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                                                                   Exhibit 10.11


                              EMPLOYMENT AGREEMENT


       THIS EMPLOYMENT AGREEMENT, (this "Agreement"), is made and entered into
as of April 20, 1999, by and between Salvatore F. D'Amato (the "Executive") and
American Bank Note Holographics, Inc., a Delaware corporation (the "Company").

                                     RECITAL

       WHEREAS, the Executive has been acting as a consultant to the Company;


       WHEREAS, in light of recent events which are generally described in the
Company's recent press releases of January 19, 1999, January 25, 1999, and
February 1, 1999, the Company desires to formally retain the Executive to render
executive and managerial services and the Executive desires to render such
services; and

       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 Chairman of the Board of Directors 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 Board of Directors of the Company (the
"Board"). Executive agrees to devote the majority 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. Executive agrees to spend
approximately 3 to 4 days per week on behalf of the Company. The Executive shall
work with the President of the Company in furthering the 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. 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.


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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) two
years from the date hereof or (ii) termination pursuant to Section 10 hereof
(the "Employment Term"). This Agreement shall be renewable for 1 year term(s)
with mutual agreement.

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 reasonable 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 a base salary of $14,300 per month (the "Salary"). Within 30
days following the end of each of the Company's fiscal quarters, the Board shall
determine if the Executive is eligible to receive a bonus (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"). The Company will provide Executive with a Lexus
400 automobile for Executive's use during the term of this Agreement. After the
two-year term of this Agreement, the Company will assign the ownership of the
automobile to the Executive. 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



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employment, on a pro rated basis calculated on the basis of the Executive's
Salary and Bonus in effect on the Termination Date. 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 175,000 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), at an
exercise price equal to the closing market price of the Common Stock on the last
date on which the New York Stock Exchange was open for trading immediately prior
to the date hereof. 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. It is the Company's policy to reimburse its senior executives that
live greater than 50 miles away from the Company's corporate offices for all
reasonable expenses associated with travelling to and staying in hotels near the
Company's offices. Pursuant to this policy, Executive is entitled to stay in
hotels as much as he determines is necessary in his reasonable discretion, and
the Company will reimburse executive for all reasonable travel, hotel costs, and
meals upon the presentation of expense reports and receipts by Executive.

             (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 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


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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.

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 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, with respect to any products or
services of the Company or any of its subsidiaries, if any, in any capacity
which would utilize the


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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:



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             (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 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
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



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the Executive's business judgment as Chairman 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 the remainder of the Employment Term in accordance with the
customary payroll practices 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 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 the remainder of the
Employment Term as set forth in Section 3, in accordance with the customary
payroll practices of the Company for its senior management personnel, (ii) the
Company shall continue any benefits in which the Executive then participates on
the same basis of participation and subject to all the terms and conditions of
such plans as applied prior to such termination or resignation, (iii) all
non-vested stock options to purchase shares of Common Stock granted under the
1998 Plan 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
1998 Plan for a period of two years following the Termination Date, (iv) the
Company shall assign to the Executive the automobile provided to the Executive
pursuant to Section 5(b) above.

              (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

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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 equal to $171,600 plus the ownership of the Lexus
400 automobile that had previously been provided to Executive. 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 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 paragraph (b) 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 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)(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 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


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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, (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.

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.


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              (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 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.


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              (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: (914) 592-2355
                            Facsimile: (914) 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:

                            Salvatore F. D'Amato
                            18 Meadow Avenue
                            Monmouth Beach, NJ 07750
                            Telephone: (732) 222-0634
                            Facsimile: (732) 728-1013

                            With a copy to:

                            Edwin T. Markham
                            Satterlee Stephens Burke & Burke LLP
                            230 Park Avenue
                            11th Floor
                            New York, NY 10169
                            Telephone: (212) 818-9200
                            Facsimile: (212) 818-9606

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,


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<PAGE>   12
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 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 as of the date hereof, between
the Company and the Executive, shall constitute a material breach of this
Agreement.

              (j)    Attorneys' Fees. The Company will pay or promptly reimburse
the Executive for all reasonable attorneys' fees, up to a maximum amount of
$5,000, incurred by Executive in the preparation, negotiation, execution and
delivery of this Agreement upon presentation to the Board of appropriate
supporting documentation.

              (k)    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.


                                                                              12
<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


                                          SALVATORE F. D'AMATO

                                          /s/ SALVATORE F. D'AMATO
                                          --------------------------------------



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