<PAGE>   1
                                                                   Exhibit 10.43


THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE OR SECURITIES LAWS
AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH EXHIBIT I REFERRED TO HEREIN.

                            EXERCISABLE ON OR BEFORE
                    5:00 P.M., NEW YORK TIME, AUGUST 20, 2002



No. _______                                                    440,000 Warrants



                                               WARRANT TO PURCHASE 440,000
                                               SHARES OF ALLEGRO NEW MEDIA, INC.
                                               COMMON STOCK


                               WARRANT CERTIFICATE


                    THIS WARRANT CERTIFICATE certifies that M.S. Farrell & Co.,
Inc., a New York corporation, with its principle place of business located at 67
Wall Street, New York, New York 10005, or its registered assigns, is the
registered holder of Warrants (the "Warrants") to purchase initially, at any
time from the date hereof until 5:00 p.m., New York time, on August 20, 2002
("Expiration Date"), up to 440,000 fully paid and nonassessable shares of common
stock, $.001 par value ("Common Stock") of Allegro New Media, Inc., a Delaware
corporation (the "Company"), at the initial exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $6.875 per share of
Common Stock upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office of the Company located at 16 Passaic Avenue, Unit
#6, Fairfield, New Jersey 07004, or any successor office, but subject to the
conditions set forth herein and in Exhibit I hereto. Payment of the Exercise
Price shall be made by certified or official bank check payable to the order of
the Company or may be made by tendering an amount of Warrants for cancellation
with a value as determined by the difference between the then current market
price of the underlying shares of Common Stock as of the date of exercise less
the Exercise Price of each Warrant.
<PAGE>   2
            No Warrant may be exercised after 5:00 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void. If the Expiration Date shall in the
State of New York be a holiday or a day on which banks are authorized to close,
then the Expiration Date shall mean 5:00 P.M., New York Time, the next following
day which, in the State of New York is not a holiday or a day on which banks are
authorized to close.

            The Warrants evidenced by this Warrant Certificate are subject to
the provisions of Exhibit I hereto, which Exhibit I is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.

            Exhibit I hereto provides that upon the occurrence of certain events
the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair the rights of the holder
as set forth in Exhibit I.

            Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company located at 16 Passaic Avenue, Unit #6,
Fairfield, New Jersey 07004, or any successor office, a new Warrant Certificate
or Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided herein and in Exhibit
I, without any charge except for any tax or other governmental charge imposed in
connection with such transfer.

            Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.

            The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.

            All terms used in this Warrant Certificate which are defined in
Exhibit I hereto shall have the meanings assigned to them in Exhibit I hereto.


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            IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed under its corporate seal.

Dated as of August 20, 1996

                                           ALLEGRO NEW MEDIA, INC.


                                           By: /s/Barry A. Cinnamon
                                               ----------------------------- 
                                               Barry A.  Cinnamon
                                                 Chairman of the Board
Attest:


/s/Lori Kramer Cinnamon
----------------------------
Lori Kramer Cinnamon
Secretary


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<PAGE>   4
                          FORM OF ELECTION TO PURCHASE



            THE UNDERSIGNED hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ___________ shares of
Common Stock and herewith tenders in payment for such securities a certified or
official bank check payable to the order of Allegro New Media, Inc. in the
amount of $___________, all in accordance with the terms hereof. The undersigned
requests that a certificate for such securities be registered in the name of
______________________ whose address is ______________________________ and that
such Certificate be delivered to ________________________ whose address is
______________________________________________.




Dated: __________________

                                        Signature: ____________________________
                                        (Signature must conform in all respects
                                        to the name of holder as specified on
                                        the face of the Warrant Certificate.)


                                        _______________________________________
                                        (Insert Social Security or Other
                                        Identifying Number of Holder)


                                        _______________________________________
                                        Signature Guarantee


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                               FORM OF ASSIGNMENT


             (To be executed by the registered holder if such holder
                  desires to transfer the Warrant Certificate)



FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto


_________________________________________________________________
           (Please print name and address of transferee)



this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Warrant Certificate on the books of the within
named Company, with full power of substitution.

Dated: ________________                 Signature:____________________________
                                        (Signature must conform in all respects
                                        to the name of holder as specified on
                                        the face of the Warrant Certificate.)

                                        _______________________________________
                                        (Insert Social Security or Other
                                        Identifying Number of Holder)


                                        _______________________________________
                                        Signature Guarantee


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<PAGE>   6

                                    EXHIBIT I

                    Section 1. Exercise of Warrant. The Warrants initially are
exercisable at an aggregate initial exercise price per share of common stock,
$.001 par value per share (the "Common Stock") of Allegro New Media, Inc. (the
"Company") set forth in Section 3 hereof (subject to adjustment as provided in
Section 5 hereof) payable by certified or official bank check. Upon surrender of
a Warrant Certificate with the annexed Form of Election to Purchase duly
executed, together with payment of the Exercise Price (as hereinafter defined)
for the shares of Common Stock purchased at the Company's principal offices in
New Jersey (presently located at 16 Passaic Avenue, Unit #6, Fairfield, New
Jersey 07004), the registered holder of a Warrant Certificate ("Holder" or
"Holders") shall be entitled to receive a certificate or certificates for the
shares of Common Stock so purchased. The purchase rights represented by each
Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional shares of the Common Stock underlying
the Warrants). In the case of the purchase of less than all the shares (the
"Warrant Shares") of Common Stock purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the shares of Common Stock purchasable thereunder.

                    Section 2. Issuance of Certificates. Upon the exercise of
the Warrants, the issuance of certificates for shares of Common Stock shall be
made forthwith (and in any event within ten (10) business days thereafter)
without charge to the Holder thereof including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall be issued in the name of, or in such names as may be directed by, the
Holder thereof; provided, however, 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 such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the persons or persons requesting the issuance thereof shall
have paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.

                    The Warrant Certificates and the certificates representing
the Warrant Shares shall be executed on behalf of the Company by the manual or
facsimile signature of the then present Chairman or Vice Chairman of the Board
of Directors and also by the Secretary or by any two Directors or by any one
Director and the Secretary of the Company under its corporate seal reproduced
thereon.

                    Section 3. Exercise Price.

                    3.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 5 hereof, the exercise price of each Warrant shall be $6.875
per share of Common Stock. The adjusted exercise price shall be the price which
shall result from time to time from any and all adjustments of the initial
exercise price in accordance with the provisions of Section 5 hereof.

                    3.2 Exercise Price. The term "Exercise Price" as used herein
shall mean the initial exercise price or the adjusted exercise price, depending
upon the context.


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                    Section 4. Restrictions on Transfer; Registration Rights.

                    4.1 Representations. The Holders of the Warrants agree to
the following:

                             (a) Each Holder understands that the Warrants, or
the Warrant Shares, have not been registered under applicable state and federal
securities laws, and that such Warrants or Warrant Shares cannot be resold or
transferred unless they are so registered, or unless such transfer qualifies for
an exemption from such registration;

                             (b) Each Holder is acquiring the Warrants for
investment purposes only, and not with a view towards resale or distribution;

                             (c) Each Holder understands that all certificates
which represent the Warrants issued to him or her will bear a legend which
incorporates these restrictions; and

                             (d) Each Holder is familiar with the business and
financial condition of the Company, has been provided access and an opportunity
to review all material agreements, books and records of the Company and has been
afforded an opportunity to question the executive officers of the Company with
respect to the foregoing.

                    4.2 Restrictions on Transfer. Notwithstanding any provisions
contained in the Warrant Certificate to the contrary, these Warrants shall not
be transferable and the related Warrant Shares shall not be transferable except
upon the conditions specified in this Section 4, which conditions are intended,
among other things, to ensure compliance with the provisions of the 1933 Act in
respect of the transfer of the Warrants or the Warrant Shares. The Holders of
the Warrants further agree that they will not (a) transfer the Warrants prior to
delivery to the Company of an opinion of the Holder's counsel as provided for in
Section 4.3), which opinion shall be acceptable to counsel for the Company, or
(b) until registration of the Warrant Shares under the Securities Act has become
effective.

                    4.3 Opinion of Counsel. In connection with any transfer of
the Warrants or of the related Warrant Shares, the following provisions shall
apply:

                             (a) If in the opinion of counsel, which counsel and
opinion shall be acceptable to the Company, the proposed transfer of the
Warrants or the Warrant Shares may be effected without registration of the
Warrants of the Warrant Shares under the 1933 Act, the Holders shall be entitled
to transfer the Warrants or the Warrant Shares in accordance with the proposed
method of disposition.

                             (b) If in the opinion of counsel, which counsel and
opinion shall be acceptable to the Company, the proposed transfer of the
Warrants or the Warrant Shares may not be effected without registration of the
Warrants or such Warrant Shares under the Securities Act, the holder of the
Warrants shall not be entitled to transfer the Warrants or the Warrant Shares
until registration is effective.


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<PAGE>   8
                    4.4 Subsequent Holders. Anything contained herein to the
contrary notwithstanding, the provisions of this Section 4 shall be binding upon
all subsequent holders of the Warrants and the Warrant Shares, and the Company
shall not be required to issue all or any portion of the Warrants or the Warrant
Shares to such Holder unless such Holder agrees in writing in advance of such
issuance to be so bound. The provisions of this Section 4 shall survive the
Expiration Date.

                    4.5 Securities Act of 1933 Legend. The Warrant and the
Warrant Shares have not been registered under the Securities Act. Upon exercise
of the Warrants, in part or in whole, the certificates representing the Warrant
Shares shall bear the following legend:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND
NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT OR SUCH LAWS OR AN EXEMPTION
FROM REGISTRATION UNDER SUCH SECURITIES ACT AND SUCH LAWS WHICH, IN THE OPINION
OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY
TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

                    4.6      Required Registration.

                    (a) Piggyback Registration. If the Company shall determine
to register any of its securities (including any initial public offering of its
securities) either for its own account or the account of a security holder or
holders exercising their respective demand registration rights other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Rule 145 transaction (including securities registered on
form S-8 or form S-4), or a registration on any registration form that does not
permit secondary sales, the Company will:

                             (i) promptly give to each Holder written notice
                    thereof; and


                             (ii) use its best efforts to include in any such
                    registration and any related qualification under blue sky
                    laws or other compliance), and in any underwriting involved
                    therein, all the Warrant Shares specified in a written
                    request or requests, made by any Holder and received by the
                    Company within twenty (20) days after the written notice
                    from the Company described in clause (i) above is mailed or
                    delivered by the Company. Such written request may specify
                    all or a part of a Holder's Warrant Shares.


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<PAGE>   9
                    The Holders agree to sell their Warrant Shares on the same
terms as the sale of other shares of Common Stock in the offering and agree to
execute such documents as shall be reasonably requested by the Company or its
counsel in connection with such offering.

                    If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to this
Section . In such event, the right of any Holder to registration pursuant to
this Section shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Warrant hares in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected by the Company.

                    (b) Expenses of Registration. All registration expenses
incurred in connection with any registration, qualification or compliance
pursuant to this Section including filing fees, printing expenses, blue sky
fees, and fees and expenses of the Company's counsel and accountants) shall be
borne by the Company. All expenses incurred by the Holders for their own counsel
or accountants and all selling expenses relating to securities so registered
(including underwriter discounts and commissions) shall be borne by the holders
of securities so registered on the basis of the number of shares of securities
so registered on their behalf.

                    (c)      Indemnification

                             (i) The Company will indemnify each Holder, each of
its officers, directors and partners, legal counsel, and accountants and each
person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification, or compliance
has been effected pursuant to this Section , and each underwriter, if any,and
each person who controls within the meaning of Section 15 of the Securities Act
any underwriter, against all expenses, claims, losses, damages, and liabilities
(or actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including any
related registration statement, notification, or the like), incident to any such
registration, qualification, or compliance, or based on 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, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification, or compliance, and will
reimburse each such Holder, each of its officers, directors, partners, legal
counsel, and accountants and each person controlling such Holder, each such
underwriter, and each person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability, or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability, or expense arises out of or is based on
any untrue statement or omission based


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<PAGE>   10
upon written information furnished to the Company by such Holder or underwriter
and stated to be specifically for use therein. It is agreed that the indemnity
agreement contained in this Section shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent has not
been unreasonably withheld).

                             (ii) Each Holder will, if Warrant Shares held by
him are included in the securities as to which such registration, qualification,
or compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and other Shareholder,
and each of their officers, directors, and partners, and each person controlling
such Holder or other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or 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, and will reimburse the Company and such Holders, other Shareholders,
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by such Holder and stated to be
specifically for use therein, provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld), and provided that in no event shall any indemnity
under this Section exceed the gross proceeds from the offering received by such
Holder.

                    Section 5. Adjustments to Exercise Price and Number of
Shares.

                    5.1 Subdivision and Combination. In case the Company shall
at any time: (i) subdivide the outstanding shares of Common Stock into a larger
number of shares, (ii) combine the outstanding shares of Common Stock into a
smaller number of shares, (iii) declare a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, or (iv) issue by
reclassification of its Common Stock any shares of its capital stock, the
Exercise Price in effect immediately after the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying the Exercise Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such dividend, distribution, subdivision,
combination or reclassification, and of which the denominator shall


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be the number of shares of Common Stock outstanding immediately after such
dividend, distribution, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event specified above shall
occur.

                    5.2 Adjustment in Number of Warrant Shares. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Section 5,
the number of Warrant Shares issuable upon the exercise of each Warrant shall be
adjusted to the nearest full share obtained by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.

                    5.3 Definition of Common Stock. For the purpose of this
Agreement, the term "Common Stock" shall mean: (i) the class of stock designated
as Common Stock in the Certificate of Incorporation of the Company as may be
amended as of the date hereof, or (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value or from no par value
to par value.

                    5.4 Merger or Consolidation. (a) In case the Company after
the date hereof: (i) shall consolidate with or merge into any other person and
shall not be the continuing or surviving corporation of such consolidation or
merger, or (ii) shall permit any other person to consolidate with or merge into
the Company and the Company shall be the continuing or surviving person but, in
connection with such consolidation or merger, the Common Stock shall be changed
into or exchanged for stock or other securities of any other person or cash or
any other property, or (iii) shall transfer all or substantially all of its
properties or assets to any other person, or (iv) shall effect a capital
reorganization or reclassification of the Common Stock (other than a capital
reorganization or reclassification resulting in the issue of additional shares
of Common Stock for which adjustment in the Exercise Price is provided in this
Section 5), then, and in the case of each such transaction, proper provision
shall be made so that, upon the basis and the terms and in the manner provided
in this Agreement and the Warrants, the Holders of the Warrants, upon the
exercise thereof at any time after the consummation of such transaction, shall
be entitled to receive (at the aggregate Exercise Price in effect at the time of
such consummation for all Common Stock issuable upon such exercise immediately
prior to such consummation), in lieu of the Common Stock, the highest amount of
securities, cash or other property to which such Holders would actually have
been entitled as shareholders upon such consummation if such Holders had
exercised the rights represented by the Warrants immediately prior thereto,
subject to adjustments (subsequent to such consummation) as nearly equivalent as
possible to the adjustments provided for in this Section 5.

                    5.5 Assumption of Obligations. Notwithstanding anything
contained in the Warrants to the contrary, the Company will not effect any of
the transactions described in clauses (i) through (iv) of Section 5.4 unless,
prior to the consummation thereof, each person (other than the Company) which
may be required to deliver any stock, securities, cash or property upon the
exercise of the Warrants as provided herein shall assume, by written instrument
delivered to the Holders of the Warrants, the obligations of the Company under
the Warrants (including this Exhibit I) (and if the


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<PAGE>   12
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Exhibit I and the Warrants) and such
person shall have similarly delivered to such Holders an opinion of counsel for
such person stating that the Warrants including this Exhibit I) shall thereafter
continue in full force and effect and the terms hereof (including, without
limitation, all of the provisions of this Section 5) shall be applicable to the
stock, securities, cash or property which such person may be required to deliver
upon any exercise of the Warrants or the exercise of any rights pursuant hereto.

                    5.6 Dividends and Other Distributions. If, at any time or
from time to time after the date of this Warrant, the Company shall issue or
distribute to the holders of shares of Common Stock, evidences of its
indebtedness, any other securities of the Company or any cash, property or other
assets (excluding a subdivision, combination or reclassification, or dividend or
distribution payable in shares of Common Stock, referred to in Section 5.1, and
also excluding cash dividends or cash distributions paid out of net profits
legally available therefor if the full amount thereof, together with the value
of other dividends and distributions made substantially concurrently therewith
or pursuant to a plan which includes payment thereof, is equivalent to not more
than 5% of the Company's net worth) (any such non-excluded event being herein
called a "Special Dividend"), the Exercise Price shall be adjusted by
multiplying the Exercise Price then in effect by a fraction, the numerator of
which shall be the then current market price of the Common Stock (defined as the
average for the thirty consecutive business days immediately prior to the record
date of the daily closing price of the Common Stock as reported by the national
securities exchange upon which the Common Stock is then listed or if not listed
on any such exchange, the average of the closing prices as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") Stock Market's National Market, or if not then listed on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked prices as reported by the NASDAQ, or if not then publicly traded, as the
fair market price as determined by the Company's Board of Directors) less the
fair market value (as determined by the Company's Board of Directors) of the
evidences of indebtedness, cash, securities or property, or other assets issued
or distributed in such Special Dividend applicable to one share of Common Stock
and the denominator of which shall be the then current market price per share of
Common Stock. An adjustment made pursuant to this Section 5.6 shall become
effective immediately after the record date of any such Special Dividend.

                    5.7 Other Dilutive Events. In case any event shall occur as
to which the other provisions of this Section 5 are similar to, but not strictly
applicable but as to which the failure to make any adjustment would not fairly
protect the purchase rights represented by the Warrants (including this Exhibit
1) in accordance with the essential intent and principles hereof then, in each
such case, the Holders collectively may appoint a firm of independent public
accountants of recognized national standing reasonably acceptable to the
Company, which shall give their opinion as to the adjustment, if any, on a basis
consistent with the essential intent and principles established herein,
necessary to preserve the purchase rights represented by the Warrants including
this Exhibit I). Upon receipt of such opinion the Company will promptly mail a
copy thereof to the Holders and shall make the adjustments described therein.
The fees and expenses of such independent public accountants shall be borne by
the Company. The issuance by the Company of shares of capital stock, including,
without limitation,


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<PAGE>   13
shares of Common Stock, for consideration less than the Exercise Price, or the
issuance of convertible securities or derivative securities, convertible into
shares of capital stock at a conversion price or exercise price less than the
Exercise Price shall be deemed an event that requires an adjustment under this
Section 5.7.

                    5.8 Notice of Adjustment Events. Whenever the Company
contemplates the occurrence of an event which would give rise to adjustments
under this Section 5, the Company shall mail to each Holder, at least thirty
(30) days prior to the record date with resect to such event or, if no record
date shall be established, at least thirty (30) days prior to such event, a
notice specifying: (i) the nature of the contemplated event, (ii) the date of
which any such record is to be taken for the purpose of such event, (iii) the
date on which such event is expected to become effective and (iv) the time, if
any is to be fixed, when the holders of record of Common Stock shall be entitled
to exchange their shares of Common Stock for securities or other property
deliverable in connection with such event.

                    5.9 Notice of Adjustments. Whenever the Exercise Price or
the kind of securities or property issuable upon exercise of the Warrants, or
both, shall be adjusted pursuant to this Section 5, the Company shall make a
certificate signed by its President or a Vice President and by its Chief
Financial Officer, Secretary or Assistant Secretary, setting forth, in
reasonable detail, the event requiring the adjustment, the amount of the
adjustment, the method of which such adjustment was calculated (including a
description of the basis on which the Company made any determination hereunder),
and the Exercise Price and the kind of securities or property issuable upon
exercise of the Warrants after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (by first class mail postage prepaid) to
each Holder promptly after each adjustment.

                    5.10 Preservation of Rights. The Company will not, by
amendment of its Certificate of Incorporation or through any consolidation,
merger, reorganization, transfer of assets, 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 of the Warrants (including this Exhibit 1) or
the rights represented thereby, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Holders of the
Warrants against dilution or other impairment.

                    5.11 When No Adjustment Required. No adjustment in the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least $0.05 per share of Common Stock; provided,
however, that any adjustments which by reason of this Section 5.11 are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment; provided further, however, that adjustments shall be
required and made in accordance with the provisions of this Section 5 (other
than this Section 5.11) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the Holders of the Warrants.
All calculations under this Section 5 shall be made to the nearest cent or to
the nearest 1/100th of a share, as the case may be. Anything in this Section 5
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Exercise Price, in addition to those required by this Section
5, as it in its discretion shall deem to be advisable in order that any stock
dividend, subdivision of shares or


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<PAGE>   14
distribution of rights to purchase stock or securities convertible or
exchangeable for stock hereafter made by the Company to its shareholders shall
not be taxable.

                    Section 6. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense, upon the surrender
thereof by the registered Holder at the principal executive of office of the
Company, for a new Warrant Certificate of like tenor and date representing in
the aggregate the right to purchase the same number of Warrant Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.

                    Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of any Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.

                    Section 7. Elimination of Fractional Interests. The Company
shall not be required to issue certificates representing fractions of shares of
Common Stock upon the exercise of the Warrants, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intent of
the parties that all fractional interests shall be eliminated by rounding any
fraction up to the nearest whole number of shares of Common Stock.

                    Section 8. Reservation of Securities. The Company shall at
all times reserve and keep available out of its authorized shares of Common
Stock, solely for the purpose of issuance upon the exercise of the Warrants,
such number of shares of Common Stock as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefor, all shares of Common Stock shall be
duly and validly issued, fully paid, nonassessable and not subject to the
preemptive rights of any shareholder.

                    Section 9. Notices to Warrant Holders. Nothing contained in
this Exhibit I shall be construed as conferring upon the Holders the right to
vote or to consent or to receive notice as a shareholder in respect of any
meetings of shareholders for the election of directors or any other matter, or
as having any rights whatsoever as a shareholder of the Company. If, however, at
any time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:

                             (a) the Company shall take a record of the holders
                    of its shares of Common Stock for the purpose of determining
                    the holders thereof who are entitled to receive any dividend
                    or other distribution payable; or

                             (b) the Company shall offer to all the holders of
                    its Common Stock any additional shares of capital stock of
                    the Company or securities convertible into or exchangeable
                    for shares of capital


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<PAGE>   15
                    stock of the Company, or any option, right or warrant to
                    subscribe therefor; or

                             (c) a voluntary or involuntary dissolution,
                    liquidation or winding-up of the Company (other than in
                    connection with a consolidation or merger) or any capital
                    reorganization, recapitalization or reclassification or a
                    sale of all or substantially all of its property, assets and
                    business as an entirety shall be proposed;

then, in any one or more of said events, the Company will mail to each Holder of
a Warrant a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the a amount and character of such dividend, distribution or right, and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, sale, dissolution, liquidation or
winding-up is to take place and the time, if any such time is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for the securities or other property deliverable upon
such reorganization, reclassification, recapitalization, consolidation, merger,
sale, dissolution, liquidation or winding-up. Such notice shall be mailed at
least thirty (30) days prior to the date therein specified.

                    Section 10. Notices.

                    All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given or
made at the time delivered by hand if personally delivered; five calendar days
after mailing if sent by registered or certified mail; when receipt is
confirmed, if telecopied; and the next business day after timely delivery to the
courier, if sent by overnight air courier guaranteeing next day delivery (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee):

                             (a) If to the registered Holder of the Warrants, to
                    the address of such Holder as shown on the books of the
                    Company; or

                             (b) If to the Company, to the address set forth in
                    Section 1 hereof or to such other address as the Company may
                    designate by notice to the Holders.

                    Section 11. Successors. All the covenants and provisions of
this Exhibit I shall be binding upon and inure to the benefit of the Company,
the Holders and their respective successors and assigns hereunder.

                    Section 12. Governing Law. This Exhibit I and each Warrant
shall be governed and construed in accordance with the laws of the State of New
York applicable to contracts made and performed in the State of New York without
giving effect to the principles of conflicts of law thereof.


                                       10
<PAGE>   16
                    Section 13. Entire Agreement; Modification. This Exhibit I
(including the Warrant Certificate and the agreements with respect to
registration rights) contains the entire understanding between the parties
hereto with respect to the subject matter hereof and may not be modified or
amended except by a writing duly signed by the party against whom enforcement of
the modification or amendment is sought.

                    Section 14. Severability. If any provision of this Exhibit I
shall be held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision of this Exhibit I.

                    Section 15. Captions. The caption headings of the Sections
of this Exhibit I are for convenience of reference only and are not intended to
be, nor should they be construed as, part of this Exhibit I and shall be given
no substantive effect.

                    Section 16. Benefits of This Exhibit I. Nothing in this
Exhibit I shall be construed to give any person or corporation other than the
Company and the registered Holder(s) of the Warrant Certificates or Warrant
Shares any legal or equitable right, remedy or claim under this Exhibit I; and
this Exhibit I shall be for the sole and exclusive benefit of the Company and
any registered Holder(s) of the Warrant Certificates or Warrant Shares.


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