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                                                                    Exhibit 10.2
                                                                    ------------
                                                                    Warrant

NEITHER THIS WARRANT NOR THE SECURITIES  ISSUABLE UPON THE EXERCISE  HEREOF HAVE
BEEN  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  AND MAY NOT BE
SOLD,  PLEDGED,  OR  OTHERWISE  TRANSFERRED  WITHOUT AN  EFFECTIVE  REGISTRATION
THEREOF  UNDER  SUCH  ACT OR  PURSUANT  TO RULE  144 OR AN  OPINION  OF  COUNSEL
REASONABLY   SATISFACTORY   TO  THE   CORPORATION  AND  ITS  COUNSEL  THAT  SUCH
REGISTRATION IS NOT REQUIRED.
                             STOCK PURCHASE WARRANT

         THIS STOCK PURCHASE  WARRANT  CERTIFIES THAT, for the agreed upon value
of $10.00 and for other good and valuable  consideration,  INSIGHT  INTERACTIVE,
LLC or its registered successors and assigns  (collectively,  the "Holder"),  is
entitled to purchase fully paid and nonassessable  shares of the $.001 par value
per share common stock (the "Common  Stock") of SOURCE  MEDIA,  INC., a Delaware
corporation  (the  "Company") at $20.00 per share (the "Exercise  Price") all as
set forth herein and as adjusted pursuant to Article 2 of this Warrant,  subject
to the  provisions  and upon the terms and conditions set forth in this Warrant.
This Warrant  allows the Holder to purchase  4,596,786  shares of Common  Stock,
subject to adjustment as provided herein,  and the shares so subject to purchase
hereunder shall be referred to herein as the "Warrant  Shares".  This Warrant is
issued  pursuant  to the  terms  of  the  Common  Stock  and  Warrants  Purchase
Agreement,  dated as of July 29,  1999 (the  "Purchase  Agreement")  between the
Company  and the Holder,  as well as  pursuant to the terms of the  Contribution
Agreement dated as of July 29, 1999 ("Contribution Agreement") among the Holder,
the Company  and  SourceSuite  LLC  ("SourceSuite")  and the  Limited  Liability
Company  Agreement of  SourceSuite  LLC  ("Operating  Agreement")  which will be
executed and  delivered at the Closing of the  Contribution  Agreement and which
was made and entered into by and between the Company and the Holder, pursuant to
which the Company and the Holder have agreed to form,  capitalize and thereafter
manage SourceSuite to conduct certain specified businesses  previously conducted
separately. Capitalized terms used herein but not otherwise defined herein shall
have the meanings set forth for such terms in the Purchase Agreement. The amount
and kind of securities  receivable  pursuant to the rights granted hereunder are
subject to adjustment pursuant to the provisions contained in this Warrant.

         This Warrant is subject to the following provisions:

                                    ARTICLE 1
                                    EXERCISE

         1.1 Method of Exercise.  The Holder may exercise  this Warrant in whole
or in part at any time and from time to time  after the date of  issuance  up to
and including  the fifth  anniversary  of the date of issuance (the  "Expiration
Date"); provided, however, that until (a) April 1, 2004, the Holder may exercise
only such  portion of this  Warrant  that would  entitle the Holder to own up to
forty-five percent (45%) of the Common Stock of the Company,  on a Fully Diluted
basis


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and (b) June 24, 2000 the Holder may  exercise  only such  portion of this
Warrant  that would  entitle  the Holder to own up to 24.99% of the  outstanding
Common  Stock of the  Company.  Deferral  of the  exercise  of a portion of this
Warrant shall not affect or limit in any manner the anti-dilution  provisions of
Article 2, which shall apply as if this  Warrant were  exercisable  at any time.
Between  April 1, 2004 and the  Expiration  Date,  the Holder may exercise  this
Warrant in whole or in part without  restriction.  The Holder may exercise  this
Warrant by delivering a duly executed  Notice of Exercise in  substantially  the
form attached as Appendix 1, to the principal office of the Company.  The Holder
shall also deliver to the Company a check for the aggregate  Exercise  Price for
the Warrant Shares being purchased.

         1.2      [Intentionally Omitted]

         1.3 Share Coverage. The number of Warrant Shares for which this Warrant
may be  exercised  shall  be  4,596,786  shares  of  Common  Stock,  subject  to
adjustment as provided herein.

         1.4 Fair Market Value.  The fair market value of the Warrant Shares for
purposes  of  Section  2.1.1(a)  below  shall be the  higher of (i) the  average
closing  price of the Warrant  Shares  reported  for the five (5)  Trading  Days
immediately before the Holder delivers its Notice of Exercise to the Company, or
the date of the issuance of additional  shares under Section  2.1.1(a) below, as
applicable; or (ii) the average closing price of the Warrant Shares reported for
the thirty (30) Trading Days  immediately  before the Holder delivers its Notice
of Exercise,  or the date of the  issuance of  additional  shares under  Section
2.1.1(a) below, as applicable.  The reported closing price for each day shall be
the  reported  closing  price (and if no sales  take place on any day,  such day
shall not be a Trading  Day),  as  reported  in the  principal  consolidated  or
composite  transaction  reporting  system on the principal  national  securities
exchange  on which such  security  is listed or  admitted  to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
National  Market  or, if such  security  is not  quoted on the  Nasdaq  National
Market,  the  average  of the  closing  bid and asked  prices on such day in the
over-the-counter market as reported by Nasdaq. As used herein, the term "Trading
Day" means a day on which the New York Stock Exchange,  each national securities
exchange on which the Warrant  Shares is listed and the Nasdaq  National  Market
are open for  business.  If the  Warrant  Shares are not then traded in a public
market,  the Board of  Directors  of the Company  shall  propose the fair market
value in its reasonable good faith judgment. The foregoing  notwithstanding,  if
the Holder  advises the Board of Directors in writing that the Holder  disagrees
with such proposed  fair market  value,  then each of the Company and the Holder
shall select a reputable  investment banking firm, and the two firms so selected
shall promptly  agree upon a third  reputable  investment  banking firm, and the
three firms shall undertake such valuation.  If the valuation of such investment
banking firms is greater than that  determined  by the Board of Directors,  then
all fees and  expenses  of such  investment  banking  firms shall be paid by the
Company. In all other circumstances, such fees and expenses shall be paid by the
Holder.

         1.5  Delivery  of  Certificate  and New  Warrant.  In the  event of any
exercise  of this  Warrant,  in whole or in part,  certificates  for the Warrant
Shares so purchased representing the aggregate number of shares specified in the
Notice of Exercise,  shall be delivered to the Holder within a reasonable  time,
not  exceeding  seven  business  days,  after  this  Warrant  shall have been so
exercised.  If this Warrant shall have been exercised only in part, then, unless
this  Warrant has


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expired,  the Company  shall,  at its expense,  at the time of delivery of said
certificates  representing the Warrant Shares,  deliver to the Holder a new
Warrant  representing  the  Warrant  Shares not so  exercised.  The Company will
pay  all  taxes  and  other  expenses  in  connection   with  the preparation,
execution and delivery of the certificates except that, in the case such
certificates are to be registered in a name or names other than the Holder,
the  Holder  will pay any and all  stock  transfer  taxes  associated  with such
transfer.

         1.6  Replacement  of  Warrants.   On  receipt  of  evidence  reasonably
satisfactory  to the Company of the loss,  theft,  destruction  or mutilation of
this Warrant and, in the case of loss,  theft or destruction,  on delivery of an
indemnity  agreement  reasonably  satisfactory in form and amount to the Company
or, in the case of mutilation,  on surrender and  cancellation  of this Warrant,
the Company at its expense shall execute and deliver in lieu of this Warrant,  a
new warrant of like tenor.

                                    ARTICLE 2
                        ADJUSTMENT TO THE WARRANT SHARES

         2.1 Antidilution Provisions.  The intent of this Article 2 is to insure
appropriate  adjustment to the Exercise Price and/or number of Warrant Shares to
be acquired in the event of the exercise of this Warrant, in the event of future
issuances of capital stock or securities  into which this Warrant may ultimately
be convertible in the instances  described below, to the end that the provisions
set forth herein (including  adjustments to the Exercise Price) shall be made to
provide  the Holder  the right to receive  essentially  the same  proportion  of
shares of capital stock (in relation to all shares of capital stock outstanding)
on the date of conversion, redemption or other exchange as the Holder would have
been entitled to had it initially been issued shares of Common Stock on the date
hereof.  Simultaneously  with each adjustment to the Exercise Price set forth in
this  Article 2, an  appropriate  adjustment  in the  number of  Warrant  Shares
obtainable upon the exercise of this Warrant shall be made so that the holder of
this  Warrant  shall  receive the same number and kind of  securities  and other
property  such holder would have been  entitled to receive had this Warrant been
exercised and converted  into Warrant Shares  immediately  prior to the event or
occurrence giving rise to the adjustment to the Exercise Price.

                  2.1.1    Adjustments for Diluting Issuances.

                  (a) In the event the Company shall issue additional  shares of
         capital stock without  consideration  or for a consideration  per share
         which is less than both the Exercise  Price for the Warrant  Shares and
         the fair market value for the Warrant Shares as determined  pursuant to
         Section 1.4 above,  then and in each such  event,  the  Exercise  Price
         shall be reduced,  concurrently with such issue of shares, to an amount
         equal to the  quotient  of:  (a) the sum of (i) the number of shares of
         Common Stock  outstanding (on a Fully Diluted basis)  immediately prior
         to such  issuance  multiplied  by the  Exercise  Price  plus  (ii)  the
         aggregate  consideration  received by the Company  upon such  issuance,
         divided by (b) the number of shares of Common Stock  outstanding  (on a
         Fully Diluted basis)  immediately after such issuance.  For purposes of
         this  Section 2.1,  the  consideration  received by the Company for the
         issue of any  additional  shares of capital  stock shall be computed as
         follows:  (i)  insofar as such  consideration  consists  of cash,

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         such consideration shall consist of the aggregate amount of cash
         received by the Company  excluding  amounts paid or payable for accrued
         interest or accrued  dividends,  and without  deduction of any expenses
         incurred or underwriting commissions or concessions paid or allowed by
         the Company;(ii)  insofar as such  consideration  consists of  property
         other than cash,such consideration shall be computed at the fair market
         value thereof at the time of such issue, as determined in good faith by
         the Board of  Directors of the Company, except where such consideration
         consists  of  securities,  in which  case the  amount of  consideration
         received  by  the  Company  shall  be the  fair  market  value  thereof
         (determined  as  provided  in  Section  1.4  hereof)  as of the date of
         receipt,  but in each  such case  without  deduction  therefrom  of any
         expenses  incurred or any underwriting  commissions or concessions paid
         or allowed by the Company in  connection  therewith.  In computing  the
         market  price  of a note or  other  obligation  that is not  listed  or
         admitted to trading on any securities  exchange or quoted in the Nasdaq
         Stock Market or reported by the National  Quotation Bureau,  Inc., or a
         similar reporting organization,  the total consideration to be received
         by the Company thereunder  (including  interest) shall be discounted to
         present  value at the prime rate  announced  or  published  in The Wall
         Street Journal under the caption "Money Rate" in effect at the time the
         note or  obligation  is deemed to have  been  issued;  and (iii) in the
         event additional Shares of capital stock are issued together with other
         securities  or other  assets of the  Company  for  consideration  which
         covers  both,  such  consideration  shall  be the  proportion  of  such
         consideration so received,  computed as determined in good faith by the
         Board of Directors of the Company.

                  (b)      Treatment of Options and Convertible Securities.

                           (i) In the event the Company should ever grant rights
                  to subscribe for or purchase,  or any options for the purchase
                  of any shares of its capital stock or  securities  convertible
                  into or  exchangeable  for  capital  stock  (such  rights  and
                  options herein referred to as "Options",  and such convertible
                  or exchangeable  securities herein referred to as "Convertible
                  Securities"), whether or not such Options or rights to convert
                  or exchange any such  Convertible  Securities are  immediately
                  exercisable,  and the price per share for which  capital stock
                  is  issuable  upon the  exercise  of such  Option  or upon the
                  conversion or exchange of such Convertible Securities shall be
                  less than the Exercise  Price in effect  immediately  prior to
                  the time of the  granting  of such  Options,  then  the  total
                  maximum  number of shares of capital  stock  issuable upon the
                  exercise of such Options or upon the conversion or exchange of
                  the  total  maximum  amount  of  such  Convertible  Securities
                  issuable  upon the exercise of such  Options  shall (as of the
                  date of granting of such Options) be deemed to be  outstanding
                  and to have been  issued and sold for such price per share and
                  the Exercise Price shall be reduced to the extent  required by
                  Section  2.1.1(a).  For purposes of this Section  2.1.1(b)(i),
                  the price per share for which such  capital  stock is issuable
                  shall be determined by dividing (x) the total amount,  if any,
                  received or receivable by the Company as consideration for the
                  granting of such Options, plus the minimum aggregate amount of
                  additional  consideration  payable  to the  Company  upon  the
                  exercise  of such  Options,  plus,  in the  case  of any  such
                  Options which relate to


<PAGE>


                  Convertible  Securities,  the minimum  aggregate  amount of
                  additional  consideration, if any, other than such Convertible
                  Securities,  payable to the Company upon the conversion or
                  exchange of such Convertible Securities, by (y) the  total
                  maximum  number of  shares  of  capital  stock issuable  upon
                  the  exercise  of such  Options  or  upon  the conversion  or
                  exchange  of all such  Convertible  Securities  issuable  upon
                  the  exercise of  such  Options. No further adjustments of the
                  Exercise  Price shall  be made  upon the actual  issue of such
                  capital  stock  or of such  Convertible Securities  upon  the
                  exercise  of such  Options  or upon the actual  issue of such
                  capital  stock upon the  conversion  or exchange of such
                  Convertible Securities.

                           (ii) If at any time the  Company  shall issue or sell
                  Convertible  Securities,  whether or not the rights to convert
                  or  exchange  such  Convertible   Securities  are  immediately
                  exercisable,  and the price per share for which  capital stock
                  is  issuable   upon  the   conversion   or  exchange  of  such
                  Convertible  Securities  shall be less than the Exercise Price
                  in effect  immediately  prior to the time of the issue or sale
                  of such Convertible Securities,  then the total maximum number
                  of shares of capital  stock  issuable  upon the  conversion or
                  exchange of all such  Convertible  Securities shall (as of the
                  date of the issue or sale of such  Convertible  Securities) be
                  deemed to be outstanding  and to have been issued and sold for
                  such price per share and the  Exercise  Price shall be reduced
                  to the extent required by Section 2.1.1(a),  provided that (a)
                  except as provided in Section  2.1.1(b)(vi) hereof, no further
                  adjustments  of the  Exercise  Price  shall  be made  upon the
                  actual  issue of such  capital  stock upon the  conversion  or
                  exchange of such  Convertible  Securities  and (b) if any such
                  issue  or sale of such  Convertible  Securities  is made  upon
                  exercise of any Options for which  adjustments of the Exercise
                  Price have been or are to be made pursuant to other provisions
                  of this Section 2.1.1,  no further  adjustment of the Exercise
                  Price  shall be made by  reason  of such  issue  or sale.  For
                  purposes of this Section 2.1.1(b)(ii), the price per share for
                  which  capital  stock  is  issuable  shall  be  determined  by
                  dividing (x) the total amount  received or  receivable  by the
                  Company  as  consideration  for  the  issue  or  sale  of such
                  Convertible  Securities,  plus the minimum aggregate amount of
                  additional consideration,  if any, other than such Convertible
                  Securities,  payable to the  Company  upon the  conversion  or
                  exchange thereof, by (y) the total maximum number of shares of
                  capital stock  issuable upon the conversion or exchange of all
                  such Convertible Securities.

                           (iii) If at any time the Company shall pay a dividend
                  or make any other  distribution upon the capital stock payable
                  in capital stock or Convertible Securities,  any capital stock
                  or  Convertible  Securities,  as the case may be,  issuable in
                  payment of such  dividend or  distribution  shall be deemed to
                  have been issued without consideration, and the Exercise Price
                  shall  be  reduced  as  if  the  Company  had  subdivided  the
                  outstanding  shares of capital stock into a greater  number of
                  shares as provided in Section 2.2 hereof.

<PAGE>


                           (iv) In case at any time  the  Company  shall  take a
                  record of the  holders  of  capital  stock for the  purpose of
                  entitling them (a) to receive a dividend or other distribution
                  payable in capital stock or Convertible Securities,  or (b) to
                  subscribe  for  or  purchase   capital  stock  or  Convertible
                  Securities,  then such  record  date shall be deemed to be the
                  date of the issue or sale of such capital stock or Convertible
                  Securities.

                           (v) If the purchase  price provided for in any Option
                  referred  to in Section  2.1.1(b)(i)  hereof,  or the price at
                  which  any  Convertible  Securities  referred  to in  Sections
                  2.1.1(b)(i)   or  (iii)   hereof  are   convertible   into  or
                  exchangeable  for  capital  stock,  shall  change  at any time
                  (whether by reason of provisions  designed to protect  against
                  dilution  or  otherwise),  the  Exercise  Price then in effect
                  hereunder  shall  forthwith  be increased or decreased to such
                  Exercise Price as would have obtained had the adjustments made
                  upon the  issuance of such Options or  Convertible  Securities
                  been made upon the basis of (a) the  issuance of the number of
                  shares of capital stock  theretofore  actually  delivered upon
                  the  exercise  of such  Options  or  upon  the  conversion  or
                  exchange  of  such  Convertible  Securities,   and  the  total
                  consideration  received therefor, and (b) the number of shares
                  of capital stock to be issued for the  consideration,  if any,
                  received  by the  Company  therefor  and to be received on the
                  basis of such changed price.

                           (vi) If any  adjustment has been made in the Exercise
                  Price  because  of the  issuance  of  Options  or  Convertible
                  Securities  and if any of such Options or rights to convert or
                  exchange  such  Convertible  Securities  expire  or  otherwise
                  terminate,  then the  Exercise  Price shall be  readjusted  to
                  eliminate the  adjustments  previously made in connection with
                  the  Options  or rights to  convert  or  exchange  Convertible
                  Securities which have expired or terminated.

                           (vii)  The   number  of  shares  of   capital   stock
                  outstanding  at any given time shall not include  shares owned
                  or  held  by or for  the  account  of  the  Company,  and  the
                  disposition of any such treasury shares shall be considered an
                  issue or sale of capital stock.

                           (viii)  Anything  in  Section  2.1.1  hereof  to  the
                  contrary notwithstanding, the Company shall not be required to
                  make any  adjustment of the Exercise  Price in the case of (A)
                  the  issuance of the Warrants or any other  warrant  issued to
                  the Holder,  (B) the  issuance of shares of Common  Stock upon
                  exercise of the  Warrants or any other  warrant  issued to the
                  Holder,  (C) the  granting of stock  options by the Company or
                  any  of  its   subsidiaries   pursuant  to  the  option  plans
                  identified on Schedule 4.3 to the Purchase Agreement, provided
                  that the  exercise  price of such  stock  options  is at least
                  equal to the fair market value of such shares of capital stock
                  (as determined by the appropriate plan) on the date such stock
                  options  are  granted,  (D) the  issuance of shares of capital
                  stock upon the  exercise of the stock  options  referred to in
                  clause (C) above,  and (E) the  issuance  of shares of capital
                  stock  upon  the  exercise,  conversion,  or  exchange  of the
                  securities which


<PAGE>

                  are set forth on Schedule 4.3 of the Purchase  Agreement, all
                  of which were issued prior to or simultaneously with the date
                  of the original issue of this Warrant.

         2.2. Adjustment for Subdivisions and Combinations.  In the event at any
time the Company  shall,  by  subdivision,  stock  split,  reverse  stock split,
dividend,  combination or reclassification of any shares of its capital stock or
otherwise  change any of the securities  then issuable upon the exercise of this
Warrant  into the same or a  different  number  of  securities  of any  class or
classes,  this Warrant shall  thereafter be exercisable,  for the same period as
the remaining  duration of the period during which this Warrant is  exercisable,
for the same number and kind of  securities  which the holder  hereof would have
received had this Warrant  been  exercised  and  converted  into Warrant  Shares
immediately prior to such change,  whether by subdivision,  stock split, reverse
stock split,  dividend,  combination  or  reclassification  of any shares of its
capital  stock or  otherwise.  In the event at any time the  Company  shall,  by
subdivision,  dividend, stock split,  reclassification or otherwise,  change the
outstanding  shares of  capital  stock  into a greater  number  of  shares,  the
Exercise  Price  in  effect  immediately  prior  to such  subdivision  shall  be
proportionately  reduced,  and  conversely,  in case the  outstanding  shares of
capital  stock shall be  combined  into a smaller  number of shares,  by reverse
stock split,  combination,  reclassification or otherwise, the Exercise Price in
effect immediately prior to such combination shall be proportionately increased.
An  adjustment  made  pursuant  to  this  Section  2.2  shall  become  effective
immediately after the effective date of such subdivision or combination.

         2.3.  Adjustment  for Dividends and  Distributions.  If at any time the
Company  shall pay a dividend or make a  distribution  to all holders of capital
stock, as such, which dividend or distribution is payable otherwise than in cash
out of  earnings  or  earned  surplus  and  otherwise  than  in  capital  stock,
Convertible Securities,  or Options, then thereafter the Holder of this Warrant,
upon the  exercise of this  Warrant,  shall be entitled to receive the number of
shares of Common  Stock  being  purchased  upon such  exercise  and, in addition
thereto and without further payment, the stock and other securities and property
(including  cash) which such Holder  would have  received by way of dividends or
distributions  (otherwise  than in cash out of earnings or earned  surplus or in
capital stock, Convertible Securities, or Options) as if continuously, since the
date of the original issue of this Warrant,  such Holder (a) had been the record
holder of the number of shares of Common Stock then being purchased, and (b) had
retained all dividends and  distributions  in stock or other  securities  (other
than capital stock,  Convertible  Securities,  or Options) which would have been
paid in  respect  of such  Common  Stock  or in  respect  of any  stock or other
securities  which would have been paid as  dividends  or  distributions  on such
Common Stock.
<PAGE>

         2.4      Repurchase on Sale, Merger, or Consolidation of the Company.

                  2.4.1   Acquisition.   For  the   purpose  of  this   Warrant,
"Acquisition"   means  any  sale,  license,  or  other  disposition  of  all  or
substantially  all  of  the  assets  of  the  Company,  or  any  reorganization,
consolidation,  or merger of the  Company  where the  holders  of the  Company's
securities before the transaction beneficially own less than fifty percent (50%)
of  the  outstanding  voting  securities  of  the  surviving  entity  after  the
transaction.

                  2.4.2  Assumption  of Warrant.  If such  Acquisition  shall be
effected in such a way that the holders of Common Stock (or any other securities
of the  Company  then  issuable  upon the  exercise  of this  Warrant)  shall be
entitled to receive stock or other securities or property  (including cash) with
respect to or in  exchange  for Common  Stock (or such other  securities),  then
lawful and adequate  provision  shall be made whereby the Holder of this Warrant
shall  thereafter have the right to purchase and receive upon the basis and upon
the terms and conditions specified in this Warrant, and in lieu of the shares of
Common Stock (or such other securities)  immediately theretofore purchasable and
receivable upon the exercise hereof,  such stock or other securities or property
(including  cash) as may be issuable or payable  with  respect to or in exchange
for a number of  outstanding  shares of Common Stock (or such other  securities)
equal to the  number  of  shares of  Common  Stock  (or such  other  securities)
immediately  theretofore  purchasable  and receivable  upon the exercise of this
Warrant,  had such  Acquisition  not taken place.  In any such case  appropriate
provision  shall be made with respect to the rights and  interests of the Holder
to the end  that the  provisions  hereof  (including,  without  limitation,  the
provisions  for  adjustments  of the Exercise Price and of the number of Warrant
Shares  purchasable  upon exercise  hereof) shall  thereafter be applicable,  as
nearly as  reasonably  may be, in relation to the stock or other  securities  or
property  thereafter  deliverable  upon the exercise  hereof.  In the event of a
consolidation  or merger of the  Company  with or into  another  corporation  or
entity as a result of which a greater or lesser number of shares of common stock
of the surviving  corporation or entity are issuable to holders of capital stock
in  respect of the number of shares of  capital  stock  outstanding  immediately
prior to such  consolidation  or  merger,  then  the  Exercise  Price in  effect
immediately prior to such  consolidation or merger shall be adjusted in the same
manner as though there were a  subdivision  or  combination  of the  outstanding
shares of capital stock.

         2.5    Reclassification,    Exchange   or   Substitution.    Upon   any
reclassification,  exchange,  substitution,  or other  event  that  results in a
change of the number  and/or class of the  securities  issuable upon exercise or
conversion  of this  Warrant,  the Holder  shall be entitled  to  receive,  upon
exercise or conversion of this  Warrant,  the number and kind of securities  and
property  that the Holder  would have  received  for the Warrant  Shares if this
Warrant had been exercised immediately before such  reclassification,  exchange,
substitution,  or  other  event.  Such an  event  shall  include  any  automatic
conversion of the outstanding or issuable  securities of the Company of the same
class or series as the Warrant  Shares to Common Stock  pursuant to the terms of
the Company's  Certificate of Incorporation upon the closing of a new registered
public  offering of the  Company's  Common  Stock.  The Company or its successor
shall  promptly  issue to the Holder a new  Warrant for such new  securities  or
other property.  The new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments  provided for in this
Article 2 including,  without limitation,  adjustments to the Exercise Price and
to the number of  securities  or  property  issuable  upon  exercise  of the new
Warrant.  The provisions of this Section 2.5 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.

         2.6  Record  Date  Adjustments.  In any case in which  this  Article  2
requires that a downward adjustment of the Exercise Price shall become effective
immediately  after a record  date for an event,  the Company may defer until the
occurrence  of such event (a) issuing to the Holder of this  Warrant  (exercised
after such record date and before the  occurrence of such event)

<PAGE>



the additional Warrant Shares issuable upon such exercise by reason of the
adjustment required by such event over and above the  Warrant  Shares  issuable
upon such exercise before giving effect to such adjustment and (b) paying to
such Holder any amount in cash in lieu of a fractional share pursuant to Section
2.8 hereof.

         2.7 Minimum Adjustment of Exercise Price. No adjustment of the Exercise
Price  shall be made in an amount less than $.05 per share in effect at the time
such adjustment is otherwise required to be made, but any such lesser adjustment
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 $.05 per share.  In case at any time the
Company  shall  issue  capital  stock by way of  dividend  on  capital  stock or
subdivide or combine the  outstanding  shares of capital  stock,  said amount of
$.05 per share (as theretofore increased or decreased,  if the said amount shall
have been adjusted in accordance  with the provisions of this Section 2.7) shall
forthwith  be  proportionately  increased in the case of such a  combination  or
decreased  in  the  case  of  such  a  subdivision   or  stock  dividend  so  as
appropriately to reflect the same.

         2.8  Fractional  Shares.  No  fractional  Shares shall be issuable upon
exercise or  conversion  of the  Warrant and the number of Warrant  Shares to be
issued shall be rounded down to the nearest whole Share.  If a fractional  share
interest  arises upon any exercise or  conversion  of the  Warrant,  the Company
shall  eliminate such  fractional  share interest by paying the Holder an amount
computed by multiplying the fractional  interest by the last reported sale price
of the  Common  Stock  on the  trading  day  immediately  preceding  the date of
exercise.

         2.9 Certificate as to Adjustments. Upon each adjustment of the Exercise
Price, the Company, at its expense, shall promptly compute such adjustment,  and
furnish the Holder with a certificate  of its Chief  Financial  Officer  setting
forth such adjustment, and the corresponding adjustment in the number of Warrant
shares  obtainable  upon the exercise of this Warrant,  and the facts upon which
such adjustments are based. The Company shall, upon written request, furnish the
Holder a certificate  setting  forth the Exercise  Price in effect upon the date
thereof and the series of adjustments leading to such Exercise Price.

         2.10 Certain  Events.  If any event occurs of the type  contemplated by
the  provisions  of  this  Article  2 but  not  expressly  provided  for by such
provisions  (including,  without limitation,  the granting of stock appreciation
rights,  phantom  stock rights or other rights with equity  features),  then the
Company's Board of Directors shall make an appropriate  adjustment in the number
of Warrant Shares  obtainable  upon exercise of this Warrant and in the Exercise
Price so as to protect the rights of the Holder of this  Warrant;  provided that
no such  adjustment  shall decrease the number of Warrant  Shares  obtainable as
otherwise determined pursuant to this Article 2.

         2.11  Purchase  Rights.  If at any time the Company  grants,  issues or
sells any rights to purchase stock,  warrants,  securities or other property pro
rata to the record  holders of any class of stock (the  "Purchase  Rights") then
the Holder of this Warrant  shall be entitled to obtain,  upon the same terms on
which the  holders of Common  Stock are to receive  such  Purchase  Rights,  the
aggregate  Purchase  Rights which such Holder could have acquired if such Holder
had held the

<PAGE>



number of Warrant Shares  acquirable upon complete exercise of this Warrant
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.

                                    ARTICLE 3
                  REPRESENTATIONS AND COVENANTS OF THE COMPANY

         The Company hereby represents and warrants to the Holder as follows:

         3.1 Title to Warrant  Shares.  All Warrant  Shares  which may be issued
upon the exercise of the rights represented by this Warrant, and all securities,
if any, issuable upon conversion of the Warrant Shares,  shall, upon issuance be
duly authorized,  validly issued, fully paid and nonassessable,  and free of any
liens and encumbrances.

         3.2 Reservation of Shares.  During the period which this Warrant may be
exercised,  the  Company  will at all times have  authorized  and  reserved  for
issuance a sufficient number of shares of Common Stock to cover such exercise.

         3.3  No  Impairment.  The  Company  shall  not,  by  amendment  of  its
Certificate of  Incorporation or through a  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  under this  Warrant by the  Company,  but
shall at all times in good faith  assist in carrying out all the  provisions  of
this Warrant and in taking all such action as may be necessary or appropriate to
protect the  Holder's  rights  under this  Warrant  against  impairment.  If the
Company takes any action  affecting the Shares or its Common Stock other than as
provided  for above  that  adversely  affects  the  Holder's  rights  under this
Warrant,  then the Company  shall make  appropriate  adjustment  to the Exercise
Price  and/or the number of Warrant  Shares to carry out the intent of Article 2
as set forth in Section 2.1.

         3.4 Notice of Certain  Events.  If the Company  proposes at any time to
(a) declare any dividend or distribution upon its Common Stock, whether in cash,
property,  stock or other securities and whether or not a regular cash dividend;
(b) offer for  subscription  pro rata to the  holders  of any class or series of
stock any additional shares of stock of any class or series or other rights; (c)
effect any reclassification or recapitalization of Common Stock; or (d) merge or
consolidate with or into any other  corporation,  or sell,  lease,  license,  or
convey all or substantially all of its assets, or to liquidate, dissolve or wind
up, then, in connection with each such event, the Company shall give the Holder:
(1) at least twenty (20) days prior written notice of the date on which a record
will be taken for such  dividend,  distribution,  or  subscription  rights  (and
specifying  the date on which the  holders  of  Common  Stock  will be  entitled
thereto) or for  determining  rights to vote,  if any, in respect of the matters
referred to in (c) and (d) above; and (2) in the case of the matters referred to
in (c) and (d) above at least twenty (20) days prior written  notice of the date
when the same will take place (and  specifying  the date on which the holders of
Common Stock will be entitled to exchange  their Common Stock for  securities or
other property deliverable upon the occurrence of such event).

<PAGE>




         3.5      Registration under the Securities Act of 1933.

                  3.5.1 Piggyback  Rights. In the event that the Company files a
         registration  statement  under the  Securities  Act of 1933, as amended
         (the "Act") which  relates to an offering of  securities of the Company
         by the Company or any holder of securities  (except in connection  with
         an offering to or by employees),  such  registration  statement and the
         prospectus  included  therein shall also, at the written request to the
         Company by the Holder, include and relate to, and meet the requirements
         of the Act with respect to, the public  offering of such Warrant Shares
         as the Holder  indicates  it intends to  exercise  and offer  under the
         registration  statement  for sale and sell,  so as to permit the public
         sale thereof in compliance with the Act, and any related qualifications
         under blue sky laws or other  compliance or any  underwriting  involved
         therein  shall also  relate  thereto.  The  Company  shall use its best
         efforts to effect such registration,  any such qualification,  any such
         compliance  and any  such  underwriting  as soon  as  practicable.  The
         Company shall give prompt written notice to the Holder of its intention
         to file a registration  statement under the Act relating to an offering
         of the aforesaid  securities of the Company,  but in no event less than
         twenty-five  (25)  days  prior  to  the  filing  of  such  registration
         statement,  and the written request  provided for in the first sentence
         of this Section shall be made by the Holder ten (10) or more days prior
         to the date specified in the notice as the date on which it is intended
         to file such  registration  statement.  Neither  the  delivery  of such
         notice by the Company  nor of such  request  pursuant  to this  Section
         3.5.1 by the Holder  shall in any way  obligate the Company to file any
         such  registration  statement and,  notwithstanding  the filing of such
         registration  statement,  the  Company  may,  at any time  prior to the
         effective date thereof,  determine not to offer the securities to which
         such registration  statement relates,  without liability to the Holder,
         except that the Company shall pay such expenses as are  contemplated to
         be paid by it under Section 3.5.3 and by the Holder pursuant to Section
         3.5.3(d).  Provided,  that, anything above in this Section 3.5.1 to the
         contrary  notwithstanding,  the inclusion of Warrant Shares in any such
         registration will require the approval of the underwriters, if any, but
         which approval shall not be unreasonably  withheld,  and such inclusion
         shall be conditioned upon the provision by the Holder to the Company of
         all information regarding the Holder reasonably required to be included
         in the  registration  statement under  applicable law and the rules and
         regulations  promulgated by the Securities and Exchange Commission (the
         "SEC")  pursuant  to the  Act.  The  "piggy-back"  registration  rights
         granted hereunder shall terminate five (5) years from the date hereof.

                  3.5.2    Demand Registration Rights.

                           (a) In  addition,  upon  written  notice  at any time
                  after the second anniversary of the date of this Warrant,  and
                  on or before the Expiration  Date, upon written request from a
                  holder  or  holders  of  fifty  percent  (50%)  or more of the
                  securities  issued or issuable  upon exercise of this Warrant,




<PAGE>

                  the Company, as promptly as possible after the receipt of such
                  notice, shall file a new registration  statement under the Act
                  with respect to the Warrant  Shares covered by such notice and
                  use  its  best  efforts  to  effect  such  registration,   all
                  qualifications under blue sky laws and all other compliance as
                  soon as practicable.  Within ten (10) days after receiving any
                  such  notice,  the  Company  shall  give  notice  to any other
                  Holders of the Warrant  Shares issued or issuable  pursuant to
                  this Warrant,  advising  that the Company is  proceeding  with
                  such registration  statement to include therein Warrant Shares
                  of such  Holders.  The Company  shall not be  obligated to any
                  such other  Holder  unless such other Holder shall accept such
                  offer by notice in writing to the Company within ten (10) days
                  thereafter.  The  Company  shall be required to effect two (2)
                  registrations  of  Warrant  Shares  pursuant  to this  Section
                  3.5.2.  The Holder  agrees to become  subject  to a  customary
                  lock-up  agreement,  for  a  reasonable  period  of  time,  if
                  required  by  the  underwriter  of a  public  offering  by the
                  Company  during the period in which the Holder is  entitled to
                  registration  of the Warrant  Shares under this Section 3.5.2;
                  provided,  however, that the Expiration Date shall be extended
                  by the  effective  period of any such lock-up  agreement.  The
                  Company may postpone, one time, for up to ninety (90) days the
                  registration  of Warrant Shares pursuant to this Section 3.5.2
                  if its Board of Directors  determines  in good faith that such
                  registration  would  have  a  material  adverse  effect  on  a
                  significant  transaction  proposed by the  Company;  provided,
                  however,  that the  Expiration  Date shall be  extended by the
                  period of any such  postponement.  The distribution of Warrant
                  Shares  covered by the  request of a Holder  pursuant  to this
                  Section  3.5.2  shall be  effected  by means of the  method of
                  distribution  selected by such Holder. If such distribution is
                  effected by means of an underwriting,  the Company shall enter
                  into  an  underwriting  agreement  in  customary  form  with a
                  managing   underwriter  of  nationally   recognized   standing
                  selected for such  underwriting  by the Holder and approved by
                  the  Company,   which  approval  shall  not  be   unreasonably
                  withheld.  Notwithstanding any other provision of this Section
                  3.5.2,  if the  managing  underwriter  advises  the  Holder in
                  writing  that  marketing  factors  require  limitation  of the
                  number of shares to be underwritten, then the underwriters may
                  exclude shares requested to be included in such  registration.
                  The number of shares to be  included in the  registration  and
                  underwriting  shall be  allocated  first among the Holders who
                  requested registration pursuant to this Section 3.5.2 and then
                  among  other  Holders  who  have  requested   registration  of
                  securities in such registration and underwriting in proportion
                  as  nearly  as  practicable  to  the  respective   amounts  of
                  securities  of the Company held by such Holders at the time of
                  filing the registration statement. No securities excluded from
                  the  underwriting  by  reason  of the  managing  underwriter's
                  marketing  limitation shall be included in such  registration.
                  If any Holder  disapproves  of the terms of the  underwriting,
                  such Holder may elect to




                  withdraw  therefrom by written notice to the  Company,  the
                  managing  underwriter  and  the  Holder requesting  such
                  registration  pursuant to this Section 3.5.2 and the
                  securities so withdrawn  shall also be withdrawn from
                  registration.  If the  distribution  of the Warrant  Shares is
                  being effected by means of an underwriting and if the managing
                  underwriter  has not  limited the number of  securities  to be
                  underwritten,  the Company may include  securities for its own
                  account in such  registration  if the managing  underwriter so
                  agrees and may include  securities  for the account of holders
                  of securities  other than Holders of the Warrant Shares issued
                  or issuable upon  exercise of this  Warrant.  The inclusion of
                  such  securities by the Company or such other holders shall be
                  on the same terms as the  registration  of Warrant Shares held
                  by  the  Holders  requesting  registration  pursuant  to  this
                  Section 3.5.2. In the event that the underwriters exclude some
                  of the securities to be registered,  the securities to be sold
                  for the account of the Company and any other  holders shall be
                  excluded  in  their  entirety  prior to the  exclusion  of any
                  Warrant Shares issued or issuable pursuant to this Warrant.

                           (b) If the Company is a  registrant  for  purposes of
                  the Act which is  entitled  to use Form S-3 (or any  successor
                  form to Form S-3) to register  securities for any registration
                  requested  pursuant  to  Section  3.5.2,  at the  request of a
                  holder  pursuant to Section  3.5.2,  the Company shall use its
                  best efforts to cause the shares to be registered on Form S-3.

                           (c) A  holder  requesting  registration  pursuant  to
                  Section  3.5.2  shall  have  the  right to  cancel a  proposed
                  registration   pursuant  to  Section   3.5.2   when,   in  its
                  discretion,  market  conditions  are so  unfavorable  as to be
                  seriously   detrimental  to  an  offering   pursuant  to  such
                  registration. For the avoidance of doubt, such cancellation of
                  a  registration  shall  not be  counted  as one of the two (2)
                  registrations  pursuant  to  Section  3.5.2,  subject  to  the
                  condition that the canceling  Holder shall promptly  reimburse
                  the Company for its expenses reasonably incurred in connection
                  with the cancelled registration,  unless such registration was
                  cancelled after having been deferred, postponed or interrupted
                  by the Company  pursuant to Section 3.5.2, in which case, such
                  expense reimbursement shall not be required.

                  3.5.3 Agreements Related to Registrations. In each instance in
         which pursuant to Sections 3.5.1 and 3.5.2 of this Section, the Company
         shall  take any  action  to permit a public  offering  or sale or other
         distribution of the Warrant Shares, the Company shall:

                           (a) Supply to the Holders of Warrant Shares intending
                  to make a  public  distribution  of  their  Warrant  Shares  a
                  reasonable  number  of copies  of the  preliminary,  final and
                  other  prospectus in conformity  with  requirements of the Act
                  and the rules and regulations  promulgated


<PAGE>

                  thereunder and such other documents as the Holders shall
                  reasonably request.

                           (b) In regard to a  registration  under Section 3.5.2
                  only,  cooperate  in taking such action as may be necessary to
                  register  or  qualify  the  Warrant  Shares  under  such other
                  securities acts or blue sky laws of such  jurisdictions as the
                  Holders shall  reasonably  request and to do any and all other
                  acts and things  which may be necessary or advisable to enable
                  the Holders of such Warrant Shares to consummate such proposed
                  sale or other  disposition  of the Warrant  Shares in any such
                  jurisdiction.

                           (c) Keep effective all such  registrations  under the
                  Act and cooperate in taking such action as may be necessary to
                  facilitate a public sale or other  disposition of such Warrant
                  Shares by such Holders.

                           (d)  Pay  all  expenses  of  any  registration  under
                  Section 3.5.2. Each registration  under Section 3.5.1 shall be
                  at the Company's expense,  except for the direct,  incremental
                  costs attributable to the "piggy-backed" Warrant Shares, which
                  shall be paid by the Holders thereof. The Company shall not be
                  required to pay any  underwriting  discount or  commission  or
                  applicable  transfer taxes relating to the  disposition of the
                  Warrant Shares.

                           (e)  Indemnify  and hold  harmless  each  Holder with
                  respect to which registration, qualification or compliance has
                  been effected  pursuant to this Agreement and any underwriter,
                  within the  meaning of the Act who may  purchase  from or sell
                  for  any  Holder  any  Warrant  Shares,   and  each  of  their
                  respective  officers,  directors,  partners and such  Holder's
                  legal counsel and  independent  accountants,  if any, and such
                  person  controlling  such  persons,  within the meaning of the
                  Act,  from and against any and all  losses,  claims,  damages,
                  expenses and liabilities (including, but not limited to, legal
                  fees  and  expenses  and  any  and  all  expenses   whatsoever
                  reasonably incurred in investigating,  preparing, defending or
                  settling any claim (including,  but not limited to, legal fees
                  and  expenses))  arising  from  or  based  on (i)  any  untrue
                  statement  (or alleged  untrue  statement)  of a material fact
                  contained in any registration  statement furnished pursuant to
                  clause (a) of this Section, or any prospectus included therein
                  or any amendment or supplement thereto,  (ii) any omission (or
                  alleged omission) to state therein a material fact required to
                  be stated therein or necessary to make the statements  therein
                  not  misleading  (unless  such  untrue  statement  (or alleged
                  untrue  statement) or omission (or alleged omission) was based
                  upon and in conformity with information  furnished in writing,
                  or required to be  furnished,  to the Company by the Holder or
                  underwriter expressly for use therein), or (iii) any violation
                  by the Company of any rule or regulation promulgated under the
                  Act or any state  securities law applicable


<PAGE>


                  to the Company and relating to action or  inaction  by the
                  Company in connection with any such registration,
                  qualification or compliance.
                           (f) Each Holder which has securities  included in any
                  registration  pursuant to this Agreement  shall  indemnify and
                  hold  harmless  the  Company and any  underwriter,  within the
                  meaning  of the Act,  and each of their  respective  officers,
                  directors,    partners,    legal   counsel   and   independent
                  accountants,  and each person  controlling such persons within
                  the  meaning of the Act,  from and against any and all losses,
                  claims, damages, expenses and liabilities (including,  but not
                  limited to,  legal fees and  expenses and any and all expenses
                  whatsoever  reasonably  incurred in investigating,  preparing,
                  defending  or settling any claim  (including,  but not limited
                  to, legal fees and expenses)) arising from or based on (i) any
                  untrue  statement (or alleged untrue  statement) of a material
                  fact  contained  in  any  registration   statement   furnished
                  pursuant  to  clause  (a) of this  Section  or any  prospectus
                  included  therein or any amendment or supplement  thereto,  or
                  (ii) any  omission (or alleged  omission)  to state  therein a
                  material  fact  required to be stated  therein or necessary to
                  make the statements therein not misleading, provided, that the
                  indemnity by such Holder  shall be limited to liability  based
                  upon  information  furnished  in  writing,  or  required to be
                  furnished,  to the  Company by such Holder  expressly  for use
                  therein.  The indemnity  agreement of the Company herein shall
                  not inure to the  benefit of any such  underwriter  (or to the
                  benefit  of any  person  who  controls  such  underwriter)  on
                  account  of  any  losses,  claims,  damages,  liabilities  (or
                  actions or  proceedings in respect  thereof)  arising from the
                  sale of any of such Warrant Shares by such  underwriter to any
                  person  if such  underwriter  failed to send or give a copy of
                  the  prospectus  furnished  pursuant  to  clause  (a) of  this
                  Section,   to  such  person  with  or  prior  to  the  written
                  confirmation  of the  sale  involved.  The  obligation  of any
                  Holder  pursuant to this Section  3.5.3(f) shall be limited to
                  an  amount  equal  to the net  proceeds  to such  Holder  from
                  securities  sold  in  such   registration   pursuant  to  this
                  Agreement.

                           (g) Each party entitled to indemnification  hereunder
                  (the  "Indemnifying  Party")  shall  give  notice to the party
                  required to provide indemnification (the "Indemnifying Party")
                  promptly after such Indemnified  Party has actual knowledge of
                  any  claim as to which  indemnity  may be  sought,  and  shall
                  permit the  Indemnifying  Party to assume  the  defense of any
                  such claim or any  litigation  resulting  therefrom,  provided
                  that counsel for the Indemnifying Party, who shall conduct the
                  defense of such claim or litigation,  shall be approved by the
                  Indemnified  Party (whose  approval shall not be  unreasonably
                  withheld).  The  Indemnified  Party  may  participate  in such
                  defense at such party's expense;  provided,  however, that the
                  Indemnifying  Party shall bear the expense of such  defense of
                  the Indemnified Party if representation of both parties by the
                  same counsel would be inappropriate due to actual or potential
                  conflicts of interest. The failure of any Indemnified Party to
                  give  notice  as

<PAGE>



                  provided   herein   shall  not  relieve  the Indemnifying
                  Party of its  obligations  under this Agreement, unless and to
                  the extent such  failure is prejudicial  to the ability of the
                  Indemnifying  Party to defend the  action.  No Indemnifying
                  Party,  in the  defense  of any  such  claim  or litigation
                  shall,  except with the consent of each Indemnified Party,
                  consent  to entry of any  judgment  or enter  into any
                  settlement  which does not  include as an  unconditional  term
                  thereof  the  giving  by the  claimant  or  plaintiff  to such
                  Indemnified  Party of a release from all  liability in respect
                  of such claim or litigation.

                           (h) If the indemnification provided for in paragraphs
                  (e) and (f)  above  is  unavailable  or  insufficient  to hold
                  harmless an Indemnified  Party, then each  Indemnifying  Party
                  shall  contribute  to the  amount  paid  or  payable  by  such
                  Indemnified Party as a result of the expenses, claims, losses,
                  damages or  liabilities  (or actions or proceedings in respect
                  thereof)  referred to in such paragraphs in such proportion as
                  is  appropriate  to reflect the relative fault of the Company,
                  on the one hand,  and the  holders  of  securities  registered
                  pursuant  hereto,  on the other hand, in  connection  with the
                  statement or omissions which resulted in such losses,  claims,
                  damages,  expenses  and  liabilities,  as  well  as any  other
                  relevant equitable considerations. The relative fault shall be
                  determined by reference  to, among other  things,  whether the
                  untrue or alleged  untrue  statement of a material fact or the
                  omission or alleged  omission to state a material fact relates
                  to information  supplied by the Company or any such holder and
                  the parties' relative intent, knowledge, access to information
                  and opportunity to correct or prevent such untrue statement or
                  omission.  The Company and the Holder  agree that it would not
                  be  just  and  equitable  if  contributions  pursuant  to this
                  paragraph (h) were to be determined by pro rata  allocation or
                  by any other method of allocation  which does not take account
                  of the equitable  consideration referred to in this paragraph.
                  No person guilty of fraudulent  misrepresentation  (within the
                  meaning of  Section  11(f) of the Act)  shall be  entitled  to
                  contribution  from  any  person  who  was not  guilty  of such
                  fraudulent misrepresentation.

                           (i) In addition,  in connection with any registration
                  requested pursuant hereto, the Company shall:

                                    (1) prepare  and file with the SEC  pursuant
                           to the Act such  amendments  and  supplements to such
                           registration   statement  and   prospectus   included
                           therein as may be  necessary  to effect and  maintain
                           the effectiveness of such registration  statement for
                           a period of 180 days or such longer  period as may be
                           required in order to complete the distribution of the
                           securities covered thereby and furnish to the Holders
                           of such  securities  copies of any such supplement or
                           amendment  prior to it being used  and/or  filed with
                           the SEC and  comply  with the  provisions  of the Act


<PAGE>



                           with respect to the  disposition of all securities to
                           be included in such registration statement.

                                    (2) provide the Holders, any underwriters in
                           connection   therewith,    one   counsel   for   such
                           underwriters  and one  counsel  for the  Holders  the
                           opportunity to participate in the preparation of such
                           registration   statement   and  each   amendment  and
                           supplement thereto.

                                    (3) for a  reasonable  period  prior  to the
                           filing of the  registration  statement and throughout
                           the period  specified  in paragraph  (1) above,  make
                           available for inspection by the parties  specified in
                           paragraph   (2)  above  such   financial   and  other
                           information and books and records of the Company, and
                           cause  the   officers,   directors,   employees   and
                           representatives  of the  Company  to  respond to such
                           inquiries as shall be reasonably necessary to conduct
                           a reasonable  investigation of the Company within the
                           meaning of the Act.

                                    (4)   promptly   notify   the   holders   of
                           securities  included in such  registration  statement
                           and the managing  underwriter in connection therewith
                           (and  confirm  such advice in writing)  (A) when such
                           registration  statement  or the  prospectus  included
                           therein or any prospectus  amendment or supplement or
                           post-effective  amendment  has been filed,  and, with
                           respect  to  such   registration   statement  or  any
                           post-effective  amendment,  when the same has  become
                           effective,  (B) of any comments by the SEC and by the
                           blue sky or securities  commissioner  or regulator of
                           any state with respect  thereto or any request by the
                           SEC   for   amendments   or   supplements   to   such
                           registration  statement  or  the  prospectus  or  for
                           additional  information,  (C) of the  issuance by the
                           SEC of any stop order suspending the effectiveness of
                           such registration  statement or the initiation of any
                           proceedings  for that purpose,  (D) of the receipt by
                           the Company of any  notification  with respect to the
                           suspension of the qualification of the securities for
                           sale in any  jurisdiction  or the  initiation  of any
                           proceeding  for such  purpose,  or (E) if it shall be
                           the case,  at any time when a prospectus  is required
                           to be delivered under the Act, that such registration
                           statement,  prospectus,  or any document incorporated
                           by  reference,  in any of the  foregoing  contains an
                           untrue statement of a material fact or omits to state
                           a  material  fact  required  to be stated  therein or
                           necessary   to  make  the   statements   therein  not
                           misleading  in  light  of  the   circumstances   then
                           existing,  in which case such  Holders of  securities
                           covered by such registration  statement shall suspend
                           sales of such securities until they have been advised
                           by  the  Company  that  an   appropriate   prospectus
                           amendment or supplement or  post-effective  amendment
                           has  been  filed;  provided,  however,  that  in such
                           instance  the Company  shall use its best  efforts to
                           promptly file such prospectus amendment or supplement
                           or  post-effective  amendment  and the period  during
                           which such  holders  shall be so  required to suspend
                           sales hereunder shall not exceed 30 days.


<PAGE>


                                    (5) use  its  best  efforts  to  obtain  the
                           withdrawal of any order suspending the  effectiveness
                           of such registration  statement or any post-effective
                           amendment thereto at the earliest practicable date.

                                    (6)  enter  into  one or  more  underwriting
                           agreements,  engagement  letters,  agency agreements,
                           "best  efforts"  underwriting   agreements,   lock-up
                           agreements or similar agreements, as appropriate, and
                           take such other  actions in  connection  therewith as
                           the Holders of securities  registered pursuant hereto
                           shall  reasonably  request  in order to  expedite  or
                           facilitate the disposition of such securities.

                                    (7) whether or not an  agreement of the type
                           referred  to in the  preceding  paragraph  is entered
                           into and whether or not any  portion of the  offering
                           contemplated  by such  registration  statement  is an
                           underwritten  offering, (A) make such representations
                           and   warranties   to  the   Holders  of   securities
                           registered   pursuant  hereto  and  any  underwriters
                           thereof,   in  form,   substance  and  scope  as  are
                           customarily  made in connection  with any offering of
                           equity   securities   pursuant  to  any   appropriate
                           agreement and/or to a registration statement filed on
                           the form applicable to such  registration  statement,
                           (B) obtain an  opinion  of counsel to the  Company in
                           customary  form and covering such matters of the type
                           customarily   covered  by  such  an  opinion  as  the
                           managing   underwriters  and  Holders  of  securities
                           registered  pursuant  hereto may reasonably  request,
                           (C) obtain a "cold"  comfort  letter or letters  from
                           the independent  certified public  accountants of the
                           Company    addressed   to   the   Holders   and   the
                           underwriters,  if any,  dated the  effective  date of
                           such  registration  statement , the effective date of
                           any prospectus  supplement to the prospectus included
                           in  such  registration  statement  or  post-effective
                           amendment to such registration statement and the date
                           of  any   consummation  of  the  sale  of  securities
                           pursuant  hereto,  such  letter or  letters  to be in
                           customary  form and covering such matters of the type
                           customarily  covered by  letters  of such  type,  (D)
                           deliver  such  documents  and   certificates  as  may
                           reasonably  be requested by the holders of securities
                           covered  by  such  registration   statement  and  the
                           managing underwriter,  if any, and (E) undertake such
                           obligations   relating   to  expense   reimbursement,
                           indemnification  and  contribution  as  are  provided
                           herein.

                                    (8) otherwise use its best efforts to comply
                           with all applicable  rules and regulations of the SEC
                           and otherwise  take all actions as may  reasonably be
                           necessary to accomplish  the  intentions and purposes
                           of this Section 3.5.

         3.6 Additional  Covenants.  The Company and Holder  understand that the
possibility  exists that in  connection  with the  exercise  (including  certain
partial  exercises)  of this  Warrant,  each of the  Company  and  Holder may be
required  to  make  certain  filings  under  the   Hart-Scott-Rodino   Antitrust
Improvements Act of 1976 ("HSR").  The Company covenants that it shall file

<PAGE>



with the Federal Trade Commission and the Department of Justice the notification
form,  together with all  necessary  materials  and  information,  to attempt to
secure  the  expiration  or  termination  of all  applicable  waiting  period(s)
relating to any or all  exercises  of the Warrant  hereunder  as required on its
part  under HSR (each an "HSR  Warrant  Consent"),  in the event the  Company is
notified  by the Holder  that the Holder has been  advised by its counsel of the
necessity of making such filings.  This covenant is in addition to any covenants
to obtain the HSR Consent under the Purchase  Agreement.  The Company agrees and
covenants that it shall use good faith commercially reasonable efforts to obtain
the HSR Warrant  Consent to allow the Holder to exercise the Warrant,  and shall
inform the  Holder of all  material  developments  in the  Company's  efforts to
obtain the HSR Warrant Consent,  and that simultaneously with the transmittal to
third  parties or to  governmental  agencies,  it shall  provide the Holder with
copies of all correspondence,  filings or other written documentation related to
efforts to obtain the HSR Warrant  Consent.  If,  notwithstanding  the Company's
satisfaction  of its  obligations  above,  the  Company  fails to obtain the HSR
Warrant  Consent,  then the Company  shall issue  Warrant  Shares in the maximum
number  of shares  permissible  without  obtaining  HSR  consent  and in lieu of
issuing the remaining  Warrant Shares in Common Stock (meaning those that cannot
be issued without HSR Consent),  the Company shall issue an equivalent number of
shares of a new class of  non-voting  common  stock of the Company  ("Non-Voting
Stock")  which shall be identical in all  respects to the Common  Stock,  except
that shares of Non-Voting  Stock shall not have the right to vote on any matters
presented to the Company's  stockholders,  unless otherwise required by law; and
by their terms the Non-Voting Stock shall  automatically,  without notice or any
other  further  action on the part of  either  the  Company  or the  Holder,  be
converted  into shares of Common  Stock if they are  transferred  by the Holder.
Thus,  if HSR Warrant  Consent  shall not have been  obtained,  the Holder shall
continue to have the right to exercise  this  Warrant,  as otherwise  allowed in
accordance with the terms hereof;  provided, that upon such exercise, in lieu of
receiving Warrant Shares,  the Holder shall receive an equal number of shares of
Non-Voting  Stock,  to the extent of the affected  Warrant  Shares  (i.e.,  if a
portion of the Warrant  Shares can then be issued  without HSR Warrant  Consent,
the  Non-Voting  Stock shall be issued only with respect to the remainder of the
Warrant Shares then  exercised as evidenced by this  Warrant).  The Amendment of
the Restated  Certificate of  Incorporation  of the Company adopted  pursuant to
Section 3.4 of the Purchase  Agreement and which is attached  thereto as Exhibit
B-1  authorized a number of shares of Non-Voting  Stock equal to or greater than
the number of Warrant Shares.

         The intent of this  Section 3.6 is to place the Holder in the  position
most nearly  identical to the  position  that the Holder would have been in upon
such  exercise if either the HSR Warrant  Consent was not  necessary or had been
obtained.  The Company covenants that, at the cost and expense of the Holder, it
will use  commercially  reasonable  efforts and continue to take all  reasonable
steps to attempt to secure for the  Holder  the  Warrant  Shares or  equivalents
which  deliver to the Holder the voting rights and economic  benefits  bargained
for under the  Purchase  Agreement,  which  efforts  shall  include,  but not be
limited  to,  appealing  any  decision of the Federal  Trade  Commission  and/or
Justice  Department  which denies consent to the exercise in question if, in the
opinion of counsel to the Holder,  there is a reasonable  basis for such appeal.
In the event the Company is unable to issue the Non-Voting Stock as contemplated
herein,  the Company covenants that it will use commercially  reasonable efforts
to secure for the Holder the benefits set forth herein.

<PAGE>


                                    ARTICLE 4
                                  MISCELLANEOUS

         4.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or before the Expiration Date set forth above.

         4.2  Legends.  This  Warrant  shall  be  imprinted  with  a  legend  in
substantially the following form:

NEITHER THIS SECURITY NOR THE SECURITIES  ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN  REGISTERED  UNDER THE SECURITIES  ACT OF 1933, AS AMENDED,  AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR  PURSUANT  TO RULE 144 OR AN  OPINION  OF  COUNSEL  REASONABLY
SATISFACTORY  TO THE  COMPANY  AND ITS  COUNSEL  THAT SUCH  REGISTRATION  IS NOT
REQUIRED.

         4.3 Compliance with  Securities Laws on Transfer.  This Warrant may not
be transferred  or assigned by the Company.  This Warrant may not be transferred
or assigned by the Holder in whole or in part without compliance with applicable
federal  and  state  securities  laws  by  the  transferor  and  the  transferee
(including,  without  limitation,  the  delivery  of  investment  representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the  Company).  The Company shall not require the Holder to provide
an opinion of counsel if the transfer is to (a) an Affiliate of the Holder;  (b)
the respective  successors of the Holder in a merger or  consolidation;  (c) the
purchaser  of all  or  substantially  all  of the  assets  of  Holder;  (d)  the
shareholders  of the Holder in the event the Holder is  liquidated or dissolved;
or (e) any other  person or entity with  respect to whom such  transfer has been
approved by the Company.  If  requested  by the Company,  and if the transfer is
other than a circumstance described above, the Holder shall provide a reasonable
opinion  of  counsel in  connection  with the  transfer  of the  Warrant  Shares
pursuant to Rule 144.

         4.4 Transfer  Procedure.  Subject to the provisions of Section 4.3, the
Holder may transfer all or part of this Warrant or the Warrant  Shares  issuable
upon  exercise  of  this  Warrant  (or  the  securities  issuable,  directly  or
indirectly, upon conversion of the Warrant Shares, if any).

         4.5 Notices.  All notices and other  communications from the Company to
the Holder,  or vice versa,  shall be deemed  delivered and effective when given
personally  or mailed by  first-class  registered  or  certified  mail,  postage
prepaid, at such address set forth in the Purchase Agreement or as may have been
thereafter  furnished  to the  Company  or the  Holder,  as the case may be,  in
writing by the Company or such the Holder from time to time.

         4.6 Waiver.  This  Warrant and any term hereof may be changed,  waived,
discharged  or terminated  only by an instrument in writing  signed by the party
against which  enforcement of such change,  waiver,  discharge or termination is
sought.

         4.7  Attorneys  Fees.  In the event of any dispute  between the parties
concerning  the terms and  provisions of this Warrant,  the party  prevailing in
such  dispute  shall be  entitled  to

<PAGE>


collect  from the  other  party all costs incurred in such dispute, including
reasonable attorney's fees.
         4.8  Governing  Law;  Jurisdiction  and Venue.  This  Warrant  shall be
governed by,  construed and enforced in accordance with the internal laws of the
State of Delaware,  excluding the conflict of laws provisions thereof that would
otherwise  require the  application  of the law of any other  jurisdiction.  The
Company acknowledges and agrees that the state and federal courts sitting in the
State of  Delaware  shall have  jurisdiction  in any matter  arising out of this
Warrant,  and the Company hereby consents to such  jurisdiction  and agrees that
the venue of any such  matter  shall  also be proper in such  state and  federal
courts sitting in the State of Delaware.

         Dated November 17, 1999.



                                         SOURCE MEDIA, INC.


                                         By:/s/Stephen W. Palley
                                            ------------------------------------
                                           Stephen W. Palley
                                           President and Chief Executive Officer



<PAGE>



                                   APPENDIX 1

                               NOTICE OF EXERCISE


         1. The undersigned hereby elects to purchase shares of the Common Stock
of Source  Media,  Inc.,  pursuant  to the terms of the  attached  Warrant,  and
tenders herewith payment of the purchase price of such shares in full.

         2. Please issue a certificate or certificates  representing said shares
in the name of the undersigned or in such other name as is specified below:


         (Name)



         (Address)

         3. The undersigned represents it is acquiring the shares solely for its
own  account and not as a nominee for any other party and not with a view toward
the  resale  or  distribution  thereof  except  in  compliance  with  applicable
securities laws.


                                   (Signature)

                                              Title

(Date)