Exhibit 10.9

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, (this “Agreement”), is made and
entered into as of March 29, 2005, by and between Kenneth Traub (the
“Executive”) and American Bank Note Holographics, Inc., a Delaware corporation
(the “Company”).

 

RECITAL

 

WHEREAS, the Executive and the Company have entered into that certain Employment
Agreement dated as of February 3, 1999, as amended as of March 20, 2000 (the
“Original Employment Agreement”);

 

WHEREAS, each of the Executive and the Company wishes to amend and restate the
provisions of the Original Employment Agreement as hereinafter set forth;

 

WHEREAS, subject to the terms and conditions hereinafter set forth, the Company
therefore wishes to establish the terms of the continued employment of the
Executive as its President and Chief Executive Officer, and the Executive agrees
to so establish such terms of his employment.

 

AGREEMENT

 

NOW THEREFORE, in consideration of the mutual promises set forth in this
Agreement and intending to be legally bound, Executive and the Company agree as
follows:

 

SECTION 1.           EMPLOYMENT. THE COMPANY HEREBY EMPLOYS EXECUTIVE AND
EXECUTIVE HEREBY ACCEPTS SUCH EMPLOYMENT AND AGREES TO RENDER SERVICES TO THE
COMPANY, UPON THE TERMS AND CONDITIONS SET FORTH IN THIS AGREEMENT.

 

SECTION 2.           POSITION AND DUTIES. EXECUTIVE SHALL ASSUME THE
RESPONSIBILITIES AND PERFORM THE DUTIES OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
OF THE COMPANY.  EXECUTIVE AGREES TO DEVOTE SUBSTANTIALLY ALL OF HIS BUSINESS
TIME, ATTENTION, SKILL AND BEST EFFORTS TO THE DILIGENT PERFORMANCE OF HIS
DUTIES HEREUNDER AND SHALL BE LOYAL TO THE COMPANY AND ITS AFFILIATES AND
SUBSIDIARIES, AND USE HIS BEST EFFORTS TO FURTHER THEIR INTERESTS. THE EXECUTIVE
SHALL BE RESPONSIBLE FOR THE DAY TO DAY WORLDWIDE GENERAL MANAGEMENT,
ADMINISTRATION AND OPERATION OF ALL PRESENT AND FUTURE BUSINESS OF THE COMPANY,
INCLUDING, WITHOUT LIMITATION, THOSE OPERATIONS SET FORTH IN THE BY-LAWS OF THE
COMPANY. THE EXECUTIVE SHALL BE THE COMPANY’S MOST SENIOR EXECUTIVE OFFICER AND
HE SHALL REPORT DIRECTLY TO THE BOARD OF DIRECTORS OF THE COMPANY (THE “BOARD”).
IN THE PERFORMANCE OF HIS DUTIES, EXECUTIVE AGREES TO ABIDE BY AND COMPLY WITH
ALL POLICIES, PRACTICES, HANDBOOKS, PROCEDURES AND GUIDELINES WHICH ARE NOW IN
EFFECT OR WHICH THE COMPANY MAY ADOPT, MODIFY, SUPPLEMENT OR CHANGE FROM TIME TO
TIME.

 

SECTION 3.           TERM OF EMPLOYMENT. THE TERM OF EMPLOYMENT HEREUNDER SHALL
COMMENCE ON THE DATE HEREOF AND SHALL CONTINUE THEREAFTER UNTIL THE EARLIER OF
(I) ONE YEAR FROM THE DATE HEREOF OR (II) TERMINATION PURSUANT TO SECTION 10
HEREOF (THE “EMPLOYMENT TERM”). THIS

 

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AGREEMENT SHALL BE AUTOMATICALLY RENEWED ANNUALLY FOR SUCCESSIVE ONE YEAR TERMS,
UNLESS THE COMPANY GIVES WRITTEN NOTICE AT LEAST SIXTY (60) DAYS PRIOR TO THE
END OF THE EMPLOYMENT TERM OF ITS ELECTION TO TERMINATE SUCH EMPLOYMENT AT THE
END OF SUCH EMPLOYMENT TERM. NOTWITHSTANDING THE FOREGOING, IF THE EXECUTIVE’S
EMPLOYMENT IS TERMINATED PURSUANT TO SECTION 10 OF THIS AGREEMENT, THE AUTOMATIC
RENEWAL PROVIDED HEREIN SHALL BE OF NO FURTHER EFFECT AS OF THE TERMINATION DATE
(AS DEFINED). IN THE EVENT EXECUTIVE’S EMPLOYMENT IS NOT RENEWED AT THE END OF
THE EMPLOYMENT TERM (EXCEPT AS OTHERWISE PROVIDED IN SECTION 10 HEREOF) OR
RENEWAL TERM, THE COMPANY WILL PAY TO THE EXECUTIVE AN AMOUNT EQUAL TO TWO TIMES
THE SALARY AND BONUS (BOTH, AS DEFINED) OF THE EXECUTIVE FOR THE PRIOR YEAR.

 

SECTION 4.           EXCLUSIVITY. DURING THE TERM OF EXECUTIVE’S EMPLOYMENT WITH
THE COMPANY, EXECUTIVE SHALL NOT WITHOUT THE PRIOR WRITTEN CONSENT OF THE BOARD
(I) PERFORM ANY MANAGERIAL, SALES, MARKETING OR TECHNICAL SERVICES DIRECTLY OR
INDIRECTLY FOR ANY PERSON OR ENTITY COMPETING DIRECTLY OR INDIRECTLY WITH THE
COMPANY OR ANY OF ITS SUBSIDIARIES IN THE HOLOGRAPHY BUSINESS; (II) PERFORM ANY
SUCH SERVICES FOR ANY ENTITY OWNED, DIRECTLY OR INDIRECTLY, BY ANYONE COMPETING,
EITHER DIRECTLY OR INDIRECTLY, WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES IN
THE HOLOGRAPHY BUSINESS; (III) ON HIS OWN BEHALF OR THAT OF ANY OTHER PERSON OR
ENTITY, COMPETE, EITHER DIRECTLY OR INDIRECTLY, WITH THE COMPANY OR ANY OF ITS
SUBSIDIARIES, TO SELL ANY PRODUCTS OR SERVICES MARKETED OR OFFERED BY THE
COMPANY OR ANY OF ITS SUBSIDIARIES; (IV) ENGAGE OR BECOME INTERESTED, DIRECTLY
OR INDIRECTLY, AS OWNER, EMPLOYER, PARTNER, CONSULTANT, THROUGH STOCK OWNERSHIP
(EXCEPT OWNERSHIP OF LESS THAN ONE PERCENT OF THE NUMBER OF SHARES OUTSTANDING
OF ANY SECURITIES WHICH ARE LISTED FOR TRADING ON ANY SECURITIES EXCHANGE,
PROVIDED THAT THE SPECIFIC NATURE AND AMOUNT OF THE INVESTMENT, IF OVER $50,000,
SHALL BE IMMEDIATELY DISCLOSED TO THE COMPANY IN WRITING), INVESTMENT OF
CAPITAL, LENDING OF MONEY OR PROPERTY, OR OTHERWISE EITHER ALONE OR IN
ASSOCIATION WITH OTHERS, IN THE OPERATION OF ANY TYPE OF BUSINESS OR ENTERPRISE
WHICH CONFLICTS OR INTERFERES WITH THE PERFORMANCE OF EXECUTIVE’S SERVICES
HEREUNDER OR (V) ENGAGE IN ANY ACTIVITIES WHICH COULD REASONABLY BE DEEMED TO BE
A CONFLICT OF INTEREST WITH HIS DUTIES HEREUNDER OR HIS OBLIGATIONS TO THE
COMPANY.

 

SECTION 5.           COMPENSATION AND BENEFITS.

 

(A)           SALARY AND BONUS.  AS COMPENSATION FOR THE PERFORMANCE OF THE
EXECUTIVE’S SERVICES HEREUNDER, DURING THE EMPLOYMENT TERM, THE COMPANY WILL PAY
TO THE EXECUTIVE AN ANNUAL BASE SALARY OF $400,000 PER ANNUM, EFFECTIVE
JANUARY 1, 2005; PROVIDED THAT THE EXECUTIVE’S ANNUAL BASE SALARY SHALL BE
INCREASED BY NOT LESS THAN 3% PER ANNUM IN THE EVENT THIS AGREEMENT IS RENEWED
PURSUANT TO SECTION 3 ABOVE (THE “SALARY”).  THE EXECUTIVE WILL ALSO BE ELIGIBLE
TO RECEIVE A BONUS EACH YEAR (THE “ANNUAL BONUS”).  WITHIN 30 DAYS FOLLOWING THE
END OF EACH FISCAL YEAR OF THE COMPANY, THE PAYMENT OF ANY ANNUAL BONUS (OR NO
ANNUAL BONUS) SHALL BE DETERMINED BY THE BOARD OR A COMMITTEE DESIGNATED BY THE
BOARD TO MAKE SUCH DETERMINATION (THE “COMPENSATION COMMITTEE”), AND SHALL BE
BASED ON THE EXECUTIVE’S PERFORMANCE AGAINST THE OBJECTIVES TO BE REASONABLY
DETERMINED BY THE BOARD OR THE COMPENSATION COMMITTEE, IN CONSULTATION WITH THE
EXECUTIVE AT THE BEGINNING OF EACH FISCAL YEAR.  THE PARTIES AGREE THAT THE
TARGET ANNUAL BONUS SHALL BE $100,000, AND THE ACTUAL ANNUAL BONUS MAY BE MORE
OR LESS THAN THE TARGET BASED ON THE COMPENSATION COMMITTEE’S REASONABLE
ASSESSMENT OF THE EXECUTIVE’S PERFORMANCE AGAINST THE AGREED-UPON OBJECTIVES.
THE BOARD OR THE COMPENSATION COMMITTEE MAY, IN ITS SOLE DISCRETION, DETERMINE
TO AWARD ADDITIONAL YEAR-END BONUSES TO THE EXECUTIVE.  THE ANNUAL BONUS PLUS
ADDITIONAL YEAR-END BONUSES, IF ANY, IN A

 

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CALENDAR YEAR ARE COLLECTIVELY REFERRED TO AS THE “BONUS”.  THE EXECUTIVE’S
SALARY AND ANY BONUS WILL BE PAYABLE IN ACCORDANCE WITH THE CUSTOMARY PAYROLL
PRACTICES OF THE COMPANY FOR ITS SENIOR MANAGEMENT PERSONNEL.

 

(B)           BENEFITS. DURING THE EMPLOYMENT TERM, THE EXECUTIVE SHALL BE
ELIGIBLE TO PARTICIPATE, ON THE SAME BASIS AND SUBJECT TO THE SAME
QUALIFICATIONS AS OTHER SENIOR MANAGEMENT PERSONNEL OF THE COMPANY, IN ANY
PENSION, PROFIT SHARING, SAVINGS, BONUS, LIFE INSURANCE, HEALTH INSURANCE,
HOSPITALIZATION, DENTAL, DRUG PRESCRIPTION, DISABILITY, ACCIDENTAL DEATH AND
DISMEMBERMENT AND OTHER BENEFIT PLANS AND POLICIES AS MAY FROM TIME TO TIME BE
IN EFFECT WITH RESPECT TO SENIOR MANAGEMENT PERSONNEL OF THE COMPANY
(COLLECTIVELY, THE “BENEFITS”).  IN ADDITION TO THE FOREGOING, THE COMPANY WILL
CONTINUE TO PROVIDE THE EXECUTIVE WITH THE TERM LIFE INSURANCE AND DISABILITY
INSURANCE POLICIES AT THE SAME LEVEL THAT IS IN PLACE AS OF THE DATE OF THIS
AGREEMENT.  THE EXECUTIVE SHALL ALSO BE ENTITLED TO VACATION DAYS (INCLUDING THE
RIGHT TO ACCRUE UNUSED VACATION TIME FROM YEAR TO YEAR IF THE AGREEMENT IS
RENEWED PURSUANT TO SECTION 3 ABOVE), HOLIDAYS AND SICK DAYS IN ACCORDANCE WITH
THE POLICIES OF THE COMPANY AS MAY BE IN EFFECT FROM TIME TO TIME; PROVIDED,
HOWEVER, THAT TERMINATION OF EXECUTIVE’S EMPLOYMENT FOR ANY REASON (INCLUDING
RESIGNATION BY THE EXECUTIVE), THE COMPANY SHALL PAY EXECUTIVE FOR ACCRUED
VACATION TIME UNUSED AS OF THE LAST DATE OF EMPLOYMENT, ON A PRO RATED BASIS
CALCULATED ON THE BASIS OF THE EXECUTIVE’S SALARY AND BONUS IN EFFECT ON THE
TERMINATION DATE.  THE COMPANY SHALL ALSO PROVIDE THE EXECUTIVE WITH A COMPANY
CAR, AS WELL AS ALL REASONABLE CAR MAINTENANCE, AND RELATED INSURANCE.

 

(C)           STOCK OPTIONS.  THE EXECUTIVE SHALL BE ELIGIBLE TO RECEIVE GRANTS
OF OPTIONS TO PURCHASE EQUITY IN THE COMPANY DURING THE EMPLOYMENT TERM AS
DETERMINED, FROM TIME TO TIME, IN THE SOLE DISCRETION OF THE BOARD OR THE
COMPENSATION COMMITTEE.

 

(D)           EXPENSES. THE COMPANY WILL PAY OR PROMPTLY REIMBURSE THE EXECUTIVE
FOR ALL REASONABLE OUT-OF-POCKET BUSINESS, ENTERTAINMENT AND TRAVEL EXPENSES
INCURRED BY THE EXECUTIVE IN THE PERFORMANCE OF HIS DUTIES HEREUNDER UPON
PRESENTATION OF APPROPRIATE SUPPORTING DOCUMENTATION AND OTHERWISE IN ACCORDANCE
WITH THE EXPENSE REIMBURSEMENT POLICIES OF THE COMPANY IN EFFECT FROM TIME TO
TIME.  THE COMPANY WILL ALSO PAY OR PROMPTLY REIMBURSE THE EXECUTIVE FOR ALL
REASONABLE EXPENSES RELATING TO ONGOING PROFESSIONAL DEVELOPMENT.

 

(E)           TAXES AND WITHHOLDINGS. ALL APPROPRIATE DEDUCTIONS, INCLUDING
FEDERAL, STATE AND LOCAL TAXES AND SOCIAL SECURITY, SHALL BE DEDUCTED FROM ANY
AMOUNT PAID BY THE COMPANY TO THE EXECUTIVE HEREUNDER IN CONFORMITY WITH
APPLICABLE LAWS.

 

SECTION 6.           CONFIDENTIALITY.  THE EXECUTIVE ACKNOWLEDGES AND AGREES
THAT (A) IN CONNECTION WITH HIS EMPLOYMENT BY THE COMPANY, THE EXECUTIVE WILL BE
INVOLVED IN THE COMPANY’S AND ITS SUBSIDIARIES’ (IF ANY) OPERATIONS; (B) IN
ORDER TO PERMIT HIM TO CARRY OUT HIS RESPONSIBILITIES, THE COMPANY MAY DISCLOSE,
TO THE EXECUTIVE, IN STRICT CONFIDENCE, OR THE EXECUTIVE MAY DEVELOP,
CONFIDENTIAL PROPRIETARY INFORMATION AND TRADE SECRETS OF THE COMPANY AND ITS
AFFILIATES, INCLUDING WITHOUT LIMITATION (I) UNPUBLISHED INFORMATION WITH
RESPECT TO THE COMPANY CONCERNING MARKETING OR SALES PLANS, OPERATIONAL
TECHNIQUES, STRATEGIC PLANS AND THE IDENTITY OF SUPPLIERS AND SUPPLY CONTACTS;
(II) UNPUBLISHED FINANCIAL INFORMATION WITH RESPECT TO THE COMPANY, INCLUDING
INFORMATION CONCERNING REVENUES, PROFITS AND PROFIT MARGINS; (III) INTERNAL
CONFIDENTIAL MANUALS AND MEMOS; AND (IV) “MATERIAL INSIDE INFORMATION” AS SUCH
PHRASE

 

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IS USED FOR PURPOSES OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(COLLECTIVELY, “CONFIDENTIAL INFORMATION”); AND (C) THE COMPANY AND ITS
AFFILIATES DERIVE SIGNIFICANT ECONOMIC VALUE AND COMPETITIVE ADVANTAGE BY REASON
OF THE FACT THAT SUCH CONFIDENTIAL INFORMATION, IN WHOLE OR IN PART, IS NOT
GENERALLY KNOWN OR READILY ASCERTAINABLE BY THE COMPANY’S OR ITS AFFILIATES’
ACTUAL OR POTENTIAL COMPETITORS AND, AS SUCH, CONSTITUTES THE COMPANY’S AND ITS
AFFILIATES’ VALUABLE TRADE SECRETS.

 

In addition to any obligations set forth herein, and in recognition of the
foregoing acknowledgments, for himself and on behalf of his affiliates, the
Executive agrees that he will not, directly or indirectly, use, disseminate or
disclose, any Confidential Information (other than for the legitimate business
purposes of the Company), and that he will not knowingly permit any of his
affiliates to, directly or indirectly, use, disseminate or disclose, any
Confidential Information. At the end of the Employment Term, the Executive
agrees to deliver immediately to the Company the originals and all copies of
Confidential Information in his possession or control, whether in written form,
on computers or discs or otherwise, or evidence that any such Confidential
Information has been destroyed.

 

The restrictions set forth in this Section 6 shall not apply to those particular
portions of Confidential Information, if any, that (a) have been published by
any of the Company or any of its affiliates in a patent, article or other
similar tangible publication; (b) is or becomes part of the public domain
through no fault of the Executive; (c) which was in the Executive’s possession
at the time of disclosure and was not acquired directly or indirectly from the
Company; or (d) which was received by a third party who did not receive such
information from the Company, and the third party did not require the Executive
to maintain such information as confidential.

 

The foregoing restrictions on the disclosure of Confidential Information set
forth in this Section 6 shall not apply to those particular portions of
Confidential Information, if any, that are required to be disclosed in
connection with any legal process; provided that, at least ten (10) days in
advance of any required disclosure, or such lesser time as may be required by
circumstances, the Executive shall furnish the Company with a copy of the
judicial or administrative order requiring that such information be disclosed
together with a written description of the information proposed to be disclosed
(which description shall be in sufficient detail to enable the Executive and its
affiliates to determine the nature and scope of the information proposed to be
disclosed), and the Executive covenants and agrees to cooperate with the Company
and its affiliates to deliver the minimum amount of information necessary to
comply with such order.

 

This Section 6 shall survive any termination of this Agreement.

 

SECTION 7.           COVENANT NOT TO COMPETE.

 

(A)           SCOPE. IN ORDER TO FULLY PROTECT THE COMPANY’S CONFIDENTIAL
INFORMATION, DURING THE EMPLOYMENT TERM AND FOR A PERIOD OF ONE YEAR THEREAFTER
(THE “NONCOMPETITION PERIOD”), THE EXECUTIVE SHALL NOT, EXCEPT AS AUTHORIZED IN
WRITING BY THE BOARD, DIRECTLY OR INDIRECTLY, RENDER SERVICES TO, ASSIST,
PARTICIPATE IN THE AFFAIRS OF, OR OTHERWISE BE CONNECTED WITH, ANY PERSON OR
ENTERPRISE (OTHER THAN THE COMPANY AND ITS SUBSIDIARIES, IF ANY), WHICH PERSON
OR ENTERPRISE IS ENGAGED IN, OR IS PLANNING TO ENGAGE IN, AND SHALL NOT
PERSONALLY ENGAGE IN, ANY BUSINESS THAT IS COMPETITIVE WITH THE BUSINESS OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES, IF ANY,

 

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WITH RESPECT TO ANY PRODUCTS OR SERVICES OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, IF ANY, IN ANY CAPACITY WHICH WOULD UTILIZE THE EXECUTIVE’S
SERVICES WITH RESPECT TO ANY PRODUCTS OR SERVICES OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, IF ANY, THAT WERE WITHIN THE EXECUTIVE’S MANAGEMENT RESPONSIBILITY
AT ANY TIME WITHIN THE TWELVE (12) MONTH PERIOD IMMEDIATELY PRIOR TO THE
TERMINATION DATE.

 

(B)           REMEDIES. THE PARTIES RECOGNIZE, ACKNOWLEDGE AND AGREE THAT
(I) ANY BREACH OR THREATENED BREACH OF THE PROVISIONS OF THIS SECTION 7 SHALL
CAUSE IRREPARABLE HARM AND INJURY TO THE COMPANY AND THAT MONEY DAMAGES WILL NOT
PROVIDE AN ADEQUATE REMEDY FOR SUCH BREACH OR THREATENED BREACH AND (II) THE
DURATION, SCOPE AND GEOGRAPHICAL APPLICATION OF THIS AGREEMENT ARE FAIR AND
REASONABLE UNDER THE CIRCUMSTANCES, AND ARE REASONABLY REQUIRED TO PROTECT THE
LEGITIMATE BUSINESS INTERESTS OF THE COMPANY. ACCORDINGLY, EXECUTIVE AGREES THAT
THE COMPANY SHALL BE ENTITLED TO HAVE THE PROVISIONS OF THIS AGREEMENT
SPECIFICALLY ENFORCED BY ANY COURT HAVING JURISDICTION, AND THAT SUCH A COURT
MAY ISSUE A TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNCTION OR OTHER
APPROPRIATE EQUITABLE RELIEF, WITHOUT HAVING TO PROVE THE INADEQUACY OF
AVAILABLE REMEDIES AT LAW. IN ADDITION, THE COMPANY SHALL BE ENTITLED TO AVAIL
ITSELF OF ALL SUCH OTHER ACTIONS AND REMEDIES AVAILABLE TO IT OR ANY OF ITS
AFFILIATES UNDER LAW OR IN EQUITY AND SHALL BE ENTITLED TO SUCH DAMAGES AS IT
SUSTAINS BY REASON OF SUCH BREACH OR THREATENED BREACH. IT IS THE EXPRESS DESIRE
AND INTENT OF THE PARTIES THAT THE PROVISIONS OF THIS AGREEMENT BE ENFORCED TO
THE FULL EXTENT POSSIBLE.

 

(C)           SEVERABILITY. IF ANY PROVISION OF SECTION 7(A) IS HELD TO BE
UNENFORCEABLE BECAUSE OF THE DURATION OF SUCH PROVISION, THE AREA COVERED
THEREBY OR THE SCOPE OF THE ACTIVITY RESTRAINED, THE PARTIES HEREBY EXPRESSLY
AGREE THAT THE COURT MAKING SUCH DETERMINATION SHALL HAVE THE POWER TO REDUCE
THE DURATION AND/OR AREAS OF SUCH PROVISION AND/OR THE SCOPE OF THE ACTIVITY TO
BE RESTRAINED CONTAINED IN SUCH PROVISION AND, IN ITS REDUCED FORM, SUCH
PROVISION SHALL THEN BE ENFORCEABLE. THE PARTIES HERETO INTEND AND AGREE THAT
THE COVENANTS CONTAINED IN SECTION 7(A) SHALL BE CONSTRUED AS A SERIES OF
SEPARATE COVENANTS, ONE FOR EACH MUNICIPALITY, COMMUNITY OR COUNTY INCLUDED
WITHIN THE AREA DESIGNATED BY SECTION 7(A). EXCEPT FOR GEOGRAPHIC COVERAGE, THE
TERMS AND CONDITIONS OF EACH SUCH SEPARATE COVENANT SHALL BE DEEMED IDENTICAL TO
THE COVENANT CONTAINED IN SECTION 7(A). FURTHERMORE, IF ANY COURT SHALL REFUSE
TO ENFORCE ANY OF THE SEPARATE COVENANTS DEEMED INCLUDED IN SECTION 7(A), THEN
SUCH UNENFORCEABLE COVENANT SHALL BE DEEMED ELIMINATED FROM THE PROVISIONS
HEREOF TO THE EXTENT NECESSARY TO PERMIT THE REMAINING SEPARATE COVENANTS TO BE
ENFORCED IN ACCORDANCE WITH THEIR TERMS. THE PREVAILING PARTY IN ANY ACTION
ARISING OUT OF A DISPUTE IN RESPECT OF ANY PROVISION OF THIS AGREEMENT SHALL BE
ENTITLED TO RECOVER FROM THE NON-PREVAILING PARTY REASONABLE ATTORNEYS’ FEES AND
COSTS AND DISBURSEMENTS INCURRED IN CONNECTION WITH THE PROSECUTION OR DEFENSE,
AS THE CASE MAY BE, OF ANY SUCH ACTION.

 

SECTION 8.           RESPONSIBILITY UPON TERMINATION. UPON THE TERMINATION OF
HIS EMPLOYMENT FOR ANY REASON AND IRRESPECTIVE OF WHETHER OR NOT SUCH
TERMINATION IS VOLUNTARY ON HIS PART:

 

(A)           THE EXECUTIVE SHALL ADVISE THE COMPANY OF THE IDENTITY OF HIS NEW
EMPLOYER WITHIN TEN (10) DAYS AFTER ACCEPTING NEW EMPLOYMENT AND FURTHER AGREES
TO KEEP THE COMPANY SO ADVISED OF ANY CHANGE IN EMPLOYMENT DURING THE
NON-COMPETITION PERIOD;

 

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(B)           THE COMPANY IN ITS SOLE DISCRETION MAY NOTIFY ANY NEW EMPLOYER OF
THE EXECUTIVE THAT HE HAS AN OBLIGATION NOT TO COMPETE WITH THE COMPANY DURING
THE NONCOMPETITION PERIOD; AND

 

(C)           THE EXECUTIVE SHALL DELIVER TO THE COMPANY ANY AND ALL RECORDS,
FORMS, CONTRACTS, MEMORANDA, WORK PAPERS, CUSTOMER DATA AND ANY OTHER DOCUMENTS
(WHETHER IN WRITTEN FORM, ON COMPUTERS OR DISCS OR OTHERWISE) WHICH HAVE COME
INTO HIS POSSESSION BY REASON OF HIS EMPLOYMENT WITH THE COMPANY, IRRESPECTIVE
OF WHETHER OR NOT ANY OF SAID DOCUMENTS WERE PREPARED FOR HIM, AND HE SHALL NOT
RETAIN MEMORANDA IN RESPECT OF OR COPIES OF ANY OF SAID DOCUMENTS.

 

SECTION 9.           NONSOLICITATION. THE EXECUTIVE AGREES THAT DURING THE TERM
OF HIS EMPLOYMENT WITH THE COMPANY AND FOR A PERIOD OF TWELVE (12) MONTHS
THEREAFTER, HE WILL NOT, AND WILL NOT ASSIST ANY OF HIS AFFILIATES TO, DIRECTLY
OR INDIRECTLY, RECRUIT OR OTHERWISE SOLICIT OR INDUCE ANY EXECUTIVE, CUSTOMER,
SUBSCRIBER OR SUPPLIER OF THE COMPANY OR ANY OF ITS SUBSIDIARIES ABOUT WHOM OR
WHICH HE GAINED CONFIDENTIAL INFORMATION WHILE AT THE COMPANY TO TERMINATE ITS
EMPLOYMENT OR ARRANGEMENT WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES, OTHERWISE
CHANGE ITS RELATIONSHIP WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES, OR
ESTABLISH ANY RELATIONSHIP WITH THE EXECUTIVE OR ANY OF HIS AFFILIATES FOR ANY
BUSINESS PURPOSE DEEMED MATERIALLY COMPETITIVE WITH THE BUSINESS OF THE COMPANY
OR ANY OF ITS SUBSIDIARIES, IF ANY.

 

SECTION 10.         TERMINATION.

 

(A)           TERMINATION FOR CAUSE. NOTWITHSTANDING ANYTHING CONTAINED HEREIN
TO THE CONTRARY, THE BOARD MAY TERMINATE THE EXECUTIVE’S EMPLOYMENT WITH THE
COMPANY FOR CAUSE; PROVIDED THAT THE EXECUTIVE SHALL BE GIVEN NOTICE OF THE
COMPANY’S INTENT TO TERMINATE HIS EMPLOYMENT FOR CAUSE, THE NATURE OF THE CAUSE
AND, IF CUREABLE, A REASONABLE OPPORTUNITY TO REMEDY THE CAUSE. FOR THE PURPOSES
OF THIS SECTION 10(A), THE TERM “REASONABLE” SHALL MEAN THAT AMOUNT OF TIME
DEEMED REASONABLE BY THE BOARD ACTING IN GOOD FAITH AND IN LIGHT OF THE NATURE
OF THE CAUSE. FOR PURPOSES OF THIS AGREEMENT, THE TERM “CAUSE” SHALL MEAN, THE
OCCURRENCE OF ANY ONE OR MORE OF THE FOLLOWING (I) THE COMMISSION OF ANY ACT OF
WILLFUL AND MATERIAL EMBEZZLEMENT OR FRAUD ON THE PART OF EXECUTIVE AGAINST THE
COMPANY, (II) ANY ACT OR OMISSION WHICH CONSTITUTES A WILLFUL AND MATERIAL
BREACH BY EXECUTIVE OF THIS AGREEMENT, INCLUDING A REFUSAL OR FAILURE BY
EXECUTIVE TO PERFORM HIS DUTIES AND OBLIGATIONS HEREUNDER, (III) EXECUTIVE HAS
BEEN CONVICTED OF A CRIME, WHICH CONVICTION HAS, OR IS REASONABLY LIKELY TO HAVE
A MATERIAL ADVERSE EFFECT ON THE COMPANY, OR ITS BUSINESS OR WILL PREVENT THE
EXECUTIVE FROM PERFORMING HIS DUTIES FOR A SUSTAINED PERIOD OF TIME, EXECUTIVE
BECOMES DISABLED (AS HEREINAFTER DEFINED), OR (IV) THE DEATH OF EXECUTIVE;
PROVIDED, HOWEVER, THAT “CAUSE” SHALL NOT INCLUDE ANY ACT OR OMISSION BY THE
EXECUTIVE UNDERTAKEN IN THE GOOD FAITH EXERCISE OF THE EXECUTIVE’S BUSINESS
JUDGMENT AS PRESIDENT AND CHIEF EXECUTIVE OFFICER OR IN GOOD FAITH RELIANCE ON
THE ADVICE OF COUNSEL. FOR PURPOSES OF THIS AGREEMENT, “DISABLED” SHALL MEAN
EXECUTIVE’S INABILITY, DUE TO ILLNESS, ACCIDENT OR ANY OTHER PHYSICAL OR MENTAL
CONDITION, TO FULLY PERFORM THE ESSENTIAL FUNCTIONS OF HIS POSITION OR THIS
AGREEMENT FOR MORE THAN 26 WEEKS CONSECUTIVELY OR FOR INTERMITTENT PERIODS
AGGREGATING 39 WEEKS DURING ANY 78-WEEK PERIOD DURING THE EMPLOYMENT TERM,
EXCEPT AS OTHERWISE REQUIRED BY LAW.

 

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If, during the Employment Term the Company terminates the Executive’s employment
pursuant to clauses (i), (ii) or (iii) of this paragraph (a), then, from and
after the date the Executive’s termination is effective (the “Termination
Date”), the Executive shall (a) have no right to receive any further Salary
following the Termination Date, (b) be entitled to receive any Bonus, payable on
a pro rata basis, which may have accrued or which otherwise would have been
granted by the Board had the Executive not been terminated, for the year in
which the Executive was terminated, (c) cease to be covered under or be
permitted to participate in any Benefits (except payments due to the Executive
or the Executive’s beneficiaries or representatives under any applicable life or
disability insurance plans or policies) and (d) shall have no further right to
purchase shares of the Company’s common stock, $0.01 par value per share (the
“Common Stock”) pursuant to any stock option plan or other equity incentive plan
of the Company (collectively, the “Plans”); provided however, that all
restrictions on any options or any shares of the Common Stock underlying the
options under the Plans (the “Restricted Stock”) purchased by the Executive
shall, subject to applicable securities laws, rules and regulations, lapse on
the Termination Date.

 

If during the Employment Term the Company terminates the Executive employment
pursuant to clause (iv) of this paragraph (a), (a) the Company shall continue to
pay the Executive (or his beneficiaries, as applicable) Salary then in effect,
for a period of one year following the Termination Date in accordance with the
customary payroll practices of the Company for its senior management personnel,
(b) the Executive shall be entitled to receive any Bonus, payable on a pro rata
basis, which may have accrued or which otherwise would have been granted by the
Board had the Executive not been terminated, for the year in which the Executive
was terminated, and (c) the Executive shall be entitled to all rights with
respect to any options granted or Common Stock purchased under the Plans for a
period of two years following the Termination Date and all restrictions on
Restricted Stock purchased by the Executive shall, subject to applicable
securities laws, rules and regulations, lapse on the Termination Date.

 

(B)           TERMINATION WITHOUT CAUSE AND RESIGNATION FOR GOOD REASON.  THE
COMPANY SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT AND THE EMPLOYMENT OF
EXECUTIVE WITH THE COMPANY FOR ANY REASON OR NO REASON AND WITHOUT CAUSE UPON
WRITTEN NOTICE TO EXECUTIVE OF SUCH TERMINATION, AND THE EXECUTIVE SHALL HAVE
THE RIGHT TO RESIGN FOR GOOD REASON (AS HEREINAFTER DEFINED); PROVIDED THAT,
EXCEPT AS OTHERWISE PROVIDED IN PARAGRAPH (C) BELOW, (I) THE COMPANY SHALL
CONTINUE TO PAY TO THE EXECUTIVE THE SALARY THEN IN EFFECT, TOGETHER WITH ANY
BONUS WHICH MAY HAVE ACCRUED OR WHICH OTHERWISE WOULD HAVE BEEN GRANTED BY THE
BOARD HAD THE EXECUTIVE NOT BEEN TERMINATED OR RESIGNED FOR TWO YEARS FOLLOWING
THE TERMINATION DATE, IN ACCORDANCE WITH THE CUSTOMARY PAYROLL PRACTICES OF THE
COMPANY FOR ITS SENIOR MANAGEMENT PERSONNEL (EXCEPT IN THE EVENT THE EXECUTIVE
RESIGNS FOR GOOD REASON AS DEFINED IN PARAGRAPH (E)(II)(D) BELOW, IN WHICH CASE
THE AMOUNT OTHERWISE PAYABLE UNDER THIS CLAUSE (I) WILL BE REDUCED BY 50%),
(II) THE COMPANY SHALL CONTINUE ANY BENEFITS IN WHICH THE EXECUTIVE THEN
PARTICIPATES ON THE SAME BASIS OF PARTICIPATION AND SUBJECT TO ALL TERMS AND
CONDITIONS OF SUCH PLANS AS APPLIED PRIOR TO SUCH TERMINATION OR RESIGNATION,
AND (III) ALL NON-VESTED OPTIONS TO PURCHASE SHARES OF COMMON STOCK GRANTED
UNDER THE PLANS SHALL VEST ON THE TERMINATION DATE AND THE EXECUTIVE SHALL BE
ENTITLED TO ALL RIGHTS WITH RESPECT TO SUCH OPTIONS OR COMMON STOCK PURCHASED
UNDER THE PLANS FOR A PERIOD OF TWO YEARS FOLLOWING THE TERMINATION DATE. ALL
RESTRICTIONS ON RESTRICTED STOCK PURCHASED BY THE EXECUTIVE SHALL, SUBJECT TO
APPLICABLE SECURITIES LAWS, RULES AND REGULATIONS, LAPSE ON THE TERMINATION
DATE.

 

7

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(C)           TERMINATION UPON CHANGE OF CONTROL OR RESIGNATION FOR GOOD REASON
FOLLOWING A CHANGE OF CONTROL. IN THE EVENT EXECUTIVE’S EMPLOYMENT IS TERMINATED
BY THE COMPANY SUBSEQUENT TO A CHANGE OF CONTROL (AS HEREINAFTER DEFINED) OR THE
EXECUTIVE RESIGNS FROM THE COMPANY FOR GOOD REASON (AS HEREINAFTER DEFINED)
WITHIN ONE YEAR FOLLOWING A CHANGE OF CONTROL, THE COMPANY WILL PAY THE
EXECUTIVE A SEVERANCE AMOUNT, IN ONE LUMP SUM, WITHIN 30 DAYS OF SUCH
TERMINATION, EQUAL TO THE PRODUCT OF (X) THE SALARY AND BONUS MULTIPLIED BY (Y)
TWO (2). IN THE EVENT EXECUTIVE’S EMPLOYMENT IS TERMINATED BY THE COMPANY
SUBSEQUENT TO A CHANGE OF CONTROL (AS HEREINAFTER DEFINED) OR THE EXECUTIVE
RESIGNS FROM THE COMPANY FOR GOOD REASON (AS HEREINAFTER DEFINED) AT ANY TIME
AFTER ONE YEAR FOLLOWING A CHANGE OF CONTROL, THE COMPANY WILL PAY THE EXECUTIVE
A SEVERANCE AMOUNT, IN ONE LUMP SUM, WITHIN 30 DAYS OF SUCH TERMINATION, EQUAL
TO THE PRODUCT OF (X) THE SALARY AND BONUS MULTIPLIED BY (Y) THREE (3). IF A
PAYMENT IS MADE TO THE EXECUTIVE PURSUANT TO THIS PARAGRAPH (C), IN NO EVENT
SHALL THE EXECUTIVE RECEIVE ANY PAYMENTS PURSUANT PARAGRAPH (B) OF THIS
SECTION 10. TO THE EXTENT THAT SUCH AMOUNTS ARE IN EXCESS OF THE AMOUNT
ALLOWABLE AS A DEDUCTION UNDER SECTION 280(G) OF THE CODE, OR ARE SUBJECT TO
EXCISE TAX PURSUANT TO SECTION 4999 OF THE CODE, THE COMPANY WILL GROSS-UP ANY
ADDITIONAL AMOUNTS DUE, AND ALL NON-VESTED OPTIONS TO PURCHASE SHARES OF COMMON
STOCK GRANTED UNDER THE PLANS SHALL VEST ON THE TERMINATION DATE AND ALL
RESTRICTIONS ON RESTRICTED STOCK PURCHASED BY THE EXECUTIVE SHALL, SUBJECT TO
APPLICABLE SECURITIES LAWS, RULES AND REGULATIONS, LAPSE ON THE TERMINATION
DATE.

 

(D)           RESIGNATION. EXECUTIVE SHALL HAVE THE RIGHT TO TERMINATE THIS
AGREEMENT AND HIS EMPLOYMENT WITH THE COMPANY UPON FOURTEEN (14) CALENDAR DAYS
PRIOR WRITTEN NOTICE TO THE COMPANY. EXCEPT IF THE EXECUTIVE’S RESIGNATION IS
FOR GOOD REASON IN ACCORDANCE WITH PARAGRAPHS (B) AND (C) ABOVE, FROM AND AFTER
THE EFFECTIVE DATE OF SUCH RESIGNATION, EXECUTIVE SHALL (I) HAVE NO RIGHT TO
RECEIVE ANY FURTHER SALARY OR BONUS HEREUNDER; (II) CEASE TO BE COVERED UNDER OR
BE PERMITTED TO PARTICIPATE IN ANY BENEFITS (EXCEPT PAYMENTS DUE THE EXECUTIVE
OR THE EXECUTIVE’S BENEFICIARIES OR REPRESENTATIVES UNDER ANY APPLICABLE
PENSION, PROFIT SHARING, LIFE OR DISABILITY INSURANCE PLANS OR POLICIES); AND
(III) FORFEIT ANY AND ALL NON-VESTED OPTIONS GRANTED OR NON-VESTED COMMON STOCK
PURCHASED UNDER THE PLANS.

 

(E)           DEFINITIONS. FOR PURPOSES OF THIS SECTION 10 THE TERMS LISTED
BELOW SHALL MEAN THE FOLLOWING:

 

(I)            “CHANGE IN CONTROL” SHALL MEAN:

 

(A)           THE DIRECT OR INDIRECT ACQUISITION, WHETHER BY SALE, MERGER,
CONSOLIDATION, OR PURCHASE OF ASSETS OR STOCK, BY ANY PERSON, CORPORATION, OR
OTHER ENTITY OR GROUP THEREOF OF THE BENEFICIAL OWNERSHIP (AS THAT TERM IS USED
IN SECTION 13(D)(L) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER) OF SHARES IN THE COMPANY WHICH,
WHEN ADDED TO ANY OTHER SHARES THE BENEFICIAL OWNERSHIP OF WHICH IS HELD BY THE
ACQUIROR, SHALL RESULT IN THE ACQUIRER’S HAVING MORE THAN 33% OF THE VOTES THAT
ARE ENTITLED TO BE CAST AT MEETINGS OF STOCKHOLDERS AS TO MATTERS ON WHICH ALL
OUTSTANDING SHARES ARE ENTITLED TO BE VOTED AS A SINGLE CLASS; PROVIDED,
HOWEVER, THAT SUCH ACQUISITION SHALL NOT CONSTITUTE A CHANGE OF CONTROL FOR
PURPOSES OF THIS AGREEMENT IF PRIOR TO SUCH ACQUISITION A RESOLUTION DECLARING
THAT THE ACQUISITION SHALL NOT CONSTITUTE A CHANGE OF CONTROL IS ADOPTED BY THE
BOARD WITH THE SUPPORT OF A MAJORITY OF THE BOARD MEMBERS WHO EITHER WERE
MEMBERS OF THE BOARD FOR AT LEAST TWO YEARS PRIOR TO THE DATE OF THE VOTE ON
SUCH RESOLUTION OR WERE NOMINATED FOR ELECTION

 

8

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TO THE BOARD BY AT LEAST TWO-THIRDS OF THE DIRECTORS THEN STILL IN OFFICE WHO
WERE MEMBERS OF THE BOARD AT LEAST TWO YEARS PRIOR TO THE DATE OF THE VOTE ON
SUCH RESOLUTION; AND PROVIDED FURTHER, THAT NEITHER THE COMPANY, NOR ANY PERSON
WHO AS OF THE DATE HEREOF WAS A DIRECTOR OR OFFICER OF THE COMPANY, NOR ANY
TRUSTEE OR OTHER FIDUCIARY HOLDING SECURITIES UNDER AN EMPLOYEE BENEFIT PLAN OF
THE COMPANY, NOR ANY CORPORATION OWNED, DIRECTLY OR INDIRECTLY, BY THE
SHAREHOLDERS OF THE COMPANY IN SUBSTANTIALLY THE SAME PROPORTIONS AS THEIR
OWNERSHIP OF SHARES OF THE COMPANY SHALL BE DEEMED TO BE AN “ACQUIRER” FOR
PURPOSES OF THIS SECTION.

 

(B)           THE ELECTION DURING ANY TWO-YEAR PERIOD TO A MAJORITY OF THE SEATS
ON THE BOARD OF DIRECTORS OF THE COMPANY OF INDIVIDUALS WHO WERE NOT MEMBERS OF
THE BOARD AT THE BEGINNING OF SUCH PERIOD UNLESS SUCH ADDITIONAL OR REPLACEMENT
DIRECTORS WERE APPROVED BY AT LEAST 80% OF THE CONTINUING DIRECTORS.

 

(C)           SHAREHOLDER APPROVAL OF A PLAN OF COMPLETE LIQUIDATION OF THE
COMPANY OR AN AGREEMENT FOR THE SALE OR DISPOSITION BY THE COMPANY OF ALL OR
SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS.

 

(II)           “GOOD REASON” SHALL MEAN THE OCCURRENCE OF (A) A MATERIAL BREACH
OF THIS AGREEMENT BY THE COMPANY, (B) THE ASSIGNMENT TO THE EXECUTIVE OF DUTIES
INCONSISTENT WITH HIS POSITION AS DESCRIBED IN SECTION 2 HEREIN, OR ANY
SIGNIFICANT ADVERSE ALTERATION IN THE STATUS OR CONDITIONS OF THE EXECUTIVE’S
EMPLOYMENT OR IN THE NATURE OF THE EXECUTIVE’S RESPONSIBILITIES AS DESCRIBED IN
SECTION 2 HEREIN, (C) THE FAILURE OF THE COMPANY TO CONTINUE TO PROVIDE
EXECUTIVE WITH BENEFITS SUBSTANTIALLY SIMILAR TO THOSE DESCRIBED IN THIS
AGREEMENT OR TO CONTINUE IN EFFECT ANY BENEFIT OR STOCK OPTION PLAN WHICH IS
MATERIAL TO THE EXECUTIVE’S COMPENSATION, INCLUDING BUT NOT LIMITED TO, THE
PLANS OR (D) THE FAILURE OF THE COMPANY TO MAINTAIN DIRECTORS’ AND OFFICERS’
INSURANCE AT AN AGGREGATE AMOUNT AT LEAST EQUAL TO THE LEVEL PROVIDED AS OF THE
DATE HEREOF; PROVIDED, HOWEVER, IN THE CASE OF (A), (C) AND (D) ABOVE, EXECUTIVE
SHALL NOT BE DEEMED TO HAVE GOOD REASON TO TERMINATE HIS EMPLOYMENT IF THE
REASON FOR SUCH TERMINATION IS REMEDIED PRIOR TO THE DATE OF TERMINATION
SPECIFIED IN THE NOTICE OF TERMINATION PURSUANT TO SECTION 10(D) HEREIN.

 

SECTION 11.         AUTHORITY. EXECUTIVE REPRESENTS AND WARRANTS THAT HE HAS THE
ABILITY TO ENTER INTO THIS AGREEMENT AND PERFORM ALL OBLIGATIONS HEREUNDER, AND
THAT THERE ARE NO RESTRICTIONS ON EXECUTIVE OR ANY OBLIGATIONS OWED BY HIM TO
THIRD PARTIES WHICH ARE REASONABLY LIKELY, IN ANY WAY, TO DETRACT FROM OR
ADVERSELY AFFECT HIS PERFORMANCE HEREUNDER.

 

SECTION 12.         MISCELLANEOUS.

 

(A)           SEPARATE AGREEMENTS. THE COVENANTS OF EXECUTIVE CONTAINED IN THIS
AGREEMENT SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND SHALL BE CONSTRUED
AS SEPARATE AGREEMENTS INDEPENDENT OF ANY OTHER AGREEMENT, CLAIM, OR CAUSE OF
ACTION OF EXECUTIVE AGAINST THE COMPANY, WHETHER PREDICATED ON THIS AGREEMENT OR
OTHERWISE. THE COVENANTS CONTAINED IN THIS AGREEMENT ARE NECESSARY TO PROTECT
THE LEGITIMATE BUSINESS INTERESTS OF THE COMPANY.

 

(B)           ENTIRE AGREEMENT. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT
THIS AGREEMENT SUPERSEDES ALL PREVIOUS CONTRACTS AND AGREEMENTS BETWEEN THE
COMPANY AND EXECUTIVE RELATING TO THE SUBJECT MATTER HEREOF AND THAT ANY SUCH
PREVIOUS CONTRACTS OR

 

9

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AGREEMENTS, INCLUDING WITHOUT LIMITATION, THE ORIGINAL EMPLOYMENT AGREEMENT,
SHALL BECOME NULL AND VOID UPON EXECUTION OF THIS AGREEMENT. THIS AGREEMENT
CONSTITUTES THE COMPLETE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT MATTER HEREOF AND NO PARTY HAS MADE OR IS RELYING ON ANY PROMISES BY ANY
OTHER PARTY OR THEIR RESPECTIVE REPRESENTATIVES NOT CONTAINED IN THIS AGREEMENT.

 

(C)           SEVERABILITY. IF ANY PROVISION OF THIS AGREEMENT IS HELD TO BE
ILLEGAL, INVALID OR UNENFORCEABLE UNDER PRESENT OR FUTURE LAWS, SUCH PROVISION
SHALL BE FULLY SEVERABLE, THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED AS IF
SUCH ILLEGAL, INVALID OR UNENFORCEABLE PROVISION HAD NEVER COMPRISED A PART OF
THIS AGREEMENT, AND THE REMAINING PROVISIONS OF THIS AGREEMENT SHALL REMAIN IN
FULL FORCE AND EFFECT AND SHALL NOT BE AFFECTED BY THE ILLEGAL, INVALID OR
UNENFORCEABLE PROVISION OR BY ITS SEVERANCE FROM THIS AGREEMENT. IF ANY
PROVISION OF THIS AGREEMENT IS HELD TO BE UNENFORCEABLE BECAUSE OF THE DURATION
OF SUCH PROVISION, THE AREA COVERED THEREBY OR THE SCOPE OF THE ACTIVITY
RESTRAINED, THE PARTIES HEREBY EXPRESSLY AGREE THAT THE COURT MAKING SUCH
DETERMINATION SHALL HAVE THE POWER TO REDUCE THE DURATION AND/OR AREAS OF SUCH
PROVISION AND/OR THE SCOPE OF THE ACTIVITY TO BE RESTRAINED CONTAINED IN SUCH
PROVISION AND, IN ITS REDUCED FORM, SUCH PROVISION SHALL THEN BE ENFORCEABLE.

 

(D)           SUCCESSOR AND ASSIGNS.

 

(I)            THIS AGREEMENT IS PERSONAL IN NATURE AND NEITHER THIS AGREEMENT
NOR ANY RIGHTS OR OBLIGATIONS ARISING HEREUNDER MAY BE ASSIGNED, TRANSFERRED OR
PLEDGED BY EXECUTIVE. THIS AGREEMENT SHALL INURE TO THE BENEFIT OF AND BE
ENFORCEABLE BY EXECUTIVE’S PERSONAL OR LEGAL REPRESENTATIVES, EXECUTORS,
ADMINISTRATORS, SUCCESSORS, HEIRS, DISTRIBUTEES, DEVISEES AND LEGATEES.

 

(II)           THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF
THE COMPANY AND THEIR SUCCESSORS. THE RIGHTS AND OBLIGATIONS OF THE COMPANY
PURSUANT TO THIS AGREEMENT ARE FREELY ASSIGNABLE AND TRANSFERABLE BY COMPANY
WITHOUT THE CONSENT OF EXECUTIVE WITHOUT HIS BEING RELIEVED OF ANY OBLIGATIONS
HEREUNDER, INCLUDING, WITHOUT LIMITATION, AN ASSIGNMENT OR TRANSFER IN
CONNECTION WITH A MERGER OR CONSOLIDATION OF THE COMPANY, OR A SALE OR TRANSFER
OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY; PROVIDED, THE
PROVISIONS OF THIS AGREEMENT SHALL BE BINDING ON AND SHALL INURE TO THE BENEFIT
OF THE SURVIVING BUSINESS ENTITY OR THE BUSINESS ENTITY TO WHICH SUCH ASSETS
SHALL BE TRANSFERRED AND SUCH SUCCESSOR SHALL EXPRESSLY ASSUME AND AGREE TO
PERFORM THIS AGREEMENT IN THE SAME MANNER AND TO THE SAME EXTENT THAT THE
COMPANY WOULD BE REQUIRED TO PERFORM IT IF NO SUCH TRANSACTION HAD TAKEN PLACE.

 

(E)           GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.

 

(F)            AMENDMENT. NO AMENDMENT, WAIVER, MODIFICATION OR CHANGE OF ANY
PROVISION OF THIS AGREEMENT SHALL BE VALID UNLESS IN WRITING AND SIGNED BY BOTH
PARTIES; PROVIDED, THAT ANY SUCH AMENDMENT, WAIVER, MODIFICATION OR CHANGE MUST
BE CONSENTED TO ON BEHALF OF THE COMPANY BY THE BOARD. THE WAIVER OF ANY BREACH
OF ANY DUTY, TERM OR CONDITION OF THIS AGREEMENT SHALL NOT BE DEEMED TO
CONSTITUTE A WAIVER OF ANY PRECEDING OR SUCCEEDING BREACH OF THE SAME OR ANY
OTHER DUTY, TERM OR CONDITION OF THIS AGREEMENT.

 

10

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(G)           NOTICES. ALL NOTICES AND COMMUNICATIONS UNDER THIS AGREEMENT SHALL
BE IN WRITING AND SHALL BE PERSONALLY DELIVERED OR SENT BY PREPAID CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, OR BY RECOGNIZED COURIER SERVICE, AND ADDRESSED
AS FOLLOWS:

 

(I)            IF TO THE COMPANY TO:

 

American Bank Note Holographics, Inc.

2 Applegate Drive

Robbinsville, NJ 08691

Attention:  Chairman

Telephone: (609) 632-0800

Facsimile: (609) 632-0850

 

with a copy to:

 

Fulbright & Jaworski L.L.P.

666 Fifth Avenue

New York, NY 10103

Attention: Paul Jacobs, Esq.

Telephone: (212) 318-3000

Facsimile: (212) 318-3400

 

(II)           IF TO THE EXECUTIVE TO:

 

Kenneth Traub

2 Applegate Drive

Robbinsville, NJ 08691

Telephone: (609) 632-0800

Facsimile: (609) 632-0850

 

or to such other address as may be specified by notice of the parties.

 

(H)           ARBITRATION. EXCEPT AS PROVIDED FOR IN SECTION 7(B), THE COMPANY
AND EXECUTIVE AGREE THAT ANY CLAIM OR CONTROVERSY ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY BREACH THEREOF (“ARBITRABLE DISPUTE”) SHALL BE SETTLED BY
ARBITRATION IF SUCH CLAIM OR CONTROVERSY IS NOT OTHERWISE SETTLED; PROVIDED,
HOWEVER THAT NOTHING SET FORTH HEREIN SHALL IN ANY WAY LIMIT THE COMPANY’S
ABILITY TO SEEK AND OBTAIN INJUNCTIVE RELIEF IN AID OF ARBITRATION FROM ANY
COURT OF COMPETENT JURISDICTION. THIS ARBITRATION AGREEMENT APPLIES TO, AMONG
OTHERS, DISPUTES ABOUT THE VALIDITY, INTERPRETATION, OR EFFECT OF THIS
AGREEMENT. THE ARBITRATION SHALL TAKE PLACE IN NEW YORK, NEW YORK, OR SUCH OTHER
LOCATION AS TO WHICH THE PARTIES MAY MUTUALLY AGREE. EXCEPT AS EXPRESSLY SET
FORTH HEREIN, ALL ARBITRATION PROCEEDINGS UNDER THIS SECTION 12(H) SHALL BE
UNDERTAKEN IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
ARBITRATION ASSOCIATION (THE “AAA”) THEN IN FORCE ONLY BEFORE INDIVIDUALS WHO
ARE (I) LAWYERS ENGAGED FULL-TIME IN THE PRACTICE OF LAW AND (II) ON THE AAA
REGISTER OF ARBITRATORS. THERE SHALL BE ONE ARBITRATOR WHO SHALL BE CHOSEN IN
ACCORDANCE WITH THE RULES OF THE AAA. THE ARBITRATOR MAY NOT MODIFY OR CHANGE
THIS AGREEMENT IN ANY WAY AND SHALL NOT BE EMPOWERED TO AWARD PUNITIVE DAMAGES
AGAINST ANY PARTY TO SUCH ARBITRATION. EACH PARTY SHALL PAY THE FEES OF SUCH
PARTY’S ATTORNEYS, THE EXPENSES OF SUCH

 

11

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PARTY’S WITNESSES, AND ANY OTHER EXPENSES THAT SUCH PARTY INCURS IN CONNECTION
WITH THE ARBITRATION, BUT ALL OTHER COSTS OF THE ARBITRATION, INCLUDING THE FEES
OF THE ARBITRATOR, THE COST OF ANY RECORD OR TRANSCRIPT OF THE ARBITRATION,
ADMINISTRATIVE FEES, AND OTHER FEES AND COSTS SHALL BE PAID IN EQUAL SHARES BY
EXECUTIVE AND THE COMPANY.  EXCEPT AS PROVIDED FOR IN SECTION 7(B), ARBITRATION
IN THIS MANNER SHALL BE THE EXCLUSIVE REMEDY FOR ANY ARBITRABLE DISPUTE. SHOULD
EXECUTIVE OR THE COMPANY ATTEMPT TO RESOLVE AN ARBITRABLE DISPUTE BY ANY METHOD
OTHER THAN ARBITRATION PURSUANT TO THIS SECTION, THE RESPONDING PARTY WILL BE
ENTITLED TO RECOVER FROM THE INITIATING PARTY ALL DAMAGES, EXPENSES, AND
ATTORNEYS’ FEES INCURRED AS A RESULT OF THAT BREACH.

 

(I)            INDEMNIFICATION AGREEMENT. A MATERIAL BREACH OF THAT CERTAIN
INDEMNIFICATION AGREEMENT, ENTERED INTO BETWEEN THE COMPANY AND THE EXECUTIVE,
SHALL CONSTITUTE A MATERIAL BREACH OF THIS AGREEMENT.

 

(J)            COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS,
EACH OF WHICH WILL BE DEEMED AN ORIGINAL BUT ALL OF WHICH WILL TOGETHER
CONSTITUTE ONE AND THE SAME AGREEMENT.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

 

 

AMERICAN BANK NOTE HOLOGRAPHICS, INC.

 

 

 

 

 

 

 

By:

 /s/ Fred Levin

 

 

Name: Fred Levin

 

Title: Chairman, Compensation Committee of the Board

 

 

 

 

 

 

 

KENNETH TRAUB

 

 

 

 

 

 

 

  /s/ Kenneth Traub

 

 

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