AMERICAN BANKNOTE CORP
8-K, 1997-12-10
COMMERCIAL PRINTING
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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 8-K

                                 CURRENT REPORT

     PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934




Date of Report (Date of earliest event reported)        November 25, 1997
                                                 -------------------------------



                          AMERICAN BANKNOTE CORPORATION

             (Exact name of registrant as specifie d in its charter)


          Delaware                   1-3410                       13-0460520
- --------------------------------------------------------------------------------
(State or Other Jurisdiction      (Commission                   (IRS Employer
      of Incorporation)            File Number)              Identification No.)



                 200 Park Avenue, New York, New York                 10166-4999
- --------------------------------------------------------------------------------
               (Address of principal executive offices)              (Zip Code)


Registrant's telephone number, including area code:  (212) 557-9100
                                                   -----------------------------



- --------------------------------------------------------------------------------
         (Former name or former address, if changed since last report.)


                       The Exhibit Index appears on Page 5

                                Page 1 of  pages.


<PAGE>

ITEM 5. OTHER EVENTS.

               Pursuant to a Securities  Purchase Agreement dated as of November
25, 1997 (the "Securities  Purchase  Agreement"),  the Company sold in a private
placement to the two accredited  investors  named therein,  $5,000,000 of a Zero
Coupon  Subordinated   Convertible   Debenture,   due  November  25,  2002  (the
"Security")   plus  warrants.   At  maturity,   the   outstanding   Security  is
automatically  converted into shares of the Company's common stock, resulting in
the Security  being  treated as a component of  stockholders'  equity.  Interest
accretes at 5% per annum on the Security.  Holders may convert the Security into
shares of the Company's  common  stock,  from time to time, at a price per share
equal to 100% of the average of the 5 consecutive  trading days' closing  prices
yielding the lowest average price during the 25 trading days prior to conversion
or  $6.56  (representing  130% of the  closing  price  on  November  24,  1997),
whichever  is lower,  except  that  during  the 25 days  following  issuance  no
conversions  will be permitted  at a conversion  price which is less than $5.25.
The  Security  may be redeemed in cash at the election of the Company in lieu of
issuing  shares of Common Stock if the closing price is below $4.00 per share on
a  conversion  date  and,  beginning  90 days  after the  effective  date of the
registration   statement   required  to  be  filed  by  the  Company  under  the
Registration  Rights  Agreement  dated as of November  25, 1997 by and among the
Company and the  purchasers  of the  Security,  if the closing  price  during 10
consecutive trading days is greater than $7.50 per share. Redemption prices vary
depending on the type of  redemption  transaction  from the closing price on the
date of conversion (or an average of 5 days' prices) multiplied by the number of
shares  that would have been  issued upon  conversion  to 110% of the  principal
amount  called for  redemption.  Unless the closing  price  exceeds  $7.22 or is
greater than 115% of the prior day's closing price (whereupon full conversion is
permitted on such day),  no portion of the Security may be converted  during the
first 90-day period,  no more than 40% during the 60-day period thereafter until
the 150th day, no more than 60% during the 60-day  period  thereafter  until the
210th day, and no more than 80% during the 60-day  period  thereafter  until the
300th day,  whereupon  full  conversion is permitted.  The foregoing  conversion
limitations do not apply in the event the Company publicly announces that (i) it
intends  to  consolidate  with or merge  with any other  corporation  or sell or
transfer all or  substantially  all of the Company's  assets or (ii) any person,
group, or entity  (including the Company)  publicly  announces a tender offer to
purchase 50% or more of the  Company's  common  stock.  In  connection  with the
Security,  the Company issued 150,000 three-year warrants at $7.09 (representing
140% of the closing  price on November  24,  1997).  If the Company  redeems the
Security,  additional 5 year warrants for 21 shares for each $1,000 redeemed are
issuable  with an  exercise  price  equal  to 105% of the  closing  price on the
redemption  date. The Security is  subordinated  to all existing or future bank,
institutional,  financial transaction or acquisition  indebtedness.  The Company
has agreed to seek  registration  for resale of the common  stock into which the
Security and warrants are convertible within 120 days of closing.  The foregoing
summary of the  Security,  the  debenture  and the  warrants is qualified in its
entirety by reference to the Securities  Purchase  Agreement,  the  Registration
Rights  Agreement  and the forms of  debenture  and warrants  relating  thereto,
copies of which are attached as exhibits to this Current Report on Form 8-K.

               On December 3, 1997, to the Credit  Agreement dated as of January
29, 1996, as amended through  December 3, 1997, among American Bank Note Company
and  American  Bank Note  Holographics,  Inc.,  the Company  (collectively,  the
"Borrowers"),  the Lenders named therein, and The Chase Manhattan Bank (formerly
known as  Chemical  Bank),  as Agent for such  Lenders  (the  "Amendment"),  was
amended to permit the Company to issue up to $100,000,000 of senior subordinated
notes,  maturing  in  2007,  to be  guaranteed  on a  subordinated  basis by the
Borrowers.  The foregoing  summary of the Amendment is qualified in its entirety
by reference to the Amendment, a copy of which is attached as an exhibit to this
Current Report on Form 8-K.


                                Page 2 of    pages.


<PAGE>

ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.

          (c)  Exhibits.

          10.1 Securities  Purchase  Agreement  by and among  American  Banknote
               Corporation,  RGC International  Investors, LDC and Halifax Fund,
               L.P., dated as of November 25, 1997.

          10.2 Form of Zero Coupon  Convertible  Subordinated  Debenture,  dated
               November 25, 1997.

          10.3 Form of Warrant to  purchase  150,000  shares of common  stock of
               American Banknote Corporation, dated November 25, 1997.

          10.4 Registration  Rights  Agreement  by and among  American  Banknote
               Corporation,  RGC International  Investors, LDC and Halifax Fund,
               L.P., dated as of November 25, 1997.

          10.5 Amendment,  dated December 3, 1997, to Credit  Agreement dated as
               of January 29, 1996, as amended through  December 3, 1997,  among
               American Bank Note Company and American  Bank Note  Holographics,
               Inc., American Banknote  Corporation,  the Lenders named therein,
               and The Chase  Manhattan Bank (formerly  known as Chemical Bank),
               as Agent for such Lenders.


                                Page 3 of  pages.


<PAGE>

                                   SIGNATURES


               PURSUANT TO THE  REQUIREMENTS  OF THE SECURITIES  EXCHANGE ACT OF
1934,  THE  REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.

                                    AMERICAN BANKNOTE CORPORATION

                                    BY:  /s/Harvey J. Kesner
                                         -------------------------------
                                         Name:  Harvey J. Kesner
                                         Title: Executive Vice President
                                                and General Counsel


Date:  December 10, 1997


                                Page 4 of  pages.


<PAGE>

                                  EXHIBIT INDEX

      Exhibit                                                               Page


      10.1   Securities   Purchase  Agreement  by  and  among  American
             Banknote Corporation, RGC International Investors, LDC and
             Halifax Fund, L.P., dated as of November 25, 1997.

      10.2   Form of  Zero  Coupon Convertible Subordinated Debenture, 
             dated November 25, 1997.

      10.3   Form of Warrant to purchase 150,000 shares of common stock
             of American Banknote Corporation, dated November 25, 1997.

      10.4   Registration   Rights  Agreement  by  and  among  American
             Banknote Corporation, RGC International Investors, LDC and
             Halifax Fund, L.P., dated as of November 25, 1997.

      10.5   Amendment,  dated  December 3, 1997,  to Credit  Agreement
             dated as of January 29, 1996, as amended through  December
             3, 1997,  among  American  Bank Note  Company and American
             Bank   Note   Holographics,    Inc.,   American   Banknote
             Corporation,  the  Lenders  named  therein,  and The Chase
             Manhattan Bank (formerly known as Chemical Bank), as Agent
             for such Lenders.


                                Page 5 of  pages.






                          SECURITIES PURCHASE AGREEMENT

        SECURITIES PURCHASE AGREEMENT (this  "AGREEMENT"),  dated as of November
25, 1997, by and among American Banknote  Corporation,  a Delaware  corporation,
with  headquarters  located at 200 Park Avenue,  49th Floor,  New York, New York
10166  ("COMPANY"),  and each of the purchasers set forth on the signature pages
hereto (the "BUYERS").

        WHEREAS:

A. The Company and the Buyers are executing  and  delivering  this  Agreement in
reliance upon the exemption from  securities  registration  afforded by Rule 506
under  Regulation  D  ("REGULATION  D")  as  promulgated  by the  United  States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");

B. The  Company has  authorized  the  issuance to the Buyers of (i)  convertible
subordinated  debentures,  in the form  attached  hereto as EXHIBIT  "A", in the
aggregate  principal  amount of Five Million Dollars  ($5,000,000),  convertible
into shares of common stock,  $.01 par value per share, of the Company (together
with  any  rights  attached  to such  common  stock  pursuant  to the  Company's
Stockholders Rights Plan, the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in such debentures (the  "DEBENTURES")  and
(ii)  warrants,  in the form  attached  hereto as EXHIBIT  "B", to purchase  One
Hundred  Fifty  Thousand   (150,000)   shares  of  Common  Stock  (the  "CLOSING
WARRANTS");

C. The Buyers desire to purchase and the Company desires to issue and sell, upon
the terms and  conditions  set forth in this  Agreement,  the Debentures and the
Closing  Warrants,  for an  aggregate  purchase  price of Five  Million  Dollars
($5,000,000).

D. Each Buyer wishes to purchase,  upon the terms and conditions  stated in this
Agreement,  such principal amount of Debentures and number of Warrants as is set
forth immediately below its name on the signature pages hereto;

E.  Contemporaneous  with the  execution  and  delivery of this  Agreement,  the
parties hereto are executing and delivering a Registration Rights Agreement,  in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION  RIGHTS  AGREEMENT"),
pursuant to which the Company has agreed to provide certain  registration rights
under the 1933 Act and the rules and  regulations  promulgated  thereunder,  and
applicable state securities laws; and

F. In accordance with the terms of the Debentures,  under certain  circumstances
the  Company  may redeem  the  Debentures  for cash plus a number of  additional
warrants,  in the form attached hereto as EXHIBIT "D", determined based upon the
redemption amount (the "REDEMPTION  WARRANTS" and, collectively with the Closing
Warrants, the "WARRANTS").


<PAGE>

        NOW  THEREFORE,  the Company and each of the Buyers  (severally  and not
jointly) hereby agree as follows:

        1.     PURCHASE AND SALE OF DEBENTURES AND CLOSING WARRANTS.

               a. Purchase of Debentures and Closing Warrants. The Company shall
issue and sell to each Buyer and each Buyer  severally  agrees to purchase  from
the Company such  principal  amount of Debentures  as are set forth  immediately
below such Buyer's name on the signatures pages hereto at the aggregate purchase
price (the "PURCHASE PRICE") as is set forth immediately below such Buyer's name
on the signature pages hereto. The issuance, sale and purchase of the Debentures
and Closing Warrants shall take place at the closing (the "CLOSING"). Subject to
the  satisfaction  (or waiver) of the conditions  thereto set forth in Section 6
and Section 7 below,  at the Closing,  the Company  shall issue and sell to each
Buyer and each Buyer shall  purchase  from the Company the  aggregate  principal
amount of  Debentures  and  Closing  Warrants  which  such  Buyer is  purchasing
hereunder for the Purchase Price.  The aggregate  principal amount of Debentures
to be  issued  at the  Closing  is Five  Million  Dollars  ($5,000,000)  and the
aggregate  number of Warrants  to be issued at the Closing is One Hundred  Fifty
Thousand  (150,000),  for an aggregate  purchase  price of Five Million  Dollars
($5,000,000).  The term Debentures  includes the Debentures to be sold hereunder
and any debenture(s)  issued in replacement thereof in accordance with the terms
thereof.

               b. Form of Payment.  On the Closing Date (as defined below),  (i)
each Buyer shall pay the Purchase Price for the Debentures and Closing  Warrants
to be issued  and sold to it at the  Closing  by wire  transfer  of  immediately
available funds to the Company,  in accordance with the Company's written wiring
instructions, against delivery of the Debentures and Closing Warrants which such
Buyer is  purchasing,  and (ii) the Company  shall deliver such  Debentures  and
Closing Warrants against delivery of such Purchase Price.

               c. Closing Date.  Subject to the  satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Debentures and Closing Warrants pursuant to this
Agreement  (the  "CLOSING  DATE") shall be 12:00 noon Eastern  Standard  Time on
November 25, 1997 or such other  mutually  agreed upon time.  The Closing  shall
occur on the Closing Date at the offices of the Company,  200 Park Avenue,  49th
Floor, New York, New York 10166.

        2.     BUYERS' REPRESENTATIONS AND WARRANTIES.

        Each Buyer  severally  (and not jointly)  represents and warrants to the
Company solely as to such Buyer that:

               a. Investment Purpose. The Buyer is purchasing the Debentures and
the shares of Common Stock  issuable upon  conversion  thereof (the  "CONVERSION
SHARES") and the


                                        2


<PAGE>

Warrants and the shares of Common Stock  issuable  upon exercise of the Warrants
(the "WARRANTS SHARES") (collectively, the "SECURITIES") for its own account for
investment  only  and  not  with a  present  view  towards  the  public  sale or
distribution thereof,  except pursuant to sales registered or exempted under the
1933 Act.

               b.  Accredited  Investor  Status.  The  Buyer  is an  "accredited
investor"  as that  term  is  defined  in  Rule  501(a)  of  Regulation  D and a
sophisticated investor (as defined in Rule 506(b)(2)(ii) at Regulation D).

               c. Reliance on  Exemptions.  The Buyer  understands  (i) that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the  Company is relying  upon the truth and  accuracy  of, and the
Buyer's   compliance   with,  the   representations,   warranties,   agreements,
acknowledgments  and  understandings  of the Buyer set forth  herein in order to
determine the  availability  of such exemptions and the eligibility of the Buyer
to acquire the Securities and (ii) it is not authorized,  and acknowledges  that
it has not,  relied on any analyst or other  reports or other third party source
information relating to the Company.

               d.  Information.  The Buyer and its  advisors,  if any, have been
furnished with all materials  relating to the business,  finances and operations
of the Company and  materials  relating to the offer and sale of the  Securities
which  have  been  requested  by the  Buyer or its  advisors.  The Buyer and its
advisors,  if any,  have not  relied on any oral or written  representations  or
assurances  made by third  parties  or any oral or  written  representations  or
assurances from the Company or any  representative or agent of the Company other
than as set forth in this  Agreement.  The Buyer and its advisors,  if any, have
been afforded the  opportunity to ask questions of the Company and have received
what the  Buyer  believes  to be  satisfactory  answers  to any such  inquiries.
Neither such  inquiries nor any other due diligence  investigation  conducted by
Buyer or any of its advisors or  representatives  shall modify,  amend or affect
Buyer's right to rely on the Company's  representations and warranties contained
in Section 3 below. The Buyer  understands that its investment in the Securities
is speculative and involves a significant degree of risk.

               e.  Governmental  Review.  The Buyer  understands  that no United
States federal or state agency or any other  government or  governmental  agency
has passed upon or made any recommendation or endorsement of the Securities.

               f. Transfer or Resale.  The Buyer  understands that (i) except as
provided in the Registration Rights Agreement,  the Securities have not been and
are not being  registered  under the 1933 Act or any applicable state securities
laws,  and  may  not be  transferred  unless  (a)  subsequently  included  in an
effective  registration  statement  thereunder,  or (b)  the  Buyer  shall  have
delivered  to the  Company  an  opinion  of  counsel  (which  opinion  shall  be
reasonably  acceptable  to the Company) to the effect that the  Securities to be
sold or  transferred  may be sold or  transferred  pursuant to an exemption from
such registration or (c) sold pursuant to Rule 144


                                        3


<PAGE>

promulgated  under  the 1933 Act (or a  successor  rule);  (ii) any sale of such
Securities  made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further,  if said Rule is not  applicable,  any resale of
such Securities  under  circumstances in which the seller (or the person through
whom the sale is made)  may be  deemed  to be an  underwriter  (as that  term is
defined in the 1933 Act) may require  compliance with some other exemption under
the 1933 Act or the  rules  and  regulations  of the SEC  thereunder;  and (iii)
neither  the Company nor any other  person is under any  obligation  to register
such  Securities  under the 1933 Act or any state  securities  laws or to comply
with the terms and conditions of any exemption  thereunder (in each case,  other
than  pursuant  to  the  Registration  Rights  Agreement).  Notwithstanding  the
foregoing or anything else contained herein to the contrary,  the Securities may
be pledged as collateral in connection with a bona fide margin account.

               g. Legends.  The Buyer understands that the Debentures,  Warrants
and,  until such time as the  Conversion  Shares and  Warrants  Shares have been
registered  under the 1933  Act,  as  contemplated  by the  Registration  Rights
Agreement,  the  Conversion  Shares and Warrant  Shares,  may bear a restrictive
legend in  substantially  the following form (and a  stop-transfer  order may be
placed against transfer of the certificates for such Securities):

        "The securities represented by this certificate have not been registered
        under the Securities Act of 1933, as amended.  The securities  have been
        acquired for investment and may not be sold,  transferred or assigned in
        the absence of an effective  registration  statement for the  securities
        under said Act, or an opinion of counsel,  in form,  substance and scope
        reasonably  acceptable to the Company, that registration is not required
        under said Act or unless sold pursuant to Rule 144 under said Act."

        The legend set forth above shall be removed and the Company  shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped,  if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective  registration  statement
filed  under the 1933 Act,  or (b) such  holder  provides  the  Company  with an
opinion of counsel,  in form,  substance and scope reasonably  acceptable to the
Company,  to the effect that a public sale or transfer of such  Security  may be
made  without  registration  under the 1933 Act and such  Security is so sold or
transferred or (c) such holder provides the Company with  reasonable  assurances
that such  Security  can be sold  pursuant  to Rule 144 under the 1933 Act (or a
successor rule thereto)  without any  restriction as to the number of Securities
acquired as of a particular  date that can then be  immediately  sold. The Buyer
agrees to sell all Securities,  including those  represented by a certificate(s)
from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any.

               h.   Authorization;   Enforcement.   This   Agreement   and   the
Registration  Rights Agreement have been duly and validly  authorized,  executed
and delivered on behalf of the Buyer and are valid and binding agreements of the
Buyer enforceable in accordance with their terms


                                        4


<PAGE>

except  as  such  enforceability  may  be  limited  by  applicable   bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally,  the enforcement of creditors' rights and remedies or by
other equitable principles of general application.

               i.  Residency.  The Buyer is a resident of the  jurisdiction  set
forth immediately below such Buyer's name on the signature pages hereto.

               j. No Legal Advice.  The Buyer  acknowledges  that it has had the
opportunity to review this Agreement and the  transactions  contemplated  hereby
with its own legal counsel and investment and tax advisors. The Buyer is relying
solely on such counsel and advisors and not on any statements of representatives
of the Company or its  representatives  as agents for legal,  tax or  investment
advice with respect to this investment,  the transactions contemplated hereby or
the securities laws of any jurisdiction.

               k. No  Brokers.  The Buyer has taken no action  which  would give
rise to any claim by any  person for  brokerage  commissions,  finder's  fees or
similar  payments  relating to this Agreement or the  transactions  contemplated
hereby.

        3.     REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

        The Company represents and warrants to each Buyer that:

               a.  Organization and  Qualification.  The Company and each of its
Subsidiaries  (as defined  below),  is a  corporation  duly  organized,  validly
existing and in good standing under the laws of the  jurisdiction in which it is
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate  its  properties  and to carry on its  business as and where now
owned, leased, used, operated and conducted.  SCHEDULE 3(A) sets forth a list of
all of the subsidiaries of the Company pursuant to which material  operations of
the Company are conducted (the  "SUBSIDIARIES")  and the  jurisdiction  in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a  foreign  corporation  to do  business  and is in good  standing  in  every
jurisdiction  in which the  nature of the  business  conducted  by it makes such
qualification  necessary  except where the failure to be so qualified or in good
standing would not have a Material  Adverse  Effect.  "MATERIAL  ADVERSE EFFECT"
means any material adverse effect on the operations, assets, financial condition
or  prospects  of the Company and its  Subsidiaries  taken as a whole,  or which
would prohibit or otherwise  adversely interfere with the ability of the Company
to enter into and perform its obligations  under this Agreement,  the Debenture,
the Registration Rights Agreement and the Warrants.

               b. Authorization;  Enforcement. (i) The Company has all requisite
corporate  power and  authority  to enter into and perform this  Agreement,  the
Registration Rights Agreement, the Debentures and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof,


                                        5


<PAGE>

(ii) the  execution  and delivery of this  Agreement,  the  Registration  Rights
Agreement,  the Debentures and the Warrants by the Company and the  consummation
by it of the transactions  contemplated  hereby and thereby  (including  without
limitation  the issuance of the Debentures and the Warrants and the issuance and
reservation  for issuance of the Conversion  Shares and Warrant Shares  issuable
upon conversion or exercise  thereof) have been duly authorized by the Company's
Board of Directors and no further consent or authorization  of the Company,  its
Board of Directors,  or its  shareholders is required,  (iii) this Agreement has
been duly  executed  and  delivered  by the  Company,  and (iv)  this  Agreement
constitutes,  and upon execution and delivery by the Company of the Registration
Rights  Agreement,  the Debentures and the Warrants,  each such  instrument will
constitute,  a legal,  valid and binding  obligation of the Company  enforceable
against the Company in accordance  with its terms except as such  enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors'  rights and remedies or by other  equitable  principles of general
application.

               c.  Capitalization.  As of  November  18,  1997,  the  authorized
capital stock of the Company  consists of (i) 50,000,000  shares of Common Stock
of which  20,853,717  shares are issued and  outstanding,  5,187,383  shares are
reserved for issuance pursuant to the Company's benefit plans,  1,850,000 shares
are reserved for issuance  pursuant to securities (other than the Debentures and
the Warrants) exercisable for, or convertible into or exchangeable for shares of
Common Stock and 1,600,000  shares are reserved for issuance upon  conversion of
the Debentures and exercise of the Warrants  (subject to adjustment  pursuant to
the  Company's  covenant set forth in Section 4(h)  below);  and (ii)  5,000,000
shares of preferred stock, none of which shares are issued and outstanding.  All
of such outstanding  shares of capital stock are, or upon issuance will be, duly
authorized,  validly issued, fully paid and nonassessable.  No shares of capital
stock of the  Company  are  subject to  preemptive  rights or any other  similar
rights of the stockholders of the Company.  Except as disclosed in SCHEDULE 3(C)
and  except  for the  transactions  contemplated  hereby  and  the  transactions
pursuant to the Securities  Purchase  Agreement dated July 24, 1997 by and among
the Company  and the Buyers  named  therein,  as of the  effective  date of this
Agreement,  (i) there are no outstanding  options,  warrants,  scrip,  rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character  whatsoever  relating to,
or  securities  or rights  convertible  into or  exchangeable  for any shares of
capital  stock of the Company,  or  arrangements  by which the Company is or may
become bound to issue  additional  shares of capital  stock of the Company,  and
(ii)  there  are no  agreements  or  arrangements  under  which the  Company  is
obligated to register the sale of any of its or their  securities under the 1933
Act  (except  the  Registration   Rights  Agreement)  and  (iii)  there  are  no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) that will
be triggered  by the  issuance of the  Debentures  or  Conversion  Shares or the
Warrants or Warrant  Shares.  The Company  has  furnished  to the Buyer true and
correct  copies of the Company's  Restated  Certificate of  Incorporation  as in
effect  on the date  hereof  ("CERTIFICATE  OF  INCORPORATION"),  the  Company's
By-laws,  as in effect on the date hereof (the "BY-LAWS"),  and the terms of all
securities convertible into or exercisable for Common


                                        6


<PAGE>

Stock of the Company and the material  rights of the holders  thereof in respect
thereto.  The  Company  shall  provide  the Buyer with a written  update of this
representation  signed  by the  Company's  Chief  Executive  or Chief  Financial
Officer on behalf of the Company as of the Closing Date.

               d. Issuance of Shares.  The Conversion  Shares and Warrant Shares
are duly authorized and, upon issuance upon conversion of the Debentures or upon
exercise of the Warrants in  accordance  with the terms  thereof will be validly
issued,  fully paid and  non-assessable,  and free from liens and  charges  with
respect to the issue  thereof and shall not be subject to  preemptive  rights or
other similar rights of stockholders of the Company.  The term Conversion Shares
includes the shares of Common Stock issuable upon  conversion of the Debentures,
including without limitation, such additional shares, if any, as are issuable as
a result of the events  described  in Section  2(c) of the  Registration  Rights
Agreement.  The Company  understands and acknowledges  the potentially  dilutive
effect to the Common Stock of the issuance of the Conversion  Shares and Warrant
Shares upon  conversion or exercise of the  Debentures or Warrants.  The Company
further  acknowledges  that its  obligation  to  issue  Conversion  Shares  upon
conversion of the Debentures and Warrant Shares upon exercise of the Warrants in
accordance with this Agreement,  the Debentures and the Warrants is absolute and
unconditional  (subject to the  Company's  redemption  rights as provided in the
Debentures) regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company.

               e. No Conflicts. The execution,  delivery and performance of this
Agreement, the Registration Rights Agreement, the Debentures and the Warrants by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including,  without limitation, the issuance and reservation
for issuance of the Conversion  Shares and Warrant Shares) will not (i) conflict
with  or  result  in  a  violation  of  any  provision  of  the  Certificate  of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any  provision  of, or constitute a default (or an event which with notice or
lapse of time or both  could  become a  default)  under,  or give to others  any
rights  of  termination,   amendment,   acceleration  or  cancellation  of,  any
agreement,  indenture  or  instrument  to  which  the  Company  or  any  of  its
Subsidiaries is a party, or result in a violation of any law, rule,  regulation,
order,  judgment  or decree  (including  federal and state  securities  laws and
regulations)  applicable to the Company or any of its  Subsidiaries  or by which
any  property  or asset of the  Company or any of its  Subsidiaries  is bound or
affected  (except  for  such  conflicts,  defaults,  terminations,   amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate,  have a Material  Adverse Effect and as set forth in SCHEDULE  3(E)).
Neither  the  Company  nor  any  of  its  Subsidiaries  is in  violation  of its
Certificate  of  Incorporation,  By-laws or other  organizational  documents and
neither the Company nor any of its  Subsidiaries is in default (and no event has
occurred which with notice or lapse of time or both could put the Company or any
of its  Subsidiaries in default)  under,  and neither the Company nor any of its
Subsidiaries  has taken any action or failed to take any action  that would give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or


                                        7


<PAGE>

instrument  to which the  Company  or any of its  Subsidiaries  is a party or by
which any property or assets of the Company or any of its  Subsidiaries is bound
or affected,  except for possible defaults as would not,  individually or in the
aggregate,  have a Material Adverse Effect. To the knowledge of the Company, the
businesses of the Company and its  Subsidiaries,  are not being  conducted,  and
shall  not be  conducted  so long  as a Buyer  owns  any of the  Securities,  in
violation of any law,  ordinance or regulation of any governmental  entity which
violation  would  have  a  Material  Adverse  Effect.   Except  as  specifically
contemplated  by this  Agreement  and as  required  under  the  1933 Act and any
applicable  state  securities  laws,  the Company is not  required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or  governmental  agency or any  regulatory or self  regulatory  agency in
order for it to execute,  deliver or perform any of its  obligations  under this
Agreement,  the Registration Rights Agreement, the Debentures or the Warrants in
accordance  with the terms  hereof or thereof.  Except as  disclosed in SCHEDULE
3(E), all consents, authorizations,  orders, filings and registrations which the
Company is  required  to obtain  pursuant to the  preceding  sentence  have been
obtained or effected on or prior to the date  hereof.  The Company is unaware of
any facts or  circumstances  which would give rise to any of the foregoing.  The
Company is not in  violation of the listing  requirements  of the New York Stock
Exchange ("NYSE") and does not reasonably  anticipate that the Common Stock will
be delisted by the NYSE in the foreseeable future.

               f. SEC Documents;  Financial Statements. Since December 31, 1995,
the Company has timely filed all reports, schedules, forms, statements and other
documents  required  to be filed by it with the SEC  pursuant  to the  reporting
requirements  of the Exchange  Act of 1934,  as amended (the "1934 ACT") (all of
the foregoing filed prior to the date hereof and all exhibits  included  therein
and  financial  statements  and  schedules  thereto  and  documents  (other than
exhibits)  incorporated  by reference  therein,  being  hereinafter  referred to
herein as the "SEC DOCUMENTS"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents,  except for such exhibits and incorporated
documents.  As of their  respective  dates,  the SEC  Documents  complied in all
material  respects  with the  requirements  of the 1934  Act and the  rules  and
regulations of the SEC promulgated  thereunder  applicable to the SEC Documents,
and  none of the SEC  Documents,  at the  time  they  were  filed  with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated  therein or necessary in order to make the statements
therein,  in  light  of the  circumstances  under  which  they  were  made,  not
misleading.  As of their  respective  dates,  the  financial  statements  of the
Company  included  in the SEC  Documents  complied  as to  form in all  material
respects with  applicable  accounting  requirements  and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared  in  accordance   with  generally   accepted   accounting   principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise  indicated in such financial  statements or the notes thereto, or (ii)
in the case of unaudited interim statements,  to the extent they may not include
footnotes or may be condensed or summary  statements)  and fairly present in all
material  respects the  consolidated  financial  position of the Company and its
consolidated  subsidiaries as of the dates thereof and the consolidated  results
of their operations and cash flows for the periods then ended (subject,


                                        8


<PAGE>

in the case of unaudited  statements,  to normal  year-end  audit  adjustments).
Except as set forth in the financial  statements of the Company  included in the
SEC Documents or on SCHEDULE 3(F), the Company has no liabilities, contingent or
otherwise,  other  than (i)  liabilities  incurred  in the  ordinary  course  of
business  subsequent to December 31, 1996 and (ii)  obligations  under contracts
and  commitments  incurred in the  ordinary  course of business and not required
under generally accepted accounting principles to be reflected in such financial
statements,  which,  individually  or in the aggregate,  are not material to the
financial condition or operating results of the Company.

               g. Absence of Certain Changes. Since December 31, 1996, there has
been no adverse change and no adverse  development  in the assets,  liabilities,
business, properties,  operations, financial condition, results of operations or
prospects of the Company or any of its  Subsidiaries  except as disclosed on any
schedule  hereto  other than  matters  which would not,  individually  or in the
aggregate, have a Material Adverse Effect.

               h.  Absence  of  Litigation.  There is no  action,  suit,  claim,
proceeding,  inquiry  or  investigation  before or by any court,  public  board,
government  agency,  self-regulatory  organization  or body  pending  or, to the
knowledge of the Company (or any officer or director of the Company), threatened
against or affecting the Company or any of its  Subsidiaries  (or any officer or
director of the Company or any of its  Subsidiaries)  that could have a Material
Adverse Effect.

               i.     [Intentionally Omitted]


               j.     [Intentionally Omitted]


               k. Tax Status.  Except as set forth on SCHEDULE 3(K), the Company
and each of its  Subsidiaries has made or filed all federal and state income and
all other tax returns,  reports and declarations required by any jurisdiction to
which it is subject  (unless and only to the extent that the Company and each of
its Subsidiaries has set aside on its books provisions  reasonably  adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental  assessments  and charges  that are  material  in amount,  shown or
determined to be due on such  returns,  reports and  declarations,  except those
being  contested  in good  faith  and  has set  aside  on its  books  provisions
reasonably  adequate for the payment of all taxes for periods  subsequent to the
periods  to which such  returns,  reports or  declarations  apply.  There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction,  and the officers of the Company know of no basis for any such
claim.

               l.     [Intentionally Omitted]


                                        9


<PAGE>

               m.  Disclosure.  All  information  relating to or concerning  the
Company or any of its  Subsidiaries  set forth in this Agreement and provided to
the Buyers  pursuant to Section 2(d) hereof and otherwise in connection with the
transactions  contemplated  hereby is true and correct in all material  respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein,  in light of the circumstances under
which they were made, not  misleading.  Except as set forth in SCHEDULE 3(F), no
event or circumstance  has occurred or exists with respect to the Company or any
of its Subsidiaries or its or their business, properties,  prospects, operations
or financial  conditions,  which,  under  applicable  law,  rule or  regulation,
requires public disclosure or announcement by the Company but which has not been
so  publicly  announced  or  disclosed  (assuming  for  this  purposes  that the
Company's  reports  filed  under  the 1934 Act are  being  incorporated  into an
effective  registration  statement  filed by the  Company  under the 1933  Act).
Notwithstanding  the  foregoing,  the Company  expressly  disclaims  any and all
responsibility  for any oral or written statements about the Company made by any
third party  (including  but not limited to  statements  by analysts in research
reports or otherwise), and the Company makes no representation or warranty as to
the accuracy or completeness of such statements.

               n. Acknowledgment  Regarding Buyers' Purchase of Securities.  The
Company  acknowledges  and  agrees  that the  Buyers  are  acting  solely in the
capacity of arm's  length  purchasers  with  respect to this  Agreement  and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial  advisor or fiduciary of the Company (or in any similar
capacity)  with  respect to this  Agreement  and the  transactions  contemplated
hereby  and  any  advice  given  by  any  Buyer  or  any  of  their   respective
representatives or agents in connection with this Agreement and the transactions
contemplated  hereby  is  merely  incidental  to  the  Buyers,  purchase  of the
Securities.  The Company  further  represents  to each Buyer that the  Company's
decision to enter into this  Agreement has been based solely on the  independent
evaluation of the Company and its representatives.

               o. No Integrated  Offering.  Neither the Company,  nor any of its
affiliates,  nor any  person  acting on its or their  behalf,  has  directly  or
indirectly  made any offers or sales in any security or solicited  any offers to
buy any security under  circumstances that would require  registration under the
1933 Act of the issuance of the Securities to the Buyers.

               p. No Brokers.  The Company has taken no action  which would give
rise to any claim by any  person for  brokerage  commissions,  finder's  fees or
similar  payments  relating to this Agreement or the  transactions  contemplated
hereby.


        4.     COVENANTS.

               a. Best  Efforts.  The  parties  shall use their best  efforts to
satisfy  timely  each of the  conditions  described  in  Section 6 and 7 of this
Agreement.


                                       10


<PAGE>

               b.  Form D; Blue Sky Laws.  The  Company  agrees to file a Form D
with respect to the Securities as required  under  Regulation D and to provide a
copy thereof to each Buyer promptly after such filing.  The Company shall, on or
before the  Closing  Date,  take such  action as the  Company  shall  reasonably
determine is necessary to qualify the  Securities  for sale to the Buyers at the
applicable  closing  pursuant to this Agreement under  applicable  securities or
"blue sky" laws of the states of the  United  States (or to obtain an  exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to such Closing Date.

               c. Reporting  Status;  Eligibility to Use Form S-3. The Company's
Common Stock is  registered  under Section 12(b) of the 1934 Act. So long as any
Buyer beneficially owns any of the Securities, the Company shall timely file all
reports  required  to be filed with the SEC  pursuant  to the 1934 Act,  and the
Company shall not voluntarily terminate its status as an issuer required to file
reports  under the 1934 Act even if the 1934 Act or the  rules  and  regulations
thereunder would permit such termination.  The Company currently meets, and will
take all  necessary  action to continue to meet,  the  "registrant  eligibility"
requirements set forth in the general instructions to Form S-3.

               d. Use of Proceeds.  The Company  shall use the proceeds from the
sale of the  Debentures  and  Warrants in the manner set forth in SCHEDULE  4(D)
attached hereto and made a part hereof.

               e. Additional Equity Capital; Right of First Refusal.  Subject to
the  exceptions  described  below,  the  Company  agrees  that during the period
beginning  on the date hereof and ending on the later of (i)  seventy-five  (75)
days  thereafter or (ii) thirty (30) days  following  the effective  date of the
Registration  Statement to be filed pursuant to Section 2(a) of the Registration
Rights Agreement (the "LOCK-UP PERIOD"), the Company will not, without the prior
written consent of a majority-in-interest  of the Buyers, conduct any additional
equity  financing  (including  debt  financing  with a discounted or convertible
equity  component  or  warrants)  where the  equity is issued on  Floating  Rate
Convertible  Terms (as  defined  below).  After the  expiration  of the  Lock-Up
Period,  subject  to the  exceptions  described  below,  the  Company  shall not
negotiate  or  contract  with any  party  (other  than  the  Buyers)  to  obtain
additional  equity  financing  (including  debt  financing  with a discounted or
convertible equity component or warrants) where the equity is issued on Floating
Rate Convertible  Terms as defined below) and that provides for the registration
under the 1933 Act of public  resales of Common Stock within one hundred  eighty
(180)  days of the  effective  date of the  Registration  Statement  to be filed
pursuant to Section 2(a) of the Registration  Rights  Agreement.  Subject to the
exceptions  described  below,  the Company will not conduct any equity financing
(including debt with a discounted or convertible  equity  component or warrants)
where  the  equity  is  issued  on  Floating  Rate  Convertible  Terms  ("FUTURE
OFFERINGS")  during  the period  beginning  on the  Closing  Date and ending one
hundred  eighty (180) days after the  expiration of the Lock-Up Period unless it
shall have first  delivered to each Buyer,  at least  fifteen (15) business days
prior to the closing of such Future  Offering,  written  notice  describing  the
proposed Future Offering,


                                       11

<PAGE>

including the terms and conditions  thereof,  and providing each Buyer an option
during the ten (10)  business  day period  following  delivery of such notice to
purchase its pro rata share (based on the ratio that the principal amount of the
Debentures  purchased by it hereunder bears to the aggregate principal amount of
Debentures  purchased  hereunder) of the securities  being offered in the Future
Offering  on the  same  terms  as  contemplated  by such  Future  Offering  (the
limitations  referred to in this paragraph are  collectively  referred to as the
"CAPITAL RAISING LIMITATIONS"),  provided that if the Buyers, as a whole, do not
purchase  all of such Future  Offering,  the Company will be free to pursue such
Future Offering entirely with third parties. The Lock-Up Period, Future Offering
and Capital Raising Limitations shall not apply to any transaction involving (i)
issuances  of  securities  in a firm  commitment  underwritten  public  offering
(excluding  a  continuous  offering  pursuant to Rule 415 under the 1933 Act) or
(ii) issuances of securities as  consideration  for a merger,  consolidation  or
sale of assets, or in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital),  or in connection
with the  disposition or  acquisition  of a business,  product or license by the
Company.  The Lock-Up Period,  Future  Offering and Capital Raising  Limitations
also shall not apply to the issuance of  securities  upon exercise or conversion
of the Company's options,  warrants or other convertible  securities outstanding
as of the date hereof or to the grant of additional options or warrants,  or the
issuance of additional securities,  under any Company stock option or restricted
stock plan  approved by a majority  of the  Company's  disinterested  directors.
"FLOATING RATE CONVERTIBLE  TERMS" means terms which include the right to buy an
indeterminate number of shares of Common Stock upon conversion of the securities
or other rights based upon a floating  rate or reset  conversion  price  derived
from the market  price of the Common  Stock  subsequent  to the  issuance of the
convertible securities and preceding the date of conversion.

               f.  Expenses.  The  Company  shall  reimburse  Rose Glen  Capital
Management,  L.P. ("RGC") for all expenses incurred by it in connection with the
negotiation,  preparation, execution, delivery and performance of this Agreement
and the other  agreements  to be executed  in  connection  herewith,  including,
without limitation, attorneys' and consultants' fees and expenses. The Company's
obligation to reimburse  RGC's expenses under this Section 4(f) shall be limited
to Fifteen Thousand Dollars ($15,000).

               g.  Financial  Information.   The  Company  agrees  to  send  the
following  reports to each Buyer until such Buyer transfers,  assigns,  or sells
all of the Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K,  its Quarterly  Reports on Form 10-Q and
any Current  Reports on Form 8-K; (ii) within one (1) day after release,  copies
of all press  releases  issued by the  Company or any of its  Subsidiaries;  and
(iii)  contemporaneously with the making available or giving to the stockholders
of the Company,  copies of any notices or other  information  the Company  makes
available or gives to such stockholders.

               h.  Reservation  of Shares.  The Company  shall at all times have
authorized,  and reserved for the purpose of  issuance,  a sufficient  number of
shares of Common Stock to


                                       12


<PAGE>

provide for the full  conversion of the  outstanding  Debentures and issuance of
the Conversion Shares in connection  therewith (based on the Conversion Price of
the  Debentures  in  effect  from  time to time)  and the full  exercise  of the
Warrants and the issuance of the Warrant Shares in connection  therewith  (based
upon the Exercise Price of the Warrants in effect from time to time), initially,
1,600,000  shares.  The Company  shall not reduce the number of shares of Common
Stock reserved for issuance upon conversion of the Debentures or exercise of the
Warrants  without  the  consent  of  each  Buyer,  which  consent  will  not  be
unreasonably  withheld  except  pursuant  to  redemptions  as  provided  in  the
Debentures.  The Company shall use its best efforts at all times to maintain the
number of shares of Common  Stock so reserved  for  issuance at no less than one
hundred fifty percent  (150%) of the number that is then actually  issuable upon
full  conversion  of the  Debentures  (based  on  the  Conversion  Price  of the
Debentures  in effect from time to time) and the full  exercise of the  Warrants
(based on the Exercise Price of the Warrants in effect from time to time). If at
any time the  number of  shares of Common  Stock  authorized  and  reserved  for
issuance is below the number of Conversion  Shares and Warrant Shares issued and
issuable upon  conversion or exercise of the Debentures and the Warrants  (based
on the  Conversion  Price and Exercise  Price then in effect),  the Company will
promptly  take all  corporate  action  necessary  to  authorize  and  reserve  a
sufficient number of shares,  including,  without limitation,  calling a special
meeting of  shareholders  to authorize  additional  shares to meet the Company's
obligations  under this Section 4(h), in the case of an  insufficient  number of
authorized shares, and using its best efforts to obtain shareholder  approval of
an increase in such authorized number of shares.

               i. Listing.  The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national  securities  exchange or
automated  quotation  system, if any, upon which shares of Common Stock are then
listed (subject to official  notice of issuance) and shall maintain,  so long as
any  other  shares of Common  Stock  shall be so  listed,  such  listing  of all
Conversion  Shares and Warrant Shares from time to time issuable upon conversion
or exercise of the  Debentures  and the  Warrants.  The Company  will obtain and
maintain  the  listing  and  trading  of its  Common  Stock on the NYSE,  Nasdaq
National  Market  ("NASDAQ"),  or the American Stock Exchange  ("AMEX") and will
comply  in  all  respects  with  the  Company's  reporting,   filing  and  other
obligations under the bylaws or rules of the National  Association of Securities
Dealers ("NASD") and such exchanges,  as applicable.  The Company shall promptly
provide to each Buyer copies of any notices it receives from the NYSE  regarding
the continued eligibility of the Common Stock for listing on the NYSE.

               j. Corporate Existence.  So long as a Buyer beneficially owns any
Debentures,  the Company shall  maintain its  corporate  existence and shall not
sell all or substantially all of the Company's assets,  except in the event of a
merger or  consolidation  or sale of all or  substantially  all of the Company's
assets,  where the surviving or successor entity in such transaction (i) assumes
the Company's  obligations  hereunder and under the agreements  and  instruments
entered into in connection  herewith and (ii) is a publicly  traded  corporation
whose Common Stock is listed for trading on the NYSE, Nasdaq or AMEX.


                                       13


<PAGE>

               k. Solvency.  The Company (both before and after giving effect to
the  transactions  contemplated  by this Agreement) is solvent and currently the
Company has no  information  that would lead it to reasonably  conclude that the
Company would not have, nor does it intend to take any action that would impair,
its  ability  to pay or  refinance  its debts  from  time to time in  connection
therewith. The Buyer hereby acknowledges (i) that the Company does not currently
have funds  reserved  specifically  for the repayment of the Debentures and (ii)
that the  Company  expects  all  amounts  payable  under  the  Debentures  to be
converted  into Common Stock in accordance  with Article I thereof.  The Company
did not receive a qualified  opinion from its auditors  with respect to its most
recent  fiscal year end and does not  anticipate or know of any basis upon which
its auditors  might issue a qualified  opinion in respect of its current  fiscal
year.

               l.  Compliance  with  Short Sale  Regulations.  To the extent the
Buyer's  engage  in any  hedging  transaction  involving  "short  sales"  of the
Company's Common Stock subsequent to the date hereof, the Buyers agree to comply
with  applicable  rules and  regulations  applying  to short  sales  (subject to
applicable exemptions).

        5.     TRANSFER AGENT INSTRUCTIONS.

        The Company shall issue  irrevocable  instructions to its transfer agent
to issue certificates,  registered in the name of each Buyer or its nominee, for
the Conversion  Shares and Warrant Shares in such amounts as specified from time
to time by  each  Buyer  to the  Company  upon  conversion  or  exercise  of the
Debentures and the Warrants in accordance  with the terms thereof (the "Transfer
Agent Instructions"). Prior to registration of the Conversion Shares and Warrant
Shares  under the 1933 Act,  all such  certificates  shall bear the  restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable  Transfer Agent Instructions  referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof  (in the  case of the  Conversion  Shares  or  Warrant  Shares,  prior to
registration  of the  Conversion  Shares or Warrant  Shares under the 1933 Act),
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely  transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration  Rights Agreement.
Nothing in this  Section  shall  affect in any way the Buyer's  obligations  and
agreement  set  forth in  Section  2(g)  hereof to  comply  with all  applicable
prospectus delivery  requirements,  if any, upon resale of the Securities.  If a
Buyer provides the Company with an opinion of counsel,  reasonably  satisfactory
to the Company in form,  substance and scope,  that  registration of a resale by
such Buyer of any of the  Securities  is not  required  under the 1933 Act,  the
Company shall permit the transfer,  and, in the case of the Conversion Shares or
Warrant  Shares,  promptly  instruct  its  transfer  agent to issue  one or more
certificates in such name and in such  denominations as specified by such Buyer.
The Company  acknowledges that a breach by it of its obligations  hereunder will
cause irreparable harm to the Buyers, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly,  the Company acknowledges that the
remedy  at law for a breach  of its  obligations  under  this  Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach


                                       14


<PAGE>

by the  Company of the  provisions  of this  Section,  that the Buyers  shall be
entitled,  in  addition  to  all  other  available  remedies,  to an  injunction
restraining any breach and requiring immediate  transfer,  without the necessity
of showing economic loss and without any bond or other security being required.


        6.     CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

        The obligation of the Company hereunder to issue and sell the Debentures
and the Warrants to a Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following  conditions  thereto,  provided
that these  conditions  are for the Company's  sole benefit and may be waived by
the Company at any time in its sole discretion:

               a. The  applicable  Buyer shall have executed this  Agreement and
the Registration Rights Agreement, and delivered the same to the Company.

               b. The  applicable  Buyer shall have delivered the Purchase Price
in accordance with Section 1(b) above.

               c. The  representations  and warranties of the  applicable  Buyer
shall be true and correct in all material  respects as of the date when made and
as of the Closing Date as though made at that time  (except for  representations
and warranties that speak as of a specific date), and the applicable Buyer shall
have  performed,  satisfied  and  complied  in all  material  respects  with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied  with by the  applicable  Buyer at or prior to the Closing
Date.

               d. No litigation,  statute,  rule,  regulation,  executive order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by or in any court or governmental  authority of competent jurisdiction
or  any   self-regulatory   organization   having  authority  over  the  matters
contemplated  hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

        7.     CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.

        The  obligation of each Buyer  hereunder to purchase the  Debentures and
the  Warrants  at the Closing is subject to the  satisfaction,  at or before the
Closing  Date,  of  each  of  the  following  conditions,  provided  that  these
conditions  are for such Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:

               a.  The  Company  shall  have  executed  this  Agreement  and the
Registration Rights Agreement, and delivered the same to the Buyer.


                                       15


<PAGE>

               b. The Company  shall have  delivered to such Buyer duly executed
Debentures  and the Closing  Warrants  being so  purchased  in  accordance  with
Section 1(b) above.

               c.  The  Transfer  Agent  Instructions,  in  form  and  substance
satisfactory to a majority-in-interest  of the Buyers, shall have been delivered
to and acknowledged in writing by the Company's Transfer Agent.

               d. The  representations  and  warranties  of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing  Date as  though  made at such  time  (except  for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by an executive officer of
the Company,  dated as of the Closing Date,  to the  foregoing  effect and as to
such other matters as may be reasonably requested by such Buyer, including,  but
not limited to  certifications  with  respect to the  Company's  Certificate  of
Incorporation,  By-laws  and Board of  Directors'  resolutions  relating  to the
transactions contemplated hereby.

               e. No litigation,  statute,  rule,  regulation,  executive order,
decree,  ruling or injunction shall have been enacted,  entered,  promulgated or
endorsed by or in any court or governmental  authority of competent jurisdiction
or  any   self-regulatory   organization   having  authority  over  the  matters
contemplated  hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

               f. The  Conversion  Shares  and  Warrant  Shares  shall have been
authorized for quotation on the NYSE and trading in the Common Stock on the NYSE
shall not have been suspended by the SEC or the NYSE.

               h. The Buyer  shall have  received  an  opinion of the  Company's
counsel,  dated as of the Closing Date, in form, scope and substance  reasonably
satisfactory  to the Buyer and in  substantially  the same form as  EXHIBIT  "E"
attached hereto.

               i. The  Buyer  shall  have  received  the  officer's  certificate
described in Section 3(c) above, dated as of the Closing Date.

        8.     GOVERNING LAW; MISCELLANEOUS.

               a.  Governing  Law.  This  Agreement  shall  be  governed  by and
interpreted in accordance with the laws of the State of Delaware  without regard
to the  principles of conflict of laws.  The parties hereto hereby submit to the
exclusive  jurisdiction  of the United States Federal Courts located in Delaware
with respect to any dispute arising under this Agreement,


                                       16

<PAGE>

the  agreements  entered  into  in  connection   herewith  or  the  transactions
contemplated hereby or thereby.

               b. Counterparts;  Signatures by Facsimile.  This Agreement may be
executed in two or more  counterparts,  all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement  bearing the signature of the party so delivering  this
Agreement.

               c. Headings.  The headings of this Agreement are for  convenience
of reference and shall not form part of, or affect the  interpretation  of, this
Agreement.

               d.  Severability.  If any  provision of this  Agreement  shall be
invalid   or   unenforceable   in   any   jurisdiction,   such   invalidity   or
unenforceability  shall  not  affect  the  validity  or  enforceability  of  the
remainder of this Agreement or the validity or  enforceability of this Agreement
in any other jurisdiction.

               e.  Entire   Agreement;   Amendments.   This  Agreement  and  the
instruments  referenced  herein contain the entire  understanding of the parties
with  respect  to  the  matters  covered  herein  and  therein  and,  except  as
specifically  set forth  herein or  therein,  neither  the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters.  No provision of this  Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.

               f. Notices.  Any notices  required or permitted to be given under
the  terms of this  Agreement  shall be sent by  certified  or  registered  mail
(return receipt  requested) or delivered  personally or by courier  (including a
recognized  overnight  delivery  service) or by facsimile and shall be effective
five days after being  placed in the mail,  if mailed by regular U.S.  mail,  or
upon  receipt,  if delivered  personally  or by courier  (including a recognized
overnight delivery service) or by facsimile,  in each case addressed to a party.
The addresses for such communications shall be:

        If to the Company:

        American Banknote Corporation
        200 Park Avenue
        49th Floor
        New York, New York  10166
        Attention:  Harvey J. Kesner, Esq.
        Facsimile: (212) 338-0747


                                       17

<PAGE>

        With copy to:

        Kramer, Levin, Natfalis & Frankel
        919 Third Avenue, 38th Floor
        New York, New York  10022
        Attention:  Scott S. Rosenblum, Esq.
        Facsimile:  (212) 983-0028

        If to a Buyer: To the address set forth  immediately  below such Buyer's
name on the signature pages hereto.

        Each  party  shall  provide  notice to the other  party of any change in
address.

               g.  Successors and Assigns.  This Agreement shall be binding upon
and inure to the  benefit  of the  parties  and their  successors  and  assigns.
Neither the Company nor any Buyer shall  assign this  Agreement or any rights or
obligations   hereunder   without  the  prior  written  consent  of  the  other.
Notwithstanding the foregoing,  any Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from a Buyer or to any
of its  "affiliates,"  as that term is defined  under the 1934 Act,  without the
consent of the Company.  Buyer agrees not to knowingly sell,  assign,  pledge or
otherwise  dispose  of or  transfer  in a private  transaction  the  Debentures,
Conversion  Shares  or  Warrant  Shares  to (i) any  purchaser  who is a  direct
competitor of the Company or its Subsidiaries or (ii) any purchaser who alone or
together  with other  persons  comprise a "group"  within the meaning of Section
13(d) of the 1934 Act as the owner of 10% of the capital  stock of the  Company.
The foregoing  sentence shall not apply to any transfer that does not constitute
a private transaction  including,  without limitation,  open market transactions
affected on the NYSE or on any other stock exchange or quotation system on which
the Common  Stock may be quoted or listed and shall  terminate  with  respect to
such sales.

               h. Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties  hereto and their  respective  permitted  successors  and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

               i. Survival.  The  representations  and warranties of the Company
and the  agreements  and  covenants set forth in Sections 2, 3, 4, 5 and 8 shall
survive the closing hereunder  notwithstanding  any due diligence  investigation
conducted by or on behalf of the Buyers.

               j.  Publicity.  The Company and each of the Buyers shall have the
right to  review a  reasonable  period  of time  before  issuance  of any  press
releases, SEC, NYSE or NASD filings, or any other public statements with respect
to the transactions  contemplated hereby;  provided,  however,  that the Company
shall be entitled, without the prior approval of each of the Buyers, to make any
press release or SEC, NYSE or NASD filings with respect to such


                                       18


<PAGE>

transactions as is required by applicable law and regulations  (although each of
the Buyers shall be consulted by the Company in  connection  with any such press
release  prior to its release and shall be provided  with a copy  thereof and be
given an  opportunity  to  comment  thereon).  Buyers  shall not make any public
announcement  with respect to the transactions  contemplated  hereby without the
written consent of the Company.

               k. Further Assurances.  Each party shall do and perform, or cause
to be done and  performed,  all such further acts and things,  and shall execute
and deliver all such other agreements, certificates,  instruments and documents,
as the other party may  reasonably  request in order to carry out the intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

               l. No Strict  Construction.  The language used in this  Agreement
will be deemed to be the language  chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.









                         [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]


                                       19


<PAGE>

        IN WITNESS WHEREOF,  the undersigned  Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.


AMERICAN BANKNOTE CORPORATION

By:  /s/Harvey J. Kesner, Esq.
     --------------------------------------------------------
     Harvey J. Kesner, Esq.
     Executive Vice President, General Counsel and Secretary


RGC INTERNATIONAL INVESTORS, LDC
By:     Rose Glen Capital Management, L.P., Investment Manager
        By:    RGC General Partner Corp., General Partner


By:  /s/Wayne D. Bloch
     --------------------------------------------------------
     Wayne D. Bloch
     Managing Director


RESIDENCE:   Cayman Islands

ADDRESS:

        c/o 3 Bala Plaza East
        251 St. Asaphs Road
        Suite 200
        Bala Cynwyd, PA  19004
        Facsimile:    (610) 617-0570
        Telephone:    (610) 617-5900


AGGREGATE SUBSCRIPTION AMOUNT:

        Principal Amount of Debentures:                         $  4,000,000

        Number of Closing Warrants:                                  120,000

        Aggregate Purchase Price:                               $  4,000,000


                                       20


<PAGE>

HALIFAX FUND, L.P.
By:     Palladin Group, L.P., as attorney-in-fact
        By:    Palladin Capital Management LLC, its General Partner


By:  /s/Andrew Kaplan
     --------------------------------------------------------------
     Andrew Kaplan
     Senior Vice President


RESIDENCE:   Cayman Islands

ADDRESS:

        c/o Palladin Group L.P.
        40 West 57th Street
        New York, NY  10019
        Facsimile:    (212) 698-0599
        Telephone:    (212) 698-0515


AGGREGATE SUBSCRIPTION AMOUNT:

        Principal Amount of Debentures:                          $  1,000,000

        Number of Closing Warrants:                                    30,000

        Aggregate Purchase Price:                                $  1,000,000


                                       21



THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED UNDER
THE  SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").  THE  SECURITIES  HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933
ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE
TO THE BORROWER  THAT  REGISTRATION  IS NOT REQUIRED  UNDER THE 1933 ACT AND ANY
APPLICABLE  STATE  SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE
1933 ACT.


             FORM OF ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURE


New York, New York
November 25, 1997                                                    $_________


         THIS DEBENTURE (this  "Debenture") is one of a duly authorized issue of
subordinated  debentures of AMERICAN  BANKNOTE  CORPORATION,  a corporation duly
organized and existing under the laws of the State of Delaware (the "Borrower"),
designated as its Zero Coupon Convertible  Subordinated  Debentures Due November
25, 2002, in an aggregate principal amount of _____________ (the "Debentures").

         FOR VALUE  RECEIVED,  the Borrower  promises to pay  ______________  or
registered  assigns (the "Holder"),  the principal sum of _____________  Dollars
($______ ) (the  "Maturity  Date  Principal  Balance") on November 25, 2002 (the
"Maturity Date").

         This  Debenture  has been  issued  at a  purchase  price of  $_________
("Purchase  Price").  The Debenture shall be deemed to accrete principal between
the date hereof (the "Issue Date") and the Maturity Date in accordance  with the
following formula:


<PAGE>

                            P2 = P1 x [1 + (r/365)]n

          Where:

          "P1" is the principal  amount of this  Debenture at the opening of the
          accretion  period  (i.e.,  the Purchase  Price).  P1 may be reduced by
          conversions or partial  payments of this Debenture in accordance  with
          Article I below.

          "P2" is the  principal  amount  of this  Debenture  as  increased  for
          accretion at any close of the  accretion  period  (i.e.,  the Maturity
          Date Principal Balance on the Maturity Date).

          "r" shall  initially be .05, but is subject to increase in  accordance
          with the terms of this Debenture and the Registration Rights Agreement
          (as hereinafter defined).

          "n" is the number of days in the accretion period.

          The  accreted  amount  of  any  conversions  or  redemptions  will  be
          calculated   with  respect  to  each  converted  or  redeemed   amount
          separately from any prior converted or redeemed amount (and P1 will be
          adjusted accordingly for any subsequent conversions or redemptions and
          further accretion).

          The principal  balance of this Debenture as accreted from time to time
          shall be referred to as the "Accreted Principal Balance". For example,
          based upon a Purchase Price of $5,000,000, after 100 days the Accreted
          Principal  Balance would be $5,068,960  (assuming no prior conversions
          or redemptions of the Debenture).

         To the extent not converted  into Common Stock,  amounts due under this
Debenture  are payable in such coin or currency of the United  States of America
as of the time of payment  is legal  tender  for  payment of public and  private
debts,  at the address last appearing on the debenture  register of the Borrower
as designated in writing by the Holder hereof from time to time. If the payments
set forth in Section  2(c) of the  Registration  Rights  Agreement  of even date
herewith among the Holder,  the other holders of the Debentures and the Borrower
(the  "Registration  Rights  Agreement")  are not paid when due,  the Holder may
elect to add such cash  default  payment  amounts,  in whole or in part,  to the
Accreted  Principal  Balance.  Any cash  default  payments  when so added to the
Accreted  Principal Balance due under this Debenture shall, for purposes of this
Debenture,  be deemed to have been part of the principal  indebtedness evidenced
by this Debenture  including,  without  limitation,  for purposes of determining
accretions  to principal  thereafter  and amounts  thereafter  convertible  into
Common Stock hereunder. For purposes of determining the


                                        2

<PAGE>

amount payable at the Maturity Date or on redemption of this Debenture,  and for
purposes of  determining  the number of shares  issuable on  conversion  of this
Debenture,  the Accreted  Principal  Balance shall  accrete,  from and after the
occurrence and during the  continuance of a Redemption  Event  hereunder (as set
forth in Article III), at the rate (i.e., "r" in the formula above) equal to the
lower of (i) Chase Manhattan  Bank's base lending rate plus two percent (2%) per
annum  (but not less  than the then  applicable  "r") or (ii) the  highest  rate
permitted  by law.  The Holder  has  certain  additional  rights,  remedies  and
benefits as set forth in the Registration  Rights  Agreement (the  "Registration
Rights  Agreement")  and in the  Securities  Purchase  Agreement  (the "Purchase
Agreement")  dated as of the date hereof among the Holder,  the other holders of
the Debentures and the Borrower.

         As used in this  Debenture,  the term "business day" shall mean any day
other than a Saturday,  Sunday or a day on which commercial banks in the city of
New York,  New York are  authorized  or  required by law or  executive  order to
remain closed.  Each  capitalized term used herein,  and not otherwise  defined,
shall have the meaning ascribed thereto in the Purchase Agreement.  The Maturity
Date is subject to extension pursuant to Section 1.4(a) below.

         The following terms shall apply to this Debenture:


                          ARTICLE I. CONVERSION RIGHTS

         1.1 CONVERSION RIGHT.

              (a) Subject to the conversion schedule set forth in Section 1.1(b)
and to the terms of  Sections  1.1(d) and 1.7 below,  the Holder  shall have the
right from time to time,  and at any time on or prior to the day that all of the
Accreted Principal Balance and other amounts payable hereunder are paid in full,
to convert at any time all or from time to time any part of the  outstanding and
unpaid Accreted Principal Balance of this Debenture of at least $25,000, or such
lesser  amount as shall remain unpaid at the time of the  conversion  into fully
paid and  non-assessable  shares of Common Stock, as such Common Stock exists on
the date of issuance of this  Debenture,  or any shares of capital  stock of the
Borrower into which such Common Stock shall hereafter be changed or reclassified
(the "Common Stock") at the conversion  price determined as provided herein (the
"Conversion Price"); provided, however, that unless the Holder delivers a waiver
in accordance with the immediately  following sentence,  in no event (other than
in  connection  with an Automatic  Conversion  (as  hereinafter  defined) on the
Maturity  Date)  shall the Holder be  entitled  to convert  any  portion of this
Debenture in excess of that portion of this Debenture  upon  conversion of which
the sum of (1) the number of shares of Common  Stock  beneficially  owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially  owned  through the  ownership of the  unconverted  portion of this
Debenture) and (2) the number of


                                        3

<PAGE>

shares of Common  Stock  issuable  upon the  conversion  of the  portion of this
Debenture with respect to which the determination of this proviso is being made,
would result in  beneficial  ownership by the Holder and its  affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of the proviso
in the  immediately  preceding  sentence,  (i)  beneficial  ownership  shall  be
determined in accordance  with Section 13(d) of the  Securities  Exchange Act of
1934, as amended, and Regulation 13 D-G thereunder, except as otherwise provided
in clause (1) of such proviso and (ii) the Holder may waive the  limitations set
forth  therein by written  notice to the Borrower  upon not less than  sixty-one
(61) days prior notice (with such waiver taking effect only upon the  expiration
of such 61-day notice period).

              (b) The  Holder  may  convert  only up to that  percentage  of the
Accreted  Principal  Balance  specified  below  during the time period set forth
opposite such percentage.

               Percentage                         Time Period
               ----------                         -----------

                   0%                   1-90 days following Issue Date
                  40%                 91-150 days following Issue Date
                  60%                151-210 days following Issue Date
                  80%                211-300 days following Issue Date
                 100%                    301 days following Issue Date

; provided,  however,  that there shall be excluded from any  calculation of the
foregoing  percentage any conversion(s)  occurring on a Conversion Date on which
the Closing Price (as hereinafter defined) of the Common Stock (i) exceeds $7.22
or (ii) is greater  than 115% of the  Closing  Price of the Common  Stock on the
immediately  preceding Trading Day. The foregoing  conversion  limitations shall
not be applicable in the event the Borrower (i) makes a public announcement that
it has signed an agreement to consolidate or merge with any other corporation or
sell or transfer all or substantially  all of the assets of the Borrower or (ii)
any person, group or entity (including the Borrower) publicly announces a tender
offer to purchase 50% or more of the Borrower's Common Stock.

              (c) The  number of shares of Common  Stock to be issued  upon each
conversion of this  Debenture  shall be  determined  by dividing the  Conversion
Amount (as hereinafter  defined) by the Conversion Price in effect on the date a
notice of conversion,  in the form attached  hereto as Exhibit A (the "Notice of
Conversion"),  is  delivered to the  Borrower by the Holder in  accordance  with
Section 1.4 below (the "Conversion  Date"). The term "Conversion  Amount" means,
with respect to any  conversion of this  Debenture,  the sum of (1) the Accreted
Principal Balance of this Debenture to be converted on such Conversion Date plus
(2) at the Holder's option,  any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g)  hereof or pursuant to Section  2(c) of the  Registration  Rights
Agreement.


                                        4

<PAGE>

              (d) In the event that the  Closing  Price of the  Common  Stock is
below $4.00 per share (subject, in each case, to equitable adjustments for stock
splits,  stock  dividends  or  rights  offerings  by the  Borrower  relating  to
Borrower's  securities or relating to the  securities  of any  subsidiary of the
Borrower,  combinations,  reclassifications,   extraordinary  distributions  and
similar events) the Conversion  Date, the Borrower shall have the right, in lieu
of issuing  shares of Common Stock to the Holder,  to redeem the portion of this
Debenture  submitted for  conversion for an amount equal to the number of shares
that  would  have  otherwise  been  issued  upon  conversion  of the  Debenture,
multiplied by the Redemption Market Price (as hereinafter defined).  "Redemption
Market  Price"  shall be equal to the Closing  Price of the Common  Stock on the
Conversion  Date.  From  time to time  following  the date of  issuance  of this
Debenture  (the  "Issue  Date"),  the Holder may  request  advance  notice as to
whether the Borrower  will issue shares of Common Stock or redeem the portion of
this Debenture  submitted for conversion  pursuant to this Section 1.1(d).  Such
request  shall be made in  writing  and the  Borrower  shall  respond in writing
within three (3) business  days of receipt of the request.  The Borrower will be
bound by such  response  for a period of  twenty  (20) days from the date of its
response. A failure to respond within three (3) business days shall be deemed to
be an  election  to  issue  Common  Stock  on  conversion.  Notwithstanding  the
foregoing,  if the  Borrower  is  bound  to  issue  Common  Stock  in  lieu of a
redemption  pursuant to this  Section  1.1(d),  it may by written  notice to the
Holder by 9:00 a.m. on the Trading Day immediately following the Conversion Date
elect to redeem the  shares  issuable  upon  conversion  at the  Post-Conversion
Redemption  Price (as  hereinafter  defined).  The  "Post-Conversion  Redemption
Price"  means  the  average  Closing  Price of the  Common  Stock  over the five
consecutive (5) Trading Days beginning on the Trading Day immediately  following
the Conversion Date. Any redemption  amounts payable  hereunder shall be paid to
the Holder  within five (5) Trading Days of the  Conversion  Date.  The "Closing
Price"  means,  for any security as of any date,  the last sale price on The New
York Stock  Exchange  (the  "NYSE") as reported by Bloomberg  Financial  Markets
("Bloomberg") or an equivalent,  reliable reporting service mutually  acceptable
to and  hereafter  designated  by the  Holders of a majority  in interest of the
Debentures and the Borrower or, if the NYSE is not the principal  trading market
for  such  security,  the last  sale  price of such  security  on the  principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg,  or if the foregoing do not apply, the last sale price of
such security in the  over-the-counter  market on the electronic  bulletin board
for such  security  as  reported  by  Bloomberg,  or, if no last  sale  price is
reported  for such  security by  Bloomberg,  then the average of the bid and ask
prices of all active  market  makers for such  security as reported in the "pink
sheets" by the National  Quotation  Bureau,  Inc. If the Closing Price cannot be
calculated  for such  security on such date on any of the foregoing  bases,  the
Closing  Price of such  security on such date shall be the fair market  value as
mutually determined by the Borrower and the Holders of a majority in interest of
Debentures  being  converted for which the  calculation  of the Closing Price is
required in order to determine the Conversion Price of such Debentures. "Trading
Day" shall mean any day on which the Common Stock is traded


                                        5

<PAGE>

for any period on the NYSE,  or on the  principal  securities  exchange or other
securities market on which the Common Stock is then being traded.

              1.2 CONVERSION PRICE. (a) The Conversion Price shall be the lesser
of (i) the Market  Price,  where the Market Price means the average of the daily
Closing  Prices of the Common Stock on the NYSE, or on the principal  securities
exchange  or other  securities  market on which the  Common  Stock is then being
traded,  for the five (5)  consecutive  Trading Days yielding the lowest average
price  during the  twenty-five  (25) Trading Day period (the  "Pricing  Period")
ending one (1)  Trading Day prior to the date the  Conversion  Notice is sent by
the  Holder  to  the  Borrower  via  facsimile  or  other  reasonable  means  of
communication  (the "Conversion  Date"),  and (ii) $6.56 (the "Fixed  Conversion
Price") (subject, in each case, to equitable adjustments for stock splits, stock
dividends  or  rights  offerings  by the  Borrower  relating  to the  Borrower's
securities  or relating to the  securities  of any  subsidiary  of the Borrower,
combinations, recapitalization,  reclassifications,  extraordinary distributions
and similar events). If the average Closing Price of the Common Stock during the
ten (10) Trading Days immediately following the public release of the Borrower's
1997 year end  results is greater  than the Fixed  Conversion  Price,  the Fixed
Conversion  Price  shall be adjusted  to equal such  10-day  average;  provided,
however, that in no event shall the Fixed Conversion Price, as adjusted,  exceed
$7.22.  Notwithstanding the foregoing,  no conversions shall be permitted during
the period beginning on the Issue Date and ending  twenty-five (25) Trading Days
from the Issue  Date at a  Conversion  Price  below the  highest  sale  price as
reported on the NYSE on the Issue Date.

              (b)  In  the  event  that  (1)  the   Borrower   fails  to  obtain
effectiveness  with the Securities and Exchange  Commission of the  Registration
Statement (as defined in the Registration Rights Agreement) prior to one hundred
twenty (120) days following the Issue Date, or (2) such  Registration  Statement
lapses in  effect,  or sales  otherwise  cannot be made  thereunder,  whether by
reason  of the  Borrower's  failure  or  inability  to amend or  supplement  the
prospectus  (the   "Prospectus")   included   therein  in  accordance  with  the
Registration  Rights Agreement or otherwise,  after such Registration  Statement
becomes effective  (including,  without limitation,  during an Allowed Delay (as
defined in the Registration Rights Agreement)), then the Pricing Period shall be
comprised  of, (i) in the case of an event  described  in clause (1), the twenty
five (25) Trading Days preceding the 120th day following the Issue Date plus all
Trading Days through and  including  the third Trading Day following the date of
effectiveness  of the Registration  Statement;  and (ii) in the case of an event
described in clause (2), the twenty five (25) Trading Days preceding the date on
which  the  Holder  is first  notified  that  sales  may not be made  under  the
Prospectus,  plus all Trading Days through and  including  the third Trading Day
following  the date on which the  Holder is first  notified  that such sales may
again be made under the Prospectus.

              1.3  AUTHORIZED  SHARES.  The Borrower  covenants  that during the
period  the  conversion  right  exists,  the  Borrower  will  reserve  from  its
authorized and unissued


                                        6

<PAGE>

Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the full conversion of the Debentures.  As of the date of issuance of
this  Debenture,  1,600,000  authorized and unissued shares of Common Stock have
been  duly  reserved  for  issuance  upon  conversion  of this  Debentures  (the
"Reserved  Amount").  The  Borrower  represents  that  upon  issuance  following
conversion,  such  shares  will be duly  and  validly  issued,  fully  paid  and
non-assessable.  The  Borrower  (i)  acknowledges  that  it has  instructed  its
transfer  agent  to  issue  certificates  for the  Common  Stock  issuable  upon
conversion  of this  Debenture  upon the  procedures  properly  established  for
conversion and (ii) agrees that its issuance of this Debenture shall  constitute
full  authority  to its  officers  and agents who are  charged  with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of Common  Stock in  accordance  with the  terms and  conditions  of this
Debenture and the Registration Rights Agreement.

         If,  at any time the  Holder  of this  Debenture  submits  a Notice  of
Conversion, the Borrower does not have sufficient authorized but unissued shares
of Common  Stock  available to effect such  conversion  in  accordance  with the
provisions of this Article I (a "Conversion  Default"),  subject to Section 6.8,
the  Borrower  shall issue to the Holder all of the shares of Common Stock which
are then  available  to effect such  conversion.  The portion of this  Debenture
which the Holder included in its Conversion  Notice and which exceeds the amount
which is then  convertible  into  available  shares of Common Stock (the "Excess
Amount") shall,  notwithstanding  anything to the contrary contained herein, not
be convertible  into Common Stock in accordance with the terms hereof until (and
at the Holder's option at any time after) the date  additional  shares of Common
Stock are  authorized by the  Borrower,  at which time the  Conversion  Price in
respect thereof shall be the lower of (i) the Conversion Price on the Conversion
Default  Date (as  hereinafter  defined)  and (ii) the  Conversion  Price on the
Conversion  Date  thereafter  elected  by the  Holder in  respect  thereof.  The
Borrower shall pay to the Holder payments  ("Conversion Default Payments") for a
Conversion  Default in the  amount of  (N/365) x .18 x the Excess  Amount on the
Conversion Date in respect of the Conversion  Default (the  "Conversion  Default
Date"), where (i) N = the number of days from the Conversion Default Date to the
date (the "Authorization Date") that the Borrower authorizes a sufficient number
of shares of Common Stock to effect conversion of the full outstanding principal
balance of this Debenture.  The Borrower shall use its best efforts to authorize
a sufficient  number of shares of Common Stock as soon as practicable  following
the earlier of (i) such time that the Holder  notifies  the Borrower or that the
Borrower  otherwise  becomes aware that there are or likely will be insufficient
authorized  and  unissued  shares to allow full  conversion  thereof  and (ii) a
Conversion  Default.  The  Borrower  shall  send  notice  to the  Holder  of the
authorization of additional shares of Common Stock, the  Authorization  Date and
the amount of the Holder's  accrued  Conversion  Default  Payments.  The accrued
Conversion  Default  Payments for each  calendar  month shall be paid in cash or
shall be  convertible  into Common  Stock (at such time as there are  sufficient
authorized  shares  of Common  Stock) at the  Market  Price,  at the  Borrower's
option, as follows:


                                        7

<PAGE>

                  (a) In the event the  Borrower  elects to make such payment in
cash,  cash  payment  shall be made to the Holder by the fifth  (5th) day of the
month following the month in which it has accrued; and

                  (b) In the event the  Borrower  elects to make such payment in
Common Stock,  such amount shall be added to the Accreted  Principal Balance and
the Holder may convert such payment  amount into Common Stock at the  Conversion
Price (as in effect at the time of  conversion)  at any time after the fifth day
of the month  following the month in which it has accrued (at such time as there
are sufficient  authorized  shares of Common Stock) in accordance with the terms
of this Article I.

         The  Borrower's  election shall be made in writing to the Holder at any
time  prior to 8:00  p.m.,  New York  City  Time,  on the third day of the month
following the month in which  Conversion  Default  payments have accrued.  If no
election is made,  the Borrower  shall be deemed to have elected to make payment
in cash.  Nothing herein shall limit the Holder's right to pursue actual damages
(to  the  extent  in  excess  of the  Conversion  Default  Payments)  due to the
Borrower's  failure to  maintain a  sufficient  number of  authorized  shares of
Common Stock.

              1.4 METHOD OF CONVERSION.

                  (a) The Accreted  Principal  Balance of this  Debenture may be
converted by the Holder in whole or in part (provided such partial conversion is
at least  $25,000,  or such lesser  amount as shall remain unpaid at the time of
the  conversion  at any time from time to time  after  the  Issue  Date,  by (A)
submitting  to the  Borrower  a Notice  of  Conversion  (by  facsimile  or other
reasonable  means of  communication  dispatched on the Conversion  Date prior to
8:00 p.m., New York City Time) and (B) subject to Section  1.4(b),  surrendering
this Debenture at the principal  office of the Borrower.  Each Debenture  issued
and  outstanding  on the Maturity  Date  automatically  shall be converted  into
shares of Common Stock on such date at the then  effective  Conversion  Price in
accordance  with,  and  subject  to,  the  provisions  of  this  Article  I (the
"Automatic Conversion"), provided that no Redemption Event has occurred which is
continuing on the Maturity Date. The Maturity Date shall be the Conversion  Date
for  purposes of  determining  the  Conversion  Price and the time within  which
certificates  representing  the Common  Stock must be  delivered  to the holder.
Notwithstanding  anything to the contrary  contained  herein,  the Maturity Date
shall be extended for the aggregate number of days comprising any Allowed Delays
under the Registration Rights Agreement and the Accreted Principal Balance shall
be adjusted accordingly.

                  (b) Notwithstanding anything to the contrary set forth herein,
upon  conversion  of this  Debenture in accordance  with the terms  hereof,  the
Holder  shall not be required to  physically  surrender  this  Debenture  to the
Borrower unless the entire unpaid


                                        8

<PAGE>

principal amount of this Debenture is so converted.  The Holder and the Borrower
shall maintain  records showing the principal  amount so converted and the dates
of such conversions or shall use such other method,  reasonably  satisfactory to
the Holder and the  Borrower,  so as not to require  physical  surrender of this
Debenture upon each such conversion. In the event of any dispute or discrepancy,
such records of the  Borrower  shall be  controlling  and  determinative  in the
absence of manifest error. Notwithstanding the foregoing, if any portion of this
Debenture is converted as aforesaid,  the Holder may not transfer this Debenture
unless the Holder first  physically  surrenders  this Debenture to the Borrower,
whereupon  the Borrower will  forthwith  issue and deliver upon the order of the
Holder a new note of like tenor,  registered  as the Holder (upon payment by the
Holder of any  applicable  transfer  taxes)  may  request,  representing  in the
aggregate the remaining unpaid  principal  amount of this Debenture.  The Holder
and any assignee,  by acceptance of this Debenture,  acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture
represented  by this  Debenture  may be less than the amount  stated on the face
hereof.

                  (c) The  Borrower  shall not be  required to pay any tax which
may be payable in respect of any transfer  involved in the issue and delivery of
shares of Common Stock or other  securities  or property on  conversion  of this
Debenture in a name other than that of the Holder (or in street  name),  and the
Borrower  shall not be  required  to issue or deliver  any such  shares or other
securities  or property  unless and until the person or persons  (other than the
Holder or the  custodian in whose street name such shares are to be held for the
Holder's  account)  requesting  the  issuance  thereof  shall  have  paid to the
Borrower  the  amount  of  any  such  tax  or  shall  have  established  to  the
satisfaction of the Borrower that such tax has been paid.

                  (d)  Upon  receipt  by  the  Borrower  from  the  Holder  of a
facsimile  transmission (or other reasonable means of communication) of a Notice
of  Conversion  meeting  the  requirements  for  conversion  as provided in this
Section 1.4, subject to the Borrower's  redemption rights as provided in Section
1.1(d)  above,  the  Borrower  shall issue and deliver or cause to be issued and
delivered to the Holder  certificates  for the Common Stock  issuable  upon such
conversion within three (3) business days after such receipt (and, solely in the
case of conversion of the entire unpaid  principal  amount hereof,  surrender of
this Debenture)  (such third business day being  hereinafter  referred to as the
"Deadline")  in  accordance  with the terms  hereof and the  Purchase  Agreement
(including,   without  limitation,  in  accordance  with  the  requirement  that
certificates for shares of Common Stock issued on or after the effective date of
the  Registration  Statement (as defined in the Registration  Rights  Agreement)
upon conversion of this Debenture shall not bear any restrictive legend).

                  (e) Upon  receipt by the  Borrower of a Notice of  Conversion,
subject to the Borrower's redemption rights as provided in Section 1.1(d) above,
the Holder


                                        9

<PAGE>

shall be deemed to be the holder of record of the  Common  Stock  issuable  upon
such  conversion,  the Accreted  Principal  Balance on this  Debenture  shall be
reduced to reflect such  conversion,  and,  unless the Borrower  defaults on its
obligations under this Article I, all rights with respect to the portion of this
Debenture  being so  converted  shall  forthwith  terminate  except the right to
receive the Common Stock or other  securities,  cash or other assets,  as herein
provided,  on such  conversion.  If the  Holder  shall  have  given a Notice  of
Conversion as provided  herein,  the Borrower's  obligation to issue and deliver
the certificates for Common Stock,  subject to the Borrower's  redemption rights
as provided  in Section  1.1(d)  above,  shall be  absolute  and  unconditional,
irrespective of the absence of any action by the Holder to enforce the same, any
waiver or consent with  respect to any  provision  thereof,  the recovery of any
judgment  against any person or any action to enforce  the same,  any failure or
delay in the  enforcement of any other  obligation of the Borrower to the holder
of record, or any setoff, counterclaim,  recoupment,  limitation or termination,
or any breach or alleged breach by the Holder of any obligation to the Borrower,
and  irrespective  of any other  circumstance  which might  otherwise limit such
obligation of the Borrower to the Holder in connection with such conversion. The
date of receipt of such Notice of  Conversion  shall be the  Conversion  Date so
long as it is received before 8:00 p.m., New York City Time, on such date.

                  (f) In lieu of delivering physical  certificates  representing
the Common Stock  issuable upon  conversion,  provided the  Borrower's  transfer
agent is  participating  in the Depository  Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon the effectiveness of the Registration
Statement to be filed pursuant to the Registration Rights Agreement and upon the
request  of the Holder  and its  compliance  with the  provisions  contained  in
Section 1.1 and in this Section 1.4,  the Borrower  shall  endeavor to cause its
transfer  agent to  electronically  transmit  the  Common  Stock  issuable  upon
conversion to the Holder by crediting  the account of the Holder's  Prime Broker
with DTC through its Deposit Withdrawal Agent Commission  ("DWAC") system.  Such
transmission  shall not  affect the  manner in which the  shares  issuable  upon
conversion  can be sold in  accordance  with  Section 1.5 below or the  Holder's
obligation to comply with the applicable prospectus delivery requirements.

                  (g) Without in any way limiting  the Holder's  right to pursue
other remedies,  including actual damages and/or equitable  relief,  the parties
agree that if delivery of the Common  Stock  issuable  upon  conversion  of this
Debenture is more than two (2)  business  day after the  Deadline  (other than a
failure due to the circumstances  described in Section 1.3 above,  which failure
shall be governed by such Section) the Borrower shall pay to the Holder $500 per
day in cash,  for each of the first two (2) days beyond the  Deadline and $2,500
per day in cash for each day thereafter  that the Borrower fails to deliver such
Common  Stock.  Such cash amount  shall be paid to the Holder by the fifth (5th)
day of the month  following  the month in which it has accrued or, at the option
of the Holder (by written  notice to the  Borrower by the first day of the month
following the month in which it


                                       10

<PAGE>

has accrued), shall be added to the principal amount of this Debenture, in which
event  interest  shall  accrue  thereon  in  accordance  with the  terms of this
Debenture and such additional  principal amount shall be convertible into Common
Stock in accordance with the terms of this Debenture. This paragraph shall apply
each time a Conversion Notice is submitted by the Holder.

               1.5  CONCERNING  THE SHARES.  The shares of Common Stock issuable
upon  conversion of this Debenture may not be sold or transferred  unless either
(i) such shares shall have been included in an effective  registration statement
under  the Act or (ii) the  Borrower  or its  transfer  agent  shall  have  been
furnished with an opinion or other similar  letter of legal counsel  (reasonably
acceptable  to the  Borrower) to the effect that such sale or transfer is exempt
from the  registration  requirements  of the Act or (iii)  such  shares are sold
pursuant to Rule 144 under the Act (or a successor  rule).  Except as  otherwise
provided in the Purchase  Agreement  (and subject to the removal  provisions set
forth below), each physical certificate for shares of Common Stock issuable upon
conversion  of this  Debenture  that has not been so  included  in an  effective
registration  statement  or that  has not been  sold  pursuant  to an  effective
registration statement or an exemption that permits removal of the legend, shall
bear a legend substantially in the following form, as appropriate:

"THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE  SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").  THE  SECURITIES  HAVE BEEN
ACQUIRED  FOR  INVESTMENT  AND MAY NOT BE SOLD,  TRANSFERRED  OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE  REGISTRATION  STATEMENT FOR THE  SECURITIES  UNDER SAID
ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE
TO THE  BORROWER  THAT  REGISTRATION  IS NOT  REQUIRED  UNDER  SAID  ACT AND ANY
APPLICABLE  STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT."

               The legend set forth  above  shall be  removed  and the  Borrower
shall issue to the Holder a new certificate therefor free of any transfer legend
if (i) the  Borrower or its  transfer  agent  shall have  received an opinion or
other similar letter of counsel, to the effect that a public sale or transfer of
such  Common  Stock  may be  made  without  registration  under  the Act and any
applicable state  securities laws and the shares are so sold or transferred,  or
the Common Stock issuable upon  conversion of this Debenture (to the extent such
securities  are  deemed  to have  been  acquired  on the same  date) can be sold
pursuant to Rule 144 (or a successor rule thereto) without any restriction as to
the number of shares of Common Stock  acquired as of a particular  date that can
then be  immediately  sold or (ii) in the case of the Common Stock issuable upon
conversion of this  Debenture,  a registration  statement under the Act covering
such securities is in effect.  Nothing in this Debenture  (including the removal
of  the  foregoing   legend  from  physical   certificates   or  the  electronic
transmission  of Common  Stock for the  Holder's  account  pursuant  to  Section
1.4(f)) shall (i) limit the Borrower's


                                       11

<PAGE>

obligation under the Registration Rights Agreement or (ii) affect in any way the
Holder's obligations to comply with applicable  prospectus delivery requirements
upon the resale of the securities referred to herein.

               1.6    EFFECT OF CERTAIN EVENTS.

                  (a)  If,  at any  time  when  this  Debenture  is  issued  and
outstanding,  there  shall be any  merger,  consolidation,  exchange  of shares,
recapitalization,  reorganization,  or other similar event, as a result of which
shares of  Common  Stock of the  Borrower  shall be  changed  into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another  entity,  or in case of any sale or conveyance of all or
substantially  all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower,  then the Holder of this Debenture
shall  thereafter  have the right to receive upon  conversion of this Debenture,
upon the bases and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock  immediately  theretofore  issuable upon  conversion,
such stock,  securities  or assets which the Holder would have been  entitled to
receive  in  such   transaction  had  this  Debenture  been  converted  in  full
immediately prior to such transaction  (without giving effect to any limitations
or restrictions on conversion set forth in this Debenture), and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holder of this Debenture to the end that the provisions  hereof  (including,
without limitation, provisions for adjustment of the Conversion Price and of the
number of shares issuable upon conversion of the Debenture)  shall thereafter be
applicable,  as nearly as may be  practicable  in relation to any  securities or
assets  thereafter  deliverable upon the exercise  hereof.  The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers or
share exchanges.

                  (b) Subject to Section 2.1, if the Borrower  shall  declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a dividend, stock repurchase,  by way of return of capital or
otherwise (including any dividend or distribution to the Borrower's shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off) (a  "Distribution"),  the Holder of this  Debenture  shall be
entitled,  upon any  conversion of this  Debenture  after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such  assets  which would have been  payable to the Holder  with  respect to the
shares of Common Stock  issuable  upon such  conversion  had the Holder been the
holder of such shares of Common  Stock on the record date for the  determination
of shareholders entitled to such Distribution.

                  (c)  Subject  to  Section  2.1,  if,  at  any  time  when  any
Debentures  are issued and  outstanding,  the  Borrower  issues any  convertible
securities or rights to purchase stock,  warrants,  securities or other property
(the "Purchase Rights") pro rata to the record holders of Common Stock, then the
Holder of this Debenture will be entitled to acquire,


                                       12

<PAGE>

upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete  conversion of this Debenture  (without
regard to any limitations on conversion contained herein) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken,  the date as of which the record  holders
of  Common  Stock  are to be  determined  for the  grant,  issue or sale of such
Purchase Rights.

                  (d) Upon the occurrence of each  adjustment or readjustment of
the  Conversion  Price as a result of the events  described in this Section 1.6,
the  Borrower,  at its  expense,  shall  promptly  compute  such  adjustment  or
readjustment  and  prepare and  furnish to the Holder of a  certificate  setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based.  The Borrower shall,  upon the written
request of the Holder,  furnish to the Holder a like  certificate  setting forth
(i) such adjustment or  readjustment,  (ii) the Conversion  Price at the time in
effect and (iii) the number of shares of Common Stock and the amount, if any, of
other securities or property which at the time would be received upon conversion
of the Debenture.

               1.7 CERTAIN  PAYMENTS IN LIEU OF CONVERSION.  If it is determined
(upon written notice from the NYSE) that the provisions of Rule 312.03(c) of the
rules of the NYSE are applicable to the issuance of Common Stock upon conversion
of this  Debenture  in  accordance  with this  Article  1, then  notwithstanding
anything to the contrary  contained herein, in no event shall the Borrower issue
more than the  Maximum  Share  Amount (as  hereinafter  defined  and  subject to
adjustment as provided herein) upon conversion of this Debenture  (including any
shares of capital  stock or rights to acquire  shares of capital stock issued by
the Borrower which are aggregated  with the Common Stock issued or issuable upon
conversion  of the  Debentures  for  purposes  of Rule  312.03(c)),  unless  the
Borrower shall have obtained  Stockholder Approval (as hereinafter defined) or a
waiver of such  requirement  by the NYSE. As used herein,  Stockholder  Approval
means  approval by the  stockholders  of the  Borrower in  accordance  with Rule
312.03(c) of the rules of the NYSE. If the Borrower receives written notice from
the NYSE that such rule applies to the issuance of Common Stock hereunder,  once
the  Maximum  Share  Amount has been  issued  (the date of which is  hereinafter
referred to as the "Maximum  Conversion  Date"),  unless the Borrower shall have
obtained  Stockholder  Approval or a waiver of such  requirement by the NYSE (or
Rule  312.03(c)  is otherwise  determined  to be  inapplicable),  in lieu of any
further  right  to  convert  this  Debenture,  and in full  satisfaction  of the
Borrower's  obligations  under this  Debenture,  the  Borrower  shall pay to the
Holder,  within  fifteen (15) business days of the Maximum  Conversion  Date, an
amount  equal to the greater of (i) the sum of (a) 110% times the then  Accreted
Principal Balance immediately following the Maximum Conversion Date plus (b) any
optional amounts that may be added thereto at the Maximum Conversion Date by the
Holder in accordance with the terms hereof (the then Accreted  Principal Balance
of this Debenture  immediately  following the Maximum  Conversion  Date plus the
amounts


                                       13

<PAGE>

referred  to in clause  (b)  above  shall  collectively  be  referred  to as the
"Remaining  Convertible  Amount"),  or (ii)  the  Remaining  Convertible  Amount
divided by the  Conversion  Price  (based on the  twenty-five  (25)  Trading Day
period  ending one (1) Trading Day prior to the date of payment)  multiplied  by
the Closing Price of the Common Stock on the Trading Day  immediately  preceding
the date of  payment.  The  Maximum  Share  Amount  shall mean an  aggregate  of
4,168,658 shares of Common Stock (19.99% of the Borrower's outstanding shares of
Common Stock as of November 25, 1997), subject to equitable adjustment from time
to time for stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring after the date hereof.
With respect to each Holder of Debentures,  the Maximum Share Amount shall refer
to the Holder's pro rata share thereof determined in accordance with Section 6.8
below. In the event that the Borrower obtains Stockholder Approval, the approval
of the NYSE or  otherwise  concludes  that it is able to increase  the number of
shares to be issued above the Maximum Share Amount (such increased  number being
the "New Maximum Share Amount"),  the references to Maximum Share Amount, above,
shall be deemed to be,  instead,  references  to the greater  New Maximum  Share
Amount. In the event that Stockholder Approval is not obtained or a registration
statement  covering the additional  shares of Common Stock which  constitute the
New Maximum  Share  Amount is not  effective  prior to the Maximum  Share Amount
being  issued (if such  registration  statement  is  necessary  to allow for the
public  resale of such  securities),  the  Maximum  Share  Amount  shall  remain
unchanged;  provided,  however,  that the Holder may grant an  extension  of the
effective  date  of such  registration  statement.  In the  event  that  (a) the
aggregate  number of shares of Common  Stock issued  pursuant to the  Debentures
(including  any shares of capital  stock or rights to acquire  shares of capital
stock issued by the Borrower which are  aggregated  with the Common Stock issued
or issuable upon  conversion of the Debentures  for purposes of Rule  312.03(c))
represents  at least fifty percent (50%) of the Maximum Share Amount and (b) the
sum of (x) the aggregate number of shares of Common Stock issued pursuant to the
Debentures  plus (y) the aggregate  number of shares of Common Stock that remain
issuable  pursuant to the  Debentures  (including any shares of capital stock or
rights to  acquire  shares of capital  stock  issued by the  Borrower  which are
aggregated  with the Common  Stock  issued or issuable  upon  conversion  of the
Debentures  for  purposes  of Rule  312.03(c))  represents  at least one hundred
percent (100%) of the Maximum Share Amount (the "Triggering Event"),  unless the
Borrower  intends to exercise its  redemption  election (and provides the Holder
with written  binding  notification  to that effect,  together  with  reasonable
assurances  regarding the source of funds therefor),  the Borrower will seek and
use its best efforts to obtain Stockholder Approval (or obtain such other relief
as will allow  conversions  hereunder in excess of the Maximum  Share Amount) as
soon as  practicable  following  the  Triggering  Event and before  the  Maximum
Conversion Date.

               1.8  STATUS  AS  STOCKHOLDER.  Upon  submission  of a  Notice  of
Conversion by a Holder,  (i) the shares covered  thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder's
allocated portion of the Reserved


                                       14

<PAGE>

Amount)  shall be deemed  converted  into  shares  of Common  Stock and (ii) the
Holder's  rights as a Holder of such converted  portion of this Debenture  shall
cease and terminate,  excepting only the right to receive  certificates  for, or
DTC transfer of, such shares of Common Stock and to any remedies provided herein
or otherwise  available at law or in equity to such Holder  because of a failure
by the Borrower to comply with the terms of this Debenture.  Notwithstanding the
foregoing,  if a Holder has not received  certificates  for, or DTC transfer of,
all shares of Common  Stock  prior to the tenth  (10th)  business  day after the
expiration  of the Deadline  with respect to a conversion of any portion of this
Debenture for any reason, then (unless the Holder otherwise elects to retain its
status as a holder of Common Stock by so  notifying  the  Borrower),  the Holder
shall  regain  the  rights of a Holder of this  Debenture  with  respect to such
unconverted  portions  of this  Debenture  and the  Borrower  shall,  as soon as
practicable,  return  such  unconverted  Debenture  to  the  holder  or,  if the
Debenture  has not been  surrendered,  adjust its  records to reflect  that such
portion of this Debenture has not been converted. In all cases, the Holder shall
retain all of its rights and remedies  (including,  without limitation,  (i) the
right to receive  Conversion Default Payments pursuant to Section 1.3 the extent
required  thereby  for such  Conversion  Default and any  subsequent  Conversion
Default  and  (ii) the  right  to have the  Conversion  Price  with  respect  to
subsequent  conversions  determined  in  accordance  with  Section  1.3) for the
Borrower's failure to convert this Debenture.

                          ARTICLE II. CERTAIN COVENANTS

               2.1 DISTRIBUTIONS ON CAPITAL STOCK. So long as the Borrower shall
have any  obligation  under this  Debenture,  the Borrower shall not without the
Holder's  written  consent (a) pay,  declare or set apart for such payment,  any
dividend or other distribution  (whether in cash,  property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely
in the  form of  additional  shares  of  Common  Stock  (unless  at the  time of
declaration  and payment  such action is  permitted to be taken under all of the
Borrower's indebtedness senior to the Debenture).

               2.2  RESTRICTION  ON STOCK  REPURCHASES.  So long as the Borrower
shall have any obligation  under this Debenture,  the Borrower shall not without
the Holder's  written consent redeem,  repurchase or otherwise  acquire (whether
for cash or in exchange for property or other  securities  or  otherwise) in any
one transaction or series of related transactions any shares of capital stock of
the Borrower or any warrants,  rights or options to purchase or acquire any such
shares (unless at the time of  declaration  and payment such action is permitted
to be taken under all of the Borrower's indebtedness senior to the Debenture).

               2.3 TRADING  RESTRICTIONS.  The Holder covenants and agrees that,
during any period during which a Conversion  Price is computed,  neither  Holder
nor others acting on its behalf shall be  responsible  for the low trading price
of the Borrower's Common Stock. In


                                       15

<PAGE>

addition,  the Holder  represents  that it has not been  responsible for the low
trading price of the Borrower's  Common Stock at any time prior to the execution
of this Agreement.


                         ARTICLE III. REDEMPTION EVENTS

               If any of the following  redemption  events (each,  a "Redemption
Event") shall occur:

               3.1 FAILURE TO PAY PRINCIPAL  BALANCE.  The Borrower fails to pay
the  Accreted  Principal  Balance  hereof when due,  whether at  maturity,  upon
mandatory prepayment pursuant to Section 1.7, upon acceleration or otherwise;

               3.2 CONVERSION AND THE SHARES. The Borrower fails to issue shares
of  Common  Stock  to the  Holder  (or  announces  that it will  not  honor  its
obligation to do so) upon exercise by the Holder of the conversion rights of the
Holder in accordance  with the terms of this Debenture (for a period of at least
ninety  (90) days,  if such  failure is solely as a result of the  circumstances
governed by Section 1.3 and the  Borrower is using its best efforts to authorize
a sufficient number of shares of Common Stock as soon as practicable),  fails to
transfer  any  certificate  for shares of Common Stock issued to the Holder upon
conversion  of  this  Debenture  and  when  required  by this  Debenture  or the
Registration Rights Agreement,  or fails to remove any restrictive legend on any
certificate  for any shares of Common Stock issued to the Holder upon conversion
of this Debenture as and when required by this Debenture, the Purchase Agreement
or the Registration Rights Agreement and any such failure shall continue uncured
(or any  announcement not to honor  conversions  shall not be rescinded) for ten
(10) days after the Borrower shall have been notified  thereof in writing by the
Holder.

               3.3 FAILURE TO EFFECT REGISTRATION.  The Borrower fails to obtain
effectiveness  with the Securities and Exchange  Commission of the  Registration
Statement prior to April 30, 1998 or the Registration Statement lapses in effect
(or  sales  cannot  otherwise  be made  thereunder)  for more than  ninety  (90)
consecutive  Trading Days or one hundred  fifty (150) Trading Days in any twelve
month period after the Registration Statement becomes effective;

               3.4 BREACH OF  COVENANTS.  The  Borrower  breaches  any  material
covenant or other material term or condition contained in Sections 1.3, 1.6, 1.7
or 4.1 of this Debenture,  or Sections 4(e),  4(h), 4(i) or 4(j) of the Purchase
Agreement and such breach  continues for a period of ten (10) days after written
notice thereof to the Borrower from the Holder;


                                             16

<PAGE>

               3.5 BREACH OF REPRESENTATIONS AND WARRANTIES.  Any representation
or  warranty  of the  Borrower  made herein or in any  agreement,  statement  or
certificate  given  in  writing  pursuant  hereto  or  in  connection   herewith
(including,  without  limitation,  the Purchase  Agreement and the  Registration
Rights  Agreement),  shall be false or misleading  in any material  respect when
made and the  breach of which  has (or with the  passage  of time  will  have) a
Material Adverse Effect (as defined in the Purchase Agreement);

               3.6 RECEIVER OR TRUSTEE.  The Borrower  shall make an  assignment
for the benefit of creditors,  or apply for or consent to the  appointment  of a
receiver  or  trustee  for it or for a  substantial  part  of  its  property  or
business, or such a receiver or trustee shall otherwise be appointed;

               3.7  BANKRUPTCY.   Bankruptcy,   insolvency,   reorganization  or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the  relief of debtors  shall be  instituted  by or  against  the
Borrower (which is not being contested if commenced against the Borrower); or

               3.8 DELISTING OF COMMON STOCK.  The Common Stock is not listed on
at least one of the NYSE,  the Nasdaq  National  Market,  or the American  Stock
Exchange;

               then,  upon the  occurrence  and during the  continuation  of any
Redemption  Event  specified in Section 3.1,  3.2,  3.3, 3.4, 3.5 or 3.9, at the
option of the Holders of a majority  of the  aggregate  principal  amount of the
outstanding  Debentures issued pursuant to the Purchase Agreement,  the Borrower
shall, and upon the occurrence of a Redemption Event specified in Section 3.6 or
3.7, the Debentures  shall become  immediately  due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations  hereunder,  an
amount  equal to the greater of (i) the sum of (w) 110% times the then  Accreted
Principal  Balance of this  Debenture  plus (x) any  amounts  owed to the Holder
pursuant to Sections  1.3 and 1.4(g)  hereof or pursuant to Section  2(c) of the
Registration  Rights  Agreement (the then  outstanding  principal amount of this
Debenture  to the date of payment  plus the  amounts  referred  to in clause (x)
shall  collectively  be known as the  "Default  Sum")  or (ii) the  Default  Sum
divided by the then applicable  Conversion  Price (based on the twenty-five (25)
Trading  Day period  ending one (1)  Trading  Day prior to the date the  Holders
exercise  their option  pursuant to this paragraph or the date of the occurrence
of an event  referred to in Section 3.6 or 3.7)  multiplied by the Closing Price
of the Common Stock on the date the Holders  exercise  their option  pursuant to
this  paragraph or the date of the occurrence of an event referred to in Section
3.6 or 3.7 (the "Default  Amount") and all other amounts payable hereunder shall
immediately become due and payable,  all without demand,  presentment or notice,
all of which hereby are expressly  waived,  together with all costs,  including,
without limitation, legal fees and expenses, of collection, and the Holder shall
be entitled to exercise  all other  rights and  remedies  available at law or in
equity.


                                             17

<PAGE>

               If the Borrower  fails to pay the Default  Amount within five (5)
business  days of written  notice that such amount is due and payable,  then the
Holder  shall  have the right at any time,  so long as the  Borrower  remains in
default  (and so long and to the  extent  that there are  sufficient  authorized
shares), to require the Borrower,  upon written notice, to immediately issue, in
lieu of the Default Amount, the number of shares of Common Stock of the Borrower
equal to the Default Amount  divided by the  Conversion  Price then in effect as
its sole and exclusive remedy.


                             ARTICLE IV. REDEMPTION

               4.1  REDEMPTION.  So  long  as no  Redemption  Event  shall  have
occurred and be continuing and so long as the Registration Statement to be filed
pursuant to the Registration  Rights Agreement is then in effect and has been in
effect and sales can be made  thereunder at all times between the receipt by the
Holders of the Redemption  Notice (as defined below) and the Redemption Date (as
defined  below),  beginning  ninety  (90) days  following  effectiveness  of the
Registration  Statement (the "First Redemption  Date"), in the event the Closing
Price  of the  Common  Stock  is  greater  than  $7.50  per  share  for ten (10)
consecutive  Trading  Days,  the Borrower may redeem,  in whole but not in part,
this  Debenture  upon  thirty  (30) days  prior  written  notice (a  "Redemption
Notice") in accordance with this Section 4.1. The First Redemption Date shall be
delayed by one (1) Trading  Day each for each  Trading  Day  (subsequent  to the
effective date of the Registration  Statement) occurring prior thereto and prior
to the full  conversion of this Debenture that (i) sales cannot be made pursuant
to the Registration  Statement  (whether by reason of the Borrower's  failure to
properly  supplement or amend the prospectus included therein in accordance with
the terms of the Registration  Rights  Agreement or otherwise,  including during
any Allowed Delay as described in the Registration Rights Agreement) or (ii) any
Redemption  Event (as defined in Article III) exists,  without regard to whether
any cure  periods  shall  have run.  Any  notice of  redemption  (a  "Redemption
Notice") shall be delivered to the Holder at its registered address appearing on
the records of the Borrower and shall state (1) that the Borrower is  exercising
its right to redeem the Debentures  and (2) the date of redemption.  On the date
fixed for redemption (the "Redemption Date"), the Borrower shall make payment of
the Redemption  Amount (as hereinafter  defined) in cash to or upon the order of
the Holder as  specified  by the Holder in writing to the  Borrower at least one
business day prior to the Redemption Date. The Redemption  Amount shall be equal
to the sum of (a)  110%  times  the  then  Accreted  Principal  Balance  of this
Debenture  plus (b) any amounts owed to the Holder  pursuant to Sections 1.3 and
1.4(g) hereof or pursuant to Section 2(c) of the Registration  Rights Agreement.
In  the  event  that  the  Borrower  redeems  this  Debenture  pursuant  to  the
immediately  preceding sentence, in addition to the Redemption Amount payable in
cash pursuant to the immediately  preceding sentence, on the Redemption Date the
Borrower  shall  issue to the Holder,  a number of  warrants to purchase  Common
Stock of the Borrower equal to the outstanding  Accreted Principal Balance being
redeemed divided by


                                       18

<PAGE>

1,000  multiplied  by 21,  which  warrants  will have a five (5) year  term,  an
exercise  price  equal to 115% of the Closing  Price of the Common  Stock on the
date of redemption and shall otherwise be in the form of the warrant attached as
Exhibit "D" to the Purchase Agreement.  Notwithstanding anything to the contrary
contained  in this  Section  4.1,  the  Holder  shall at all times  prior to the
Redemption  Date under this Section 4.1 maintain the right to convert all or any
part of this Debenture in accordance with Article I and any amounts so converted
after receipt of a Redemption  Notice and prior to the Redemption Date set forth
in such  notice  which  is  otherwise  subject  to  redemption  pursuant  to the
Redemption Notice.


                            ARTICLE V. SUBORDINATION

               5.1.  AGREEMENT TO SUBORDINATE.  Except as otherwise  provided in
Section  1.7,  Article  III and  Article  IV of  this  Debenture,  the  Accreted
Principal  Balance of this Debenture is payable solely in shares of Common Stock
upon conversion in accordance with Article I hereof. Notwithstanding anything in
this  Debenture to the  contrary,  the Borrower  agrees,  and by accepting  this
Debenture the Holder agrees,  that the indebtedness  evidenced by this Debenture
is subordinate and subject in right of payment,  to the extent and in the manner
expressly provided in this Article V, to the prior payment in full of all Senior
Debt, and that the  subordination  is for the benefit of and  enforceable by the
holders of Senior Debt.  This Debenture shall in all respects rank at least pari
passu with all other present and future  obligations  of the Borrower,  and only
Senior Debt shall rank senior to this Debenture.

               5.2  INSOLVENCY,  BANKRUPTCY,  DISSOLUTION OF BORROWER.  Upon any
payment or  distribution  (whether in cash,  securities  or other  property)  to
creditors of the Borrower upon any Insolvency Event (as hereinafter defined):

                      (a) all Senior Debt shall first be paid in full before the
        Holder shall be entitled to receive any payment or other distribution on
        or in respect of this Debenture; and

                      (b) until all Senior Debt is paid in full,  any payment or
        distribution to which the Holder of this Debenture would be entitled but
        for this  Article V shall be made to  holders  of  Senior  Debt as their
        interests may appear,  except that the Holder may receive  shares of the
        Borrower as  reorganized  or readjusted or securities of the Borrower or
        any other  corporation if the payment of such  securities is subordinate
        to  Senior  Debt to at  least  the  same  extent  as this  Debenture  is
        subordinate to Senior Debt.

               5.3  DEFAULT ON SENIOR  DEBT.  (a) The  Borrower  may not pay the
Accreted  Principal  Balance of this Debenture or make any deposit in respect of
this Debenture and


                                       19

<PAGE>

may not  repurchase,  redeem or otherwise  retire this Debenture  (collectively,
"pay this  Debenture") if (i) the principal of or interest on any Senior Debt is
not paid  when due or (ii) any  other  default  on Senior  Debt  occurs  and the
maturity of such Senior Debt is accelerated in accordance with its terms unless,
in each case, the default has been cured or waived and any such acceleration has
been rescinded or such Senior Debt has been paid in full. During the continuance
of any  default  (other  than a default  described  in clause (i) or (ii) of the
preceding  sentence)  with  respect to any  Senior  Debt  pursuant  to which the
maturity thereof may be accelerated  immediately  without further notice (except
such notice as may be required to effect such acceleration) or the expiration of
any  applicable  grace  periods,  the Borrower may not pay this  Debenture for a
period (a "Payment Blockage Period") commencing upon the receipt by the Borrower
and the Holder of written notice of such default from a  representative  of such
Senior  Debt  specifying  an  election  to effect a Payment  Blockage  Period (a
"Payment  Blockage  Notice") and ending 179 days  thereafter (or earlier if such
Payment Blockage Period is terminated (i) by written notice to the Borrower from
the representative which gave such Payment Blockage Notice, (ii) by repayment in
full of such Senior Debt or (iii) because the default  specified in such Payment
Blockage Notice is no longer  continuing and the prior default has been waived).
Notwithstanding   the  immediately   preceding  sentence  (but  subject  to  the
provisions contained in the first sentence of this Section),  unless the holders
of such Senior Debt or the representative of such holders shall have accelerated
the maturity of such Senior Debt, the Borrower shall resume payments  (including
any missed  payments) on this Debenture  after the end of such Payment  Blockage
Period  unless  such  payment is  otherwise  prohibited  under  this  Article V.
Multiple  Payment  Blockage Periods may be imposed so long as (x) the cumulative
period covered by all such Payment  Blockage Periods does not exceed 179 days in
any 365 consecutive day period and (y) no more than one Payment  Blockage Period
may result from the same default.

                  (b) The  failure  to make a payment  or  distribution  on this
Debenture  by reason  of this  Article  V shall  not be  construed  or deemed to
prevent the  occurrence  of a  Redemption  Event  hereunder;  provided  that any
acceleration of payment of this Debenture resulting therefrom shall be rescinded
if and when the following conditions shall be simultaneously  satisfied (x) each
payment or distribution  which gave rise to such Redemption  Event shall be made
and (y) no other such Redemption Event shall have occurred.

               5.4 SUBORDINATED ACCELERATION;  STANDSTILL. (a) The Holder agrees
to give the  Borrower not less than five (5) days' prior  written  notice of its
intention to accelerate the maturity of this  Debenture  pursuant to Article III
hereof.  The  Borrower  will  promptly  notify  holders  of  Senior  Debt of any
obligation to make payments to be made under Section 1.7.

                  (b) The Holder will not for a period of 179 days  following an
acceleration of this Debenture  pursuant to Article III,  including by reason of
the  Borrower's  breach of its  covenants  under  Section  1.7 (other than if an
Insolvency Event shall have


                                       20

<PAGE>

occurred or if the Senior Debt shall have been  accelerated)  pursue or exercise
any other right, power or remedy arising under Article III of this Debenture.

               5.5. PERMITTED PAYMENTS.  So as to eliminate any doubt, except in
the event of an  Insolvency  Event,  or as  provided  in the first  sentence  of
Section 5.3(a) during any Payment Blockage Period,  as set forth in Sections 5.2
and 5.3, respectively,  accretion of principal,  payments under 1.3, 1.4(g), 1.7
and 4.1 of this Debenture,  and payments under Section 2(c) of the  Registration
Rights   Agreement   (whether   in  cash  or  Common   Stock  (as   applicable))
(collectively,  "Permitted  Payments") shall be credited or made by the Borrower
on the terms of this Debenture.

               5.6  TURNOVER.  If the  Holder  receives  any  payment  or  other
distribution  on this  Debenture  (whether  in  cash,  property,  securities  or
whatever) at a time when such payment or distribution  should not have been made
to the Holder by reason of this Article V, such payment or distribution shall be
deemed to have been received and held in trust for the benefit of the holders of
the Senior Debt,  and shall be segregated  from other property of the Holder and
be paid and  delivered as promptly as  practicable  to the holders of the Senior
Debt, as their interests may appear,  for application to, or collateral for, the
payment or prepayment of the Senior Debt.

               5.7 RELATIVE  RIGHTS.  This Article V defines the relative rights
of the Holder and the holders of Senior Debt. Nothing herein shall:

                      (a) impair,  as between the Borrower  and the Holder,  the
        obligation of the Borrower, which is absolute and unconditional,  to pay
        principal  of,  premium,  if any,  and  interest  on this  Debenture  in
        accordance  with  its  terms  and  to  fulfill  its  other   obligations
        hereunder; or

                      (b) except as otherwise expressly provided herein, prevent
        the  Holder  from  exercising  its  available  remedies  upon a default,
        subject to the rights of holders of Senior Debt to receive distributions
        otherwise payable to the Holder.

               5.8 AGREEMENT TO  COOPERATE.  In the event that a payment may not
be made on the  Debentures  as a result of the  provisions  of this  Article  V,
including without limitation, as a result of an Insolvency Event or a default on
any Senior Debt,  the  Borrower  shall,  if requested by the Holder,  reasonably
assist the Holder in attempting  to purchase such Senior Debt or otherwise  cure
such default so that the payment may be made on the  Debenture.  Nothing in this
Section 5.8 shall obligate the Holder to purchase such Senior Debt or to attempt
to cure any such default.

               5.9   CONVERSION.   Notwithstanding   anything  to  the  contrary
contained in this Article V, nothing in this Article V shall restrict the rights
of the Holder to convert the


                                       21

<PAGE>

Conversion Amount in accordance with Article I, including,  without  limitation,
after an  Insolvency  Event and during the pendency of a default on Senior Debt.
To the extent any Permitted Payments would be payable, but for the provisions of
this  Article  V, in cash  (whether  at the  Borrower's  option or the  Holder's
option),  such Permitted  Payments shall  automatically be added to the Accreted
Principal  Balance including after an Insolvency Event or during the pendency of
a default on Senior  Debt and shall  thereafter  and  during  such  pendency  be
convertible into Common Stock in accordance with Article I.

               5.10  DEFINITIONS.

                  (a) "Bankruptcy Code" means the Bankruptcy Reform Act of 1978,
11 U.S.C. ss. 101 et seq., or any successor statute thereto.

                  (b) "Insolvency  Event" means (i) any winding-up,  insolvency,
bankruptcy,  liquidation or reorganization of the Borrower, whether voluntary or
involuntary,  (ii)  any  proceeding  or case  for  reorganization,  liquidation,
bankruptcy,  dissolution  or other  winding-up  of the  Borrower  or its assets,
whether or not involving  insolvency or bankruptcy,  (iii) any assignment by the
Borrower for the benefit of creditors or (iv) any  receivership or other similar
proceeding or any marshalling of assets of the Borrower.

                  (c) "Senior Debt" means (i) all obligations and liabilities of
the Borrower or any of its subsidiaries, whether for or on account of principal,
reimbursement  obligations,  accrued  and  unpaid  interest  (including  without
limitation  all  interest  accruing  on and after an  Insolvency  Event),  fees,
expenses,  indemnities and other amounts payable under or in connection with any
and  all  bank,   institutional  or  other  financial  transaction  indebtedness
including,  without limitation,  under that certain bank agreement dated January
29, 1996 among the Borrower, its subsidiaries, the lenders named therein and The
Chase  Manhattan  Bank, as agent, as amended to date, the 10 3/8% senior secured
indebtedness due June 1, 2002 and the 11 5/8% senior  indebtedness due August 1,
2002, and all documents or instruments executed in connection therewith,  as may
be amended or restated  thereunder,  or any similar  replacement,  successor  or
additional  indebtedness,  whether  outstanding  on the date of issuance of this
Debenture or hereafter created,  assumed or incurred and (ii) all obligations of
the Borrower or any of its subsidiaries for deferred  purchase price payments in
connection   with  any  business   acquisitions   by  Borrower  or  any  of  its
subsidiaries.

                            ARTICLE VI. MISCELLANEOUS

               6.1 FAILURE OR INDULGENCE NOT WAIVER.  No failure or delay on the
part of the Holder in the exercise of any power,  right or  privilege  hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All


                                       22

<PAGE>

rights and remedies existing  hereunder are cumulative to, and not exclusive of,
any rights or remedies otherwise available.

               6.2 NOTICES.  Any notice  (including  conversion  notices) herein
required or  permitted  to be given  shall be in writing  and may be  personally
served or delivered by courier or sent by United States mail and shall be deemed
to have been given upon  receipt  if  personally  served  (which  shall  include
telephone  line  facsimile  transmission)  or sent by  courier or three (3) days
after  being  deposited  in the United  States  mail,  certified,  with  postage
pre-paid and properly  addressed,  if sent by mail. For the purposes hereof, the
address of the Holder shall be as shown on the records of the Borrower;  and the
address of the Borrower shall be American Banknote Corporation, 200 Park Avenue,
49th Floor,  New York,  New York  10166-4999,  Attention:  Secretary,  facsimile
number: (212) 338-0747,  and a copy to the attention of Patrick Reddy, Assistant
Secretary,  facsimile number:  (212) 338- 0728. Both the Holder and the Borrower
may change the address for service by service of written  notice to the other as
herein provided.

               6.3 AMENDMENTS.  This Debenture and any provision hereof may only
be amended by an  instrument  in writing  signed by the Borrower and the Holder.
The  term  "Debenture"  and  all  reference  thereto,  as used  throughout  this
instrument, shall mean this instrument (and the other Debentures issued pursuant
to the  Purchase  Agreement)  as  originally  executed,  or if later  amended or
supplemented, then as so amended or supplemented.

               6.4  ASSIGNABILITY.  This  Debenture  shall be  binding  upon the
Borrower and its  successors  and assigns,  and shall inure to be the benefit of
the Holder and its  successors  and assigns.  Each  transferee of this Debenture
must be an "accredited investor" (as defined in Rule 501(a) of the 1933 Act). As
a condition to any  assignment  or transfer,  the assignee or  transferee  shall
agree to be bound to the terms of this Debenture.  This Debenture may be pledged
as collateral in connection with a bona fide margin account.

               6.5 COST OF COLLECTION. If default is made in the payment of this
Debenture,  the  Borrower  shall  pay the  Holder  hereof  costs of  collection,
including reasonable attorneys' fees.

               6.6  GOVERNING  LAW.  This  Debenture  shall be  governed  by the
internal  laws of the State of Delaware,  without  regard to the  principles  of
conflict of laws.

               6.7 CERTAIN  AMOUNTS.  Whenever  pursuant to this  Debenture  the
Borrower  is  required  to pay an amount in  excess  of the  Accreted  Principal
Balance (or the portion thereof  required to be paid at that time), the Borrower
and the Holder  agree that the actual  damages to the Holder from the receipt of
cash payment on this  Debenture  may be difficult to determine and the amount to
be so paid by the Borrower represents stipulated damages and


                                       23

<PAGE>

not a penalty and is intended to  compensate  the Holder in part for loss of the
opportunity  to convert  this  Debenture  and to earn a return  from the sale of
shares of Common Stock acquired upon  conversion of this Debenture at a price in
excess of the price paid for such shares pursuant to this Debenture.

               6.8 ALLOCATIONS OF MAXIMUM SHARE AMOUNT AND RESERVED AMOUNT.  The
Maximum Share Amount and the Reserved Amount  (including any increases  thereto)
shall be  allocated  pro rata  among  the  Holders  of  Debentures  based on the
principal amount of Debentures then held by the Holder relative to the aggregate
principal amount of the Debentures then outstanding.

               6.9  DAMAGES  SHARES.  The  shares  of Common  Stock  that may be
issuable to the Holder  pursuant to Sections 1.3 and 1.4(g)  hereof and pursuant
to Section 2(c) of the Registration Rights Agreement ("Damages Shares") shall be
treated as Common Stock  issuable  upon  conversion  of this  Debenture  for all
purposes  hereof and shall be subject to all of the limitations and afforded all
of the rights of the other shares of Common Stock issuable hereunder,  including
without limitation, the right to be included in the Registration Statement filed
pursuant to the  Registration  Rights  Agreement.  For  purposes of  calculating
interest payable on the outstanding principal amount hereof, except as otherwise
provided herein,  amounts  convertible  into Damages Shares ("Damages  Amounts")
shall not bear  interest but must be converted  prior to the  conversion  of any
outstanding  principal amount hereof,  until the outstanding  Damages Amounts is
zero.

               6.10 DENOMINATIONS.  At the request of the Holder, upon surrender
of this  Debenture,  the Borrower  shall  promptly  issue new  Debentures in the
aggregate  outstanding  principal  amount  hereof,  in the form hereof,  in such
denominations of at least $100,000 as the Holder shall request.

               6.11 PURCHASE AGREEMENT. By its acceptance of this Debenture, the
Holder agrees to be bound by the applicable terms of the Purchase Agreement.

               6.12 NOTICE OF CORPORATE  EVENTS.  Except as  otherwise  provided
below, the Holder of this Debenture shall have no rights as the Holder of Common
Stock unless and only to the extent that it converts this  Debenture into Common
Stock.  The Borrower  shall  provide the Holder with prior  notification  of any
meeting of the Borrower's  shareholders (and copies of proxy materials and other
information sent to shareholders). In the event of any taking by the Borrower of
a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution,  any right to
subscribe  for,  purchase  or  otherwise  acquire  (including  by way of merger,
consolidation,  reclassification or recapitalization)  any share of any class or
any other  securities  or property,  or to receive any other  right,  or for the
purpose of determining  shareholders who are entitled to vote in connection with
any proposed sale, lease or


                                       24

<PAGE>

conveyance  of all or  substantially  all of the assets of the  Borrower  or any
proposed  liquidation,  dissolution or winding up of the Borrower,  the Borrower
shall mail a notice to the Holder, at least twenty (20) days prior to the record
date  specified  therein (or thirty (30) days prior to the  consummation  of the
transaction  or  event,  whichever  is  earlier),  of the date on which any such
record is to be taken for the purpose of such dividend,  distribution,  right or
other event,  and a brief  statement  regarding the amount and character of such
dividend,  distribution,  right or other event to the extent known at such time.
Subject to Allowed Delays (as defined in Section 3(f) of the Registration Rights
Agreement), the Borrower shall make a public announcement of any event requiring
notification  to the  Holder  hereunder  substantially  simultaneously  with the
notification to the Holder in accordance with the terms of this Section 6.12.


                 [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]


                                       25

<PAGE>

               IN WITNESS WHEREOF,  the Borrower has caused this Debenture to be
signed in its name by its duly  authorized  officer  this 25th day of  November,
1997.


                                       AMERICAN BANKNOTE CORPORATION



                                       By:    /s/Harvey J. Kesner
                                              ----------------------------------
                                       Name:  Harvey J. Kesner
                                       Title:  Executive Vice President, General
                                               Counsel and Secretary


                                       26





<PAGE>

                                                                       Exhibit A

                              NOTICE OF CONVERSION
                            OF CONVERTIBLE DEBENTURE

TO:     American Banknote Corporation
        200 Park Avenue, 49th Floor
        New York, New York  10166-4999
        Attention:  Secretary
        Facsimile:  (212) 338-0747

               (1) Pursuant to the terms of the attached  Convertible  Debenture
(the "Debenture"), the undersigned hereby elects to convert $__________ Accreted
Principal  Balance of the  Debenture  into  shares of Common  Stock of  American
Banknote Corporation, a Delaware corporation (the "Borrower"). Capitalized terms
used  herein and not  otherwise  defined  herein  have the  respective  meanings
provided in the Debenture.

               (2) Please issue a certificate or certificates  for the number of
shares of Common  Stock  into  which  such  Accreted  Principal  Balance  of the
Debenture  is  convertible  (_____  shares,  based on the  Holder's  calculation
attached hereto) in the name(s)  specified  immediately  below or, if additional
space is necessary, on an attachment hereto:

- -----------------------------                     -----------------------------
Name                                              Name


- -----------------------------                     -----------------------------
Address                                           Address


- -----------------------------                     -----------------------------
SS or Tax ID Number                               SS or Tax ID Number


               (3) The Holder  acknowledges  and affirms  that the Common  Stock
issued  pursuant  to  this  Notice  of  Conversion  has  been or will be sold in
accordance with the requirements of the 1933 Act, if applicable,  or pursuant to
an exemption under the 1933 Act.

               (4)  Capitalized  terms used in this Notice of Conversion and not
otherwise  defined  herein shall have the  respective  meanings  provided in the
Debenture.


Date_________________                       ____________________________________
                                            Signature of Registered Holder (must
                                            be signed exactly as name appears in
                                            the Debenture).





        THIS WARRANT AND THE SHARES  ISSUABLE  UPON THE EXERCISE OF THIS WARRANT
        HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
        EXCEPT  AS  OTHERWISE  SET  FORTH  HEREIN  OR IN A  SECURITIES  PURCHASE
        AGREEMENT DATED AS OF NOVEMBER 25, 1997, NEITHER THIS WARRANT NOR ANY OF
        SUCH SHARES MAY BE SOLD,  OFFERED FOR SALE,  ASSIGNED,  TRANSFERRED,  OR
        OTHERWISE  DISPOSED OF IN THE ABSENCE OF REGISTRATION  UNDER SUCH ACT OR
        AN OPINION OF COUNSEL THAT  REGISTRATION  IS NOT REQUIRED UNDER SUCH ACT
        OR UNLESS  SOLD  PURSUANT  TO RULE 144 UNDER  SUCH ACT.  ANY SUCH  SALE,
        ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE SECURITIES
        LAWS.

                                                                 Right to
                                                                 Purchase
                                                                 150,000
                                                                 Shares of
                                                                 Common
                                                                 Stock, par
                                                                 value $.01 per
                                                                 share


                FORM OF STOCK PURCHASE WARRANT (CLOSING WARRANT)

        THIS CERTIFIES THAT, for value received,  _______________________ or its
registered assigns, is entitled to purchase from American Banknote  Corporation,
a Delaware corporation (the "Company"),  at any time or from time to time during
the period specified in Paragraph 2 hereof, One Hundred Fifty Thousand (150,000)
fully paid and  nonassessable  shares of the Company's  Common Stock,  par value
$.01 per share (the  "Common  Stock"),  at an exercise  price of $7.09 per share
(the "Exercise Price"). The term "Warrant Shares", as used herein, refers to the
shares of  Common  Stock  purchasable  hereunder.  The  Warrant  Shares  and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof.  The
term Warrants  means this Warrant and the other Closing  Warrants and Redemption
Warrants issued pursuant to that certain Securities  Purchase  Agreement,  dated
November  25,  1997,  by and  among the  Company  and the  Buyers  listed on the
execution page thereof (the "Securities Purchase Agreement").

        This  Warrant  is  subject  to  the  following  terms,  provisions,  and
conditions:


<PAGE>

        1. MANNER OF  EXERCISE;  ISSUANCE OF  CERTIFICATES;  PAYMENT FOR SHARES.
Subject to the  provisions  hereof,  this Warrant may be exercised by the holder
hereof,  in whole or in part, by the surrender of this Warrant,  together with a
completed  exercise  agreement  in  the  form  attached  hereto  (the  "Exercise
Agreement"),  to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company  as it may  designate  by notice  to the  holder  hereof),  and upon (i)
payment to the Company in cash,  by certified or official  bank check or by wire
transfer  for the account of the Company of the  Exercise  Price for the Warrant
Shares specified in the Exercise  Agreement or (ii) delivery to the Company of a
written  notice of an election to effect a  "Cashless  Exercise"  (as defined in
Section 11(c) below) for the Warrant Shares specified in the Exercise Agreement.
The  Warrant  Shares so  purchased  shall be  deemed to be issued to the  holder
hereof or such holder's designee,  as the record owner of such shares, as of the
close of business on the date on which this Warrant shall have been surrendered,
the completed  Exercise  Agreement shall have been delivered,  and payment shall
have been made for such shares as set forth above.  Certificates for the Warrant
Shares so purchased,  representing  the aggregate  number of shares specified in
the  Exercise  Agreement,  shall be  delivered  to the  holder  hereof  within a
reasonable time, not exceeding three (3) business days, after this Warrant shall
have  been  so  exercised.  The  certificates  so  delivered  shall  be in  such
denominations  as may be requested by the holder  hereof and shall be registered
in the name of such  holder or such  other name as shall be  designated  by such
holder.  If this Warrant shall have been  exercised only in part,  then,  unless
this  Warrant has expired,  the Company  shall,  at its expense,  at the time of
delivery of such certificates,  deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.

               Notwithstanding  anything in this Warrant to the contrary,  in no
event  shall the Holder of this  Warrant  be  entitled  to  exercise a number of
Warrants (or portions  thereof) in excess of the number of Warrants (or portions
thereof)  upon  exercise  of which the sum of (i) the number of shares of Common
Stock  beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised  Warrants and  unconverted  Debentures (as defined in the Securities
Purchase  Agreement) and (ii) the number of shares of Common Stock issuable upon
exercise  of the  Warrants  (or  portions  thereof)  with  respect  to which the
determination  described  herein  is being  made,  would  result  in  beneficial
ownership by the Holder and its affiliates of more than 4.9% of the  outstanding
shares of Common  Stock.  For purposes of the  immediately  preceding  sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities  Exchange Act of 1934, as amended,  and Regulation 13D- G thereunder,
except as otherwise provided in clause (i) hereof.

        2. PERIOD OF EXERCISE.  This Warrant is  exercisable at any time or from
time to time on or after the date on which this Warrant is issued and  delivered
pursuant to the terms of the Securities Purchase Agreement and before 5:00 p.m.,
New York City time on November 25, 2000 (the "Exercise Period").


                                       -2-

<PAGE>

        3. CERTAIN  AGREEMENTS OF THE COMPANY.  The Company hereby covenants and
agrees as follows:

               (a)  SHARES TO BE FULLY  PAID.  All  Warrant  Shares  will,  upon
issuance in accordance with the terms of this Warrant, be validly issued,  fully
paid,  and  nonassessable  and free from liens and charges  with  respect to the
issue thereof.

               (b)  RESERVATION  OF SHARES.  During  the  Exercise  Period,  the
Company  shall at all times have  authorized,  and  reserved  for the purpose of
issuance upon exercise of this Warrant,  a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.

               (c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock  issuable upon exercise of the Warrant upon each national
securities  exchange or automated quotation system, if any, upon which shares of
Common  Stock are then  listed  (subject to  official  notice of  issuance  upon
exercise of this  Warrant)  and shall  maintain,  so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable  upon the exercise of this Warrant;  and the Company shall
so list on each national  securities  exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company  issuable  upon the exercise of this Warrant if and so long
as any  shares of the same  class  shall be listed on such  national  securities
exchange or automated quotation system.

               (d)  CERTAIN  ACTIONS  PROHIBITED.   The  Company  will  not,  by
amendment  of its  charter or through  any  reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder,  but will at all times in
good faith assist in the carrying out of all the  provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this  Warrant in order to protect the  exercise  privilege of the holder of this
Warrant  against  dilution or other  impairment,  consistent  with the tenor and
purpose of this Warrant.  Without limiting the generality of the foregoing,  the
Company  (i) will not  increase  the par value of any  shares  of  Common  Stock
receivable  upon the exercise of this Warrant  above the Exercise  Price then in
effect,  and (ii) will take all such actions as may be necessary or  appropriate
in  order  that the  Company  may  validly  and  legally  issue  fully  paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.

               (e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.

        4.  ANTIDILUTION  PROVISIONS.  During the Exercise Period,  the Exercise
Price and the number of Warrant Shares shall be subject to adjustment  from time
to time as provided in this Paragraph 4.


                                            -3-

<PAGE>

        In the event  that any  adjustment  of the  Exercise  Price as  required
herein results in a fraction of a cent,  such Exercise Price shall be rounded up
to the nearest cent.

               (a)  ADJUSTMENT  OF  EXERCISE  PRICE AND  NUMBER  OF SHARES  UPON
ISSUANCE OF COMMON STOCK.  Except as otherwise  provided in Paragraphs  4(c) and
4(e)  hereof,  if and  whenever on or after the date of issuance of this Warrant
the Company  issues or sells,  or in accordance  with  Paragraph  4(b) hereof is
deemed to have issued or sold,  any shares of Common Stock for no  consideration
or for a  consideration  per share (before  deduction of reasonable  expenses or
commissions  or  underwriting  discounts or allowances in connection  therewith)
less than the Market Price (as  hereinafter  defined) on the date of issuance (a
"Dilutive Issuance"),  then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to a price determined by multiplying the Exercise Price in
effect  immediately  prior  to the  Dilutive  Issuance  by a  fraction,  (i) the
numerator  of which is an amount equal to the sum of (x) the number of shares of
Common Stock actually  outstanding  immediately prior to the Dilutive  Issuance,
plus (y) the quotient of the aggregate consideration, calculated as set forth in
Paragraph  4(b)  hereof,  received by the Company  upon such  Dilutive  Issuance
divided  by the  Market  Price  in  effect  immediately  prior  to the  Dilutive
Issuance,  and (ii) the  denominator  of which is the total  number of shares of
Common  Stock  Deemed  Outstanding  (as  defined  below)  immediately  after the
Dilutive Issuance.

               (b) EFFECT ON EXERCISE PRICE OF CERTAIN  EVENTS.  For purposes of
determining  the  adjusted  Exercise  Price under  Paragraph  4(a)  hereof,  the
following will be applicable:

                  (i)  ISSUANCE  OF RIGHTS OR  OPTIONS.  If the  Company  in any
manner  issues  or  grants  any  warrants,  rights or  options,  whether  or not
immediately  exercisable,  to subscribe for or to purchase Common Stock or other
securities  convertible  into or  exchangeable  for Common  Stock  ("Convertible
Securities")  (such  warrants,  rights and options to purchase  Common  Stock or
Convertible  Securities are hereinafter  referred to as "Options") and the price
per share for which Common  Stock is issuable  upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such  Options,
then the  maximum  total  number of shares of  Common  Stock  issuable  upon the
exercise of all such  Options  will,  as of the date of the issuance or grant of
such Options,  be deemed to be  outstanding  and to have been issued and sold by
the Company for such price per share.  For purposes of the  preceding  sentence,
the "price per share for which  Common  Stock is issuable  upon the  exercise of
such Options" is determined by dividing (i) the total amount,  if any,  received
or  receivable by the Company as  consideration  for the issuance or granting of
all such Options, plus the minimum aggregate amount of additional consideration,
if any,  payable to the Company upon the exercise of all such Options,  plus, in
the case of Convertible  Securities  issuable upon the exercise of such Options,
the  minimum  aggregate  amount of  additional  consideration  payable  upon the
conversion or exchange  thereof at the time such  Convertible  Securities  first
become  convertible or exchangeable,  by (ii) the maximum total number of shares
of Common Stock  issuable upon the exercise of all such Options  (assuming  full
conversion of Convertible Securities,  if applicable).  No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common


                                       -4-

<PAGE>

Stock upon the  exercise of such Options or upon the  conversion  or exchange of
Convertible Securities issuable upon exercise of such Options.

                  (ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any  Convertible  Securities,  whether or not immediately
convertible  (other  than  where  the same are  issuable  upon the  exercise  of
Options) and the price per share for which  Common  Stock is issuable  upon such
conversion  or exchange is less than the Market  Price on the date of  issuance,
then the  maximum  total  number of shares of  Common  Stock  issuable  upon the
conversion or exchange of all such  Convertible  Securities will, as of the date
of the issuance of such Convertible Securities,  be deemed to be outstanding and
to have been issued and sold by the  Company  for such price per share.  For the
purposes of the preceding sentence,  the "price per share for which Common Stock
is issuable upon such  conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the  issuance  or sale of all such  Convertible  Securities,  plus  the  minimum
aggregate  amount of additional  consideration,  if any,  payable to the Company
upon the conversion or exchange thereof at the time such Convertible  Securities
first become  convertible or  exchangeable,  by (ii) the maximum total number of
shares of Common  Stock  issuable  upon the  conversion  or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual  issuance of such Common  Stock upon  conversion  or exchange of
such Convertible Securities.

                  (iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional  consideration payable to the
Company  upon the  exercise  of any  Options;  (ii)  the  amount  of  additional
consideration, if any, payable to the Company upon the conversion or exchange of
any  Convertible  Securities;  or  (iii)  the  rate  at  which  any  Convertible
Securities are  convertible  into or  exchangeable  for Common Stock (other than
under or by reason of  provisions  designed to protect  against  dilution),  the
Exercise  Price in effect at the time of such change will be  readjusted  to the
Exercise  Price which would have been in effect at such time had such Options or
Convertible  Securities still outstanding  provided for such changed  additional
consideration  or  changed  conversion  rate,  as the case  may be,  at the time
initially granted, issued or sold.

                  (iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED  CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon  conversion  or exchange of any  Convertible
Securities is not, in fact,  issued and the rights to exercise such Option or to
convert  or  exchange  such   Convertible   Securities  shall  have  expired  or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price  which  would  have  been in  effect  at the  time of such  expiration  or
termination had such Option or Convertible Securities, to the extent outstanding
immediately  prior to such  expiration or termination  (other than in respect of
the actual  number of shares of Common Stock issued upon  exercise or conversion
thereof), never been issued.

                  (v)  CALCULATION  OF  CONSIDERATION  RECEIVED.  If any  Common
Stock, Options or Convertible  Securities are issued,  granted or sold for cash,
the


                                       -5-

<PAGE>

consideration  received therefor for purposes of this Warrant will be the amount
received by the Company  therefor,  before deduction of reasonable  commissions,
underwriting  discounts  or  allowances  or other  reasonable  expenses  paid or
incurred by the Company in connection with such issuance, grant or sale. In case
any Common Stock,  Options or  Convertible  Securities  are issued or sold for a
consideration  part or all of which shall be other than cash,  the amount of the
consideration  other than cash received by the Company will be the fair value of
such consideration,  except where such consideration consists of securities,  in
which case the  amount of  consideration  received  by the  Company  will be the
Market  Price  thereof  as of the date of  receipt.  In case any  Common  Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or  consolidation  in which the  Company  is the  surviving  corporation,
unless the Board of Directors of the Company  specifically  provides  otherwise,
the amount of  consideration  therefor  will be deemed to be equal to the Market
Price of such Common Stock, Options or Convertible  Securities,  as the case may
be, on the date of issuance. The fair value of any consideration other than cash
or securities  will be determined in good faith by the Board of Directors of the
Company.

                  (vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the  Exercise  Price  will be made  (i) upon the  exercise  of any  warrants,
options or convertible securities granted, issued and outstanding on the date of
issuance  of this  Warrant;  (ii)  upon the  grant or  exercise  of any stock or
options which may hereafter be granted or exercised  under any employee  benefit
plan of the Company now existing or to be implemented in the future,  so long as
the  issuance  of such  stock  or  options  is  approved  by a  majority  of the
independent  members of the Board of  Directors  of the Company or a majority of
the  members  of a  committee  of  independent  directors  established  for such
purpose;  (iii) upon the exercise of the Warrants;  (iv) upon the  conversion of
the Debentures issued pursuant to the Securities  Purchase Agreement or (v) upon
issuance,  exercise or  conversion  of any  securities  purchased  by the Holder
pursuant to the provisions of Section 4(e) of the Securities Purchase Agreement.

               (c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time  subdivides  (by any stock  split,  stock  dividend,  recapitalization,
reorganization,  reclassification  or  otherwise)  the  shares of  Common  Stock
acquirable  hereunder into a greater number of shares,  then,  after the date of
record for effecting such subdivision,  the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time  combines  (by  reverse  stock  split,  recapitalization,   reorganization,
reclassification  or otherwise) the shares of Common Stock acquirable  hereunder
into a smaller  number of shares,  then,  after the date of record for effecting
such  combination,  the  Exercise  Price  in  effect  immediately  prior to such
combination will be proportionately increased.

               (d) ADJUSTMENT IN NUMBER OF SHARES.  Upon each  adjustment of the
Exercise  Price  pursuant to the  provisions of this  Paragraph 4, the number of
shares of Common Stock  issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect  immediately prior
to such adjustment by the


                                       -6-

<PAGE>

number  of shares  of  Common  Stock  issuable  upon  exercise  of this  Warrant
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.

               (e)  CONSOLIDATION,  MERGER OR SALE. In case of any consolidation
of the Company with, or merger of the Company into any other corporation,  or in
case of any sale or conveyance of all or substantially  all of the assets of the
Company  other than in  connection  with a plan of complete  liquidation  of the
Company,  then  as  a  condition  of  such  consolidation,  merger  or  sale  or
conveyance,  adequate  provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the  shares of  Common  Stock  immediately  theretofore  acquirable  upon the
exercise  of  this  Warrant   (without  giving  effect  to  any  limitations  or
restrictions  on  conversion  set forth in the  Debentures  (as  defined  in the
Securities  Agreement)),  such shares of stock,  securities  or assets as may be
issued or payable  with  respect to or in  exchange  for the number of shares of
Common Stock immediately  theretofore acquirable and receivable upon exercise of
this  Warrant had such  consolidation,  merger or sale or  conveyance  not taken
place. In any such case, the Company will make  appropriate  provision to insure
that the provisions of this Paragraph 4 hereof will  thereafter be applicable as
nearly as may be in  relation  to any shares of stock or  securities  thereafter
deliverable  upon the exercise of this Warrant.  The Company will not effect any
consolidation,  merger or sale or  conveyance  unless prior to the  consummation
thereof,  the  successor  corporation  (if other  than the  Company)  assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing  provisions,  the holder may be entitled to
acquire.

               (f) DISTRIBUTION OF ASSETS.  In case the Company shall declare or
make any distribution of its assets  (including cash) to holders of Common Stock
as a partial  liquidating  dividend,  by way of return of capital or  otherwise,
then,  after the date of record for  determining  stockholders  entitled to such
distribution,  but prior to the date of distribution, the holder of this Warrant
shall be entitled  upon  exercise of this Warrant for the purchase of any or all
of the shares of Common  Stock  subject  hereto,  to receive  the amount of such
assets  which  would have been  payable to the holder had such  holder  been the
holder of such shares of Common  Stock on the record date for the  determination
of stockholders entitled to such distribution.

               (g) NOTICE OF ADJUSTMENT.  Upon the occurrence of any event which
requires any adjustment of the Exercise Price,  then, and in each such case, the
Company shall give notice  thereof to the holder of this  Warrant,  which notice
shall state the Exercise Price  resulting from such  adjustment and the increase
or  decrease  in the number of  Warrant  Shares  purchasable  at such price upon
exercise,  setting forth in reasonable  detail the method of calculation and the
facts upon which such calculation is based.  Such calculation shall be certified
by the chief financial officer of the Company.

               (h) MINIMUM  ADJUSTMENT OF EXERCISE  PRICE.  No adjustment of the
Exercise  Price shall be made in an amount of less than 5% of the Exercise Price
in effect at the time such adjustment is otherwise  required to be made, but any
such lesser adjustment


                                       -7-

<PAGE>

shall be carried  forward  and shall be made at the time and  together  with the
next  subsequent  adjustment  which,  together with any  adjustments  so carried
forward, shall amount to not less than 5% of such Exercise Price.

               (i) NO FRACTIONAL  SHARES.  No fractional  shares of Common Stock
are to be issued upon the exercise of this Warrant,  but the Company shall pay a
cash  adjustment  in respect of any  fractional  share which would  otherwise be
issuable in an amount equal to the same  fraction of the Market Price of a share
of Common Stock on the date of such exercise.

               (j) OTHER NOTICES. In case at any time:

                  (i) the Company  shall  declare any  dividend  upon the Common
Stock  payable  in shares  of stock of any class or make any other  distribution
(including dividends or distributions  payable in cash out of retained earnings)
to the holders of the Common Stock;

                  (ii) the Company shall offer for  subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

                  (iii)  there  shall  be  any  capital  reorganization  of  the
Company,  or reclassification of the Common Stock, or consolidation or merger of
the Company  with or into,  or sale of all or  substantially  all its assets to,
another corporation or entity; or

                  (iv) there shall be a voluntary  or  involuntary  dissolution,
liquidation or winding-up of the Company;

then,  in each such case,  the Company  shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for  determining  the holders of Common Stock entitled to receive
any such dividend,  distribution,  or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such  reorganization,
reclassification,  consolidation,  merger,  sale,  dissolution,  liquidation  or
winding-up  and (b) in the  case of any such  reorganization,  reclassification,
consolidation,  merger, sale, dissolution,  liquidation or winding-up, notice of
the date (or,  if not then  known,  a  reasonable  approximation  thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or  other  securities  or  property   deliverable   upon  such   reorganization,
reclassification,  consolidation,  merger, sale,  dissolution,  liquidation,  or
winding-up,  as the case  may be.  Such  notice  shall be given at least 30 days
prior to the record date or the date on which the Company's  books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings  referred to in clauses (i), (ii),  (iii)
and (iv) above.

               (k) CERTAIN EVENTS.  If any event occurs of the type contemplated
by the adjustment  provisions of this Paragraph 4 but not expressly provided for
by such  provisions,  the Company  will give notice of such event as provided in
Paragraph 4(g) hereof, and the


                                       -8-

<PAGE>

Company's Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of shares of Common Stock  acquirable upon exercise of this
Warrant  so that  the  rights  of the  Holder  shall  be  neither  enhanced  nor
diminished by such event.

               (l)    CERTAIN DEFINITIONS.

                  (i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock  actually  outstanding  (not  including  shares of Common
Stock held in the  treasury of the  Company),  plus (x)  pursuant  to  Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the  exercise  of  Options,  as of the  date of such  issuance  or grant of such
Options,  if any,  and (y) pursuant to Paragraph  4(b)(ii)  hereof,  the maximum
total number of shares of Common Stock  issuable upon  conversion or exchange of
Convertible  Securities,  as  of  the  date  of  issuance  of  such  Convertible
Securities, if any.

                  (ii) "Market  Price," as of any date, (i) means the average of
the last  reported  sale  prices for the shares of Common  Stock on the New York
Stock Exchange ("NYSE") for the five (5) trading days immediately preceding such
date as reported by Bloomberg,  L.P.  ("Bloomberg"),  or (ii) if the NYSE is not
the principal  trading market for the shares of Common Stock, the average of the
last reported sale prices on the principal  trading  market for the Common Stock
during the same period as reported by Bloomberg, or (iii) if market value cannot
be calculated as of such date on any of the  foregoing  bases,  the Market Price
shall be the fair market value as reasonably determined in good faith by (a) the
Board   of   Directors   of   the   Corporation   or,   at  the   option   of  a
majority-in-interest  of the  holders  of  the  outstanding  Warrants  by (b) an
independent  investment bank of nationally  recognized standing in the valuation
of  businesses  similar  to the  business  of the  corporation.  The  manner  of
determining  the  Market  Price of the Common  Stock set forth in the  foregoing
definition  shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.

                  (iii)  "Common  Stock,"  for  purposes  of this  Paragraph  4,
includes the Common Stock, par value $.01 per share, and any additional class of
stock of the Company  having no preference as to dividends or  distributions  on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include  only shares of Common  Stock,  par value $.01 per share,  in respect of
which this Warrant is exercisable,  or shares  resulting from any subdivision or
combination  of  such  Common  Stock,  or in the  case  of  any  reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in
such Paragraph.

        5. ISSUE TAX. The issuance of  certificates  for Warrant Shares upon the
exercise  of this  Warrant  shall be made  without  charge to the holder of this
Warrant or such shares for any issuance  tax or other costs in respect  thereof,
provided  that the  Company  shall not be  required  to pay any tax which may be
payable in respect of any transfer  involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.


                                       -9-

<PAGE>

        6. NO RIGHTS OR  LIABILITIES  AS A  SHAREHOLDER.  This Warrant shall not
entitle the holder  hereof to any voting rights or other rights as a shareholder
of the  Company.  No provision of this  Warrant,  in the absence of  affirmative
action by the holder hereof to purchase Warrant Shares,  and no mere enumeration
herein of the rights or privileges of the holder hereof,  shall give rise to any
liability  of such  holder for the  Exercise  Price or as a  shareholder  of the
Company,  whether  such  liability is asserted by the Company or by creditors of
the Company.

        7.     TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.

               (a) RESTRICTION ON TRANSFER.  This Warrant and the rights granted
to the holder hereof are  transferable,  in whole or in part,  upon surrender of
this Warrant,  together with a properly executed assignment in the form attached
hereto,  at the office or agency of the Company  referred to in  Paragraph  7(e)
below,  provided,  however,  that any transfer or assignment shall be subject to
the  conditions  set  forth  in  Paragraph  7(f)  hereof  and to the  applicable
provisions of the  Securities  Purchase  Agreement.  Until due  presentment  for
registration of transfer on the books of the Company,  the Company may treat the
registered  holder hereof as the owner and holder  hereof for all purposes,  and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration  rights described in
Paragraph  8 are  assignable  only in  accordance  with the  provisions  of that
certain  Registration  Rights  Agreement,  dated as of November 25, 1997, by and
among the Company and the other signatories  thereto (the  "Registration  Rights
Agreement").

               (b)  WARRANT  EXCHANGEABLE  FOR  DIFFERENT  DENOMINATIONS.   This
Warrant is  exchangeable,  upon the surrender hereof by the holder hereof at the
office or agency of the Company  referred to in  Paragraph  7(e) below,  for new
Warrants of like tenor  representing  in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder,  each of such
new Warrants to represent  the right to purchase  such number of shares as shall
be designated by the holder hereof at the time of such surrender.

               (c) REPLACEMENT OF WARRANT.  Upon receipt of evidence  reasonably
satisfactory to the Company of the loss,  theft,  destruction,  or mutilation of
this  Warrant and, in the case of any such loss,  theft,  or  destruction,  upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the  Company,  or,  in the  case of any  such  mutilation,  upon  surrender  and
cancellation  of this  Warrant,  the Company,  at its expense,  will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

               (d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this  Paragraph 7, this Warrant shall be promptly  canceled by the Company.  The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses  (other  than  legal  expenses,  if  any,  incurred  by the  Holder  or
transferees) and charges payable in connection with the preparation,  execution,
and delivery of Warrants pursuant to this Paragraph 7.


                                      -10-

<PAGE>

               (e)  REGISTER.  The  Company  shall  maintain,  at its  principal
executive  offices  (or such  other  office or agency of the  Company  as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company  shall  record the name and address of the person in whose name this
Warrant has been issued,  as well as the name and address of each transferee and
each prior owner of this Warrant.

               (f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in  connection  with any  exercise,  transfer,  or
exchange of this  Warrant,  this Warrant (or, in the case of any  exercise,  the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933,  as  amended  (the  "Securities  Act") and under  applicable  state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise,  transfer, or exchange, (i) that the holder or transferee of this
Warrant,  as the case may be,  furnish  to the  Company  a  written  opinion  of
counsel,  which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under  applicable  state securities or blue sky laws, (ii) that the
holder or transferee  execute and deliver to the Company an investment letter in
form and substance  acceptable to the Company,  and (iii) that the transferee be
an  "accredited  investor"  as  defined  in Rule  501(a)  promulgated  under the
Securities  Act;  provided  that  no  such  opinion,  letter  or  status  as  an
"accredited  investor" shall be required in connection with a transfer  pursuant
to Rule 144 under the  Securities  Act.  The first  holder of this  Warrant,  by
taking and  holding  the same,  represents  to the  Company  that such holder is
acquiring this Warrant for  investment  and not with a view to the  distribution
thereof.

        8. REGISTRATION  RIGHTS. The initial holder of this Warrant (and certain
assignees  thereof) is entitled  to the benefit of such  registration  rights in
respect of the Warrant Shares as are set forth in Section 2 of the  Registration
Rights Agreement.

        9. NOTICES. All notices,  requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered,  or shall be sent by certified
or registered mail or by recognized overnight mail courier,  postage prepaid and
addressed,  to such holder at the address  shown for such holder on the books of
the  Company,  or at such  other  address as shall  have been  furnished  to the
Company  by  notice  from  such  holder.  All  notices,   requests,   and  other
communications  required or permitted to be given or delivered  hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and  addressed,  to the office of the Company at 200 Park  Avenue,  49th
Floor, New York, New York 10166, Attention:  Secretary, or at such other address
as shall have been  furnished  to the holder of this  Warrant by notice from the
Company.  Any  such  notice,  request,  or  other  communication  may be sent by
facsimile,  but  shall  in such  case be  subsequently  confirmed  by a  writing
personally  delivered or sent by certified or  registered  mail or by recognized
overnight  mail  courier as provided  above.  All notices,  requests,  and other
communications  shall be  deemed to have  been  given  either at the time of the
receipt  thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9,


                                      -11-

<PAGE>

or, if mailed by  registered  or certified  mail or with a recognized  overnight
mail courier upon deposit with the United  States Post Office or such  overnight
mail courier,  if postage is prepaid and the mailing is properly  addressed,  as
the case may be.

        10.  GOVERNING  LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE  WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE  WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.

        11.    MISCELLANEOUS.

               (a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.

               (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs  of this Warrant are inserted  for  purposes of reference  only,  and
shall not affect the meaning or construction of any of the provisions hereof.

               (c) CASHLESS EXERCISE.  Notwithstanding  anything to the contrary
contained in this  Warrant,  this Warrant may be exercised by  presentation  and
surrender of this Warrant to the Company at its principal executive offices with
a written  notice of the  holder's  intention  to  effect a  cashless  exercise,
including  a  calculation  of the number of shares of Common  Stock to be issued
upon such exercise in accordance with the terms hereof (a "Cashless  Exercise").
In the event of a Cashless  Exercise,  in lieu of paying the  Exercise  Price in
cash,  the holder  shall  surrender  this  Warrant  for that number of shares of
Common Stock  determined by multiplying the number of Warrant Shares to which it
would  otherwise be entitled by a fraction,  the numerator of which shall be the
difference  between the then current  Market Price per share of the Common Stock
and the Exercise  Price,  and the denominator of which shall be the then current
Market Price per share of Common Stock.

               (d) Other  Agreements.  This Warrant is subject to the rights and
restrictions set forth in the Securities Purchase Agreement and the Registration
Rights Agreement.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                      -12-


<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.

                                      AMERICAN BANKNOTE CORPORATION


                                      By:  /s/Harvey J. Kesner, Esq.
                                           ----------------------------------
                                           Harvey J. Kesner, Esq.
                                           Executive Vice President, General 
                                                Counsel and Secretary


                                             Dated as of November 25, 1997


                                      -13-

<PAGE>

                           FORM OF EXERCISE AGREEMENT


                                                         Dated:  ________, ____.


To:_____________________________


        The  undersigned,  pursuant  to the  provisions  set forth in the within
Warrant,  hereby agrees to purchase  ________  shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by  certified or official  bank check in the
amount of,  or, if the resale of such  Common  Stock by the  undersigned  is not
currently registered pursuant to an effective  registration  statement under the
Securities  Act of 1933, as amended,  by surrender of  securities  issued by the
Company  (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________.  Please issue a certificate  or  certificates  for
such shares of Common  Stock in the name of and pay any cash for any  fractional
share to:


                             Name:          
                                               --------------------------------

                             Signature:         
                                               --------------------------------
                             Address:          
                                               --------------------------------


                             Note:         The above signature should
                                           correspond exactly with the name
                                           on the face of the within Warrant.

and,  if said  number  of shares of  Common  Stock  shall not be all the  shares
purchasable under the within Warrant,  a new Warrant is to be issued in the name
of said undersigned  covering the balance of the shares  purchasable  thereunder
less any fraction of a share paid in cash.


<PAGE>

                               FORM OF ASSIGNMENT


        FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant,  with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:

Name of Assignee                    Address                         No of Shares



, and hereby irrevocably constitutes and appoints ______________
________________________  as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.


Dated: _____________________, ____,

In the presence of

- ------------------

                          Name:          
                                               --------------------------------


                                 Signature:       
                                               --------------------------------
                                 Title of Signing Officer or Agent (if any):

                                               --------------------------------
                                 Address:       
                                               --------------------------------


                                 Note:  The above signature should
                                        correspond exactly with the name
                                        on the face of the within Warrant.





                          REGISTRATION RIGHTS AGREEMENT

        REGISTRATION RIGHTS AGREEMENT (this  "Agreement"),  dated as of November
25, 1997, by and among American Banknote  Corporation,  a Delaware  corporation,
with  headquarters  located at 200 Park Avenue,  49th Floor,  New York, New York
10166  (the  "COMPANY"),  and  each  of the  undersigned  (together  with  their
respective  affiliates and any assignee or transferee of all of their respective
rights hereunder, the "INITIAL INVESTORS").

        WHEREAS:

        A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),  the
Company  has  agreed,  upon the terms and  subject to the  conditions  contained
therein, to issue and sell to the Initial Investors (i) convertible subordinated
debentures (the  "DEBENTURES") that are convertible into shares (the "CONVERSION
SHARES") of the Company's common stock (the "COMMON STOCK"),  upon the terms and
subject to the  limitations and conditions set forth in such Debentures and (ii)
warrants (the "CLOSING WARRANTS") to acquire 150,000 shares of Common Stock (the
"CLOSING  WARRANT  SHARES"),  upon the terms and subject to the  limitations and
conditions set forth in the Warrants dated November 25, 1997; and

        B. In  accordance  with  the  terms  of the  Debentures,  under  certain
circumstances  the Company may redeem the  Debentures  for cash plus a number of
additional warrants determined based upon the redemption amount (the "REDEMPTION
WARRANTS"  and,  collectively  with the Closing  Warrants,  the  "WARRANTS")  to
acquire  shares  of  Common  Stock  (the   "REDEMPTION   WARRANT   SHARES"  and,
collectively with the Closing Warrant Shares, the "WARRANT SHARES").


        C. To induce the Initial Investors to execute and deliver the Securities
Purchase  Agreement,  the  Company  has agreed to provide  certain  registration
rights  under  the  Securities  Act of  1933,  as  amended,  and the  rules  and
regulations  thereunder,  or any similar  successor statute  (collectively,  the
"1933 ACT"), and applicable state securities laws;

        NOW,  THEREFORE,  in  consideration  of  the  premises  and  the  mutual
covenants  contained  herein  and other  good and  valuable  consideration,  the
receipt and sufficiency of which are hereby  acknowledged,  the Company and each
of the Initial Investors hereby agree as follows:


<PAGE>


        1.     DEFINITIONS.

               a. As used in this Agreement,  the following terms shall have the
following meanings:

                    (i)  "INVESTORS"   means  the  Initial   Investors  and  any
transferee  or assignee  who agrees to become  bound by the  provisions  of this
Agreement in accordance with Section 9 hereof.

                    (ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration  effected  by  preparing  and filing a  Registration  Statement  or
Statements  in  compliance  with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"),  and the  declaration or ordering of  effectiveness  of such
Registration  Statement by the United States Securities and Exchange  Commission
(the "SEC").

                    (iii)  "REGISTRABLE  SECURITIES" means the Conversion Shares
and Warrant  Shares issued or issuable and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the  foregoing  (including,  but not  limited to,  Common  Stock  issuable  upon
conversion of the principal  and interest of the  Debentures or shares  issuable
pursuant to the damage provisions of the Debentures and hereunder).  Registrable
Securities  shall cease to be  Registrable  Securities  at such time as (i) they
have been sold pursuant to an effective  registration statement or Rule 144 to a
person who acquires  them free of  restrictions  on transfer or (ii) they may be
sold free of restrictions on transfer (including restrictions relating to volume
limitations) under Rule 144(k) or any similar or successor rule.

                    (iv) "REGISTRATION STATEMENT" means a registration statement
of the Company under the 1933 Act.

               b. Capitalized terms used herein and not otherwise defined herein
shall  have  the  respective  meanings  set  forth  in the  Securities  Purchase
Agreement.

        2.     REGISTRATION.

               a. Mandatory Registration.  The Company shall prepare, and, on or
prior to the date which is  forty-five  (45) days after the date of the  Closing
under the Securities  Purchase Agreement (the "CLOSING DATE"), file with the SEC
a Registration Statement on Form S-3 (or, if Form S-3 is not then available,  on
such  form  of  Registration   Statement  as  is  then  available  to  effect  a
registration  of the  Registrable  Securities,  subject  to the  consent  of the
Initial Investors, which consent will not be unreasonably withheld) covering the
resale of the  Registrable  Securities  underlying  the  Debentures and Warrants
issued  or  issuable  pursuant  to  the  Securities   Purchase  Agreement  which
Registration Statement, to the extent allowable under the 1933 Act and the Rules
promulgated  thereunder (including Rule 416), shall state that such Registration


                                       2
<PAGE>

Statement also covers such  indeterminate  number of additional shares of Common
Stock as may become  issuable upon  conversion of the Debentures and exercise of
the  Warrants  (i) to  prevent  dilution  resulting  from  stock  splits,  stock
dividends or similar transactions or (ii) by reason of changes in the Conversion
Price of the  Debentures  in  accordance  with the terms thereof or the Exercise
Price of the Warrants in accordance with the terms thereof. The number of shares
of Common Stock initially  included in such  Registration  Statement shall be no
less than 1,600,000.

               b.  Underwritten   Offering.   If  any  offering  pursuant  to  a
Registration  Statement pursuant to Section 2(a) hereof involves an underwritten
offering,  the  Investors  who hold a majority in  interest  of the  Registrable
Securities  subject  to  such  underwritten  offering,  with  the  consent  of a
majority-in-interest  of the Initial  Investors,  shall have the right to select
one legal counsel and an investment banker or bankers and manager or managers to
administer  the  offering,  which  investment  banker or  bankers  or manager or
managers shall be reasonably satisfactory to the Company.

               c.  Payments  by the  Company.  The  Company  shall  use its best
efforts  to  obtain  effectiveness  of the  Registration  Statement  as  soon as
practicable.  If (i) the  Registration  Statement(s)  covering  the  Registrable
Securities  required to be filed by the Company  pursuant to Section 2(a) hereof
is not declared  effective by the SEC within one hundred twenty (120) days after
the Closing  Date or if,  after the  Registration  Statement  has been  declared
effective  by the  SEC,  sales  cannot  be  made  pursuant  to the  Registration
Statement  (other than by reason of an Allowed  Delay as defined in Section 3(f)
below),  or (ii) the Common Stock is not listed or included for quotation on any
one of the New York Stock  Exchange (the  "NYSE"),  the Nasdaq  National  Market
("NASDAQ") or the American  Stock Exchange (the "AMEX") after being so listed or
included for quotation,  then the Company will make payments to the Investors in
such amounts and at such times as shall be  determined  pursuant to this Section
2(c) as partial  relief for the damages to the  Investors  by reason of any such
delay in or reduction of their ability to sell the Registrable Securities (which
remedy  shall not be  exclusive  of any other  remedies  available  at law or in
equity).  The Company shall pay to each holder of the Debentures or Registerable
Securities  an  amount  equal to the then  outstanding  principal  amount of the
Debentures  (and,  in the  case  of  holders  of  Registerable  Securities,  the
principal  amount of Debentures  from which such  Registerable  Securities  were
converted)   ("OUTSTANDING  PRINCIPAL  AMOUNT")  multiplied  by  the  Applicable
Percentage  (as  defined  below)  times  the sum of:  (i) the  number  of months
(prorated for partial  months) after the end of such 120-day period and prior to
the date the Registration  Statement is declared effective by the SEC, provided,
however,  that there  shall be excluded  from such  period any delays  which are
solely  attributable  to changes  required by the Investors in the  Registration
Statement  with respect to  information  relating to the  Investors,  including,
without  limitation,  changes to the plan of distribution,  or to the failure of
the Investors to conduct their review of the Registration  Statement pursuant to
Section  3(h) below in a  reasonably  prompt  manner;  (ii) the number of months
(prorated  for  partial  months)  that  sales  cannot  be made  pursuant  to the
Registration  Statement  after  the  Registration  Statement  has been  declared
effective (including, without limitation, when sales cannot be made by reason of
the Company's  failure to properly  supplement or amend the prospectus  included
therein in 


                                       3
<PAGE>

accordance  with the terms of this Agreement,  but excluding  Allowed Delays (as
defined in Section 3(f));  and (iii) the number of months  (prorated for partial
months)  that the Common  Stock is not listed or included  for  quotation on the
NYSE,  Nasdaq or AMEX or that trading  thereon is halted after the  Registration
Statement  has  been  declared  effective.  (For  example,  if the  Registration
Statement  becomes  effective  two  hundred ten (210) days after the end of such
120-day period, the Company would pay $70,000, or $10,000 for each $1,000,000 of
Outstanding Principal Amount for each month during such 7-month period following
the 120-day period for which the  Registration  Statement is not  effective.  If
thereafter,  sales could not be made pursuant to the Registration  Statement for
an additional  30-day  period,  the Company would pay an additional  $15,000 for
each $1,000,000 of Outstanding  Principal Amount.  Such amounts shall be paid in
cash or, at each Investor's  option, may be added to the principal amount of the
Debenture and  thereafter be  convertible  into Common Stock at the  "CONVERSION
PRICE" (as defined in the  Debentures).  Any shares of Common  Stock issued upon
conversion  of such amounts  shall be  Registrable  Securities.  If the Investor
desires to convert the amounts due hereunder  into  Registrable  Securities,  it
shall so notify the Company in writing  within two (2) business days of the date
on which such  amounts are first  payable in cash and such  amounts  shall be so
convertible  (pursuant  to  the  mechanics  set  forth  under  Article  I of the
Debentures),  beginning  on the last  day  upon  which  the  cash  amount  would
otherwise be due in  accordance  with the following  sentence.  Payments of cash
pursuant  hereto shall be made within five (5) days after the end of each period
that gives rise to such  obligation,  provided  that, if any such period extends
for more than thirty  (30) days,  interim  payments  shall be made for each such
thirty (30) day period.  The term "APPLICABLE  PERCENTAGE"  means one hundredths
(.010)  with  respect  to the first  seven (7) months of any  calculation  under
Clause  (i)  of  the   sentence  in  which  the  term  is  used,   and  one  and
one-half-hundredths  (.015) for any other purpose.  Notwithstanding  anything to
the contrary set forth herein, in no event shall the aggregate payments pursuant
to this Section 2(c) exceed twelve hundredths (.12) of the Outstanding Principal
Amount.

               d.  Piggy-Back  Registrations.  If  at  any  time  prior  to  the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration  Statement  relating to an offering for its own
account  or the  account  of  others  under  the 1933  Act of any of its  equity
securities  (other  than  on Form  S-4 or Form  S-8 or  their  then  equivalents
relating  to equity  securities  to be  issued  solely  in  connection  with any
acquisition  of  any  entity  or  business  or  equity  securities  issuable  in
connection with stock option or other employee benefit plans), the Company shall
send to each Investor who is entitled to registration  rights under this Section
2(d) written notice of such determination and, if within fifteen (15) days after
the effective  date of such notice,  such Investor  shall so request in writing,
the Company shall include in such Registration  Statement all or any part of the
Registrable Securities such Investor requests to be registered,  except that if,
in  connection  with any  underwritten  public  offering  for the account of the
Company the managing  underwriter(s)  thereof  shall impose a limitation  on the
number of  shares of Common  Stock  which may be  included  in the  Registration
Statement because, in such underwriter(s)' judgment,  marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such  


                                       4
<PAGE>

Registration  Statement only such limited portion of the Registrable  Securities
with respect to which such  Investor has  requested  inclusion  hereunder as the
underwriter or the Company shall permit. Any exclusion of Registrable Securities
shall be made pro rata  among  the  Investors  seeking  to  include  Registrable
Securities in proportion to the number of  Registrable  Securities  sought to be
included  by such  Investors;  provided,  however,  that the  Company  shall not
exclude any  Registrable  Securities  unless the Company has first  excluded all
outstanding  securities,  the holders of which are not  entitled to inclusion of
such securities in such  Registration  Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving  effect to the  immediately  preceding  proviso,  any  exclusion of
Registrable  Securities  shall be made pro rata with holders of other securities
having the right to include such securities in the Registration  Statement other
than holders of  securities  entitled to inclusion of their  securities  in such
Registration  Statement by reason of demand  registration  rights,  whose rights
shall be senior.  No right to registration of Registrable  Securities under this
Section 2(d) shall be construed to limit any registration required under Section
2(a) hereof.  If an offering in connection with which an Investor is entitled to
registration  under this Section  2(d) is an  underwritten  offering,  then each
Investor  whose  Registrable   Securities  are  included  in  such  Registration
Statement shall,  unless  otherwise  agreed by the Company,  offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and  conditions  as other shares of Common Stock  included in such  underwritten
offering.  Notwithstanding  anything  to the  contrary  set  forth  herein,  the
registration rights of the Investors pursuant to this Section 2(d) shall only be
available  in  the  event  that  the  Company  fails  to  timely  file,   obtain
effectiveness or maintain the effectiveness of the Registration  Statement to be
filed pursuant to Section 2(a) in accordance  with the terms of this  Agreement;
provided,  however,  that if the  Registration  Statement is not  effective as a
result of an Allowed  Delay,  the Company  will not be required to register  the
Registrable  Securities  pursuant to this  Section 2(d) and will be permitted to
use the Registration Statement upon the expiration of the Allowed Delay.

               e. Eligibility for Form S-3. The Company  represents and warrants
that it meets the registrant  eligibility  requirements  for the use of Form S-3
for registration of the sale by the Initial Investors and any other Investors of
the Registrable Securities and the Company shall file all reports required to be
filed by the  Company  with the SEC in a timely  manner so as to  maintain  such
eligibility for the use of Form S-3.

        3.     OBLIGATIONS OF THE COMPANY.

        In connection with the registration of the Registrable  Securities,  the
Company shall have the following obligations:

               a. The Company shall prepare promptly,  and file with the SEC not
later than forty-five (45) days after the Closing Date, a Registration Statement
with respect to the number of Registrable  Securities  provided in Section 2(a),
and  thereafter  use its best  efforts  to  cause  such  Registration  Statement
relating to Registrable Securities to become effective as soon as possible 


                                       5
<PAGE>

after such filing,  and keep the Registration  Statement  effective  pursuant to
Rule 415 at all times until such date as is the earlier of (i) the date on which
all of the Registrable  Securities have been sold and (ii) the date on which the
Registrable  Securities (in the opinion of counsel to the Initial Investors) may
be immediately  sold without  restriction  (including  without  limitation as to
volume by each  holder  thereof)  without  registration  under the 1933 Act (the
"REGISTRATION  PERIOD"),  which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein,  or necessary to make the statements  therein in light of the
circumstances under which made, not misleading.

               b.  The  Company  shall  prepare  and  file  with  the  SEC  such
amendments  (including   post-effective   amendments)  and  supplements  to  the
Registration   Statement  and  the  prospectus   used  in  connection  with  the
Registration  Statement as may be necessary to keep the  Registration  Statement
effective at all times during the Registration  Period, and, during such period,
comply with the  provisions of the 1933 Act with respect to the  disposition  of
all Registrable  Securities of the Company covered by the Registration Statement
until such time as all of such  Registrable  Securities have been disposed of in
accordance  with the intended  methods of  disposition  by the seller or sellers
thereof as set forth in the Registration  Statement.  In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the  Registrable  Securities  issued or issuable
upon conversion of the Debentures or exercise of the Warrants, the Company shall
amend the Registration  Statement,  or file a new Registration Statement (on the
short form available therefore,  if applicable),  or both, so as to cover all of
the Registrable  Securities,  in each case, as soon as  practicable,  but in any
event within  twenty (20)  business  days after the  necessity  therefor  arises
(based on the market  price of the Common  Stock and other  relevant  factors on
which the Company  reasonably  elects to rely).  The Company  shall use its best
efforts to cause such  amendment  and/or new  Registration  Statement  to become
effective as soon as practicable following the filing thereof. The provisions of
Section 2(c) above shall be applicable with respect to such obligation, with the
one hundred  twenty  (120) days running from the day after the date on which the
Company  reasonably first determines (or reasonably  should have determined) the
need therefor.

               c. The Company shall furnish to each Investor  whose  Registrable
Securities are included in the Registration  Statement and its legal counsel (i)
promptly  after the same is prepared  and publicly  distributed,  filed with the
SEC, or received by the Company, one copy of the Registration  Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto,  and, in the case of the Registration  Statement referred
to in Section  2(a),  each letter  written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such  Registration  Statement  (other
than  any  portion  of  any  thereof  which  does  not  relate  to the  plan  of
distribution  or the  Initial  Investors,  the  Debentures  or the  Registerable
Securities  or which  contains  information  for which the  Company  has  sought
confidential  treatment),  and (ii)  such  number  of  copies  of a  prospectus,
including a preliminary  


                                       6
<PAGE>

prospectus,  and all amendments and supplements thereto and such other documents
as such Investor may reasonably  request in order to facilitate the  disposition
of  the  Registrable  Securities  owned  by  such  Investor.  The  Company  will
immediately  notify  each  Investor by  facsimile  of the  effectiveness  of the
Registration Statement or any post-effective amendment.

               d. The Company shall use  reasonable  efforts to (i) register and
qualify the Registrable  Securities covered by the Registration  Statement under
such other  securities  or "blue sky" laws of such  jurisdictions  in the United
States as the  Investors  who hold a majority  in  interest  of the  Registrable
Securities  being  offered  reasonably  request,  (ii) prepare and file in those
jurisdictions  such  amendments   (including   post-effective   amendments)  and
supplements  to such  registrations  and  qualifications  as may be necessary to
maintain the effectiveness  thereof during the Registration  Period,  (iii) take
such other  actions as may be  necessary  to  maintain  such  registrations  and
qualifications in effect at all times during the Registration  Period,  and (iv)
take all  other  actions  reasonably  necessary  or  advisable  to  qualify  the
Registrable  Securities  for  sale  in such  jurisdictions,  in  each  case,  if
necessary  to enable  Holder to dispose  of  Registrable  Securities;  provided,
however,  that the Company shall not be required in connection therewith or as a
condition  thereto to (a) qualify to do business  in any  jurisdiction  where it
would not  otherwise  be  required  to qualify but for this  Section  3(d),  (b)
subject itself to general taxation in any such jurisdiction,  (c) file a general
consent  to  service  of  process  in any such  jurisdiction,  (d)  provide  any
undertakings  that cause the Company  undue  expense or burden,  or (e) make any
change in its charter or bylaws,  which in each case the Board of  Directors  of
the Company  determines to be contrary to the best  interests of the Company and
its stockholders.

               e. In the event Investors who hold a majority-in-interest  of the
Registrable  Securities  being  offered in the offering  (with the approval of a
majority-in-interest   of  the  Initial  Investors)  intend  to  distribute  the
Registerable  Securities  by means of an  underwriting,  they  shall  notify the
Company  of  any  such  underwriting  and  will  only  be  permitted  to  use an
underwriter  designated or otherwise  acceptable  to the Company.  Only one such
underwriting  shall be  permitted  hereunder.  The Company  shall enter into and
perform its obligations under an underwriting  agreement, in usual and customary
form, including, without limitation,  customary indemnification and contribution
obligations, with the underwriters of such offering.

               f. As promptly as practicable after becoming aware of such event,
the Company shall notify each  Investor of the happening of any event,  of which
the Company has knowledge,  as a result of which the prospectus  included in the
Registration  Statement,  as then in effect,  includes an untrue  statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the  statements  therein not  misleading,  and use its best
efforts  promptly  to prepare a  supplement  or  amendment  to the  Registration
Statement to correct such untrue statement or omission,  and deliver such number
of copies of such  supplement or amendment to each Investor as such Investor may
reasonably request; provided that, for not more than forty-five (45) consecutive
trading  days (or a total of not more than sixty (60) trading days in any twelve
(12) month period),  the Company may delay the disclosure of material non-public
information  concerning  the  Company  (as well as  prospectus  or  Registration


                                       7
<PAGE>

Statement  updating)  the  disclosure  of which at the time is not,  in the good
faith opinion of the Company,  in the best interests of the Company (an "ALLOWED
DELAY");  provided,  further,  that the Company  shall  promptly  (i) notify the
Investors  in writing of the  existence  of (but in no event,  without the prior
written consent of an Investor,  shall the Company disclose to such Investor any
of the facts or circumstances  regarding) material non-public information giving
rise to an Allowed  Delay and (ii) advise the  Investors in writing to cease all
sales under the Registration  Statement until the end of the Allowed Delay. Upon
expiration of the Allowed  Delay,  the Company shall again be bound by the first
sentence  of this  Section  3(f) with  respect to the  information  giving  rise
thereto.

               g. The Company shall use its best efforts to prevent the issuance
of any  stop  order or  other  suspension  of  effectiveness  of a  Registration
Statement,  and, if such an order is issued,  to obtain the  withdrawal  of such
order at the  earliest  possible  moment and to notify each  Investor  who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the  managing  underwriters)  of the  issuance of such order and the  resolution
thereof.

               h. The Company  shall permit a single firm of counsel  designated
by the Initial Investors to review the Registration Statement and all amendments
and  supplements   thereto  (as  well  as  all  requests  for   acceleration  or
effectiveness  thereof) a  reasonable  period of time prior to their filing with
the SEC, and not file any  document in a form to which such  counsel  reasonably
objects and will not request acceleration of the Registration  Statement without
prior  notice  to such  counsel.  The  sections  of the  Registration  Statement
covering  information with respect to the Investors,  the Investor's  beneficial
ownership  of  securities  of the Company or the  Investors  intended  method of
disposition of Registrable  Securities shall conform to the information provided
to the Company by each of the Investors.

               i. The Company  shall make  generally  available  to its security
holders  as soon as  practical,  but not later than  ninety  (90) days after the
close of the period covered  thereby,  an earnings  statement (in form complying
with the  provisions  of Rule 158 under the 1933 Act)  covering  a  twelve-month
period  beginning not later than the first day of the Company's  fiscal  quarter
next following the effective date of the Registration Statement.

               j. At the request of any seller of  Registrable  Securities,  the
Company shall furnish, on the date that Registrable  Securities are delivered to
an underwriter, if any, for sale in connection with an underwritten offering and
the  Registration  Statement  or, if such  securities  are not being  sold by an
underwriter,  on the date of effectiveness  thereof (i) an opinion,  dated as of
such  date,  from  counsel   representing  the  Company  for  purposes  of  such
Registration  Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriters,  if any, and the
seller of Registerable  Securities and (ii) a letter,  dated such date, from the
Company's  independent  certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters,  if any, and the
Investors.
               


                                       8
<PAGE>

               k. The Company  shall make  available  for  inspection by (i) any
Investor, (ii) any underwriter  participating in any disposition pursuant to the
Registration  Statement  and  (iii)  one  firm  of  attorneys  and  one  firm of
accountants or other agents  retained by the Initial  Investors,  (collectively,
the  "INSPECTORS")  all  pertinent  financial and other  records,  and pertinent
corporate documents and properties of the Company (collectively, the "RECORDS"),
as shall be  reasonably  deemed  necessary  by each  Inspector  to  enable  each
Inspector to exercise its due diligence responsibility,  and cause the Company's
officers,  directors and employees to supply all information which any Inspector
may reasonably  request for purposes of such due diligence;  provided,  however,
that each  Inspector  shall hold in confidence and shall not make any disclosure
(except to an  Investor)  of any Record or other  information  which the Company
determines  in good faith to be  confidential,  and of which  determination  the
Inspectors  are so  notified,  unless  (a) the  disclosure  of such  Records  is
necessary  to avoid or correct a  misstatement  or omission in any  Registration
Statement,  (b)  release of such  Records is ordered  pursuant  to a subpoena or
other order from a court or government  body of competent  jurisdiction,  or (c)
the information in such Records has been made generally  available to the public
other  than by  disclosure  in  violation  of this or any other  agreement.  The
Company shall not be required to disclose any  confidential  information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality  agreements (in form and substance  satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall,  upon learning that disclosure of such
Records  is  sought  in  or  by  a  court  or  governmental  body  of  competent
jurisdiction or through other means, give prompt notice to the Company and allow
the  Company,  at its  expense,  to  undertake  appropriate  action  to  prevent
disclosure  of,  or to  obtain  a  protective  order  for,  the  Records  deemed
confidential.  Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor's ability to
sell  Registrable  Securities  in a manner  which is otherwise  consistent  with
applicable laws and regulations.

               l.  The  Company  shall  hold  in  confidence  and not  make  any
disclosure of information  concerning an Investor provided to the Company unless
(i) disclosure of such  information is necessary to comply with federal or state
securities  laws, (ii) the disclosure of such  information is necessary to avoid
or correct a misstatement or omission in any Registration  Statement,  (iii) the
release of such  information  is ordered  pursuant  to a subpoena or other order
from a court  or  governmental  body of  competent  jurisdiction,  or (iv)  such
information  has been made  generally  available  to the  public  other  than by
disclosure in violation of this or any other agreement.  The Company agrees that
it shall,  upon  learning  that  disclosure  of such  information  concerning an
Investor  is  sought  in  or  by a  court  or  governmental  body  of  competent
jurisdiction  or through other means,  give prompt notice to such Investor prior
to making such disclosure,  and allow the Investor, at its expense, to undertake
appropriate  action to prevent  disclosure  of, or to obtain a protective  order
for, such information.

               m. The  Company  shall (i) cause all the  Registrable  Securities
covered  by the  Registration  Statement  to be listed on the NYSE or each other
national  securities  exchange on which  securities  of the same class or series
issued  by the  Company  are  then  listed,  if  any,  if the  


                                       9
<PAGE>

listing of such Registrable Securities is then permitted under the rules of such
exchange,  or (ii) secure the designation and quotation,  of all the Registrable
Securities covered by the Registration Statement on Nasdaq and, without limiting
the  generality of the  foregoing,  to arrange for at least two market makers to
register with the National  Association of Securities Dealers,  Inc. ("NASD") as
such with respect to such Registrable Securities.

               n. The  Company  shall  provide a transfer  agent and  registrar,
which may be a single entity, for the Registrable  Securities not later than the
effective date of the Registration Statement.
               o.  The  Company  shall  cooperate  with the  Investors  who hold
Registrable   Securities   being  offered  and  the  managing   underwriter   or
underwriters,  if any, to  facilitate  the timely  preparation  and  delivery of
certificates  (not bearing any  restrictive  legends)  representing  Registrable
Securities to be offered pursuant to the Registration  Statement and enable such
certificates to be in such denominations or amounts,  as the case may be, as the
managing  underwriter or  underwriters,  if any, or the Investors may reasonably
request  and   registered  in  such  names  as  the  managing   underwriter   or
underwriters,  if any, or the  Investors  may  request,  and,  within  three (3)
business  days  after  a  Registration   Statement  which  includes  Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel  selected by the Company to deliver,  to the transfer  agent
for the Registrable  Securities (with copies to the Investors whose  Registrable
Securities  are included in such  Registration  Statement) an instruction in the
form  attached  hereto as EXHIBIT 1 and an  opinion of such  counsel in the form
attached hereto as EXHIBIT 2.

        4.     OBLIGATIONS OF THE INVESTORS.

        In connection with the registration of the Registrable  Securities,  the
Investors shall have the following obligations:

               a. It shall be a condition  precedent to the  obligations  of the
Company to complete the registration  pursuant to this Agreement with respect to
the  Registrable  Securities of a particular  Investor that such Investor  shall
furnish to the  Company  such  information  regarding  itself,  the  Registrable
Securities  held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such  Registrable  Securities  and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
business  days prior to the first  anticipated  filing date of the  Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.

               b.  Each  Investor,   by  such   Investor's   acceptance  of  the
Registrable  Securities,  agrees to  cooperate  with the  Company as  reasonably
requested by the Company in connection  with the  preparation  and filing of the
Registration Statement hereunder,  unless such Investor has notified the Company
in  writing  of such  Investor's  election  to  exclude  all of such  Investor's


                                       10
<PAGE>

Registrable  Securities  from the  Registration  Statement,  in  which  case the
Company shall have no further obligation to such Investor under this Agreement.

               c. In the event Investors holding a  majority-in-interest  of the
Registrable  Securities  being  registered  (with the  approval  of the  Initial
Investors)  determine to engage the services of an  underwriter,  each  Investor
agrees  to  enter  into  and  perform  such  Investor's   obligations  under  an
underwriting  agreement,  in  usual  and  customary  form,  including,   without
limitation,  customary  indemnification and contribution  obligations,  with the
managing  underwriter  of such  offering  and take  such  other  actions  as are
reasonably  required in order to expedite or facilitate  the  disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such  Investor's  election  to  exclude  all of such  Investor's  Registrable
Securities from the Registration Statement, in which case the Company shall have
no further obligation to such Investor under this Agreement.

               d. Each Investor agrees that, upon receipt of any notice from the
Company of the  happening of any event of the kind  described in Section 3(f) or
3(g),  such Investor will  immediately  discontinue  disposition  of Registrable
Securities  pursuant to the  Registration  Statement  covering such  Registrable
Securities  until such Investor's  receipt of the copies of the  supplemented or
amended  prospectus  contemplated by Section 3(f) or 3(g) and, if so directed by
the Company,  such Investor  shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a  certificate  of  destruction)
all  copies in such  Investor's  possession,  of the  prospectus  covering  such
Registrable Securities current at the time of receipt of such notice.

               e. No Investor may participate in any  underwritten  registration
hereunder  unless  such  Investor  (i)  agrees  to sell  all of such  Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and  customary  form  entered  into by the  Company  if  requested  by the
Company,  (ii)  completes and executes all  questionnaires,  powers of attorney,
indemnities,  underwriting  agreements and other documents  reasonably  required
under the terms of such underwriting  arrangements,  and (iii) agrees to pay its
pro rata share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to Section 5 below.

        5.     EXPENSES OF REGISTRATION.

        All  reasonable   expenses,   other  than  underwriting   discounts  and
commissions,   incurred   in   connection   with   registrations,   filings   or
qualifications pursuant to Sections 2 and 3, including,  without limitation, all
registration,  listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company shall be borne by the Company,
and the actual  documented fees and disbursements of one counsel selected by the
Initial  Investors  pursuant  to  Sections  2(b) and 3(h)  hereof (not to exceed
$2,500) shall be borne by the Company.



                                       11
<PAGE>


      6. INDEMNIFICATION.

        In the event any  Registrable  Securities are included in a Registration
Statement under this Agreement:

               a. To the extent  permitted by law,  the Company will  indemnify,
hold  harmless  and  defend  (i)  each  Investor  who  holds  such   Registrable
Securities, (ii) the directors,  officers, partners,  employees, agents and each
person who controls  any  Investor  within the meaning of Section 15 of the 1933
Act or Section 20 of the Securities  Exchange Act of 1934, as amended (the "1934
ACT"),  if any,  (iii)  any  underwriter  (as  defined  in the 1933 Act) for the
Investors, and (iv) the directors, officers, partners, employees and each person
who controls any such  underwriter  within the meaning of Section 15 of the 1933
Act or  Section  20 of the 1934 Act,  if any (each,  an  "INDEMNIFIED  PERSON"),
against any joint or several losses,  claims,  damages,  liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or  self-regulatory  organization,  whether commenced or threatened,  in respect
thereof,  "CLAIMS")  to which any of them may  become  subject  insofar  as such
Claims  arise out of or are based  upon:  (i) any  untrue  statement  or alleged
untrue statement of a material fact in a Registration  Statement or the omission
or alleged  omission to state  therein a material  fact required to be stated or
necessary  to make the  statements  therein  not  misleading;  (ii)  any  untrue
statement  or alleged  untrue  statement  of a material  fact  contained  in any
preliminary  prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented,  if
the Company files any amendment  thereof or supplement  thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein,  in light of the circumstances under which the
statements therein were made, not misleading;  or (iii) any violation or alleged
violation  by the  Company  of the  1933  Act,  the 1934  Act,  any  other  law,
including,  without  limitation,  any  state  securities  law,  or any  rule  or
regulation  thereunder  relating  to  the  offer  or  sale  of  the  Registrable
Securities  (the  matters in the  foregoing  clauses  (i) through  (iii)  being,
collectively,  "VIOLATIONS").  Subject to the  restrictions set forth in Section
6(c) with respect to the number of legal  counsel,  the Company shall  reimburse
the Indemnified  Person,  promptly as such expenses are incurred and are due and
payable,  for any reasonable legal fees or other reasonable expenses incurred by
them  in   connection   with   investigating   or  defending   any  such  Claim.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information  furnished in writing to the Company by any Indemnified  Person
or underwriter for such Indemnified  Person expressly for use in connection with
the preparation of the Registration  Statement or any such amendment  thereof or
supplement  thereto, if such prospectus was timely made available by the Company
pursuant  to  Section  3(c)  hereof;  (ii)  shall not apply to  amounts  paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company,  which consent shall not be unreasonably  withheld;  and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified  Person if the untrue  statement or omission of material fact
contained in the  preliminary  prospectus was corrected on 


                                       12
<PAGE>

a  timely  basis  in the  prospectus,  as then  amended  or  supplemented,  such
corrected  prospectus  was timely  made  available  by the  Company  pursuant to
Section 3(c) hereof,  and the Indemnified Person was promptly advised in writing
not to use the incorrect  prospectus prior to the use giving rise to a Violation
and  such  Indemnified  Person,  notwithstanding  such  advice,  used  it.  Such
indemnity shall remain in full force and effect  regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.

               b. In  connection  with any  Registration  Statement  in which an
Investor is  participating,  each such Investor agrees severally and not jointly
to  indemnify,  hold  harmless  and  defend,  to the same extent and in the same
manner set forth in Section 6(a), the Company,  each of its  directors,  each of
its  officers who signs the  Registration  Statement,  each person,  if any, who
controls  the Company  within the  meaning of the 1933 Act or the 1934 Act,  any
underwriter  and  any  other  stockholder  selling  securities  pursuant  to the
Registration  Statement  or any of its  directors  or officers or any person who
controls such  stockholder or underwriter  within the meaning of the 1933 Act or
the  1934  Act  (collectively  and  together  with  an  Indemnified  Person,  an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise,  insofar as such Claim arises out
of or is based upon any Violation by such  Investor,  in each case to the extent
(and only to the extent)  that such  Violation  occurs in  reliance  upon and in
conformity  with written  information  furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other expenses  (promptly
as such  expenses are incurred and are due and payable)  reasonably  incurred by
them in connection  with  investigating  or defending any such Claim;  provided,
however,  that the indemnity  agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such  settlement is effected
without the prior written  consent of such Investor,  which consent shall not be
unreasonably withheld;  provided,  further,  however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds to such  Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect  regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the   Registrable   Securities   by  the   Investors   pursuant  to  Section  9.
Notwithstanding  anything to the contrary contained herein, the  indemnification
agreement  contained  in this  Section  6(b)  with  respect  to any  preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the  preliminary  prospectus
was  corrected  on a  timely  basis  in  the  prospectus,  as  then  amended  or
supplemented.

               c. Promptly after receipt by an Indemnified Person or Indemnified
Party  under  this  Section  6 of  notice  of the  commencement  of  any  action
(including any  governmental  action),  such  Indemnified  Person or Indemnified
Party  shall,  if a  Claim  in  respect  thereof  is  to  be  made  against  any
indemnifying  party under this  Section 6, deliver to the  indemnifying  party a
written notice of the commencement  thereof,  and the  indemnifying  party shall
have the right 


                                       13
<PAGE>

to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying  party similarly  noticed,  to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified  Person or the Indemnified  Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party,  if, in the reasonable  opinion of counsel  retained by the  indemnifying
party,  the  representation  by  such  counsel  of  the  Indemnified  Person  or
Indemnified  Party and the  indemnifying  party  would be  inappropriate  due to
actual or  potential  differing  interests  between such  Indemnified  Person or
Indemnified  Party and any  other  party  represented  by such  counsel  in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable,  and such
legal counsel shall be selected by Investors holding a  majority-in-interest  of
the Registrable  Securities included in the Registration  Statement to which the
Claim  relates  (with the  approval  of a  majority-in-interest  of the  Initial
Investors),  if the Investors are entitled to indemnification  hereunder, or the
Company, if the Company is entitled to indemnification hereunder, as applicable.
The  failure  to  deliver  written  notice to the  indemnifying  party  within a
reasonable  time of the  commencement  of any such action shall not relieve such
indemnifying  party of any liability to the  Indemnified  Person or  Indemnified
Party under this Section 6, except to the extent that the indemnifying  party is
actually  prejudiced in its ability to defend such action.  The  indemnification
required  by this  Section 6 shall be made by  periodic  payments  of the amount
thereof  during the course of the  investigation  or defense,  as such  expense,
loss, damage or liability is incurred and is due and payable.

        7.     CONTRIBUTION.

        To the extent any indemnification by an indemnifying party is prohibited
or  limited  by  law,  the  indemnifying   party  agrees  to  make  the  maximum
contribution  with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided,  however, that
(i) no contribution shall be made under  circumstances where the maker would not
have been  liable for  indemnification  under the fault  standards  set forth in
Section  6, (ii) no  seller  of  Registrable  Securities  guilty  of  fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution  from any seller of Registrable  Securities who was not
guilty of such fraudulent  misrepresentation,  and (iii) contribution  (together
with any  indemnification  or other  obligations  under this  Agreement)  by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

        8.     REPORTS UNDER THE 1934 ACT.

        With a view to making  available to the  Investors  the benefits of Rule
144  promulgated  under the 1933 Act or any other  similar rule or regulation of
the SEC that may at any time  permit the  investors  to sell  securities  of the
Company to the public without registration ("RULE 144"), the Company agrees to:


                                       14
<PAGE>

               a. make and keep public information available, as those terms are
understood and defined in Rule 144;

               b. file with the SEC in a timely  manner  all  reports  and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company  remains  subject to such  requirements  (it being  understood  that
nothing herein shall limit the Company's  obligations  under Section 4(c) of the
Securities  Purchase  Agreement)  and the  filing  of  such  reports  and  other
documents is required for the applicable provisions of Rule 144; and

               c.  furnish  to each  Investor  so long  as  such  Investor  owns
Registrable  Securities,  promptly upon request,  (i) a written statement by the
Company that it has complied  with the reporting  requirements  of Rule 144, the
1933 Act and the 1934 Act,  (ii) a copy of the most recent  annual or  quarterly
report of the  Company  and such other  reports  and  documents  so filed by the
Company,  and (iii) such other  information  as may be  reasonably  requested to
permit  the  Investors  to sell such  securities  pursuant  to Rule 144  without
registration.

        9.     ASSIGNMENT OF REGISTRATION RIGHTS.

        The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable  Securities if:
(i) the  Investor  agrees in writing with the  transferee  or assignee to assign
such rights,  and a copy of such  agreement is furnished to the Company within a
reasonable time after such assignment,  (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such  transferee or assignee,  and (b) the  securities  with
respect to which such  registration  rights are being  transferred  or assigned,
(iii)  following  such transfer or assignment,  the further  disposition of such
securities by the  transferee  or assignee is restricted  under the 1933 Act and
applicable  state  securities  laws,  (iv) at or  before  the time  the  Company
receives the written notice  contemplated  by clause (ii) of this sentence,  the
transferee or assignee  agrees in writing with the Company to be bound by all of
the  provisions  contained  herein,  (v) such  transfer  shall have been made in
accordance  with  the  applicable   requirements  of  the  Securities   Purchase
Agreement,  and (vi) such transferee  shall be an "ACCREDITED  INVESTOR" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.

        10.    AMENDMENT OF REGISTRATION RIGHTS.

        Provisions of this Agreement may be amended and the  observance  thereof
may  be  waived  (either  generally  or  in a  particular  instance  and  either
retroactively or prospectively),  only with written consent of the Company, each
of the  Initial  Investors  (to the  extent  such  Initial  Investor  still owns
Registrable  Securities)  and  Investors  who hold a  majority  interest  of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.


                                       15
<PAGE>

        11.    MISCELLANEOUS.

               a. A person or  entity  is  deemed to be a holder of  Registrable
Securities  whenever  such  person or entity  owns of  record  such  Registrable
Securities.  If  the  Company  receives  conflicting  instructions,  notices  or
elections  from  two or more  persons  or  entities  with  respect  to the  same
Registrable  Securities,  the Company shall act upon the basis of  instructions,
notice  or  election  received  from the  registered  owner of such  Registrable
Securities.

               b. Any notices  required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt  requested)
or delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective  five days after being placed in
the mail,  if  mailed by  regular  U.S.  mail,  or upon  receipt,  if  delivered
personally or by courier (including a recognized  overnight delivery service) or
by  facsimile,  in each  case  addressed  to a  party.  The  addresses  for such
communications shall be:

        If to the Company:

        American Banknote Corporation
        200 Park Avenue
        49th Floor
        New York, New York  10166
        Attention:  Harvey J. Kesner, Esq.
        Facsimile:  212-338-0747

        With copy to:

        Kramer, Levin, Naftalis & Frankel
        919 Third Avenue, 38th Floor
        New York, New York  10022
        Attention:  Scott S. Rosenblum
        Facsimile:  212-983-0028

If to an Investor:  to the address set forth  immediately  below such Investor's
name on the signature pages to the Securities Purchase Agreement.

               c.  Failure of any party to  exercise  any right or remedy  under
this  Agreement or otherwise,  or delay by a party in  exercising  such right or
remedy, shall not operate as a waiver thereof.

               d. This Agreement shall be enforced, governed by and construed in
accordance  with the laws of Delaware  applicable to  agreements  made and to be
performed  entirely  within such State.  In the event that any provision of this
Agreement is invalid or  unenforceable  under any applicable  statute or rule of
law, then such provision shall be deemed 


                                       16
<PAGE>

inoperative  to the extent that it may  conflict  therewith  and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or  unenforceable  under any law shall not affect the validity
or  enforceability  of any other  provision  hereof.  The parties  hereto hereby
submit to the exclusive jurisdiction of the United States Federal Courts located
in Delaware  with  respect to any dispute  arising  under this  Agreement or the
transactions contemplated hereby.

               e.  This   Agreement  and  the  Securities   Purchase   Agreement
(including all schedules and exhibits  thereto)  constitute the entire agreement
among the parties  hereto with respect to the subject matter hereof and thereof.
There are no  restrictions,  promises,  warranties or  undertakings,  other than
those set forth or  referred  to herein  and  therein.  This  Agreement  and the
Securities  Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.

               f.  Subject  to  the  requirements  of  Section  9  hereof,  this
Agreement  shall inure to the benefit of and be binding upon the  successors and
assigns of each of the parties hereto.

               g.  The  headings  in  this  Agreement  are  for  convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.

               h. This  Agreement  may be executed in two or more  counterparts,
each of which shall be deemed an original but all of which shall  constitute one
and the same  agreement.  This  Agreement,  once  executed  by a  party,  may be
delivered to the other party hereto by facsimile  transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.

               i.  Each  party  shall  do and  perform,  or cause to be done and
performed,  all such further acts and things,  and shall execute and deliver all
such other  agreements,  certificates,  instruments and documents,  as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

               j. Except as otherwise  provided  herein,  all consents and other
determinations  to be made by the Investors  pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable  Securities,  determined
as if the  all  of the  Debentures  and  Warrants  then  outstanding  have  been
converted into or exercised for Registrable Securities.

               k. The language used in this  Agreement  will be deemed to be the
language  chosen by the parties to express their mutual intent,  and no rules of
strict construction will be applied against any party.


                                       17
<PAGE>

        IN WITNESS WHEREOF,  the Company and the undersigned  Initial  Investors
have  caused  this  Agreement  to be duly  executed  as of the date first  above
written.


AMERICAN BANKNOTE CORPORATION

By:  /s/Harvey J. Kesner, Esq.
     -------------------------------------------------------
     Harvey J. Kesner, Esq.
     Executive Vice President, General Counsel and Secretary



RGC INTERNATIONAL INVESTORS, LDC

By: Rose Glen Capital Management, L.P., Investment Manager
        By: RGC General Partner Corp., General Partner


By:  /s/Wayne D. Bloch
     -------------------------------------------------------
     Wayne D. Bloch
     Managing Director


HALIFAX FUND, L.P.

By:     Palladin Group, L.P., as attorney-in-fact
        By:  Palladin Capital Management LLC, its General Partner

By:  /s/Andrew Kaplan
     -------------------------------------------------------
     Andrew Kaplan
     Senior Vice President


                                       18



                             [THE CHASE LETTERHEAD]



                                                   December 3, 1997


American Banknote Corporation
200 Park Avenue - 49th Fl.
New York, New York 10166-4999

        Re:    Credit  Agreement dated as of January 29, 1996 as amended to date
               (the "Credit  Agreement"),  among the American  Bank Note Company
               and American  Bank Note  Holographics,  Inc.  (the  "Borrowers"),
               American  Banknote  Corporation   ("ABNC"),   the  Lenders  named
               therein, and The Chase Manhattan Bank (formerly known as Chemical
               Bank), as Agent for such Lenders

Gentlemen:

        Reference  is made to the Credit  Agreement,  and  particularly  Section
7.03, restriction on the incurrence of indebtedness.

        We  understand  that by no later  than  December  31,  1997 ABNC will be
issuing up to $100,000,000 of senior  subordinated  notes,  maturing in the year
2007 which will be guaranteed on a subordinated  basis by the Borrowers,  and we
have been  requested  to waive the  provisions  of  Section  7.03 of the  Credit
Agreement  to permit the  issuance of such  indebtedness  and such  subordinated
guarantee.

        We hereby waive the  provisions of Section 7.03 of the Credit  Agreement
to permit the issuance of such indebtedness by ABNC and the guarantee thereof by
the  Borrowers  on  a  subordinated  basis.  This  waiver  is  specific  to  the
indebtedness  referred  to  above,  and is  not  intended  to  waive  any  other
provisions of the Credit Agreement.

                                                   Very truly yours,

                                                   THE CHASE MANHATTAN BANK


                                                   By: /s/ Robert J. Arth
                                                       ----------------------
                                                        Name:  Robert J. Arth
                                                        Title: V.P.



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