**Exhibit10.9**

 

**AMENDED AND RESTATED EMPLOYMENT AGREEMENT**

 

THISAMENDED 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., aDelaware corporation (the “Company”).

 

RECITAL

 

WHEREAS,the Executive and the Company have entered into that certain EmploymentAgreement 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 theprovisions of the Original Employment Agreement as hereinafter set forth;

 

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

 

AGREEMENT

 

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

 

# SECTION 1.           EMPLOYMENT.The Company hereby employs Executive and Executive hereby accepts suchemployment and agrees to render services to the Company, upon the terms andconditions set forth in this Agreement.

 

# SECTION 2.           POSITIONAND DUTIES. Executive shall assume the responsibilities and perform the duties ofPresident and Chief Executive Officer of the Company.  Executive agrees to devote substantially allof his business time, attention, skill and best efforts to the diligentperformance of his duties hereunder and shall be loyal to the Company and itsaffiliates and subsidiaries, and use his best efforts to further theirinterests. The Executive shall be responsible for the day to day worldwidegeneral management, administration and operation of all present and futurebusiness of the Company, including, without limitation, those operations setforth in the By-laws of the Company. The Executive shall be the Company’s mostsenior executive officer and he shall report directly to the Board of Directorsof 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 theCompany may adopt, modify, supplement or change from time to time.

 

# SECTION 3.           TERMOF EMPLOYMENT. The term of employment hereunder shall commence on the datehereof and shall continue thereafter until the earlier of (i) one yearfrom 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 forsuccessive one year terms, unless the Company gives written notice at leastsixty (60) days prior to the end of the Employment Term of its election toterminate such employment at the end of such Employment Term. Notwithstanding theforegoing, if the Executive’s employment is terminated pursuant to Section 10of this agreement, the automatic renewal provided herein shall be of no furthereffect as of the Termination Date (as defined). In the event Executive’s employmentis not renewed at the end of the Employment Term (except as otherwise providedin Section 10 hereof) or renewal term, the Company will pay to the Executivean amount equal to two times the Salary and Bonus (both, as defined) of the Executivefor the prior year.

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# SECTION 4.           EXCLUSIVITY.During the term of Executive’s employment with the Company, Executive shall notwithout the prior written consent of the Board (i) perform any managerial,sales, marketing or technical services directly or indirectly for any person orentity competing directly or indirectly with the Company or any of itssubsidiaries in the holography business; (ii) perform any such servicesfor any entity owned, directly or indirectly, by anyone competing, eitherdirectly or indirectly, with the Company or any of its subsidiaries in theholography business; (iii) on his own behalf or that of any other person orentity, 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 ofits subsidiaries; (iv) engage or become interested, directly orindirectly, as owner, employer, partner, consultant, through stock ownership (exceptownership of less than one percent of the number of shares outstanding of anysecurities which are listed for trading on any securities exchange, providedthat the specific nature and amount of the investment, if over $50,000, shallbe immediately disclosed to the Company in writing), investment of capital,lending of money or property, or otherwise either alone or in association withothers, in the operation of any type of business or enterprise which conflictsor interferes with the performance of Executive’s services hereunder or (v) engagein any activities which could reasonably be deemed to be a conflict of interestwith his duties hereunder or his obligations to the Company.

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# SECTION 5.           COMPENSATIONAND BENEFITS.

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## (a)           Salaryand Bonus.  As compensation for theperformance of the Executive’s services hereunder, during the Employment Term,the Company will pay to the Executive an annual base salary of $400,000 perannum, effective January 1, 2005; provided that the Executive’s annualbase salary shall be increased by not less than 3% per annum in the event thisAgreement is renewed pursuant to Section 3 above (the “Salary”).  The Executive will also be eligible toreceive a bonus each year (the “Annual Bonus”). Within 30 days following the end of each fiscal year of the Company, thepayment of any Annual Bonus (or no Annual Bonus) shall be determined by theBoard or a committee designated by the Board to make such determination (the “CompensationCommittee”), and shall be based on the Executive’s performance against theobjectives to be reasonably determined by the Board or the CompensationCommittee, in consultation with the Executive at the beginning of each fiscalyear.  The parties agree that the target AnnualBonus shall be $100,000, and the actual Annual Bonus may be more or less thanthe target based on the Compensation Committee’s reasonable assessment of theExecutive’s performance against the agreed-upon objectives. The Board or theCompensation Committee may, in its sole discretion, determine to awardadditional 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 bepayable in accordance with the customary payroll practices of the Company forits senior management personnel.

 

## (b)           Benefits.During the Employment Term, the Executive shall be eligible to participate, onthe same basis and subject to the same qualifications as other seniormanagement personnel of the Company, in any pension, profit sharing, savings,bonus, life insurance, health insurance, hospitalization, dental, drugprescription, disability, accidental death and dismemberment and other benefitplans and policies as may from time to time be in effect with respect to seniormanagement personnel of the Company (collectively, the “Benefits”).  In addition to the foregoing, the Company willcontinue to provide the Executive with the Term Life Insurance and DisabilityInsurance policies at the same level that is in place as of the date of thisAgreement.  The Executive shall also beentitled to vacation days (including the right to accrue unused vacation timefrom year to year if the Agreement is renewed pursuant to Section 3above), holidays and sick days in accordance with the policies of the Companyas may be in effect from time to time; provided, however, that termination ofExecutive’s employment for any reason (including resignation by the Executive),the Company shall pay Executive for accrued vacation time unused as of the lastdate of employment, on a pro rated basis calculated on the basis of theExecutive’s Salary and Bonus in effect on the Termination Date.  The Company shall also provide the Executivewith a Company car, as well as all reasonable car maintenance, and related insurance.

 

## (c)           StockOptions.  The Executive shall beeligible to receive grants of options to purchase equity in the Company duringthe Employment Term as determined, from time to time, in the sole discretion ofthe Board or the Compensation Committee.

 

## (d)           Expenses.The Company will pay or promptly reimburse the Executive for all reasonable out-of-pocketbusiness, entertainment and travel expenses incurred by the Executive in theperformance of his duties hereunder upon presentation of appropriate supportingdocumentation and otherwise in accordance with the expense reimbursementpolicies of the Company in effect from time to time.  The Company will also pay or promptlyreimburse the Executive for all reasonable expenses relating to ongoing professionaldevelopment.

 

## (e)           Taxesand Withholdings. All appropriate deductions, including federal, state andlocal taxes and social security, shall be deducted from any amount paid by theCompany to the Executive hereunder in conformity with applicable laws.

 

# SECTION 6.           CONFIDENTIALITY. The Executive acknowledges and agreesthat (a) in connection with his employment by the Company, the Executivewill be involved in the Company’s and its subsidiaries’ (if any) operations; (b) inorder to permit him to carry out his responsibilities, the Company maydisclose, to the Executive, in strict confidence, or the Executive may develop,confidential proprietary information and trade secrets of the Company and itsaffiliates, including without limitation (i) unpublished information withrespect to the Company concerning marketing or sales plans, operationaltechniques, strategic plans and the identity of suppliers and supply contacts; (ii) unpublishedfinancial information with respect to the Company, including information concerningrevenues, profits and profit margins; (iii) internal confidential manualsand memos; and (iv) “material inside information” as such phrase 

 

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# is used for purposes of the Securities Exchange Act of1934, as amended (collectively, “Confidential Information”); and (c) theCompany and its affiliates derive significant economic value and competitiveadvantage by reason of the fact that such Confidential Information, in whole orin part, is not generally known or readily ascertainable by the Company’s orits affiliates’ actual or potential competitors and, as such, constitutes theCompany’s and its affiliates’ valuable trade secrets.

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

 

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

 

The foregoing restrictions on the disclosure ofConfidential Information set forth in this Section 6 shall not apply tothose particular portions of Confidential Information, if any, that arerequired to be disclosed in connection with any legal process; provided that,at least ten (10) days in advance of any required disclosure, or suchlesser time as may be required by circumstances, the Executive shall furnishthe Company with a copy of the judicial or administrative order requiring thatsuch information be disclosed together with a written description of theinformation proposed to be disclosed (which description shall be in sufficientdetail to enable the Executive and its affiliates to determine the nature andscope of the information proposed to be disclosed), and the Executive covenantsand agrees to cooperate with the Company and its affiliates to deliver theminimum amount of information necessary to comply with such order.

 

This Section 6 shall survive any termination ofthis Agreement.

 

# SECTION 7.           COVENANTNOT TO COMPETE.

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## (a)           Scope.In order to fully protect the Company’s Confidential Information, during theEmployment Term and for a period of one year thereafter (the “NoncompetitionPeriod”), the Executive shall not, except as authorized in writing by theBoard, directly or indirectly, render services to, assist, participate in theaffairs of, or otherwise be connected with, any person or enterprise (otherthan the Company and its subsidiaries, if any), which person or enterprise isengaged 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 itssubsidiaries, if any, 

 

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## with respect to any products or services of theCompany or any of its subsidiaries, if any, in any capacity which would utilizethe Executive’s services with respect to any products or services of theCompany or any of its subsidiaries, if any, that were within the Executive’smanagement responsibility at any time within the twelve (12) month periodimmediately prior to the Termination Date.

 

## (b)           Remedies.The parties recognize, acknowledge and agree that (i) any breach orthreatened breach of the provisions of this Section 7 shall causeirreparable harm and injury to the Company and that money damages will not providean adequate remedy for such breach or threatened breach and (ii) the duration,scope and geographical application of this Agreement are fair and reasonableunder the circumstances, and are reasonably required to protect the legitimatebusiness interests of the Company. Accordingly, Executive agrees that theCompany shall be entitled to have the provisions of this Agreement specificallyenforced by any court having jurisdiction, and that such a court may issue atemporary restraining order, preliminary injunction or other appropriateequitable relief, without having to prove the inadequacy of available remediesat law. In addition, the Company shall be entitled to avail itself of all suchother actions and remedies available to it or any of its affiliates under lawor in equity and shall be entitled to such damages as it sustains by reason ofsuch breach or threatened breach. It is the express desire and intent of theparties that the provisions of this Agreement be enforced to the full extentpossible.

 

## (c)           Severability.If any provision of Section 7(a) is held to be unenforceable becauseof the duration of such provision, the area covered thereby or the scope of theactivity restrained, the parties hereby expressly agree that the court makingsuch determination shall have the power to reduce the duration and/or areas ofsuch provision and/or the scope of the activity to be restrained contained insuch provision and, in its reduced form, such provision shall then beenforceable. The parties hereto intend and agree that the covenants containedin Section 7(a) shall be construed as a series of separate covenants,one for each municipality, community or county included within the areadesignated by Section 7(a). Except for geographic coverage, the terms andconditions of each such separate covenant shall be deemed identical to thecovenant contained in Section 7(a). Furthermore, if any court shall refuseto enforce any of the separate covenants deemed included in Section 7(a),then such unenforceable covenant shall be deemed eliminated from the provisionshereof to the extent necessary to permit the remaining separate covenants to beenforced in accordance with their terms. The prevailing party in any action arisingout of a dispute in respect of any provision of this Agreement shall be entitledto recover from the non-prevailing party reasonable attorneys’ fees and costsand disbursements incurred in connection with the prosecution or defense, asthe case may be, of any such action.

 

# SECTION 8.           RESPONSIBILITYUPON TERMINATION. Upon the termination of his employment for any reason andirrespective of whether or not such termination is voluntary on his part:

 

## (a)           TheExecutive shall advise the Company of the identity of his new employer withinten (10) days after accepting new employment and further agrees to keepthe Company so advised of any change in employment during the Non-competitionPeriod;

 

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## (b)           TheCompany in its sole discretion may notify any new employer of the Executivethat he has an obligation not to compete with the Company during theNoncompetition Period; and

 

## (c)           TheExecutive shall deliver to the Company any and all records, forms, contracts,memoranda, work papers, customer data and any other documents (whether inwritten form, on computers or discs or otherwise) which have come into hispossession by reason of his employment with the Company, irrespective ofwhether or not any of said documents were prepared for him, and he shall notretain 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 Companyand for a period of twelve (12) months thereafter, he will not, and will notassist any of his affiliates to, directly or indirectly, recruit or otherwisesolicit or induce any executive, customer, subscriber or supplier of theCompany or any of its subsidiaries about whom or which he gained ConfidentialInformation while at the Company to terminate its employment or arrangementwith the Company or any of its subsidiaries, otherwise change its relationshipwith the Company or any of its subsidiaries, or establish any relationship withthe Executive or any of his affiliates for any business purpose deemedmaterially competitive with the business of the Company or any of itssubsidiaries, if any.

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# SECTION 10.         TERMINATION.

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## (a)           Terminationfor Cause. Notwithstanding anything contained herein to the contrary, theBoard may terminate the Executive’s employment with the Company for cause;provided that the Executive shall be given notice of the Company’s intent toterminate his employment for cause, the nature of the cause and, if cureable, areasonable 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 theBoard acting in good faith and in light of the nature of the cause. Forpurposes of this Agreement, the term “cause” shall mean, the occurrence of anyone or more of the following (i) the commission of any act of willful andmaterial embezzlement or fraud on the part of Executive against the Company, (ii) anyact or omission which constitutes a willful and material breach by Executive ofthis Agreement, including a refusal or failure by Executive to perform hisduties and obligations hereunder, (iii) Executive has been convicted of acrime, which conviction has, or is reasonably likely to have a material adverseeffect on the Company, or its business or will prevent the Executive fromperforming his duties for a sustained period of time, Executive becomesDisabled (as hereinafter defined), or (iv) the death of Executive; provided,however, that “cause” shall not include any act or omission by the Executiveundertaken in the good faith exercise of the Executive’s business judgment asPresident and Chief Executive Officer or in good faith reliance on the adviceof counsel. For purposes of this Agreement, “Disabled” shall meanExecutive’s inability, due to illness, accident or any other physical or mentalcondition, to fully perform the essential functions of his position or thisAgreement for more than 26 weeks consecutively or for intermittent periods aggregating39 weeks during any 78-week period during the Employment term, except asotherwise required by law.

 

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If, during the Employment Term the Company terminatesthe Executive’s employment pursuant to clauses (i), (ii) or (iii) ofthis paragraph (a), then, from and after the date the Executive’s terminationis effective (the “Termination Date”), the Executive shall (a) haveno right to receive any further Salary following the Termination Date, (b) beentitled to receive any Bonus, payable on a pro rata basis, which may haveaccrued or which otherwise would have been granted by the Board had theExecutive not been terminated, for the year in which the Executive wasterminated, (c) cease to be covered under or be permitted to participatein any Benefits (except payments due to the Executive or the Executive’sbeneficiaries or representatives under any applicable life or disabilityinsurance plans or policies) and (d) shall have no further right topurchase shares of the Company’s common stock, $0.01 par value per share (the “CommonStock”) pursuant to any stock option plan or other equity incentive plan ofthe Company (collectively, the “Plans”); provided however, that allrestrictions on any options or any shares of the Common Stock underlying theoptions under the Plans (the “Restricted Stock”) purchased by the Executiveshall, subject to applicable securities laws, rules and regulations, lapseon the Termination Date.

 

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

 

## (b)           TerminationWithout Cause and Resignation For Good Reason.  The Company shall have the right to terminatethis Agreement and the employment of Executive with the Company for any reasonor no reason and without cause upon written notice to Executive of suchtermination, and the Executive shall have the right to resign for Good Reason(as hereinafter defined); provided that, except as otherwise provided inparagraph (c) below, (i) the Company shall continue to pay to theExecutive the Salary then in effect, together with any Bonus which may haveaccrued or which otherwise would have been granted by the Board had theExecutive not been terminated or resigned for two years following theTermination Date, in accordance with the customary payroll practices of the Companyfor its senior management personnel (except in the event the Executive resignsfor Good Reason as defined in paragraph (e)(ii)(d) below, in which case theamount otherwise payable under this clause (i) will be reduced by 50%), (ii) theCompany shall continue any benefits in which the Executive then participates onthe same basis of participation and subject to all terms and conditions of suchplans as applied prior to such termination or resignation, and (iii) all non-vestedoptions to purchase shares of Common Stock granted under the Plans shall veston the Termination Date and the Executive shall be entitled to all rights withrespect to such options or Common Stock purchased under the Plans for a periodof two years following the Termination Date. All restrictions on RestrictedStock purchased by the Executive shall, subject to applicable securities laws, rules andregulations, lapse on the Termination Date.

 

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## (c)           TerminationUpon Change of Control or Resignation for Good Reason Following a Change ofControl. In the event Executive’s employment is terminated by the Companysubsequent to a Change of Control (as hereinafter defined) or the Executiveresigns from the Company for Good Reason (as hereinafter defined) within oneyear following a Change of Control, the Company will pay the Executive aseverance amount, in one lump sum, within 30 days of such termination, equal tothe product of (x) the Salary and Bonus multiplied by (y) two (2). In the eventExecutive’s employment is terminated by the Company subsequent to a Change ofControl (as hereinafter defined) or the Executive resigns from the Company forGood Reason (as hereinafter defined) at any time after one year following aChange of Control, the Company will pay the Executive a severance amount, inone 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 theExecutive pursuant to this paragraph (c), in no event shall the Executivereceive any payments pursuant paragraph (b) of this Section 10. Tothe extent that such amounts are in excess of the amount allowable as adeduction under Section 280(G) of the Code, or are subject to excisetax pursuant to Section 4999 of the Code, the Company will gross-up anyadditional amounts due, and all non-vested options to purchase shares of CommonStock granted under the Plans shall vest on the Termination Date and allrestrictions on Restricted Stock purchased by the Executive shall, subject toapplicable securities laws, rules and regulations, lapse on theTermination Date.

 

## (d)           Resignation.Executive shall have the right to terminate this Agreement and his employmentwith the Company upon fourteen (14) calendar days prior written notice to theCompany. Except if the Executive’s resignation is for Good Reason in accordancewith paragraphs (b) and (c) above, from and after the effective dateof such resignation, Executive shall (i) have no right to receive anyfurther Salary or bonus hereunder; (ii) cease to be covered under or bepermitted to participate in any Benefits (except payments due the Executive orthe Executive’s beneficiaries or representatives under any applicable pension,profit sharing, life or disability insurance plans or policies); and (iii) forfeitany and all non-vested options granted or non-vested Common Stock purchasedunder the Plans.

 

## (e)           Definitions.For purposes of this Section 10 the terms listed below shall mean thefollowing:

 

### (i)            “Changein Control” shall mean:

 

#### (a)           thedirect or indirect acquisition, whether by sale, merger, consolidation, orpurchase of assets or stock, by any person, corporation, or other entity orgroup 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 andregulations promulgated thereunder) of shares in the Company which, when addedto 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 entitledto be cast at meetings of stockholders as to matters on which all outstandingshares are entitled to be voted as a single class; provided, however, that suchacquisition shall not constitute a Change of Control for purposes of thisAgreement if prior to such acquisition a resolution declaring that theacquisition shall not constitute a Change of Control is adopted by the Boardwith the support of a majority of the Board members who either were members ofthe Board for at least two years prior to the date of the vote on suchresolution or were nominated for election 

 

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#### to the Board by at least two-thirds of the directorsthen still in office who were members of the Board at least two years prior to thedate of the vote on such resolution; and provided further, that neither theCompany, nor any person who as of the date hereof was a director or officer ofthe Company, nor any trustee or other fiduciary holding securities under anemployee benefit plan of the Company, nor any corporation owned, directly orindirectly, by the shareholders of the Company in substantially the sameproportions as their ownership of shares of the Company shall be deemed to bean “acquirer” for purposes of this Section.

 

#### (b)           theelection during any two-year period to a majority of the seats on the Board ofDirectors of the Company of individuals who were not members of the Board atthe beginning of such period unless such additional or replacement directorswere approved by at least 80% of the continuing directors.

 

#### (c)           shareholderapproval of a plan of complete liquidation of the Company or an agreement forthe sale or disposition by the Company of all or substantially all of theCompany’s assets.

 

### (ii)           “GoodReason” shall mean the occurrence of (a) a material breach of thisAgreement by the Company, (b) the assignment to the Executive of dutiesinconsistent with his position as described in Section 2 herein, or anysignificant adverse alteration in the status or conditions of the Executive’semployment or in the nature of the Executive’s responsibilities as described inSection 2 herein, (c) the failure of the Company to continue toprovide Executive with benefits substantially similar to those described inthis Agreement or to continue in effect any benefit or stock option plan whichis material to the Executive’s compensation, including but not limited to, the Plansor (d) the failure of the Company to maintain directors’ and officers’ insuranceat an aggregate amount at least equal to the level provided as of the datehereof; provided, however, in the case of (a), (c) and (d) above,Executive shall not be deemed to have Good Reason to terminate his employmentif the reason for such termination is remedied prior to the date of terminationspecified 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 thisAgreement and perform all obligations hereunder, and that there are norestrictions on Executive or any obligations owed by him to third parties whichare reasonably likely, in any way, to detract from or adversely affect hisperformance hereunder.

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# SECTION 12.         MISCELLANEOUS.

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## (a)           SeparateAgreements. The covenants of Executive contained in this Agreement shallsurvive any termination of this Agreement and shall be construed as separateagreements independent of any other agreement, claim, or cause of action ofExecutive against the Company, whether predicated on this Agreement orotherwise. The covenants contained in this Agreement are necessary to protectthe legitimate business interests of the Company.

 

## (b)           EntireAgreement. The parties hereto acknowledge and agree that this Agreementsupersedes all previous contracts and agreements between the Company andExecutive relating to the subject matter hereof and that any such previouscontracts or 

 

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## agreements, including without limitation, the OriginalEmployment Agreement, shall become null and void upon execution of thisAgreement. This Agreement constitutes the complete agreement among the partieshereto with respect to the subject matter hereof and no party has made or isrelying on any promises by any other party or their respective representativesnot contained in this Agreement.

 

## (c)           Severability.If any provision of this Agreement is held to be illegal, invalid orunenforceable under present or future laws, such provision shall be fully severable,this Agreement shall be construed and enforced as if such illegal, invalid orunenforceable provision had never comprised a part of this Agreement, and theremaining provisions of this Agreement shall remain in full force and effectand shall not be affected by the illegal, invalid or unenforceable provision orby its severance from this Agreement. If any provision of this Agreement isheld to be unenforceable because of the duration of such provision, the areacovered thereby or the scope of the activity restrained, the parties herebyexpressly agree that the court making such determination shall have the powerto reduce the duration and/or areas of such provision and/or the scope of theactivity to be restrained contained in such provision and, in its reduced form,such provision shall then be enforceable.

 

## (d)           Successorand Assigns.

 

### (i)            ThisAgreement is personal in nature and neither this Agreement nor any rights orobligations arising hereunder may be assigned, transferred or pledged byExecutive. This Agreement shall inure to the benefit of and be enforceable byExecutive’s personal or legal representatives, executors, administrators,successors, heirs, distributees, devisees and legatees.

 

### (ii)           ThisAgreement shall be binding upon and inure to the benefit of the Company andtheir successors. The rights and obligations of the Company pursuant to thisAgreement are freely assignable and transferable by Company without the consentof Executive without his being relieved of any obligations hereunder,including, without limitation, an assignment or transfer in connection with amerger or consolidation of the Company, or a sale or transfer of all orsubstantially all of the assets of the Company; provided, the provisions ofthis Agreement shall be binding on and shall inure to the benefit of thesurviving business entity or the business entity to which such assets shall betransferred and such successor shall expressly assume and agree to perform thisAgreement in the same manner and to the same extent that the Company would berequired to perform it if no such transaction had taken place.

 

## (e)           GoverningLaw. This Agreement shall be governed by and construed in accordance withthe 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 Agreementshall be valid unless in writing and signed by both parties; provided, that anysuch amendment, waiver, modification or change must be consented to on behalfof the Company by the Board. The waiver of any breach of any duty, term orcondition of this Agreement shall not be deemed to constitute a waiver of anypreceding or succeeding breach of the same or any other duty, term or conditionof this Agreement.

 

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## (g)           Notices.All notices and communications under this Agreement shall be in writing andshall be personally delivered or sent by prepaid certified mail, return receiptrequested, or by recognized courier service, and addressed as follows:

 

### (i)            Ifto 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)           Ifto the Executive to:

 

Kenneth Traub

2 Applegate Drive

Robbinsville, NJ 08691

Telephone: (609) 632-0800

Facsimile: (609) 632-0850

 

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

 

## (h)           Arbitration.Except as provided for in Section 7(b), the Company and Executive agreethat any claim or controversy arising out of or relating to this Agreement orany breach thereof (“Arbitrable Dispute”) shall be settled byarbitration if such claim or controversy is not otherwise settled; provided,however that nothing set forth herein shall in any way limit the Company’sability to seek and obtain injunctive relief in aid of arbitration from anycourt of competent jurisdiction. This arbitration agreement applies to, amongothers, disputes about the validity, interpretation, or effect of thisAgreement. The arbitration shall take place in New York, New York, or such otherlocation as to which the parties may mutually agree. Except as expressly setforth herein, all arbitration proceedings under this Section 12(h) shallbe undertaken in accordance with the Commercial Arbitration Rules of theAmerican Arbitration Association (the “AAA”) then in force only beforeindividuals who are (i) lawyers engaged full-time in the practice of lawand (ii) on the AAA register of arbitrators. There shall be one arbitratorwho shall be chosen in accordance with the rules of the AAA. The arbitratormay not modify or change this Agreement in any way and shall not be empoweredto award punitive damages against any party to such arbitration. Each partyshall pay the fees of such party’s attorneys, the expenses of such 

 

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## party’s witnesses, and any other expenses that suchparty incurs in connection with the arbitration, but all other costs of thearbitration, including the fees of the arbitrator, the cost of any record ortranscript of the arbitration, administrative fees, and other fees and costsshall 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 ArbitrableDispute. Should Executive or the Company attempt to resolve an ArbitrableDispute by any method other than arbitration pursuant to this Section, theresponding party will be entitled to recover from the initiating party alldamages, expenses, and attorneys’ fees incurred as a result of that breach.

 

## (i)            IndemnificationAgreement. A material breach of that certain indemnification agreement,entered into between the Company and the Executive, shall constitute a materialbreach of this Agreement.

 

## (j)            Counterparts.This Agreement may be executed in counterparts, each of which will be deemed anoriginal but all of which will together constitute one and the same agreement.

 

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IN WITNESS WHEREOF, the parties hereto have executedthis 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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