Document:

Exhibit 10.1

 

AMENDED AND RESTATED EMPLOYMENT
AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT, (this “Agreement”), is
made and entered into as of June 9, 2005, 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
and the Company have entered into that certain Employment Agreement dated as of
May 11, 1999 (the “Original Employment Agreement”); and

 

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

 

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 Vice President, Finance 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 or Chief
Financial 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 at the Company’s headquarters located at 2
Applegate Drive, Robbinsville, New Jersey 08691 or his home office and shall be
loyal to the Company and its affiliates and subsidiaries, and use his best
efforts to further their interests. 
Executive shall work in the Company’s Robbinsville office a minimum of
three days per week, except due to approved vacation or illness.  The Executive shall perform such tasks and
responsibilities assigned to him by the Chief Executive Officer and the Chief
Financial Officer of the Company, including without limitation, assisting with
and/or overseeing 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) March 31, 2006 or (ii) termination
pursuant to Section 10 hereof (the “Employment Term”). The date of the last
day of the Employment Term shall be hereinafter referred to as the “Termination
Date”.  Executive’s employment by the
Company shall terminate on the Termination Date.

 

 

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
and the Severance Period (as defined below), the Company will pay to the
Executive an annual base salary of $240,000. 
In the event that the Employment Term is extended by the Company, in its
sole discretion, Executive’s salary will be raised by a minimum of 3% annually,
as determined by the Board of Directors. 
For purposes hereof, “Severance Period” shall mean the nine-month period
commencing the day following the Termination Date or in the event of an extended
Employment Term the day following the termination of such extended Employment
Term, as the case may be.  During the
Severance Period, upon Executive’s execution and delivery to the Company on the
Termination Date or in the event of an extended Employment Term the date of
Executive’s last day of employment with the Company of a general release
substantially equivalent to the release set forth in Section 11 hereof,
Executive shall receive benefits as described below, and shall be paid in
accordance with the customary payroll practices of the Company for its senior
management personnel (collectively, the “Severance Benefits”).  Notwithstanding the foregoing, in no event
shall there be a Severance Period nor shall Executive be entitled to any salary,
Severance Benefits or other benefits to the extent Executive was terminated for
cause (as defined in Section 10(a)) or resigned other than for Good Reason
(as defined in Section 10(e)(ii)) during the Employment Term or any
extended Employment Term.

 

(b)                                 Benefits.  During the Employment Term and Severance Period,
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, holidays and sick days in accordance with the

 

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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 from the
inception of his employment through the last date of employment as set forth on
Exhibit A, on a pro rated basis calculated on the basis of the Executive’s
Salary in effect on the Termination Date. The Executive shall also be entitled
to have his existing leased car (the “Leased Car”) extended through the
Termination Date in accordance with the terms set forth on Exhibit B. In
the event that the Executive continues to be employed by the Company through March 31,
2006 and Executive chooses to apply for unemployment benefits, the Company will
not contest the Executive’s application. Further, in the event that the
Executive is terminated without cause or resigns for Good Reason prior to March 31,
2006, the Company will not contest the Executive’s application for such
benefits.

 

(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. 
All of Executive’s options shall vest immediately upon the expiration of
the Employment Term and remain exercisable for a period of two years.

 

(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.  Such
expenses shall include the cost of (i) gas and tolls incurred by the
Executive in connection with the Executive’s travel to and from his residence
and the Company’s headquarters located at 2 Applegate Drive, Robbinsville, New
Jersey 08691 and (ii) accommodations in the Robbinsville, New Jersey
vicinity. The Company shall also promptly reimburse the Executive for
out-of-pocket expenses incurred for moving and storage costs associated with
his previously planned relocation and home sale preparation. Such costs shall
be limited to $1,400.

 

(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

 

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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.

 

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 in any jurisdiction where the
Company has transacted business at any time prior to the Termination Date that
is competitive with the business of the Company or any of its subsidiaries, if
any, with respect to any products or

 

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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.

 

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

 

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(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
regular 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 Vice President, Finance 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

 

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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 $.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 as disclosed in the Plans on the shares of
Common Stock underlying any options granted 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) or (v) of
this paragraph (a), (a) the Company shall continue to pay the Executive
(or his beneficiaries, as applicable) Salary and with respect to clause (iv) Benefits,
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 and the 2000 Plan for a period of two years
following the Termination Date including the immediate vesting of any unvested
options 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.

 

(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, the Severance Period shall commence on the day
immediately following the date of such termination or resignation, as the case
may be, and the Executive shall be entitled to receive the Severance
Benefits.  All of the Executive’s non-vested
options to purchase shares of Common Stock granted under the 1998 Plan and the
2000 Plan shall vest on the Termination Date. 
The Executive shall be entitled to exercise any or all vested options
that were granted under the Plans for a period of two years following 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 Severance Period shall commence on the day
immediately following the date of such termination or resignation, as the case
may be, and the Executive shall be entitled to receive the Severance Benefits.
If the Executive receives the Severance Benefits pursuant to this paragraph
(c), in no event shall the Executive receive any Severance Benefits 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

 

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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 and the 2000 Plan shall vest on the
Termination Date and the Executive shall be entitled to exercise any or all of
the vested options that were granted under the 1998 Plan or 2000 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.

 

(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, bonus or Severance Benefits 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 Plans.  Notwithstanding the foregoing, if Executive
terminates his employment with the Company pursuant to this Section 10(d) prior
to September 27, 2005, Executive shall purchase the Leased Car in
accordance with the terms set forth on Exhibit B.

 

(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 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

 

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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 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 maintain directors’ and officers’
insurance at an aggregate amount at least equal to the level provided as of the
date hereof or (d) 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; provided, however, 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.

 

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SECTION 11. RELEASE.  Executive for himself and for the executors
and administrators of his estate, his heirs, successors and assigns, hereby
releases and forever discharges the Company and its officers, directors,
employees and stockholders and the respective executors, administrators, heirs,
successors and assigns of the foregoing, from any and all claims, actions,
causes of action, suits, sums of money, debts, dues, accounts, reckonings,
bonds, bills, covenants, contracts, controversies, agreements, promises,
demands or damages of any nature whatsoever or by reason of any matter, cause
or thing regardless of whether known or unknown at present, which against the
Company or any of its officers, directors, employees or stockholders Executive
ever had, now has or hereafter can, shall or may have for, upon, or by reason
of, any matter, cause or thing whatsoever from the beginning of the world to
the date hereof including, but not limited to, any matter relating to or
arising out of the employment of Executive or termination thereof under any
contract, tort, federal, state or local fair employment practices or civil
rights law including, but not limited to, Title VII of the Civil Rights Act of
1964, as amended, the Americans with Disabilities Act, the Age Discrimination
in Employment Act, the Older Workers Benefits Protection Act, the federal
Family and Medical Leave Act, or any claim for physical or emotional distress
or injuries, or any other duty or obligation of any kind or description,
including any implied covenant of good faith and fair dealing, implied contract
of permanent employment or the tortious or willful discharge of employment.  The parties also agree that this Agreement
does not either affect the rights and responsibilities of the Equal Employment
Opportunity Commission to enforce the Age Discrimination in Employment Act, or
justify interfering with the protected right of an employee to file a charge or
participate in an investigation or proceeding conducted by the Equal Employment
Opportunity Commission under the Age Discrimination in Employment Act.  In the event the Equal Employment Opportunity
Commission commences a proceeding against the Company in which Executive is a
named party, Executive agrees to waive and forego any monetary claims which may
be alleged by the Equal Employment Opportunity Commission to be owed to
Executive.  The parties agree that nothing in the provisions of this Section 11
is intended to limit their rights under and concerning enforcement of this
Agreement.

 

SECTION 12. REVOCATION.  The Company has advised Executive to consult
with an attorney prior to executing this Agreement.  By executing this Agreement, Executive
acknowledges that (a) he has been provided an opportunity to consult with
an attorney or other advisor of his choice regarding the terms of this
Agreement, (b) this is a final offer and Executive has been given
twenty-one (21) days in which to consider whether he wishes to enter into this
Agreement, (c) Executive has elected to enter this Agreement knowingly and
voluntarily and (d) if he does so within fewer than 21 days from receipt
of the final document he has knowingly and voluntarily waived the remaining
time.  The Company reserves the right to
change or revoke this Agreement prior to Executive’s execution hereof.  This Agreement shall be fully effective and
binding upon all parties hereto immediately upon execution of this Agreement
except as to rights or claims arising under the ADEA, in which case Executive
has seven (7) days following execution of this Agreement to change his
mind (the “Revocation Period”). 
Executive further covenants not to contest the validity of the release
set forth in Section 11 hereof subsequent to the Revocation Period and
agrees that if he nonetheless should pursue litigation against the Company
involving any matter covered and released hereby, Executive agrees that he
first shall restore to the Company the full value of all consideration he has
received or to which he is entitled hereunder and shall be liable for the
Company’s costs and attorneys’ fees incidental to defending such legal action.

 

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SECTION 13. 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 14. 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, 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 of their respective
representatives not contained in this Agreement.

 

(c)                                  Severability.  If any provision of this Agreement is held to
be illegal, invalidor 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

 

11

 

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.

 

(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.

2 Applegate Drive

Robbinsville, NJ 08691

Attention: 
President

Telephone:  (609)
632-0800

Facsimile:  
(609) 632-0850

 

 

With a copy to:

 

Fulbright & Jaworski LLP

666 Fifth Avenue

New York, NY 10103

Attention:  Paul
Jacobs, Esq.

Telephone: 
(212) 318-3348

Facsimile:  
(212) 752-5958

 

12

 

(ii)                          If to
the Executive to:

 

Alan Goldstein

1219 Baldwin Road

Yorktown Heights, NY 10598

Telephone: 
(914) 245-1907

Facsimile:  
(914) 962-4938

 

With a copy to:

 

Sapir & Frumkin LLP

399 Knollwood Road, Suite 310

White Plains, NY 10603

Attention: William Frumkin, Esq.

Telephone: (914) 326-0366

Facsimile: (914) 682-9128

 

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.

 

13

 

(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.

 

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 and Chief Executive
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ALAN GOLDSTEIN

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/ Alan
  Goldstein

  

 

14

 

Exhibit A

 

Unused Vacation Summary

1999-2004

 

	
   

  	
   

  	
  Days Taken For

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Year

  	
   

  	
  Vacation

  	
   

  	
  Personal

  	
   

  	
  Sick

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1999

  	
   

  	
  8

  	
   

  	
  1

  	
   

  	
  1

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2000

  	
   

  	
  13

  	
   

  	
  2

  	
   

  	
  1

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2001

  	
   

  	
  11

  	
   

  	
  2

  	
   

  	
  1

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2002

  	
   

  	
  16

  	
   

  	
  2

  	
   

  	
  1

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2003

  	
   

  	
  18

  	
   

  	
  2

  	
   

  	
  1

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2004

  	
   

  	
  16

  	
   

  	
  2

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Year

  	
   

  	
  1999

  	
   

  	
  2000

  	
   

  	
  2001

  	
   

  	
  2002

  	
   

  	
  2003

  	
   

  	
  2004

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vacation
  Earned

  	
   

  	
  15

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vacation
  Taken

  	
   

  	
  8

  	
   

  	
  13

  	
   

  	
  11

  	
   

  	
  16

  	
   

  	
  18

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Unused
  Vacation

  	
   

  	
  7

  	
   

  	
  7

  	
   

  	
  9

  	
   

  	
  4

  	
   

  	
  2

  	
   

  	
  4

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Unused
  Vacation

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  33

  	
   

  
															

 

15

 

Exhibit B

 

Leased Car

 

1.     The current lease term of the Leased Car
ends on September 27, 2005. If the Executive’s Termination Date is prior
to September 27, 2005, the Company will continue the Leased Car benefit
until the expiration of the current lease term. At the end of the lease term
the Company will purchase the Leased Car for the residual lease value ($22,257
plus sales tax for a total of $24,093) and the Executive will purchase the
Leased Car from the Company for the residual value less any excess mileage charge
which the Company would have had to pay to the leasing company when returning
the Leased Car. The Executive will pay all title fees, registration and sales
tax upon purchase of the Leased Car.  The
excess mileage charge is $0.20 per mile over 36,000 miles.

 

2.     If the Termination Date is after September 27,
2005, the Company will extend the lease term to the extent permissible by the
leasing company of the Leased Car.

 

3.     In the event the lease for the Leased Car
cannot be extended, the Company will purchase the Leased Car at the end of the
current lease term on September 27, 2005 for the residual value and
depreciate the Leased Car based on the monthly lease payment (approximately
$485/month) it is currently paying. On the Termination Date the Executive will
purchase the Leased Car from the Company for the net book value of the Leased
Car less the excess mileage cost at that time. The excess mileage base (36,000
miles) will increase by 1,000 miles per month through the Termination Date. The
Executive will pay all title fees, registration and sales tax upon purchase of
the Leased Car.

 

16Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT
AGREEMENT, (this “Agreement”), is made and entered into as of June 9,
2005, by and between Mark Bonney (the “Executive”) and American Bank
Note Holographics, Inc., a Delaware corporation (the “Company”).

 

RECITAL

 

WHEREAS, the Company desires that the Executive be
employed to serve as its Executive Vice President, Chief Financial Officer and
Secretary, and the Executive desires to be so employed by the Company, upon the
terms and subject to the conditions set forth herein.

 

AGREEMENT

 

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

 

SECTION 1.      EMPLOYMENT.
The Company hereby agrees to employ the Executive, and the 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. The Executive shall assume the responsibilities and perform the
duties of Executive Vice President and Chief Financial Officer of the Company,
and shall report to the Chief Executive Officer of the Company.  The Executive shall be responsible for the
financial management and financial reporting of the Company and shall also
perform such duties and responsibilities assigned to him from time to time by
the Chief Executive Officer of the Company. 
The 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 not engage in any business activities (other than for the
Company) which would in any way affect his ability to perform his duties as
full time employee under this Agreement. The Company recognizes that the
Executive is a member of the board of directors of the Community Health Center, Inc.
and the Angel Investor Forum, Inc., and the Company will permit Executive
to continue to serve on such board of directors, as long as such service is
performed by Executive essentially during evenings, weekends and/or Executive’s
vacation days; and such service does not conflict with any other obligation of
Executive to the Company.  Executive
shall notify each of the entities of which he is a member of the board of
directors of his employment by the Company and shall substantially reduce his
time commitment to such entities shortly following the execution of this
Agreement.  In the performance of his
duties, the 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 9 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 9
of this Agreement, the automatic renewal provided herein shall be of no further
effect as of the Termination Date (as defined herein). In the event the
Executive’s employment is not renewed at the end of the Employment Term (except
as otherwise provided in Section 9 hereof), the Company will pay to the
Executive an amount equal to the Executive’s then existing Salary  (as defined) for the next six months in
accordance with the customary payroll practices of the Company and shall  continue all Benefits (as defined below) for
such six-month period.

 

SECTION 4.      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 not less than $215,000 per annum (the “Salary”).  In the event this Agreement is renewed
pursuant to Section 3 above, the Salary may or may not be increased at the
sole discretion of the Board of Directors (the “Board”), or a committee
designated by the Board to make such determination (the “Compensation
Committee”), in consultation with the Chief Executive Officer.  The Executive will also be eligible to
receive a bonus each year (the “Bonus”). 
Within 30 days following the end of each fiscal year of the Company, the
payment of any Bonus (or no Bonus) shall be determined by the Board or the
Compensation Committee in consultation with the Chief Executive Officer, and
shall be based on the Executive’s and the Company’s performance against the
objectives to be determined by the Board or the Compensation Committee, in
consultation with the Chief Executive Officer at the beginning of each fiscal
year.  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 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 the Executive’s
employment for any reason (including resignation by the Executive), the Company
shall pay the 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 in effect on the Termination Date. 
The Executive shall also be entitled to receive a car allowance of $700
per month (inclusive of the cost of gas, tolls, repairs, insurance, maintenance
and other car related expenses).  The
parties anticipate the Executive will relocate his personal residence in
connection with his employment hereunder, and the Company shall reimburse the
Executive for all reasonable expenses specifically related to such relocation,
subject to a maximum amount of $100,000, upon the submission of supporting
documentation for such expenses. To the extent includible in income, the
reimbursement of these relocation expenses will be grossed-up to

 

2

 

eliminate any federal or state tax consequence to the
Executive of his relocation. Until such time as the Executive relocates his
personal residence and in no event longer than two years from the date hereof,
the Company shall provide the Executive with a corporate apartment for use in
connection with his employment hereunder.

 

(c)           Stock
Options. As additional compensation hereunder the Executive shall be
granted stock options to purchase up to 112,500 shares of the Company’s common
stock, par value $.001 per share (the “Common Stock”) at an exercise
price equal to the fair market value of the Common Stock on the date of the
grant, pursuant to any stock option plan or other equity incentive plan of the
Company (collectively, the “Plans”). 
Such options will vest as to 37,500 shares on each anniversary of the
date of grant, provided that the Executive remains employed by the Company
through each such applicable anniversary date. 
The options and any shares of Common Stock underlying options may be
subject to certain restrictions as disclosed in the  Plans. 
The Executive shall be eligible to receive subsequent 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 in consultation with the Chief Executive Officer.   In addition, the option to purchase 25,000
shares of Common Stock granted to the Executive on February 19, 2003 and
the option to purchase 5,000 shares of Common Stock granted to the Executive on
January 7, 2005 shall remain outstanding during the Employment Term (but
in no event beyond the expiration of stated terms thereof) and shall continue
to vest in accordance with their terms during the Executive’s period of
employment hereunder.

 

(d)           Expenses.
The Company will pay or promptly reimburse the Executive for all reasonable
out-of-pocket business, entertainment and travel expenses (other than
commutation expenses relating to the Executive’s travel from his residence to
the Company’s headquarters located at 2 Applegate Drive, Robbinsville, NJ
08691) incurred by the Executive and approved by the Chief Executive Officer 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 5.      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

 

3

 

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 during the Employment Term and
thereafter 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 5
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 5 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 5 shall survive any termination of
this Agreement.

 

SECTION 6.      COVENANT
NOT TO COMPETE.

 

(a)           Scope.
During the term of the Executive’s employment with the Company and for a period
of one year thereafter (the “Non-competition Period”), the Executive
shall not, in any jurisdiction where the Company has transacted business prior
to the date the Executive ceases to be an employee of the Company, (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

 

4

 

Company or any of its subsidiaries; or (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 the Executive’s services hereunder.

 

(b)           Remedies.
The parties recognize, acknowledge and agree that (i) any breach or threatened
breach of the provisions of this Section 6 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, the 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 6(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 6(a) shall be construed as a series of separate covenants,
one for each municipality, community or county included within the area
designated by Section 6(a). Except for geographic coverage, the terms and
conditions of each such separate covenant shall be deemed identical to the
covenant contained in Section 6(a). Furthermore, if any court shall refuse
to enforce any of the separate covenants deemed included in Section 6(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 7.      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:

 

5

 

(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;

 

(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 8.      NONSOLICITATION.
The Executive agrees that for a period of twelve (12) months after the date he
ceases to be an employee of the Company, he will not, and will not assist any
of his affiliates to, directly or indirectly, recruit or otherwise solicit or
induce any employee, customer, partner or supplier of the Company or any of its
affiliates to terminate its relationship or arrangement with the Company or any
of its affiliates, otherwise change its relationship with the Company or any of
its affiliates, or establish any relationship with the foregoing or any of its
or their respective affiliates for any business purpose.

 

SECTION 9.      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 9(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 theft or
fraud on the part of the Executive against the Company, (ii) any act or
omission which constitutes a material breach by the Executive of this
Agreement, including a refusal or failure by the Executive to perform his
duties and obligations hereunder, (iii) the Executive has been convicted
of a crime, (iv) the Executive becomes Disabled (as hereinafter defined),
or (v) the death of the Executive. For purposes of this Agreement, “Disabled”
shall mean the Executive’s inability, due to illness, accident or any other
physical or mental condition, to perform the essential functions of his
position or this Agreement, with or without reasonable accommodation, 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), (iii), (iv) or (v) 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) cease
to be covered under

 

6

 

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 (c) shall have no further
right to purchase shares of the Company’s Common Stock pursuant to the Plans.

 

(b)           Termination
Without Cause and Resignation For Good Reason.  The Company shall have the right to terminate
this Agreement and the employment of the Executive with the Company for any
reason or no reason and without cause upon written notice to the 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 for six months following the Termination
Date, in accordance with the customary payroll practices of the Company for its
senior management personnel, provided that the Executive has executed and
delivered to the Company a general release in favor of the Company, effective
upon the Executive’s last day of employment, (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) the Executive
shall be entitled to exercise any stock options granted under the Plans that
have vested as of the Termination Date for a period of nine months following
the Termination Date.

 

(c)           Termination
Upon Change of Control or Resignation for Good Reason Following a Change of
Control. In the event the 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 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) one and one-half
(1.5).  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 9. 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 Common Stock purchased by the Executive under the Plans shall,
subject to applicable securities laws, rules and regulations, lapse on the
Termination Date.

 

(d)           Resignation.
The 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, the 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 9 the terms listed below shall mean the
following:

 

7

 

(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 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 or (b) the failure of the Company to continue to provide
the Executive with salary and 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 the failure to pay the Executive a Bonus pursuant to the
terms and subject to the conditions of Section 4(a) hereof; provided,
however, the Executive shall not be deemed to have Good Reason to terminate his
employment until such time as the Company shall have received notice of the
Executive’s intent to terminate his employment upon the occurrence of an event
set forth in (a) or (b) above, the nature of such event(s) and the
Company has been given thirty (30) days to remedy such events.

 

SECTION 10.    AUTHORITY.
The 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 the 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.

 

8

 

SECTION 11.    MISCELLANEOUS.

 

(a)           Separate
Agreements. The covenants of the 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 the 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 the
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 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 the
Executive. This Agreement shall inure to the benefit of and be enforceable by
the 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 the 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.

 

9

 

(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.

 

(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:   Chief Executive
Officer

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:

 

Mark Bonney

12 Vincent Avenue

Old Saybrook, CT 06475

Telephone: (860) 395-0833

Facsimile: (203) 286-2098

 

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

 

(h)           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.

 

(i)            Effectiveness.  As a condition to the effectiveness of this Agreement
the Executive shall have resigned from the Board of Directors of the Company.

 

10

 

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
  and CEO

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MARK
  BONNEY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Mark Bonney

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