any such proceedings. This shall not be construed, however, as a
waiver of Lessee’s right to assert any such claims in any separate action
brought by Lessee.

      F. Lessee hereby expressly waives and all rights of redemption granted by
or under any present or future law in the event this Lease is terminated or
Lessee is evicted or dispossessed by reason of violation by Lessee of any of the
provisions of this Lease.

      G. In the event of breach or threatened breach by Lessee of any provision
of this Lease, Lessor shall have the right of injunction as if other remedies
were not provided for herein.

      H. No right or remedy herein conferred upon or reserved to Lessor is
intended to be exclusive of any other right or remedy herein or by law provided,
but each shall be cumulative and in

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

addition to every other right or remedy given herein or now or hereafter
existing at law or in equity or by statute.

      I. If Lessee shall default in the performance of any covenant required to
be performed by it under this Lease, Lessor may perform the same for the account
and at the expense of Lessee. If Lessor at any time is compelled to pay or
elects to pay, any sum of money or to do any act, which will require the payment
of any sum of money by reason of the failure of Lessee to comply with any
provisions hereof, or if Lessor is compelled to incur any expense, including
reasonable counsel fees, in instituting, prosecuting or defending against any
action or proceedings instituted by reason of any default of Lessee hereunder,
the amount of such payments or expenses shall be paid by Lessee to Lessor as
Additional Rent, on the next day following such payment or the incurring of such
expenses upon which a regular monthly rental is due, together with interest
thereon at the rate set forth herein.

      J. No waiver by Lessor of any breach by Lessee of any of its obligations,
agreements or covenants hereunder shall be a waiver of any subsequent breach or
of any other obligation, agreement or covenant, nor shall any forbearance by
Lessor to seek a remedy for any breach by Lessee be a waiver by Lessor of its
rights and remedies with respect to such or any subsequent breach.

      K. Lessee expressly waives any right of defense which it may have based on
any purported merger of any cause of action, and neither the commencement of any
actions or proceeding nor the settlement thereof or the entering of judgment
therein shall bar Lessor from bringing subsequent actions or proceedings from
time to time.

 
*** NOTICE ***

      In Pennsylvania, court decisions provide that a Tenant can waive its due
process rights to a deprivation of hearing and notice when it voluntarily,
knowingly and intelligently consents to an agreement containing a cognovit,
(meaning, confession of judgment) clause. See Jordan v. Fox, Rothschild,
O’Brien & Frankel, 20 F.3d 1250 (3d Cir. 1994) (holding that judgment against a
reasonably sophisticated, corporate [or business] debtor, who has signed an
instrument containing a document permitting judgment by confession as part of a
commercial transaction, is enforceable in the same manner as any other
judgment); Rappaport v. Norlar, Inc., No. 93-4756, 1994 U.S. Dist. Lexis 5754 at
#18 (E.D. Pa. April 29, 1994) and Germantown Savings Bank v. Talacki, 520, 657
A.2d 1285, 1289 (Pa. Super. Ct. 1995).

      THE FOLLOWING PARAGRAPHS 20(L) AND 20(M) EACH SETS FORTH A WARRANT OF
ATTORNEY FOR ANY PROTHONOTARY OR ATTORNEY OF COURT OF RECORD TO CONFESS JUDGMENT
AGAINST THE LESSEE. IN GRANTING THESE WARRANTS OF ATTORNEY TO CONFESS JUDGMENT
AGAINST THE LESSEE, THE LESSEE, FOLLOWING CONSULTATION WITH (OR DECISION NOT TO
CONSULT) SEPARATE COUNSEL FOR THE LESSEE AND WITH KNOWLEDGE OF THE LEGAL EFFECT
THEREOF, HEREBY KNOWINGLY, INTENTIONALLY, VOLUNTARILY AND UNCONDITIONALLY WAIVES
ANY AND ALL RIGHTS THE LESSEE HAS OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY
FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES OF
AMERICA, THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE. IT IS SPECIFICALLY
ACKNOWLEDGED BY THE LESSEE THAT THE LESSOR HAS RELIED ON THESE WARRANTS OF
ATTORNEY IN EXECUTING THIS LEASE AND AS AN INDUCEMENT TO GRANT FINANCIAL
ACCOMMODATIONS HEREUNDER TO THE LESSEE.

      LESSEE EXPRESSLY WARRANTS AND REPRESENTS THAT THE FOLLOWING WARRANT OF
ATTORNEY TO CONFESS JUDGMENT HAS BEEN AUTHORIZED EXPRESSLY

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

BY PROPER ACTION OF THE BOARD OF DIRECTORS OF LESSEE (IF LESSEE IS A
CORPORATION) OR THE PARTNERS OF LESSEE (IF LESSEE IS A PARTNERSHIP), OR THE
MEMBERS OF LESSEE (IF LESSEE IS A LIMITED LIABILITY COMPANY).

      Notwithstanding anything in Paragraphs 20(L) AND 20(M) to the contrary,
these Paragraphs and the authority granted by Lessee therein are not and shall
not be construed to constitute a “power of attorney” and are not governed by the
provisions of 20 Pa. C. S. Chapter 56. Furthermore, an attorney or other person
or entity acting under these Paragraphs 23(L) AND 23(M) shall not have any
fiduciary obligations to Lessee and, without limiting the foregoing shall have
NO duty to: (1) exercise the powers for the benefit of Lessee, (2) keep separate
any assets of Lessee from those of such attorney, other person or entity or
Lessor, (3) exercise reasonable caution and prudence on behalf of Lessee, or
(4) keep a full and accurate record of all actions, receipts and disbursements
on behalf of Lessee.

      LESSEE AND LESSOR HEREBY CONSENT TO THE JURISDICTION OF THE COURT OF
COMMON PLEAS OF MONTGOMERY COUNTY PENNSYLVANIA OR THE FEDERAL DISTRICT COURT FOR
THE EASTERN DISTRICT OF PENNSYLVANIA FOR ANY PROCEEDING IN CONNECTION HEREWITH,
AND HEREBY WAIVE OBJECTIONS AS TO VENUE AND CONVENIENCE OF FORUM IF VENUE IS IN
MONTGOMERY COUNTY, PENNSYLVANIA OR IN THE FEDERAL DISTRICT COURT FOR THE EASTERN
DISTRICT OF PENNSYLVANIA. IN ANY ACTION OR SUIT UNDER THIS LEASE, SERVICE OF
PROCESS MAY BE MADE UPON LESSOR OR ANY LESSEE BY MAILING A COPY OF THE PROCESS
BY FIRST CLASS MAIL TO THE RECIPIENT AT THE RESPECTIVE ADDRESS SET FORTH IN
PARAGRAPH 26, INFRA. LESSOR AND LESSEE HEREBY WAIVES ANY AND ALL OBJECTIONS TO
SUFFICIENCY OF SERVICE OF PROCESS IF DULY SERVED IN THIS MANNER.

      L. Upon the occurrence of any event of default, which is not cured within
any period of time herein provided and after an additional ten (10) days written
notice of default under the terms and conditions of this Lease, Lessee, with
understanding of the RELINQUISHMENT OF CERTAIN RIGHTS to which Lessee would
otherwise be entitled as a matter of law and due process including the right to
notice and judicial hearing, hereby irrevocably empowers any Prothonotary, clerk
or attorney of any court of the Commonwealth of Pennsylvania to appear for
Lessee, with or without declaration filed, as of any term, and therein TO
CONFESS OR ENTER JUDGMENT AGAINST LESSEE for rent and/or the charges, payments,
costs and expenses herein reserved as rent, or herein agreed to be paid by
lessee, and then due and unpaid and for interest and costs, together with a
reasonable attorney’s commission of not less than Ten Percent (10%) of such
rents or other charges or expenses then due. Such authority shall not be
exhausted by one exercise thereof, but judgment may be confessed as aforesaid
from time to time as often as any of said rent and/or other charges reserved as
rent or agreed to be paid by Lessee shall fall due or be in arrears.

      M. Upon the occurrence of any event of default which is not cured within
any period of time herein provided, Lessee with understanding of the
RELINQUISHMENT OF CERTAIN RIGHTS, to which Lessee would otherwise be entitled as
a matter of law and due process, including the right to notice and judicial
hearing, hereby authorizes and empowers any attorney of any court of record in
the Commonwealth of Pennsylvania as attorney for Lessee, as well as for all
persons claiming under, by or through Lessee, to appear for Lessee and enter in
any competent court, in accordance with the then execution or appeal, against
Lessee and all persons claiming under, by or through Lessee and therein CONFESS
JUDGMENT FOR THE RECOVERY BY LESSOR OF POSSESSION OF THE PREMISES, for which
this Lease (or a copy of thereof) shall be sufficient warrant, whereupon if
Lessor so desires, a writ of possession may be issued forthwith, without any
prior writ or proceeding whatsoever.

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

It is hereby expressly agreed that if for any reason, after such action has been
commenced, the same shall be discontinued, marked satisfied of record or
terminated, or possession of the Premises remain in or be restored to Lessee,
Lessor shall have the right for the same default, or any subsequent default, to
bring one or more actions in the manner herein set forth to recover possession
of the Premises.

      N. In any action involving a confession of judgment by Lessor against
Lessee, Lessor shall first cause to be filed in such action an affidavit made by
it or someone acting for it, setting forth the facts necessary to authorize the
entry of judgment and if a true copy of this Lease (and such affidavit shall be
sufficient evidence of the truth of the copy) be filed in such action, it shall
not be necessary to file the original as warrant of attorney, any rule of court,
custom or practice to the contrary notwithstanding. Lessee hereby releases
Lessor and any and all attorneys who may appear for Lessee, from all liability
for all errors in said proceedings.

      O. If proceedings shall be commenced by Lessor to recover possession under
the Acts of Assembly and Rules of Civil Procedure, either at the end of the term
or earlier termination of this Lease, or for nonpayment of rent or any other
reason, Lessee specifically waives the right to the three (3) month notice and
to the fifteen (15) or thirty (30) days notice required by the Landlord and
Tenant Act of 1951, and agrees that notice under either Pa. R.C.P. 2973.2 or Pa.
R.C.P. 2973.3, as amended from time to time, shall be sufficient in either or
any such case.

      P. Notwithstanding anything herein elsewhere contained to the contrary,
Lessor agrees that Lessor will not exercise any right or remedy provided for in
this Lease or allowed by law, because of any default of Lessee, unless Lessor
shall first have given written notice thereof to Lessee, and Lessee, (i) within
a period of fifteen (15) days thereafter shall have failed to pay the sum or
sums due if the default consists of the failure to pay money, or (ii) if said
default shall consist of anything other than the failure to pay the sum or sums
due hereunder, Lessee shall have failed within the period of twenty (20) days
after notice from Lessor to have cured said default, except that, if such
default cannot be cured within said twenty (20) days, Lessee shall only be in
default if Lessee shall have failed to begin and actively and diligently in good
faith proceed with the correction of the default until it shall be fully
corrected not later than sixty (60) days after such notice; provided, further,
however, that no such notice from Lessor shall be required nor shall Lessor be
required to allow any part of the said notice periods if Lessee shall have
removed from or shall be in the course of removing from the Premises in
violation of Paragraph 28, infra, or Lessee shall have failed to provide any
insurance required by this Lease or if a Petition in Bankruptcy or for
reorganization shall have been filed by or against the Lessee resulting in an
order for relief in bankruptcy, or for reorganization, or if a receiver or
trustee is appointed for Lessee and such appointment and such receivership or
trusteeship is not terminated within sixty (60) days, or if Lessee makes an
assignment for the benefit of creditors, or if Lessee is levied upon and is
about to be sold out upon the Premises by any sheriff, Marshall or constable, or
if Lessee violates any of the provisions of Paragraph 40, infra, dealing with
Hazardous Substances. Notwithstanding Lessor shall not be required to give any
notice called for by this Paragraph of the Lease more than two (2) times within
any Lease Year. Nothing contained herein shall be deemed to constitute a waiver
of Lessee’s right under law to appeal any judgment or proceeding and seek to
have the judgment opened or stricken.

      21. Mechanic’s Liens. Lessee shall not permit any mechanic’s,
materialman’s or similar liens to remain upon the Premises for labor or material
furnished to Lessee or claimed to have been furnished to Lessee in connection
with work of any character performed or claimed to have been performed on the
Premises or at the direction or with the consent of Lessee, whether such work
was performed or materials furnished before or after the commencement of the
term of this Lease. Lessee may, however, contest the validity of any such lien
or claim, provided Lessee shall give Lessor such reasonable security to insure
payment and to prevent any sale, foreclosure or forfeiture of the Premises by
reason of such non-payment as Lessor may require. Upon final determination of
the validity of any such lien or claim, Lessee shall immediately pay any
judgment or decree rendered against Lessee or Lessor with all proper costs and

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

charges and shall cause such lien to be released of record without cost to
Lessor. Notwithstanding anything contained herein to the contrary, Lessee shall
at all times prepare and file a waiver of mechanics’ liens prior to the
commencement of any work, or the ordering of any material, in compliance with
the terms of Paragraph 6(A), supra, Lessee shall not commence any such work
until and unless Lessor issues its prior written approval thereof in accordance
with Paragraph 24(B) infra.

      22. Subordination. This Lease shall be subordinate in all respects to any
Lease or other arrangement or right to possession under which the Lessor is in
control of the Premises to the rights of the owner or owners of the Premises and
of the land or buildings of which the Premises are a part, to all rights of the
Lessor’s landlord and to any and all liens of any mortgages or other
encumbrances now or hereafter encumbering the Premises or any part thereof, or
upon the land and/or the buildings, and any Declaration of Condominium executed
by Lessor hereafter, with the same force and effect as if such Mortgage had been
executed, acknowledged, delivered and recorded prior to the execution of this
Lease. The subordination contained in this Paragraph is and shall be effective
without the necessity of any further act or writing by either party hereto, but
Lessee agrees that it will, immediately upon Lessor’s request, deliver such
additional documents as any mortgagee may require to confirm such subordination.
Lessee, at the request of any mortgagee or any one acquiring title to Lessor’s
estate or the Premises by foreclosure, deed in lieu of foreclosure or otherwise,
shall attorney to the then owner and recognize such owner as Lessor for the
balance of the term of this Lease, subject to all of the terms and provisions
hereof. Such mortgagee or purchaser at said foreclosure sale shall not be:

           A. Liable for any act or omission of Lessor;            B. Subject to
any offsets or defenses which Lessee may have against the Lessor;            C.
Bound by any rent or additional rent which the Lessee may have paid to the
Lessor for more than the current month;            D. Bound by any amendment or
modification of the lease made, without its consent;            E. Entitled to
any security deposits paid to Lessor by Lessee if Lessor has exercised its
rights under this Lease to apply such security deposits against sums or rents
due to Lessor.

      Any mortgagee of Lessor may, at any time, at its option, by notice to
Lessor and Lessee, declare its mortgage subordinate in lien and payment to this
Lease, in which event, this Lease shall be deemed superior to such mortgage.

      Upon receipt of written request by Lessee, Lessor agrees to request from
the then current mortgagee on behalf of Lessee, a Non-Disturbance Agreement from
Lessor’s mortgagee on the mortgagee’s standard form. Any fee charged for this
agreement by the mortgagee and all reasonable costs and expenses incurred by
Lessor in its efforts to obtain the same (whether or not successful) shall be
paid by Lessee as Additional Rent. Lessor’s failure to acquire such
Non-Disturbance Agreement shall not be deemed to be a default under this Lease.

      23. Estoppel Certificate. Lessee agrees to execute and deliver to any
mortgagee or purchaser of the Premises immediately upon request, an “Estoppel
Certificate”, in form to be supplied by Lessor, stating the amount of rent due
from Lessee hereunder; that this Lease remains in full force and effect without
any modifications, except for modifications requested by any such mortgage; that
Lessee consents to any reasonable modification of the Lease (except rental
terms) requested by any mortgagee; that Lessee has no setoffs against rent; or,
if Lessee has any setoffs against rent or, if this Lease has been

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

modified, the exact nature of the modification and the precise amount of the
setoffs and such other matters reasonably requested by said mortgagee or
purchaser.

      24. Alterations and Improvements.

      A. Lessee may, at its sole cost and expense, make additional alterations,
additions, or improvements to the interior of the Premises, which is the subject
of this Lease (hereinafter called “Alterations and Improvements”), provided that
such Alterations and Improvements shall not adversely or otherwise affect the
roof and Structural portions of the Premises or the building of which the
Premises is a part in the case of multi-tenant properties, or any Systems
contained therein. THE ABOVE NOTWITHSTANDING, LESSEE SHALL NOT, UNDER ANY
CIRCUMSTANCES MAKE ANY HOLES IN OR PENETRATIONS OF THE ROOF OF THE BUILDING
WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR, WHICH MAY BE WITHHELD, DELAYED OR
REFUSED FOR ANY REASON OR NO REASON WHATSOEVER.

      B. All such Alterations and Improvements shall be in accordance with
detailed plans and specifications to be supplied by Lessee to Lessor, which
plans shall in all instances first be subject to Lessor’s prior written approval
(“Lessor’s Approval”), which Lessor’s Approval shall not be unreasonably
withheld. In the event that Lessor grants approval for the construction of such
Interior Improvements, Lessor shall also advise Lessee, if Lessor will allow
such Interior Improvements to remain upon the Premises as of the Lease
Termination Date. If Lessor shall determine that such Interior Improvements are
to remain upon the Premises, as of the Lease Termination Date, Lessee shall be
required to restore them to the same condition as existed upon the initial
completion of the construction of such Interior Improvements and to the
specifications initially approved by the Lessor. In the event that Lessor shall
not confirm in writing to Lessee that such Interior Improvements shall remain
upon the Premises, it shall be deemed to be a requirement that such Interior
Improvements be removed from the Premises prior to the Lease Termination Date
specified in Subparagraph D hereinbelow. Lessee shall provide Lessor with
evidence that each contractor performing work on the Premises has adequate
workmen’s compensation insurance, Commercial General Liability insurance, and
Vehicular Liability insurance (written on an occurrence basis) in the amount of
at least One Million Dollars ($1,000,000.00) per occurrence and at least Two
Million Dollars ($2,000,000.00) aggregate as to the Premises for bodily injury,
including death, personal injury and property damage, in the form of a
certificate from an insurer, who shall be reasonably satisfactory to Lessor, to
the effect that such insurance may not be canceled or substantially modified
without at least thirty (30) days’ prior written notice, certified mail, return
receipt requested, to Mark Hankin, personally, as authorized representative of
Lessor. Said insurance policies shall be with an insurance company having a Best
Rating of A and shall name Lessor, Montgomery County Industrial Development
Authority, any mortgagee of record and other appropriate parties designated by
Lessor as additional named insureds. Lessor’s Approval is intended solely for
purposes of this Paragraph 24, for the purpose of providing Lessor with notice
of all Alterations and Improvements, and the opportunity to reject any adverse
effect on the Premises and Lessor’s obligations under this Lease. Lessor’s
Approval shall not signify approval by Lessor of the design or functionality of
any Alterations and Improvements and shall not confer any rights whatsoever on
third parties.

      C. No Alterations and Improvements by Lessee at the Premises shall be done
except after filing a waiver of mechanic’s lien in accordance with the
provisions of Paragraphs 6 and 7 hereinabove. A time-stamped copy of each
“mechanic’s lien” waiver shall be filed with Lessor prior to the commencement of
any work or purchase of any material by Lessee or any subcontractor.

      D. As to Alterations and Improvements installed with prior Lessor’s
Approval, Lessee may, or at Lessor’s demand, shall remove all Alterations and
Improvements prior to the end of the term of this Lease and Lessee shall at its
own cost and expense, return the Premises to its condition as of the

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

Lease Commencement Date of the Prior Lease. In the event, in violation of
subparagraph B hereof, Lessee installs Alterations and Improvements upon the
Premises without prior Lessor’s Approval, Lessee shall remove all Alterations
and Improvements prior to the end of this Lease, at its own cost and expense,
returning the Premises to its condition as of the Lease Commencement Date. In
the event Lessee shall fail to remove the Alterations and Improvements and
restore the Premises, as herein provided, Lessor shall have the right to go upon
the Premises and do so, and Lessee agrees to pay the cost thereof plus Twenty
One Percent (21%) of the cost thereof, as Additional Rent. Additionally, Lessor
may decline to accept surrender of the Premises by Lessee so long as such
Alterations and Improvements have not been removed and until removal of the same
and restoration of the Premises, Lessee shall be deemed to have held over under
the provisions of paragraph 2(C), supra. With respect to those Alterations and
Improvements which, with Lessor’s consent, have remained upon the Premises at
the end of the term of this Lease, Lessee agrees that title to the same shall
vest in Lessor. Prior to commencing to install any Alterations or Improvements,
Lessee shall deposit with Lessor an additional security deposit, to be held by
Lessor in accordance with the provisions of paragraph 14, supra., in an amount
reasonably established by Lessor to cover the cost of removal of said
Alterations and Improvements upon termination of this Lease

      E. If as a result of any Interior Improvements which may be made to the
Premises by the Lessee, either pursuant to this clause or without authorization
from the Lessor, any person and/or property shall be injured and/or damaged,
liability therefore shall be the sole responsibility of Lessee.

      F. In making any Alterations and Improvements, Lessee shall comply with
any and all laws, statutes, ordinances, rules and regulations and requirements
of the municipal and other duly constituted governmental authorities and
insurance organizations.

      G. It is understood and agreed that no Alterations and Improvements to any
portion of the Premises except the interior of the Building (“Exterior
Alterations and Improvements”) may be performed by Lessee, except in full
compliance with any conditions established by Lessor, in writing prior to the
performance thereof. Lessee must first obtain Lessor’s Approval for any such
Exterior Alterations and Improvements, which Lessor’s Approval may be withheld
for any reason whatsoever, whereupon all of the remaining provisions of this
Paragraph 24 relating to the duties and responsibilities of the Lessee shall
apply to all such proposed Exterior Alterations and Improvements. All such
Exterior Alterations and Improvements are to be made at Lessee’s sole cost and
expense.

      25. Extensions - Renewals - CPI Escalator.

      A. Extensions. Lessee may terminate this Lease at the end of this term and
any renewal term or extension term, by giving to Lessor written notice at least
six (6) months prior thereto, and Lessor may terminate this Lease at the end of
this term and any renewal or extension thereof by giving to Lessee written
notice at least twelve (12) months prior thereto (each an “Expiration Notice”);
but in default of a timely Expiration Notice given by either party in the manner
provided herein, this Lease shall continue for one (1) year (“Extension Term”)
commencing the day after the expiration of the current term, upon the terms and
conditions in force immediately prior to the expiration of the then-current
term, Extension Term, or Renewal Term (except for the Minimum Annual Rent, which
shall be computed in subparagraph 25(C)), and so on from year to year, unless
terminated by the giving of an Expiration Notice within the times and in the
manner aforesaid. Provided, however: that if Lessor shall have given notice to
Lessee, (an “Amendment Notice”) at any time prior to the expiration of any term
hereby created of its intention to change any of the terms and conditions of
this Lease and Lessee shall not within ten (10) days from such Amendment Notice
notify Lessor, by Expiration Notice, of Lessee’s intention to vacate the
Premises at the end of the then current term, Lessee shall be considered as
Lessee under the terms and conditions mentioned in the then current term, Lessee
shall be considered as Lessee under the terms and conditions mentioned in the
Amendment Notice for a further term of one year, as above provided, or for such
longer further term as

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

may be stated in the Amendment Notice. In the event that Lessee or Lessor shall
have given a valid and timely Expiration Notice, and Lessee shall fail or refuse
to completely vacate the Premises and restore the same to the condition required
in this Lease on or before the end of the term hereof (the “Expiration Date”),
then it is expressly agreed that the Lessor shall have the option either:

           (i) to disregard the Expiration Notice as having no force and effect,
whereupon the Expiration Notice shall be null and void, ab initio, as if never
given; or            (ii) treat Lessee as Holding Over, in accordance with
paragraph 2(C) hereof.

     All powers granted to Lessor by this Lease shall be exercised and all
obligations imposed upon Lessee by this Lease shall be performed by Lessee as
well during any Holding Over, Extension Term, or Renewal Term as during the
original term hereof.

     Notwithstanding anything set forth in subparagraph 25(A) to the contrary,
if the term of this Lease is not previously terminated, the term of this Lease
shall end absolutely, without further notice, at 11:59 p.m. on the day previous
to the 29th anniversary of the Lease Commencement Date.

     B. Option to Renew.

     Provided Lessee has not ever been, nor is in default under the terms of
this Lease beyond the applicable cure periods, as provided in Section 20.P.
hereof, Lessee shall have the right and privilege at its election to renew the
term of this Lease for a further period of two (2) years (“Renewal Term”) to
commence upon expiration of the original term hereof, by giving Lessor written
notice of its execution to renew at least thirteen (13) months prior to the
expiration of the original term hereof. Such renewal shall be on the same terms
and conditions (except for this option to renew, which shall be eliminated and
except for the Minimum Annual Rent which shall be calculated as is set forth in
the following paragraph) as herein provided for the original term. In the event
Lessee does not exercise its option to renew, then the term of this Lease shall
continue in accordance with the provisions of subparagraph A hereof except for
any increase in Minimum Annual Rent as is set forth in subparagraph C hereof and
except further if Lessor has given Lessee an Expiration Notice as provided in
subparagraph A hereof.

     C. Computation of Minimum Annual Rent in the Event of Extension or Renewal

     In the event of extension of this Lease in accordance with subparagraph A
hereof (or exercise of Lessee’s option to renew in accordance with the terms of
subparagraph B hereof) commencing with the installment of Minimum Annual Rent
due on the first day of the Extension term (or Renewal Term as the case may be)
the Minimum Annual Rent set forth in this Lease for the last Lease Year of the
original term shall be increased by the greater of:

           (i) Five Percent (5%) per annum, compounded, from the Lease
Commencement Date to the date of termination of the term previous to the
Extension Term or Renewal Term for which the computation is made; or      
     (ii) The extent that the Consumer Price Index for “All Urban Consumers”
(the “CPI U”) for the United States of America published by the “Bureau of Labor
Statistics of the United States Department of Labor” (1982-84 = 100) for the
last reported month at the time of the expiration of the term of this Lease and
the same month for each succeeding year (the “Adjustment Index”) is higher than
the CPI U for the last reported month at the time of execution of this Lease
(the “Base Index”).

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

     The new Minimum Annual Rent effective on and after the first day of the
Extension Term, or Renewal Term, for the balance of the Extension Term, or
Renewal Term shall be (a) the Minimum Annual Rent as set forth in this Lease for
the last Lease Year of the term plus the greater of (b) the percentage increase
computed under subparagraph 25(C)(i) above multiplied by the Minimum Annual Rent
as set forth in this Lease for the last Lease Year of the term hereof or (c) an
amount which is equal to the product obtained by multiplying the said Minimum
Annual Rent for the last Lease Year of the term by a fraction, the numerator of
which is the difference between the Adjustment Index and the Base Index and the
denominator of which is the Base Index.

     Said Minimum Annual Rent shall be payable in advance in equal monthly
installments commencing on the first day of the Extension Term, or Renewal Term
and on the first day of each month thereafter during said Extension Term, or
Renewal Term.

     If at the time of any adjustment of the Minimum Annual Rent, the CPI U is
no longer reported or its basic principal has been altered, an alternative
method shall be used to increase the Minimum Annual Rent to equitably reflect
any increase in the cost of living. Under no circumstances, however, shall any
new Minimum Annual Rent be less than the Minimum Annual Rent set forth in this
Lease for the last Lease year of the original term, increased by the sum of Five
Percent (5%) per annum compounded from the Lease Commencement Date to the later
of the date of termination of the original term of the Lease, the last previous
Extension Term, or Renewal Term of the Lease.

     26. Place of Payment of Rent and Notices.

     A.     (i) All rent shall be payable without notice or demand; and

             (ii) All notices other than rent shall be given to Lessor by
registered or certified mail, return receipt requested, or a nationally
recognized overnight mail delivery service issuing return- receipts, at the
following address or at such other address as Lessor may designate by written
notice to Lessee:

For notices by United States Mail:

      Mark Hankin
P.O. Box 26767
Elkins Park, PA 19027

For notices by nationally-recognized overnight delivery service:

      Mark Hankin
c/o Hankin Management Company
5301 Tacony Street
Building #1
Philadelphia, PA 19137

     In particular, all notices relating to terminations, extensions and
renewals of this Lease as more fully set forth in Paragraph 25 and to repairs
and replacements as more fully set forth in Paragraph 6(B) must be sent to Mark
Hankin, personally, as authorized representative of Lessor, by certified mail,
return-receipt requested, to the address stated hereinabove or by a
nationally-recognized overnight mail service issuing return-receipts to the
address stated hereinabove.

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

     These notice provisions are an essential requirement of this Lease and the
Lessee agrees that no evidence of any other notice other than certified mail,
return receipt requested addressed to Mark Hankin, personally, as authorized
representative of Lessor or by a nationally recognized overnight mail service
with a return receipt to the address stated hereinabove to Mark Hankin,
personally, as authorized representative of Lessor may be introduced at the time
of any trial herein, or arbitration. Any notice sent to any other person or any
other manner shall be deemed null and void.

     B.  All notices shall be given to Lessee by registered or certified mail,
return receipt requested, or a nationally recognized overnight mail delivery
service, at the following address or such other address as Lessee may designate
by written notice to Lessor:

American Bank Note Holographics, Inc.
1448 County Line Road
Huntingdon Valley, PA 19006

or by hand-delivery to the Premises.

     27.  Condition of Premises at Termination.  At the expiration of the term
hereof, Lessee shall surrender the Premises to Lessor in good order and
condition, all Alterations and Improvements designated by Lessor for removal
pursuant to Paragraph 24(D) having been removed, all Systems in good operating
condition, broom clean, free of trash, rubbish or debris (interior and exterior)
and without consideration of, or allowance for, wear and tear, but damage by
insured fire or other insured casualty alone excepted. Lessor may decline to
accept surrender of the Premises if any of the above have not been completed to
Lessor’s satisfaction, in which event, Paragraph 25(A), supra., shall apply.
Provided Lessee is not in default hereunder and subject to the provisions of
Paragraph 24 hereof, all furniture and trade fixtures installed at the expense
of Lessee shall remain the property of Lessee. Provided Lessee is not in default
hereunder and subject to the provisions of Paragraph 24 hereof, Lessee shall
remove fixtures and/or equipment installed by Lessee in the herein Premises
during the term of this Lease and any renewal or extension term. Lessee agrees
to repair its cost and expense any damage done to the Premise by reason of the
removal of such fixtures and/or equipment without any consideration of, or
allowances for, wear and tear.

     28.  Vacation.   Lessee shall not vacate or desert the Premises during the
term of this Lease or permit the same to be empty and unoccupied without the
prior written consent of Lessor, which consent shall not be unreasonably
withheld, and without Lessee complying with the requirements set forth in
Exhibit “C” (“Vacation Requirements”). If Lessor does so consent, Lessee shall
take adequate measures to secure and monitor the Demised Premises in addition to
any other requirements or conditions reasonably imposed by Lessor.

     29.  Net Lease.  Except as otherwise specifically provided herein to the
contrary, the parties intend this to be a “net-net-net” Lease pursuant to which
the rent payable hereunder shall be absolutely net return to Lessor for the term
of this Lease, undiminished by the taxes (real estate, business privilege,
mercantile, etc.) or any of them or any part thereof or any other carrying
charges, maintenance charges, Common Expenses, assessments, or any other charges
of any kind or nature whatsoever except any mortgage now or hereafter placed
upon the Premise and Lessor shall not be required to perform any services or
furnish any utilities of any kind or nature whatsoever. Lessor may discontinue
at any time any and all facilities furnished and services rendered by Lessor not
expressly covenanted for herein or required to be furnished or rendered by law,
it being understood that they constitute no part of the consideration of this
Lease.

     30.  [Reserved]

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

     31. Additional Security. Should the roof, structural, or mechanical
portions of the Premises be subjected to damage by corrosion or similar damage,
by virtue of Lessee’s use, abuse or misuse of the Premises, Lessee shall be
responsible to reimburse Lessor for the full direct and indirect costs to
effectuate such repairs, maintenance or replacements. In addition, Lessor shall
have the right to require that Lessee shall post an additional security deposit
with Lessor as Lessor shall demand to cover the estimated repair, maintenance or
replacement cost thereof.

     32. Effect of Repairs on Rental. No contract entered into or that may be
subsequently entered into by Lessor with Lessee, relative to any alterations,
additions, improvements or repairs, nor the failure of Lessor to make such
alterations, additions, improvements or repairs as required by any such
contract, nor the making by Lessor or his agents or contractors of such
alterations, additions, improvements or repairs shall in any way affect the
payment of the rent or said other charges at the time specified in this Lease,
except to the extent and in the manner herein provided.

     33. Conduct of Lessee. This Lease is granted upon the expressed condition
that Lessee and/or the occupants of the Premises herein leased shall not conduct
themselves in a manner which is contrary to any law, ordinance or regulation or
to the provisions of this Lease, and if at any time during the term of this
Lease or any extension or continuation thereof Lessee or any occupier of the
said Premises shall have conducted itself in such manner which is improper or
objectionable, Lessee shall be taken to have broken the covenants and conditions
of this lease, and Lessor will be entitled to all of the rights and remedies
granted and reserved herein for the Lessee’s failure to observe all of the
covenants and conditions of this Lease.

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

     34. Trash Disposal. Lessee shall provide a trash dumpster for the Premises.
Lessee shall pay bills for said trash collection within ten (10) days of receipt
of said bill from said trash hauler.

     35. Meters.

     A. Water Meter. If a water meter is not in place to measure the water
consumption by the Lessee and would not be supplied by the Utility Supplier
serving the Premises, Lessor agrees to install a water meter in the Premises
herein described to measure the water consumption of the said Premises. Said
meter may be a sub-meter from the meter installed by the Utility Supplier
serving the said Premises, if there is more than one (1) tenant in the building.

     B. Electrical. In the event that electricity is supplied to the Premises
and is not supplied directly by a public utility, then Lessor may elect to
install a meter or a sub-meter in the Premises herein described to measure the
electricity consumption of the said Premises.

     C. Gas. In the event that gas is supplied to the Premises and is not
supplied directly by a Utility Supplier, then Lessor may elect to install a
meter or sub-meter in the Premises herein described to measure the gas
consumption of the said Premises.

     D. All charges and payments due to Lessor under Paragraphs 35(A), 35(B) and
35(C) herein shall be paid in accordance with the provisions of Paragraph 5
supra.

     36. Real Estate Brokers. The parties warrant to one another that neither
party was introduced to the other through the intervention of a real estate
broker other than Hart Corporation, whose commission shall be paid in full by
Lessor. In the event commissions are claimed by any other real estate broker
claiming to have introduced Lessee to Lessor or claiming to be the efficient,
procuring cause of this Lease, all of said commission shall be paid by Lessee
and Lessor shall not be responsible in any event whatsoever for the payment of
commissions to real estate brokers regarding any Lease or sale of the Premises.

     37. Lessor’s Signs. Lessor shall have the right to display a “For Sale”
sign at any time, and also, after notice from either party of intention to
determine this Lease, or any time within three (3) months prior to the
expiration of this Lease, a “For Rent” sign, or both “For Rent” and “For Sale”
signs; and all said signs shall be placed upon such part of the Premises as
Lessor may elect and may contain such matter as Lessor shall require.
Prospective purchasers or tenants, authorized by Lessor may inspect the Premises
at reasonable hours at any time on reasonable advanced notice to Lessee so as to
minimize the effect of same on Lessee’s use and enjoyment of the Premises.

     38. Miscellaneous.

     A. Where any provision of this Lease mandates or permits a claim or
controversy hereunder to be submitted to arbitration, such claim or controversy
shall (or may, where arbitration is not mandated) be submitted to final and
binding Arbitration in the American Arbitration Association in Philadelphia PA,
in accordance with the rules and regulations of the American Arbitration
Association, as modified herein. Judgment upon the award rendered by the
American Arbitration Association shall be entered in any court having
jurisdiction thereof. The following standards shall supplement the regulations
of the American Arbitration Association and shall control in the event of
conflict.

           (i) The aggrieved party shall request arbitration after the dispute
arises and promptly serve notice of submission to the other party;

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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

               (a) The above notwithstanding, the Lessee shall be required to
request such arbitration no later than thirty (30) days after the dispute arises
and failure by Lessee to make such timely request shall be deemed to be a waiver
of Lessee’s rights, hereunder and full award shall be granted to Lessor;      
     (ii) Within twenty (20) days of submission, each party shall submit a
proposed award (“Proposed Award”) to the American Arbitration Association, each
individual item of dispute may be submitted as a separate item of dispute for
decision making purposes, even though they may be submitted under the same
arbitration hearing;            (iii) The arbitrator shall have jurisdiction,
only, to enter, as an award, the Proposed Award of one or the other party,
together with all amounts payable under Paragraph 38(a)(iv), infra., and may not
make any other award or finding;            (iv) All costs and expenses of the
arbitration shall be paid by the non-prevailing party and shall be added to the
award. Each party shall bear their own counsel fees, except that if the
arbitration is brought by Lessor as a result of a default by Lessee and Lessor
shall prevail in the arbitration, Lessee shall reimburse Lessor for all
expenses, including reasonable attorney’s fees in the same manner as provided in
Paragraph 20(I) hereof, which shall be added to the award.            (v) In the
event that the non-prevailing party does not make the required payment(s) within
ten (10) days of the arbitration, the prevailing party shall have the right to
confess judgment as provided in Paragraph 20 hereof.

     B. Parties Bound. Subject to the provisions of this Lease regarding consent
by Lessor, this Lease shall be binding upon and inure to the benefit of and be
enforceable by their respective successors and assigns.

     C. Waiver of Custom. Lessor shall have the right at all times, any law,
usage or custom notwithstanding, to enforce strictly the provisions of this
Lease, and the failure of Lessor at any time or times, strictly to enforce any
provision hereof, shall not be construed as having created a custom or waiver in
any way contrary to the specific provisions of this Lease or as having in any
way or manner modified this Lease.

     D. Number and Gender. For the purpose of this Lease, the singular shall
include the plural and the plural shall include the singular and the masculine
shall include the feminine and the neuter, and vice versa, as the context may
require. The word “Lessor” as used herein shall mean the owner from time to time
of fee or equitable title to the Premises and upon transfer of fee or equitable
title, the person named herein as Lessor shall have no further liability or
obligation hereunder.

     E. Captions. The captions contained herein are for the convenience of the
parties only. They do not in any way modify, amplify, alter or give full notice
of the provisions hereof.

     F. Amendments. This Lease may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge, or termination is sought.

     G. Partial Invalidity. If any clause or provision of this Lease or the
application thereof to any person or in any circumstance shall by any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such clause or provision to persons or in circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each
clause and provision of this lease shall be valid and enforceable to the fullest
extent permitted by law.

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

     H. Governing Law. This Lease shall be governed by the laws of the
Commonwealth of Pennsylvania.

     I. Entire Agreement. This Lease constitutes the entire agreement between
the parties hereto and cannot be modified except in writing as an Addendum to
this Lease, which Addendum must be executed by both the Lessor and Lessee.
Except as set forth herein, there are no promises, representations or
understandings between the parties of any kind or nature whatsoever.

     Neither party is to rely on the oral statements of any party nor, in
particular, on any oral statement or writing of any AGENT OR APPARENT PURPORTED
AGENT OF THE OTHER PARTY. NO EVIDENCE OF ORAL STATEMENT OR RELIANCE UPON ANY
SUCH ORAL STATEMENT MAY BE INTRODUCED AT THE TIME OF TRIAL AND/OR HEARING.
SECRETARIES, RECEPTIONISTS, PARALEGALS, RENTAL AGENTS, BROKERS, SECURITY GUARDS,
DOORMEN, CONSTRUCTION PERSONNEL, ADMINISTRATIVE ASSISTANTS AND/OR BOOKKEEPERS
HAVE NO AUTHORITY UNDER ANY CIRCUMSTANCES TO BIND ANY PARTY, EITHER ORALLY OR IN
WRITING.

     IT IS SPECIFICALLY UNDERSTOOD THAT LESSOR’S COUNSEL DOES NOT HAVE THE
AUTHORITY TO MODIFY, AMEND OR EXTEND THE LEASE.

     ALL NOTICES OF TERMINATION SHOULD BE SENT TO MARK HANKIN, PERSONALLY, AS
THE AUTHORIZED REPRESENTATIVE OF LESSOR, BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED. IT IS ESSENTIAL THAT THIS CONDITION BE STRICTLY ADHERED TO BY LESSEE.

     The intention of the parties to modify the Agreement shall be evidenced
solely by a written document signed by Mark Hankin, personally, as the
authorized representative of Lessor, and the designated representative of Lessee
and must contain the words “intending to be legally bound”.

     J. Rules and Regulations. At any time or times, and from time to time,
Lessor may make such reasonable rules and regulations as may be necessary or
desirable for the safety, care and cleanliness of the Premises and/or Huntingdon
Valley Industrial Center and of real and personal properties contained therein
and for the preservation of good order. Such rules and regulations shall, when
communicated in writing to Lessee, form a part of this Lease.

     K. Time of the Essence. All time set forth in this Lease shall be deemed to
be of the essence, and all notices or consents required herein shall be deemed
to have been given as of the date placed in the United States Postal Service or
a nationally recognized overnight mail delivery service as evidenced by the date
shown on certified or registered mail receipt form, or in the case of notices
for Lessee, Lessor may in the alternative, hand deliver the notice to the
Premises.

     L. Lessee agrees that it will pay the rent and all other charges herein
reserved as rent at the times and at the place that the same are payable,
without fail; and if Lessor shall at any time or times accept said rent or rent
charges after the same shall have become delinquent, such acceptance shall not
excuse delay upon subsequent occasions, or constitute or be construed as a
waiver of any of Lessor’s rights. Lessee agrees that any charge or payment
herein reserved, included, or agreed to be paid by Lessee may be proceeded for
and recovered by Lessor by legal process in the same manner as rent due and in
arrears.

     M. Lessee agrees that if, with the permission in writing of Lessor, Lessee
shall vacate or decide at any time during the term of this lease, or any renewal
thereof, to vacate the herein Premises

     N. [Reserved]

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

prior to the expiration of this Lease, or any renewal hereof, Lessee will not
cause or allow any other agent to represent Lessee in any subletting or
re-leasing of the Premises other than an agent approved by the Lessor and that
should Lessee do so, or attempt to do so, the Lessor may remove any signs that
may be placed on or about the Premises by such other agent without any liability
to Lessee or to said agent, the Lessee assuming all responsibility for such
action.

     O. Lessee agrees that any and all payments due hereunder shall be due and
payable by Lessee without any deduction or setoff whatsoever, and Lessee hereby
expressly waives any right to deduct or setoff any amounts from any such
payments.

     P. All utility charges, whether billed as a common area expense or whether
billed by separate utility meter, shall be considered as Additional Rents under
this Lease.

     Q. Consents and Approvals. Except as may otherwise be provided in this
Lease, any consent or approval required pursuant to this Lease shall not be
unreasonably withheld, delayed or conditioned and shall be exercised in good
faith and delivered in writing.

     39. Americans With Disabilities Act. Within ten (10) days after receipt,
Lessor and Lessee shall advise the other party in writing and provide the other
with copies of (as applicable), any notices alleging violation of the Americans
with Disabilities Act of 1990 (“ADA”) relating to any portion of the Premises,
the Building or the Lot; any claims made or threatened in writing regarding
non-compliance with the ADA and relating to any portion of the Premises, the
Building or the Lot; or any governmental or regulatory actions or investigations
instituted or threatened regarding non-compliance with the ADA and relating to
any portion of the Premises, the Building or the Lot.

     40. Hazardous Substances. As used herein, “Hazardous Substance” means any
substance which is toxic, ignitable, reactive or corrosive and which is
regulated by any local government, the State of Pennsylvania or the United
States Government. Hazardous Substance includes any and all materials or
substances which are defined as “hazardous wastes”, or “extremely hazardous
wastes” or “hazardous substance” pursuant to state, federal or local
governmental laws or regulations. “Hazardous Substance” includes, but is not
restricted to asbestos, polychlorinated biphenyls (PCBs) and petroleum. Lessee
shall not cause or permit any Hazardous Substance to be used, stored, generated
or disposed of on, about, or in the Premises by Lessee, Lessee’s agents,
employees, contractors or invitees, without first obtaining Lessor’s written
consent, which may be withheld, delayed, or conditioned at Lessor’s sole and
absolute discretion. If Hazardous Substances are used, stored, generated or
disposed of on or in the Premises or if the Premises become contaminated in any
manner for which Lessee is legally liable, Lessee shall indemnify, defend and
hold harmless the Lessor from any and all claims, damages, fines, judgments,
penalties, costs, liabilities or losses (including without limitation, a
decrease in value of the Premises or the Building or the Lot, damages, because
of adverse impact on marketing of the Premises and any and all sums paid for
settlement of claims, attorneys’, consultant and expert fees) arising during or
after the term hereof and arising as a result of such contamination by Lessee.
The indemnification includes, without limitation, any and all costs incurred,
because of any investigation of the Lot or any clean-up, removal or restoration
mandated by a federal, state or local agency or political subdivision. In
addition, if Lessee causes or permits the presence of any Hazardous Substance on
the Premises and this results in contamination, Lessee shall promptly, at its
sole expense, take any and all necessary actions to return the Premises to the
condition existing before the presence of any such Hazardous Substance on the
Premises,

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

provided, however, that Lessee shall first obtain Lessor’s approval for any such
remedial action. Within ten (10) days after receipt, Lessor and Lessee shall
advise the other party in writing and provide the other party with copies of (as
applicable), any notices alleging violation of any law or regulation relating to
any Hazardous Substance upon any portion of the Premises, the Building or the
Lot; any claims made or threatened in writing regarding non-compliance with any
law or regulation involving the presence of any Hazardous Substance or any
portion of the Premises, the Building or the Lot; or any governmental or
regulatory actions or investigations instituted or threatened regarding
non-compliance with any law or regulation involving any Hazardous Substance upon
any portion of the Premises, the Building or the Lot. If Lessor has reasonable
cause to believe that the Premises is in violation of any of the provisions of
this Article 40, Lessor shall, upon prior notice to Lessee, have the right, but
no obligation, at any time that is reasonable under the circumstances: (i) to
enter upon the Premises, take samples, review Lessee’s books and records for any
notices related to environmental violations, interview Lessee’s employees and
officers; (ii) either, cause environmental site assessments in accordance with
ASTM Standard E-1527-97 (as amended, from time to time, (the “ESA’s”) to be
performed, or require Lessee to cause the ESA’s to be performed and provided to
Lessor within a reasonable time; and (iii) conduct such other activities as
Lessor, in its sole and absolute discretion, deems appropriate, ((i),(ii) and
(iii) being referred to herein as the “Audit”). Lessee shall cooperate fully in
the conduct of the Audit. Lessor shall not unreasonably disturb the normal
operation of the Premises in the course of the Audit. Lessee shall, upon demand,
pay, as Additional Rent all costs and expenses of Lessor connected with the
Audit if it discloses the need for any remedial work. Where materials generated
by Lessee are disposed of off of the Premises, Lessee agrees that Lessor is not
the owner of the materials, and indemnifies and holds Lessor harmless for any
costs incurred in defending and paying for any action where it is alleged that
Lessor is the owner of the materials.

      41. Bankruptcy or Insolvency.

      A. If a petition is filed by or an order for relief is entered against
Lessee under Chapter 7 of the Bankruptcy Code and the trustee of Lessee elects
to assume this Lease for the purpose of assigning it, the election or
assignment, or both, may be made only if all of the terms and conditions of
Paragraphs 41(B) and 41(D) of this Lease are satisfied. Lessee’s rights to be
compensated for damages in the bankruptcy proceeding, however, shall survive.

      B. If Lessee files a petition for reorganization under Chapter 11 or 13 of
the Bankruptcy Code or a proceeding that is filed by or against Lessee under any
other chapter of the Bankruptcy Code is converted to a Chapter 11 or 13
proceeding and Lessee’s trustee or Lessee, as a debtor-in-possession, fails to
assume this Lease within sixty (60) days of filing of the petition or the
conversion, the trustee or the debtor-in-possession will be deemed to have
rejected this Lease. The election to assume this Lease must be given by notice
hereunder and, in Lessor’s business judgment, all of the following conditions,
which Lessor and Lessee acknowledge to be commercially reasonably, must have
been satisfied:

          (a) The trustee or the debtor-in-possession has cured or has provided
to the Lessor adequate assurance, as defined in this Paragraph, that:       (i)
The trustee will cure all monetary defaults under this Lease within ten (10)
days from the date of the assumption; and       (ii) The trustee will cure all
non-monetary defaults under this Lease within thirty (30) days from date of
assumption.     (b) The trustee or the debtor-in-possession has compensated
Lessor, or has provided to Lessor adequate assurance as defined in this
Paragraph, that within ten (10) days from the date of the assumption, Lessor
will be compensated for any pecuniary loss it incurred arising from the default
of the  

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

            Lessee, the trustee or the debtor-in-possession as recited in
Lessor’s written statement of pecuniary loss sent to the trustee or the
debtor-in-possession by notice hereunder.     (c) The trustee or the
debtor-in-possession has provided Lessor with adequate assurance of the future
performance of each of Lessee’s obligation under the Lease; provided, however,
that:       (i) The trustee or debtor-in-possession will also deposit with
Lessor as security for the timely payment of rent, an amount equal to three
months Minimum Annual Rent and Additional Rent accruing under this Lease on a
fully gross basis;       (ii) The obligations imposed upon the trustee or the
debtor-in-possession will continue for Lessee after the completion of bankruptcy
proceedings.     (d) Lessor has determined that the assumption of the Lease will
not breach any provision in any other lease, mortgage, refinancing agreement or
other agreement by which Lessor is bound relating to the Premises.     (e) For
purposes of this Paragraph, “adequate assurance” means that:       (i) Lessor
will determine that the trustee or the debtor-in-possession has, will continue
to have, sufficient unencumbered assets after payment of all secured obligations
and administrative expenses to assure Lessor that the trustee or
debtor-in-possession will have sufficient funds to fulfill Lessee’s obligations
under this Lease.       (ii) An order will have been entered segregating
sufficient cash payable to Lessor and/or a valid and perfected first lien in
security interest will have been granted in property of Lessee, trustee or
debtor-in-possession that is acceptable for value in kind to Lessor to secure to
Lessor the obligation of the trustee or debtor-in-posession to cure the monetary
or non-monetary defaults under this Lease within the time periods set forth
above.   C. In the event that this Lease is assumed by a trustee appointed to
Lessee or by Lessee, as debtor-in-possession, under the provisions of Paragraph
41(B) of this Lease, and, thereafter, Lessee is either adjudicated bankrupt or
files a subsequent petition for arrangement under Chapter 11 of the Bankruptcy
Code, then Lessor may terminate, at its option, this Lease and all of Lessee’s
rights under it by giving notice of Lessor’s election to terminate.   D. If the
trustee or the debtor-in-possession has assumed the Lease, under the terms of
subparagraphs (A) or (B) hereof, to assign or to elect to assign Lessee’s
interest under this Lease of the estate created by that interest or any other
person, that interest or estate may be assigned only if Lessor acknowledges in
writing that the intended assignee has provided adequate assurance, as defined
in this subparagraph (D), of future performance of all of the terms, covenants
and conditions of this Lease to be performed by the Lessee.     For the purpose
of this subparagraph (D), “adequate assurance of future performance” means that
the Lessor has ascertained that each of the following conditions have been
satisfied:     (a) The assignee has submitted a current financial statement,
audited by a certified public accountant, that shows a net worth and working
capital in amounts determined by Lessor to be sufficient to assure the future
performance by the assignee of Lessee’s obligations under this Lease;  

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

           (b) If requested by Lessor, the assignee will obtain guaranties in
form and substance satisfactory to Lessor from one or more persons who satisfy
Lessor’s standards of creditworthiness;            (c) Lessor has obtained all
consents or waivers from any third party required under any lease, mortgage,
financing arrangement, or other agreement by which Lessor is bound to enable
Lessor to permit the assignment.

     E. When, pursuant to the Bankruptcy Code, the trustee or the
debtor-in-possession is obligated to pay reasonable use and occupancy charges
for the use of all or part of the Premises, the charges will not be less than
the minimum monthly rent and all Additional Rent accruing hereunder on a fully
gross basis.

     F. Neither Lessee’s interest in the Lease or any estate of Lessee created
in the Lease will pass to any trustee, receiver, assignee for the benefit of
creditors, or any other person or entity or otherwise by operation of law under
the laws of any state having jurisdiction over the person or property of Lessee
(“State Law”) unless Lessor consents in writing to this transfer. Lessor’s
acceptance of rent or any other payments from any trustee, assignee, receiver,
person or entity will not be deemed to have been waived, or waive, the need to
obtain Lessor’s consent or Lessor’s right to terminate this Lease for any
transfer of Lessee’s interest under this Lease without this consent.

     G. Lessor may terminate, at its option, by giving Lessee written notice of
this election, this Lease and all of Lessee’s rights under this Lease if any of
the following events occur:

           (a) Lessee’s estate created by this Lease is taken in execution or by
other process of law;            (b) Lessee or any guarantor of Lessee’s
obligations under this Lease (“Guarantor”) is adjudicated insolvent pursuant to
the provisions of any present or future insolvency law under the laws of any
state having jurisdiction;            (c) Any proceedings or filings by or
against that Guarantor under the Bankruptcy Code or any similar provisions of
any future federal bankruptcy laws;            (d) A receiver or trustee of the
property of Lessee or the Guarantor is appointed under State Law by reason of
Lessee’s or Guarantor’s insolvency or inability to pay its debts as they become
due or otherwise; or            (e) Any assignment for the benefit of creditors
is made of Lessee’s or Guarantor’s property under State Law.

     42. EFFECTIVENESS: THE FURNISHING OF THE FORM OF THIS LEASE, SHALL NOT
CONSTITUTE AN OFFER OF ANY KIND OR A RESERVATION OF ANY OPTION FOR THE LEASED
SPACE; THIS LEASE SHALL BECOME EFFECTIVE UPON AND ONLY UPON ITS EXECUTION BY AND
DELIVERY TO EACH PARTY HERETO.

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

     IN WITNESS WHEREOF, AND INTENDING TO BE LEGALLY BOUND, we have hereunto set
our hands and seal the date first above written.

                    By: -s- Mark Hankin   Date:  10/18/02

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WITNESS    

--------------------------------------------------------------------------------

Mark Hankin    

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        HANMAR ASSOCIATES, MLP, A PENNSYLVANIA
LIMITED PARTNERSHIP, BY INDUSTRIAL REAL
ESTATE MANAGEMENT, ITS GENERAL PARTNER-
LESSOR         By:  -s- Mark Hankin   Date:  10/18/02      

--------------------------------------------------------------------------------

     

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      Its:  Pres            

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              AMERICAN BANK NOTE HOLOGRAPHICS, INC. LESSEE     -s- ILLEGIBLE  
By: -s- Kenneth Traub   Date:  10/16/02

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WITNESS    

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President    

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      Kenneth Traub          

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Print Name           Corporate Seal:   Attest: -s- Alan Goldstein   Date:
 10/16/02      

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Secretary    

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      -s- Alan Goldstein          

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Print Name      

 
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HANKIN MANAGEMENT COMPANY
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
October 9, 2002/kat

EXHIBIT “A”
AMERICAN BANK NOTE HOLOGRAPHICS, INC.
1448 COUNTY LINE ROAD
HUNTINGDON VALLEY, PA

     Lessor and Lessee mutually agree that the Demised Premises are accepted in
its existing "as-is, where-is" condition, except that the Lessor shall:

1.   Re-paint the exterior block wall of the building;   2.   Repair or replace
at Lessor's option, the exterior fire door on the north side of the building;  
3.   Service the other three (3) metal fire doors in the exterior masonry walls
of the building;   4.   Repair any existing damage to or replace at Lessor's
option, the mansard roof on the southeast corner of the building; and   5.  
Clean the ceramic tile walls and floors and the plumbing fixtures in the
existing bathrooms.                  

NOTE: The above improvements will not be completed as of the Lease Commencement
Date.

37

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[floorplan]

 

 

 

 

Exhibit “B”

 

 

 

 

 

 

 

 

 

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Exhibit “C”

VACATION REQUIREMENTS

Work to be performed by Lessee in the event that Lessee vacates the Demised
Premises during the term of the Lease:

1.   Lessee shall notify Lessor in writing, certified mail, return receipt
requested, of its intention to vacate the Premises in advance of such vacation;
  2.   Such vacation shall not occur until ten (10) days after receipt of such
notification;   3.   Lessee shall ensure that the heating system is activated
and that the thermostats are set at no less than 55 Degrees and continually
inspect the facility to ensure the maintenance of such temperature;   4.  
Lessee shall provide a temperature monitor, which is to be monitored by a
central call station to ensure that the building maintains a minimum 55 Degree
temperature. A central call monitoring company shall be required to contact such
employees as designated by Lessee and Mark Hankin at 215-537-8400, ext. 134
(office) or 215-651-0855 (cellular);   5.   Lessee shall ensure that the gas and
electric bills are paid and the heat and electric remain activated at all times;
  6.   Lessee shall drain and winterize the domestic water lines and winterize
the sinks and toilets by installing antifreeze in the toilet bowls, tank and the
drain lines of the sinks;   7.   Lessee shall continually inspect to ensure that
the exterior lights are operating;   8.   Lessee shall insure that the sprinkler
system is monitored for temperature and activation;   9.   Lessee shall install
a centrally monitored burglar system which shall be continually monitored in the
same fashion as the temperature monitors to ensure against break-ins and
vandalism;   10.   Lessee shall continually inspect the interior and exterior of
the building to ensure against vandalism damage, broken water lines, etc.   11.
  Lessee shall comply with any requirements of any current or future insurance
carrier regarding the maintenance and monitoring of the Premises.