Document:

<PAGE>

                                                                    Exhibit 10.1

                              SETTLEMENT AGREEMENT
                                 - "AGREEMENT" -

                                     between

                      AMERICAN BANK NOTE HOLOGRAPHICS, INC.
      such being represented by its Chief Executive Officer, Kenneth Traub,
             399 Executive Boulevard, Elmsford, New York 10523, USA
                                     -"ABH"-

         Attorneys: Fulbright & Jaworski L.L.P., Attn. Mr. Peter Felfe,
                    666 Fifth Ave., New York 10103-3198, USA

                                       and

                           LEONHARD KURZ GMBH & CO. KG
          such being represented by its General Manager and President,
                                 Mr. Walter Kurz
                   Schwabacher Str. 482, 90763 Fuerth, Germany
                                    -"KURZ"-

          Attorneys: Louis, Pohlau, Lohrentz & Segeth, Attn. Mr. Pohlau
                     Merianstr. 26, 90409 Nuremberg, Germany

           - ABH and Kurz individually or collectively "PARTY(IES)" -
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S>      <C>                                                                              <C>
1.       Obligations of ABH..............................................................   5

2.       Obligations of Kurz.............................................................   5

3.       Cross License Agreement between the Parties dated February 25th, 1992 ("CLA")...   7

4.       Right to represent and bind.....................................................   7

5.       Miscellaneous...................................................................   7

6.       Assignment......................................................................   8

7.       Confidential Information........................................................   9

8.       Press Release...................................................................   9

9.       Applicable Law..................................................................   9

10.      Arbitration.....................................................................   9

11.      Attachments.....................................................................   9
</TABLE>
<PAGE>
PREAMBLE

WHEREAS, ABH is a corporation organized and existing under the laws of Delaware;
and

WHEREAS, ABH is one of the leading companies in the design, production and
marketing of holograms used primarily for security applications such as the
authentication of transaction cards, valuable documents, and consumer and
industrial products; and

WHEREAS, Kurz is a limited partnership organized and existing under the laws of
the Federal Republic of Germany; and

WHEREAS, Kurz is one of the leading companies involved in the research,
development and production of decorative and security features, such as but not
limited to, optically variable devices for all kinds of applications (bank
notes, bank documents, identification documents, etc.); and

WHEREAS, ABH and Kurz each have a portfolio of patents in their field of
operation, especially in relation to optically variable devices for all kinds of
applications (bank notes, bank documents, identification documents, etc.); and

WHEREAS, ABH is of the opinion that Kurz has infringed its Demet Patents (A1)
and Gallagher Patents (A2) and Kurz is of the opinion that ABH has infringed its
Meisel Patents (A3); and

WHEREAS, Kurz is of the opinion that it has not infringed the Demet Patents (A1)
and Gallagher Patents (A2) and ABH is of the opinion that it has not infringed
the Meisel Patents (A3); and

WHEREAS, the Parties intend to conclude a final settlement in order to resolve
the existing disputes which have arisen between them, on the one hand and to
waive all claims in relation to the past, present and the future activities of
the Parties in relation to the patents (A1, A2, A3), on the other hand;

NOW THEREFORE, the Parties have agreed to an amicable out-of-court settlement as
follows:
<PAGE>
DEFINITIONS

0.1      "ABH" shall mean American Banknote Holographics, Inc. with its
         registered office at 399 Executive Boulevard, Elmsford, New York 10523,
         United States and its worldwide subsidiaries, affiliates, successors,
         assignees and other organizations of ABH in which ABH has a direct or
         indirect twenty-five percent (25%) share participation.

0.2      "ABH Customers" shall mean customers of ABH of any tier (i.e. customers
         of ABH, customers of ABH's customers and their consecutive customers).

0.3      "Application" or "Apply" shall mean the application of a Kurz Product
         to a substrate, such as but not limited to, bank notes, bank documents,
         identification documents and decorative applications.

0.4      "Demet Patents" shall mean the patents defined in A1.

0.5      "Gallagher Patents" shall mean the patents defined in A2.

0.6      "Kurz" shall mean Leonhard Kurz GmbH & Co. KG with its registered
         office at Schwabacher Str. 482, 90763, Fuerth, Germany and its
         worldwide subsidiaries, affiliates, successors, assignees and other
         organizations of Kurz over which Kurz has a direct or indirect
         twenty-five percent (25%) share participation.

0.7      "Kurz Customers" shall mean customers of Kurz of any tier (i.e.
         customers of Kurz, customers of Kurz's customers and their consecutive
         customers) which, inter alia, Apply and / or Use the Kurz Product and
         may, in the opinion of ABH, infringe the Demet Patents and Gallagher
         Patents.

0.8      "Kurz Product" shall mean the foil products or systems with optically
         variable devices produced, used or marketed by Kurz and sold by Kurz to
         Kurz Customers for application to substrates.

0.9      "Meisel Patents" shall mean the patents defined in A3 and any U.S. or
         foreign counterpart patents.

0.10     "Use" or "To Use" shall mean to Apply, market, use, sell, supply or
         perform other related activities in respect of the Kurz Products.
<PAGE>
1.       OBLIGATIONS OF ABH

1.1      In consideration of and subject to payment of the amounts specified in
         Article 2. and following the payment mode according to Article 2, ABH
         hereby grants to Kurz and Kurz Customers an irrevocable release from
         any past, present and future infringement of the Demet Patents and
         Gallagher Patents in connection with the Use of a Kurz Product
         (hereinafter "Released Products") and any of its consequences
         ("ABH-Release") other than the future Use of "Licensed Products" as
         defined in Article 1.6 of the contemporaneous Patent License Agreement
         between the Parties hereto, until the expiration date of such Demet
         Patents and Gallagher Patents as defined in A1 and A2. This release
         shall be retroactive and extend to activities of Kurz and Kurz
         Customers occurring prior to the date of execution of this Agreement,
         except as to future use of "Licensed Products" as defined in Article
         1.6 of the contemporaneous Patent License Agreement.

1.2      ABH shall assume responsibility for the application, maintenance,
         reexamination, reissue, opposition and prosecution of any kind relating
         to the Demet Patents and Gallagher Patents.

1.3      ABH is the owner of the entire right in and to the Demet Patents and
         Gallagher Patents. ABH has full power and authority to grant the
         Release in Article 1.1 and has the sole right to grant rights of Use to
         Kurz and/or Kurz Customers of the Demet Patents and Gallagher Patents
         hereunder with respect to Released Products. The Demet Patents and
         Gallagher Patents are free and clear of all liens, charges and
         encumbrances. ABH has not granted licenses or rights to any other party
         in respect of the Demet Patents and Gallagher Patents that would
         restrict the Release of Kurz and / or Kurz Customers to Use the Demet
         Patents and Gallagher Patents granted by ABH hereunder, with respect to
         Released Products.

2.       OBLIGATIONS OF KURZ

2.1      Kurz hereby grants to ABH and ABH Customers an irrevocable release from
         any charge of past, present and future infringement of the Meisel
         Patents ("Kurz-Release").
<PAGE>
2.2      Kurz has full authority to grant the Kurz-Release and/or waivers in
         Article 2.1

2.3      Kurz shall pay to ABH a lump sum of U.S. $ 900,000 (nine hundred
         thousand U.S. dollars) subject to Article 2.4.

2.4      The Parties agree that the payment (Article 2.3) is in full and final
         settlement of the releases, waivers and rights granted by the Parties
         to each other expressed herein. The Parties agree that such payment is
         without prejudice to Kurz's position that prior to this Agreement it
         had no legal duty to make any payment to ABH.

2.5      The sum of U.S. $ 900,000 (nine hundred thousand U.S. dollars) shall be
         paid in the following installments:

         2.5.1    One-third of said sum, that is U.S. $ 300,000 (three hundred
                  thousand U.S. dollars) shall be paid within seven (7) bank
                  working days in Germany from the date of signature of this
                  Agreement;

         2.5.2    The remaining two-thirds, that is U.S. $ 600,000 (six hundred
                  thousand U.S. dollars) shall be paid, to an account nominated
                  by ABH, in 8 (eight) installments of U.S. $75,000 (seventyfive
                  thousand U.S. dollars) each, no later than the first banking
                  working day in Germany of the following months:

                  October 2002;
                  January 2003;
                  April 2003;
                  July 2003;
                  October  2003;
                  January 2004;
                  April 2004; and
                  July 2004.

2.6      Upon the coming into effect of this Agreement (5.5), the Parties shall
         have no claims against each other in relation to the subject matter of
         this Agreement other than those expressly defined in this Agreement and
         the Patent License Agreement executed contemporaneously herewith (A4).
<PAGE>
3.       CROSS LICENSE AGREEMENT BETWEEN THE PARTIES DATED FEBRUARY 25TH, 1992
         ("CLA")

         The Parties further agree that the CLA shall be replaced with the
         Substitute CLA (A5).

4.       RIGHT TO REPRESENT AND BIND

         This Agreement is fully legally binding in every respect upon ABH and
         Kurz. Leonhard Kurz GmbH & Co. KG represents, and warrants, that it is
         fully entitled to represent and to act for and on behalf of Kurz by
         execution of this Agreement, and vice versa, American Bank Note
         Holographics, Inc. represents and warrants, that it is fully entitled
         to represent and to act for and on behalf of ABH by execution of this
         Agreement.

5.       MISCELLANEOUS

5.1      COSTS

         Each Party shall bear its own costs for lawyers fees and expenditure
         incurred in relation to this Agreement.

5.2      NOTICES

         To be binding, all information, letters, notices and the like, to be
         exchanged between the Parties under the terms of this Agreement shall
         be in writing and shall be validly made by personal delivery with
         acknowledgement of receipt requested or by fax with confirmation by
         letter or by registered letter:

<TABLE>
<S>                                                <C>
         ABH                                       TO KURZ
         American Bank Note Holographics, Inc.     Leonhard Kurz GmbH & Co. KG
         Chief Executive Officer                   General Manager and President
         399 Executive Boulevard                   Schwabacher Str. 482
         Elmsford, NY 10523                        90763 Fuerth
         USA                                       Germany
         Tel: 001 / 914 / 592 - 2355               Tel: 0049 / 911 / 7141 - 0
         Fax: 001 / 914 / 592 - 3248               Fax: 0049 / 911 / 7141 - 506
</TABLE>

         Any change of address shall be furnished in writing and sufficiently in
         advance to the other Party. Notices hereunder shall be effective when
         received or demonstrably deposited at the other Party's registered
         office.
<PAGE>
5.3      INVALIDITY

         If any provision contained in this Agreement is or becomes ineffective
         or is held to be invalid by a competent authority or court having final
         jurisdiction thereon, all other provisions of this Agreement shall
         remain in full force and effect and there shall be substituted for the
         said invalid provision such valid provisions as have an economic effect
         as similar as possible to the said provision.

5.4      ENTIRE AGREEMENT

         This Agreement constitutes the entire Agreement between the Parties and
         supersedes all prior agreements, oral or written, concerning the
         subject matter hereof. This Agreement may be amended only in writing
         duly signed by the Parties hereto.

5.5      COMING INTO EFFECT

         This Agreement shall come into effect subject to the following
         conditions being fulfilled:

         a)       Signature of this Agreement, Patent License Agreement and the
                  Substitute CLA by both Parties ("Date of Execution of this
                  Agreement"); and

         b)       Payment of the sum of U.S. $300,000 by Kurz to ABH as per
                  Article 2.5.1 of this Agreement.

6.       ASSIGNMENT

6.1      In the event that ABH assigns any of the Demet Patents and / or
         Gallagher Patents to a third party, ABH shall guarantee that such third
         party is obliged to fulfill ABH's obligations under the terms of this
         Agreement in relation to the Demet Patents and / or Gallagher Patents.

6.2      The Release granted in Article 1.1 is not assignable by Kurz without
         the written consent of ABH.
<PAGE>
7.       CONFIDENTIAL INFORMATION

         The existence and contents of this Agreement shall be treated as being
         confidential in relation to third parties and shall not be published or
         referred to in advertising material or in information to shareholders
         unless such confidential information is required to be disclosed under
         U.S. laws or under German laws to a public authority or agency
         (including, without limitation, the Securities and Exchange Commission)
         or its equivalent in Germany or pursuant to judicial action, and the
         other Party has been informed prior to such disclosure.

8.       PRESS RELEASE

         Kurz and ABH shall agree to a mutually acceptable press release
         concerning this Agreement and settlement of their differences.

9.       APPLICABLE LAW

         This Agreement shall be governed by English substantive law.

10.      ARBITRATION

         Any dispute arising out of or in connection with this Agreement,
         including any question regarding its existence, validity or
         termination, shall be referred to and finally resolved by arbitration
         under the Rules of Conciliation and Arbitration of the International
         Chamber of Commerce by 3 arbitrators appointed in accordance with the
         said Rules. The place of arbitration shall be London, UK. The language
         of the arbitration shall be English.

11.      ATTACHMENTS

         Attachments 1 - 5 shall form an integral part of this Agreement even if
         they are not signed separately.

<TABLE>
<CAPTION>
                                                                         DATE            PAGE(S)
<S>            <C>                                                   <C>                 <C>
         A1    List of DeMet Patents                                      ./.                1
         A2    List of Gallagher Patents                                  ./.                1
         A3    List of Meisel Patents                                     ./.                1
         A4    Patent Licence Agreement                              01.July.2002           14
         A5    Agreement (Substitute CLA to replace Agreement        01.July.2002           15
               dated Feb. 25th 1992)
</TABLE>
<PAGE>
<TABLE>
<S>                                        <C>
The undersigned is authorized to           The undersigned is authorized to
represent and execute this Agreement       represent and execute this Agreement
on behalf of ABH.                          on behalf of Kurz.

Frankfurt,the 01.July.2002                 Frankfurt,the 01.July.2002

/s/ Kenneth Traub                          /s/ Werner Reinhart
---------------------------------------    ------------------------------------
AMERICAN BANK NOTE                         LEONHARD KURZ
HOLOGRAPHICS, INC.                         GmbH & Co KG
Name:    Kenneth Traub                     Name:    Werner Reinhart
Title:   Chief Executive Officer           Title:   Vice President of Security
                                           Concepts and Member of the Board
</TABLE>
<PAGE>
      Attachment 1 to the Settlement Agreement ABNH / Kurz dated 01.07.2002

MALLIK ("DEMET") PATENTS

<TABLE>
<CAPTION>
NO.         PATENT NO.         COUNTRY OF VALIDITY          EXPIRATION DATE
---         ----------         -------------------          ---------------
<S>         <C>                <C>                          <C>
1           5.044,707          United States                25 January 2010
2           5.128,779          United States                07 July 2009
3           5.142,383          United States                25 January 2010
4           5.145,212          United States                08 September 2009
5           5.411,296          United States                02 May 2012
6           245300             Argentina                    09 February 2009
7           1332301            Canada                       11 October 2011
8           023740             Colombia                     09 February 2009
9           0328086            European Patent (GB)         09 February 2009
10          1008105            Hong Kong (from EP)          09 February 2009
11          170832             Mexico                       10 February 2009
12          52363              Venezuela                    09 February 2009
</TABLE>
<PAGE>
      Attachment 2 to the Settlement Agreement ABNH / Kurz dated 01.07.2002

GALLAGHER PATENTS

<TABLE>
<CAPTION>
NO.         PATENT NO.         COUNTRY OF VALIDITY          EXPIRATION DATE
---         ----------         -------------------          ---------------
<S>         <C>                <C>                          <C>
1           1 257 992          Canada                       01 August 2006
2           2 129 739          United Kingdom               01 February 2003
3           656 721 A5         Switzerland                  05 October 2003
4           2 535 864          France                       27 April 2003
</TABLE>
<PAGE>
      Attachment 3 to the Settlement Agreement ABNH / Kurz dated 01.07.2002

MEISEL PATENTS

<TABLE>
<CAPTION>
NO.         PATENT NO.         COUNTRY OF VALIDITY          EXPIRATION DATE         OWNER
---         ----------         -------------------          ---------------         -----
<S>         <C>                <C>                          <C>                     <C>
1           4 232 077          United States                04 November 1997        Kurz
2           1 568 563          Great Britain                29 October 1996         Kurz
</TABLE><PAGE>
                                                                    Exhibit 10.2

                                                          CONFIDENTIAL TREATMENT
                                                          REQUESTED PURSUANT TO
                                                          RULE 24b-2

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

Certain portions of this exhibit have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.
The omitted materials have been filed separately with the Securities and
Exchange Commission.

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

                            PATENT LICENSE AGREEMENT
                                  -"AGREEMENT"-

                                     between

                      AMERICAN BANK NOTE HOLOGRAPHICS, INC.
    such being represented by its Chief Executive Officer, Mr. Kenneth Traub
             399 Executive Boulevard, Elmsford, New York 10523, USA
                                     -"ABH"-

          Attorneys: Fulbright & Jaworski, LLP, Attn. Mr. Peter Felfe,
                    666 Fifth Ave., New York 10103-3198, USA

                                       and

                           LEONHARD KURZ GMBH & CO. KG
          such being represented by its General Manager and President,
                                 Mr. Walter KURZ
                   Schwabacher Str. 482, 90763 Furth, Germany
                                    -"KURZ"-

          Attorneys: Louis, Pohlau, Lohrentz & Segeth, Attn. Mr. Pohlau
                     Merianstr. 26, 90409 Nuremberg, Germany

            -ABH and KURZ individually or collectively "PARTY(IES)"-
<PAGE>
<TABLE>
<S>    <C>                                                                   <C>
1.     DEFINITIONS.........................................................    3

2.     GRANT OF LICENSE....................................................    4

3.     ROYALTY.............................................................    5

4.     INFRINGEMENT CLAIMS.................................................    6

5.     REPRESENTATIONS, WARRANTIES AND COVENANTS OF ABH....................    6

6.     TERM................................................................    7

7.     DEFAULT AND TERMINATION.............................................    7

8.     ACCOUNTING..........................................................    8

9.     INDEMNITY...........................................................    9

10.    ASSIGNMENT..........................................................    9

11.    RIGHT TO REPRESENT AND BIND.........................................   10

12.    MISCELLANEOUS.......................................................   10

12.1   ENTIRE AGREEMENT....................................................   10

12.2   LAW.................................................................   10

12.3   ARBITRATION.........................................................   10

12.4   NOTICES.............................................................   11

12.5   INVALIDITY..........................................................   11

12.6   CONFIDENTIALITY.....................................................   11

13.    EFFECTIVE DATE......................................................   12

14.    ATTACHMENT..........................................................   12
</TABLE>
<PAGE>
PREAMBLE

WHEREAS, ABH owns the Demet Patents registered in the United States referred to
in A1;

WHEREAS, KURZ is desirous of acquiring a non-exclusive, world-wide right and
license, to produce, have produced, use, market and sell, KURZ Product(s) with
optically variable devices for application to substrates, especially documents,
covered by the claims of said Demet Patents (A1), and ABH is willing to grant
such right and license upon the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants,
terms and conditions hereinafter expressed, the Parties hereby agree as follows:

1.       DEFINITIONS

1.1      ABH shall mean American Bank Note Holographics, Inc. with its
         registered office at 399 Executive Boulevard, Elmsford, New York 10523,
         United States and its worldwide subsidiaries, affiliates, successors,
         assignees and other organizations of ABH over which ABH has a direct or
         indirect twenty-five per cent (25%) share participation.

1.2      KURZ PRODUCT(S) shall mean the foil products or systems with optically
         variable devices which are produced, have been produced, used or
         marketed by KURZ and sold by KURZ to KURZ Customers for application to
         substrates.

1.3      KURZ CUSTOMERS shall mean customers of KURZ of any tier (i.e. customers
         of KURZ, customers of KURZ's customers and their consecutive customers)
         which, inter alia, apply and/or use the KURZ Product and may, by
         producing a Licensed Product, in the opinion of ABH, infringe the Demet
         Patents (A1).

1.4      KURZ shall mean Leonhard KURZ GmbH & Co KG with its registered office
         at Schwabacher Str. 482, 90763, Fuerth, Germany and its worldwide
         subsidiaries, affiliates, successors, assignees and other organizations
         of KURZ over which KURZ has a direct or indirect twenty-five percent
         (25%) share participation.

1.5      DEMET PATENTS shall mean the patents defined in A1, along with all
         foreign counterparts, improvements, divisions, continuations and
         reissues thereof.
<PAGE>
1.6      LICENSED PRODUCT(S) shall mean any KURZ Product for KURZ Customer
         contracts concluded after the Effective Date (Article 13.) containing
         an optically variable device applied to a substrate in such a way that,
         due to part-demetallization, alpha-numeric or image information
         provided on the substrate is viewable through the optically variable
         device of the KURZ Product such that under normal illumination
         conditions the alphanumeric or image information can be recognized and
         identified with the unaided eye from a viewing distance of 30 cm.
         Embodiments of the Demet Patents and / or Gallagher Patents other than
         those corresponding to the Licensed Product(s) are not covered by the
         Grant of License herein and are covered by a separate Settlement
         Agreement being executed by the Parties contemporaneously herewith.

1.7      COMMENCEMENT DATE of this Agreement shall be the date of the last
         signature written below.

1.8      FISCAL YEAR means the period beginning on 1 February and ending on 31
         January of the next year, and each consecutive twelve month period
         thereafter.

1.9      NET SELLING PRICE shall mean the invoiced price for the Licensed
         Product(s) Ex-Works production facilities KURZ according to Incoterms
         2000 after deduction of discounts, deductibles as per 3.2, packaging,
         freight, royalties due to third parties, duties and taxes, KURZ
         Product(s) returned under warranty by KURZ Customers but before
         deduction of any other items.

2.       GRANT OF LICENSE

2.1      Subject to Article 7, ABH hereby grants to KURZ for KURZ Customer
         contracts concluded after the Effective Date (13.) an irrevocable,
         non-exclusive, world-wide right to produce, have produced, use, market
         and sell the Licensed Product(s); KURZ may sub-license such right and
         license to KURZ Customers in connection with the application or use of
         a KURZ Product until the expiration date of the Demet Patents (A1);
         provided KURZ remains responsible for payment of the royalty due under
         Article 3.1. ABH waives all rights against KURZ's Customers in relation
         to the KURZ Product(s) and/or Licensed Product(s) covered by its Demet
         Patents (A1).
<PAGE>
2.2      This Agreement is to settle certain disputes between the Parties and
         nothing contained in this Agreement shall be construed as a
         representation or warranty by ABH as to the validity or scope of the
         Demet Patents. Specifically, nothing herein, including the definition
         of royalty-bearing Licensed Product, shall be regarded as affecting the
         scope of the Demet Patents.

3.       ROYALTY

3.1      KURZ shall pay to ABH a royalty for each Licensed Product but not more
         than one royalty for each Licensed Product. The royalty shall be 3.5%
         of the Net Selling Price.

3.2      If a Licensed Product contains features additional to those licensed by
         ABH to KURZ under this Agreement (2.), the royalty payable by KURZ to
         ABH for each Licensed Product shall be calculated based on a reduction
         of the Net Selling Price. Such reduction shall be determined by the
         Parties according to the value of the additional features in proportion
         to the licensed features (A2).

3.3      For the purpose of this Agreement, the royalty for a Licensed Product
         shall be due within thirty (30) days from the end of each calendar
         quarter, and shall be based on sales which KURZ has billed a KURZ
         Customer. Royalties paid by KURZ to ABH on Licensed Product(s) which
         are not accepted or are returned by a KURZ Customer within thirty (30)
         days shall be credited to KURZ in the following quarterly statement.

3.4      KURZ's obligation to pay royalties hereunder shall cease upon the
         earliest of (i) an expiration of the last to expire Demet Patent(s)
         (A1) or (ii) upon the judgment of invalidity in respect of the Demet
         Patent(s) by a court or administrative agency of competent jurisdiction
         from which no appeal is taken or can be taken or (iii) non-payment of
         maintenance fees in respect of the Demet Patents (A1) by ABH or (iv)
         the termination of this Agreement (7.).

3.5      At the time KURZ delivers the accounting statement required by Article
         8.1, KURZ shall simultaneously pay to ABH a sum equal to the aggregate
         payment due based on the information contained in such accounting
         statement and consistent with this Agreement.
<PAGE>
3.6      All payments shall be effected in U.S. dollars. For the purposes of
         calculating the royalty payments the exchange rate applicable to the
         payments (3.6) to be paid by Kurz under Article 3.1 hereunder shall be
         converted from Euro into U.S dollars at the end of each calendar
         quarter according to the exchange rate published in the Daily Euro
         Foreign Exchange Reference Rate for the Euro/U.S. dollar on the web
         site of the European Central Bank (http://www.ecb.int/).

4.       INFRINGEMENT CLAIMS

         ABH shall, at its election and expense, have the right, but not the
         obligation, to prosecute any and all claims against third parties for
         infringement of the Demet Patents (A1). ABH shall also have the right,
         but not the obligation, to defend any and all claims against the
         validity of the Demet Patents (A1) by third parties. If ABH finds it
         necessary or desirable, it may join KURZ as a party in any suit or
         proceeding against third parties alleging infringement of the Demet
         Patents (A1). The cost of joining KURZ as a party shall be borne by
         ABH. Should ABH elect not to prosecute or defend or not to continue to
         prosecute or defend any claim, action or proceeding described above, it
         shall promptly give notice thereof to KURZ and KURZ shall have the
         right, at its own expense, to prosecute or defend or continue the
         prosecution or defense of such claim, action or proceeding. In this
         event, Kurz shall keep ABH advised of all infringement proceedings.

5.       REPRESENTATIONS, WARRANTIES AND COVENANTS OF ABH

5.1      ABH represents and warrants to KURZ that ABH is the owner of the entire
         right in and to the Demet Patents (A1). ABH has the full power and
         authority to grant the license provided for in this Agreement (2.) to
         KURZ and/or KURZ Customers. The Demet Patents (A1) are free and clear
         of all liens, charges and encumbrances. ABH has not granted licenses to
         any third party in respect of the Demet Patents (A1) that would
         restrict the rights of KURZ and/or KURZ Customers to use the Demet
         Patents (A1) granted hereunder.
<PAGE>
5.2      To the knowledge of ABH, the Demet Patents (A1) do not conflict with or
         infringe any rights owned or preserved by any third party, no person
         has asserted any such conflict or infringement and there are no claims,
         judgements or settlements to be paid by ABH with respect to the Demet
         Patents (A1) or pending claims or litigation relating to the Demet
         Patents (A1).

5.3      ABH shall assume responsibility for the application, maintenance,
         reexamination, reissue, opposition and prosecution of any kind relating
         to the Demet Patents (A1).

6.       TERM

         The term of this Agreement shall commence on the Commencement Date and
         shall end on the expiration date of the longest contractual running
         Demet Patent(s) as indicated in A1, unless terminated sooner pursuant
         to Article 7.

7.       DEFAULT AND TERMINATION

7.1      KURZ shall be deemed to be in default hereunder if (i) KURZ breaches
         any material covenant made by it hereunder and fails to remedy such
         breach within sixty (60) days after notice thereof from ABH, or (ii)
         KURZ fails to render an accounting statement and payment for all
         royalties due within thirty (30) days of the end of the calendar
         quarter (which failure is not cured within thirty (30) days after
         notice of such failure from ABH). In the event of KURZ's default
         hereunder, ABH may terminate this Agreement by giving KURZ written
         notice of termination. In the event that KURZ is in default hereunder
         or termination of this Agreement occurs pursuant to Article 7.1 or for
         any other reason, the sole and exclusive remedy which ABH shall have
         shall be the termination of this Agreement, the right to recover unpaid
         royalties times 1.5 as well as related necessary lawyer fees and cost
         for arbitration.

7.2      ABH shall be deemed to be in default hereunder if ABH breaches any
         material covenant made by it hereunder and fails to remedy such breach
         within sixty (60) days after notice
<PAGE>
         thereof from KURZ. In the event of ABH's default hereunder, KURZ may
         terminate this Agreement by giving ABH written notice of the
         termination. In the event that ABH is in default hereunder or
         termination of this Agreement occurs pursuant to Article 7.2 or for any
         other reason, the sole and exclusive remedy which KURZ shall have shall
         be the right to retain unpaid royalties which shall no longer be
         payable by KURZ to ABH as well as related necessary lawyer fees and
         cost for arbitration.

7.3      KURZ shall have the right to terminate this Agreement for the next
         Fiscal Year by giving ABH not less than three months written notice of
         termination to the end of a calendar quarter and paying ABH any unpaid
         royalty accrued prior to such termination pursuant to Article 3. above

7.4      On the effective date of termination of this Agreement, the right and
         license granted herein to KURZ under the Demet Patents (A1) shall
         terminate, provided, however, that, except where such termination or
         expiration is the result of KURZ's failure to make royalty payments
         when due, KURZ may use or otherwise dispose of Licensed Product(s) in
         stock or in process on the effective date of termination or expiration
         provided KURZ complies with the royalty and reporting provisions of
         this Agreement with respect to such Licensed Product(s).

8.       ACCOUNTING

8.1      KURZ agrees to keep regular books of account and to render a statement
         within thirty (30) days after the end of each calendar quarter to set
         forth the scope of Licensed Product(s) sold, and the royalty due
         thereon, and shall accompany each such statement with a remittance
         covering the royalty due. Such books of account shall be open at
         reasonable business hours for inspection by an independent auditor
         nominated by ABH.

8.2      The accountants then regularly employed by KURZ shall audit the number
         of Licensed Product(s) sold, which audit shall be delivered to ABH
         together with KURZ's written statement.
<PAGE>
8.3      KURZ shall permit the books of account to be verified by an independent
         auditor nominated by ABH. KURZ shall give the independent auditor all
         necessary facilities, access and assistance for verifying the accounts
         and shall give such other information as may be necessary to enable the
         amount of the royalties due to ABH to be truly and accurately
         determined and verified. The cost of the independent auditor shall be
         borne by ABH unless it is established that the accounts and other
         information are inaccurate and the inaccuracy exceeds five (5%) percent
         and such five (5%) percent is not less than a minimum of 5000 dollars,
         in which case the cost shall be borne by KURZ.

8.4      Any payments due to ABH as a consequence of any invoiced amount that
         subsequently is validly deemed a bad or doubtful debt shall be
         deductible from any amounts due by KURZ to ABH. If the bad or doubtful
         debt is subsequently made good, ABH shall be entitled to any amounts
         due to it in relation to the former bad or doubtful debt.

8.5      The accounting statements shall not disclose the name or the project
         for which the Licensed Product(s) were produced if the projects
         undertaken by KURZ are confidential and KURZ is bound by the terms of
         confidentiality agreements. Notwithstanding the fact that the KURZ
         Customer and the project may not be named in any statement, the
         information in the statement to be submitted by KURZ to ABH under
         Article 8.1 shall be capable of being traced back to its original
         source.

9.       INDEMNITY

         KURZ agrees to indemnify and hold harmless ABH from and against any
         product liability and patent infringement claims that may be asserted
         against ABH based upon or arising out of the KURZ Product(s).

10.      ASSIGNMENT

10.1     In the event that ABH assigns any of the Demet Patents (A1) to a third
         party, ABH shall guarantee that such third party is obliged to fulfill
         ABH's obligations under the terms of this Agreement in relation to the
         Demet Patents (A1).

10.2     The license granted in Article 2 hereof is not assignable by KURZ to a
         third party.
<PAGE>
11.      RIGHT TO REPRESENT AND BIND

         This Agreement shall benefit and be fully legally binding in every
         respect upon ABH and KURZ. Leonhard KURZ GmbH & Co. KG shall represent
         and warrant, that it is fully entitled to represent and to act for and
         on behalf of KURZ by execution of this Agreement, and vice versa,
         American Bank Note Holographics, Inc. shall represent and warrant, that
         it is fully entitled to represent and to act for and on behalf of ABH
         by execution of this Agreement.

12.      MISCELLANEOUS

12.1     ENTIRE AGREEMENT

         This Agreement constitutes the entire Agreement between the Parties and
         supersedes all prior agreements, oral or written, concerning the
         subject matter hereof. This Agreement may be amended only in writing
         duly signed by the Parties hereto.

12.2     LAW

         This Agreement shall be governed by English substantive law.

12.3     ARBITRATION

         Any dispute arising out of or in connection with this Agreement,
         including any question regarding its existence, validity or
         termination, shall be referred to and finally resolved by arbitration
         under the Rules of the Conciliation and Arbitration of the
         International Chamber of Commerce by three (3) arbitrators appointed in
         accordance with the said Rules. The place of arbitration shall be
         London, UK. The language of the arbitration shall be English.
<PAGE>
12.4     NOTICES

         To be binding, all information, letters notices and the like, to be
         exchanged between the Parties under the terms of this Agreement shall
         be in writing and shall be validly made by personal delivery with
         acknowledgement of receipt requested or by fax with confirmation by
         letter or by registered letter:

<TABLE>
<S>                                                <C>
         TO ABH                                    TO KURZ
         American Bank Note Holographics, Inc.     Leonhard KURZ GmbH & Co. KG
         Chief Executive Officer                   General Manager and President
         399 Executive Boulevard                   Schwabacher Str. 482
         Elmsford, NY 10523                        90763 Fuerth
         USA                                       Germany
         Tel: 001 - 914 - 592 - 2355               Tel: 0049 - 911 - 7141 - 0
         Fax: 001 - 914 - 592 - 3248               Fax. 0049 - 911 - 7141 - 506
</TABLE>

         Any change of address shall be furnished in writing and sufficiently in
         advance to the other Party. Notices hereunder shall be effective when
         received or demonstrably deposited at the other Party's domicile.

12.5     INVALIDITY

         If any provision contained in this Agreement is or becomes ineffective
         or is held to be invalid by a competent authority or court having final
         jurisdiction thereon, all other provisions of this Agreement shall
         remain in full force and effect and there shall be substituted for the
         said invalid provision such valid provisions as have an economic effect
         as similar as possible to the said provision.

12.6     CONFIDENTIALITY

         The existence and contents of this Agreement shall be treated as being
         confidential in relation to third parties and shall not be published or
         referred to in advertising material or
<PAGE>

         in information to shareholders unless such confidential information is
         required to be disclosed by a public authority or pursuant to judicial
         action and the other Party has been informed prior to such disclosure.

13.      EFFECTIVE DATE

         The effective date of this Agreement ("Effective Date") shall be:

         13.1     last date of signature of this Agreement

         13.2     Coming into Effect of the Settlement Agreement between ABH and
                  KURZ (see 5.5 Settlement Agreement).

14.      ATTACHMENT

         Attachments 1 and 2 shall form an integral part of this Agreement.

<TABLE>
<CAPTION>
      ATTACHMENTS                                DATE        PAGE(S)
<S>   <C>                                     <C>            <C>
A1    List of Demet Patents                   01.07.2002        1

A2    Deductibles for Additional Features     01.07.2002        1
</TABLE>

<TABLE>
<S>                                       <C>
The undersigned is authorized to          The undersigned is authorized to
represent and execute this Agreement      represent and execute this Agreement
on behalf of ABH.                         on behalf of Kurz.

Frankfurt,the 01.July.2002                Frankfurt,the 01.July.2002

/s/ Kenneth Traub                          /s/ Werner Reinhart
---------------------------------------    ------------------------------------
AMERICAN BANK NOTE                         LEONHARD KURZ
HOLOGRAPHICS, INC.                         GmbH & Co KG
Name:    Kenneth Traub                     Name:    Werner Reinhart
Title:   Chief Executive Officer            Title:  Vice President of Security
                                                    Concepts and Member of the
                                                    Board
</TABLE>
<PAGE>
Attachment A1 to Patent License Agreement dated 01.07.2002

DEMET PATENTS

<TABLE>
<CAPTION>
NO.   PATENT-NO.       COUNTRY OF VALIDITY         EXPIRATION DATE
<S>   <C>              <C>                         <C>
1     5.044,707        United States               25 January 2010

2     5.128,779        United States               07 July 2009

3     5.142,383        United States               25 January 2010

4     5.145,212        United States               08 September 2009

5     5.411,296        United States               02 May 2012

6     245300           Argentina                   30 December 2008

7     1332301          Canada                      09 February 2009

8     023740           Columbia                    09 February 2009

9     0328086          European Patent (GB)        09 February 2009

10    1008105          Hong Kong (from EP)         09 February 2009

11    170832           Mexico                      10 February 2009

12    52363            Venezuela                   09 February 2009
</TABLE>
<PAGE>
Attachment A2 to Patent License Agreement dated 01.07.2002

DEDUCTIBLES FOR ADDITIONAL FEATURES FROM THE NET SELLING PRICE:

<TABLE>
<CAPTION>
PRIORITY ORDER
OF DEDUCTION      FEATURES                                           PERCENTAGE
------------      --------                                           ----------
<S>               <C>                                                <C>
1.                OPTICAL TECHNOLOGY

                  HOLOGRAM OR DOT MATRIX                             [*]

                  TRUSTSEAL(R)                                       [*]

                  KINEGRAM(R)                                        [*]

                  EXELGRAM(R)                                        [*]

2.                COMPONENTS

                  HIGH REFRACTIVE INDEX (HRI)                        [*]

                  PARTIAL DEMETALISATION                             [*]
                  -   NOT REGISTERED                                 [*]
                  -   REGISTERED IN Y-AXIS                           [*]
                  -   REGISTERED IN XY-AXIS                          [*]

3.                TYPE OF METALISATION/DEMETALISATION

                  ALUMINUM (ALREADY CONTAINED IN STANDARD DEMET)     [*]

                  CHROMIUM                                           [*]

                  GOLD                                               [*]

4.                ADDITIONAL COLOR PRINT

                  VISUAL
                  -   ONE COLOR                                      [*]
                  -   TWO COLOR                                      [*]
                  -   THREE COLOR                                    [*]
                  LUMINESCENT                                        [*]

5.                FOILTYPE                                           [*]
                  PRESSURE SENSITIVE LABELS / FOILS                  [*]
</TABLE>

All accumulated Deductions may not result in a lower price than the following
lowest Net Selling Price for Security Application: [*] / sqm

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

* Confidential

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00041-of-00352.parquet"}]]