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                                                                  EXHIBIT 10.13

                               EMPLOYMENT AGREEMENT


         THIS EMPLOYMENT AGREEMENT, (this "Agreement"), is made and entered into
as of May 11, 1999, by and between Alan Goldstein (the "Executive") and American
Bank Note Holographics, Inc., a Delaware corporation (the "Company").

                                  R E C I T A L

         WHEREAS, the Executive has been acting as a consultant to the Company
since February 1, 1999;

         WHEREAS, the Company and the Executive desire to set forth herein the
terms and conditions on which the Company will employ the Executive, and the
Executive will accept employment with the Company.

                                    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 Chief Financial Officer and Secretary of the Company. The
Executive shall also serve in such similar capacities as may be assigned to him
in good faith from time to time by the President 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
financial management and financial reporting of the Company. 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 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
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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 the Executive's then
existing Salary and Bonus for the next six (6) months.

SECTION 4. EXCLUSIVITY. During the term of Executive's employment with the
Company, Executive shall not without the prior written consent of the Board of
Directors (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 $160,000 per annum; 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"). Within 30 days following the end of each of the Company's fiscal
quarters, the President and Board shall determine if the Executive is eligible
to receive a bonus (the "Bonus). While the payment of any Bonus (or no Bonus)
shall be determined by the President and the Board or a committee designated by
the President and the Board to make such determination (the "Compensation
Committee") in its sole discretion, and shall be based on certain performance
measures which shall be determined by the Board or the Compensation Committee in
its sole discretion, the parties agree that a target bonus of at least $10,000
per quarter would be appropriate. 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.

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         (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, 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"). 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 upon 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 Executive shall also be entitled to receive a car
allowance of $600 per month. Upon mutual agreement of the Company and the
Executive that it would be beneficial to both parties for the Executive to
relocate his personal residence in connection with his employment hereunder, the
Company shall reimburse the Executive for the reasonable expenses related to
such relocation upon the submission of supporting documentation for such
expenses.

         (c) Stock Options. As additional compensation hereunder, the Executive
shall be granted stock options to purchase up to 100,000 shares of the Company's
common stock, par value $0.01 per share (the "Common Stock"), pursuant to the
Company's 1998 Stock Incentive Plan (the "1998 Plan"). The options and any
shares of Common Stock underlying the options may be subject to certain
restrictions as disclosed in the 1998 Plan (the "Restricted Stock"). Subsequent
grants of options to purchase equity in the Company during the Employment Term
will be made at the sole discretion of the Board or the Compensation Committee.
The Company will use reasonable efforts to file a registration statement on Form
S-8 under the Securities Act of 1933, as amended, to register all shares of
Common Stock issued to the Executive under the 1998 Plan.

         (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.

         (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,

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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 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.

                  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 or (b) become available to the
Executive from a source other than the Company, provided that the source of such
Confidential Information was not known by the Executive, after reasonable
inquiry, to be bound by a confidentiality agreement with or other obligation of
confidentiality to the Company or any of its affiliates.

                  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.

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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 "Non-competition 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 provide assistance to 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, 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 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.

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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 then (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;

         (b) The Company in its sole discretion may notify any new employer, who
the Company has good faith basis to believe is a competitor pursuant to Section
7 of this Agreement, of the Executive that he has an obligation not to compete
with the Company during the Non-competition 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 curable, 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

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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, (iv)
Executive becomes Disabled (as hereinafter defined), or (v) 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 Operating 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.

         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 Common Stock pursuant to the 1998 Plan;
provided, however, that all restrictions on 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) or (v) 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 1998 Plan 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

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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 six months following the
Termination Date, in accordance with the customary payroll practices of the
Company for its senior management personnel and 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 all non-vested options to purchase
shares of Common Stock granted under the 1998 Plan shall vest on the Termination
Date.

         (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) the
Company will pay the Executive a severance amount equal to nine months of Salary
and Bonus. 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 (iii) all non-vested options to purchase shares of
Common Stock granted under the 1998 Plan 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
by 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 1998 Plan.

         (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)(1) of the Securities Exchange Act of 1934, as
amended, and the rules and

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regulations promulgated thereunder) of shares in the Company which, when added
to any other shares the beneficial ownership of which is held by the acquirer,
shall result in the acquirer's having more that 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 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 the 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 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 1998
         Plan 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 third
parties which are reasonably likely, in any way, to detract from or adversely
affect his performance hereunder.

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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 agreements 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 of 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 relived of any
obligations hereunder, including, without limitation, an assignment or transfer
in connection with a merger or

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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
an 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.

                  (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.
                               399 Executive Boulevard
                               Elmsford, NY  10523
                               Attention:  President
                               Telephone:  (212) 592-2355
                               Facsimile:   (212) 592-4469



                               With a copy to:

                               Fulbright & Jaworski LLP
                               666 Fifth Avenue
                               New York, NY  10103
                               Attention:  Paul Jacobs, Esq.
                               Telephone:  (212) 318-6348
                               Facsimile:   (212) 752-5958

                           (iii) If to the Executive to:

                                    Alan Goldstein
                                    1219 Baldwin Road

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                                    Yorktown Heights, NY 10598
                                    Telephone:  (914) 245-1907
                                    Facsimile:   (914) 962-4938

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 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 full by 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.

                  (i) Indemnification Agreement. A material breach of that
certain Indemnification Agreement, entered into as of the date hereof, 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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<PAGE>   13
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

                                    AMERICAN BANK NOTE HOLOGRAPHICS, INC.



                                    By: /s/ KENNETH TRAUB
                                        ---------------------------------------
                                        Name: Kenneth Traub
                                        Title: President


                                    ALAN GOLDSTEIN


                                        /s/ ALAN GOLDSTEIN
                                        ----------------------------------------




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