SOFTWARE PUBLISHING CORP HOLDINGS INC, 10-Q, 1998-08-14

SOFTWARE PUBLISHING CORP HOLDINGS INC
10-Q, 1998-08-14
PREPACKAGED SOFTWARE

Previous: SANGUINE CORP, NT 10-Q, 1998-08-14

Next: MERIDIAN SPORTS INC, 10-Q/A, 1998-08-14

U.S. Securities and Exchange Commission
Washington, D.C. 20549

Form 10-QSB

(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to________

Commission file number: 1-14076

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)

Delaware 22-3270045
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)

3A Oak Road, Fairfield, New Jersey 07004
(Address of principal executive offices)

(973) 808-1992
(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes[X] No[ ]

State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,910,049 shares of Common
Stock as of August 13, 1998.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

<PAGE>

PART I. FINANCIAL INFORMATION

Item Page

Item 1. Financial Statements:

Condensed Consolidated Balance Sheets as of June 30, 1998
(Unaudited) and December 31, 1997 . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1998 and 1997 (Unaudited) . . . . 4
Condensed Consolidated Statement of Changes in Stockholders'
Equity for the Six Months Ended June 30, 1998 (Unaudited) . . . 5
Condensed Consolidated Statements of Cash Flows for the Three
and Six Months Ended June 30, 1998 and 1997 (Unaudited) . . . . 6
Notes to Condensed Financial Statements. . . . . . . . . . . . . . . 7

Item 2. Management's Discussion and Analysis or Plan of
Operation . . . . . . . . . . . . . . . . . . . . . . . . 9

<PAGE>

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

June 30, December 31,
1998 1997
(Unaudited) (Note)

ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . $2,088,500 $ 2,586,753
Marketable securities . . . . . . . . . . . . . -- 173,600
Accounts receivable, net. . . . . . . . . . . . 1,497,943 1,324,102
Inventories . . . . . . . . . . . . . . . . . . 610,640 567,336
Prepaid expenses and other current assets . . . 333,775 329,591
---------- ----------
Total current assets . . . . . . . . . . . 4,530,858 4,981,382
Property and equipment, net. . . . . . . . . . . 448,349 568,888
Acquired software, net . . . . . . . . . . . . . 3,295,584 4,446,750
Goodwill, net. . . . . . . . . . . . . . . . . . 231,086 268,559
Restricted cash. . . . . . . . . . . . . . . . . 300,000 300,000
Other assets . . . . . . . . . . . . . . . . . . 80,023 63,923
---------- ----------

Total assets . . . . . . . . . . . . . . . $8,885,900 $10,629,502
---------- ----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . . . $ 3,355,715 $ 3,015,198
Accrued liabilities . . . . . . . . . . . . . . 2,074,344 4,112,267
Current portion of long-term debt . . . . . . . 150,877 173,866
---------- ----------
Total current liabilities. . . . . . . . . 5,580,936 7,301,331
Long-term debt, less current maturities. . . . . 103,750 184,765
---------- ----------
Total liabilities. . . . . . . . . . . . . 5,684,686 7,486,096
---------- ----------
Commitments and contingencies. . . . . . . . . . -- --
Stockholders' equity:
Serial Preferred Stock, authorized 1,939,480 shares:
none issued and outstanding . . . . . . . . -- --
Class B Voting Preferred Stock, Series A, 60,520 shares
authorized, none issued and outstanding . . . -- --
Common stock, par value $.001 per share, authorized
30,000,000 shares: issued and outstanding 3,910,049
shares in 1998 and 3,003,767 shares in 1997 3,910 3,004
Additional paid-in capital . . . . . . . . . . . 44,226,768 42,971,820
Accumulated deficit. . . . . . . . . . . . . . . (41,029,464) (39,831,418)
---------- ----------
Total stockholders' equity . . . . . . . . 3,201,214 3,143,406
---------- ----------
Total liabilities and stockholders' equity $8,885,900 $10,629,502
---------- ----------

<FN>

Note: The balance sheet at December 31, 1997 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements.
</FN>
</TABLE>

See notes to condensed financial statements.

<PAGE>

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
(Note) (Note)

<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . $ 4,079,533 $ 4,144,311 $ 8,002,979 $ 8,094,563
Cost of goods sold . . . . . . . 745,657 827,603 1,703,301 1,779,369
------------ ------------ ------------ -----------
Gross profit. . . . . . . . 3,333,876 3,316,708 6,299,678 6,315,194

Selling, general and administrative
expenses. . . . . . . . . . . . (2,768,421) (3,565,436) (5,412,663) (7,728,016)
Amortization of acquired software and
goodwill and depreciation . . . (717,012) (822,618) (1,366,849) (1,689,537)
Product development. . . . . . . (517,324) (890,526) (772,577) (1,646,738)
Other income (expense) - net . . (5,273) 18,633 54,365 108,257
------------ ------------ ------------ -----------
Loss before income tax benefit. (674,154) (1,943,239) (1,198,046) (4,640,840)
Income tax benefit . . . . . . . 44,971 -- -- --
------------ ------------ ------------ -----------
Net loss . . . . . . . . . . . $ (629,183) $(1,943,239) $(1,198,046) $(4,640,840)
------------ ------------ ------------ -----------

Net loss per common share:
Net loss per common share -
basic and diluted. . . . . . $ (.18) $ (.72) $ (.36) $ (1.74)
------------ ------------ ------------ -----------
Weighted average number of
common shares outstanding -
basic and diluted. . . . . . 3,576,425 2,683,474 3,296,956 2,663,969
------------ ------------ ------------ -----------

<FN>
Note: Net loss per common share and weighted average number of common shares
outstanding for all periods presented have been adjusted to reflect
the Company's one-for-three (1:3) reverse stock split made effective
May 27, 1998.
</FN>
</TABLE>

See notes to condensed financial statements.

<PAGE>

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-In Accumulated Stockholders'
$.001 Par Value Capital Deficit Equity
--------------- ---------- ----------- -------------
Shares Amount
(Note)

<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 . . . . . . . 3,003,767 $ 3,004 $42,971,820 $(39,831,418) $3,143,406
Issuance of common stock in payment of
liability in connection with business
combination . . . . . . . . . . . . . . 10,616 11 31,239 31,250
Issuance of common stock in payment of
of liabilities for services in connection
with business combinations. . . . . . . 27,299 27 49,112 49,139
Issuance of common stock in payment of
liabilities for services. . . . . . . . 20,670 21 36,697 36,718
Issuance of common stock and warrants for
services rendered . . . . . . . . . . . 53,333 53 100,447 100,500
Sale of common stock and warrants. . . . . 333,333 333 499,667 500,000
Sale of common stock in private
placement - net . . . . . . . . . . . . 461,031 461 537,786 538,247
Net loss . . . . . . . . . . . . . . . . . (1,198,046) (1,198,046)
---------- ------- ------------ ------------ ------------
Balance at June 30, 1998 . . . . . . . . . 3,910,049 $ 3,910 $44,226,768 $(41,029,464) $3,201,214
---------- ------- ------------ ------------ ------------

<FN>
Note: The balance at December 31, 1997 and all issuances of common stock
through June 30, 1998 have been adjusted to reflect the Company's
one-for-three (1:3) reverse stock split made effective May 27, 1998.
</FN>
</TABLE>

See notes to condensed financial statements.

<PAGE>

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
For the Six Months Ended June 30,
---------------------------------
1998 1997

Operating activities
<S> <C> <C>
Cash (used in) from operations . . . . . . $(1,410,925) $(6,239,217)
------------ ------------
Investment activities
Purchase of property and equipment . . . . (21,571) (457,348)
Proceeds from sale of short term
investments. . . . . . . . . . . . . . . -- 4,840,546
------------ ------------
(21,571) 4,383,198
------------ ------------

Financing activities
Proceeds from sale of common stock . . . . 1,038,247 --
Repayment of notes . . . . . . . . . . . . (104,004) (1,805,273)
------------ ------------
934,243 (1,805,273)
------------ ------------

Net (decrease) in cash . . . . . . . . . . (498,253) (3,661,292)
Cash at beginning of period. . . . . . . . 2,586,753 6,483,454
------------ ------------
Cash at end of period. . . . . . . . . . . $ 2,088,500 $ 2,822,162
------------ ------------

Supplemental disclosure of non-cash financing and investing activities:

Common stock issued in payment of
liabilities . . . . . . . . . . . . . . $ 107,107 $ --
------------ ------------

Common stock issued for services . . . . . $ 110,500 $ --
------------ ------------
</TABLE>

See notes to condensed financial statements.

<PAGE>

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation.

The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.

2. Accounting Principles.

Recently Issued Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and displaying comprehensive income and its
components in financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. The adoption of
SFAS No. 130 has no impact on the Company's consolidated results of operations,
financial position or cash flows. The Company presently has no items of other
comprehensive income.

In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to stockholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. Financial statement disclosures for prior
periods are required to be restated. The Company is in the process of evaluating
the disclosure requirements. The adoption of SFAS No. 131 will have no impact on
the Company's consolidated results of operations, financial position or cash
flows.

3. Loss Per Share.

Basic loss per share is computed based upon the weighted average number of
common shares outstanding during each period presented. Stock options did not
have an effect on the computation of diluted earnings per share in the three and
six month periods ended June 30, 1998 and 1997 since they were anti-dilutive.

4. Inventories.

Inventories consist principally of finished goods.

<PAGE>
5. Stockholders' Equity.

In March 1998, the Company authorized 100,000 shares of Junior
Participating Preferred Stock, Series A, par value $.001 per share. The Junior
Preferred Stock has preferential voting, dividend and liquidation rights over
the Common Stock. On March 31, 1998, the Company declared a dividend
distribution, payable April 30, 1998, of one Preferred Share Purchase Right
("Right") on each share of Common Stock. Each Right, when exercisable, entitles
the registered holder thereof to purchase from the Company one one-thousandth of
a share of Junior Preferred Stock at a price of $1.00 per one one-thousandth of
a share (subject to adjustment). The one one-thousandth of a share is intended
to be the functional equivalent of one share of the Common Stock. The Rights
will not be exercisable or transferable apart from the Common Stock until an
Acquiring Person, as defined in the Rights Agreement, dated as of March 31,
1998, between the Company and American Stock Transfer & Trust Company, without
the prior consent of the Company's Board of Directors, acquires 20% or more of
the voting power of the Common Stock or announces a tender offer that would
result in 20% ownership. The Company is entitled to redeem the Rights, at $.001
per Right, any time before a 20% position has been acquired or in connection
with certain transactions thereafter announced. Under certain circumstances,
including the acquisition of 20% of the Common Stock, each Right not owned by a
potential Acquiring Person will entitle its holder to purchase, at the Right's
then-current exercise price, shares of Common Stock having a market value of
twice the Right's exercise price. Holders of a Right will be entitled to buy
stock of an Acquiring Person at a similar discount if, after the acquisition of
20% or more of the Company's voting power, the Company is involved in a merger
or other business combination transaction with another person in which its
common shares are changed or converted, or the Company sells 50% or more of its
assets or earning power to another person. The Rights expire on April 20, 2008.

On May 26, 1998, the stockholders of the Company granted the Board of
Directors of the Company authority to amend the Company's Certificate of
Incorporation to authorize either a one-for-two (1:2), one-for-three (1:3) or
one- for-five (1:5) reverse stock split of the Common Stock. Following such
stockholder action, the Company's Board of Directors authorized a one-for-three
(1:3) reverse stock split (the "Reverse Stock Split") of the Common Stock and
directed that a Certificate of Amendment of the Certificate of Incorporation of
the Company (the "Certificate of Amendment") effectuating the Reverse Stock
Split be filed with the Delaware Secretary of State. The Certificate of
Amendment was filed with the Delaware Secretary of State on May 27, 1998. In
accordance with the Certificate of Amendment, the Reverse Stock Split became
effective as of the close of business on May 27, 1998. Giving effect to the
Reverse Stock Split, the Company's net loss per share - basic and diluted, as
restated, was $.19 and $1.02 per share for the quarters ended March 31, 1998 and
1997, respectively, and $3.57 and $22.44 per share for the years ended December
31, 1997 and 1996, respectively.

6. Pending Legal Matters

The action commenced by the Company's former Chairman of the Board,
President and Chief Executive Officer and his spouse, also a former director and
officer of the Company, has been dismissed with prejudice.

The action commenced by certain purchasers of Common Stock seeking
recession of their aggregate $919,495 investment in the Company and certain
other relief, and in which the Company has made certain counterclaims, is in the
discovery stage.

<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operation.

Statements contained in this Quarterly Report on Form 10-QSB that are not
based upon historical fact are "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements included
in this Form 10-QSB involve known and unknown risks, uncertainties and other
factors which could cause actual results, performance (financial or operating)
or achievements expressed or implied by such forward looking statements not to
occur or be realized. Such forward looking statements generally are based upon
the best estimates by Software Publishing Corporation Holdings, Inc. (the
"Company") of future results, performance or achievement, based upon current
conditions and the most recent results of operations. Forward-looking statements
may be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "believe," "estimate," "anticipate," "continue," or similar
terms, variations of those terms or the negative of those terms.

The Company acquired three operating software companies in 1996 and
conducted a restructuring of its management and operations in late 1997 and
early 1998 with the expectation that such transactions and restructuring will
result in long-term strategic benefits. While the Company has substantially
implemented its integration and restructuring plans, there can be no assurance
that the expected long-term strategic benefits of the acquisitions and
restructuring will be realized. Additional potential risks and uncertainties
include, among other things, such factors as the overall level of business and
consumer spending for computer software, the market acceptance and amount of
sales of the Company's products, the extent that the Company's direct mail
programs achieve satisfactory response rates, the efficiency of the Company's
telemarketing operations, the competitive environment within the computer
software and direct mail industries, the Company's ability to raise additional
capital, the ability of the Company to continue to implement its reorganization
plan efficiently and achieve the anticipated results therefrom, the
cost-effectiveness of the Company's product development activities, the extent
to which the Company is successful in developing, acquiring or licensing
successful products, and other factors and information disclosed and discussed
in this "Item 2. Management's Discussion and Analysis or Plan of Operation" and
in other sections of this Form 10-QSB. Readers of this Form 10-QSB should
carefully consider such risks, uncertainties and other information, disclosures
and discussions which contain cautionary statements identifying important
factors that could cause actual results to differ materially from those provided
in the forward looking statements.

General

The Company is an international developer, publisher and supplier of
proprietary computer software applications primarily targeted towards the visual
communications market segment through desktop publishing, presentation graphics,
graphics/drawing and business productivity software for the corporate and small
office/home office ("SOHO") markets. The Company's products produce documents
through its easy-to-use desktop publishing, drawing and presentation graphics
applications, and also improve the graphical appeal and overall effectiveness of
documents produced by either the Company's or third parties' desktop publishing,
presentation graphics, web page, e-mail, word processing and other similar
applications. The Company currently offers sixteen products, primarily Serif
PagePlus and Harvard Graphics , that operate on the Windows 98, Windows 95,
Windows NT , Windows 3.1 and DOS operating systems for IBM personal computers
and compatibles. The Company has established a multi-channel distribution system
utilizing direct mail, telemarketing, retail, corporate and OEM sales channels
and also disseminates its software programs over the Internet. The Company
currently derives substantially all of its net sales from products sold directly
to end-users by its direct mail and telemarketing centers, and to retailers,
distributors and corporate purchasers by its internal corporate and retail sales
force and independent sales representatives. The Company anticipates to commence
selling certain computer hardware and digital imaging equipment manufactured by
third parties through the Company's direct mail sales channel.

In July 1996, the Company acquired Serif Inc. and Serif (Europe) Limited
(collectively, the "Serif companies"), which significantly expanded the
Company's product line to include desktop publishing titles Serif PagePlus and
Serif DrawPlus, among others. In December 1996, the Company acquired all of the
outstanding capital stock of Software Publishing Corporation ("SPC"), as a
result of which the Company's product line expanded further to include SPC's
presentation graphics and other visual communications and business productivity
software products. The Company

<PAGE>

continues to operate the Serif companies and SPC as wholly-owned subsidiaries.
Since January 1998, the operations of SPC have been significantly reduced.

North America and international net revenues for the Company's three month
and six month periods ending June 30, 1998 and 1997, were as follows:

<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
----------------------------------- ---------------------------------
$ % $ % $ % $ %
----------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North America . . $1,955,375 47.9 $1,902,380 45.9 $3,830,594 47.9 $3,774,545 46.6
International . . 2,124,158 52.1 2,241,931 54.1 4,172,385 52.1 4,320,018 53.4
---------- ---- ---------- ---- ---------- ---- ---------- ----
Total . . . . . . $4,079,533 100.0 $4,144,311 100.0 $8,002,979 100.0 $8,094,563 100.0
</TABLE>

The Company believes that end users are continuing to migrate from the
Windows 3.1 to the Windows 95 and Windows 98 platforms and potentially may
migrate to Internet computing. The Company expects increased competition,
including price competition, in the Windows 3.1, Windows 95, Windows 98 and
Windows NT markets in the future. Several of the Company's competitors have
introduced suites of products which include products that directly compete with
the Company's products. The Company believes that these offerings of product
suites adversely affect net revenues and will continue to adversely affect sales
of the Company's products in the future as the individual products within the
suites continue to gain increased levels of inter-operability and functionality.
The Company currently does not offer a suite of general purpose office products;
however, the Company currently offers one product suite, Serif Publishing Power
Suite, as well as products that complement competitive suite products. The
Company believes that in order to increase its net revenues, it must continue to
develop and introduce new technologies and products internally, obtain
additional technologies and products through strategic alliances and
acquisitions and introduce new marketing strategies. Any inability or delay in
executing these strategies, difficulties encountered in introducing new products
or marketing programs, or failures of the Company's current and future products
to compete successfully with products offered by other vendors, could adversely
affect the Company's net revenues and profitability. The Company's growth is
expected to require increases in the number of the Company's employees,
expenditures for new product development, the acquisition of product rights,
sales and marketing expenses, and general and administrative expenses.

Results of Operations

Three Month Period Ended June 30, 1998 Compared to the Three Month Period
Ended June 30, 1997

Net Sales. Net sales decreased approximately $65,000, or 1.6%, from
$4,144,000 in the three month period ended June 30, 1997 to $4,080,000 in the
three month period ended June 30, 1998 principally as a result of an extended
Easter vacation period in Europe in the 1998 period, which has historically
resulted in lower sales volume. The Company provided for returns in the three
month period ended June 30, 1998 at approximately 9% of gross sales as compared
to 6% in the three month period ended June 30, 1997 due to a shift in product
sales from direct channels to retail sales, which historically have exhibited
higher returns than the direct sales channels. As at June 30, 1998, the Company
had approximately $210,000 in confirmed back orders.

Cost of Goods Sold. Cost of goods sold decreased approximately $82,000, or
9.9%, from $828,000 in the three month period ended June 30, 1997 to $746,000 in
the three month period ended June 30, 1998, as a result of the Company's effort
to reduce product costs through changes in suppliers. As a percentage of net
sales, cost of goods sold decreased from approximately 20.0% of net sales in the
three month period ended June 30, 1997 to 18.3% of net sales in the three month
period ended June 30, 1998. Cost of goods sold consists primarily of product
costs, freight charges, royalties and inventory allowances for damaged and
obsolete products. Product costs consist of the costs to purchase the underlying
materials and print both boxes and manuals, media costs (CD-ROM's and other
media) and assembly.

The Company's gross margins and operating income may be affected in
particular periods by the timing of product introductions, promotional pricing
and rebate offers, as well as by return privileges and marketing promotions in
connection with new product introductions and upgrades. These promotions may
have a negative influence on average

<PAGE>

selling prices and gross margins. Gross margins have also been, and may
continue to be, adversely affected by competitive pricing strategies in the
industry as a whole, including competitive upgrade pricing, the OEM business and
alternative licensing arrangements.

Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses decreased by approximately $797,000, or 22.4%,
from $3,565,000 in the three month period ended June 30, 1997 to $2,768,000 in
the three month period ended June 30, 1998, primarily as a result of the
implementation of the Company's restructuring program, which included closing
the Company's San Jose, California office. Total selling expenses (not including
salaries) decreased approximately $619,000, or 27.2%, from $2,277,000 in the
three month period ended June 30, 1997 to $1,658,000 in the three month period
ended June 30, 1998, primarily as a result of a decrease in the level of
advertising and sales promotion activities within the retail distribution
channels.

The Company establishes several of its marketing expenditure levels based
on expected net revenues. If orders and shipments do not occur when expected,
expenditure levels could be disproportionately high compared to recognized
revenues for the reported period and the Company's operating results could be
adversely affected. The Company periodically reviews and adjusts its variable
expenditure levels based on actual sales volumes. In the future, the Company's
net revenues and operating results could be adversely affected by these and
other factors, such as delays in new product introductions, the mix of product
sales or distribution channels and customer choices regarding operating systems.

Amortization of Acquired Software and Goodwill and Depreciation.
Depreciation and amortization decreased to approximately $717,000 in the three
month period ended June 30, 1998 from approximately $823,000 for the three month
period ended June 30, 1997 due to the elimination of certain goodwill in 1997.

Product Development. Product development expenses decreased approximately
$373,000, or 41.9%, from $891,000 in the three month period ended June 30, 1997
to $517,000 in the three month period ended June 30, 1998 principally as a
result of the reduction in product development staff located in California and
the Company's shift in focus toward acquiring or licensing products developed by
third parties. As a percentage of net sales, the Company's product development
costs were approximately 12.7% in the three month period ended June 30, 1998 as
compared to 21.5% in the three month period ended June 30, 1997. The Company
expects that development expenses will increase in dollar amount in the future
to the extent the Company expands its development activities, although the
Company's long-term goal is to continue to reduce product development costs as a
percentage of sales. All product development costs have been expensed in the
period incurred.

Other (Income) Expense. Other (income) expense decreased from income of
approximately $19,000 in the three month period ended June 30, 1997 to an
expense of $5,000 in the three month period ended June 30, 1998 primarily as a
result of lower average cash balances during the 1998 period.

Six Month Period Ended June 30, 1998 Compared to the Six Month Period Ended
June 30, 1997

Net Sales. Net sales decreased approximately $92,000, or 1.1%, from
$8,095,000 in the six month period ended June 30, 1997 to $8,003,000 in the six
month period ended June 30, 1998 primarily as a result of the longer Easter
vacation period in 1998, which has historically resulted in lower sales volume.
The Company provided in the six month period ended June 30, 1998 for returns at
approximately 7% of gross sales as compared to 15% in the six month period ended
June 30, 1997, due to a shift in product sales in the quarter ended March 31,
1998 from primarily retail sales to more direct channels, which historically
have exhibited fewer returns than the retail sales channels.

Cost of Goods Sold. Cost of goods sold decreased approximately $76,000, or
4.3%, from $1,779,000 for the six month period ended June 30, 1997 to $1,703,000
in the six month period ended June 30, 1998 primarily as a result of decreased
sales volume and the Company's effort to reduce product costs through changes in
suppliers. As a percentage of net sales, cost of goods sold decreased from
approximately 22.0% in the six month period ended June 30, 1997 to 21.3% in the
six month period ended June 30, 1998.

<PAGE>

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased by approximately $2,315,000, or 30.0%, from
$7,728,000 in the six month period ended June 30, 1997 to $5,413,000 in the six
month period ended June 30, 1998 primarily as a result of a decrease in
advertising and the implementation of the Company's restructuring, which
resulted in reduced personnel costs of approximately $500,000 and decreases in
rental and other occupancy costs, partially offset by an increase in
professional fees. General and administrative expenses decreased approximately
$344,000, or 25.0%, from $1,375,000 in the six month period ended June 30, 1997
to $1,031,000 in the six month period ended June 30, 1998. Total selling
expenses (not including salaries) decreased approximately $1,005,000, or 27.8%,
from $3,611,000 in the six month period ended June 30, 1997 to $2,606,000 in the
six month period ended June 30, 1998, primarily as a result of the Company's
restructuring program.

Amortization of Acquired Software and Goodwill and Depreciation. In the six
month period ended June 30, 1998, the Company recorded approximately $1,367,000
in amortization of acquired software and goodwill and depreciation compared to
$1,690,000 incurred in the six month period ended June 30, 1997, primarily as a
result of the elimination of certain goodwill in 1997.

Product Development. Product development expenses decreased approximately
$874,000, or 53.1%, from $1,647,000 in the six month period ended June 30, 1997
to $773,000 in the six month period ended June 30, 1998 principally as a result
of the Company's restructuring program. As a percentage of net sales, the
Company's product development costs decreased to approximately 9.7% in the six
month period ended June 30, 1998 as compared to 20.3% in the six month period
ended June 30, 1997. The Company expects that development expenses will increase
in dollar amount in the future to the extent the Company expands its development
activities, although the Company's long-term goal is to continue to reduce
product development costs as a percentage of sales. All development costs have
been expensed in the period incurred.

Other (Income) Expense. Other income decreased approximately $54,000, or
49.8%, from $108,000 in the six month period ended June 30, 1997 to $54,000 in
the six month period ended June 30, 1998, primarily as a result of lower average
cash balances in the 1998 period.

Liquidity and Capital Resources

During the six-month period ended June 30, 1998, the Company's cash and
cash equivalents decreased by approximately $498,000 from $2,587,000 at December
31, 1997 to $2,089,000 at June 30, 1998, primarily as a result of using
$1,411,000 in operations, $104,000 to pay certain debt and $22,000 to purchase
property and equipment, partially offset by the sale of Company securities
during the three months ended June 30, 1998, with net proceeds to the Company of
$1,038,000. The Company had a working capital deficit of approximately
$1,050,000 at June 30, 1998, a reduction of $1,270,000 from the Company's
working capital deficit at December 31, 1997, which resulted primarily from cash
used in operations, offset in part by the Company's sale of securities discussed
below.

In April and May 1998, the Company sold an aggregate 794,364 shares of
Common Stock, and warrants to purchase an additional aggregate 800,000 shares of
Common Stock, to a total of twenty investors, including certain directors,
officers and employees of the Company and their affiliates, for aggregate
proceeds of $1,038,247 (net of sales commissions of $11,700 and expenses of
$15,000). Also during the 1998 second quarter, the Company issued an aggregate
101,302 shares of Common Stock in payment of liabilities for services rendered
and goods supplied. The Company also implemented a cost reduction program
relating to personnel and operating expenses in connection with its 1997
restructuring.

The Company has a letter of credit facility of $300,000 relating to certain
lease obligations collateralized by $300,000 of restricted cash and has a debt
facility of approximately $300,000 with its primary bank in the United Kingdom,
of which approximately $255,000 was outstanding at June 30, 1998. The Company
intends to continue to pursue a possible offering of its equity or debt
securities; however, there can be no assurance that the Company will be
successful in completing such an offering. The Company believes that its
existing cash and cash equivalents, cash generated from operations, if any, and
the proceeds from the April and May 1998 sale of Company securities should be
sufficient to meet its currently anticipated liquidity and capital expenditure
requirements for at least the next

<PAGE>

approximately six to nine months. There can be no assurance, however, that the
Company will be successful in attaining its sales goals, nor that attaining such
goals will have the desired effect on the Company's cash resources.

The Company's operating activities for the first six months of 1998 used
cash of approximately $1,411,000 primarily related to costs associated with
development, sales and marketing the Company's products, an increase in accounts
receivable and a reduction of accrued expenses. The Company intends to continue
to utilize its working capital in 1998 for product development, marketing and
advertising, to finance the higher level of inventory and accounts receivable
necessary to support an anticipated increase in sales and for internal and
external software development. However, the Company's cash requirements may
change depending upon numerous factors, including, without limitation, the need
to finance direct marketing programs and the licensing or acquisition of third
party software as well as increased inventory and accounts receivable arising
from the sale and shipment of new products. The Company intends to continue to
seek additional working capital funding to expand certain direct marketing
programs.

In the six-month period ended June 30, 1998, approximately 52.1% of the
Company's total sales were generated outside the United States. The Company
expects this pattern to continue as it continues to expand its foreign sales
operations. The Company's exposure to foreign currency gains and losses is
partially mitigated as the Company incurs operating expenses in the principal
foreign currency in which it invoices foreign customers. As of June 30, 1998 the
Company had no foreign exchange contracts outstanding. The Company's foreign
exchange gains and losses may be expected to fluctuate from period to period
depending upon the movement in exchange rates.

In June 1994, SPC sold its Superbase product line to Computer Concepts
Corporation ("CCC") (NASDAQ: CCEE) for shares of CCC's restricted common stock.
During the three-month period ending June 30, 1998, SPC sold its remaining
125,000 shares of common stock of CCC for gross proceeds of approximately
$53,000.

Seasonality

The computer software market is characterized by significant seasonal
swings in demand, which typically peak in the fourth quarter of each calendar
year. This seasonal pattern is due primarily to the increased demand for
software during the year-end holiday buying season and reduced retail and
corporate demand for business software during the European summer vacation
period. The Company expects its net sales and operating results to continue to
reflect this seasonality. The Company's revenues may also experience substantial
variations as a result of a number of factors, such as consumer and business
preferences and introduction of competing titles by competitors, as well as
limited time promotional offers. There can be no assurance that the Company will
achieve consistent growth or profitability on a quarterly or annual basis.

Inflation

The Company believes that inflation has generally not had a material impact
on its operations.

Year 2000 Compliance Issues

Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish twenty-first century dates
from twentieth century dates. As a result, in less than two years, computer
systems and software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. The Company is in the process of
implementing a review of issues related to the Company's Year 2000 compliance.
This review is intended to determine the effect of the turn of the century on
the operability of the Company's products, internal and external information
technology ("IT") systems, non-IT systems the Company utilizes to conduct its
business and other internal and external processes which may impact the
Company's operations. In connection with this evaluation, the Company also
intends to review the Company's vendors and suppliers for Year 2000 compliance
and to effect changes where necessary.

The Company believes that this review process will be conducted in three
phases. The first phase is anticipated to encompass a review of all of the
Company's products, internal and external systems/processes and vendors and

<PAGE>

suppliers for Year 2000 compliance. The second phase is expected to correct all
items identified as non-compliant and essential to the operations of the
Company. The third phase is contemplated to be a second review to ensure year
2000 compliance and interoperability of all systems/processes.

The Company anticipates conducting its review with its current resources
and expects that it has sufficient resources to complete the review process in a
timely manner. The Company has not determined, at this time, what total costs it
will incur to conduct the review process and to implement any necessary
corrections. The Company has identified one IT system which will need to be
replaced at a cost of approximately $25,000.

The Company produces application computer software and has determined that
the products it has developed within the last several years are Year 2000
compliant. The Company is currently reviewing products sold by the Company prior
to 1994 for Year 2000 compliance. The Company currently believes that it has no
liability concerning any of its products with respect to Year 2000 requirements.

The Company does not know, at this time, of any product, process or system,
which, if found to be non-Year 2000 compliant, would have any significant impact
on the Company's business, financial condition or results of operations.

<PAGE>

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

Reference is hereby made to the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1997, Item 3 (pages 11-12), filed April 15,
1998, the Company's Quarterly Report on Form 10-QSB, Item 1 of Part II (page
13), filed May 13, 1998 (Commission File No.: 1-14076), and to the references
therein, for a discussion of all material pending legal proceedings to which the
Company or any of its subsidiaries are parties.

The lawsuit captioned Barry Cinnamon and Lori Kramer Cinnamon, suing
derivatively on behalf of Software Publishing Corporation Holdings, Inc. and its
shareholders, and Barry Cinnamon and Lori Kramer Cinnamon, individually, v.
Software Publishing Corporation Holdings, Inc., Neil M. Kaufman, Mark Leininger
and John Does 1-10 has been dismissed with prejudice. Further, Barry A.
Cinnamon, the former Chairman of the Board, Chief Executive Officer and
President of the Company and a plaintiff in such action, has sold all shares of
Common Stock held by Mr. Cinnamon, both individually and as custodian for his
minor children, to third parties, thereby terminating the proxy previously
granted to the Company's President to vote such 900,320 shares.

The action titled Howard Milstein and Ronald Altman v. Software Publishing
Corporation Holdings, Inc., Mark E. Leininger and Barry A. Cinnamon is currently
in the discovery stage.

Item 2. Changes in Securities and Use of Proceeds.

In May 1998, the Company issued 9,418 shares (as adjusted to give effect to
the Reverse Stock Split referred to below) (the "Abrams Shares") of Common Stock
to Joseph Abrams in payment for consulting services valued at $15,000. The
issuance of the Abrams Shares was a private transaction exempt from registration
under Section 4(2) of the Securities Act.

In May 1998, the Company issued 954 shares (as adjusted to give effect to
the Reverse Stock Split referred to below) (the "PBC Shares") of Common Stock to
Perma-Bilt Clothing in payment for goods and services valued at $1,718. The
issuance of the PBC Shares was a private transaction exempt from registration
under Section 4(2) of the Securities Act.

The Company and The Whitehaven Group, LLC ("Whitehaven") have agreed to
delay, for a four month period, the commencement of the exercise period of the
warrants issued to Whitehaven pursuant to the Subscription Agreement, dated
April 28, 1988, between the Company and Whitehaven. Accordingly, the warrants to
purchase 183,333 and 83,333 shares of Common Stock at exercise prices of $.03
and $2.15625 per share, respectively (as adjusted to give effect to the Reverse
Stock Split), will be exercisable at any time and from time to time on or after
January 5, 1999 and through January 4, 2001.

<PAGE>

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

On May 26, 1998, the 1998 Annual Meeting of Stockholders of the Company was
held, at which the following matters were voted upon and adopted by the votes
indicated:

1. Two directors were re-elected to Class II of the Board of
Directors to serve until the Annual Meeting of Stockholders in 2001,
in addition to the other five directors whose term of office continued
after the Meeting. The names of the re-elected directors and votes
cast in favor of their election and shares withheld are as follows:

Nominee Votes For Votes Withheld
------- --------- --------------
Norman W. Alexander 5,818,413 248,173
Neil M. Kaufman 5,819,109 247,477

2. Grant the Board of Directors of the Company authority to amend
the Company's Certificate of Incorporation to authorize a one-for-two
reverse stock split of the Common Stock. The votes cast in favor of
the proposal, against the proposal, those votes which abstained and
broker non-votes were as follows:

Votes For Votes Against Votes Abstaining/Withheld Broker Non-Votes
--------- ------------- ------------------------- ----------------
5,551,962 472,388 42,236 -0-

3. Grant the Board of Directors of the Company authority to amend
the Company's Certificate of Incorporation to authorize a
one-for-three reverse stock split of the Common Stock. The votes cast
in favor of the proposal, against the proposal, those votes which
abstained and broker non-votes were as follows:

Votes For Votes Against Votes Abstaining/Withheld Broker Non-Votes
--------- ------------- ------------------------- ----------------
5,471,921 558,720 35,945 -0-

4. Grant the Board of Directors of the Company authority to amend
the Company's Certificate of Incorporation to authorize a one-for-five
reverse stock split of the Common Stock. The votes cast in favor of
the proposal, against the proposal, those votes which abstained and
broker non-votes were as follows:

Votes For Votes Against Votes Abstaining/Withheld Broker Non-Votes
--------- ------------- ------------------------- ----------------
5,503,936 517,917 44,733 -0-

Item 5. Other Information.

On July 29, 1998, the Company was advised by The Nasdaq Stock Market, Inc.
that a Nasdaq Listing Qualifications Panel (the "Panel") "was of the opinion
that the Company appears to comply with the net tangible assets and bid price
requirements at present," and determined to continue listing of the Common Stock
on The Nasdaq SmallCap Market ("Nasdaq"). However, the Panel imposed upon the
Company, in order to maintain this listing, the requirements that (a) the
Company demonstrate minimum net tangible assets of $2,500,000 as of June 30,
1998, (b) the Company report an operating profit and net income in excess of
$250,000 for the three months ended June 30, 1998 (the "Supplemental Income
Requirement") and (c) the Company remain in full compliance with all
requirements for

<PAGE>

continued listing on Nasdaq. The Company had net tangible assets in excess of
$2,500,000 as of June 30, 1998, and believes it was in full compliance with all
other requirements for continued listing on Nasdaq. However, the Company did not
have an operating profit or net income in excess of $250,000 for the three
months ended June 30, 1998. Accordingly, the Company has appealed the Panel's
determination to impose the Supplemental Income Requirement. No assurance can
be given that the Company will be successful in its appeal of the Panel's
determination to impose the Supplement Income Requirement, or that the Company
will continue in the future to maintain net tangible assets of at least
$2,500,000 or compliance with all other Nasdaq continued listing maintenance
requirements. Any delisting of the Company's securities from Nasdaq could cause
a precipitous decline in the market value of the Company's securities and
adversely affect the liquidity of the Company's securities.

Effective July 17, 1998, the Company repriced to $1.375 per share of Common
Stock, 75% of all options granted under the Company's various stock incentive
plans to current employees, officers, directors and outside consultants of the
Company.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits.

Set forth below are all exhibits to this Quarterly Report on Form 10-QSB.

Exhibit
Number Description

3.1 Composite of Certificate of Incorporation of the Company, as amended
to date.
10.60 Warrant, dated as of July 3, 1998, registered in the name of The
Whitehaven Group, LLC, with respect to 183,333 shares of Common Stock.
10.61 Warrant, dated as of July 3, 1998, registered in the name of The
Whitehaven Group, LLC, with respect to 83,333 shares of Common Stock.
10.62 Form of Warrant Certificate issued to M.S. Farrell Holdings,
Inc. ("Holdings"), as assignee of M.S. Farrell & Co., Inc., and
certain other persons, as assignees of Holdings.
27 Financial Data Schedule.

(b) Reports on Form 8-K.

On May 29, 1998 the Company filed a Current Report on Form 8-K (Date of
Report: May 26, 1998) with the Commission reporting, as Item 5 disclosures, the
approval by Company's shareholders and the effectuation of the Reverse Stock
Split and the dismissal with prejudice of the lawsuit captioned Barry Cinnamon
and Lori Kramer Cinnamon, suing derivatively on behalf of Software Publishing
Corporation Holdings, Inc. and its shareholders, and Barry Cinnamon and Lori
Kramer Cinnamon, individually, v. Software Publishing Corporation Holdings,
Inc., Neil M. Kaufman, Mark Leininger and John Does 1-10.

<PAGE>

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

SOFTWARE PUBLISHING
CORPORATION HOLDINGS, INC.

Dated: August 13, 1998 By: /s/ Mark E. Leininger
Mark E. Leininger
President and Chief Executive Officer
(Principal Executive Officer)

Dated: August 13, 1998 By: /s/ Kevin D. Sullivan
Kevin D. Sullivan
Vice President - Finance, Treasurer
and Chief Financial Officer
(Principal Financial Officer)

<PAGE>

EXHIBIT INDEX

Exhibit
Number Description

COMPOSITE

CERTIFICATE OF INCORPORATION

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
(a Delaware corporation)

* * * * * *

FIRST: The name of the corporation is:

Software Publishing Corporation Holdings, Inc.

SECOND: The location of the registered office of the Corporation in the State
of Delaware is at Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle. The name of the registered agent of the
Corporation in the State of Delaware at such address upon whom process against
the Corporation may be served is The Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.

FOURTH: (a) The total number of shares of all classes of stock which the
Corporation shall have authority to issue is THIRTY-TWO MILLION (32,000,000)
shares. Of these (i) THIRTY MILLION (30,000,000) shares shall be shares of
Common Stock of the par value of $.001 per share; (ii) ONE MILLION NINE HUNDRED
THIRTY-NINE THOUSAND FOUR HUNDRED EIGHTY (1,939,480) shares shall be Serial
Preferred Stock of the par value of $.001 per share; and (iii) SIXTY-THOUSAND
FIVE HUNDRED TWENTY (60,520) shares shall be Class B Voting Preferred Stock,
Series A of the par value of $.001 per share.

(b) The statement of the relative rights, preferences and limitations
of the shares of each class is as follows:

A. Serial Preferred Stock. The Serial Preferred Stock may be
issued from time to time in classes or series and shall have such voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, as shall be stated
and expressed in the resolution or resolutions of the Board of Directors
providing for the issuance of such stock.

Class B Voting Preferred Stock, Series A:

1. Designation. (a) The designation of the series of
Serial Preferred Stock created hereby shall be "Class B Voting
Preferred Stock, Series A" (hereinafter called the "Class B
Preferred"), and the number of shares constituting the Class B
Preferred is 60,520.

(b) All shares of Class B Preferred shall be
identical with each other in all respects. All shares of Class B
Preferred shall rank, as to the payment of dividends and of
distributions of assets upon any dissolution, liquidation or
winding up of the Corporation, prior to the common stock, par
value $.001 per share, of the Corporation, and any other stock
which by its terms ranks junior to the Class B Preferred and on a
parity with any other class or series of stock of the Corporation
ranking on a parity with the Class B Preferred as to distribution
upon dissolution, liquidation or winding up of the Corporation.

<PAGE>

(c) Shares of the Class B Preferred that have been
redeemed, purchased or otherwise acquired by the Corporation
shall not be reissued as Class B Preferred and when retired as
provided by the General Corporation Law of the State of Delaware,
shall have the status of authorized but unissued shares of
Serial Preferred Stock, without designation as to series until
such shares are once more designated as part of a particular
series by the Board of Directors of the Corporation or a duly
authorized committee thereof.

2. Dividends. Each holder of shares of Class B Preferred
(each a "Holder") shall not be entitled to receive any dividends.

3. Liquidation Rights. (a) Upon the dissolution,
liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, the Holders of shares of Class
B Preferred then outstanding shall be entitled to receive, out of
the assets of the Corporation available for distribution to
stockholders after satisfying claims of creditors but before
distributions of assets shall be made on the Common Stock or any
other class or series of stock ranking junior to the shares of
Class B Preferred upon liquidation, dissolution or winding up
of the Corporation, the amount of $.001 per share plus an amount
equal to all accrued but unpaid dividends on such shares to
the date of final distribution.

(b) Neither the sale, lease or exchange (for cash,
shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Corporation, nor
the merger or consolidation of the Corporation into or with any
other corporation, or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to
be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this paragraph.

(c) After payment to the Holders of the full
preferential amount provided for in this paragraph 3 ($605.20),
holders of shares of Class B Preferred in their capacity as
Holders shall have no right or claim to any of the remaining
assets of the Corporation.

(d) If the assets of the Corporation available for
distribution to the Holders upon dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which the
Holders are entitled pursuant to clause (a) of this paragraph 3,
and to which holders of any other class or series of stock of the
Corporation ranking on a parity with the Class B Preferred as to
distribution upon dissolution, liquidation or winding up of the]
Corporation (collectively, the "Parity Stockholders") are
entitled pursuant to the Certificate of Incorporation, as it may
be amended from time to time (including any Certificate
of Designations), then such assets shall be distributed among
the Holders of the Class B Preferred and the Parity Stockholders
ratably in proportion to the full amounts otherwise due such
Holders and Parity Stockholders.

4. Voting Rights. (a) The Holders of shares of Class B
Preferred shall vote together with the shares of Common Stock
of the Corporation. The Holder of each share of Class B Preferred
shall be entitled to ten (10) votes per share of Class B
Preferred.

(b) Voting rights hereunder shall be exercised at
each meeting of stockholders for the election of directors or
otherwise or in connection with a written consent in lieu
thereof, as the case may be.

Junior Participating Preferred Stock, Series A:

Section 1. Designation and Amount. The shares of such series
shall be designated as "Junior Participating Preferred Stock,
Series A" (the "Series A Preferred Stock") and the number of
shares constituting the Series A Preferred Stock shall be
100,000.

<PAGE>

Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no
decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the
Company convertible into Series A Preferred Stock.

Section 2. Dividends and Distributions.

(a) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock) ranking
prior and superior to the Series A Preferred Stock with respect
to dividends, the holders of shares of Series A Preferred Stock,
in preference to the holders of Common Stock, par value $.001
per share (the "Common Stock"), of the Company, and of any other
junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash
on the first day of January, April, July and October in each
year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share
or fraction of a share of Series A Preferred Stock, in an amount
per share (rounded to the nearest cent) equal to the greater of
(i) $10 or (ii) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount
of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction
of a share of Series A Preferred Stock. In the event the Company
shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then, in each such case, the
amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under clause (ii)
of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such
event.

(b) The Company shall declare a dividend or
distribution on the Series A Preferred Stock as provided in
paragraph (a) of this Section immediately after the Company
declares a dividend or distribution on the Common Stock (other
than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have
been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10 per share on the Series
A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.

(c) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of
issue of such shares, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin
to accrue from the date of issue of such shares, or, unless the
date of issue is a Quarterly Dividend Payment Date or is a date
after the record date for the determination of holders of shares
of Series A Preferred Stock entitled to receive a quarterly
dividend and

<PAGE>

before such Quarterly Dividend Payment Date, in either of which
events, such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than 50
days prior to the date fixed for the payment thereof.

Section 3. Voting Rights. The holders of shares of Series
A Preferred Stock shall have the following voting rights:

(a) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted
to a vote of the stockholders of the Company. In the event
the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then, in each
such case, the number of votes per share to which holders of
shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number
by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

(b) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Serial Preferred
Stock or any similar stock, or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common
Stock and any other capital stock of the Company having general
voting rights shall vote together as one class on all matters
submitted to a vote of shareholders of the Company.

(c) Except as set forth herein, or as otherwise
provided by law, holders of Series A Preferred Stock shall have
no special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Common Stock as set forth herein)for taking any corporate action.

Section 4. Certain Restrictions.

(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided
in Section 2 are in arrears, thereafter and until all accrued
and unpaid dividends and distributions, whether or not declared,
on shares of Series A Preferred Stock outstanding shall have been
paid in full, the Company shall not:

(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock;

(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;

<PAGE>

(iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock; provided that the
Company may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for
shares of any stock of the Company ranking junior (either
as to dividends or upon dissolution, liquidation or winding
up) to the Series A Preferred Stock; or

(iv) redeem or purchase or otherwise acquire
for consideration any shares of Series A Preferred Stock,
or any shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.

(b) The Company shall not permit any subsidiary of
the Company to purchase or otherwise acquire for consideration
any shares of stock of the Company unless the Company could,
under paragraph (a) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.

Section 5. Reacquired Shares. Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Company in
any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares shall, upon their cancellation,
become authorized but unissued shares of Serial Preferred Stock and
may be reissued as part of a new series of Serial Preferred Stock
subject to the conditions and restrictions on issuance set forth
herein, in the Certificate of Incorporation, or in any other
Certificate of Designations creating a series of Serial Preferred
Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution
shall be made (a) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $1,000 per
share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such
payment; provided that the holders of shares of Series A Preferred
Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal
to 1,000 times the aggregate amount to be distributed per share to
holders of shares of Common Stock, or (b) to the holders of shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all
such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation,
dissolution or winding up. In the event the Company shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then, in
each such case, the aggregate amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event
under the proviso in clause (a) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.

<PAGE>

Section 7. Consolidation, Merger, etc. In case the Company
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged
for or changed into other stock or securities, cash and/or any other
property, then, in any such case, each share of Series A Preferred
Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Company shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then, in
each such case, the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the nominator of which is the number
of shares of Common Stock that were outstanding immediately prior to
such event.

Section 8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable.

Section 9. Rank. The Series A Preferred Stock shall rank,
with respect to the payment of dividends and the distribution of
assets, junior to all series of any other class of the Serial
Preferred Stock.

Section 10. Amendment. The Certificate of Incorporation
of the Company shall not be amended in any manner which would
materially alter or change the powers, preferences or special
rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Series A Preferred Stock, voting together as
a single class.

B. Common Stock. Subject to the rights, privileges,
preferences and priorities of any holders of Serial Preferred Stock, the
Common Stock shall be entitled to dividends out of funds legally available
therefor, when, as and if declared and paid to the holders of Common Stock,
and upon liquidation, dissolution or winding up of the Corporation, to
share ratably in the assets of the Corporation available for distribution
to the holders of Common Stock. Except as otherwise provided herein or by
law, the holders of the Common Stock shall have full voting rights and
powers, and each share of Common Stock shall be entitled to one vote. All
shares of Common Stock shall be identical with each other in every respect.

Each issued and outstanding share of Common Stock, par value
of $.001 per share, of the Corporation (the "Old Common Stock") as of the
close of business on May 27, 1998 (the "Effective Date") shall
automatically and without any action on the part of the holder
thereof, be reclassified as and changed into one-third (1/3) of one share
of Common Stock, par value of $.001 per share (the "New Common Stock"), of
the Corporation, subject to the treatment of fractional share interests as
described below. Each holder of a certificate or certificates which
immediately prior to the Effective Date represented outstanding shares of
Old Common Stock (each, an "Old Certificate") shall be entitled to receive
upon surrender of such Old Certificate to the Company's Transfer Agent for
cancellation, a certificate or certificates (each, a "New Certificate")
representing the number of whole shares of the New Common Stock into which
the Old Common Stock formerly represented by the Old Certificate so
surrendered are reclassified under the terms hereof. From and after the
Effective Date, Old Certificates shall represent only the right to receive
New Certificates (and, where applicable, cash in lieu of fractional shares,
as provided below) pursuant to the provisions hereof. No certificates or
scrip representing fractional share interests in New Common Stock will be
issued, and no such fractional share interest will entitle the holder
thereof to vote, or to any rights of a stockholder, of the Corporation. A
holder of Old Certificates

<PAGE>

shall receive, in lieu of any fraction of a share of New Common Stock to
which the holder would otherwise be entitled, a cash payment therefor on
the basis of the average of the last sale price of the Old Common Stock on
The Nasdaq Stock Market on the Effective Date (or in the event the
Company's Common Stock is not so traded on the Effective Date, such
sale price on the next preceding day on which such stock was traded on
The Nasdaq Stock Market). If more than one Old Certificate shall be
surrendered at one time for the account of the same stockholder, the
number of full shares of New Common Stock for which New Certificates shall
be issued shall be computed on the basis of the aggregate number
of shares represented by the Old Certificates so surrendered. In the
event that the Company's Transfer Agent determines that a holder of Old
Certificates has not tendered all of such holder's Old Certificates for
exchange, the Transfer Agent shall carry forward any fractional share
until all Old Certificates of such holder have been presented for exchange
such that payment for fractional shares to any one person shall not exceed
the value of one share of New Common Stock. If any New Certificate is to
be issued in a name other than that in which the Old Certificates
surrendered for exchange are issued, the Old Certificates so surrendered
shall be properly endorsed and otherwise in proper form for transfer,
and the person or persons requesting such exchange shall affix any
requisite stock transfer tax stamps to the Old Certificates
surrendered, or provide funds for their purchase, or establish to the
satisfaction of the Transfer Agent that such taxes are not payable. From
and after the Effective Date, the amount of capital represented by the
shares of the New Common Stock into which and for which the shares of the
Old Common Stock are reclassified under the terms hereof shall be the same
as the amount of capital represented by the shares of Old Common Stock so
reclassified, until thereafter reduced or increased in accordance with
applicable law.

FIFTH: The name and mailing address of the incorporator is as follows:

Neil M. Kaufman
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Suite 225
Jericho, New York 11753

SIXTH: (a) The number of directors of the corporation shall be determined in
the manner prescribed by the by-laws of this corporation.

(b) The Board of Directors shall be divided into three (3) classes as
nearly equal in number as possible, and no class shall include less than one (1)
director. The terms of the office of the directors initially classified shall
be as follows: that of Class shall expire at the next annual meeting of
shareholders to be held in 1994, Class II at the second annual meeting of
shareholders to be held in 1995 and Class III at the third succeeding annual
meeting of shareholders to be held in 1996. The foregoing notwithstanding, each
director shall serve until his successor shall have been duly elected and
qualified, unless he shall resign, become disqualified, disabled or shall
otherwise be removed. Whenever a vacancy occurs on the Board of Directors, a
majority of the remaining directors have the power to fill the vacancy by
electing a successor director to fill that portion of the unexpired term
resulting from the vacancy.

(c) At each annual meeting of shareholders after such initial
classification, directors chosen to succeed those whose terms then expire at
such annual meeting shall be elected for a term of office expiring at the third
succeeding annual meeting of shareholders after their election. When the number
of directors is increased by the Board of Directors and any newly created
directorships are filled by the Board of Directors, there shall be no
classification of the additional directors until the next annual meeting of
shareholders. Directors elected, whether by the Board of Directors or by the
shareholders, to fill a vacancy, subject to the foregoing, shall hold office for
a term expiring at the annual meeting at which the term of the Class to which
they shall have been elected expires. Any newly created directorships or any
decrease in directorships shall be so apportioned among the classes as to make
all classes as nearly equal in number as possible.

SEVENTH: Meetings of stockholders may be held within or without the State of
Delaware as the by-laws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the by-laws

<PAGE>

of the corporation. Election of directors need not be by written ballot unless
the by-laws of the corporation shall so provide.

EIGHTH: Subject to the provisions contained in Article TWELFTH hereof, the
corporation reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.

NINTH: Any action required to be taken or which may be taken at any annual or
special meeting of stockholders of the corporation may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.

TENTH: Special meetings of stockholders may be called by the Chairman of the
Board, President or a majority of the Board of Directors or at the written
request of stockholders owning at least sixty-six and two-thirds percent
(66-2/3%) of the entire voting power of the corporation's capital stock.

ELEVENTH: In the event that it is proposed that the corporation enter into a
merger or consolidation with any other corporation and such other corporation or
its affiliates singly or in the aggregate own or control directly or indirectly
fifteen (15%) percent or more of the outstanding voting power of the capital
stock of this corporation, or that the corporation sell substantially all of its
assets or business to such other corporation, the affirmative vote of the
holders of not less than sixty-six and two-thirds (66-2/3%) percent of the total
voting power of all outstanding shares of capital stock of this corporation
shall be required for the approval of any such proposal; provided, however, that
the foregoing shall not apply to any such merger, consolidation or sale of
assets or business which was approved by resolutions of the Board of Directors
of this corporation prior to the acquisition of the ownership or control of
fifteen (15%) percent of the outstanding shares of this corporation by such
other corporation or its affiliates, nor shall it apply to any such merger,
consolidation or sale of assets or business between this corporation and another
corporation, fifty (50%) percent or more of the total voting power of which is
owned by this corporation. For the purposes hereof, an "affiliate" is any person
(including a corporation, partnership, trust, estate or individual) who directly
or indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the person specified; and "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of a person, whether through the ownership
of voting securities, by contract, or otherwise.

TWELFTH: The provisions set forth in Articles SIXTH, NINTH, TENTH AND ELEVENTH
above may not be altered, amended or repealed in any respect unless such
alteration, amendment or repeal is approved by the affirmative vote of the
holders of not less than sixty-six and two-thirds percent (66-2/3%) of the total
voting power of all outstanding shares of capital stock of the corporation.

THIRTEENTH: Each person who at any time is or shall have been a director or
officer of the Corporation and is threatened to be or is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is, or
he or his testator or intestate was, a director, officer, employee or agent of
the Corporation, or served at the request of the Corporation as a director,
officer, employee, trustee or agent of another corporation, partnership, joint,
venture, trust or other enterprise, shall be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any such threatened,
pending or completed action, suit or proceeding to the full extent authorized
under Section 145 of the General Corporation Law of the State of Delaware. The
foregoing right of indemnification shall in no way be exclusive of any other
rights of indemnification to which such director, officer, employee or agent may
be entitled under any By-Law, agreement, vote of stockholders or disinterested
directors, or otherwise.

FOURTEENTH: Any and all right, title, interest and claim in or to any dividends
declared by the Corporation, whether in cash, stock, or otherwise, which are
unclaimed by the stockholder entitled thereto for a period of six (6) years
after the close of business on the payment date shall be and be deemed to be
extinguished and abandoned; such unclaimed

<PAGE>

dividends in the possession of the Corporation, its transfer agents, or other
agents or depositaries, shall at such time become the absolute property of the
Corporation, free and clear of any and all claims for any person whatsoever.

FIFTEENTH: Any and all directors of the Corporation shall not be liable to the
Corporation or any stockholder thereof for monetary damages for breach of
fiduciary duty as director except as otherwise required by law. No amendment to
or repeal of this Article FIFTEENTH shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any act or omission of such director occurring prior to such
amendment or repeal.

SIXTEENTH: The Board of Directors of the Corporation shall expressly have the
power and authorization to make, alter and repeal the By-Laws of the
Corporation, subject to the reserved power of the stockholders to make, alter
and repeal any By-Laws adopted by the Board of Directors.

VOID AFTER THE EXPIRATION TIME,
WARRANT TO PURCHASE 183,333 SHARES OF COMMON STOCK

WARRANT TO PURCHASE COMMON STOCK
of
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT FOR THIS WARRANT AND/OR SUCH SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER OF THIS WARRANT AND SUCH SHARES TO THE
EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND SUCH STATE
SECURITIES LAWS.

Warrant Certificate No. W-3

This is to Certify That, for value received, The Whitehaven Group, LLC, the
registered holder hereof, or its registered assigns (the registered holder or
assigns are being referred to hereinafter as the "Warrantholder"), is entitled
to purchase from Software Publishing Corporation Holdings, Inc., a Delaware
corporation (the "Company"), subject to the provisions of this Common Stock
Warrant Certificate, at any time and from time to time on or after January 5,
1999 (the "Exercise Date"), and before 5:00 p.m., New York City time, on January
4, 2001 (the "Expiration Time"), at the price of $.03 per share (as adjusted as
herein provided, the "Exercise Price"), up to one hundred eighty three thousand
three hundred thirty three (183,333) shares of the common stock, par value $.001
per share (the "Common Stock"), of the Company (such number of shares of Common
Stock purchasable

<PAGE>

upon the exercise of this Warrant Certificate, as adjusted from time to time
pursuant to the provisions hereinafter set forth, are referred to in this
Warrant Certificate as the "Warrant Shares").

The number of Warrants (the "Warrants") evidenced by this Warrant
Certificate (the "Warrant Certificate"), the number and character of shares of
Warrant Shares and the Exercise Price are subject to adjustment from time to
time as provided herein.

The terms of the Warrants are as follows:

1. Exercise of Warrants.

(a) The Warrants may be exercised, in whole or in part, commencing on
the Exercise Date and on or prior to the Expiration Time by surrendering this
Warrant Certificate, with the purchase form provided for herein duly executed by
the Warrantholder or by the Warrantholder's duly authorized attorney-in-fact, at
the principal office of the Company, presently located at 3A Oak Road,
Fairfield, New Jersey 07004, or at such other office or agency in the United
States as the Company may designate by notice in writing to the Warrantholder
(in either event, the "Company Offices"), accompanied by payment in full, either
in the form of cash, bank cashier's check or certified check payable to the
order of the Company, of the Exercise Price payable in respect of the Warrants
being exercised. If fewer than all of the Warrants are exercised, the Company
shall, upon each exercise prior to the Expiration Time, execute and deliver to
the Warrantholder a new Warrant Certificate (dated the date hereof) evidencing
the balance of the Warrants that remain exercisable.

(b) On the date of exercise of the Warrants, the Warrantholder
exercising same shall be deemed to have become the holder of record for all
purposes of the Warrant Shares to which the exercise relates.

(c) As soon as practicable, but not in excess of ten days, after the
exercise of all or part of the Warrants, the Company, at its expense (including
the payment by it of any applicable issue taxes), will cause to be issued in the
name of and delivered to the Warrantholder a certificate or certificates
evidencing the number of fully-paid and nonassessable Warrant Shares to which
the Warrantholder shall be entitled upon such exercise.

(d) No certificates for fractional Warrant Shares shall be issued upon
the exercise of the Warrants but, in lieu thereof, the Company shall, upon
exercise of all the Warrants, round up any fractional Warrant Share to the
nearest whole share of Common Stock.

2. Issuance of Common Stock; Reservation of Shares.

(a) The Company covenants and agrees that all Warrant Shares which may
be issued upon the exercise of all or part of the Warrants will, upon issuance
in accordance with the

<PAGE>

terms hereof, be validly issued, fully-paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof.

(b) The Company further covenants and agrees that if any shares of
Common Stock to be reserved for the purpose of the issuance of Warrant Shares
upon the exercise of Warrants require registration with, or approval of, any
governmental authority under any federal or state law before such shares may be
validly issued or delivered upon exercise, then the Company will promptly use
its best efforts to effect such registration or obtain such approval, as the
case may be.

3. Adjustments of Exercise Price, Number and Character of Warrant Shares,
and Number of Warrants.

The Exercise Price the number and kind of securities purchasable upon
the exercise of each Warrant shall be subject to adjustment from time to time
upon the happening of the events enumerated in this Section 3.

(a) Stock Dividends, Subdivisions and Combinations. If after the date
hereof the Company shall:

(i) pay a dividend or make a distribution in shares of
Common Stock to holders of its capital stock of any class;

(ii) subdivide the outstanding shares of its Common Stock
into a larger number of shares;

(iii) combine the outstanding shares of its Common Stock
into a smaller number of shares; or

(iv) issue by reclassification of its shares of Common Stock
any shares of capital stock of the Company;

then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such event and (ii) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such event. An adjustment made pursuant to this
Paragraph 3(a) shall become effective immediately after the record date, in the
case of a dividend or distribution, and the effective date, in the case of a
subdivision, combination or reclassification.

(b) Issuance of Additional Shares of Common Stock. If, after the date
hereof, the Company shall (except as hereinafter provided) issue any Additional
Shares of Common Stock (as defined in Subparagraph 3(l) below) for a
consideration less than the Exercise Price then in effect, then, upon each such
issuance, the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction:

<PAGE>

(i) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such
Additional Shares of Common Stock plus the number of shares of Common Stock
which the aggregate consideration for the total number of such Additional
Shares of Common Stock so issued would purchase at the then effective
Exercise Price; and

(ii) the denominator of which shall be the number of shares
of Common Stock outstanding immediately prior to the issuance of such
Additional Shares of Common Stock plus the number of such Additional Shares
of Common Stock so issued.

The provisions of this Paragraph 3(b) shall not apply to any
Additional Shares of Common Stock which are distributed to holders of Common
Stock as a stock dividend or subdivision, for which an adjustment is provided
for under Paragraph 3(a). No adjustment of the Exercise Price shall be made
under this Paragraph 3(b) upon the issuance of any Additional Shares of Common
Stock which are issued pursuant to the exercise of any warrants or other
subscription or purchase rights or pursuant to the exercise of any conversion or
exchange rights in any Convertible Securities (as defined in Paragraph 3(c)
below) if any such adjustment shall previously have been made (or determined not
to be required) upon the date of issuance of such warrants or other rights or
upon the date of issuance of such convertible securities (or upon the date of
issuance of any warrants or other rights therefor) pursuant to Paragraphs 3(c)
or 3(d).

(c) Issuance of Warrants, Stock Options or Other Rights. In case the
Company shall issue any warrants, stock options or other rights to subscribe for
or purchase any Additional Shares of Common Stock or any securities convertible
into Additional Shares of Common Stock, other than Warrants (in each event,
"Convertible Securities"), or the Company shall amend, modify or otherwise
change the price of warrants, stock options or other rights outstanding on the
original issuance date of this Warrant to subscribe for or purchase any
Additional Shares of Common Stock or the conversion rate of any Convertible
Securities and the consideration per share for which Additional Shares of Common
Stock may at any time thereafter be issuable pursuant to such warrants, stock
options or other rights or pursuant to the terms of such Convertible Securities
shall be less than the Exercise Price in effect on the date of grant or the date
of price change of such warrants, stock options or other rights, then the
Exercise Price shall be adjusted in the manner prescribed in Paragraph 3(b) on
the basis that (i) the maximum number of Additional Shares of Common Stock
issuable pursuant to all such warrants, stock options or other rights or
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and (ii) the aggregate
consideration for such maximum number of Additional Shares of Common Stock shall
be deemed to be the minimum consideration received and receivable by the Company
for the issuance of such Additional Shares of Common Stock pursuant to such
warrants, stock options or other rights or pursuant to the terms of such
Convertible Securities.

(d) Issuance of Convertible Securities. In case the Company shall
issue any Convertible Securities and the consideration per share for which
Additional Shares of Common Stock may at any time thereafter be issuable
pursuant to the terms of such Convertible Securities shall be less than the
Exercise Price in effect on the date of issuance of such Convertible Securities,
then the Exercise Price shall be adjusted in the manner prescribed in Paragraph
3(b) on the basis that

<PAGE>

(i) the maximum number of Additional Shares of Common Stock necessary to
effect the conversion or exchange of all such Convertible Securities shall
be deemed to have been issued and (ii) the aggregate consideration for
such maximum number of Additional Shares of Common Stock shall be deemed to be
the minimum consideration received and receivable by the Company for the
issuance of such Additional Shares of Common Stock pursuant to the terms
of such Convertible Securities. No adjustment of the Exercise Price shall be
made under this Paragraph 3(d) upon the issuance of any Convertible Securities
which are issued pursuant to the exercise of any options, warrants or other
subscription or purchase rights therefor, if any, such adjustment shall
previously have been made upon the issuance of such options, warrants or other
rights pursuant to Paragraph 3(c) above.

(e) Other Provisions Applicable to Adjustments Under this Section 3.
The following provisions shall be applicable to the making of adjustments in the
Exercise Price hereinbefore provided in this Section 3.

(i) Computation of Consideration.

(A) To the extent that any Additional Shares of
Common Stock or any Convertible Securities or any options, warrants or
other rights to subscribe for or purchase any Additional Shares of
Common Stock or any Convertible Securities shall be issued for a cash
consideration, the consideration received by the Company shall be
deemed to be the amount of the cash received by the Company therefor,
or, if such Additional Shares of Common Stock or Convertible
Securities or options, warrants or other rights are offered by the
Company for subscription, the subscription price, or, if such
Additional Shares of Common Stock or Convertible Securities or
options, warrants or other rights are sold to underwriters or dealers
for public offering without a subscription offering, the initial
public offering price, in any such case excluding any amounts paid or
receivable for accrued interest or accrued dividends and without
deduction of any compensation, discounts or expenses paid or incurred
by the Company for and in the underwriting of, or otherwise in
connection with the issue thereof.

(B) To the extent that such issuance shall be for
a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration as determined in good faith
by the Board of Directors of the Company

(C) The consideration for any Additional Shares of
Common Stock issuable pursuant to any options, warrants or other
rights to subscribe for or purchase the same shall be the
consideration received by the Company for issuing such options,
warrants or other rights, plus the additional consideration payable to
the Company upon the exercise of such options, warrants or other
rights. The consideration for any Additional Shares of Common Stock
issuable pursuant to the terms of any Convertible Securities shall be
the consideration received by the Company for issuing any options,
warrants or other rights to subscribe for or

<PAGE>

purchase such Convertible Securities plus the consideration paid or
payable to the Company in respect of the subscription for or purchase
of such Convertible Securities, plus the additional consideration,
if any, payable to the Company upon the exercise of the right of
conversion or exchange in such Convertible Securities.

(D) In case of the issuance at any time of any
Additional Shares of Common Stock or Convertible Securities in payment
or satisfaction of any dividend upon any class of equity securities
other than Common Stock, the Company shall be deemed to have received
for such Additional Shares of Common Stock or Convertible Securities
consideration equal to the amount of such dividend so paid or
satisfied.

(ii) Readjustment of Exercise Price. Subject to the
provisions of the second sentence of this Subparagraph 3(e)(ii), upon the
expiration of the right to convert or exchange any Convertible Securities,
or upon the expiration of any rights, options or warrants, or upon any
increase in the minimum consideration receivable by the Company for the
issuance of Additional Shares of Common Stock pursuant to such Convertible
Securities, rights, options or warrants, if any, if such Convertible
Securities shall not have been converted or exchanged, or if any such
rights, options or warrants shall not have been exercised, the number of
shares of Common Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon conversion or exchange of any such
Convertible Securities or upon exercise of any such rights, options or
warrants shall no longer be computed as set forth above, and the Exercise
Price shall forthwith be readjusted and thereafter be the price which it
would have been (but reflecting any other adjustments in the Exercise Price
made pursuant to the provisions of this Section 3 after the issuance of
such Convertible Securities, rights, options or warrants) had the
adjustment of the Exercise Price made upon the issuance or sale of such
Convertible Securities or the issuance of such rights, options or warrants
been made on the basis of the issuance only of the number of Additional
Shares of Common Stock actually issued upon conversion or exchange of such
Convertible Securities or upon the exercise of such rights, options or
warrants, or upon the basis of such increased minimum consideration, as the
case may be, and thereupon only the number of Additional Shares of Common
Stock actually so issued or the number thereof issuable upon the basis of
such increased minimum consideration shall be deemed to have been issued
and only the consideration actually received or such increased minimum
consideration receivable by the Company (computed as provided in
Subparagraph 3(i)(a) shall be deemed to have been received by the Company.
No such readjustment of the Exercise Price shall be made unless the
Exercise Price was adjusted under the provisions of Paragraph 3(c) above at
the time such rights, options or warrants were issued.

(f) Extraordinary Dividends. In case the Company shall declare a
dividend upon its Common Stock (except a dividend payable in shares of Common
Stock referred to in clause (i) of Paragraph 3(a) or a dividend payable in
warrants, rights or Convertible Securities referred to in Paragraph 3(c) or 3(d)
payable otherwise than out of retained earnings), the Exercise Price in effect
immediately prior to the declaration of such dividend shall be reduced by an
amount equal, in the case of a dividend in cash, to the amount thereof payable
per share of Common Stock to the extent

<PAGE>

otherwise than out of retained earnings or, in the case of any other dividend,
to the fair value thereof per share of Common Stock as determined in good
faith by the Board of Directors of the Company; provided, that in no event
shall the Exercise Price be reduced to less than the then current par value of
the Common Stock per share. For the purposes of the foregoing, a dividend
payable other than in cash or capital stock of the Company shall be considered
payable out of retained earnings only to the extent that such retained earnings
are charged an amount equal to the fair value of such dividend as determined
by the Board of Directors of the Company. Such reduction shall take effect
as of the date on which a record is taken for the purpose of such dividend or
if a record is not taken, the date as of which the holders of the Common Stock
of record entitled to such dividend are to be determined. Appropriate
readjustment of the Exercise Price shall be made in the event that any dividend
referred to in this Paragraph 3(f) shall be lawfully abandoned.

(g) Minimum Adjustment. Except as hereinafter provided, no adjustment
of the Exercise Price hereunder shall be made if such adjustment results in a
change of the Exercise Price then in effect of less than one cent ($.01) per
share. Any adjustment of less than one cent ($.01) per share of any Exercise
Price shall be carried forward and shall be made at the time of and together
with any subsequent adjustment which, together with adjustment or adjustments so
carried forward, amounts to one cent ($.01) per share or more. However, upon
exercise of this Warrant Certificate, the Company shall make all necessary
adjustments (to the nearest cent) not theretofore made to the Exercise Price up
to and including the effective date upon which this Warrant Certificate is
exercised.

(h) Notice of Adjustments. Whenever the Exercise Price shall be
adjusted pursuant to this Section 3, the Company shall promptly deliver a
certificate signed by the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Company, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board of
Directors of the Company made any determination hereunder), by first class mail
postage prepaid to each Holder.

(i) Capital Reorganizations and Other Reclassifications. In case of
any capital reorganization of the Company, or of any reclassification of the
shares of Common Stock (other than a reclassification, subdivision or
combination of shares of Common Stock referred to in Paragraph 3(a)), or in case
of the consolidation of the Company with, or the merger of the Company with, or
merger of the Company into, any other corporation (other than a reclassification
of the shares of Common Stock referred to in Paragraph 3(a) or a consolidation
or merger which does not result in any reclassification or change of the
outstanding shares of Common Stock) or of the sale of the properties and assets
of the Company as, or substantially as, an entirety to any other corporation or
entity, each Warrant shall, after such capital reorganization, reclassification
of shares of Common Stock, consolidation, merger, or sale, be exercisable, upon
the terms and conditions specified in this Warrant Certificate, for the kind,
amount and number of shares or other securities, assets, or cash to which a
holder of the number of shares of Common Stock purchasable (at the time of such
capital reorganization, reclassification of shares of Common Stock,
consolidation, merger or sale) upon exercise of such Warrant would have been
entitled to receive upon such capital reorganization, reclassification of shares
of Common Stock, consolidation, merger, or sale; and in any such case, if

<PAGE>

necessary, the provisions set forth in this Section 3 with respect to the rights
and interests thereafter of the Warrantholder shall be appropriately adjusted so
as to be applicable, as nearly equivalent as possible, to any shares or other
securities, assets, or cash thereafter deliverable on the exercise of the
Warrants. The Company shall not effect any such consolidation, merger, or sale,
unless prior to or simultaneously with the consummation thereof the successor
corporation or entity (if other than the Company) resulting from such
consolidation or merger or the corporation or entity purchasing such assets or
other appropriate corporation or entity shall assume, by written instrument, the
obligation to deliver to the Warrantholder such shares, securities, assets, or
cash as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations hereunder. The subdivision or
combination of shares of Common Stock at any time outstanding into a greater or
lesser number of shares shall not be deemed to be a reclassification of the
shares of Common Stock for purposes of this Paragraph 3(i).

(j) Adjustments to Other Securities. In the event that at any time, as
a result of an adjustment made pursuant to this Section 3, the Warrantholder
shall become entitled to purchase any shares or securities of the Company other
than the shares of Common Stock, thereafter the number of such other shares or
securities so purchasable upon exercise of each Warrant and the exercise price
for such shares or securities shall be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as possible to the provisions with
respect to the shares of Common Stock contained in Paragraphs 3(a) through (i),
inclusive.

(k) Deferral of Issuance of Additional Shares in Certain
Circumstances. In any case in which this Section 3 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event issuing to the Warrantholder exercised after such record date the shares
of Common Stock, if any, issuable upon such exercise over and above the Warrant
Shares, if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver as soon as practicable to such holder a due bill or other appropriate
instrument provided by the Company evidencing such holder's right to receive
such additional shares of Common Stock upon the occurrence of the event
requiring such adjustment.

(l) Additional Shares of Common Stock Defined. For purposes of this
Warrant Certificate, the term "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Company on or after the date hereof except
shares of Common Stock issued upon the exercise of any of options granted or
available for grant under the Company's 1994 Long-Term Incentive Plan, the
Company's Outside Director and Advisor Stock Option Plan, the Company's Software
Publishing Corporation 1989 Stock Plan and the Company's Software Publishing
Corporation 1991 Stock Option Plan.

4. Definition of Common Stock.

The Common Stock issuable upon exercise of the Warrants shall be the
Common Stock as constituted on the date hereof except as otherwise provided in
Section 3.

<PAGE>

5. Notices of Record Date, etc.

In the event the Company shall propose to take any action of the types
requiring an adjustment of the Exercise Price or the number or character of the
Warrant Shares or Warrants pursuant to Section 3 or a dissolution, liquidation
or winding up of the Company (other than in connection with a consolidation,
merger, or sale of all or substantially all of its property, assets, and
business as an entirety) shall be proposed, the Company shall give notice to
each Warrantholder as provided in Section 11, which notice shall specify the
record date, if any, with respect to any such action and the date on which such
action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonable necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Exercise Price and the number, kind or class of shares or other securities
or property which shall be deliverable or purchasable upon the occurrence of
such action or deliverable upon the exercise of the Warrants. In the case of any
action which will require the fixing of a record date, unless otherwise provided
in this Warrant Certificate, such notice shall be given at least twenty days
prior to the date so fixed, and in case of all other action, such notice shall
be given at least thirty days prior to the taking of such proposed action.

6. Replacement of Securities.

If this Warrant Certificate shall be lost, stolen, mutilated or
destroyed, the Company shall, on such terms as to indemnity or otherwise as the
Company may in its discretion reasonably impose, issue a new certificate of like
tenor or date representing in the aggregate the right to subscribe for and
purchase the number of shares of Common Stock which may be subscribed for and
purchased hereunder. Any such new certificate shall constitute an original
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant Certificate shall be at any time
enforceable by anyone.

7. Registration.

This Warrant Certificate, as well as all other warrant certificates
representing Warrants shall be numbered and shall be registered in a register
(the "Warrant Register") maintained at the Company Office as they are issued.
The Warrant Register shall list the name, address and Social Security or other
Federal Identification Number, if any, of all Warrantholders. The Company shall
be entitled to treat the Warrantholder as set forth in the Warrant Register as
the owner in fact of the Warrants as set forth therein for all purposes and
shall not be bound to recognize any equitable or other claim to or interest in
such Warrant on the part of any other person, and shall not be liable for any
registration of transfer of Warrants that are registered or to be registered in
the name of a fiduciary or the nominee of a fiduciary unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration of transfer, or with such knowledge of such facts
that its participation therein amounts to bad faith.

<PAGE>

8. Transfer.

9. Benefits and Obligations of Subscription Agreement.

The holder of any Warrant Shares shall receive the benefits of and be
subject to the obligations, including restrictions on the transferability of the
Warrant Shares, as set forth in that certain Subscription Agreement, dated April
27, 1998, between the Company and the Warrantholder pursuant to which this
Warrant Certificate was issued, a copy of which is on file at the Company
Offices.

10. Exchange of Warrant Certificates.

This Warrant Certificate may be exchanged for another certificate or
certificates entitling the Warrantholder thereof to purchase a like aggregate
number of Warrant Shares as this Warrant Certificate entitles such Warrantholder
to purchase. A Warrantholder desiring to so exchange this Warrant Certificate
shall make such request in writing delivered to the Company, and shall surrender
this Warrant Certificate therewith. Thereupon, the Company shall execute and
deliver to the person entitled thereto a new certificate or certificates, as the
case may be, as so requested.

11. Notices.

All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered in person, against written receipt
therefor, or two days after being sent, by registered or certified mail, postage
prepaid, return receipt requested, and, if to the Warrantholder, at such address
as is shown on the Warrant Register or as may otherwise may have been furnished
to the Company in writing by the Warrantholder and, if to the Company, at the
Company Offices.

<PAGE>

12. Miscellaneous.

This Warrant Certificate and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This certificate is deemed to have been delivered in the State of New
York and shall be construed and enforced in accordance with and governed by the
laws of such State. The headings in this Warrant Certificate are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.

13. Expiration.

Unless as hereinafter provided, the right to exercise these Warrants
shall expire at the Expiration Time.

Dated: As of July 3, 1998

SOFTWARE PUBLISHING CORPORATION
HOLDINGS, INC.

By: /s/ Mark E. Leininger
Mark E. Leininger, President

ATTEST:

/s/ Marc E. Jaffe
Marc E. Jaffe, Secretary

<PAGE>

EXERCISE FORM

Dated:_______________, 19__

TO: SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.:

The undersigned hereby irrevocably elects to exercise the within
Warrant, to the extent of purchasing _________________ shares of Common Stock,
and hereby makes payment of _____________ in payment of the actual Exercise
Price thereof.

----------

INSTRUCTIONS FOR REGISTRATION OF STOCK

Name: ______________________________________________________________
(Please type or print in block letters)

Address: ______________________________________________________________

______________________________________________________________

Signature: ___________________________________________________________
(Signature must conform in all respects to the name of
the Warrantholder as set forth on the face of this
Warrant Certificate.)

<PAGE>

ASSIGNMENT FORM

FOR VALUE RECEIVED, ____________________________________ hereby sells,
assigns and transfers unto

Name: _____________________________________________________________
(Please type or print in block letters)

Address: _____________________________________________________________

_____________________________________________________________

the right to purchase Common Stock represented by this Warrant Certificate to
the extent of ________________ shares as to which such right is exercisable and
does hereby irrevocably constitute and appoint ___________________________
Attorney-in-Fact, to transfer the same on the books of the Company with full
power of substitution in the premises.

Dated: ______________________________

Signature: ___________________________________________________________
(Signature must conform in all respects to the name of the
Warrantholder as set forth on the face of this Warrant
Certificate.)

VOID AFTER THE EXPIRATION TIME,
WARRANT TO PURCHASE 83,333 SHARES OF COMMON STOCK

WARRANT TO PURCHASE COMMON STOCK
of
SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.

Warrant Certificate No. W-4

This is to Certify That, for value received, The Whitehaven Group, LLC, the
registered holder hereof, or its registered assigns (the registered holder or
assigns are being referred to hereinafter as the "Warrantholder"), is entitled
to purchase from Software Publishing Corporation Holdings, Inc., a Delaware
corporation (the "Company"), subject to the provisions of this Common Stock
Warrant Certificate, at any time and from time to time on or after January 5,
1999 (the "Exercise Date"), and before 5:00 p.m., New York City time, on January
4, 2001 (the "Expiration Time"), at the price of $2.15625 per share (as adjusted
as herein provided, the "Exercise Price"), up to eighty three thousand three
hundred thirty three shares of the common stock, par value $.001 per share (the
"Common Stock"), of the Company (such number of shares of Common Stock
purchasable upon the exercise

<PAGE>

of this Warrant Certificate, as adjusted from time to time pursuant to the
provisions hereinafter set forth, are referred to in this Warrant Certificate
as the "Warrant Shares").

The terms of the Warrants are as follows:

1. Exercise of Warrants.

2. Issuance of Common Stock; Reservation of Shares.

(a) The Company covenants and agrees that all Warrant Shares which may
be issued upon the exercise of all or part of the Warrants will, upon issuance
in accordance with the

<PAGE>

terms hereof, be validly issued, fully-paid and nonassessable and free from
all taxes, liens and charges with respect to the issue thereof.

3. Adjustments of Exercise Price, Number and Character of Warrant Shares,
and Number of Warrants.

(a) Stock Dividends, Subdivisions and Combinations. If after the date
hereof the Company shall:

(i) pay a dividend or make a distribution in shares of
Common Stock to holders of its capital stock of any class;

(ii) subdivide the outstanding shares of its Common Stock
into a larger number of shares;

(iii) combine the outstanding shares of its Common Stock
into a smaller number of shares; or

(iv) issue by reclassification of its shares of Common Stock
any shares of capital stock of the Company;

<PAGE>

(i) the maximum number of Additional Shares of Common Stock necessary to
effect the conversion or exchange of all such Convertible Securities shall be
deemed to have been issued and (ii) the aggregate consideration for such
maximum number of Additional Shares of Common Stock shall be deemed to be the
minimum consideration received and receivable by the Company for the issuance of
such Additional Shares of Common Stock pursuant to the terms of such Convertible
Securities. No adjustment of the Exercise Price shall be made under this
Paragraph 3(d) upon the issuance of any Convertible Securities which are issued
pursuant to the exercise of any options, warrants or other subscription or
purchase rights therefor, if any, such adjustment shall previously have
been made upon the issuance of such options, warrants or other rights pursuant
to Paragraph 3(c) above.

(i) Computation of Consideration.

<PAGE>

purchase such Convertible Securities plus the consideration paid
or payable to the Company in respect of the subscription for or
purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Company upon the exercise of
the right of conversion or exchange in such Convertible Securities.

<PAGE>

4. Definition of Common Stock.

The Common Stock issuable upon exercise of the Warrants shall be the
Common Stock as constituted on the date hereof except as otherwise provided in
Section 3.

<PAGE>

5. Notices of Record Date, etc.

6. Replacement of Securities.

7. Registration.

<PAGE>

8. Transfer.

9. Benefits and Obligations of Subscription Agreement.

10. Exchange of Warrant Certificates.

11. Notices.

<PAGE>

12. Miscellaneous.

13. Expiration.

Unless as hereinafter provided, the right to exercise these Warrants
shall expire at the Expiration Time.

Dated: As of July 3, 1998

SOFTWARE PUBLISHING CORPORATION
HOLDINGS, INC.

By: /s/ Mark E. Leininger
Mark E. Leininger, President

ATTEST:

/s/ Marc E. Jaffe
Marc E. Jaffe, Secretary

<PAGE>

EXERCISE FORM

Dated:_______________, 19__

TO: SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.:

----------

INSTRUCTIONS FOR REGISTRATION OF STOCK

Name: ___________________________________________________________
(Please type or print in block letters)

Address: ___________________________________________________________

___________________________________________________________

Signature: ___________________________________________________________
(Signature must conform in all respects to the name of the
Warrantholder as set forth on the face of this Warrant
Certificate.)

<PAGE>

ASSIGNMENT FORM

FOR VALUE RECEIVED, ____________________________________ hereby sells,
assigns and transfers unto

Name: __________________________________________________________
(Please type or print in block letters)

Address: __________________________________________________________

__________________________________________________________

Dated: ______________________________

Signature: _____________________________________________________________
(Signature must conform in all respects to the name of the
Warrantholder as set forth on the face of this Warrant
Certificate.)

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. __

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 exercise price, subject to
adjustment in certain events (the "Exercise Price"), of $3.0225 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 3A Oak Road, 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>

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 $3.0225 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.

<PAGE>

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.

<PAGE>

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.

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

<PAGE>

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.

(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 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).

<PAGE>

(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
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

<PAGE>

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
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.

<PAGE>

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
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)

<PAGE>

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.

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.

<PAGE>

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 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

<PAGE>

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.

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.

<PAGE>

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.

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED FINANCIAL STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENT.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Jun-30-1998
<CASH> 2,088,500
<SECURITIES> 0
<RECEIVABLES> 1,497,943
<ALLOWANCES> 0
<INVENTORY> 610,640
<CURRENT-ASSETS> 4,530,858
<PP&E> 448,349
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,885,900
<CURRENT-LIABILITIES> 5,580,936
<BONDS> 0
0
0
<COMMON> 3,910
<OTHER-SE> 3,197,304
<TOTAL-LIABILITY-AND-EQUITY> 8,885,900
<SALES> 8,002,979
<TOTAL-REVENUES> 8,002,979
<CGS> 1,703,301
<TOTAL-COSTS> 1,703,301
<OTHER-EXPENSES> 2,139,426
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (54,365)
<INCOME-PRETAX> (1,198,046)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,198,046)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,198,046)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)

</TABLE>