Document:

Exhibit 10.25

 

HOME
FEDERAL BANK

PROMISSORY NOTE MODIFICATION AGREEMENT

 

	
  Modification
  #3544

  	
   

  	
  Loan #9206756

  

 

This Agreement is made as
of February 28, 2005, between Home Federal Bank having its office at 225
South Main Avenue, Post Office Box 5000, Sioux Falls, South Dakota 57117-5000 (“Lender”)
and Great Plains Ethanol LLC, 27716 462nd Ave., Chancellor, SD 57015
(“Borrower”).

 

RECITALS:

 

A.                                   Lender
is the holder of a Promissory Note of Borrower dated February 28, 2003
payable to the Lender in the original principal amount not to exceed
$1,600,000.00 (the “Loan”).

 

B.                                     Lender
is willing to modify payment terms of the Loan evidenced by the Loan Documents
in the manner set forth below.  These
proposed changes are requested by and acceptable to Borrower.  Borrower acknowledges that the Loan Documents
shall remain the legal and binding obligation of Borrower, endorsers and
guarantors, free of any claim, defense or offset.

 

Accordingly,
in consideration of the premises and other good and valuable consideration,
each paid to the other, the parties agree as follows:

 

1.                                       Effective
as of, N/A and until the Loan is fully paid or Lender changes the number of
basis points or the Index, whichever is the first to occur, the unpaid balance
of the Loan shall bear interest at a variable rate of N/A basis points in
excess of the N/A (“Index”).  Lender, at
its discretion, may change the number of basis points or Index upon thirty (30)
days’ prior written notice to Borrower.

 

2.                                       The
unpaid principal balance of the Loan and interest thereon shall be paid in full
on or before March 1, 2006.

 

3.                                       The
maximum amount of the Loan is changed to and shall not exceed $1,125,000.00.

 

4.                                       The
Loan Documents are amended to the extent necessary to reflect the changes set
forth above.  No other amendments are
made to the Loan Documents.  Except as
amended herein, the terms and conditions contained in the Loan Documents, and
the Related Documents described therein, shall continue to govern the
relationship of the parties.

 

5.                                       It
is understood and agreed by the parties that this Agreement shall not operate
as a novation of the Loan Documents or the Loan.

 

6.                                       A
Loan Modification Fee of $2,812.50 will be charged.

 

IN WITNESS WHEREOF, the
parties hereto each duly executed this Agreement as of the day and year first
above written.

 

	
   

  	
  HOME FEDERAL
  BANK

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BY:

  	
  /s/ Terry
  Cleberg

  	
   

  
	
   

  	
  ITS:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  GREAT PLAINS
  ETHANOL LLC

  
	
   

  	
   

  
	
   

  	
  /s/ Darrin Ihnen

  	
   

  
	
   

  	
  DARRIN IHNEN,
  PRESIDENTExhibit 10.26

 

AGREEMENT TO COMPENSATE GUARANTORS

 

THIS
AGREEMENT is made and entered into effective this 28th day of February, 2005,
by and between Great Plains Ethanol, LLC (the “Company”) and Robert Broin, Jeff
Broin, Todd Broin, Duane Sather, Fred Thurman, and Dennis Schrag (collectively
the “Guarantors”).

 

RECITALS:

 

A.                                   The Company entered into a Natural Gas
Distribution Delivery Agreement dated September 2, 2002, with NorthWestern
Energy Corporation (“NEC”).

 

B.                                     In connection with the Natural Gas Distribution
Delivery Agreement, Home Federal Bank issued an Irrevocable Standby Letter of
Credit dated February 28, 2003, in the amount of $1,600,000.00 (the “Letter
of Credit”) in favor of NEC.

 

C.                                     In consideration for the Letter of Credit,
the Company executed a Promissory Note dated February 28, 2003, in the
amount of $1,600,000.00 in favor of Home Federal Bank (the “2003 Note”).

 

D.                                    The Letter of Credit was modified and
restated pursuant to a First Amended and Restated Irrevocable Standby Letter of
Credit dated May 28, 2003.

 

E.                                      The Letter of Credit was further modified and
restated pursuant to a Second Amended and Restated Irrevocable Standby Letter
of Credit dated February 25, 2004, in the amount of $1,250,000.00.  In consideration for the Second Amended and
Restated Letter of Credit, the Company entered into a Promissory Note
Modification Agreement with Home Federal Bank dated February 25, 2004,
reducing the maximum loan amount to $1,250,000.00 (the “2004 Note”).

 

F.                                      The Letter of Credit was further modified and
restated pursuant to a Third Amended and Restated Irrevocable Standby Letter of
Credit dated February 28, 2005, in the amount of $1,125,000.00.  In consideration for the Third Amended and
Restated Irrevocable Standby Letter of Credit, the Company entered into a
Promissory Note Modification Agreement with Home Federal Bank dated February 28,
2005, reducing the maximum loan amount to $1,125,000.00 (the “2005 Note”).

 

G.                                     The Guarantors are each willing to personally
guarantee the 2005 Note in part.

 

H.                                    The Company wishes to provide certain
compensation to the Guarantors in

 

 

consideration
for their agreement to enter into the guarantees.

 

NOW,
THEREFORE, the parties agree as follows:

 

1.                                       In consideration for each Guarantor’s
agreement to provide his personal guarantee to Home Federal Bank in connection
with the 2005 Note in the amount set forth below, the Company agrees to
compensate each Guarantor in an amount equal to two percent (2%) per annum of
his respective guarantee amount, so long as he continues to guarantee the
Letter of Credit issued by Home Federal Bank. 
The amounts of the individual guarantees related to the 2005 Note are as
follows:

 

	
  Robert
  Broin

  	
   

  	
  $

  	
  250,000.00

  	
   

  
	
  Jeff
  Broin

  	
   

  	
  $

  	
  250,000.00

  	
   

  
	
  Todd
  Broin

  	
   

  	
  $

  	
  250,000.00

  	
   

  
	
  Duane
  Sather

  	
   

  	
  $

  	
  125,000.00

  	
   

  
	
  Fred
  Thurman

  	
   

  	
  $

  	
  125,000.00

  	
   

  
	
  Dennis
  Schrag

  	
   

  	
  $

  	
  125,000.00

  	
   

  

 

2.                                       Payment will be made by the Company to the
Guarantors on or before March 31 of each year in which the guarantees are
executed, renewed, replaced or extended.

 

3.                                       This Agreement constitutes the entire
agreement among the parties with respect to compensation to be paid by the
Company to the Guarantors for their guarantees. 
This Agreement supercedes any prior negotiations, agreements, or understandings
between the parties with respect to compensation to be paid by the Company to
the Guarantors for their guarantees.

 

	
  GREAT
  PLAINS ETHANOL, LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/
  Darrin Ihnen

  	
   

  	
   

  
	
  Its: President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/
  Robert Broin

  	
   

  	
  /s/
  Jeff Broin

  	
   

  
	
  Robert
  Broin

  	
  Jeff
  Broin

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/
  Todd Broin

  	
   

  	
  /s/
  Duane Sather

  	
   

  
	
  Todd
  Broin

  	
  Duane
  Sather

  
								

 

2

 

	
  /s/
  Fred Thurman

  	
   

  	
  /s/
  Dennis Schrag

  	
   

  
	
  Fred
  Thurman

  	
  Dennis
  Schrag

  

 

3Exhibit
10.9

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

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

 

RECITAL

 

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

 

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

 

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

 

AGREEMENT

 

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

 

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

 

SECTION 2.           POSITION
AND DUTIES. Executive shall assume the responsibilities and perform the duties of
President and Chief Executive Officer of the Company.  Executive agrees to devote substantially all
of his business time, attention, skill and best efforts to the diligent
performance of his duties hereunder and shall be loyal to the Company and its
affiliates and subsidiaries, and use his best efforts to further their
interests. The Executive shall be responsible for the day to day worldwide
general management, administration and operation of all present and future
business of the Company, including, without limitation, those operations set
forth in the By-laws of the Company. The Executive shall be the Company’s most
senior executive officer and he shall report directly to the Board of Directors
of the Company (the “Board”). In the performance of his duties,
Executive agrees to abide by and comply with all policies, practices,
handbooks, procedures and guidelines which are now in effect or which the
Company may adopt, modify, supplement or change from time to time.

 

SECTION 3.           TERM
OF EMPLOYMENT. The term of employment hereunder shall commence on the date
hereof and shall continue thereafter until the earlier of (i) one year
from the date hereof or (ii) termination pursuant to Section 10 hereof
(the “Employment Term”). This 

 

 

Agreement shall be automatically renewed annually for
successive one year terms, unless the Company gives written notice at least
sixty (60) days prior to the end of the Employment Term of its election to
terminate such employment at the end of such Employment Term. Notwithstanding the
foregoing, if the Executive’s employment is terminated pursuant to Section 10
of this agreement, the automatic renewal provided herein shall be of no further
effect as of the Termination Date (as defined). In the event Executive’s employment
is not renewed at the end of the Employment Term (except as otherwise provided
in Section 10 hereof) or renewal term, the Company will pay to the Executive
an amount equal to two times the Salary and Bonus (both, as defined) of the Executive
for the prior year.

 

SECTION 4.           EXCLUSIVITY.
During the term of Executive’s employment with the Company, Executive shall not
without the prior written consent of the Board (i) perform any managerial,
sales, marketing or technical services directly or indirectly for any person or
entity competing directly or indirectly with the Company or any of its
subsidiaries in the holography business; (ii) perform any such services
for any entity owned, directly or indirectly, by anyone competing, either
directly or indirectly, with the Company or any of its subsidiaries in the
holography business; (iii) on his own behalf or that of any other person or
entity, compete, either directly or indirectly, with the Company or any of its subsidiaries,
to sell any products or services marketed or offered by the Company or any of
its subsidiaries; (iv) engage or become interested, directly or
indirectly, as owner, employer, partner, consultant, through stock ownership (except
ownership of less than one percent of the number of shares outstanding of any
securities which are listed for trading on any securities exchange, provided
that the specific nature and amount of the investment, if over $50,000, shall
be immediately disclosed to the Company in writing), investment of capital,
lending of money or property, or otherwise either alone or in association with
others, in the operation of any type of business or enterprise which conflicts
or interferes with the performance of Executive’s services hereunder or (v) engage
in any activities which could reasonably be deemed to be a conflict of interest
with his duties hereunder or his obligations to the Company.

 

SECTION 5.           COMPENSATION
AND BENEFITS.

 

(a)           Salary
and Bonus.  As compensation for the
performance of the Executive’s services hereunder, during the Employment Term,
the Company will pay to the Executive an annual base salary of $400,000 per
annum, effective January 1, 2005; provided that the Executive’s annual
base salary shall be increased by not less than 3% per annum in the event this
Agreement is renewed pursuant to Section 3 above (the “Salary”).  The Executive will also be eligible to
receive a bonus each year (the “Annual Bonus”). 
Within 30 days following the end of each fiscal year of the Company, the
payment of any Annual Bonus (or no Annual Bonus) shall be determined by the
Board or a committee designated by the Board to make such determination (the “Compensation
Committee”), and shall be based on the Executive’s performance against the
objectives to be reasonably determined by the Board or the Compensation
Committee, in consultation with the Executive at the beginning of each fiscal
year.  The parties agree that the target Annual
Bonus shall be $100,000, and the actual Annual Bonus may be more or less than
the target based on the Compensation Committee’s reasonable assessment of the
Executive’s performance against the agreed-upon objectives. The Board or the
Compensation Committee may, in its sole discretion, determine to award
additional year-end bonuses to the Executive. 
The Annual Bonus plus additional year-end bonuses, if any, in a 

 

2

 

calendar year are collectively referred to as the “Bonus”.  The Executive’s Salary and any Bonus will be
payable in accordance with the customary payroll practices of the Company for
its senior management personnel.

 

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

 

(c)           Stock
Options.  The Executive shall be
eligible to receive grants of options to purchase equity in the Company during
the Employment Term as determined, from time to time, in the sole discretion of
the Board or the Compensation Committee.

 

(d)           Expenses.
The Company will pay or promptly reimburse the Executive for all reasonable out-of-pocket
business, entertainment and travel expenses incurred by the Executive in the
performance of his duties hereunder upon presentation of appropriate supporting
documentation and otherwise in accordance with the expense reimbursement
policies of the Company in effect from time to time.  The Company will also pay or promptly
reimburse the Executive for all reasonable expenses relating to ongoing professional
development.

 

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

 

SECTION 6.           CONFIDENTIALITY.
 The Executive acknowledges and agrees
that (a) in connection with his employment by the Company, the Executive
will be involved in the Company’s and its subsidiaries’ (if any) operations; (b) in
order to permit him to carry out his responsibilities, the Company may
disclose, to the Executive, in strict confidence, or the Executive may develop,
confidential proprietary information and trade secrets of the Company and its
affiliates, including without limitation (i) unpublished information with
respect to the Company concerning marketing or sales plans, operational
techniques, strategic plans and the identity of suppliers and supply contacts; (ii) unpublished
financial information with respect to the Company, including information concerning
revenues, profits and profit margins; (iii) internal confidential manuals
and memos; and (iv) “material inside information” as such phrase 

 

3

 

is used for purposes of the Securities Exchange Act of
1934, as amended (collectively, “Confidential Information”); and (c) the
Company and its affiliates derive significant economic value and competitive
advantage by reason of the fact that such Confidential Information, in whole or
in part, is not generally known or readily ascertainable by the Company’s or
its affiliates’ actual or potential competitors and, as such, constitutes the
Company’s and its affiliates’ valuable trade secrets.

 

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

 

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

 

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

 

This Section 6 shall survive any termination of
this Agreement.

 

SECTION 7.           COVENANT
NOT TO COMPETE.

 

(a)           Scope.
In order to fully protect the Company’s Confidential Information, during the
Employment Term and for a period of one year thereafter (the “Noncompetition
Period”), the Executive shall not, except as authorized in writing by the
Board, directly or indirectly, render services to, assist, participate in the
affairs of, or otherwise be connected with, any person or enterprise (other
than the Company and its subsidiaries, if any), which person or enterprise is
engaged in, or is planning to engage in, and shall not personally engage in,
any business that is competitive with the business of the Company or any of its
subsidiaries, if any, 

 

4

 

with respect to any products or services of the
Company or any of its subsidiaries, if any, in any capacity which would utilize
the Executive’s services with respect to any products or services of the
Company or any of its subsidiaries, if any, that were within the Executive’s
management responsibility at any time within the twelve (12) month period
immediately prior to the Termination Date.

 

(b)           Remedies.
The parties recognize, acknowledge and agree that (i) any breach or
threatened breach of the provisions of this Section 7 shall cause
irreparable harm and injury to the Company and that money damages will not provide
an adequate remedy for such breach or threatened breach and (ii) the duration,
scope and geographical application of this Agreement are fair and reasonable
under the circumstances, and are reasonably required to protect the legitimate
business interests of the Company. Accordingly, Executive agrees that the
Company shall be entitled to have the provisions of this Agreement specifically
enforced by any court having jurisdiction, and that such a court may issue a
temporary restraining order, preliminary injunction or other appropriate
equitable relief, without having to prove the inadequacy of available remedies
at law. In addition, the Company shall be entitled to avail itself of all such
other actions and remedies available to it or any of its affiliates under law
or in equity and shall be entitled to such damages as it sustains by reason of
such breach or threatened breach. It is the express desire and intent of the
parties that the provisions of this Agreement be enforced to the full extent
possible.

 

(c)           Severability.
If any provision of Section 7(a) is held to be unenforceable because
of the duration of such provision, the area covered thereby or the scope of the
activity restrained, the parties hereby expressly agree that the court making
such determination shall have the power to reduce the duration and/or areas of
such provision and/or the scope of the activity to be restrained contained in
such provision and, in its reduced form, such provision shall then be
enforceable. The parties hereto intend and agree that the covenants contained
in Section 7(a) shall be construed as a series of separate covenants,
one for each municipality, community or county included within the area
designated by Section 7(a). Except for geographic coverage, the terms and
conditions of each such separate covenant shall be deemed identical to the
covenant contained in Section 7(a). Furthermore, if any court shall refuse
to enforce any of the separate covenants deemed included in Section 7(a),
then such unenforceable covenant shall be deemed eliminated from the provisions
hereof to the extent necessary to permit the remaining separate covenants to be
enforced in accordance with their terms. The prevailing party in any action arising
out of a dispute in respect of any provision of this Agreement shall be entitled
to recover from the non-prevailing party reasonable attorneys’ fees and costs
and disbursements incurred in connection with the prosecution or defense, as
the case may be, of any such action.

 

SECTION 8.           RESPONSIBILITY
UPON TERMINATION. Upon the termination of his employment for any reason and
irrespective of whether or not such termination is voluntary on his part:

 

(a)           The
Executive shall advise the Company of the identity of his new employer within
ten (10) days after accepting new employment and further agrees to keep
the Company so advised of any change in employment during the Non-competition
Period;

 

5

 

(b)           The
Company in its sole discretion may notify any new employer of the Executive
that he has an obligation not to compete with the Company during the
Noncompetition Period; and

 

(c)           The
Executive shall deliver to the Company any and all records, forms, contracts,
memoranda, work papers, customer data and any other documents (whether in
written form, on computers or discs or otherwise) which have come into his
possession by reason of his employment with the Company, irrespective of
whether or not any of said documents were prepared for him, and he shall not
retain memoranda in respect of or copies of any of said documents.

 

SECTION 9.           NONSOLICITATION.
The Executive agrees that during the term of his employment with the Company
and for a period of twelve (12) months thereafter, he will not, and will not
assist any of his affiliates to, directly or indirectly, recruit or otherwise
solicit or induce any executive, customer, subscriber or supplier of the
Company or any of its subsidiaries about whom or which he gained Confidential
Information while at the Company to terminate its employment or arrangement
with the Company or any of its subsidiaries, otherwise change its relationship
with the Company or any of its subsidiaries, or establish any relationship with
the Executive or any of his affiliates for any business purpose deemed
materially competitive with the business of the Company or any of its
subsidiaries, if any.

 

SECTION 10.         TERMINATION.

 

(a)           Termination
for Cause. Notwithstanding anything contained herein to the contrary, the
Board may terminate the Executive’s employment with the Company for cause;
provided that the Executive shall be given notice of the Company’s intent to
terminate his employment for cause, the nature of the cause and, if cureable, a
reasonable opportunity to remedy the cause. For the purposes of this Section 10(a),
the term “reasonable” shall mean that amount of time deemed reasonable by the
Board acting in good faith and in light of the nature of the cause. For
purposes of this Agreement, the term “cause” shall mean, the occurrence of any
one or more of the following (i) the commission of any act of willful and
material embezzlement or fraud on the part of Executive against the Company, (ii) any
act or omission which constitutes a willful and material breach by Executive of
this Agreement, including a refusal or failure by Executive to perform his
duties and obligations hereunder, (iii) Executive has been convicted of a
crime, which conviction has, or is reasonably likely to have a material adverse
effect on the Company, or its business or will prevent the Executive from
performing his duties for a sustained period of time, Executive becomes
Disabled (as hereinafter defined), or (iv) the death of Executive; provided,
however, that “cause” shall not include any act or omission by the Executive
undertaken in the good faith exercise of the Executive’s business judgment as
President and Chief Executive Officer or in good faith reliance on the advice
of counsel. For purposes of this Agreement, “Disabled” shall mean
Executive’s inability, due to illness, accident or any other physical or mental
condition, to fully perform the essential functions of his position or this
Agreement for more than 26 weeks consecutively or for intermittent periods aggregating
39 weeks during any 78-week period during the Employment term, except as
otherwise required by law.

 

6

 

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

 

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

 

(b)           Termination
Without Cause and Resignation For Good Reason.  The Company shall have the right to terminate
this Agreement and the employment of Executive with the Company for any reason
or no reason and without cause upon written notice to Executive of such
termination, and the Executive shall have the right to resign for Good Reason
(as hereinafter defined); provided that, except as otherwise provided in
paragraph (c) below, (i) the Company shall continue to pay to the
Executive the Salary then in effect, together with any Bonus which may have
accrued or which otherwise would have been granted by the Board had the
Executive not been terminated or resigned for two years following the
Termination Date, in accordance with the customary payroll practices of the Company
for its senior management personnel (except in the event the Executive resigns
for Good Reason as defined in paragraph (e)(ii)(d) below, in which case the
amount otherwise payable under this clause (i) will be reduced by 50%), (ii) the
Company shall continue any benefits in which the Executive then participates on
the same basis of participation and subject to all terms and conditions of such
plans as applied prior to such termination or resignation, and (iii) all non-vested
options to purchase shares of Common Stock granted under the Plans shall vest
on the Termination Date and the Executive shall be entitled to all rights with
respect to such options or Common Stock purchased under the Plans for a period
of two years following the Termination Date. All restrictions on Restricted
Stock purchased by the Executive shall, subject to applicable securities laws, rules and
regulations, lapse on the Termination Date.

 

7

 

(c)           Termination
Upon Change of Control or Resignation for Good Reason Following a Change of
Control. In the event Executive’s employment is terminated by the Company
subsequent to a Change of Control (as hereinafter defined) or the Executive
resigns from the Company for Good Reason (as hereinafter defined) within one
year following a Change of Control, the Company will pay the Executive a
severance amount, in one lump sum, within 30 days of such termination, equal to
the product of (x) the Salary and Bonus multiplied by (y) two (2). In the event
Executive’s employment is terminated by the Company subsequent to a Change of
Control (as hereinafter defined) or the Executive resigns from the Company for
Good Reason (as hereinafter defined) at any time after one year following a
Change of Control, the Company will pay the Executive a severance amount, in
one lump sum, within 30 days of such termination, equal to the product of (x)
the Salary and Bonus multiplied by (y) three (3). If a payment is made to the
Executive pursuant to this paragraph (c), in no event shall the Executive
receive any payments pursuant paragraph (b) of this Section 10. To
the extent that such amounts are in excess of the amount allowable as a
deduction under Section 280(G) of the Code, or are subject to excise
tax pursuant to Section 4999 of the Code, the Company will gross-up any
additional amounts due, and all non-vested options to purchase shares of Common
Stock granted under the Plans shall vest on the Termination Date and all
restrictions on Restricted Stock purchased by the Executive shall, subject to
applicable securities laws, rules and regulations, lapse on the
Termination Date.

 

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

 

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

 

(i)            “Change
in Control” shall mean:

 

(a)           the
direct or indirect acquisition, whether by sale, merger, consolidation, or
purchase of assets or stock, by any person, corporation, or other entity or
group thereof of the beneficial ownership (as that term is used in Section 13(d)(l)
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder) of shares in the Company which, when added
to any other shares the beneficial ownership of which is held by the acquiror,
shall result in the acquirer’s having more than 33% of the votes that are entitled
to be cast at meetings of stockholders as to matters on which all outstanding
shares are entitled to be voted as a single class; provided, however, that such
acquisition shall not constitute a Change of Control for purposes of this
Agreement if prior to such acquisition a resolution declaring that the
acquisition shall not constitute a Change of Control is adopted by the Board
with the support of a majority of the Board members who either were members of
the Board for at least two years prior to the date of the vote on such
resolution or were nominated for election 

 

8

 

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

 

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

 

(c)           shareholder
approval of a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially all of the
Company’s assets.

 

(ii)           “Good
Reason” shall mean the occurrence of (a) a material breach of this
Agreement by the Company, (b) the assignment to the Executive of duties
inconsistent with his position as described in Section 2 herein, or any
significant adverse alteration in the status or conditions of the Executive’s
employment or in the nature of the Executive’s responsibilities as described in
Section 2 herein, (c) the failure of the Company to continue to
provide Executive with benefits substantially similar to those described in
this Agreement or to continue in effect any benefit or stock option plan which
is material to the Executive’s compensation, including but not limited to, the Plans
or (d) the failure of the Company to maintain directors’ and officers’ insurance
at an aggregate amount at least equal to the level provided as of the date
hereof; provided, however, in the case of (a), (c) and (d) above,
Executive shall not be deemed to have Good Reason to terminate his employment
if the reason for such termination is remedied prior to the date of termination
specified in the notice of termination pursuant to Section 10(d) herein.

 

SECTION 11.         AUTHORITY.
Executive represents and warrants that he has the ability to enter into this
Agreement and perform all obligations hereunder, and that there are no
restrictions on Executive or any obligations owed by him to third parties which
are reasonably likely, in any way, to detract from or adversely affect his
performance hereunder.

 

SECTION 12.         MISCELLANEOUS.

 

(a)           Separate
Agreements. The covenants of Executive contained in this Agreement shall
survive any termination of this Agreement and shall be construed as separate
agreements independent of any other agreement, claim, or cause of action of
Executive against the Company, whether predicated on this Agreement or
otherwise. The covenants contained in this Agreement are necessary to protect
the legitimate business interests of the Company.

 

(b)           Entire
Agreement. The parties hereto acknowledge and agree that this Agreement
supersedes all previous contracts and agreements between the Company and
Executive relating to the subject matter hereof and that any such previous
contracts or 

 

9

 

agreements, including without limitation, the Original
Employment Agreement, shall become null and void upon execution of this
Agreement. This Agreement constitutes the complete agreement among the parties
hereto with respect to the subject matter hereof and no party has made or is
relying on any promises by any other party or their respective representatives
not contained in this Agreement.

 

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

 

(d)           Successor
and Assigns.

 

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

 

(ii)           This
Agreement shall be binding upon and inure to the benefit of the Company and
their successors. The rights and obligations of the Company pursuant to this
Agreement are freely assignable and transferable by Company without the consent
of Executive without his being relieved of any obligations hereunder,
including, without limitation, an assignment or transfer in connection with a
merger or consolidation of the Company, or a sale or transfer of all or
substantially all of the assets of the Company; provided, the provisions of
this Agreement shall be binding on and shall inure to the benefit of the
surviving business entity or the business entity to which such assets shall be
transferred and such successor shall expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such transaction had taken place.

 

(e)           Governing
Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflict of law rules thereof.

 

(f)            Amendment.
No amendment, waiver, modification or change of any provision of this Agreement
shall be valid unless in writing and signed by both parties; provided, that any
such amendment, waiver, modification or change must be consented to on behalf
of the Company by the Board. The waiver of any breach of any duty, term or
condition of this Agreement shall not be deemed to constitute a waiver of any
preceding or succeeding breach of the same or any other duty, term or condition
of this Agreement.

 

10

 

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

 

(i)            If
to the Company to:

 

American Bank Note Holographics, Inc.

2 Applegate Drive

Robbinsville, NJ 08691

Attention:  Chairman

Telephone: (609) 632-0800

Facsimile: (609) 632-0850

 

with a copy to:

 

Fulbright & Jaworski L.L.P.

666 Fifth Avenue

New York, NY 10103

Attention: Paul Jacobs, Esq.

Telephone: (212) 318-3000

Facsimile: (212) 318-3400

 

(ii)           If
to the Executive to:

 

Kenneth Traub

2 Applegate Drive

Robbinsville, NJ 08691

Telephone: (609) 632-0800

Facsimile: (609) 632-0850

 

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

 

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

 

11

 

party’s witnesses, and any other expenses that such
party incurs in connection with the arbitration, but all other costs of the
arbitration, including the fees of the arbitrator, the cost of any record or
transcript of the arbitration, administrative fees, and other fees and costs
shall be paid in equal shares by Executive and the Company.  Except as provided for in Section 7(b),
arbitration in this manner shall be the exclusive remedy for any Arbitrable
Dispute. Should Executive or the Company attempt to resolve an Arbitrable
Dispute by any method other than arbitration pursuant to this Section, the
responding party will be entitled to recover from the initiating party all
damages, expenses, and attorneys’ fees incurred as a result of that breach.

 

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

 

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

 

12

 

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

 

 

	
   

  	
  AMERICAN
  BANK NOTE HOLOGRAPHICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Fred Levin

  	
   

  
	
   

  	
  Name:
  Fred Levin

  
	
   

  	
  Title:
  Chairman, Compensation Committee of the Board

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KENNETH
  TRAUB

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    /s/ Kenneth Traub

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