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. __                                                          ______ Warrants



                                                 WARRANT TO PURCHASE __________
                                                 SHARES OF SOFTWARE PUBLISHING
                                                 CORPORATION HOLDINGS, INC.
                                                 COMMON STOCK


                               WARRANT CERTIFICATE


     THIS  WARRANT  CERTIFICATE  certifies  that  _________________________,  or
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 _________  fully paid and
nonassessable  shares of common  stock,  $.001 par  value  ("Common  Stock")  of
Software Publishing Corporation Holdings,  Inc. (f/k/a Allegro New Media, Inc.),
a Delaware  corporation (the "Company"),  at the initial exercise price, subject
to adjustment in certain  events (the  "Exercise  Price"),  of the lesser of (a)
$1.27  per  share of  Common  Stock,  or (b) 120% of the  price per share of any
shares of Common  Stock or the  imputed  price per share of any shares of Common
Stock included in any units (without attributing any value to any warrant or any
other derivative  security included in any unit), as applicable,  of the Company
sold by the Company to a source introduced to the Company by M.S. Farrell & Co.,
Inc. on or prior to January 28,  1999,  but in any event not less than $1.06 per
share,  upon surrender of this Warrant  Certificate  and payment of the Exercise
Price at the office of the Company located at 3A Oak Road, Fairfield, New Jersey

<PAGE>

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.

     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 3A Oak Road, 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.


<PAGE>


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

Dated __________________________

                                    SOFTWARE PUBLISHING CORPORATION
                                      HOLDINGS, INC.


                                    By: _________________________
                                      Mark E. Leininger
                                      President
Attest:

By:____________________________
    Marc E. Jaffe
     Secretary


<PAGE>


                          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  Software  Publishing  Corporation
Holdings,  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


<PAGE>


                               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


<PAGE>


                                    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 Software Publishing Corporation Holdings, Inc.
(f/k/a  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 California  (presently  located at 3A Oak
Road,  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 the lesser of (a)
$1.27  per  share of  Common  Stock,  or (b) 120% of the  price per share of any
shares of Common  Stock or the  imputed  price per share of any shares of Common
Stock included in any units (without attributing any value to any warrant or any
other derivative  security included in any unit), as applicable,  of the Company
sold by the Company to a source introduced to the Company by M.S. Farrell & Co.,
Inc. on or prior to January 28,  1999,  but in any event not less than $1.06 per
share of Common Stock. The adjustedexercise price shall be the price which shall

<PAGE>

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.

           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.


<PAGE>

                (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.

     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

<PAGE>

           mailed or delivered by the Company.  Such written request may specify
           all or a part of a Holder's Warrant Shares.

     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,

<PAGE>

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 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 be the  number  of  shares  of  Common  Stock

<PAGE>

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 Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release

<PAGE>

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,  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

<PAGE>

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  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.

<PAGE>

           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
           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

<PAGE>

           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.

           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.


<PAGE>

           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.


           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.


<PAGE>

           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.

           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



<PAGE>

                           (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.

           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

<PAGE>

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 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

<PAGE>

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 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.


<PAGE>

           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 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

<PAGE>

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,  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

<PAGE>

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  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


<PAGE>

                           (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
           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.


<PAGE>

           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.

           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.