SOFTWARE PUBLISHING CORP HOLDINGS INC, 10KSB, 1999-04-15

SOFTWARE PUBLISHING CORP HOLDINGS INC
10KSB, 1999-04-15
PREPACKAGED SOFTWARE

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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 10-KSB

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to __________

Commission file number: 1-14076

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.
(Name of small business issuer in its charter)
Delaware 22-3270045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

Securities registered under Section 12(b) of the Exchange Act: Common stock,
par value $.001

Securities registered under Section 12(g) of the Exchange Act: None

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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
--- ---

Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

State issuer's net revenues for its most recent fiscal year: $18,271,733.

The aggregate market value of the voting stock held by non-affiliates of
the registrant was $5,962,773, at March 26, 1999, based on the last bid price of
the Common Stock on such date of $1-3/16 per share, as reported by The Nasdaq
Stock Market, Inc.

As of March 26, 1999, there were a total of 5,263,891 shares of the Common
Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

NONE

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PART I

Introductory Comment - Forward-Looking Statements.

Statements contained in this Annual Report on Form 10-KSB include
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Forward-looking statements involve
known and unknown risks, uncertainties and other factors which could cause the
actual results of Software Publishing Corporation Holdings, Inc. ("we," "us" or
the "Company"), 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 Company's best
estimates 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. 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 marketing programs achieve
satisfactory response rates,
- the efficiency of the Company's telemarketing operations,
- the competitive environment within the computer software and direct
marketing industries,
- the Company's ability to raise additional capital,
- unforeseen operational difficulties and financial losses due to year
2000 computer problems,
- the cost-effectiveness of the Company's product development
activities,
- the extent to which the Company is successful in developing, acquiring
or licensing products which are accepted by the market, and
- the other factors and information disclosed and discussed under
"Risk Factors" below and in other sections of this Annual Report on
Form 10-KSB.

Investors 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. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.

RISK FACTORS

You should carefully consider the following risk factors.

No Assurance of Profitability; Losses to Date

The Company has been unprofitable since inception in July 1992 and may
continue to incur operating losses in the future. For the year ended December
31, 1998, we had a net loss of approximately $2,407,000. Our operating losses
may increase as we develop, produce and distribute additional products,
de-emphasize other products and continue to develop our business. We may not be
able to become profitable or, if we become profitable, thereafter maintain
profitability.

Competition May Adversely Affect Results of Operations

The market for our software products is characterized by:

- ongoing technological developments,
- evolving industry standards,
- licensing of technology between companies,
- cross and collateral marketing of products by two or more companies,

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- alliances between companies,
- joint marketing campaigns and
- rapid changes in customer requirements and increasing customer
demands.

We believe that the principal competitive factors in the corporate, small
office and home office ("SOHO") and consumer software markets include:

- pricing (which includes individual product pricing, standard and
competitive upgrade pricing, licensing and volume discounting),
- product functionality,
- ease-of-use,
- bundling in suites of related products,
- distribution through existing and new channels and
- brand name recognition.

As a result, we believe that our success in this market depends upon our
ability to continue to:

- provide continued enhancement of our existing and future products,
- correctly identify and enter new markets,
- effectively market and sell our current and future products,
- expand our existing distribution channels while also developing new
distribution channels including e-commerce,
- timely and efficiently acquire, license or develop and introduce new
products that take advantage of technological advances and
- respond to new requirements and demands of the market.

To the extent one or more of our competitors introduce products that better
address market requirements, our business could be adversely affected. We may
not be successful in developing and marketing enhancements to our existing
products or new products incorporating new technology on a timely basis. Also,
our existing and new products may not adequately address the changing needs of
the marketplace. If we are unable to timely develop and introduce new products
or enhance existing products, our business and results of operations could be
materially and adversely affected.

The dominant position of Microsoft Corporation ("Microsoft") in the
personal computer operating system and application program marketplace provides
Microsoft with a range of competitive advantages, including its ability to
determine the direction of future operating systems and to leverage its strength
in one or more product areas to achieve a dominant position in new markets. This
position may enable Microsoft to increase its market position even with respect
to products having superior performance, price and ease-of-use features.
Microsoft's ability to:

- offer corporate and SOHO operating systems combined with its own
productivity software,
- bundle software,
- provide incentives to customers to purchase certain products in order
to obtain favorable sales terms or necessary compatibility or
information with respect to other products,
- pre-load such bundled software on new computers, and
- purchase advantageous product positioning and presentations in various
distribution channels

may significantly inhibit our ability to maintain or expand our business. In
addition, as Microsoft or other companies create new operating systems and
applications, we may not be able to re-work our products in order for the
products to remain compatible with these new systems and applications. The
introduction of upgrades to operating systems or the introduction of new
operating systems and standardized software by Microsoft and others, over which
we have no control, may adversely affect our ability to upgrade our own products
and may cause a reduction in sales of our products.

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We believe that competition will continue to intensify in the future and
that new product introductions, as well as potential price reductions, strategic
alliances and other actions by competitors could materially and adversely affect
our competitive position.

Short Product Life Cycles May Adversely Affect Revenues

From time to time we or our competitors may announce new products,
capabilities or technologies that have the potential to replace or shorten the
life cycles of our existing products. Such announcements of currently planned or
other new products may cause customers to defer purchasing our existing
products.

Seasonality Is Expected to Cause Fluctuations in Revenues and Operating Results

Fluctuations in Quarterly Results and the Uncertainty of Future Operating
Results May Cause Significant Fluctuations Our Stock Price

Our quarterly operating results have and, in the future, may fluctuate
significantly, depending on factors such as:

- demand for our products,
- the size, timing and timely fulfilment of orders,
- the number, timing and significance of new product announcements by us
and our competitors,
- our ability to develop, introduce and market new products, as well
as enhanced versions of our current products on a timely basis,
- the level of product and price competition,
- changes in operating expenses,
- changes in average selling prices and product mix,
- changes in our sales incentive strategy, as well as sales personnel
changes,
- the mix of direct and indirect sales, product returns and rebates,
- changes in technology,
- general economic factors, and
- seasonality.

Our expense levels, however, are expected to be based in large part on our
expectations of future revenues. Therefore, if revenue levels are below
expectations, operating results are likely to be adversely affected. Net income
may be disproportionately affected by an unanticipated decline in revenue for a
particular quarter because a relatively small amount of our expenses will vary
with our revenue in the short term. As a result, we believe that
period-to-period comparisons of our results of operations are not and will not
necessarily be meaningful and should not be relied upon as any indication of
future performance. Due to all of the foregoing factors, it is likely that in
some future quarter our operating results will be below expectations. In such
event, the market price of the Common Stock could be materially adversely
affected.

Volatility of Stock Prices

The market for the Common Stock is highly volatile. The trading price of
the Common Stock could be subject to wide fluctuations in response to, among
other things:

- quarterly variations in operating and financial results,
- announcements of technological innovations or new products by us or
our competitors,
- changes in prices of our products or our competitors' products and
services,

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- changes in product mix,
- changes in our revenue and revenue growth rates as a whole or for
individual geographic areas, business units, products or product
categories, and
- response to the Company's strategies concerning e-commerce and the
Internet.

Statements or changes in opinions, ratings, or earnings estimates made by
brokerage firms or industry analysts relating to the market in which we do
business or relating to us could result in an immediate and adverse effect on
the market price of the Common Stock. In addition, the stock market has from
time to time experienced extreme price and volume fluctuations which have
particularly affected the market price for the securities of many software and
Internet companies and which often have been unrelated to the operating
performance of these companies. These broad market fluctuations may adversely
affect the market price of the Common Stock.

Rapid Technological Changes Could Cause Delay in New Products; Delays May Cause
Reduced Revenues

The software market is characterized by ongoing technological developments,
evolving industry standards, frequent new product introductions and rapid
changes in customer requirements and preferences. The introduction of products
embodying new technologies and the emergence of new industry standards and
practices can rapidly render existing products obsolete and unmarketable. In the
past, we have experienced delays in software development and may experience
delays in connection with current product developments or future development
activities. Such delays may prevent the successful introduction or marketing of
these products. Further, our new products and product enhancements may not
adequately meet the requirements of the marketplace and achieve market
acceptance. Delays in the commencement of commercial shipments of new products
or enhancements may also result in customer dissatisfaction and delay or loss of
product revenues.

Product Defects Could Delay or Prevent Market Acceptance of New or Upgraded
Products

Software products as complex as those offered by the Company may contain
undetected errors or failures when first introduced or as new versions are
released. Despite testing internally or by current or potential customers,
errors may be found in new products after commencement of commercial shipments,
resulting in loss of or delay in market acceptance.

Although we have a number of ongoing development projects, the following
risks still exist:

- development may not be completed successfully on time or within our
projected cost,
- projects may not include the features required to achieve market
acceptance, and
- enhancements to our products may not keep pace with broadening market
requirements.

Product Returns and Difficulties in the Collection of Accounts Receivable Could
Result in Reductions in Cash Flows

Some of our sales are made on credit terms which may vary substantially. We
do not hold collateral to secure payment. Therefore, a default in payment on a
significant scale could materially adversely affect our business, results of
operations and financial condition. In addition, it is difficult for us to
ascertain future demand for our existing products and anticipated demand for
newly introduced products. Consistent with industry practices, we may accept
product returns or provide other credits in the event that a retailer or
distributor holds excess inventory of our products, even when we are not legally
required to do so. Accordingly, we are exposed to the risk of product returns
from retailers, distributors and direct sales customers. While we believe that
we have established appropriate allowances for collection problems and
anticipated returns based on our historical experience and industry norms,
actual returns and uncollectible receivables may exceed such allowances.
Defective products also may result in higher customer support costs and product
returns.

Customer Concentration and Credit Risk

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4.0% of net outstanding accounts receivable at December 31, 1998 and 1997,
respectively. The Company considers several of its customers to be significant.
The loss of any of such customers, a significant decrease in product shipments
to one or more of them or an inability to collect receivables from one or more
of them could adversely affect the Company's business, operating results and
financial condition.

Dependence on Key Personnel

Significant historical growth from acquisitions and operational
restructurings have placed strain upon our personnel, management systems and
resources. In the future, we expect to continue to improve our financial and
management controls, reporting systems and procedures on a timely basis and
train and manage our employee work force. An inability to do so may inhibit our
ability to grow. Competition for qualified sales, technical and other qualified
personnel, including expert Windows-environment programmers, is intense, and we
may not be able to attract or retain highly qualified employees in the future.
Our future success depends in significant part upon the continued service of our
current key technical, sales and senior management personnel. The loss of the
services of one or more of these key employees could have a material adverse
effect on our business, operating results and financial condition. Additions of
new and departures of existing personnel, particularly in key positions, can be
disruptive, which could have a material adverse effect upon the Company.

International Sales and Operations and Currency Fluctuations Could Have an
Adverse Affect

International sales are a significant source of revenue for the Company.
International sales represented approximately 53.9% of our total revenues for
1998 and 48.9% of total revenues for 1997. We believe that achieving
profitability will require, among other matters, additional expansion of sales
in foreign markets. In order to increase international sales, we may be required
to establish additional foreign operations, hire additional personnel and
recruit additional international resellers. Currently, our international sales
are denominated in either U.S. dollars, the Euro or local currency and we do not
anticipate engaging in any hedging activities. The introduction of the Euro may
have an impact on currency fluctuations. Although exposure to currency
fluctuations to date has not been significant, fluctuations in currency exchange
rates in the future could have a material adverse impact on the Company.
Additional risks inherent in our international business activities include:

- unexpected changes in regulatory requirements,
- tariffs and other trade barriers,
- costs of localizing products for foreign countries,
- lack of acceptance of localized products in foreign countries,
- longer accounts receivable payment cycles,
- difficulties in collecting payment,
- difficulties in managing international operations,
- potentially adverse tax consequences including limitations on the
repatriation of earnings,
- reduced protection for intellectual property,
- the burdens of complying with a wide variety of foreign laws, and
- the effects of potentially high local wage scales, employment customs
and other expenses.

Any of these factors or others not presently contemplated by the Company
could have a material adverse effect on our future international operations.

Litigation and Potential Litigation May be Costly and/or Time-Consuming

Our competitors and potential competitors may resort to litigation as a
means of competition. Any litigation involving the Company, whether as plaintiff
or defendant, regardless of the outcome, may result in substantial costs and
expenses to the Company and significant diversion of effort by our management
and technical personnel. In the event of an adverse result in any such
litigation, we could be required to:

- expend significant resources to develop non-infringing technology,

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- obtain licenses to the technology which is the subject of the
litigation on terms not advantageous to the Company,
- pay damages, and/or
- cease the use of any infringing technology.

There can be no assurance that we would be successful in such development,
that any such licenses would be available and/or that we would have available
funds sufficient to satisfy any cash awards.

In the first quarter of 1998, the Company and certain of our current and
former executive officers and directors were named as defendants in an action
claiming that such defendants made intentional misrepresentations of material
facts in connection with such plaintiffs' purchases of an aggregate 296,333
shares of Common Stock for $919,495. While we believe this action to be without
merit, the ultimate outcome of such lawsuit is unknown at this time. Any adverse
decision in this action may have a material adverse effect on our business,
operating results and financial condition.

We are also a defendant in litigations involving disputes with a landlord
and several vendors. These litigations generally arise out of our ordinary
course of business, and we believe that any adverse decision resulting from any
of these litigations will not have a materially adverse effect on the Company;
however, no assurance can be given in this regard.

Software Piracy and Intellectual Property Infringement May Adversely Affect Our
Revenues

We believe that our success depends significantly upon our proprietary
technology. We currently rely on a combination of copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions and other
written materials under trade secret, patent and copyright laws to protect our
proprietary technology; however, these methods generally afford only limited
protection. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or services or to obtain and
use information that we regard as proprietary. In addition, the laws of some
foreign countries do not protect proprietary rights to as great an extent as do
the laws of the United States. Monitoring and identifying unauthorized use of
personal computer software is difficult. We expect software piracy to be a
continuing problem resulting in a reduction of our potential revenues.

Dependence on Third Party Licenses Could Have Adverse Affects

We rely on certain software, technology and content that we license or have
licensed from third parties, including software, technology and content that is
integrated with internally developed software and used in our products to
perform key functions. These third-party software licenses may not continue to
be available to us on commercially reasonable terms. Also, such software may not
be appropriately supported, maintained or enhanced by the licensors such that
the licensed software would not continue to provide the necessary commercial
benefits to our products. In addition, we may not be able to license such
software, technology and content on terms advantageous to the Company. The loss
of or inability to obtain or replace licenses to, or inability to support,
maintain and enhance, any of such licensed software, could result in increased
costs, including the expense of internally developing the required software,
technology and/or content, as well as delays or reductions in product shipments.

Dependence on Retailers, Distributors and Sales Representatives May Adversely
Affect Sales and Cash Flows

Our customers are not contractually required to make future purchases of
our products and could discontinue carrying or purchasing our products, at any
time and for any reason. Retailers and distributors generally are in a strong
position to negotiate favorable terms of sale, including price discounts and
product return policies. Retailers also often require software publishers to pay
fees in exchange for preferred shelf space. Further, resellers may give higher
priority to products other than ours, thus reducing their efforts to sell our
products. We may not be able to increase or sustain the current amount of our
retail shelf space and, as a result, our operating results could be adversely
affected.

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Use of Net Operating Loss Carry Forwards is Limited

We estimate our consolidated tax net operating loss carryforwards to be
approximately $84 million at December 31, 1998, which expire in years 2002
through 2018, and our general business credit carryover to be approximately $1.5
million, which expires in years 2005 and 2006. These carryforwards are subject
to certain limitations described below. Under Section 382 of the Internal
Revenue Code of 1986, as amended (the "Code"), changes in the ownership or the
business of a corporation that has net operating loss carry forwards can result
in the inability to use or the imposition of significant restrictions on the use
of such net operating loss carry forwards to offset future income and tax
liability of such corporation. An "ownership change" may be deemed to have
occurred under Section 382 of the Code and the regulations thereunder with
respect to both the Company and its wholly-owned subsidiary, Software Publishing
Corporation ("SPC"), which the Company acquired in December 1996, and the use by
the Company of these net operating loss carry forwards will be limited.
Utilization of the net operating loss carry forwards of SPC may be further
limited by reason of the consolidated return/separate return limitation year
rules. In addition, the SPC net operating loss carry forwards are also subject
to the additional limitation that such losses can only be utilized to offset the
separate taxable income of SPC. We estimate the maximum utilization of such net
operating loss carry forwards to be approximately $1,200,000 per year for losses
through December 31, 1996; losses incurred thereafter can be fully utilized
until expired under present circumstances. There can be no assurance that we
will be able to utilize all of our net operating loss carry forwards. In
addition, the foreign losses incurred by SPC may decrease or otherwise restrict
our ability to claim U.S. tax credits for foreign income taxes.

Failure to Obtain IRS Closing Agreement Could Result in Large Tax Payment

We have applied for a closing agreement with the Internal Revenue Service
(the "IRS") pursuant to which we would become jointly and severally liable for
SPC's tax obligations upon occurrence of a "triggering event" requiring
recapture of dual consolidated losses previously utilized by SPC. Such closing
agreement would avoid SPC's being required to recognize a tax of approximately
$8 million on approximately $24.5 million of SPC's previous dual consolidated
losses. The IRS has, to date, refused to grant the Company's application for
such a closing agreement because of alleged deficiencies in SPC's
pre-acquisition dual loss certifications. The IRS has indicated that it will
consider alternative measures, which the Company is presently evaluating, to
correct these deficiencies and allow for such a closing agreement. While the
Company believes that the IRS should agree to such a closing agreement, no
assurance can be given that the IRS will do so and, absent extraordinary relief,
any failure to do so could result in the recognition of this tax liability.
Should such a closing agreement be obtained, in certain circumstances, a future
acquirer of the Company may also be required to agree to a similar closing
agreement in order to avoid the same tax liability, to the extent it is able to
do so. This could have a material adverse effect on our future ability to sell
SPC. The report of our auditors covering the December 31, 1998 consolidated
financial statements contains a paragraph emphasizing these dual consolidated
losses.

Year 2000 Compliance Issues

We are in the process of conducting a review of issues related to our Year
2000 compliance. In connection with this evaluation, we intend to review all
Company products for Year 2000 compliance, as well as to review our vendors and
suppliers for Year 2000 compliance, and to effect changes where necessary. We
expect to be able to conduct our review within our current resources, but no
assurance can be given that we have sufficient resources to complete the review
process in a timely manner. We have not determined, at this time, what total
costs we will incur to conduct the review process and to implement any necessary
corrections. At this time, we do not know of any of our products, processes or
systems, which, if found to be non-Year 2000 compliant, would have any
significant impact on the Company. We believe that all of our current products
are Year 2000 compliant. We are currently developing contingency plans to
address the failure of our products, vendors or information technology systems
to be Year 2000 compliant.

Change in Product Strategy May Not be Successful

The Company acquired SPC in December 1996. In SPC's fiscal year ended
September 30, 1996, approximately 70% of SPC's net revenue was derived from the
Harvard Graphics line of products. However, net

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revenues for that line of products declined substantially over the previous
few years and has continued to decline. While we believe that the market for the
Harvard Graphics product line has matured, we also believe that our Harvard and
Serif brands have attracted significant customer bases. Accordingly, we intend
to utilize these brand strengths for our current and certain anticipated new
products, including our proposed Visualcities.com Internet portal. This product
line and brand transition, and the development of the Visualcities.com Internet
portal, may not be accomplished in a timely or efficient manner and may not be
successful.

Potential Anti-Takeover Effects of Delaware Law, Certificate of Incorporation,
Stockholder Rights Plan and Possible of Preferred Stock Could Impede a Takeover
of the Company

Certain provisions of Delaware law and our Certificate of Incorporation
could make it more difficult to complete a merger, tender offer or proxy contest
involving the Company, even if such events could be beneficial to the interests
of our stockholders. These provisions include:

- Section 203 of the Delaware General Corporation Law,
- the classification of the Company's Board of Directors into three
classes,
- the requirement that 66-2/3% of our stockholders are needed to request
a special meeting of stockholders (other than a special meeting called
by the Board of Directors or the President),
- the "golden parachute" provisions of the Company's agreement with its
President,
- the requirement that 66-2/3% of the stockholders of the Company
entitled to vote thereon approve transactions such as a merger,
consolidation or sale of assets with or to an entity controlling 15%
or more of the voting power of the Company's capital stock, unless
approved by the Board of Directors prior to such entity's acquisition
of 15% or more of such voting power,
- the existence of "blank check" preferred stock that may be issued by
our Board of Directors without stockholder approval on such terms as
the Board may determine, and
- the existence of a "poison pill."

Under the poison pill, the Company has declared a dividend of one Preferred
Share Purchase Right (each, a "Right") on each outstanding share of Common
Stock. Each Right becomes exercisable only if a person or group acquires 20% or
more of the outstanding Common Stock or announces a tender offer the
consummation of which would result in ownership by a person or group of 20% or
more of the Common Stock. If we are acquired in a merger or other business
combination transaction after a person or group has acquired 20% or more of the
outstanding Common Stock, each Right will entitle its holder to purchase, at the
Right's then current exercise price (currently, $1,000), a number of the
acquiring company's common shares having a market value of twice such price. In
addition, if a person or group acquires 20% or more of the outstanding Common
Stock, each Right will entitle its holder (other than such person or members of
such group) to purchase, at the Right's then current exercise price, a number of
shares of Common Stock having a market value of twice such price.

The rights of the holders of Common Stock also will be subject to, and may
be adversely affected by, the rights of the holders of additional or other
classes of preferred stock that may be issued in the future, including the blank
check preferred stock. Such issuance may make it more difficult for a third
party to acquire, or may discourage a third party from acquiring, a majority of
the voting stock of the Company. These provisions could limit the price that
certain investors might be willing to pay in the future for shares of Common
Stock.

Limited Directors' Liability Could Prevent Stockholders From Holding Directors
Responsible for a Lack of Care

The Company's Certificate of Incorporation provides that our directors (but
not our officers) will not be held liable to the Company or our stockholders for
monetary damages upon breach of a director's fiduciary duty, except to the
extent otherwise required by law.

No Dividends

The Company has never paid any cash dividends on the Common Stock and we do
not anticipate paying any dividends in the foreseeable future.

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Possible Issuance of Substantial Amounts of Additional Shares Without
Stockholder Approval Could Dilute Stockholders

As of March 26, 1999, we have an aggregate of 5,263,891 shares of Common
Stock outstanding. In addition, as of March 26, 1999, we have 1,939,480 shares
of Serial Preferred Stock authorized but unissued, of which, 1,836,980 shares
are not reserved for specific purposes, and an additional (a) aggregate of
1,717,115 shares of Common Stock issuable upon the exercise of stock options
granted or available for grant under our various stock plans and (b) aggregate
of 2,236,337 shares of Common Stock issuable upon exercise of other stock
options or warrants previously granted and outstanding. All of such shares may
be issued without any action or approval by our stockholders. Although there are
no other material present plans, agreements, commitments or undertakings with
respect to the issuance of additional shares of Common Stock or securities
convertible into any such shares, other than in connection with the exercise of
outstanding stock options and warrants, any shares issued would further dilute
the percentage ownership of the Company held by our stockholders.

Any Delisting of Securities from Nasdaq System Could Precipitate Risks
Associated with Low-Priced Stocks

The Common Stock is listed on the Nasdaq SmallCap Market and the Boston
Stock Exchange. To remain eligible for listing on the Nasdaq SmallCap Market, we
must comply with the following:

- The Common Stock must have a minimum bid price of $1.00,

- we must have either minimum tangible net assets of $2,000,000,
a market capitalization of $35,000,000 or net income of $500,000 in
two of the three prior fiscal years and

- we must have a public float of at least 500,000 shares with a market
value of at least $1,000,000, at least 300 stockholders must hold
shares of Common Stock and at least two market makers must make a
market in the Common Stock.

These maintenance standards may be changed by Nasdaq. While we presently
comply with the Nasdaq listing maintenance requirements, the failure to maintain
these requirements or other requirements of Nasdaq could result in de-listing of
our securities from Nasdaq. In the event our securities are de-listed from
Nasdaq, you may be affected in any one or more of the following ways:

- our securities will have to trade on a non-Nasdaq, and possibly less
efficient, "over-the-counter" market,

- fewer brokerage firms and dealers may make a market in our securities
which may cause a decline in the trading price of our securities,

- you may also find it more difficult to dispose of, or obtain accurate
quotations, as to the market value of our securities,

- our securities may no longer be eligible for sale in certain
jurisdictions without additional compliance with such jurisdictions'
laws and regulations and

- the market for our securities may become illiquid.

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<PAGE>

Item 1. Description of Business.

General

The Company makes and sells computer software products for both the United
States domestic and international markets. Most of these products are desktop
publishing, presentation graphics and graphics/drawing software for the
corporate, SOHO and consumer markets. Our products are intended to 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. We currently offer
twenty-five products that operate on the Windows 98, Windows 95, Windows NT(R),
Windows(R) 3.1 and DOS operating systems for IBM personal computers and
compatibles. We also sell software products together with certain computer
hardware, such as "mouse pens," new personal computers and digital cameras. We
have established a multi-channel distribution system utilizing direct mail,
telemarketing, retail, corporate and OEM sales channels and also disseminate our
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 sales force and independent sales representatives. We
estimate that approximately 84.0% of our net sales for the year ended December
31, 1998 (the "1998 Fiscal Year") were generated through the Company's direct
sales and telemarketing efforts and 16.0% were generated through non-direct
channels.

North America and international net revenues for the 1998 Fiscal Year and
the year ended December 31, 1997 (the "1997 Fiscal Year") were as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------
1998 1997
------------------------ --------------------
Amount % Amount %
------------ ----- ----------- -----
<S> <C> <C> <C> <C>
North America . . . . . . . $ 8,431,271 46.1 $ 8,770,684 51.1
International . . . . . . . 9,840,462 53.9 8,386,181 48.9
------------ ----- ----------- -----
Total . . . . . . . . . . . 18,271,733 100.0 $17,156,865 100.0
============ ===== =========== =====
</TABLE>

We believe that end users are continuing to migrate from the Windows 3.1
and Windows 95 environments to the Windows NT and Windows 98 platforms and to
Internet computing. We expect increased competition, including price
competition, in the computer software and hardware markets in the future.
Several of our competitors sell suites of products which include products that
directly compete with our products. We believe that these offerings of product
suites have and will continue to adversely affect sales of our products 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, we currently offer one
product suite, Serif Publishing Power Suite, as well as products that complement
competitive suite products.

The Company was incorporated in Delaware on December 23, 1993, and
succeeded to the business of its predecessor New Jersey corporation, which was
formed on July 20, 1992. In July 1996, we acquired Serif Inc. and Serif (Europe)
Limited (collectively, the "Serif companies"), which significantly expanded our
product line to include desktop publishing and drawing titles Serif PagePlus and
Serif DrawPlus, among others. In December 1996, we acquired all of the
outstanding capital stock of Software Publishing Corporation ("SPC"), as a
result of which our product line expanded further to include SPC's presentation
graphics and other visual communications and business productivity software
products. We continue to operate the Serif companies and SPC as wholly-owned
subsidiaries. Since January 1998, the operations of SPC have been significantly
reduced.

We are currently substantially dependent upon sales of our Serif line of
software programs. Microsoft Corporation, Corel Corporation, Adobe Systems and
others sell products targeted for substantially the same market as the Serif
product line, some of which are included in product suites.

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<PAGE>

inability or delay in executing these strategies, difficulties encountered
in introducing new products or marketing programs, or failures of our current
and future products to compete successfully with products offered by other
vendors, could adversely affect our performance. The Company's growth is
expected to require increases in the number of employees, expenditures for new
product development and expansion of our e-commerce and Internet sites, the
acquisition of product rights, sales and marketing expenses, and general and
administrative expenses.

In the third quarter of the 1998 Fiscal Year, we began selling our Go
Digital Camera Pak, which consists of a digital camera and digital imaging
software licensed from a third party, as well as certain accessories. The
digital imaging market is fairly new and we may not sustain a profitable level
of sales as competitors focus their marketing efforts, develop enhancements to
their products and develop products that take advantage of technological
advances.

The Company currently is in the process of developing a new website
entitled Visualcities.com. The Company contemplates that this website will be an
Internet portal/community which would provide information, content, goods and
services to users. No assurance can be given that the Company will be able to
successfully develop and operate this website, that it will attract a
significant number of users or that the Company will achieve significant
revenues therefrom.

Unless the context otherwise requires, all references herein to the Company
include Software Publishing Corporation Holdings, Inc. and its subsidiaries,
including SPC and the Serif companies, on a consolidated basis.

The Company's principal executive offices are located at 3A Oak Road,
Fairfield, New Jersey 07004; telephone (973) 808-1992. The Company maintains
websites at www.spch.com, www.serif.com and www.harvardgraphics.com.

Business Strategy

The Company's strategic objective, with respect to its core software
business, is to become a leading supplier of easy-to-use software applications
that improve the graphical appeal and overall effectiveness of documents and
digital images produced or used by desktop publishing, web publishing, drawing
and presentation graphics applications, as well as to maximize the profitability
and productivity of the Company's direct marketing and telemarketing operations
in the United States and Europe.

The Company believes that many current graphical presentation software
applications and first-generation Internet publishing tools were designed for
computer specialists, corporate MIS departments, computer consultants and other
technically knowledgeable users. The Company believes that there is a market
opportunity for software that makes it easy for the average computer user to
create high-quality, graphically rich documents, presentations, e-mail and web
pages or to enhance digital images.

With respect to sales and marketing, the Company intends to leverage its
multi-million user, multi-national installed base of Serif and Harvard Graphics
customers through its multi-national direct marketing and telemarketing
operations, as well as the corporate and retail sales channels. The Company
believes that the Internet may provide additional opportunities for further
sales and marketing success, and has established an on-line store at its website
from which its products may be purchased.

The Company's primary product families are the Serif line of desktop
publishing and drawing products, consisting primarily of Serif PagePlus,
SerifDraw Plus, Serif DesignStudio and Serif Publishing Power Suite, and the
Harvard line of graphical information presentation products, consisting
primarily of Harvard Graphics and Harvard ChartXL. The Company believes that
Serif PagePlus is the most popular desktop presentation software application in
use in the United Kingdom. The Company also markets the Active line of companion
utility products (currently consisting of ActiveOffice , ActiveMail and Serif
MailPlus ), and the ASAP line of presentation graphics products.

The Company's strategy with respect to its anticipated Visualcities.com
business is to create a compelling environment on the World Wide Web which will
attract large numbers of computer users, including users of the

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<PAGE>

Company's software products. The Company expects to generate revenues from
this usage through transaction fees, including collection of commissions on
electronic commerce transacted by users of the Visualcities.com portal.

Products

The Company's primary product lines include desktop publishing,
presentation graphics and business productivity applications. Certain of the
Company's product lines are available in languages other than English. Both the
Serif and Harvard lines of products continue to derive substantial revenues from
foreign sales. See "Item 6. Management's Discussion and Analysis."

The Company's primary products, listed by product genre, are:

Desktop Publishing

- Serif PagePlus 5 Professional Edition for Windows 95 is the
Company's premium desktop publishing application designed to permit
the average computer user to produce professional-quality
advertisements, flyers, reports, banners, brochures, newsletters,
greeting cards and other written documents.

- Serif PagePlus Home/Office for Windows 95 is designed for
more price-sensitive SOHO and home computer desktop publishing users
who do not need all the content and advanced features included in
PagePlus 5.

- Serif PagePlus 4 is designed to permit the average computer
user to produce professional-quality advertisements, flyers, reports,
banners, brochures, newsletters, greeting cards and other written
documents.

- Serif DrawPlus 3 Home/Office Edition for Windows 95, is
designed for both the average and advanced computer user, with a range
of drawing and design tools that they can use to create logos,
posters, cartoons, certificates, report covers and greeting cards.

- Serif Publishing Power Suite is a combination of products
consisting of Serif PagePlus 3, TypePlus, TablePlus, DrawPlus 3,
PhotoPlus, Arena 3D Design ED (licensed from a third party) and
PhotoMorph 2.0 (licensed from a third party), along with 7,000 clipart
images, 500 photos and 400 fonts.

- Serif PagePlus Home/Office Designer Pack provides over 100
design wizards, 100 additional fonts, 50 photos and over 5,000 clipart
images.

- Serif ArtGallery contains 100,000 clipart images licensed from a
third party.

- Harvard Publisher is a desktop publishing program for SOHO and home
users.

Drawing/Special Effects

- Harvard Draw 98 is an easy to use drawing, illustration and photo
editing solution for SOHO, educational and home users.

- Serif 3DPlus offers easy three-dimensional rendering capabilities
for text and scenes, complementing the graphics capabilities
of other Serif products.

- Serif DrawPlus 4 provides dozens of advanced drawing, illustration
and animation development technologies.

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<PAGE>

- Harvard Design Studio is the Company's premium U.S. retail
drawing and illustration application software product designed to
permit the average computer user to produce professional quality
drawings and graphics.

- Serif Design Studio is the Company's U.K. premium drawing
and illustration application software product designed to permit the
average computer user to produce professional quality drawings and
graphics.

Digital Imaging

- Go Digital Photo Pak is a complete digital color camera and
digital image editing software solution designed to allow users an
affordable entry into digital photography.

- Go Video Pak contains two digital video cameras and software
designed for entry-level users.

Presentation Graphics

- Harvard Graphics 98 is a premium Windows presentation
graphics software package offering a range of capabilities enabling
users to create and deliver more effective presentations.

- Harvard Graphics 3.0 for Windows is a Windows 3.1 presentation
graphics package offering the Advisor System and an
interactive design checker.

- Harvard ChartXL 2.0 for Windows 95 is a charting application
program that provides users of spreadsheet software and other major
Windows-based applications a tool for analyzing, viewing and
presenting their data more effectively with more than 300 unique two-
and three-dimensional business, statistical, and technical chart
types, coupled with spreadsheet capabilities and "what if" analytical
tools.

- Harvard Spotlight 2.0 for Windows 95 helps assist users to
control the flow and delivery of their electronic presentations.

- ActiveMail and Serif MailPlus enable users to send graphical e-mail
messages in addition to or instead of plain text.

- Harvard InstantCharts is designed as a quick and easy way to turn
plain text and numbers into high- impact visual elements which
are embedded in their text, thereby increasing the communication
effectiveness of their documents.

- ASAP WordPower, v.1.95 is a presentation graphics application
that helps inexperienced users create a presentation within a few
minutes. ASAP WordPower allows the Windows 95 user to convert text
created in ASAP WordPower or MS Word into a professional,
well-designed presentation.

- ASAP WebShow is a viewer for presentations that are created
with the Company's ASAP WordPower presentation software and posted to
the World Wide Web. The combination of ASAP WebShow and ASAP WordPower
provides a set of tools to enhance communications over the Internet.
Together, these two products offer users a solution for creating and
viewing presentations on the World Wide Web. An ASAP WebShow user can
view a presentation in interactive or auto-run mode, download the
materials for later viewing, or print hard copies for local use.

Business Productivity Applications

- Word Processing and Other Products. The Company's word
processing and other business productivity products are older, legacy
products for mature market segments. These products include

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Professional Write, Professional Write PLUS, OfficeWriter and
Professional File. The Company has de-emphasized this category.

Intellectual Property and Other Proprietary Rights

The Company believes that its success depends significantly upon its
proprietary technology. The Company currently relies on a combination of
copyright and trademark laws, trade secrets, confidentiality procedures and
contractual provisions and other written materials under trade secret, patent
and copyright laws to protect its proprietary technology; however, these
generally afford only limited protection. The Company has registered and applied
for registration for certain service marks and trademarks, and intends to
continue to evaluate the registration of additional service marks and trademarks
as appropriate. Additionally, the Company generally copyrights its software and
related user documentation, but the copyright laws afford only limited practical
protection against duplication of the media embodying the programs and the
related user manuals. The Company's patent application relating to its
Intelligent Formatting technology has been denied by the U.S. Patent Office.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or services or to
obtain and use information that the Company regards as proprietary. In addition,
the laws of some foreign countries do not protect proprietary rights to as great
an extent as do the laws of the United States. Monitoring and identifying
unauthorized use of such broadly disseminated products as personal computer
software is difficult. The Company expects software piracy to be a continuing
problem for the software industry. The Company relies upon software engineering
and marketing skills to protect its market position, in addition to the
copyright and trademark or trade secret protection discussed above. Because the
software development industry is characterized by rapid technological change,
the Company believes that factors such as the technological and creative skills
of its personnel, new product developments, frequent product enhancements, brand
name recognition and reliable product maintenance are as important to
establishing and maintaining a technology leadership position as the various
legal protections of its technology.

There can be no assurance that any issued patent will provide the Company
with any competitive advantages. The Company believes that it retains ownership
rights to all software, both developed and commercially distributed by the
Company, except for those components of the software that the Company licenses
from third parties. Software offered by the Company is licensed and generally
provided in object code pursuant to shrink-wrap or on-screen license agreements
or executed license agreements which contain restrictions on disclosure and
transferability. In addition, the Company has from time to time licensed to
third parties the right to use, modify, reproduce, sublicense, distribute and
market certain of the Company's software products or portions of its software
products. Such licensed software is provided in object code and, in certain
limited circumstances, source code, pursuant to agreements which contain
restrictions on disclosure and transferability.

Certain technology used in the Company's products is licensed on a
perpetual, fully paid, non-royalty-bearing basis from third parties. If any
event occurred that rendered technology licensed from a third party and
incorporated in the Company's products unavailable to the Company, or if the
technology is not appropriately supported and enhanced by the licensor, the
Company could be forced to expend financial and development resources to replace
that technology. Such expenditures could materially adversely affect the
Company's business, financial condition and results of operations.

The Company is not aware that any of its products materially infringes the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim such infringement by the Company or its licensors
with respect to current or future products. The Company expects that software
product developers will increasingly be subject to such claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or might require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company.

Litigation may be necessary to protect the Company's proprietary
technology. Any such litigation may be time-consuming and costly. There can be
no assurance that the Company's means of protecting its proprietary rights will

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<PAGE>

be adequate or that the Company's competitors will not independently develop
similar technology or duplicate the Company's products or services or design
around patents or other intellectual property rights of the Company. There has
been a substantial amount of litigation in the software industry regarding
intellectual property rights and there can be no assurance that the patents or
other intellectual property rights of others will not have a material adverse
effect on the Company's ability to do business.

Competitors and potential competitors of the Company may resort to
litigation as a means of competition. Such litigation may be costly and expose
the Company to new claims that it may not have anticipated. Although patent and
intellectual property disputes in the software area have often been settled
through licensing, cross-licensing or similar arrangements, costs associated
with such arrangements may be substantial if they may be obtained at all. Any
litigation involving the Company, whether as plaintiff or defendant, regardless
of the outcome, including any litigation relating to claims which have been or
may in the future be asserted against the Company, may result in substantial
costs and expenses to the Company and significant diversion of effort by the
Company's technical and management personnel. In addition, there can be no
assurance that litigation, instituted either by or against the Company, will not
be necessary to resolve issues that may arise from time to time in the future
with other competitors. Any such litigation could have a material adverse effect
upon the Company's business, operating results and financial condition. In the
event of an adverse result in any such litigation, the Company could be required
to expend significant resources to develop non- infringing technology, obtain
licenses to the technology which is the subject of the litigation on terms not
advantageous to the Company, pay damages, and/or cease the use of any infringing
technology. There can be no assurance that the Company would be successful in
such development, that any such licenses would be available and/or that the
Company would have available funds sufficient to satisfy any cash awards.

Product Development

The personal computer software industry is characterized by rapid
technological change, which requires a continuing high level of expenditures for
the enhancement of existing products as well as development, licensing or
acquisition of new software products. The Company's current product development
activities include enhancing and updating its present software packages and
designing certain new products, as well as the continued development of the
Company's planned Visualcities.com Internet portal website. The Company intends
to expand and update its Serif desktop publishing software code through a
rewrite of the code base to allow the products using the code base to more
easily accept anticipated future technological advancements beyond Year 2000.

The Company's Serif technology includes two advanced code bases, desktop
publishing and drawing, which can continue to be expanded as user requirements
evolve. In 1998, the Company introduced three new products based on its updated
Serif technology. The Company has focused its research and development resources
on expanding its Serif and Harvard Graphics technology, as well as on its
planned Visualcities.com website and other Internet technologies and products.

The Company intends to acquire additional technology through a combination
of internal development, licensing, purchasing and strategic alliances. There
can be no assurance that the Company's product development efforts or product
introductions will result in commercially successful products. The Company's
revenues are based on a combination of products developed internally, acquired
products and licensed products. The Company intends to continue a flexible
approach to the development, acquisition and release of new products and
technologies, recognizing that the rapid changes in the software industry
require ever shorter development cycles and ever higher levels of product
quality and functionality. The Company plans to continue to develop and acquire
software technology and products, and to acquire licensing or distribution
rights to third-party products, to enhance and expand its product offerings.

In June 1996, SPC entered into a non-exclusive licensing and joint
development agreement with Oracle Corporation ("Oracle") to embed Intelligent
Formatting technology into the Oracle InterOffice Product Line. Under the
agreement, the Company's Intelligent Formatting engine is being ported to Java
for use in the Oracle InterOffice product line. Intelligent Formatting
technology is intended to enhance the Oracle InterOffice product offerings in
the area of visual communications. The collaborative services offered by Oracle
InterOffice -- messaging, directory services, calendar/scheduling, document
management and workflow -- are designed to enable users to productively share,
exchange and manage information within their group, across the enterprise and
beyond. Intelligent Formatting

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<PAGE>

technology is expected to complement these services by adding rich visual
content to the range of the Oracle InterOffice applications. Under the terms of
this agreement, Oracle has paid to the Company a development fee and a one-time
license fee in installments. The Company believes that the development fee and
license fee have not resulted in a material financial benefit to the Company. In
addition, in June 1996, Oracle Corporation purchased a worldwide end-user site
license for the Company's ASAP WordPower visual communications software. Under
the terms of the agreement, the Company granted Oracle and its subsidiaries a
license for the desktop, network and mobile use of ASAP WordPower.

The Company spent approximately $1,266,000 in 1998 and $3,227,000 in 1997
for product development and enhancement activities. These expenditures
represented approximately 6.9% and 18.8% of total net revenues for such years,
respectively, and are expected to increase in the future.

Production

After approval by quality assurance personnel and management, the Company's
product development staff produces the master diskettes, CD-ROMs and user
manuals for its proprietary software as part of its product development
activities. Third party contractors generally print and assemble CD-ROM discs,
diskettes, manuals, inserts and boxes in which the Company's products are
shipped. The Company has multiple sources for major components of its products,
does not rely on any one principal supplier and has not experienced any material
delays in production or assembly. To date, the Company has not experienced any
material difficulties or delays in production of its software products and
related documentation.

The Company generally purchases computer hardware products such as mouse
pens and digital cameras from third parties. From time to time, supplies of
these products have not been sufficient to meet customer demand, primarily as a
result of the Company's just-in-time inventory policy and less than optimal
amounts of letter of credit facilities or other resources sufficient to finance
such purchases.

Sales and Marketing

The Company's software products are sold primarily through direct
marketing, telemarketing, retail, corporate, and original equipment manufacturer
("OEM") channels. Hardware products are sold almost exclusively through direct
marketing. The Company has also positioned itself to take advantage of the
Internet as an additional sales medium. Direct sales, which accounted for
approximately 84.0% and 72.4% of the Company's revenues in 1998 and 1997,
respectively, are generated by inbound and outbound telemarketing operations in
the U.S. and U.K. Corporate sales are comprised of both individual product sales
as well as volume license sales. Most sales to the retail channel are made on a
two-step basis with the initial sales being made to distributors and then to
retail chains. The Company also distributes its products through OEMs on a
bundled or value-added basis. In addition, the popularity of the Internet and
the World Wide Web has made it feasible for the Company to sell its products
over the Internet. In this connection, the Company has established an on-line
software store from which the Company's products may be purchased. As the
Internet continues to evolve mechanisms for efficiently and securely charging
customers directly for software, the Company expects that it will continue to
expand its software and hardware distribution over the Internet. The Company
expects to market its anticipated Visualcities.com business initially primarily
to its existing user base of its software products through direct marketing
efforts.

The Company utilizes its telemarketing operations in conjunction with its
direct mail operations to maximize direct sales to existing and new end user
customers. These mailings and direct response advertisements originate from the
Company's offices in Nashua, New Hampshire and Nottingham, England and are
handled by the Company's inbound and outbound telemarketers in such locations.
These mailings and advertisements are varied and tested to attempt to maximize
response rates and profitability. The Company maintains a list of its registered
user customers and sends periodic mailings to sell upgrade versions and new
products.

The Company attempts to assist distributors and resellers in selling,
promoting and merchandising its products. Large corporate and government sales
are fulfilled principally through resellers and distributors while all other
sales are fulfilled directly. The Company also offers site licenses and volume
purchase discounts to its corporate customers.

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<PAGE>

The OEM sales effort is responsible for sales to hardware and software
original equipment manufacturers, which include the Company's products in
bundles with their equipment.

The Company's advertising programs for its product lines are designed to
increase corporate and product brand awareness, as well as to sell directly to
customers. The Company's advertising targets new customers, its installed
customer base and, with competitive upgrade promotions, its competitors'
customers. The Company advertises primarily through promotions to support
distributors' and resellers' sales efforts, including distributor/reseller
advertising programs, rebates, training and price promotions, and engages in
joint promotional activities with personal computer, peripheral and other
manufacturers, direct mailings and participation at trade shows.

The Company's products continue to derive substantial revenues from foreign
sales. The Company translates certain of its products, including packaging,
documentation, software, and promotional materials, for international markets.
These translations are generally done by contractors hired by the Company, or by
the Company's local sales and marketing agents. Advertising and promotional
programs are customized for local markets where necessary. International sales
include localized versions of selected products, as well as the English language
versions of the Company's products throughout the United Kingdom, Europe, Latin
America, South America and the Asia/Pacific region. Localized versions include
German, French, Spanish, Italian, Portuguese and Dutch. Approximately 53.9% of
the Company's worldwide sales in 1998 and 48.9% of worldwide sales in 1997 were
made outside of the U.S. The Company expects to continue to sell internationally
and invoice in foreign currencies. Accordingly, the Company is subject to risks
associated with exchange rate fluctuations.

The Company has a general return policy for its North American resellers
and distributors whereby they may return any products previously purchased from
the Company, provided that the aggregate purchase price for such returned
products does not exceed 10% of the reseller's or distributor's net purchases
for the prior quarter. In addition to this return allowance, North American
distributors and resellers may generally exchange any discontinued products
within ninety days of notification of discontinuation for products of equal or
greater value. For international distributors and resellers, the general return
policy is the same as for North American resellers and distributors, except that
returns with respect to sales in a quarter must be completed within the first
month of the subsequent quarter. For international distributors and resellers,
the policy for the exchange of obsolete products generally allows returns within
thirty days after the announcement of a product's obsolescence, provided that
the product was shipped within thirty days prior to the announcement. However,
to maintain good customer relations, the Company may accept returns in excess of
those allowed under its general policy.

The Company typically ships software products within several days after
receipt of orders, which is customary in the personal computer applications
software business. The Company also attempts to ship its hardware products
within several days after receipt of orders; however, when supplies of such
products are not on hand within such the periods, delays of up to several weeks
may occur. As of December 31, 1998 and 1997, the Company's backlog was
approximately $389,000 and $125,000, respectively. The Company expects all
backlogged orders to be shipped within several weeks.

Customer Concentration and Credit Risk

The Company had one customer which accounted for approximately 12.7% and
12.9% of net revenues for the years ended December 31, 1998 and 1997,
respectively. This same customer accounted for approximately 36.0% and 4.0% of
net outstanding accounts receivable at December 31, 1998 and 1997, respectively.
The Company considers several of its customers to be significant. The loss of
any of such customers, a significant decrease in product shipments to one or
more of them or an inability to collect receivables from one or more of them
could adversely affect the Company's business, operating results and financial
condition.

Customer Support

With respect to its software and hardware products, the Company provides
free technical support directly in the United States, United Kingdom and Germany
for a period of thirty days from either the first call to its technical support
centers from the customer or from receipt of the customer's product registration
card. The Company expenses

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the cost of this support as incurred. After this initial period, technical
support is available for purchase under a variety of value-added support
programs. However, to maintain good customer relations, the Company may provide
free technical support in excess of the initial period.

Competition

The market for visual communications and business productivity software is
highly competitive and subject to rapid technological change. Many of the
Company's current and potential competitors possess significantly greater
financial, technical and marketing resources, greater name recognition and a
larger installed customer base than the Company. In addition, any of these
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, as well as to devote greater resources to
the development, promotion and sale of their products than the Company.
Furthermore, because there are relatively low barriers to entry in the software
industry, the Company expects additional competition from other established and
emerging companies, which may choose to enter the market by developing products
that compete with those offered by the Company or by acquiring companies,
businesses, products or product lines that compete with the Company. It is also
possible that competitors may enter into alliances and rapidly acquire
significant market share. The Company also believes that competition will
increase as a result of software industry consolidation. There can be no
assurance that the Company's current or potential competitors will not develop
or acquire products comparable or superior to those developed by the Company,
combine or merge to form significant competitors, or adapt more quickly than the
Company to new technologies, evolving industry trends and changing customer
requirements. Increased competition could result in price reductions, reduced
margins or loss of market share, any of which could materially and adversely
affect the Company's business, operating results and financial condition. There
can be no assurance that the Company will be able to compete successfully
against current and future competitors or that competitive pressures faced by
the Company will not have a material adverse effect on its business, operating
results and financial condition. If the Company is unable to compete
successfully against current and future competitors, the Company's business,
operating results and financial condition would be materially and adversely
affected.

Some of the competitors of the Company sell "bundles" or "suites" of
products which include products that directly compete with the Company's
products and which are bundled with other office software programs by the same
or multiple competitors. These suite products are sold at an all-inclusive
price. Additionally, application software is increasingly provided as part of
the operating system, or bundled and pre-loaded into new computers. The price
for a stand-alone or pre-loaded bundle or suite of software is typically
significantly less than separately purchased applications, and many end users
are likely to prefer the bundle or suite over a more expensive combination of
other individually purchased applications, even if the latter applications offer
superior performance or features. These factors have resulted in and are
expected to continue to cause significant downward pressures on average selling
prices for the Company's products. There is no assurance that the Company will
be able to adopt strategies to compete successfully in this environment.

Based on product lines and price points, the Company regards Microsoft,
Symantec Corporation, Corel Corporation, Lotus Development Corporation, Adobe
Systems, The Learning Company, Micrografix, Fractile, Visio, Metatools,
Deltapoint, Macromedia and International Microcomputer Software, Inc. as
competitors to its software business. The dominant position of Microsoft in the
personal computer operating system and application program market place provides
it with a range of competitive advantages, including the ability to determine
the direction of future operating systems and to leverage its strength existing
in one or more product areas to achieve a dominant position in new markets. This
position may enable Microsoft to increase its market position even with respect
to products having superior performance, price and ease-of-use features.
Microsoft's ability to offer corporate and SOHO productivity software, to bundle
software, to provide incentives to customers to purchase certain products in
order to obtain favorable sales terms or necessary compatibility or information
with respect to other products, and to pre-load such bundled software on new
computers, may significantly inhibit the Company's ability to maintain or expand
its business. In addition, as Microsoft or other companies create new operating
systems and applications, there can be no assurance that the Company will be
able to ensure that its products will be compatible therewith. The introduction
of upgrades to operating systems or the introduction of new operating systems
and standardized software by Microsoft and others, over which the Company has no
control, may adversely affect the Company's ability to upgrade its own products,
and may cause reduction in sales of the Company's products.

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<PAGE>

The Company believes that the principal competitive factors in the
corporate and SOHO software market include pricing (which includes individual
product pricing, standard and competitive upgrade pricing, licensing and volume
discounting), product functionality, ease-of-use, bundling in suites of related
products, distribution through existing and new channels and brand name
recognition. The Company's ability to compete will be contingent on its
continued enhancement of its existing products, its ability to correctly
identify and enter new markets, effectively market and sell its current
products, develop, acquire or license new products and broaden its distribution
channels. The Company believes that competition will continue to intensify in
the future and that new product introductions, further price reductions,
strategic alliances and other actions by competitors could materially and
adversely affect the Company's competitive position.

Operations

The Company coordinates its accounting, product development, sales,
marketing, purchasing and scheduling primarily at its offices in Fairfield, New
Jersey and its telemarketing, sales and fulfillment operations at Nashua, New
Hampshire, Nottingham, England and Munich, Germany. The Company's inventory
control, order processing, warehousing and shipping activities related to such
operations are located primarily at its offices in Nashua and Nottingham. The
Company's computer systems handle order entry, order processing, picking,
billing, accounts receivable, accounts payable, general ledger, inventory
control, catalog management and analysis, and mailing list management.

Governmental Regulation

The Company believes that it does not need any government approval for
production and sale of its products. In addition, the Company knows of no
governmental regulations, either federal, state or local which materially affect
its operations or products. Furthermore, the Company knows of no environmental
laws, either federal, state or local, which would materially affect the Company
or its products. Consequently, the Company has not incurred any costs nor has it
experienced any effects from compliance with any governmental regulations or
environmental laws.

Employees

As of December 31, 1998, the Company had 149 full-time employees, of whom
fifteen were in product development, 105 were in marketing, sales and customer
support, seven were in production and 22 were in general and administrative
functions. Of the total, 74 employees were located in North America and 75
internationally. In addition, as of December 31, 1998, the Company had two
part-time employees and two temporary employees. The Company also Company
utilized two independent contractors in connection with its product development,
administration and marketing activities. The Company has never experienced a
work stoppage and believes that it has satisfactory relations with its employees
and contractors. In January 1998, the Company terminated the employment of
twelve employees, of which five were administrative, three were in marketing,
three in product development and one in production. Also, three contractors'
engagements were terminated.

Item 2. Description of Property.

The Company's principal executive offices are located at 3A Oak Road,
Fairfield, New Jersey, 07004. The Company's North American executive,
administrative, sales, marketing and support staff are primarily located at this
facility. The lease for this facility terminates in September 1999 and provides
for average annual rental costs of approximately $73,000, for approximately
13,300 square feet of space. Approximately 10,000 square feet of this facility
have been subleased for the duration of the lease, providing a net annual rental
cost of approximately $19,200. In addition, Serif Inc. leases approximately
18,000 square feet of office and warehouse space in Nashua, New Hampshire
pursuant to a lease ending in March 2002. This facility serves as the Company's
primary North American telemarketing, customer support, product development,
warehouse and fulfillment center. Rental costs for the Nashua facility average
approximately $90,000 per year for the remaining term. Serif (Europe) Limited
leases approximately 20,000 square feet of office and warehouse space in
Nottingham, England for a five year period which commenced in May 1997. This
facility serves as the Company's United Kingdom telemarketing center and
European warehouse and fulfillment center.

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<PAGE>

The rental cost for the Nottingham facility is expected to average
approximately $128,000 per year for the lease term. The Company also leases
1,200 square feet of office space in Munich, Germany pursuant to a lease which
expires in November 1999 with a rental cost of approximately $26,000 per year
for the lease term. The facility serves as the Company's European sales and
German customer support office. The Company believes that its existing space
provides it with adequate space for the foreseeable future, except that the
Company intends to re-locate its New Jersey office by the end of the lease term
for such facility. The Company does not own nor does it contemplate owning any
real property in the foreseeable future.

The Company does not currently have any policy imposing limitations,
whether by quantity or type, with respect to investments in real estate or
interests in real estate, investments in real estate mortgages or the securities
of or interests in persons primarily engaged in real estate activities.
Additionally, there is no policy currently in effect regarding investments in
real estate for possible capital gain or income. It is not anticipated that the
creation of any policy regarding real estate investments, and changes to any
such policy once created, will require a vote of holders of the Company's
securities.

Item 3. Legal Proceedings.

On January 30, 1998, an action was commenced against the Company, Mark E.
Leininger and Barry A. Cinnamon in the United States District Court, Southern
District of New York, under the caption Howard Milstein and Ronald Altman v.
Software Publishing Corporation Holdings, Inc., Mark E. Leininger and Barry A.
Cinnamon. Mr. Leininger currently is President, Chief Operating Officer and a
director of the Company and Mr. Cinnamon formerly was Chairman of the Board,
President and Chief Executive Officer of the Company. In the action, plaintiffs
allege that, in October 1997, they purchased an aggregate 296,333 shares of
Common Stock for $919,495 based upon certain statements made to one of the
plaintiffs. Plaintiffs further allege that such statements were intentional
misrepresentations of material fact that were designed to deceive plaintiffs as
to the Company's true financial status and to induce the plaintiffs to invest in
the Company. Plaintiffs seek recission of their investment and a return of their
purchase price and certain other relief. The Company believes that these claims
are without merit and is vigorously defending itself in this action. The Company
has filed an answer in this action denying the plaintiffs' allegations. This
action currently is in the discovery stage. The Company has asserted affirmative
defenses, including that the plaintiffs' subscription agreements bar plaintiffs'
claims, and asserted counterclaims that, among other things:

- plaintiffs breached certain of the representations contained in their
subscription agreements,
- plaintiff Altman breached his fiduciary duties to the Company, and
- plaintiffs' violated Section 13(d) of the Exchange Act by filing a
materially false and misleading Schedule 13D with respect to the
Common Stock.

In January 1998, SPC and Pyramid Data, Inc. ("Pyramid") settled the
remaining cause of action in the action brought by Pyramid in May 1994 against
SPC in the Santa Clara Superior Court. The settlement agreement resulted in a
payment by the Company to Pyramid of $9,500 and the dismissal of the action. In
addition, claims of indemnification and contribution under the cross-complaints
among SPC, Custom Paper Products ("CPP") and certain officers and directors of
CPP have been dismissed with prejudice.

In the fourth quarter of 1998, an action was commenced in the Superior
Court of the State of California in and for the County of Santa Clara, under the
caption Community Towers, LLC vs. Software Publishing Corporation Holdings,
Inc., pursuant to which the plaintiff is seeking $300,000.00 in damages for the
Company's alleged violation of a lease for office space located in San Jose,
California. This is the location at which SPC had its principal place of
business and at which the Company had its principal executive offices during the
period of January 1997 through January 1998. The Company no longer has any
offices at this location. The Company believes that plaintiffs claims in this
action are without merit and intends to vigorously defend itself in this action.
The Company has filed an answer in this action denying the plaintiffs'
allegations and this action is currently in the discovery stage.

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<PAGE>

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

Not applicable.

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<PAGE>

PART II

Item 5. Market for Common Equity and Related Stockholder Matters.

(a) Market Information

The Common Stock was traded on the Nasdaq SmallCap Market under the symbol
"ANMI" from December 6, 1995 through December 27, 1996, under the symbol "SPCOD"
from December 28, 1996 through January 27, 1997 and from May 28, 1998 through
June 24, 1998, under the symbol "SPCOC" from October 23, 1998 through January
14, 1999, and otherwise has been traded under the symbol "SPCO" since January
28, 1997. The Common Stock was also traded on the Boston Stock Exchange under
the symbol "APO" from December 6, 1995 through January 20, 1997 and has been
traded under the symbol "SPO" since January 20, 1997. The following table sets
forth the range of high and low bid prices for the Common Stock for the periods
indicated as derived from reports furnished by Nasdaq, adjusted to reflect the
Company's one-for-three (1:3) reverse stock split effective as of May 27, 1998
(the "Reverse Stock Split"). Such adjustment has been made by multiplying the
bid prices by three and does not necessarily reflect the prices for the Common
Stock had the Reverse Stock Split occurred prior to the periods indicated. The
information reflects inter-dealer prices, without retail mark-ups, mark-downs or
commissions and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>

High Bid Low Bid
-------- -------
Fiscal 1997
- -----------
<S> <C> <C>
First Quarter . . . . . . . . . . . . . $ 14-1/4 $ 8-13/16
Second Quarter. . . . . . . . . . . . . 9-9/16 5-5/8
Third Quarter . . . . . . . . . . . . . 7-1/8 3
Fourth Quarter. . . . . . . . . . . . . 6-15/16 2-5/32

Fiscal 1998
- -----------
First Quarter . . . . . . . . . . . . . $ 2-13/16 $ 1-1/2
Second Quarter . . . . . . . . . . . . 3 1-3/8
Third Quarter . . . . . . . . . . . . . 1-5/8 5/8
Fourth Quarter. . . . . . . . . . . . . 1-1/8 9/16

</TABLE>

As of March 26, 1999, the closing bid price for the Common Stock as
reported on Nasdaq was $1-3/16. At March 22, 1999, there were 658 stockholders
of record of the Company. The Company estimates, based upon surveys conducted by
its transfer agent in connection with the Company's 1998 Annual Meeting of
Stockholders, that there are approximately 7,000 beneficial stockholders.

The Company has never paid cash dividends on its capital stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain any future earnings for reinvestment in its
business. Any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon the Company's
financial condition, results of operations, capital requirements and other
relevant factors.

(b) Recent Sales of Unregistered Securities

The information set forth below is a list of all sales and issuances by the
Company of the Company's equity securities occurring during 1998 not otherwise
disclosed in the Company's Quarterly Reports on Form 10-QSB.

In May 1998, the Company issued 7,812 shares (as adjusted to give effect to
the Reverse Stock Split) (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.

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<PAGE>

In May 1998, the Company issued 27,299 shares (as adjusted to give effect
to the Reverse Stock Split) (the "F-B Shares") of Common Stock to Frost &
Berman, Inc. in payment for consulting services. The issuance of the F-B Shares
was a private transaction exempt from registration under Section 4(2) of the
Securities Act.

Effective October 1998, the Company issued warrants (the "SERP Warrants")
to purchase 150,000 shares of Common Stock, at an exercise price of $.86 per
share, to Southeast Research Partners, Inc. ("SERP"), pursuant to a Financial
Advisory and Investment Banking Agreement, dated October 23, 1998, between the
Company and SERP. The SERP Warrants are exercisable during the period of April
23, 1999 through October 23, 2003. The Company has the right to cancel SERP
Warrants to purchase 75,000 shares of Common Stock in the event the Company
terminates SERP's investment banking services on or before April 23, 1999. The
issuance of the SERP Warrants was a private transaction exempt from registration
under Section 4(2) of the Securities Act.

On December 11, 1998, pursuant to a private placement (the "December 1998
Private Placement") conducted in accordance with Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), the Company sold
an aggregate 243,604 shares (the "December 1998 Private Placement Shares") of
Common Stock, to a total of six accredited investors for aggregate proceeds of
$161,997. In connection with the December 1998 Private Placement, the Company
incurred sales commissions and other expenses aggregating approximately $30,000
and issued warrants (the "Agency Warrants"), to purchase 17,052 shares of Common
Stock, at an exercise price of $1.50 per share, exercisable from December 11,
1998 through December 10, 2000. The issuances of the December 1998 Private
Placement Shares and Agency Warrants were private transactions exempt from
registration under Section 4(2) of the Securities Act.

On December 15, 1998, the Company purchased an aggregate of 120,000 freely
tradeable shares (the "X-Ceed Shares") of the common stock, par value $.01 per
share (the "X-Ceed Common Stock"), of X-Ceed, Inc. from Seafish Partners in
exchange for the Company's issuance of an aggregate of 930 shares (the "Class A
Preferred Shares") of the Class A 14% Cumulative Non-Convertible Redeemable
Preferred Stock, Series A, par value $.001 per share (the "Class A Preferred
Stock"), of the Company. The Certificate of Designations with respect to the
Class A Preferred Stock, which was filed with the Secretary of State of the
State of Delaware on December 15, 1998, authorizes a class of 1,500 shares of
Preferred Stock. Holders of shares of Class A Preferred Stock were entitled to
(a) cumulative dividends of $140 per share per annum, payable semi-annually on
June 30 and December 31 of each calendar year, commencing on June 30, 1999, (b)
a liquidation preference of $1,000 per share and (c) the right to elect one
director in the event the Corporation fails to tender in full three consecutive
semi-annual dividend payments. In addition, the Company has the right to redeem
the Class A Preferred Stock, in part or whole, at any time, upon payment of
$1,300 per share. The issuance of the Class A Preferred Shares was a private
transaction exempt from registration under Section 4(2) of the Securities Act.
Thereafter, pursuant to a Letter Agreement, dated January 4, 1999, between the
Company and Seafish Partners, Seafish Partners exchanged the Class A Preferred
Shares for (i) the issuance of 930 shares (the "Class C Preferred Shares") of
the Class C 11% Cumulative Non-Convertible Redeemable Preferred Stock, par value
$.001 per share (the "Class C Preferred Stock), of the Company, (ii) the
issuance of warrants (the "Seafish Warrants") to purchase 260,000 shares of
Common Stock, at an exercise price of $1.0625 per share, exercisable immediately
and expiring on January 3, 2006, (c) a payment of $7,134.25 representing all
accrued dividends on the Class A Shares through January 4, 1999. On January 4,
1999, the closing bid price of the Common Stock was $1.0625 per share. The
Certificate of Designations with respect to the Class C Preferred Stock
authorizes a class of 1,000 shares of Class C Preferred Stock. Holders of shares
of Class C Preferred Stock will be entitled to (a) cumulative dividends of $110
per share per annum, payable semi-annually on June 30 and December 31 of each
calendar year, commencing on June 30, 1999, (b) a liquidation preference of
$1,000 per share and (c) the right to elect one director in the event the
Corporation fails to tender in full three consecutive semi-annual dividend
payments. In addition, the Company has the right to redeem the Class C Preferred
Stock, in part or whole, at any time, upon payment of $1,000 per share of Class
C Preferred Stock. The Class C Shares and Seafish Warrants are exempt securities
under Section 3(9) of the Securities Act and the issuances of the Class C Shares
and Seafish Warrants were private transactions exempt from registration under
the Securities Act pursuant to Section 4(2) thereof.

On December 15, 1998, the Company also sold (the "Common Stock Sales
Transaction"), in accordance with Regulation D promulgated under the Securities
Act, an aggregate of 840,000 shares (the "Common Stock Sales Shares") of Common
Stock to a total of four accredited investors for aggregate proceeds of
$336,000. In connection with the

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<PAGE>

Common Stock Sales Transaction, the Company incurred expenses of
approximately $5,000. The issuances of the Common Stock Sales Shares were
private transactions exempt from registration under the Securities Act pursuant
to Section 4(2) thereof.

Pursuant to a Consulting Agreement between the Company and Target Capital
Corporation ("Target"), the Company retained Target to provide consulting
services to the Company for a five year period in consideration for (i) the
issuance of warrants (the "Target Warrants") to purchase 520,000 shares of
Common Stock, at an exercise price of $.75 per share, exercisable immediately
and expiring on December 16, 2005, (ii) the agreement to pay Target certain cash
consideration, including an amount equal to .30% of the Company's net revenue,
with a minimum of $125,000 per annum and a maximum of $250,000 per annum, and
(iii) the issuance to United Krasna Organizations of warrants (the "Krasna
Warrants") to purchase 120,000 shares of Common Stock, at an exercise price of
$.75 per share, exercisable immediately and expiring on December 16, 2005. The
issuances of the Target Warrants and Krasna Warrants were private transactions
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof.

Pursuant to a Consulting Agreement, between the Company and Michel
Ladovitch (the "European Consulting Agreement"), the Company retained Mr.
Ladovitch to provide public and investor relations consulting services to the
Company in the European Union and the United Kingdom for a five year period in
consideration for the issuance of warrants (the "European Warrant") to purchase
600,000 shares of Common Stock, at an exercise price of $.75 per share,
exercisable immediately with respect to 500,000 shares and commencing June 17,
1999, with respect to 100,000 shares, and all expiring on December 16, 2005. The
issuance of the European Consultant Warrant was a private transaction exempt
from registration under the Securities Act pursuant to Section 4(2) thereof.

Pursuant to a letter agreement, dated December 17, 1998, the Company issued
30,000 shares (the "Jaffe Shares") of Common Stock to Marc E. Jaffe, Chairman of
the Board of the Company, in payment of $22,500 of compensation due Mr. Jaffe.
The issuance of the Jaffe Shares was a private transaction exempt from
registration under Section 4(2) of the Securities Act.

Item 6. Management's Discussion and Analysis.

The following discussion should be read in conjunction with the historical
financial statements, including the notes thereto, of the Company included
elsewhere in this Annual Report on Form 10-KSB.

General

The Company makes and sells computer software products for both the United
States domestic and international markets. Most of these products are desktop
publishing, presentation graphics and graphics/drawing software for the
corporate, SOHO and consumer markets. Our products are intended to improve the
graphical appeal and overall effectiveness of documents and digital images
produced by either the Company's or third parties' desktop publishing, web
publishing, presentation graphics, e-mail, word processing and other similar
applications and products. We currently offer twenty-five products that operate
on the Windows 98, Windows 95, Windows NT(R), Windows(R) 3.1 and DOS operating
systems for IBM personal computers and compatibles. We also sell software
products together with certain computer hardware, such as "mouse pens," new
personal computers and digital cameras. We have established a multi-channel
distribution system utilizing direct mail, telemarketing, retail, corporate and
OEM sales channels and also disseminate our 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 sales force and
independent sales representatives. We estimate that approximately 84.0% of our
net sales for the 1998 Fiscal Year were generated through the Company's direct
sales and telemarketing efforts and 16.0% were generated through non-direct
channels.

North America and international net revenues for the 1998 Fiscal Year and
1997 Fiscal Year were as follows:

-25-
<PAGE>

Year Ended December 31,
---------------------------------------------
1998 1997
--------------------- --------------------
Amount % Amount %
----------- ----- ----------- -----
<S> <C> <C> <C> <C>
North America . . . . . . . . . $ 8,431,271 46.1 $ 8,770,684 51.1
International . . . . . . . . . 9,840,462 53.9 8,386,181 48.9
----------- ----- ----------- -----
Total . . . . . . . . . . . . . 18,271,733 100.0 $17,156,865 100.0
=========== ===== =========== =====
</TABLE>

In July 1996, we acquired Serif Inc. and Serif (Europe) Limited
(collectively, the "Serif companies"), which significantly expanded our product
line to include desktop publishing and drawing titles Serif PagePlus and Serif
DrawPlus, among others. In December 1996, we acquired all of the outstanding
capital stock of Software Publishing Corporation ("SPC"), as a result of which
our product line expanded further to include SPC's presentation graphics and
other visual communications and business productivity software products. We
continue to operate the Serif companies and SPC as wholly-owned subsidiaries.
Since January 1998, the operations of SPC have been significantly reduced.

We believe that in order to increase net revenues, we 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 to include strengthening our
marketing through e-commerce and the Internet. Any inability or delay in
executing these strategies, difficulties encountered in introducing new products
or marketing programs, or failures of our current and future products to compete
successfully with products offered by other vendors, could adversely affect our
performance. The Company's growth is expected to require increases in the number
of employees, expenditures for new product development and expansion of our
e-commerce and Internet sites, the acquisition of product rights, sales and
marketing expenses, and general and administrative expenses.

Results of Operations

1998 Compared to 1997

Net Sales. Net sales increased by approximately $1,115,000 or 6.5% to
$18,272,000 for the 1998 Fiscal Year from $17,157,000 for the 1997 Fiscal Year
primarily as a result of the introduction of several new software products,
expanded operations in Germany and sales of the Company's Go Digital Camera Pak,
which more than offset continued declining revenues from Harvard Graphics and
the Active line of products. The Company provided for returns in the

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<PAGE>

1998 Fiscal Year at 10% of gross sales compared to 5% in the 1997 Fiscal
Year as a result of selling hardware as well as software products in the 1998
Fiscal Year.

Cost of Goods Sold. In the 1998 Fiscal Year, cost of goods sold increased
by approximately $192,000, or 4.6% to $4,348,000 from $4,156,000 in the 1997
Fiscal Year, primarily as a result of increased unit sales and the inclusion of
higher costs associated with hardware sales. Cost of goods sold decreased as a
percentage of net sales to 23.8% for the 1998 Fiscal Year from 24.2% for the
1997 Fiscal Year, as a result of lower production costs resulting from greater
unit volume and increased multi-seat licenses, which more than offset higher
cost of goods associated with sales of more hardware products.

The Company's gross margins and operating income may be affected in
particular periods by the timing of product introductions and 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 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.

Costs of goods sold consists primarily of product costs, royalties and an
inventory allowance 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-ROMs and other media) and assembly.

Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses decreased by approximately $3,906,000, or
23.3%, to $12,842,000 for the 1998 Fiscal Year from $16,748,000 for the 1997
Fiscal Year, primarily as a result of the Company's restructuring efforts
effected in January 1998. SG&A expenses for the 1998 Fiscal Year include
$6,507,000 in marketing and administrative expenses, $4,522,000 in salary and
wage expense and $1,813,000 in general and administrative expense, compared to
$8,573,000 in marketing and administrative expenses, $5,913,000 in salary and
wage expense and $2,262,000 in general and administrative expense for the 1997
Fiscal Year.

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.

Product Development. Product development expenses decreased approximately
$1,961,000 or 60.8% to $1,266,000 for the 1998 Fiscal Year from $3,227,000 for
the 1997 Fiscal Year, primarily as a result of the substantial reduction in
operations of the Company's SPC subsidiary. The Company's product development
costs represents 6.9% of net sales for the 1998 Fiscal Year compared to 18.8%
for the 1997 Fiscal Year. The Company expects to increase its development
efforts in the future. However, the Company's long-term goal is to continue to
reduce product development costs as a percentage of net sales. All internally
generated development costs have been expensed in the period incurred. In
addition to the Company's intention to increase its development efforts in the
future, the Company also intends to continue to acquire externally developed
technology, explore strategic alliances and other methods of acquiring or
licensing technology and is considering lower cost development resources in
Asia. Because of the inherent uncertainties associated with software development
projects, there can be no assurance that the Company's research and development
efforts will result in successful product introductions or increased revenues or
profitability.

Amortization of Goodwill and Purchased Technology. In the 1998 Fiscal Year,
the Company incurred an expense of approximately $2,377,000 in respect of the
amortization of goodwill and purchased technology associated with acquisitions
of the Serif companies and SPC, a decrease of $189,000 or 7.4% from $2,566,000
in the 1997 Fiscal Year, primarily due to the restructurings of SPC operations
effectuated in 1997 and early 1998. The Company expects

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<PAGE>

to complete the amortization of purchased technology associated with the
Serif companies and SPC by the end of the fiscal year ending December 31, 1999.

Restructuring Expenses. In the 1997 Fiscal Year, the Company expensed
approximately $376,000 in charges related to the restructuring of its
operations. The expenses associated with this restructuring program, which was
substantially completed by February 1998, included employee severance
arrangements, the settlement and general release agreement with the Company's
former President and Chief Executive Officer, and costs relating to the
elimination of lease facilities in California. No similar expenses were incurred
in the 1998 Fiscal Year. See "Item 3.
Legal Proceedings."

Other Income. For the 1998 Fiscal Year, the Company received other income
of approximately $185,000, as compared to $196,000 for the 1997 Fiscal Year,
primarily as a result of lower cash balances.

Liquidity and Capital Resources

During the 1998 Fiscal Year, the Company's cash, cash equivalents and
marketable securities increased by approximately $637,000 to $3,398,000,
primarily as a result of the Company's receipt of proceeds of its sale of shares
of Common Stock during 1998 and the issuance of Class A Preferred Stock in
connection with the acquisition of 120,000 shares of X-Ceed Common Stock in
December 1998, offset in part by net cash used in operations of approximately
$1,497,000. In light of the stabilization of the Company's cash flow resulting
primarily from increased revenues and reduced selling, general and
administrative expenses, together with the Company's significantly improved
working capital position, the Company believes that its existing cash and cash
equivalents and cash generated from operations, if any, should be sufficient to
meet its currently anticipated liquidity and capital expenditure requirements
for at least through December 31, 1999. 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 has a letter of credit facility of $200,000 relating to certain lease
obligations. Serif (Europe) Limited has a letter of credit facility of
approximately $400,000, none of which was drawn upon as of December 31, 1998,
with its primary bank in the United Kingdom, which is secured by substantially
all of the assets of Serif (Europe) Limited. There can be no assurances that the
Company will be able to obtain additional financing, if at all, or that such
financing will be on terms acceptable to the Company. The Company is pursuing 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's operating activities for the 1998 Fiscal Year used cash of
approximately $1,497,000, compared to $2,777,000 in 1997, primarily related to
cash costs associated with implementing its 1997 restructuring which were
expended in 1998, expansion of the Company's European operations and expanded
product offerings, which more than offset the reductions in operating expenses
resulting from the Company's restructurings. The Company intends to continue to
utilize its working capital in 1999 for software and website development,
marketing and advertising, to finance the higher level of inventory necessary to
support the anticipated continued increase in sales and for capital
expenditures, including the purchase of computer equipment and software.
However, the Company's working capital requirements may change depending upon
numerous factors, including, without limitation, the need to finance the
licensing or acquisition of third party software as well as increased inventory
arising from the sale and shipment of new products.

For the 1998 Fiscal Year, approximately 53.9% of the Company's net sales
were generated outside the U.S., compared to 48.9% for the 1997 Fiscal Year. The
Company's exposure for foreign currency exchange gains and losses is partially
mitigated by the incurrence of operating expenses in most of the currencies in
which it invoices customers. As of December 31, 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 on the movement in
exchange rates.

In December 1998, the Company acquired 120,000 shares of X-Ceed Common
Stock (Nasdaq National Market Symbol: XCED). The Company has recorded the X-Ceed
Shares as marketable securities with a value of $1,020,000 at December 31, 1998.
As of March 19, 1999, the per share closing price of X-Ceed Common Stock was
$11.625.

-28-

<PAGE>

Net Operating Loss Carryforwards; Possible Tax Obligation

We estimate our consolidated tax net operating loss carryforwards to be
approximately $84 million at December 31, 1998, which expire in years 2002
through 2018, and our general business credit carryover to be approximately $1.5
million, which expires in years 2005 and 2006. These carryforwards are subject
to certain limitations described below. Under Section 382 of the Internal
Revenue Code of 1986, as amended (the "Code"), changes in the ownership or the
business of a corporation that has net operating loss carry forwards can result
in the inability to use or the imposition of significant restrictions on the use
of such net operating loss carry forwards to offset future income and tax
liability of such corporation. An "ownership change" may be deemed to have
occurred under Section 382 of the Code and the regulations thereunder with
respect to both the Company and SPC, and the use by the Company of these net
operating loss carry forwards will be limited. Utilization of the net operating
loss carry forwards of SPC may be further limited by reason of the consolidated
return/separate return limitation year rules. In addition, the SPC net operating
loss carry forwards are also subject to the additional limitation that such
losses can only be utilized to offset the separate taxable income of SPC. We
estimate the maximum utilization of such net operating loss carry forwards to be
approximately $1,200,000 per year for losses through December 31, 1996; losses
incurred thereafter can be fully utilized until expired under present
circumstances. There can be no assurance that we will be able to utilize all of
our net operating loss carry forwards. In addition, the foreign losses incurred
by SPC may decrease or otherwise restrict our ability to claim U.S. tax credits
for foreign income taxes.

We have applied for a closing agreement with the Internal Revenue Service
(the "IRS") pursuant to which we would become jointly and severally liable for
SPC's tax obligations upon occurrence of a "triggering event" requiring
recapture of dual consolidated losses previously utilized by SPC. Such closing
agreement would avoid SPC's being required to recognize a tax of approximately
$8 million on approximately $24.5 million of SPC's previous dual consolidated
losses. The IRS has, to date, refused to grant the Company's application for
such a closing agreement because of alleged deficiencies in SPC's
pre-acquisition dual loss certifications. The IRS has indicated that it will
consider alternative measures, which the Company presently is evaluating, to
correct these deficiencies and allow for such a closing agreement. While the
Company believes that the IRS should agree to such a closing agreement, no
assurance can be given that the IRS will do so and, absent extraordinary relief,
any failure to do so could result in the recognition of this tax liability.
Should such a closing agreement be obtained, in certain circumstances, a future
acquirer of the Company may also be required to agree to a similar closing
agreement in order to avoid the same tax liability, to the extent it is able to
do so. This could have a material adverse effect on our future ability to sell
SPC. The report of our auditors covering the December 31, 1998 consolidated
financial statements contains a paragraph emphasizing these dual consolidated
losses.

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 one year, computer
systems and software used by many companies may need to be upgraded to comply
with such "Year 2000" requirements. We are in the process of conducting a review
of issues related to our Year 2000 compliance. This review is intended to
determine the effect of the turn of the century on the operability of our
products, internal and external information technology ("IT") systems, non-IT
systems we utilize to conduct our business and other internal and external
processes which may impact our operations. In connection with this evaluation,
we also intend to review our vendors and suppliers for Year 2000 compliance and
to effect changes where necessary.

This review process is being conducted in three phases. The first phase
encompasses a review of all of our products, internal and external
systems/processes and vendors and suppliers for Year 2000 compliance. The second
phase is expected to correct all items identified as non-compliant and essential
to our operations. The third phase is contemplated to be a second review to
ensure year 2000 compliance and interoperability of all systems/processes.

We are conducting our review with our current resources and believe that we
have sufficient resources to complete the review process in a timely manner. We
have not determined, at this time, what total costs we will incur to conduct the
review process and to implement any necessary corrections. We identified one IT
system which we

-29-

<PAGE>

believe will need to be replaced. The Company has expended a total of
approximately $50,000 in its year 2000 compliance review and implementation
efforts through March 31, 1999, and anticipates additional expenditures of
approximately $25,000 to complete such review and implementation efforts.

We produce computer application software. We have determined that products
that we have developed within the last several years are Year 2000 compliant. We
are currently reviewing products sold by the Company prior to 1994 for Year 2000
compliance. We currently believe that we have no liability concerning any of our
products with respect to Year 2000 requirements.

We do not know, at this time, of any of our products, processes or systems,
which, if found to be non-Year 2000 compliant, would have any significant impact
on the Company. We are developing a contingency plan to address any failure of
our products, vendors or IT systems to be Year 2000 compliant.

Seasonality

The computer software market is characterized by significant seasonal
swings in demand, which typically peak in the fourth quarter of each calendar
year. The 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 pricing 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.

Item 7. Financial Statements.

Set forth below is a list of the financial statements of the Company
included in this Annual Report on Form 10-KSB.

Item Page*
- ---- -----
Independent Auditors' Reports. . . . . . . . . . . . . . . . . . . . . . . F-2
Balance Sheet at December 31, 1998 . . . . . . . . . . . . . . . . . . . . F-4
Statements of Operations for the years ended December 31, 1998 and 1997. . F-5
Statements of Stockholders' Equity for the years ended December 31, 1998
and 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Statements of Cash Flows for the years ended December 31, 1998 and 1997. . F-7
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . F-8
- ----------
* Page F-1 follows page 47 to this Annual Report on Form 10-KSB.

Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.

Not applicable.

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<PAGE>

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.

Officers and Directors

The current executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>

Director
Name Age Positions and Offices with the Company Since
- ---- --- -------------------------------------- --------
<S> <C> <C> <C>
Mark E. Leininger 48 President, Chief Operating Officer and Director 1996
Marc E. Jaffe, Esq. 47 Chairman of the Board of Directors and Secretary 1995
Norman W. Alexander 69 Director 1996
Neil M. Kaufman, Esq. 38 Director 1996
Martin F. Schacker 41 Director 1997

</TABLE>

Set forth below is a brief description of the background of the executive
officers and directors of the Company, based on information provided by them to
the Company.

Mark E. Leininger was Chief Financial Officer of the Company from July 1995
through December 1997, and has been the Chief Operating Officer and a director
of the Company since September 1996 and President of the Company since January
1998. From February 1994 through April 1995, Mr. Leininger was the President of
Phoenix Leasing Corporation, a passenger and cargo air carrier and aircraft
leasing company, which filed for bankruptcy protection in 1996. From February
1986 through February 1994, Mr. Leininger held various positions, including
Chief Financial Officer and Chief Operating Officer, with Mid Pacific Air
Corporation, a transportation and service company whose stock was traded on
NASDAQ. Mr. Leininger received an MBA from National University, San Diego,
California in 1979 and a BA from Miami University, Oxford, Ohio in 1972.

Marc E. Jaffe, Esq., has been a director of the Company since May 1995. In
January 1998, Mr. Jaffe was elected Chairman of the Board of Directors of the
Company, in which capacity he does not serve as the Company's chief executive
officer. From 1992 until the present time, Mr. Jaffe has been President of
Electronic Licensing Organization, Inc., which, from time to time, has acted as
the Company's agent in the acquisition of certain electronic publishing rights.
From November 1997 until the present time, Mr. Jaffe has been Chairman of the
Board of Ice Capital Corporation, an investment banking company. From 1988 to
1991, Mr. Jaffe was Executive Vice President of database management for Franklin
Electronic Publishers, a New York Stock Exchange company engaged in the business
of publishing electronic books on hand held media. From 1985 through 1987, Mr.
Jaffe was President of the software and video division of Simon & Schuster, a
publishing company. Mr. Jaffe received a JD degree from Columbia University
School of Law in 1976 and a BA from Columbia College in 1973.

Norman W. Alexander has been a director of the Company since October 1996.
Mr. Alexander is a retired director of Imperial Foods Ltd. ("Imperial"), a food
products company, and formerly was the chairman of several subsidiaries of
Imperial.

Neil M. Kaufman, Esq., has been a director of the Company since December
1996 and served as the Company's Secretary from December 1996 to December 1997.
Mr. Kaufman is currently a member of Kaufman & Moomjian, LLC, counsel to the
Company. From January 1997 to December 1997, Mr. Kaufman was a partner in
Moritt, Hock & Hamroff, LLP ("Moritt Hock"). For four years prior thereto, he
was a member of Blau, Kramer, Wactlar & Lieberman, P.C. ("Blau Kramer"). Prior
to his affiliation with Blau Kramer, Mr. Kaufman was associated with Lord Day &
Lord, Barrett Smith ("Lord Day"). Moritt Hock, Blau Kramer and Lord Day served
as counsel to the Company during the periods in which Mr. Kaufman was affiliated
or associated with such firms. Mr. Kaufman received a JD degree from New York
University School of Law in 1984 and a BA degree from SUNY Binghamton in 1981.

-31-

<PAGE>

Martin F. Schacker has been a director of the Company since December 1997.
Mr. Schacker also served as a director of the Company from August 1994 to
December 1995. From 1991 until the current time, Mr. Schacker has been Chairman
of M.S. Farrell & Co., Inc. ("MS Farrell"), a Wall Street investment banking and
brokerage firm which serves as one of the Company's investment bankers and acted
as the representative of the underwriters of the Company's 1995 initial public
offering. From 1987 through 1991, Mr. Schacker served as Senior Vice President
of investments and corporate finance of D.H. Blair & Company, Inc., an
investment banking and brokerage firm. Prior to that, Mr. Schacker served as
Senior Vice President of Shearson Lehman Brothers, a Wall Street investment
banking and brokerage firm. Mr. Schacker received a BA in Business from Hofstra
University in 1982. Mr. Schacker is a director of Innapharma, Inc., a Suffern,
New York-based biotechnology and contract research company.

The Company's Board of Directors is classified into three classes. The
directors in each class serve for three-year terms. Marc E. Jaffe currently is
the sole member of Class I, which serves until the Company's 2000 Annual Meeting
of Stockholders. Norman W. Alexander and Neil M. Kaufman are members of Class
II, which serves until the Company's 2001 Annual Meeting of Stockholders. Mark
E. Leininger and Martin F. Schacker are members of Class III, which serves until
the Company's 1999 Annual Meeting of Stockholders. Directors receive no cash
compensation for their services to the Company as directors, but are reimbursed
for expenses actually incurred in connection with attending meetings of the
Board of Directors. Members of the Board of Directors who are not employees of
the Company, of which there currently are three, are eligible to participate in
the Company's Outside Director and Advisor Stock Option Plan (the "OD&ASOP").
During 1998, the Board of Directors met thirteen times. All current directors of
the Company attended not less than 75% of such meetings of the Board and
committees thereof on which they serve.

The Audit Committee, which currently consists of Norman W. Alexander, Marc
E. Jaffe and Neil M. Kaufman, met three times during 1998. The Audit Committee
recommends engagement of the Company's independent certified public accountants,
and is primarily responsible for reviewing and approving the scope of the audit
and other services performed by the Company's independent certified public
accountants and for reviewing and evaluating the Company's accounting principles
and practices, systems of internal controls, quality of financial reporting and
accounting and financial staff, as well as any reports or recommendations issued
by the independent accountants.

The Compensation Committee, which currently consists of Norman W. Alexander
and Neil M. Kaufman, held one meeting during 1998. The Compensation Committee
generally reviews and approves of the Company's executive compensation and
currently administers all of the Company Stock Plans.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely upon a review of Forms 3, 4 and 5, and amendments thereto,
furnished to the Company, together with written representations received by the
Company from applicable parties that no Form 5 was required to be filed by such
parties, all parties subject to the reporting requirements of Section 16(a) of
the Exchange Act filed all such required reports during and with respect to the
1998 Fiscal Year, except that Kevin D. Sullivan was two days delinquent in
filing his Initial Statement of Beneficial Ownership of Securities on Form 3.

Item 10. Executive Compensation.

The following table sets forth, for the three years ended December 31,
1998, the cash and other compensation paid to all individuals serving as the
Company's Chief Executive Officer (or acting in a similar capacity) during the
1998 Fiscal Year and two other individuals who served as executive officers of
the Company during 1998 whose total compensation, for services rendered to the
Company during the 1998 Fiscal Year, was $100,000 or more (each, a "Named
Executive Officer").

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<PAGE>

Long-Term
Compensation
Annual Compensation Awards
-------------------------------- ------------
Securities All
Other Annual Underlying Other
Name and Principal Position Year Salary Bonus Compensation (1) Options Compensation
- --------------------------- ---- ------ ----- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mark E. Leininger, 1998 $ 145,000 -- -- 210,000 (2) --
President and Chief 1997 145,000 $ 39,737 -- 100,000 (3) --
Operating Officer, 1996 81,000 35,000 -- 75,000 --

Kevin D. Sullivan (4) 1998 $ 90,000 $ 24,868 -- 16,666 --
Vice President - Finance,
Chief Financial Officer
and Treasurer

Robert Gordon (5) 1998 $ 106,875 $ 12,782 -- -- $ 6,565 (6)
Vice President - 1997 75,100 28,521 -- 49,097 (7) --
Marketing and Sales 1996 26,809 35,085 -- 25,270 (8) --
- ----------
<FN>

(1) The value of all perquisites provided did not exceed the lesser of
$50,000 or 10% of the officer's salary and bonus.
(2) Does not include options to purchase 102,188 shares of Common Stock
repriced under the Company's 1998 repricing program. See "Repricing of
Options" below and "Item 12. Certain Relationships and Related
Transactions."
(3) Does not include options to purchase 181,666 shares of Common Stock
repriced and reduced to options to purchase 136,250 shares of Common Stock
under the 1997 Repricing Program. See "Repricing of Options" below and
"Item 12. Certain Relationships and Related Transactions."
(4) Mr. Sullivan's employment by the Company was terminated in January 1999.
(5) Mr. Gordon's employment by the Company was terminated in October 1998.
(6) Represents accrued vacation time paid in cash upon termination of
employment.
(7) Does not include options to purchase 42,345 shares of Common Stock repriced
under the Company's 1998 repricing program. See "Repricing of Options"
below.
(8) Does not include options to purchase 71,624 shares of Common Stock repriced
and reduced to options to repurchase 53,718 shares under the Company's 1997
Repricing Program. See "Repricing of Options" below.
</FN>
</TABLE>

Stock Option Grants in 1998

The following table sets forth the (a) number of shares underlying options
granted to each Named Executive Officer during the 1998 Fiscal Year, (b)
percentage that the grant represents of the total number of options granted to
all Company employees during the 1998 Fiscal Year, (c) per share exercise price
of each option and (d) expiration date of each option.
<TABLE>
<CAPTION>

Number of Shares Percentage of Total
Underlying Options Options Granted to Exercise Expiration
Name Granted During 1998 Employees in 1998 Price Date
- ---- ------------------- ------------------- -------- ----------
<S> <C> <C> <C> <C> <C>
Mark E. Leininger. . . . . 3,750 (1) 0.5 $ 1.375 7/16/08
Mark E. Leininger. . . . . 1,875 (1) 0.3 1.375 7/16/08
Mark E. Leininger. . . . . 13,125 (1) 1.8 1.375 7/16/08
Mark E. Leininger. . . . . 27,188 (1) 3.7 1.375 7/16/08
Mark E. Leininger. . . . . 56,250 (1) 7.6 1.375 7/16/08
Mark E. Leininger. . . . . 200,000 27.0 .78125 11/12/08
Mark E. Leininger. . . . . 10,000 1.3 .78125 11/12/08
Kevin D. Sullivan. . . . . 12,500 (1) 1.7 1.375 7/16/08
- ----------

-33-

<PAGE>

<FN>
(1) Represents repriced options.
</FN>
</TABLE>

Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values

Set forth in the table below is information, with respect to each of the
Named Executive Officers, as to the (a) number of shares acquired during the
1998 Fiscal Year upon each exercise of options granted to such individuals, (b)
the aggregate value realized upon each such exercise (i.e., the difference
between the market value of the shares at exercise and their exercise price),
(iii) the total number of unexercised options held on December 31, 1998,
separately identified between those exercisable and those not exercisable as of
such date, and (iv) the aggregate value of in-the-money, unexercised options
held on December 31, 1998, separately identified between those exercisable and
those not exercisable.

<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options
at December 31, 1998 at December 31, 1998
------------------------------ --------------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark E. Leininger . . . . . . -0- -0- 180,415 165,835 $ 38,542 $ 27,083
Kevin D. Sullivan . . . . . . -0- -0- 4,166 12,500 -0- -0-

</TABLE>

Employment Agreements

The Company has entered into an agreement with Mark E. Leininger (the
"Leininger Agreement"), which contains restrictions on the employee engaging in
competition with the Company for the term thereof and for up to one year
thereafter and provisions protecting the Company's proprietary rights and
information. The Leininger Agreement provides for the payment of three times the
average annual cash compensation paid by the Company to Mr. Leininger over the
previous five years, less $1.00, and the accelerated vesting of all outstanding
stock options granted to Mr. Leininger, upon the termination of his employment
within six months after a change in control or within six months prior thereto
if such termination was without cause. In October 1996, the Board of Directors
determined to pay to Mr. Leininger a bonus of $25,000 following the first
profitable fiscal quarter of the Company after the fourth quarter of 1996. This
bonus has not been paid.

On January 28, 1998, the Compensation Committee of the Board of Directors
of the Company determined to compensate Marc E. Jaffe for his services as
Chairman of the Board of Directors of the Company at the rate of $5,000 per
month, payable $2,500 in the month of service and $2,500 twelve months after
such initial payment. During 1998, the Company paid Mr. Jaffe $30,000 under this
arrangement and, pursuant to a letter agreement, dated December 17, 1998,
between the Company and Mr. Jaffe, the Company agreed to issue to Mr. Jaffe
30,000 shares of Common Stock in satisfaction of $22,500 of the Company's
obligations under such January 28, 1998 compensation arrangement. On January 13,
1999, the Compensation Committee of the Board of Directors of the Company
determined to compensate Marc E. Jaffe for his services as Chairman of the Board
of Directors of the Company for the 1999 calendar year at the rate of $5,000 per
month.

Company Stock Plans

1994 Long Term Incentive Plan

The Company has adopted the Company's 1994 Long Term Incentive Plan (the
"1994 Incentive Plan") in order to motivate qualified employees of the Company
to assist the Company in attracting employees and to align the interests of such
persons with those of the Company's stockholders. The 1994 Incentive Plan
provides for the grant of "incentive stock options" within the meaning of the
Section 422 of the Internal Revenue Code of 1986, as amended, "non-qualified
stock options," stock appreciation rights, restricted stock, performance grants
and other types of awards to officers, key employees, consultants and
independent contractors of the Company and its affiliates.

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<PAGE>

The 1994 Incentive Plan, which is administered by the Compensation
Committee of the Board of Directors (presently comprised of Norman W. Alexander
and Neil M. Kaufman), currently authorizes the issuance of a maximum of
1,333,333 shares of Common Stock (giving effect to the Reverse Stock Split),
which may be either newly issued shares, treasury shares, re-acquired shares,
shares purchased in the open market or any combination thereof. Incentive stock
options generally may be granted at an exercise price of not less than the fair
market value of shares of Common Stock on the date of grant, and non-qualified
stock options may be granted at an exercise price of not less than 85% of such
fair market value. If any award under the 1994 Incentive Plan terminates,
expires unexercised or is canceled, the shares of Common Stock that would
otherwise have been issuable pursuant thereto will be available for issuance
pursuant to the grant of new awards. The Company has issued an aggregate 1,666
(giving effect to the Reverse Stock Split) shares of Common Stock upon exercise
of options granted under the 1994 Incentive Plan, and, as of March 26, 1999,
options to purchase an aggregate 1,325,867 shares of are outstanding and 5,800
shares remain available for issuance under the 1994 Incentive Plan. The 1994
Incentive Plan expires in December 2003.

Outside Director and Advisor Stock Option Plan

The Company adopted the Outside Director and Advisor Stock Option Plan (the
"Director and Advisor Plan") for the purpose of attracting and retaining
well-qualified persons to serve as directors of and advisors to the Company and
to provide such persons with the opportunity to increase their personal interest
in the Company's continued success and further align their interests with the
interests of the stockholders of the Company through the grant of options to
purchase shares of Common Stock. All directors of the Company who are not
employees of the Company (each, a "Non-Employee Director"), of which there are
presently three, are eligible to participate in the Director and Advisor Plan.
Currently, up to 166,666 shares (giving effect to the Reverse Stock Split) of
Common Stock may be issued under the Director and Advisor Plan.

Under the Director and Advisor Plan, each Non-Employee Director of the
Company, upon first becoming a director of the Company, receives options to
purchase 8,333 (giving effect to the Reverse Stock Split) shares of Common Stock
at a price equal to the fair market value of the Common Stock on the date of
grant and thereafter receives options to purchase 3,333 (giving effect to the
Reverse Stock Split) shares of Common Stock at a price equal to the per share
fair market value of the Common Stock on August 1st of each subsequent year. In
March 1997, the Advisory Committee was eliminated. Options awarded to each
Non-Employee Director become exercisable over a period of two years, and are
subject to forfeiture under certain conditions. The Company has issued an
aggregate 6,556 shares (giving effect to the Reverse Stock Split) of Common
Stock upon exercise of options granted under the Director and Advisor Plan, and,
as of March 26, 1999, options to purchase an aggregate 123,439 shares (giving
effect to the Reverse Stock Split) are outstanding and options to purchase
36,672 shares remain available for grant under the Director and Advisor Plan.
The Director and Advisor Plan expires in December 2005.

SPC 1989 Stock Plan

In connection with the Merger, the Company assumed all of SPC's obligations
under SPC's 1989 Stock Plan (the "SPC 1989 Plan"). The SPC 1989 Plan remains
effective and the Company may, until the SPC 1989 Plan terminates in accordance
with its terms, at its discretion, grant additional options under the SPC 1989
Plan.

The SPC 1989 Plan provides for the grant of incentive stock options,
non-qualified stock options, stock appreciation rights, stock purchase rights,
incentive stock rights, performance grants and other types of awards to
officers, key employees, consultants and independent contractors of SPC and the
Company. The SPC 1989 Plan, which is administered by the Compensation Committee
of the Board of Directors, currently authorizes the issuance of a maximum of
89,350 shares (giving effect to the Reverse Stock Split) of Common Stock, which
may be either newly issued shares, treasury shares, re-acquired shares, shares
purchased in the open market or any combination thereof. Incentive stock options
generally may be granted at an exercise price of not less than the fair market
value of shares of Common Stock on the date of grant; non-qualified stock
options may be granted at an exercise price of not less than 50% of such fair
market value; incentive stock rights permit the rightsholder to receive cash or
shares of Common Stock based upon the Company or the rightsholder obtaining
results specified at the time of the granting of such rights; stock appreciation
rights (which may be granted in connection with an option grant or as a separate
grant) entitles the grantee to receive a cash payment based upon the yield of
the Common Stock between grant and exercise; stock purchase rights

-35-

<PAGE>

entitle the rightsholder to purchase shares of Common Stock at a price of
not less than 50% of the fair market price of such shares with the Company
retaining a diminishing right to repurchase such shares over a specified period
should the rightsholder's relationship with the Company terminate; and long term
performance awards allow the Company to customize incentive award programs to
permit the awarding of cash or Common Stock upon the Company or grantee
researching specified levels of performance. If any award under the SPC 1989
Plan terminates, expires unexercised, or is canceled, the shares of Common Stock
that would otherwise have been issuable pursuant thereto will be available for
issuance pursuant to the grant of new awards. The equivalent of 4,616 shares
(giving effect to the Reverse Stock Split) of Common Stock have been issued upon
exercise of options granted under the SPC 1989 Plan, and, as of March 26, 1999,
options to purchase an aggregate 80,435 shares are outstanding and 4,299 shares
remain available for issuance under the SPC 1989 Plan. The SPC 1989 Plan will
terminate in October 1999.

SPC 1991 Stock Option Plan

In connection with the Merger, the Company assumed all of SPC's obligations
under SPC's 1991 Stock Option Plan (the "SPC 1991 Plan"). The SPC 1991 Plan
remains effective and the Company may, until the SPC 1991 Plan terminates in
accordance with its terms, at its discretion, grant additional options under the
SPC 1991 Plan.

The SPC 1991 Plan provides for the grant of incentive stock options,
non-qualified stock options and stock purchase rights to officers, key
employees, consultants and independent contractors of SPC and the Company. The
SPC 1991 Plan, which is administered by the Compensation Committee of the Board
of Directors, currently authorizes the issuance of a maximum of 142,960 shares
of Common Stock, which may be either newly issued shares, treasury shares,
re-acquired shares, shares purchased in the open market or any combination
thereof. Incentive stock options generally may be granted at an exercise price
of not less than the fair market value of shares of Common Stock on the date of
grant; non-qualified stock options may be granted at an exercise price of not
less than 85% of such fair market value; and stock purchase rights entitle the
rightsholder to purchase shares of Common Stock at a price of not less than 85%
of the fair market price of such shares with the Company retaining a diminishing
right to repurchase such shares over a specified period should the
rightsholder's relationship with the Company terminate. If any award under the
SPC 1991 Plan terminates, expires unexercised, or is canceled, the shares of
Common Stock that would otherwise have been issuable pursuant thereto will be
available for issuance pursuant to the grant of new awards. The equivalent of
355 shares of Common Stock have been issued upon exercise of options granted
under the SPC 1991 Plan, and, as of March 26, 1999, the Company has options to
purchase an aggregate 142,605 shares of Common Stock outstanding and no shares
remain available for issuance under the SPC 1991 Plan. The SPC 1991 Plan will
terminate in October 2001.

Repricing of Options

On August 29, 1997, the Board of Directors approved the 1997 Repricing
Program pursuant to which the Company has offered to all then-current officers,
directors and employees of the Company the opportunity to reduce the exercise
price of their respective options granted under the Company Stock Plans to $3.75
per share (giving effect to the Reverse Stock Split) of Common Stock (the fair
market value of the Common Stock as of the close of business on such date);
provided, that, as a condition to such repricing, the optionee is required to
surrender for cancellation 25% of the options so repriced, which would in all
cases be the latest options to become exercisable under each repriced option.
Except for such cancellation provision, each repriced option would be identical
to the optionee's prior option, except that, during the six-month period
commencing from the date of the acceptance of the repricing offer, the options
would not be exercisable.

Effective July 17, 1998, the Company adopted a repricing program (the "1998
Repricing Program") pursuant to which (a) the Company offered to each optionee
(each, an "Eligible Optionee") granted one or more options under any of the
Plans who, as of July 17, 1998, was either an employee or a director of the
Company, the right to exchange each outstanding option (each, an "Eligible
Option") granted to such Eligible Optionee under the Company's 1994 Long Term
Incentive Plan (the "1994 Plan"), Outside Director and Advisor Option Plan (the
"OD&ASOP"), Software Publishing Corporation 1989 Stock Plan (the "SPC 1989
Plan") and Software Publishing Corporation 1991 Stock Option Plan (the "SPC 1991
Plan" and, collectively with the 1994 Plan, OD&ASOP, SPC 1989 Plan and SPC 1991
Plan, the "Company Stock Plans"), for the issuance of two options (collectively,
the "Repriced Options"), the first such option (the "New Option") entitling the
Eligible Optionee to purchase up to 75% of the number of shares of the common

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<PAGE>

stock, par value $.001 per share (the "Common Stock"), of the Company, that were
issuable under the Eligible Option so exchanged, at an exercise price per share
equal to $1.375, the closing per share price on July 17, 1998, as reported by
The Nasdaq Stock Market, Inc., and the second such option (the "Non-Repriced
Option") entitling such Eligible Optionee to purchase up to 25% of the number of
shares of Common Stock that were issuable under the Eligible Option so
exchanged, at an exercise price per share equal to the exercise price per share
under the Eligible Option so exchanged. To the extent the Eligible Option so
exchanged was exercisable as of July 17, 1998, the Non-Repriced Option shall be
exercisable and, where the number of shares exercisable under the Eligible
Option so exchanged as of July 17, 1998 exceeded the number of shares issuable
under the Non-Repriced Option, any such options shall be immediately exercisable
under the New Option. Further, to the extent the Eligible Option so exchanged
was not exercisable as of July 17, 1998, the Non-Repriced Option shall first
become exercisable in accordance with the earliest dates set forth in the
Eligible Option so exchanged for the exercisability of shares issuable under the
Eligible Option so exchanged, and the shares of Common Stock issuable under the
New Option shall become exercisable (i) on July 17, 1999, with respect to 25% of
the total number of shares of Common Stock issuable under the New Option, (ii)
on July 17, 2000, with respect to an additional 25% of the total number of
shares of Common Stock issuable under the New Option, (iii) on July 17, 2001,
with respect to an additional 25% of the total number of shares of Common Stock
issuable under the New Option, and (iv) on July 17, 2002, with respect to the
final 25% of the total number of shares of Common Stock issuable under the New
Option. In addition, each New Option shall have a term expiring at the close of
business on July 16, 2008 and shall be deemed granted under such of the Plans
under which the Eligible Option was originally granted and the Non-Repriced
Option shall be deemed granted under such of the Plans under which the Eligible
Option was originally granted. Except as otherwise noted, each of the Repriced
Options shall otherwise be identical to the Eligible Option so exchanged.

The creation of the 1997 Repricing Program and 1998 Repricing Program was
approved primarily because of the importance to the Company of having meaningful
equity incentives in the hands of key officers, directors and employees. The
Board and Compensation Committee believed that stock options which are "out of
the money" provide less compensatory incentive to an officer, director and
employee who may be considering alternative opportunities. The six month period
during which the repriced options were not exercisable under the 1997 Repricing
Program was viewed as a means of retaining the services of valued employees for
a longer period of time. The Board and Committee decided to include directors
and officers in the 1997 Repricing Program and 1998 Repricing Program because of
the importance of their leadership, administrative and technical skills to the
success of the Company's business. See "Item 12. Certain Relationships and
Related Transactions."

Indemnification

Section 145 of the Delaware General Corporation Law provides that
indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, may be provided by such
corporation.

The Company's Certificate of Incorporation includes provisions eliminating
the personal liability of its directors for monetary damages resulting from
breaches of their fiduciary duty except, pursuant to the limitations of the
Delaware General Corporation Law, (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or any
amendatory or successor provisions thereto, or (iv) with respect to any
transaction from which the director derived an improper personal benefit. The
Company's By-laws provide indemnification to directors, officers, employees and
agents, including against claims brought under state or Federal securities laws,
to the full extent allowable under Delaware law. The Company also has entered
into indemnification agreements with its directors and executive officers
providing, among other things, that the Company will provide defense costs
against any such claim, subject to reimbursement in certain events. The Company
also maintains a directors and officers liability insurance policy in a coverage
amount of $3,000,000, subject to a $200,000 deductible.

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<PAGE>

Item 11. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth the beneficial ownership of shares of voting
stock of the Company, as of March 26, 1999, of (i) each person known by the
Company to beneficially own 5% or more of the shares of outstanding Common Stock
based on filings with the SEC and certain other information, (ii) each of the
Company's executive officers and directors and (iii) all of the Company's
executive officers and directors as a group. Except as otherwise indicated, all
shares are beneficially owned, and investment and voting power is held by, the
persons named as owners.

<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Common Stock Percentage Ownership
Beneficial Owner (1) Beneficial Owned (2) of Common Stock (3)
- -------------------- -------------------- --------------------
<S> <C> <C> <C>
Regency Investment Partners . . . . . . 500,000 (4) 8.7
Shelly and Elliot Loewenstern . . . . . 332,499 (5) 6.2
Howard Milstein . . . . . . . . . . . . 296,333 (6) 5.6
Martin F. Schacker. . . . . . . . . . . 256,432 (7) 4.8
Mark E. Leininger . . . . . . . . . . . 210,414 (8) 3.8
Marc E. Jaffe . . . . . . . . . . . . . 191,803 (9) 3.6
Norman W. Alexander . . . . . . . . . . 87,079 (10) 1.6
Neil M. Kaufman . . . . . . . . . . . . 61,458 (11) 1.2

All officers and directors as
a group (5 persons). . . . . 807,185 (12) 13.8
- ----------
* Less than 1.0%.

<FN>
(1) Unless otherwise indicated, the address for each beneficial owner
listed in the table is Software Publishing Corporation Holdings, Inc., 3A
Oak Road, Fairfield, New Jersey 07004.

(2) Unless otherwise indicated, the Company believes that all persons named
in the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them. A person is deemed to be
the beneficial owner of securities which may be acquired by such person
within 60 days from the date on which beneficial ownership is to be
determined upon the exercise of options, warrants or convertible
securities.

(3) Each beneficial owner's percentage ownership is determined by assuming
that stock options and warrants that are held by such person (but not those
held by any other person) and which are exercisable within 60 days from the
date on which beneficial ownership is to be determined have been exercised.

(4) Represents 500,000 shares of Common Stock issuable upon exercise of
warrants held by Regency Investment Partners ("Regency") which are
exercisable within the next 60 days. Does not include 100,000 shares of
Common Stock issuable upon exercise of warrants held by Regency which are
not exercisable within the next 60 days.

(5) Represents (a) 228,333 shares of Common Stock owned of record by The
Whitehaven Group, LLC ("Whitehaven"), which is owned by Mr. and Ms.
Loewenstern as joint tenants by the entirety, (b) 83,333 shares of Common
Stock issuable upon exercise of warrants owned of record by Whitehaven
which is exercisable within the next 60 days and (c) 20,833 shares of
Common Stock owned by The Loewenstern Family Partnership, L.P., of which
Mr. Loewenstern is the general partner.

(6) Represents (a) 288,333 shares of Common Stock registered in the name of
Howard Milstein ("H. Milstein") and (b) 8,000 shares registered in the name
of Ronald L. Altman ("Altman"). Does not include an option (the "Altman
Option") to purchase 32,033 shares of Common Stock (the "Altman Option
Shares") granted to Altman which is not exercisable within the next 60
days. According to a Schedule 13D filed by H. Milstein, Altman, Michael
Jesselson ("Jesselson") and Edward Milstein ("E. Milstein" and,
collectively with H.

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<PAGE>

Milstein, Altman, and Jesselson, the "Milstein Group"), the individuals
comprising the Milstein Group have entered into an agreement, dated as of
October 23, 1997 (the "Milstein Group Agreement"), which provides that
(a) H. Milstein and E. Milstein each have a 25% beneficial interest
in the aggregate 296,333 shares of Common Stock (the "Milstein Group
Shares") registered in the names of H. Milstein and Altman, and Jesselson
has a 50% beneficial interest in the Milstein Group Shares, (b) Altman
has a 15% interest in the net profits or losses to the others
collectively resulting from the sale of the Milstein Group Shares and (c)
H. Milstein has the sole voting power and dispositive power with regard to
all of the Milstein Group Shares. The Milstein Group Agreement also appears
to provide that (a) in the event of the sale of the Altman Option, Altman
shall receive 50% of the net proceeds thereof (taking into account any
sales, commissions or related fees) and the balance of the net proceeds
shall be divided among H. Milstein, E. Milstein and Jesselson in the
proportion of 25%, 25% and 50%, respectively, (b) if the Altman Option is
exercised and the Altman Option Shares are subsequently sold, Altman shall
receive 50% of the net proceeds thereof (after taking into account the
payment of the exercise price and any costs of disposing of the Altman
Option Shares) and the balance of such net proceeds shall be divided among
H. Milstein, E. Milstein and Jesselson in the proportion of 25%, 25% and
50%, respectively, and (c) H. Milstein has the sole power to dispose,
transfer and vote the Altman Option Shares and to exercise, dispose or
transfer the Altman Option. The address for Howard Milstein is c/o Douglas
Elliman, 575 Madison Avenue, New York, New York 10022. See "Legal
Proceedings."

(7) Represents (a) 27,294 shares (subject to adjustment) of Common Stock
issuable upon exercise of warrants owned by Mr. Schacker which are
exercisable within the next 60 days, (b) 14,443 shares (subject to
adjustment) of Common Stock issuable upon exercise of options granted to
Mr. Schacker under the Company Stock Plans which are exercisable within the
next 60 days, (c) 5,100 shares of Common Stock owned of record by MS
Farrell, of which Mr. Schacker is Chairman of the Board and the controlling
person, (d) 20,809 shares of Common Stock owned of record by M.S. Farrell
Holdings, Inc. ("MSF Holdings"), of which Mr. Schacker is Chairman of the
Board and the controlling person, (e) 23,414 shares of Common Stock
issuable upon exercise of Underwriter's Purchase Options ("UPOs") granted
to MS Farrell in connection with the Company's 1995 initial public
offering, (f) 63,872 shares (subject to adjustment) of Common Stock
issuable upon exercise of warrants owned by MSF Holdings which are
exercisable within the next 60 days, and (g) 101,500 shares (the
"Associated Shares") of Common Stock owned of record by Associated Candy &
Nut Corp. ("Associated"), of which Mr. Schacker is a director. Mr.
Schacker disclaims beneficial ownership of the Associated Shares. Does
not include (a) 28,889 shares of Common Stock issuable upon exercise of
options granted to Mr. Schacker under the Company Stock Plans which are
not exercisable within the next 60 days or (b) 106,008 shares (subject to
adjustment) of Common Stock issuable upon exercise of UPOs and warrants
originally granted to MS Farrell which currently are owned by
stockholders, directors, managing directors and executive officers of
MS Farrell and MSF Holdings and others. The address for Mr. Schacker is
c/o MS Farrell, 67 Wall Street, New York, New York 10005.

(8) Represents (a) 3,333 shares of Common Stock held by Mr. Leininger and
his spouse as joint tenants and (b) 207,081 shares of Common Stock issuable
upon exercise of options granted to Mr. Leininger under the Company Stock
Plans which are exercisable within the next 60 days. Does not include
219,169 shares of Common Stock issuable upon exercise of options granted to
Mr. Leininger under the Company Stock Plans which are not exercisable
within the next 60 days.

(9) Includes 138,470 shares of Common Stock issuable upon exercise of
options granted to Mr. Jaffe under the Company Stock Plans which are
exercisable within the next 60 days. Does not include 99,029 shares of
Common Stock issuable upon exercise of options granted to Mr. Jaffe under
the Company Stock Plans which are not exercisable within the next 60 days.
The address for Mr. Jaffe is c/o Electronic Licensing Organization, 386
Park Avenue South, Suite 1900, New York, New York 10016.

(10) Includes (a) 8,333 shares of Common Stock owned of record by Mr.
Alexander's spouse and (b) 47,776 shares of Common Stock issuable upon
exercise of options granted Mr. Alexander under the Company Stock
Plans which are exercisable within the next 60 days. Does not include
84,307 shares of Common Stock issuable upon exercise of options granted
to Mr. Alexander under the Company Stock Plans which are not exercisable

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<PAGE>

within the next 60 days. The address for Mr. Alexander is Burnside, Church
Walk, Marholm, Peterborough, PE 67H2 England.

(11) Includes 42,220 shares of Common Stock issuable upon exercise of
options granted to Mr. Kaufman under the Company Stock Plans which are
exercisable within the next 60 days. Does not include options to purchase
62,780 shares of Common Stock granted to Mr. Kaufman under the Company
Stock Plans which are not exercisable within the next 60 days. The address
for Mr. Kaufman is c/o Kaufman & Moomjian, LLC, 50 Charles Lindbergh
Boulevard, Suite 206, Mitchel Field, New York 11553.

(12) Includes an aggregate 564,570 shares of Common Stock issuable upon
exercise of the options and warrants discussed in notes (7) through (11)
above which are exercisable within the next 60 days.
</FN>
</TABLE>

Item 12. Certain Relationships and Related Transactions.

Martin F. Schacker, a director of the Company, is Chairman of the Board of
Directors of MS Farrell and MSF Holdings, the parent holding company of MS
Farrell. MS Farrell acted as placement agent on behalf of the Company in selling
an aggregate of 1,115,250 shares of Class A Convertible Preferred Stock of the
Company in June 1994 and an additional 75,000 shares of Class A Convertible
Preferred Stock in November 1994 for aggregate gross proceeds of $1,190,250. In
consideration for its services in connection therewith, MS Farrell received a
10% commission and a 3% non-accountable expense allowance on the gross proceeds
of such offering, a warrant which became exercisable for an aggregate of 100,784
shares (giving effect to the Reverse Stock Split) of Common Stock which MS
Farrell exercised in full for nominal consideration, and certain other
consideration. As a result of such warrant exercise, MS Farrell became a holder
of more than 5% of the outstanding Common Stock. MS Farrell also acted as
placement agent on behalf of the Company in selling an aggregate of $1,250,000
principal amount of promissory notes and 81,300 shares (giving effect to the
Reverse Stock Split) of Common Stock in August 1995. In connection with its
services therewith, MS Farrell received a 10% commission and a 3%
non-accountable expense allowance on the gross proceeds of such offering. A
$100,000 loan from MS Farrell to the Company was repaid from the Company's
proceeds of such offering. MS Farrell acted as representative of the
underwriters of the Company's initial public offering (the "IPO"), which was
consummated on December 12, 1995, pursuant to which the Company sold an
aggregate 380,800 shares (giving effect to the Reverse Stock Split) of Common
Stock for gross proceeds of $5,854,800. As compensation for its underwriting
services in connection with the IPO, MS Farrell received a 10% underwriting
discount and a 3% non-accountable expense allowance of the gross proceeds from
the IPO and UPOs to purchase 34,433 shares (giving effect to the Reverse Stock
Split) of Common Stock at $18.45 per share (giving effect to the Reverse Stock
Split) for a four year period terminating on December 5, 2000.

Pursuant to an engagement agreement, dated December 23, 1993, between the
Company and MS Farrell, the Company agreed (a) to use MS Farrell as its
exclusive investment banker for a five-year period, (b) to pay monthly
consulting fees to MS Farrell of $2,500 until December 1998, in connection with
which the Company paid MS Farrell $138,128 through August 20, 1996, and (c) to
pay to MS Farrell a fee of 2% of the greater of the maximum commitment under, or
the maximum amount actually borrowed by the Company pursuant to, a conventional
line of credit extended to the Company by a bank or other short-term lender
introduced to the Company by MS Farrell. The Company had the right to terminate
the above-described obligations under this engagement agreement upon the payment
of $250,000 in cash. In August 1996, in exchange for the right to pay such
termination fee in shares of Common Stock, the suspension of payment of
obligations under this engagement agreement and certain other consideration, the
Company granted to MS Farrell and a designee thereof warrants (the "MSF
Warrants") to purchase 166,666 shares (giving effect to the Reverse Stock Split)
of Common Stock exercisable at $20.625 per share (giving effect to the Reverse
Stock Split) for a six-year period and extended the expiration date of the UPOs
to August 22, 2002. In March 1997, the Company exercised its right to terminate
the Company's investment banking obligations to MS Farrell and, in connection
therewith, issued an aggregate of 23,809 shares (giving effect to the Reverse
Stock Split) of Common Stock to MSF Holdings, the parent holding company of MS
Farrell, and to one other designee thereof.

In June 1996, the Company loaned $200,000 to Associated. Martin F.
Schacker, a director of the Company and Chairman of the Board of MS Farrell, is
a director and stockholder and Neil M. Kaufman, a director of the

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<PAGE>

Company, is a stockholder of Associated. This loan was represented by a
promissory note (the "Associated Note"), bearing interest at 14% per annum and
secured by the assets of Associated. In connection with this loan, the Company
also received a warrant (the "Innapharma Warrant") to purchase 100,000 shares of
the common stock of Innapharma, Inc., a pharmaceutical company ("Innapharma"),
of which MS Farrell may also be considered an affiliate and of which Mr.
Schacker is a director, at an exercise price of $5.50 per share. In March 1997,
in consideration for a warrant (the "Associated Warrant") to purchase 100,000
shares of the common stock of Associated at an exercise price of $1.00 per
share, exercisable for a six year period, the Company agreed to extend the
maturity of the Associated Note and the Company further agreed to exchange the
Associated Note for a similar note (the "Innapharma Note") bearing interest at
12% per annum issued by Innapharma maturing on the earlier of November 27, 1997
or the consummation of an offering of equity securities of Innapharma. In July,
1997, the Innapharma Note was repaid in full (including all accrued interest
thereon) and contemporaneously therewith, the Company assigned the Innapharma
Warrant to MS Farrell in exchange for a reduction in the number of shares of
Common Stock that may be purchased under the MS Farrell Warrants by 33,333
shares (giving effect to the Reverse Stock Split).

Pursuant to a Financial Advisory Agreement, dated as of November 20, 1997
(the "1997 Farrell Agreement"), between the Company and MS Farrell, the Company
retained MS Farrell to perform specified financial advisory services for the
Company on a non-exclusive basis. In consideration for entering into the 1997
Farrell Agreement, the number of shares of Common Stock that may be purchased
upon exercise of the MS Farrell Warrants was reduced by 20,000 to 113,333 shares
(giving effect to the Reverse Stock Split), the number of shares of Common Stock
that may be purchased upon exercise of the UPOs was reduced by 5,165 to 29,268
shares (giving effect to the Reverse Stock Split), the exercise price of both
the MS Farrell Warrants and Underwriters' Purchase Options was reduced to $6.00
per share (giving effect to the Reverse Stock Split) and MS Farrell waived all
anti-dilutive rights under the UPOs and MS Farrell Warrants in connection with
the Company's October 1997 sale of 320,666 shares (giving effect to the Reverse
Stock Split) of Common Stock in a private placement transaction. Under the 1997
Farrell Agreement, the Company is obligated to pay MS Farrell between 2% and 7%
of the aggregate consideration paid in any merger, consolidation,
recapitalization, business combination or other stock or asset transaction in
which MS Farrell participates as an identifying or introducing agent or in
connection with which the Company seeks the advice of MS Farrell. Pursuant to an
Amendment to the Financial Advisory Agreement, dated January 28, 1998 (the "1998
Farrell Agreement"), between the Company and MS Farrell, MS Farrell agreed to
perform additional financial advisory services for the Company. In consideration
for entering into the 1998 Farrell Agreement, the per share exercise price of
the MS Farrell Warrants and UPOs was reduced to the lesser of: $3.81 (giving
effect to the Reverse Stock Split) or 120% of the sale price of any shares of
Common Stock sold by the Company to a source introduced by MS Farrell within the
twelve-month period terminating on January 27, 1999; provided, however, that the
per share exercise price may not be less than $3.18 (giving effect to the
Reverse Stock Split); and the expiration date of the MS Farrell Warrants and
UPOs was extended to August 20, 2002. Giving effect to the anti-dilutive
provisions of the MS Farrell Warrants, the MS Farrell Warrants entitle the
holders thereof to purchase an aggregate of 191,321 shares of Common Stock at
$2.1384 per share.

In connection with the Company's private placement (the "May 1998 Private
Placement") consummated in May 1998, MS Farrell was paid a fee of $11,700 with
respect to the sale of an aggregate 129,999 shares (giving effect to the Reverse
Stock Split) of Common Stock to two individuals.

The following directors and executive officers purchased shares of Common
Stock in the May 1998 Private Placement, each at $1.20 per share.

Name Number of Shares
---- ----------------
<S> <C>
Norman W. Alexander (1). . . . . 8,333
Marc E. Jaffe. . . . . . . . . . 23,333
Mark E. Leininger (2). . . . . . 3,333
- ----------
<FN>
(1) Mr. Alexander's spouse also purchased 8,333 shares of Common Stock in the May 1998 Private Placement.
(2) Purchased with spouse as joint tenants.
</FN>
</TABLE>

During 1997, the Company incurred approximately $480,000 in legal fees to
Moritt Hock, then its counsel. Neil M. Kaufman, a director of the Company, was a
partner in Moritt Hock during 1997. Mr. Kaufman currently is a

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<PAGE>

member of Kaufman & Moomjian, LLC, counsel to the Company (together with
its predecessors, "K & M"). During 1997, the Company incurred approximately
$55,000 in legal fees to K & M. During 1998, the Company incurred approximately
$390,000 in legal fees to K & M. In May 1998, K & M was issued 11,904 shares of
Common Stock in partial satisfaction of outstanding legal fees equal in amount
to the market value of such shares, and these shares have been assigned to Mr.
Kaufman. In 1997 and 1998, Moritt Hock and K & M acted as counsel to MS Farrell
in connection with four private placement transactions, two of which
transactions involved Innapharma, Inc. ("Innapharma"), and certain other
matters, and also acted as counsel to Associated. Martin F. Schacker, a director
of the Company, is Chairman of the Board of MS Farrell and a director of
Innapharma and Associated; and MS Farrell may also be considered an affiliate of
Innapharma and Associated.

With respect to compensation paid to Mark E. Leininger in his capacity as
an employee of the Company, see "Item 10. Executive Compensation." On January
13, 1999, the Compensation Committee of the Board of Directors of the Company
fixed the 1999 base salary of Mr. Leininger at $162,500.

In connection with the 1997 Repricing Program, options held by directors
and executive officers granted under the Company Stock Plans were repriced as
follows:
<TABLE>
<CAPTION>

Prior Option (1) Repriced Option (2)
------------------------------- -------------------
Shares Per Share Shares
Underlying Exercise Underlying Exercise
Optionee Option Price Option (1) Date
- -------- ------ ----- ---------- ----
<S> <C> <C> <C> <C>
Norman W. Alexander . . . . 8,333 $ 15.09 6,250 12/19/06
Norman W. Alexander . . . . 3,333 6.0375 2,500 7/31/07
Marc E. Jaffe . . . . . . . 1,666 7.50 1,250 10/31/04
Marc E. Jaffe . . . . . . . 8,333 8.25 6,250 8/2/05
Marc E. Jaffe . . . . . . . 3,333 17.625 2,500 7/31/06
Marc E. Jaffe . . . . . . . 3,333 6.0375 2,500 7/31/07
Neil M. Kaufman . . . . . . 8,333 8.25 6,250 4/24/06
Neil M. Kaufman . . . . . . 8,333 15.09 6,250 12/19/06
Neil M. Kaufman . . . . . . 8,333 6.0375 2,500 7/31/07
Mark E. Leininger . . . . . 6,666 11.25 5,000 7/20/05
Mark E. Leininger . . . . . 3,333 12.75 2,500 2/19/06
Mark E. Leininger . . . . . 23,333 8.25 17,500 4/24/06
Mark E. Leininger . . . . . 48,333 22.68 36,250 9/28/06
Mark E. Leininger . . . . . 100,000 10.29 75,000 2/4/07
- ---------
<FN>
(1) Gives effect to the Reverse Stock Split
(2) The exercise price of all options were repriced to $3.75 per share (giving effect to the Reverse Stock Split).
</FN>
</TABLE>

In connection with the 1998 Repricing Program, the following options held
by directors and executive officers granted under the Company Stock Plans were
repriced each to an exercise price of $1.375 per share with a termination date
of July 16, 2008:

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Shares Underlying Original Original
Optionee Original Option Exercise Price Termination Date
- -------- --------------- -------------- ----------------
<S> <C> <C> <C> <C>
Norman W. Alexander . . . . 4,688 $ 3.75 12/19/06
Norman W. Alexander . . . . 1,875 3.75 7/31/07
Norman W. Alexander . . . . 25,000 3.1875 12/15/07
Marc E. Jaffe . . . . . . . 938 3.75 10/31/04
Marc E. Jaffe . . . . . . . 4,688 3.75 8/2/05
Marc E. Jaffe . . . . . . . 1,875 3.75 7/31/06
Marc E. Jaffe . . . . . . . 1,875 3.75 7/31/07
Mark E. Jaffe . . . . . . . 25,000 3.1875 12/15/07
Marc E. Jaffe . . . . . . . 16,250 2.8125 1/27/08
Neil M. Kaufman . . . . . . 4,688 3.75 4/24/06
Neil M. Kaufman . . . . . . 4,688 3.75 12/19/06
Neil M. Kaufman . . . . . . 1,875 3.75 7/31/07
Mark E. Leininger . . . . . 3,750 3.75 7/20/05
Mark E. Leininger . . . . . 1,875 3.75 2/19/06
Mark E. Leininger . . . . . 13,125 3.75 4/24/06
Mark E. Leininger . . . . . 27,188 3.75 9/28/06
Mark E. Leininger . . . . . 56,250 3.75 2/4/07
Martin F. Schacker. . . . . 6,249 2.859375 12/28/07
Martin F. Schacker. . . . . 18,750 2.8125 1/27/08

</TABLE>

Item 13. Exhibits and Reports on Form 8-K.

(a) Exhibits.

Set forth below are all exhibits to this Annual Report on Form 10-KSB:

Exhibit
Number Description of Exhibit
- ------- ----------------------

-43-

<PAGE>

Company's Quarterly Report on Form 10-QSB (Commission File
Number: 1-14076), for the quarter ended September 30, 1997, filed
with the Commission on November 14, 1997.)
10.6 Settlement and General Release Agreement, dated as of July 25, 1997,
among Daniel J. Fraisl, the Company and Software Publishing
Corporation. (Incorporated by reference to Exhibit 10.48 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended June 30, 1997, filed with the
Commission on August 19, 1997.)
10.7 Form of Indemnification Agreement between the Registrant and its
executive officers and directors. (Incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on Form SB-2
(Registration Number: 33-97184), filed with the Commission on
September 21, 1995.)
10.8 Form of Underwriters' Purchase Option (Specimen). (Incorporated by
reference to Exhibit 10.18 to the Company's Annual Report on Form
10-KSB, for the year ended December 31, 1997, filed with the
Commission on April 16, 1998.)
10.9 Registration Rights Agreement, dated July 31, 1996, between the
Company and the former stockholders of Serif Inc. and Serif (Europe)
Limited. (Incorporated by reference to Exhibit 10.31 to the Company's
Current Report on Form 8-K (Date of Report: July 31, 1996)
(Commission File Number: 1-14076), filed with the Commission on
August 13, 1996.)
10.10 Lease Agreement, dated September 7, 1995, between Community Towers
LLC and the Company, for facilities located at 111 North Market
Street, San Jose, California. (Incorporated by reference to Exhibit
10.22 to Software Publishing Corporation's Annual Report on Form
10-K (Commission File Number: 0-14025), for the fiscal year ended
September 30, 1995, filed with the Commission on December 29, 1995.)
10.11 Letter Agreement, dated March 27, 1997, between the Company and
M.S. Farrell & Co., Inc. (Incorporated by reference to Exhibit 10.45
to the Company's Annual Report on Form 10-KSB (Commission File
Number: 1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.12 Financial Advisory Agreement, dated as of November 20, 1997, between
the Company and M.S. Farrell & Co., Inc. (Incorporated by reference to
Exhibit 10.47 to the Company's Annual Report on Form 10-KSB
(Commission File Number: 1-14076), for the year ended December 31,
1997, filed with the Commission on April 16, 1998.)
10.13 Amendment to the Financial Advisory Agreement, dated as of January
28, 1998, between the Company and M.S. Farrell & Co., Inc.
(Incorporated by reference to Exhibit 10.48 to the Company's Annual
Report on Form 10-KSB (Commission File Number: 1-14076), for the year
ended December 31, 1997, filed with the Commission on April 16, 1998.)
10.14 Letter Agreement, dated April 28, 1998, between the Company and
M.S. Farrell & Co., Inc. (Incorporated by reference to Exhibit 10.59
to the Company's Quarterly Report on Form 10-QSB (Commission
File Number: 1-14076), for the quarter ended March 31, 1998,
filed with the Commission on May 13, 1998.)
10.15 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. (Incorporated by
reference to Exhibit 10.62 to the Company's Quarterly Report
on Form 10-QSB (Commission File Number: 1-14076), for the quarter
ended June 30, 1998, filed with the Commission on August 14, 1998.)
10.16 Consulting Agreement, dated as of July 25, 1997, between the Company
and Daniel J. Fraisl. (Incorporated by reference to Exhibit 10.49
to the Company's Quarterly Report on Form 10-QSB (Commission
File Number: 1-14076), for the quarter ended June 30, 1997, filed
with the Commission on August 19, 1997.)
10.17 Form of Subscription Agreements, each dated October 23, 1997,
between the Company and each of Ronald L. Altman (with respect to
24,000 shares of Common Stock), Gerold M. Fleischner (with respect
to 24,000 shares of Common Stock), Howard Milstein (with respect
to 865,000 shares of Common Stock), Patriot Group, LP (with
respect to 24,000 shares of Common Stock) and Stephen P. Rosenblatt
(with respect to 24,000 shares of Common Stock). (Incorporated by
reference to Exhibit 10.50 to the Company's Quarterly Report on
Form 10-QSB (Commission File Number: 1-14076), for the quarter
ended September 30, 1997, filed with the Commission on November 14,
1997.)
10.18 Registration Rights Agreement, dated October 23, 1997, among the
Company, Ronald L. Altman, Gerold M. Fleischner, Howard Milstein,
Patriot Group, LP and Stephen P. Rosenblatt. (Incorporated by
reference to Exhibit 10.51 to the Company's Quarterly Report on
Form 10-QSB (Commission File Number: 1-14076), for the quarter ended
September 30, 1997, filed with the Commission on November 14, 1997.)

-44-

<PAGE>

10.19 Option, dated October 23, 1997, issued to Ronald L. Altman.
(Incorporated by reference to Exhibit 10.53 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076), for
the quarter ended September 30, 1997, filed with the Commission on
November 14, 1997.)
10.20 Settlement and Release Agreement, dated December 19, 1997, among
the Company, Barry A. Cinnamon and Lori Kramer Cinnamon.
(Incorporated by reference to Exhibit 10.54 to the Company's Current
Report on Form 8-K (Date of Report: December 19, 1997) (Commission
File Number: 1-14076), filed with the Commission on December 30,
1997.)
10.21 Settlement Agreement, dated May 22, 1998, among the Company, Neil M.
Kaufman, Esq., Mark E. Leininger and Barry Cinnamon and Lori Cinnamon.
10.22 License Agreement, dated December 19, 1997, between Software
Publishing Corporation and Barry A. Cinnamon. (Incorporated by
reference to Exhibit 10.55 to the Company's Current Report on Form
8-K (Date of Report: December 19, 1997) (Commission File Number:
1-14076), filed with the Commission on December 30, 1997.)
10.23 Amendment No. 1 to Escrow Agreement, dated as of April 1, 1997,
among the Company, Serif Inc., Norman W. Alexander, Moritt, Hock &
Hamroff, LLP and Blau, Kramer, Wactlar & Lieberman, P.C. (Incorporated
by reference to Exhibit 10.49 to the Company's Annual Report
on Form 10-KSB (Commission File Number: 1-14076), for the year ended
December 31, 1997, filed with the Commission on April 16, 1998.)
10.24 Amendment No. 1 to Escrow Agreement, dated as of April 1, 1997, among
the Company, Serif (Europe) Limited, Norman W. Alexander, Moritt,
Hock & Hamroff, LLP and Blau, Kramer, Wactlar & Lieberman, P.C.
(Incorporated by reference to Exhibit 10.50 to the Company's
Annual Report on Form 10-KSB (Commission File Number: 1-14076),
for the year ended December 31, 1997, filed with the
Commission on April 16, 1998.)
10.25 Rights Agreement, dated as of March 31, 1998, between the Company
and American Stock Transfer & Trust Company. (Incorporated by
reference to Exhibit 10.51 to the Company's Annual Report on Form
10-KSB (Commission File Number: 1-14076), for the year ended December
31, 1997, filed with the Commission on April 16, 1998.)
10.26 Warrant, dated April 7, 1998, registered in the name of Boru
Enterprises, Inc., with respect to 50,000 shares of Common Stock
(before giving effect to the Company's one-for-three reverse
stock split made effective May 27, 1998). (Incorporated by
reference to Exhibit 10.53 to the Company's Quarterly Report on Form
10-QSB (Commission File Number: 1-14076), for the quarter ended March
31, 1998, filed with the Commission on May 13, 1998.)
10.27 Warrant, dated April 7, 1998, registered in the name of Boru
Enterprises, Inc., with respect to 50,000 shares of Common Stock
(before giving effect to the Company's one-for-three reverse stock
split made effective May 27,1998). (Incorporated by reference to
Exhibit 10.54 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended March 31,
1998, filed with the Commission on May 13, 1998.)
10.28 Form of Subscription Agreement, dated April 28, 1998, between the
Company and The Whitehaven Group, LLC. (Incorporated by reference
to Exhibit 10.55 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended March 31,
1998, filed with the Commission on May 13, 1998.)
10.29 Warrant, dated April 28, 1998, registered in the name of The
Whitehaven Group, LLC, with respect to 550,000 shares of Common
Stock (before giving effect to the Company's one-for-three reverse
stock split made effective May 27, 1998). (Incorporated by
reference to Exhibit 10.56 to the Company's Quarterly Report on Form
10-QSB (Commission File Number: 1-14076), for the quarter ended March
31, 1998, filed with the Commission on May 13, 1998.)
10.30 Warrant, dated April 28, 1998, registered in the name of The
Whitehaven Group, LLC, with respect to 250,000 shares of Common Stock
(before giving effect to the Company's one-for-three reverse stock
split made effective May 27, 1998). (Incorporated by reference to
Exhibit 10.57 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended March 31,
1998, filed with the Commission on May 13, 1998.)
10.31 Form of Subscription Agreement, each executed between April 29,
and May 6, 1998, between the Company and each of the April/May 1998
Investors. (Incorporated by reference to Exhibit 10.58 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended March 31, 1998, filed with the
Commission on May 13, 1998.)

-45-

<PAGE>

10.32 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. (Incorporated by reference to Exhibit 10.60 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076),
for the quarter ended June 30, 1998, filed with the Commission on
August 14, 1998.)
10.33 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. (Incorporated by reference to Exhibit 10.61 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076), for
the quarter ended June 30, 1998, filed with the Commission on August
14, 1998.)
10.34 Form of Subscription Agreement utilized in the December 1998 Private
Placement. (Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 10-QSB (Date of Report: December
15, 1998)(Commission File Number: 1-14076), filed with the Commission
on December 16, 1998.)
10.35 Stock Exchange Agreement, dated December 15, 1998, between the Company
and Seafish Partners. (Incorporated by reference to Exhibit 10.2 to
the Company's Current Report on Form 10-QSB (Date of Report:
December 15, 1998) (Commission File Number: 1-14076), filed with the
Commission on December 16, 1998.)
10.36 Letter Agreement, dated January 4, 1999, between the Company and
Seafish Partners. (Incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 10-QSB (Date of Report: January 11,
1999) (Commission File Number: 1-14076), filed with the Commission
on January 20, 1999.)
10.37 Form of Subscription Agreement utilized in the Common Stock Sales.
(Incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 10-QSB (Date of Report: December 15, 1998)
(Commission File Number: 1-14076), filed with the Commission on
December 16, 1998.)
10.38 Consulting Agreement between the Company and Target Capital Corp.
(Incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 10-QSB (Date of Report: January 11, 1999) (Commission
File Number: 1-14076), filed with the Commission on January 20, 1999.)
10.39 Consulting Agreement between the Company and Michel Ladovitch.
(Incorporated by reference to Exhibit 10.2 to the Company's Current
Report on Form 10-QSB (Date of Report: January 11, 1999)
(Commission File Number: 1-14076), filed with the Commission on
January 20, 1999.)
10.40 Warrant Certificate, with respect to 520,000 shares of Common Stock,
registered in the name of Target Capital Corp. (Incorporated by
reference to Exhibit 10.5 to the Company's Current Report on Form
10-QSB (Date of Report: January 11, 1999) (Commission File Number:
1-14076), filed with the Commission on January 20, 1999.)
10.41 Warrant Certificate, with respect to 120,000 shares of Common Stock,
registered in the name of United Krasna Organizations.
(Incorporated by reference to Exhibit 10.6 to the Company's
Current Report on Form 10-QSB (Date of Report: January 11, 1999)
(Commission File Number: 1-14076), filed with the Commission on
January 20, 1999.)
10.42 Warrant Certificate, with respect to 260,000 shares of Common
Stock, registered in the name of Seafish Partners. (Incorporated
by reference to Exhibit 10.8 to the Company's Current Report on
Form 10-QSB (Date of Report: January 11, 1999) (Commission File
Number: 1-14076), filed with the Commission on January 20, 1999.)
10.43 Warrant Certificate, with respect to 600,000 shares of Common Stock,
registered in the name of Regency Investment Partners.
10.44 Letter Agreement, dated December 17, 1998, between the Company Marc
E. Jaffe. (Incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 10-QSB (Date of Report:
January 11, 1999) (Commission File Number: 1-14076), filed with the
Commission on January 20, 1999.)
10.45 Advice of Borrowing Terms, dated December 29, 1998, between
Serif (Europe) Limited and National Westminster Bank PLC, and
Mortgage Debenture, dated October 9, 1989, between Serif (Europe)
Limited and National Westminster Bank PLC.
21 Subsidiaries of the Company.
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Ernst & Young.
24 Powers of Attorney (set forth on the signature page of this Annual
Report on Form 10-KSB).
27 Financial Data Schedule.

-46-

<PAGE>

(b) Reports on Form 8-K.

On December 16, 1998, the Company filed a Current Report on Form 8-K (Date
of Report: December 15, 1997) with the Commission, as an Item 5 disclosure, to
demonstrate the Company's compliance with the requirements of a Nasdaq Listing
Qualification Panel, and reporting the consummation of the December 1998 Private
Placement, X- Ceed Stock Purchase and Common Stock Sale Transaction.

On January 20, 1999, the Company filed a Current Report on Form 8-K (Date
of Report: January 11, 1999) with the Commission reporting, as an Item 5
disclosure, that (a) the Company had been advised that a Nasdaq Listing
Qualification Panel had determined that the Company had complied with the
Panel's requirements for the continued listing of the Common Stock on The Nasdaq
SmallCap Market, (b) the Company had exchanged the then outstanding 930 shares
of Class A Preferred Stock for 930 shares of Class C Preferred Stock and the
Seafish Warrants, (c) the Company had issued 30,000 shares of Common Stock to
Marc E. Jaffe, (d) that the Company had retained Target Capital Corporation as a
consultant (e) the Company had retained Michel Ladovitch as a consultant and (e)
Kevin D. Sullivan's employment with the Company had been terminated.

-47-

<PAGE>

Index to Financial Statements

Independent Auditors' Reports. . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheet at December 31, 1998. . . . . . . . F-4
Consolidated Statements of Operations for the years ended
December 31, 1998 and 1997. . . . . . . . . . . . . . . . F-5
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998 and 1997. . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997. . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . F-8

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Software Publishing Corporation Holdings, Inc.
Fairfield, New Jersey

We have audited the consolidated balance sheet of Software Publishing
Corporation Holdings, Inc. and subsidiaries as of December 31, 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the two years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. We did not audit the
financial statements of Serif (Europe) Limited, a wholly owned subsidiary, which
statements reflect total assets and net sales constituting 33.7% and 50.9% of
the related consolidated totals for 1998 and net sales constituting 42.4% for
1997. Those financial statements were audited by other auditors whose reports
have been furnished to us, and our opinion, insofar as it relates to the amounts
included for Serif (Europe) Limited, is based solely on the reports of the other
auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of the other auditors provide a
reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, the
financial statements enumerated above present fairly, in all material respects,
the consolidated financial position of Software Publishing Corporation Holdings,
Inc. and subsidiaries as of December 31, 1998, and the consolidated results of
their operations and their consolidated cash flows for each of the two years
then ended in conformity with generally accepted accounting principles.

As described in Note 9, the Company has applied to enter into a closing
agreement with the Internal Revenue Service with respect to dual consolidated
losses previously utilized by a wholly owned subsidiary of the Company, Software
Publishing Corporation ("SPC"). Such closing agreement, if not consummated, will
require the Company to recognize a tax of approximately $8 million on
approximately $24.5 million of SPC's previous dual consolidated losses.

/s/ Richard A. Eisner & Company, LLP
Richard A. Eisner & Company, LLP
New York, New York
April 8, 1999

F-2
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Serif (Europe) Limited

We have audited the balance sheets of Serif (Europe) Limited as of December 31,
1998 and 1997, and the related statements of operations, cash flows and
shareholders' equity for each of the two years in the period ended December 31,
1998. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audits in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Serif (Europe) Limited at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1998, in conformity
with United Kingdom generally accepted accounting principles.

United Kingdom accounting principles vary in certain material respects from
accounting principles generally accepted in the United States. The application
of the latter would not have materially affected the determination of
shareholders' equity and financial position as of December 31, 1998 and 1997 and
the determination of net profit for the two years ended December 31, 1998.

/s/ Ernst & Young
Ernst & Young

Nottingham, England
April 1, 1999

F-3

<PAGE>

Software Publishing Corporation Holdings, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1998

<TABLE>
<CAPTION>
ASSETS

<S> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . $ 2,377,648
Marketable securities. . . . . . . . . . . . . . 1,020,000
Accounts receivable, less allowances of $859,441 1,787,551
Inventories. . . . . . . . . . . . . . . . . . . 706,704
Prepaid expenses and other current assets. . . . 684,268
-------------
Total current assets . . . . . . . . . 6,576,171

Property and equipment, net. . . . . . . . . . . . . 445,447
Acquired software, net of accumulated amortization
of $4,762,583. . . . . . . . . . . . . . . . . . . 2,144,417
Goodwill, net of accumulated amortization of
$181,120 . . . . . . . . . . . . . . . . . . . . . 193,611
Restricted cash. . . . . . . . . . . . . . . . . . . 200,000
Other assets . . . . . . . . . . . . . . . . . . . . 753,050
-------------
Total assets . . . . . . . . . . . . . $ 10,312,696
=============
</TABLE>

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . $ 3,484,275
Accrued liabilities. . . . . . . . . . . . . . . 2,461,780
Short term debt and current portion of long-term
debt. . . . . . . . . . . . . . . . . . . . . . 195,044
-------------
Total current liabilities. . . . . . . 6,141,099

Long-term debt, less current maturities. . . . . . . 99,554
-------------
Total liabilities. . . . . . . . . . . 6,240,653
-------------

Commitments and contingencies. . . . . . . . . . . . --

Stockholders' equity:
Serial Preferred Stock, authorized 1,939,480
shares, par value $.001 per share
Class A 14% Cumulative Non-Convertible
Redeemable Preferred Stock, 1,500 shares
authorized, 930 shares issued and outstanding
(at liquidation preference) . . . . . . . . . . 930,000
Class B Voting Preferred Stock, Series A, 60,520
shares authorized, none issued and outstanding . --
Junior Participating Preferred Stock, Series A,
100,000 shares authorized, none issued and
outstanding . . . . . . . . . . . . . . . . . . --
Common stock, par value $.001 per share,
authorized 30,000,000 shares; issued and
outstanding 5,083,653 shares. . . . . . . . . . 5,084
Additional paid-in capital. . . . . . . . . . . . 45,385,487
Accumulated deficit . . . . . . . . . . . . . . . (42,238,133)
-------------
4,082,438
Less: Treasury stock (3,095 shares, at December
31, 1998), at cost. . . . . . . . . . . . . . . (10,395)
-------------
Total stockholders' equity . . . . . . 4,072,043
-------------
Total liabilities and stockholders'
equity . . . . . . . . . . . . . . . $ 10,312,696
=============
</TABLE>

See report of independent auditors and accompanying notes.

F-4

<PAGE>

Software Publishing Corporation Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended December 31,
____________________________________________
1998 1997
---- ----
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . $ 18,271,733 $ 17,156,865
Cost of goods sold. . . . . . . . . . . . 4,348,002 4,155,749
--------------- --------------
Gross profit. . . . . . . . . . 13,923,731 13,001,116
Selling, general and administrative
expenses. . . . . . . . . . . . . . . . (12,842,199) (16,747,963)
Product development . . . . . . . . . . . (1,266,163) (3,227,215)
Amortization of goodwill and purchased
technology. . . . . . . . . . . . . . . (2,377,282) (2,566,422)
Restructuring expenses. . . . . . . . . . -- (375,902)
Other income, net . . . . . . . . . . . . 184,739 195,655
-------------- --------------
Loss before income taxes. . . . $ (2,377,174) (9,720,731)

Income taxes. . . . . . . . . . . . . . . (29,541) (47,035)
-------------- --------------

Net loss. . . . . . . . . . . . (2,406,715) $ (9,767,766)
============== ==============

Loss per common share:
Net loss per common share - basic
and diluted. . . . . . . . . . . . $ (.65) $ (3.57)
Weighted average number of common
shares outstanding - basic and
diluted. . . . . . . . . . . . . . 3,676,820 2,734,355
</TABLE>

See report of independent auditors and accompanying notes.

F-5

<PAGE>

Software Publishing Corporation Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Class A Class B Common Stock
Preferred Stock Preferred Stock ($.001 Par Value)
--------------- --------------- -----------------
Number Number Number
of of of
Shares Shares Shares
Issued Amount Issued Amount Issued Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996. . . . . . 60,520 $ 61 2,620,081 $ 2,620
Issuance of common stock in payment of
liabilities for services in connection
with business combinations. . . . . . 37,090 37
Issuance of common stock in payment of
liabilities for services. . . . . . . 825 1
Issuance of common stock in connection
with cancellation of agreement for
services . . . . . . . . . . . . . . 23,809 24
Issuance of common stock upon exercise
of options . . . . . . . . . . . . . 1,666 2
Sale of common stock - net . . . . . . 320,333 320
Retirement of Class B Preferred Stock. (60,520) $ (61)
Net Loss . . . . . . . . . . . . . . .
------- -------- -------- ------ ---------- --------
Balance at December 31, 1997 . . . . . 0 $ 0 0 0 3,003,804 $ 3,004

Issuance of common stock in payment of
previously established liabilities . 58,585 59
Issuance of common stock and warrants
in payment of liabilities for services
rendered . . . . . . . . . . . . . . 143,333 143
Issuance of warrants for services
rendered . . . . . . . . . . . . . .
Acquisition of treasury shares . . . .
Adjustment of common stock to reflect
payment of fractional shares in cash
in connection with reverse stock
split. . . . . . . . . . . . . . . . (37) 0
Sale of common stock - net . . . . . . 1,877,968 1,878
Issuance of Class A Preferred Stock. . 930 930,000
Net loss . . . . . . . . . . . . . . .
------- -------- -------- ------ ---------- --------
Balance at December 31, 1998 . . . . . 930 $ 930,000 0 $ 0 5,083,653 $ 5,084
======== ======== ======== ====== ========== ========
</TABLE>

<TABLE>
<CAPTION>
Treasury Stock
at Cost
--------------
Number Additional Total
of Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996. . . . . . $ 41,736,677 $ (30,063,652) $ 11,675,706
Issuance of common stock in payment of
liabilities for services in connection
with business combinations. . . . . . (37) --
Issuance of common stock in payment of
liabilities for services. . . . . . . 14,999 15,000
Issuance of common stock in connection
with cancellation of agreement for
services . . . . . . . . . . . . . . 249,976 250,000
Issuance of common stock upon exercise
of options . . . . . . . . . . . . . 9,998 10,000
Sale of common stock - net . . . . . . 960,146 960,466
Retirement of Class B Preferred Stock. 61 --
Net Loss . . . . . . . . . . . . . . . (9,767,766) (9,767,766)
------- -------- ------------- -------------- ------------
Balance at December 31, 1997 . . . . . $ 42,971,820 0 $ (39,831,418) $ 3,143,406

Issuance of common stock in payment of
previously established liabilities . 117,107 117,166
Issuance of common stock and warrants
in payment of liabilities for services
rendered . . . . . . . . . . . . . . 186,607 186,750
Issuance of warrants for services
rendered . . . . . . . . . . . . . . 701,206 701,206
Acquisition of treasury shares . . . . 3,095 (10,395) (10,395)
Adjustment of common stock to reflect
payment of fractional shares in cash
in connection with reverse stock
split. . . . . . . . . . . . . . . . 0
Sale of common stock - net . . . . . . 1,408,747 1,410,625
Issuance of Class A Preferred Stock. . 930,000
Net loss . . . . . . . . . . . . . . . (2,406,715) (2,406,715)
------- -------- ------------- ------------- ------------
Balance at December 31, 1998 . . . . . 3,095 $(10,395) $ 45,385,487 $(42,238,133) $ 4,072,043
======= ======== ============= ============= =============
</TABLE>

See report of independent auditors and accompanying notes.

F-6
<PAGE>

Software Publishing Corporation Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended December 31,
_______________________________
1998 1997
____ ____
Operating activities:
<S> <C> <C>
Net income (loss) . . . . . . . . . . . . $ (2,406,715) $ (9,767,766)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization . . . . . 2,570,924 6,358,731
Provision for doubtful accounts . . . . 665,000 171,000
Unrealized holding gain on marketable
securities. . . . . . . . . . . . . . (90,000) --
Gains on sale of fixed assets . . . . . (9,409) --
Sale of marketable securities . . . . . 173,600 6,154,580
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . (1,128,449) 496,688
Inventories . . . . . . . . . . . . . (139,368) 146,251
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . (354,677) (93,742)
Other assets. . . . . . . . . . . . . (3,778) 59,938
Accounts payable. . . . . . . . . . . 586,243 (493,863)
Accrued liabilities . . . . . . . . . (1,359,937) (5,808,791)
------------- -------------
Net cash used in operating
activities . . . . . . . . . . . . (1,496,566) (2,776,974)
------------- -------------

Investing activities:
Purchase of property and equipment . . . (103,415) (266,275)
Restricted cash draw downs . . . . . . . 100,000 1,350,000
Proceeds from sales of property and
equipment. . . . . . . . . . . . . . . 58,480 --
------------- -------------
Net cash provided by investing
activities . . . . . . . . . . . . 55,065 1,083,725
------------- -------------

Financing activities:
Proceeds from sale of common stock - net 1,410,625 970,466
Payment of long-term debt. . . . . . . . (167,834) (1,523,918)
Purchase of treasury stock . . . . . . . (10,395) --
------------- -------------
Net cash provided by (used in
financing activities . . . . . . . 1,232,396 (553,452)
------------- -------------

(Decrease) in cash and cash equivalents. (209,105) (2,246,701)
Cash and cash equivalents at beginning
of year. . . . . . . . . . . . . . . . 2,586,753 4,833,454
------------- -------------
Cash and cash equivalents at end of year $ 2,377,648 $ 2,586,753
============= =============

Supplemental disclosure of noncash financing and investing activities:
Issuance of Class A Preferred Stock
for marketable securities . . . . . . $ 930,000 --
Issuance of common stock for previously
established liabilities . . . . . . . 117,166 $ 265,000
Issuance of common stock in payment of
liabilities for services rendered . . 186,750 --
Issuance of warrants to purchase common
stock for services rendered . . . . . 701,206 --

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest paid . . . . . . . . . . . . $ 107,704 $ 60,328
Income taxes. . . . . . . . . . . . . 55,564 1,974

</TABLE>
See report of independent auditors and accompanying notes.

F-7
<PAGE>

Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

1. Summary of Significant Accounting Policies

Nature of Business

Software Publishing Corporation Holdings, Inc. (formerly known as Allegro
New Media, Inc.) ("SPCH") and subsidiaries (collectively, the "Company"), is an
international developer and supplier of desktop publishing, presentation
graphics and other visual communications business and productivity computer
software products to corporate customers, consumers, retail and wholesale
customers and original equipment manufacturers primarily in the United States
and Europe.

Reverse Stock Split

The Company effected a one-for-three (1:3) reverse stock split, effective
as of the close of business on May 27, 1998. All share and per share amounts for
all years presented have been adjusted to reflect such reverse stock split.

Principles of Consolidation

The consolidated financial statements include the accounts of SPCH and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The translation of foreign currencies into
United States dollars for subsidiaries where the local currency is the
functional currency is performed for balance sheet accounts using the exchange
rate in effect at year end and for revenue and expense accounts using an average
rate for the period. For foreign operations which are considered an extension of
United States operations, the United States dollar is used as the functional
currency. Gains and losses resulting from remeasurement and foreign currency
transactions are included in the results of operations.

Business Combinations

The Company has accounted for all business combinations under the purchase
method of accounting. Under this method the purchase price is allocated to the
assets and liabilities of the acquired enterprise as of the acquisition date
based on their estimated respective fair values and are subject to revision for
a period not to exceed one year from the date of acquisition. The results of
operations of the acquired enterprises are included in the Company's
consolidated financial statements for the period subsequent to their
acquisition.

Concentration of Credit Risk

The Company performs periodic credit evaluations of its customers but
generally does not require collateral from its customers.

Revenue Recognition

Revenue is generally recognized upon shipment of products to customers and
is recorded net of allowances for anticipated returns for potential excess
quantities in the distribution channel. Certain customers have been provided
goods on a consignment basis. Revenues on these transactions are recognized upon
the sale of products to the ultimate customer. Revenue for "locked versions" of
software are recognized when customers purchase an unlocking code.

F-8

<PAGE>
Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

Cash Equivalents

Cash equivalents consist of highly liquid investments with a maturity of
three months or less when purchased.

Inventories

Inventories, which are principally finished goods, are stated at the lower
of cost (first-in, first-out) or market.

Royalty Advances

Non-refundable royalty payments in connection with licensing contracts for
the Company's products are generally amortized based on product sales.
Management evaluates the future realization of royalty advances periodically and
charges to cost of goods sold any amounts they believe will not be recovered
through future sales.

Product Development Costs and Acquired Software

Costs incurred in the development of new software products and enhancements
to existing software products are expensed as incurred until technological
feasibility has been established. To date, the Company's product development has
been completed concurrent with the establishment of technological feasibility
and, accordingly, no costs have been capitalized.

Acquired software consists of the value of developed products acquired as a
result of business combinations and is being amortized over a three year period.

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the related assets,
generally 3 to 7 years. Leasehold improvements are amortized on a straight-line
basis over the shorter of the life of the improvement or the remainder of the
lease term.

Goodwill

Goodwill represents costs in excess of the fair value of net assets of
businesses acquired in purchase transactions. Goodwill is being amortized on a
straight-line basis over 5 years. Goodwill associated with the Software
Publishing Corporation acquisition (see note 2) was reduced during 1997 to
reflect the settlement and adjustment of acquisition and pre-acquisition
liabilities and accruals.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. These estimates principally include provisions for sales
returns and allowances and purchase price allocations. Actual results could
differ from these estimates.

Income Taxes

The liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax basis of assets and liabilities and are

F-9
<PAGE>

Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The resulting asset at December 31, 1998
was fully reserved since management does not believe it is more likely than not
that the tax benefit will ultimately be realized.

Loss Per Share

The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128") in the year ended December 31, 1997. SFAS
No. 128 replaced the calculation of primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes the effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share.

Basic loss per share is computed based upon the weighted average number of
common shares outstanding during each year. Stock options and warrants did not
have an effect on the computation of diluted earnings (loss) per share in 1998
and 1997 since they were anti-dilutive.

Marketable Securities

The Company accounts for investments in marketable securities pursuant to
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS No. 115"). SFAS No. 115
requires, among other things, the classification of investments in one of three
categories based upon the Company's intent: (a) trading, (b) available-for-sale
and (c) held-to-maturity, with trading and available-for-sale securities carried
at market value and held-to-maturity securities carried at amortized cost. The
Company accounts for marketable securities as trading securities and gains and
losses are included in the statement of operations.

Fair Value of Financial Investments

The fair value of the Company's financial instruments, including cash and
cash equivalents, marketable securities, accounts receivable, accounts payable,
accrued liabilities and short- and long-term debt approximate their carrying
values because of short-term maturities or because their interest rates
approximate current market rates.

Advertising and Promotion Costs

Advertising and promotion costs include the costs of advertising,
catalogues, direct mail and postage and are expensed as incurred. These costs
amounted to approximately $5,736,000 and $6,978,000 in 1998 and 1997,
respectively.

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 had no impact on the Company's consolidated financial statements
since the Company's only component of comprehensive income is net income (loss).

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

F-10

<PAGE>

Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

information about operating segments in financial statements. 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
adoption of SFAS No. 131 had no significant impact on the Company's consolidated
financial statements since the Company has only one operating segment.

2. Business Combinations and Acquisitions

In July 1996, the Company acquired Serif Inc. and Serif (Europe) Limited
(collectively, the "Serif companies"). The aggregate purchase price, including
all direct costs, was approximately $4,200,000 and was principally financed
through the issuance of 333,333 shares of the Company's common stock. The cost
of the acquisition exceeded the fair value of Serif's net assets by
approximately $400,000, which was recorded as goodwill.

In December 1996, the Company acquired Software Publishing Corporation
("SPC"). The aggregate purchase price, including all direct costs, was
approximately $30,000,000 and was principally financed through the issuance of
1,125,305 shares of the Company's common stock. The cost of the acquisition
exceeded the fair value of SPC's net assets by approximately $3,795,000, which
was recorded as goodwill as of the acquisition date and was subsequently
eliminated in 1997 as a result of settlement and adjustment of pre-acquisition
liabilities and accruals.

3. Marketable Securities

Marketable securities at fair market value consist of the following at
December 31, 1998:
<TABLE>

<S> <C>
Common stock of X-Ceed, Inc. . . . . . . . . . $ 1,020,000
------------
$ 1,020,000
============
</TABLE>

Unrealized holding gains on these securities amounted to $90,000 at
December 31, 1998, which amount has been included in other income for 1998.

4. Property and Equipment

Property and equipment consists of the following as of December 31, 1998:

<TABLE>
<S> <C>
Office furniture and equipment . . . . . . . . $ 908,402
Leasehold improvements . . . . . . . . . . . . 195,030
------------
1,103,432
Less accumulated depreciation. . . . . . . . . (657,985)
------------
Total. . . . . . . . . . . . . . . . . . . . . $ 445,447
============
</TABLE>

F-11

<PAGE>

Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

5. Debt

Debt consists of the following at December 31, 1998:

<TABLE>

<S> <C>
Notes payable - landlord payable in monthly
installments of $1,402 through March 2002
and bearing interest at 10% per annum . . . . . . . $ 46,528
Bank loans payable in monthly installments
of $4,100 through July 2000 and bearing
interest at 9.5% per annum . . . . . . . . . . . . . 23,347
Capital lease obligation payable in quarterly
installments of $6,300 through June 2002
and bearing interest at 10.25% per annum . . . . . . 75,922
Litigation settlement, payable in monthly
installments of $10,000 through May 1999
and bearing interest at 7% per annum . . . . . . . . 45,000
Directors and officers insurance premium
financing, payable in monthly installments
of $11,909 through September 1999 and
bearing interest at 7.75% per annum. . . . . . . . . 103,801
------------
294,598
Less current maturities. . . . . . . . . . . . . . . . (195,044)
------------
$ 99,554
============
</TABLE>

Maturities of long-term debt as of December 31, 1998 are as follows:

<TABLE>
<CAPTION>
Year Ending
December 31, Amount
<S> <C>
1999 . . . . . 195,044
2000 . . . . . 44,417
2001 . . . . . 37,746
2002 . . . . . 17,391
--------
Total. . . . . $294,598
========
</TABLE>

The Company's United Kingdom subsidiary has a letter of credit facility of
approximately $400,000, collateralized by substantially all of the subsidiary's
assets. No amounts were drawn upon at December 31, 1998.

6. Accrued Liabilities

Accrued liabilities at December 31, 1998 consist of the following:

<TABLE>

<S> <C>
Accrued legal costs. . . . . . . . . . . . $ 154,297
Accrued royalties. . . . . . . . . . . . . 138,628
Valued added and other taxes payable . . . 915,794
Other accruals . . . . . . . . . . . . . . 1,253,061
----------
$2,461,780
==========
</TABLE>

F-12

<PAGE>
Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

7. Stockholders' Equity

In 1996, the Company granted warrants, exercisable at $20.625 per share
until August 22, 2002, to purchase 166,666 shares of the Company's common stock
and agreed to issue 23,809 shares of its common stock to the underwriter of its
initial public offering, and a designee thereof, to modify and terminate,
respectively, certain contractual rights of such underwriter. The 23,809 shares
of common stock were issued in 1997 in satisfaction of the related liability of
$250,000 recorded in 1996.

In 1997, the Company issued an aggregate 37,090 shares of common stock in
payment for services associated with the acquisition of SPC to three financial
advisors which was accrued for and reflected in additional paid-in capital in
1996 and issued 825 shares of its common stock for payment of $15,000 in
consulting fees which was accrued as a liability in 1996. Also in 1997, the
Company received proceeds of $10,000 for the issuance of 1,666 shares of common
stock for the exercise of certain stock options and the Company consummated the
sale of an aggregate 320,333 shares of common stock to five investors for net
proceeds of $960,466 in private transactions. In connection with such sale, the
Company issued a five year option to purchase 32,033 shares of common stock, at
an exercise price of $3.8268 per share, to a financial advisor.

In 1998, the Company issued an aggregate of 58,585 shares of common stock
in payment of previously established liabilities incurred in 1996 and 1997 for
the acquisition of certain software, goods and legal and consulting services.

In 1998, the Company issued an aggregate of 143,333 shares of common stock
and warrants to purchase 33,332 shares of common stock, exercisable at various
prices ranging from $1.50 to $3.83 (subject to adjustment) per share, in payment
for services rendered in 1998 by consultants and the Chairman of the Board.

In 1998, the Company retained an investment banking firm and consultants
and, in connection therewith, issued warrants, valued at $701,206, to purchase
1,390,000 shares of common stock. The related deferred charges are being
amortized over periods of one to five years.

In 1998, the Company acquired an aggregate 3,095 shares of common stock, of
which 1,237 shares were held by a former employee of one of the Company's
subsidiaries and 1,858 shares were held by a trust for the benefit of certain of
the employees of such subsidiary. The Company is holding such 3,095 shares in
its treasury.

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 of the common stock. The reverse stock split became
effective as of the close of business on May 27, 1998.

In 1998, the Company sold an aggregate of 1,877,968 shares of common stock
to a number of investors (including directors, officers and employees of the
Company and their affiliates) for net proceeds of $1,410,625.

Preferred Stock

There are 1,939,480 authorized shares of Serial Preferred Stock, par value
$.001 per share. Any shares of Serial Preferred Stock that have been redeemed
are deemed retired and extinguished and may be reissued. The Board of Directors
establishes and designates the series and fixes the number of shares and the
relative rights, preferences and limitations of the respective series of the
Serial Preferred Stock. There were 930 shares of Class A Cumulative Non-

F-13
<PAGE>

Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

Convertible Redeemable Preferred Stock, Series A (the "Class A Preferred
Stock") issued and outstanding at December 31, 1998.

In 1998, the Company authorized 1,500 shares of Class A Preferred Stock.
Under the Company's Certificate of Designations, holders of shares of Class A
Preferred Stock are entitled to (a) cumulative dividends of $140 per share per
annum, payable semi-annually on June 30 and December 31 of each calendar year,
commencing on June 30, 1999, (b) a liquidation preference of $1,000 per share
and (c) the right to elect one director in the event the Corporation fails to
tender in full three consecutive semi-annual dividend payments. In addition, the
Company has the right to redeem the Class A Preferred Stock, in part or whole,
at any time, upon payment of $1,300 per share of Class A Preferred Stock plus
any accrued and unpaid dividends on the Class A Preferred Stock so redeemed.
Subsequent to December 31, 1998, the holder of the 930 outstanding shares of
Class A Preferred Stock exchanged such shares for 930 shares of Class C
Cumulative Non-Convertible Redeemable Preferred Stock, Series A and received
warrants to purchase 260,000 shares of common stock, at an exercise price of
$1.0625 per share (see note 15). Dividends accrued on Class A Preferred Stock
through December 31, 1998 amounted to approximately $6,000.

The Class B Voting Preferred Stock, Series A ("Class B Voting Preferred")
has maximum liquidation rights of $.001 per share, but is not permitted to
receive dividends. The issued shares of the Class B Voting Preferred were
retired and canceled during 1997.

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 Junior Preferred 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.

8. Restructuring Expenses

In connection with the closure of its California offices initiated in
December 1997 and completed in February 1998, the Company initiated a
restructuring program, the expenses and charges relating to which consisted of
employee severance arrangements ($84,292), a settlement agreement with its
former President and Chief Executive Officer ($256,000), the elimination of
lease facilities in California and other related costs ($35,610).

F-14

<PAGE>
Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

9. Income Taxes

At December 31, 1998, the Company has available net operating loss
carryforwards of approximately $84,000,000 that expire in years 2002 through
2018, and general business credit carryovers of approximately $1,500,000, which
expire in years 2005 and 2006. These carryforwards are subject to the
limitations as described below.

The significant components of the Company's deferred tax assets and
liabilities, as of December 31, 1998, are as follows:

<TABLE>
<S> <C>
Current:
Reserve for accounts receivable, inventory and other. . $ 688,000
Non-current:
Depreciation. . . . . . . . . . . . . . . . . . . . . . 1,721,000
General business credit carryforwards . . . . . . . . . 1,527,000
Net operating loss carryforwards. . . . . . . . . . . . 33,649,000
------------
Total deferred tax assets. . . . . . . . . . . . . . . . 37,585,000
Valuation allowance for deferred tax assets . . . . . . (37,585,000)
------------
Net deferred tax assets. . . . . . . . . . . . . . . . . $ 0
============
</TABLE>

The decrease in the valuation allowance during the year ended December 31,
1998 in the amount of $191,000 was due principally to a partial utilization of
the net operating loss carryover.

The Company's profit (loss) before taxes is comprised of the following:

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1998 1997
---- ----
<S> <C> <C>
United States. . . . . . . . . $ (3,071,051) $ (9,871,203)
Foreign. . . . . . . . . . . . 693,877 150,472
------------- -------------
$ (2,377,174) $ (9,720,731)
============= =============
</TABLE>

The provision for income taxes of $29,541 for 1998 and $47,035 for 1997
consists principally of foreign taxes which are currently payable.

The reconciliation of income tax computed at the United States federal
statutory tax rates to the recorded income tax expense is as follows:

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1998 1997
---- ----
<S> <C> <C>
Tax (benefit) at United States
federal statutory rates . . . $ (808,000) $ (3,305,000)
Permanent differences. . . . . 999,000 2,325,000
Change in valuation allowance. (191,000) 980,000
Foreign and state income taxes 29,541 47,205
------------- -------------
$ 29,541 $ 47,205
============= =============
</TABLE>

The Tax Reform Act of 1986 enacted a complex set of rules limiting the
potential utilization of net operating loss and tax credit carryforwards in
periods following a corporate "ownership change." In general, for federal income
tax purposes, an ownership change is deemed to occur if the percentage of stock
of a loss corporation owned (actually,

F-15

<PAGE>
Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

constructively and, in some cases, deemed) by one or more "5% shareholders"
has increased by more than 50 percentage points over the lowest percentage
ownership of such stock owned during a three-year testing period. With regard to
the purchase of SPC, such a change in ownership occurred. As a result of the
change, the Company's ability to utilize its net operating loss carryforwards
and general business credits will be limited to approximately $1.2 million of
taxable income per year through December 31, 1996 and losses subsequent to 1996
can be fully utilized until they are used or expired. The SPC portion of the net
operating loss carryforwards totaling approximately $69 million are also subject
to the additional limitation that such losses can only be utilized to offset the
separate company taxable income of SPC.

In connection with the purchase of SPC, the Company applied for a closing
agreement with the Internal Revenue Service (the "IRS") pursuant to which the
Company will become jointly and severally liable for SPC's tax obligations upon
occurrence of a "triggering event" requiring recapture of dual consolidated
losses previously utilized by SPC. Such closing agreement would avoid SPC's
being required to recognize a tax of approximately $8 million on approximately
$24.5 million of SPC's previous dual consolidated losses. The IRS has, to date,
refused to grant the Company's application for such a closing agreement because
of alleged deficiencies in SPC's pre-acquisition dual loss certifications. The
IRS has indicated that it will consider alternative measures, which the Company
is presently evaluating, to correct these deficiencies and allow for such a
closing agreement. While the Company believes that the IRS should agree to such
a closing agreement, no assurance can be given that the IRS will do so and,
absent extraordinary relief, any failure to do so could result in the
recognition of this tax liability.

10. Stock Option Plans

The Company has four stock options plans: the 1994 Long-Term Incentive Plan
(the "1994 Incentive Plan"), Outside Directors and Advisors Stock Option Plan
(the "Company Directors Plan") and the Software Publishing Corporation 1989
Stock Option Plan and Software Publishing Corporation 1991 Stock Option Plan
(collectively, the "SPC Stock Plans"). All plans are administered by the Board
of Directors or a committee thereof.

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25, if
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.

Elements of the Company's various stock option plans include the following:

The 1994 Incentive Plan - In December 1993, the Company's Board of Directors
and stockholders adopted the 1994 Incentive Plan. Under the terms of the 1994
Incentive Plan, the Company's Board of Directors or a committee thereof may
grant options, stock appreciation rights, restricted stock performance grants of
the Company's common stock, cash or other assets to employees, consultants and
others who perform services for the Company at such prices as may be determined
by the Board of Directors (which price may be no less than 85% of the fair
market value of the common stock on the date of grant in the case of
nonqualified stock options). The maximum number of shares of common stock
subject to the 1994 Incentive Plan is 1,333,333. The options currently
outstanding vest over a period of up to five years and expire after 10 years.

The Company Directors Plan - In August 1995, the Company's Board of
Directors and stockholders approved the Company Directors Plan. Under the terms
of this plan, each new non-employee director and member of the Advisory
Committee receives options to purchase 25,000 shares exercisable at fair market
value on the date of grant upon becoming such a director or member. In addition,
on each August 1 thereafter each such person will receive options to purchase
10,000 shares of the Company's common stock at an exercise price equal to the
fair market value

F-16

<PAGE>
Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

at the respective dates of grant. The Advisory Committee of the Company was
dissolved in 1997. The maximum number of shares of common stock subject to the
Company Directors Plan is 166,666. The options vest over a period of two years
and expire after 10 years.

The SPC Plans - Options under the SPC Stock Plans may be granted for periods
of up to ten years, for the 1989 plan, at prices no less than 50% of fair value
and, for the 1991 plan, an exercise price no lower than 85% of fair value, in
each case for non qualified options, and at not less than fair market value for
incentive stock options. To date all options have been issued at fair value.
Options become exercisable at such times and under such conditions as determined
by the Board of Directors. As a result of the acquisition of SPC by the Company
all options outstanding under the SPC Plans were converted (based on the
exchange ratio used to complete the acquisition) to options to acquire the
Company's common stock. The maximum number of shares of common stock subject to
the SPC Stock Plans is 232,310.

In addition to the plans described above, the Company's Board of Directors
from time-to-time has granted outside consultants and vendors non-plan options.
Specific terms of each such grant are at the sole discretion of the Board of
Directors and are generally at prices not less than the fair market value at the
date of grant.

Option activities under the plans and for the non-plan options are detailed
in the following table:

<TABLE>
<CAPTION>
Weighted
Average
1994 Company's Exercise
Incentive Directors SPC Non- Price Per
Plan Plan Plans Plan Share
---- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
Outstanding at January 1, 1997 . . . 487,182 123,445 217,120 50,000 $ 11.97
Granted . . . . . . . . . . . . . . 1,170,906 16,666 18,333 -- 6.18
Exercised . . . . . . . . . . . . . (1,666) -- -- -- 6.00
Forfeited . . . . . . . . . . . . . (416,333) (8,333) (162,996) -- 10.29
Repriced - granted. . . . . . . . . 245,575 40,000 1,624 -- 3.75
Repriced - forfeited. . . . . . . . (327,433) (53,333) (2,165) -- 8.88
---------- -------- --------- ------ --------
Outstanding at December 31, 1997 . . 1,158,231 118,445 71,916 50,000 $ 6.87
---------- -------- --------- ------ --------

Granted . . . . . . . . . . . . . . 495,001 49,998 -- -- $ 0.95
Forfeited . . . . . . . . . . . . . (511,535) (12,781) (63,876) (33,334) (7.26)
Repriced - granted. . . . . . . . . 430,723 34,377 -- -- 1.38
Repriced - forfeited. . . . . . . . (430,723) (34,377) -- -- (4.01)
---------- -------- --------- ------ --------
Outstanding at December 31, 1998 . . 1,141,697 155,662 8,040 16,666 $ 2.43
========== ======== ========= ====== ========

Exercisable at December 31, 1998 . . 459,929 130,592 8,040 16,666 $ 3.72
========== ======== ========= ====== ========

Exercisable at December 31, 1997 . . 102,811 92,580 47,610 50,000 $ 11.52
========== ======== ========= ====== ========

</TABLE>

As of December 31, 1998, 1,719,117 shares of common stock are reserved for
issuance under the plans described above.

On May 27, 1998, the Company effected a one-for-three reverse stock split.
All option balances and activities have been adjusted to reflect this reverse
stock split.

F-17

<PAGE>

Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

In August 1997, the Company offered to the Company's then current officers,
employees and directors holding options granted under the Company's various
stock option plans an opportunity to reprice the exercise price of their
respective options granted under the Company's stock option plans to $3.75 per
share of common stock which was the fair value as of the effective date of this
repricing program, provided that the option holder surrender 25% of their
options.

Effective July 1998, the Company adopted a repricing program pursuant to
which (a) the Company offered to each optionee (each, an "Eligible Optionee")
granted one or more options under any of the Company's various stock plans who,
as of July 17, 1998, was either an employee or a director of the Company, the
right to exchange each outstanding option (each, an "Eligible Option") granted
to such Eligible Optionee under the Company's various stock option plans for the
issuance of two options (collectively, the "Repriced Options"), the first such
option (the "New Option") entitling the Eligible Optionee to purchase up to 75%
of the number of shares of common stock that were issuable under the Eligible
Option so exchanged, at an exercise price per share equal to $1.375, the closing
per share price on the effective date of the repricing program, and the second
such option (the "Non-Repriced Option") entitling such Eligible Optionee to
purchase up to 25% of the number of shares of common stock that were issuable
under the Eligible Option so exchanged, at an exercise price per share equal to
the exercise price per share under the Eligible Option so exchanged. To the
extent the Eligible Option so exchanged was exercisable, the Non-Repriced Option
shall be exercisable and, where the number of shares exercisable under the
Eligible Option so exchanged exceeded the number of shares issuable under the
Non-Repriced Option, any such options shall be immediately exercisable under the
New Option. Further, to the extent the Eligible Option so exchanged was not
exercisable, the Non-Repriced Option shall first become exercisable in
accordance with the earliest dates set forth in the Eligible Option so exchanged
for the exercisability of shares issuable under the Eligible Option so
exchanged, and the shares of common stock issuable under the New Option shall
become exercisable over the next four years. In addition, each New Option shall
have a term expiring ten years from the effective date of the repricing program
and shall be deemed granted under such of the Plans under which the Eligible
Option was originally granted and the Non-Repriced Option shall be deemed
granted under such of the Plans under which the Eligible Option was originally
granted. Except as otherwise noted, each of the Repriced Options shall otherwise
be identical to the Eligible Option so exchanged.

The weighted average fair value of options granted was $.60 and $4.71 for
1998 and 1997, respectively.

F-18
<PAGE>
Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

At December 31, 1998, for each of the following classes of options as
determined by range of exercise price, the following information regarding
weighted-average exercise prices and weighted average remaining contractual
lives of each class is as follows:

<TABLE>
<CAPTION>
Weighted
Weighted Average
Weighted Average Exercise
Average Remaining Number of Price of
Number Exercise Contract Life Options Options
of Price of of Outstanding Currently Currently
Option Class Options Options Options Exercisable Exercisable
------------ ------- -------- -------------- ----------- -----------
Prices ranging from:
<S> <C> <C> <C> <C> <C>
$0.656 - $1.99 . . 975,927 $ 1.06 9.67 317,425 $ .93
$2.00 - $3.99. . . 184,660 3.52 7.81 165,438 3.53
$4.00 - $5.99. . . 499 4.78 8.76 249 5.06
$6.00 - $7.99. . . 61,413 6.61 6.41 50,250 6.50
$8.00 - $ 9.99 . . -- -- -- -- --
$10.00 - $11.99. . 54,779 11.17 7.09 45,411 11.20
$12.00 - $13.99. . 16,373 13.36 6.83 16,373 13.36
$14.00 - $15.99. . -- -- -- -- --
$16.00 - $17.99. . 28,331 17.63 7.58 19,998 17.63
$18.00 - $21.99. . -- -- -- -- --
$22.00 - $23.99. . 83 23.25 7.70 83 23.25
</TABLE>

Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had been
accounting for its employee stock options under the fair value method of that
statement. The fair value of these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following assumptions for
1998 and 1997, respectively: weighted-average risk-free interest rates of 5.21%
for 1998 and 6.25% for 1997; no dividends; volatility factors of the expected
market price of the Company's common stock of .7 for 1998 and 1.2046 for 1997;
and a weighted-average expected life of the options of five years for 1998 and
5.1 years for 1997.

For purposes of pro forma disclosures, the estimated fair value of the
options granted in 1998, 1997 and 1996 is amortized to expense over the options'
vesting period. The Company's pro forma information follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Pro forma net loss. . . . . . . . . . . . . . . . . . $(3,083,875) $(11,204,354)
Pro forma net loss per share - basic and diluted. . . $ (.84) (1.37)
</TABLE>

The pro forma disclosures presented above for 1998 and 1997, respectively,
reflect compensation expense only for options granted in 1998, 1997 and 1996.
These amounts may not necessarily be indicative of the pro forma effect of SFAS
No. 123 for future periods in which options may be granted.

F-19
<PAGE>
Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

11. Commitments and Contingencies

Leases

The Company leases various office space under non-cancelable operating
leases. In addition to the fixed rentals, certain of the leases require the
Company to pay additional amounts based on specified costs related to the
property. Certain of the leases have renewal options for periods of up to 2
years. Rental expense was approximately $158,000 and $540,000 in 1998 and 1997,
respectively. Restricted cash of $200,000 at December 31, 1998 represents
collateral for a letter of credit of like amount which serves as a lease
security deposit for premises in California previously occupied by the Company
and now sub-leased.

Future minimum lease payments under non-cancelable operating leases with
terms of one year or more are as follows:
<TABLE>

<S> <C>
1999 . . . . . $ 244,000
2000 . . . . . 136,000
2001 . . . . . 272,000
2002 . . . . . 51,000
----------
Total. . . . . $ 703,000
==========
</TABLE>

Pending Litigation

On January 30, 1998, an action was commenced against the Company, Mark E.
Leininger and Barry A. Cinnamon in the United States District Court, Southern
District of New York. Mr. Leininger currently is President, Chief Operating
Officer and a director of the Company and Mr. Cinnamon formerly was Chairman of
the Board, President and Chief Executive Officer of the Company. In the action,
plaintiffs allege that, in October 1997, they purchased an aggregate 296,333
shares of the Company's common stock for gross proceeds of $919,495 based upon
certain statements made to one of the plaintiffs. Plaintiffs further allege that
such statements were intentional misrepresentations of material fact that were
designed to deceive plaintiffs as to the Company's true financial state and to
induce the plaintiffs to invest in the Company. Plaintiffs seek recission of
their investment and a return of their purchase price and certain other relief.
The Company believes that these claims are without merit and intends to
vigorously defend itself in this action. The Company has filed an answer in this
action denying the plaintiffs' allegations and asserting affirmative defenses,
including that the plaintiffs' subscription agreements bar plaintiffs' claims,
and asserting counterclaims that, among other things, plaintiffs breached
certain of the representations contained in their subscription agreements, that
plaintiff Altman breached his fiduciary duties to the Company and that
plaintiffs' violated Section 13(d) of the Exchange Act by filing a materially
false and misleading Schedule 13D with respect to the Common Stock.

In May 1998, the action commenced by the Company's former Chairman of the
Board, President and Chief Executive Officer and his wife, also a former officer
and director of the Company, was settled at a cost to the Company of
approximately $200,000, which amount had been accrued at December 31,1997.

In the fourth quarter of 1998, an action was commenced against the Company
in California in which plaintiff is seeking $300,000 in damages for the
Company's alleged violation of a lease for office space located in San Jose,
California. This is the location at which SPC had its principal place of
business and at which the Company had its principal executive offices during the
period of January 1997 through January 1998. The Company no longer has any
offices at this location. The Company believes that plaintiffs claims in this
action are without merit and intends to

F-20

<PAGE>

Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

vigorously defend itself in this action. The Company has filed an answer in
this action denying the plaintiffs' allegations and this action is currently in
the discovery stage.

The Company has other litigation matters in progress in the ordinary course
of business. In the opinion of management, all of such other pending litigation
of the Company will be resolved without a material adverse effect of the
Company's financial position, results of operations or cash flows.

12. Foreign and Domestic Operations

The Company conducts its business within the computer software industry.

Foreign and domestic operations as of December 31, 1998 and for the year
then ended are as follows:

<TABLE>
<CAPTION>
United
States Europe Eliminations Consolidated
------ ------ ------------ ------------

<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . $ 8,431,271 $ 9,840,462 -- $ 18,271,733
(Loss) income before income taxes . (3,071,051) 693,877 -- (2,377,174)
Depreciation and amortization . . . 2,462,708 108,216 -- 2,570,924
Income tax expense. . . . . . . . . -- 29,541 -- 29,541
Interest expense. . . . . . . . . . 24,084 43,341 -- 67,425
Interest income . . . . . . . . . . 60,148 86,359 -- 146,507

Identifiable assets as of
December 31, 1998 . . . . . . . . $ 6,780,412 $ 4,789,456 $(1,257,172) $ 10,312,696
=========== =========== ============ ============
</TABLE>

Foreign and domestic operations as of December 31, 1997 and for the year
then ended are as follows:

<TABLE>
<CAPTION>
United
States Europe Eliminations Consolidated
------ ------ ------------ ------------

<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . $ 8,770,684 $ 8,386,181 -- $ 17,156,865
(Loss) income before income taxes. (10,445,713) 724,982 -- (9,720,731)
Depreciation and amortization . . 6,305,216 53,515 -- 6,358,731
Income tax expense. . . . . . . . 2,789 44,246 -- 47,035
Interest expense. . . . . . . . . 9,865 15,980 -- 25,845
Interest income . . . . . . . . . 38,088 27,860 -- 65,948

Identifiable assets as of
December 31, 1997. . . . . . . . $ 7,554,216 $ 3,489,164 $ (413,878) $ 10,629,502
============= =========== ============ ============
</TABLE>

13. Related Party Transaction

The Company incurred legal expenses of approximately $448,000 in 1998 and
$600,000 in 1997 to a law firm in which a director of the Company was a member,
of which approximately $278,000 is included in accounts payable at December 31,
1998.

F-21

<PAGE>

Software Publishing Corporatin Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998

14. Customer Concentration and Credit Risk

15. Subsequent Events

In January 1999, the holder of all 930 shares of the Class A 14% Cumulative
Non-Convertible Redeemable Preferred Stock of the Company exchanged such Class A
Preferred Stock shares for (i) the issuance of 930 shares of the Class C 11%
Cumulative Non-Convertible Redeemable Preferred Stock of the Company, (ii) the
issuance of warrants to purchase 260,000 shares of Common Stock, at an exercise
price of $1.0625 per share, exercisable immediately and expiring in January
2006, (iii) a payment of $7,134 representing all accrued dividends on the Class
A Shares through the effective date of such exchange. The Certificate of
Designations with respect to the Class C Preferred Stock authorizes a class of
1,000 shares of Class C Preferred Stock. Holders of shares of Class C Preferred
Stock will be entitled to (a) cumulative dividends of $110 per share per annum,
payable semi-annually on June 30 and December 31 of each calendar year,
commencing on June 30, 1999, (b) a liquidation preference of $1,000 per share
and (c) the right to elect one director in the event the Corporation fails to
tender in full three consecutive semi-annual dividend payments. In addition, the
Company has the right to redeem the Class C Preferred Stock, in part or whole,
at any time, upon payment of $1,000 per share of Class C Preferred Stock.

F-22

<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated: April 14, 1999 SOFTWARE PUBLISHING CORPORATION
HOLDINGS, INC.

By: /s/ Mark E. Leininger
-------------------------------------
Mark E. Leininger
President and Chief Operating Officer

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Annual Report on Form 10-KSB has been signed on April 14, 1999 by
the following persons in the capacities indicated. Each person whose signature
appears below constitutes and appoints Mark E. Leininger, with full power of
substitution, his/her true and lawful attorney-in-fact and agent to do any and
all acts and things in his/her name and on his/her behalf in his/her capacities
indicated below which he may deem necessary or advisable to enable Software
Publishing Corporation Holdings, Inc. to comply with the Securities Exchange Act
of 1934, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Annual Report on
Form 10-KSB, including specifically, but not limited to, power and authority to
sign for him/her in his/her name in the capacities stated below, any and all
amendments thereto, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in such connection, as fully to all intents and purposes as
he/her might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.

/s/ Mark E. Leininger President, Chief Operating Officer and Director
- ------------------------------ (Principal Executive and Financial Officer)
Mark E. Leininger

/s/ Marc E. Jaffe Chairman of the Board, Secretary and Director
- ------------------------------
Marc E. Jaffe

/s/ Norman W. Alexander Director
- ------------------------------
Norman W. Alexander

/s/ Neil M. Kaufman Director
- ------------------------------
Neil M. Kaufman

Director
- ------------------------------
Martin F. Schacker

-70-

<PAGE>

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.

ANNUAL REPORT ON FORM 10-K
Fiscal Year Ended December 31, 1998

EXHIBIT INDEX

Exhibit
Number Description of Exhibit
- ------- ----------------------

3.1 Composite of Certificate of Incorporation of the Company, as amended
to date. (Incorporated by reference to Exhibit 3.1 to the
Company's Current Report on Form 10-QSB (Date of Report: January
11, 1999) (Commission File Number: 1-14076), filed with the Commission
on January 20, 1999.)
3.2 By-laws of the Company, as amended. (Incorporated by reference to
Exhibit 3.3 to the Company's Annual Report on Form 10-KSB
(Commission File Number: 1-14076), for the year ended December 31,
1997, filed with the Commission on April 16, 1998.)
4.1 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-KSB
(Commission File Number: 1-14076), for the year ended December 31,
1997, filed with the Commission on April 16, 1998.)
10.1 Company 1994 Long Term Incentive Plan, as amended to date.
(Incorporated by reference to Exhibit 10.46 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076),
for the quarter ended June 30, 1997, filed with the Commission on
August 19, 1997.)
10.2 Company Outside Director and Advisor Stock Option Plan, as amended
to date. (Incorporated by reference to Exhibit 10.47 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended June 30, 1997, filed with the
Commission on August 19, 1997.)
10.3 SPC 1989 Stock Plan. (Incorporated by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-8 (Registration Number:
333-19509), filed with the Commission on January 10, 1997.)
10.4 SPC 1991 Stock Option Plan. (Incorporated by reference to Exhibit
4.3 to the Company's Registration Statement on Form S-8
(Registration Number: 333-19509), filed with the Commission on
January 10, 1997.)
10.5 Settlement and General Release Agreement, dated as of September 26,
1997, among Joseph Szczepaniak, the Company and Software Publishing
Corporation. (Incorporated by reference to Exhibit 10.52 to the
Company's Quarterly Report on Form 10-QSB (Commission File
Number: 1-14076), for the quarter ended September 30, 1997, filed
with the Commission on November 14, 1997.)
10.6 Settlement and General Release Agreement, dated as of July 25, 1997,
among Daniel J. Fraisl, the Company and Software Publishing
Corporation. (Incorporated by reference to Exhibit 10.48 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended June 30, 1997, filed with the
Commission on August 19, 1997.)
10.7 Form of Indemnification Agreement between the Registrant and its
executive officers and directors. (Incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on Form SB-2
(Registration Number: 33-97184), filed with the Commission on
September 21, 1995.)
10.8 Form of Underwriters' Purchase Option (Specimen). (Incorporated by
reference to Exhibit 10.18 to the Company's Annual Report on Form
10-KSB, for the year ended December 31, 1997, filed with the
Commission on April 16, 1998.)
10.9 Registration Rights Agreement, dated July 31, 1996, between the
Company and the former stockholders of Serif Inc. and Serif (Europe)
Limited. (Incorporated by reference to Exhibit 10.31 to the Company's
Current Report on Form 8-K (Date of Report: July 31, 1996)
(Commission File Number: 1-14076), filed with the Commission on
August 13, 1996.)
10.10 Lease Agreement, dated September 7, 1995, between Community Towers
LLC and the Company, for facilities located at 111 North Market
Street, San Jose, California. (Incorporated by reference to Exhibit
10.22 to Software Publishing Corporation's Annual Report on Form
10-K (Commission File Number: 0-14025), for the fiscal year ended
September 30, 1995, filed with the Commission on December 29, 1995.)

-71-

<PAGE>

10.11 Letter Agreement, dated March 27, 1997, between the Company and
M.S. Farrell & Co., Inc. (Incorporated by reference to Exhibit 10.45
to the Company's Annual Report on Form 10-KSB (Commission File
Number: 1-14076), for the year ended December 31, 1996, filed with the
Commission on April 15, 1997.)
10.12 Financial Advisory Agreement, dated as of November 20, 1997, between
the Company and M.S. Farrell & Co., Inc. (Incorporated by reference to
Exhibit 10.47 to the Company's Annual Report on Form 10-KSB
(Commission File Number: 1-14076), for the year ended December 31,
1997, filed with the Commission on April 16, 1998.)
10.13 Amendment to the Financial Advisory Agreement, dated as of January
28, 1998, between the Company and M.S. Farrell & Co., Inc.
(Incorporated by reference to Exhibit 10.48 to the Company's Annual
Report on Form 10-KSB (Commission File Number: 1-14076), for the year
ended December 31, 1997, filed with the Commission on April 16, 1998.)
10.14 Letter Agreement, dated April 28, 1998, between the Company and
M.S. Farrell & Co., Inc. (Incorporated by reference to Exhibit 10.59
to the Company's Quarterly Report on Form 10-QSB (Commission
File Number: 1-14076), for the quarter ended March 31, 1998,
filed with the Commission on May 13, 1998.)
10.15 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. (Incorporated by
reference to Exhibit 10.62 to the Company's Quarterly Report
on Form 10-QSB (Commission File Number: 1-14076), for the quarter
ended June 30, 1998, filed with the Commission on August 14, 1998.)
10.16 Consulting Agreement, dated as of July 25, 1997, between the Company
and Daniel J. Fraisl. (Incorporated by reference to Exhibit 10.49
to the Company's Quarterly Report on Form 10-QSB (Commission
File Number: 1-14076), for the quarter ended June 30, 1997, filed
with the Commission on August 19, 1997.)
10.17 Form of Subscription Agreements, each dated October 23, 1997,
between the Company and each of Ronald L. Altman (with respect to
24,000 shares of Common Stock), Gerold M. Fleischner (with respect
to 24,000 shares of Common Stock), Howard Milstein (with respect
to 865,000 shares of Common Stock), Patriot Group, LP (with
respect to 24,000 shares of Common Stock) and Stephen P. Rosenblatt
(with respect to 24,000 shares of Common Stock). (Incorporated by
reference to Exhibit 10.50 to the Company's Quarterly Report on
Form 10-QSB (Commission File Number: 1-14076), for the quarter
ended September 30, 1997, filed with the Commission on November 14,
1997.)
10.18 Registration Rights Agreement, dated October 23, 1997, among the
Company, Ronald L. Altman, Gerold M. Fleischner, Howard Milstein,
Patriot Group, LP and Stephen P. Rosenblatt. (Incorporated by
reference to Exhibit 10.51 to the Company's Quarterly Report on
Form 10-QSB (Commission File Number: 1-14076), for the quarter ended
September 30, 1997, filed with the Commission on November 14, 1997.)
10.19 Option, dated October 23, 1997, issued to Ronald L. Altman.
(Incorporated by reference to Exhibit 10.53 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076), for
the quarter ended September 30, 1997, filed with the Commission on
November 14, 1997.)
10.20 Settlement and Release Agreement, dated December 19, 1997, among
the Company, Barry A. Cinnamon and Lori Kramer Cinnamon.
(Incorporated by reference to Exhibit 10.54 to the Company's Current
Report on Form 8-K (Date of Report: December 19, 1997) (Commission
File Number: 1-14076), filed with the Commission on December 30,
1997.)
10.21 Settlement Agreement, dated May 22, 1998, among the Company, Neil M.
Kaufman, Esq., Mark E. Leininger and Barry Cinnamon and Lori Cinnamon.
10.22 License Agreement, dated December 19, 1997, between Software
Publishing Corporation and Barry A. Cinnamon. (Incorporated by
reference to Exhibit 10.55 to the Company's Current Report on Form
8-K (Date of Report: December 19, 1997) (Commission File Number:
1-14076), filed with the Commission on December 30, 1997.)
10.23 Amendment No. 1 to Escrow Agreement, dated as of April 1, 1997,
among the Company, Serif Inc., Norman W. Alexander, Moritt, Hock &
Hamroff, LLP and Blau, Kramer, Wactlar & Lieberman, P.C. (Incorporated
by reference to Exhibit 10.49 to the Company's Annual Report
on Form 10-KSB (Commission File Number: 1-14076), for the year ended
December 31, 1997, filed with the Commission on April 16, 1998.)
10.24 Amendment No. 1 to Escrow Agreement, dated as of April 1, 1997, among
the Company, Serif (Europe) Limited, Norman W. Alexander, Moritt,
Hock & Hamroff, LLP and Blau, Kramer, Wactlar & Lieberman, P.C.
(Incorporated by reference to Exhibit 10.50 to the Company's
Annual Report on Form 10-KSB (Commission File Number: 1-14076),
for the year ended December 31, 1997, filed with the
Commission on April 16, 1998.)

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10.25 Rights Agreement, dated as of March 31, 1998, between the Company
and American Stock Transfer & Trust Company. (Incorporated by
reference to Exhibit 10.51 to the Company's Annual Report on Form
10-KSB (Commission File Number: 1-14076), for the year ended December
31, 1997, filed with the Commission on April 16, 1998.)
10.26 Warrant, dated April 7, 1998, registered in the name of Boru
Enterprises, Inc., with respect to 50,000 shares of Common Stock
(before giving effect to the Company's one-for-three reverse
stock split made effective May 27, 1998). (Incorporated by
reference to Exhibit 10.53 to the Company's Quarterly Report on Form
10-QSB (Commission File Number: 1-14076), for the quarter ended March
31, 1998, filed with the Commission on May 13, 1998.)
10.27 Warrant, dated April 7, 1998, registered in the name of Boru
Enterprises, Inc., with respect to 50,000 shares of Common Stock
(before giving effect to the Company's one-for-three reverse stock
split made effective May 27,1998). (Incorporated by reference to
Exhibit 10.54 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended March 31,
1998, filed with the Commission on May 13, 1998.)
10.28 Form of Subscription Agreement, dated April 28, 1998, between the
Company and The Whitehaven Group, LLC. (Incorporated by reference
to Exhibit 10.55 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended March 31,
1998, filed with the Commission on May 13, 1998.)
10.29 Warrant, dated April 28, 1998, registered in the name of The
Whitehaven Group, LLC, with respect to 550,000 shares of Common
Stock (before giving effect to the Company's one-for-three reverse
stock split made effective May 27, 1998). (Incorporated by
reference to Exhibit 10.56 to the Company's Quarterly Report on Form
10-QSB (Commission File Number: 1-14076), for the quarter ended March
31, 1998, filed with the Commission on May 13, 1998.)
10.30 Warrant, dated April 28, 1998, registered in the name of The
Whitehaven Group, LLC, with respect to 250,000 shares of Common Stock
(before giving effect to the Company's one-for-three reverse stock
split made effective May 27, 1998). (Incorporated by reference to
Exhibit 10.57 to the Company's Quarterly Report on Form 10-QSB
(Commission File Number: 1-14076), for the quarter ended March 31,
1998, filed with the Commission on May 13, 1998.)
10.31 Form of Subscription Agreement, each executed between April 29,
and May 6, 1998, between the Company and each of the April/May 1998
Investors. (Incorporated by reference to Exhibit 10.58 to the
Company's Quarterly Report on Form 10-QSB (Commission File Number:
1-14076), for the quarter ended March 31, 1998, filed with the
Commission on May 13, 1998.)
10.32 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. (Incorporated by reference to Exhibit 10.60 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076),
for the quarter ended June 30, 1998, filed with the Commission on
August 14, 1998.)
10.33 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. (Incorporated by reference to Exhibit 10.61 to the Company's
Quarterly Report on Form 10-QSB (Commission File Number: 1-14076), for
the quarter ended June 30, 1998, filed with the Commission on August
14, 1998.)
10.34 Form of Subscription Agreement utilized in the December 1998 Private
Placement. (Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 10-QSB (Date of Report: December
15, 1998)(Commission File Number: 1-14076), filed with the Commission
on December 16, 1998.)
10.35 Stock Exchange Agreement, dated December 15, 1998, between the Company
and Seafish Partners. (Incorporated by reference to Exhibit 10.2 to
the Company's Current Report on Form 10-QSB (Date of Report:
December 15, 1998) (Commission File Number: 1-14076), filed with the
Commission on December 16, 1998.)
10.36 Letter Agreement, dated January 4, 1999, between the Company and
Seafish Partners. (Incorporated by reference to Exhibit 10.3 to the
Company's Current Report on Form 10-QSB (Date of Report: January 11,
1999) (Commission File Number: 1-14076), filed with the Commission
on January 20, 1999.)
10.37 Form of Subscription Agreement utilized in the Common Stock Sales.
(Incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 10-QSB (Date of Report: December 15, 1998)
(Commission File Number: 1-14076), filed with the Commission on
December 16, 1998.)

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10.38 Consulting Agreement between the Company and Target Capital Corp.
(Incorporated by reference to Exhibit 10.1 to the Company's Current
Report on Form 10-QSB (Date of Report: January 11, 1999) (Commission
File Number: 1-14076), filed with the Commission on January 20, 1999.)
10.39 Consulting Agreement between the Company and Michel Ladovitch.
(Incorporated by reference to Exhibit 10.2 to the Company's Current
Report on Form 10-QSB (Date of Report: January 11, 1999)
(Commission File Number: 1-14076), filed with the Commission on
January 20, 1999.)
10.40 Warrant Certificate, with respect to 520,000 shares of Common Stock,
registered in the name of Target Capital Corp. (Incorporated by
reference to Exhibit 10.5 to the Company's Current Report on Form
10-QSB (Date of Report: January 11, 1999) (Commission File Number:
1-14076), filed with the Commission on January 20, 1999.)
10.41 Warrant Certificate, with respect to 120,000 shares of Common Stock,
registered in the name of United Krasna Organizations.
(Incorporated by reference to Exhibit 10.6 to the Company's
Current Report on Form 10-QSB (Date of Report: January 11, 1999)
(Commission File Number: 1-14076), filed with the Commission on
January 20, 1999.)
10.42 Warrant Certificate, with respect to 260,000 shares of Common
Stock, registered in the name of Seafish Partners. (Incorporated
by reference to Exhibit 10.8 to the Company's Current Report on
Form 10-QSB (Date of Report: January 11, 1999) (Commission File
Number: 1-14076), filed with the Commission on January 20, 1999.)
10.43 Warrant Certificate, with respect to 600,000 shares of Common Stock,
registered in the name of Regency Investment Partners.
10.44 Letter Agreement, dated December 17, 1998, between the Company Marc
E. Jaffe. (Incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 10-QSB (Date of Report:
January 11, 1999) (Commission File Number: 1-14076), filed with the
Commission on January 20, 1999.)
10.45 Advice of Borrowing Terms, dated December 29, 1998, between
Serif (Europe) Limited and National Westminster Bank PLC, and
Mortgage Debenture, dated October 9, 1989, between Serif (Europe)
Limited and National Westminster Bank PLC.
21 Subsidiaries of the Company.
23.1 Consent of Richard A. Eisner & Company, LLP.
23.2 Consent of Ernst & Young.
24 Powers of Attorney (set forth on the signature page of this Annual
Report on Form 10-KSB).
27 Financial Data Schedule.

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SETTLEMENT AGREEMENT

Agreement made this 22nd day of May 1998 by and among Software Publishing
Corporation Holdings, Inc. (the "Company"), with its principal place of business
located at 3A Oak Road, Fairfield, New Jersey 07004, Neil Kaufman, Esq.
("Kaufman"), having an address at Kaufman & Associates, LLC, 50 Charles
Lindbergh Blvd., Suite 206, Mitchel Field, New York 11553, Mark Leininger
("Leininger"), having an address at 27 Liberty Street, Ridgewood, New Jersey
07450, and Barry Cinnamon and Lori Cinnamon, residing at 18480 Hillview Drive,
Los Gatos, California 95030 (collectively referred to herein as the
"Cinnamons").

WHEREAS, the Cinnamons have filed with the Superior Court of New Jersey,
Law Division, Essex County, a Verified Complaint dated February 13, 1998 in an
action entitled, Barry Cinnamon, et als. v. Software Publishing Corporation
Holdings, Inc., Neil Kaufman, Esq., Mark Leininger and John Does 1-10 (name
being fictitious), Docket No. L-1870-98 (the "Litigation");

WHEREAS, the defendants in the Litigation have expressed their denial of
the claims as alleged by the Cinnamons; and

WHEREAS, in order to avoid future protracted and expensive litigation, the
parties hereto are desirous of settling any and all claims each party may have
against the other in this litigation and anyone else related to the subject
matter of the litigation.

NOW, THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the parties agree as follows:

1. Stipulation and Notice of Dismissal with Prejudice. The Cinnamons shall
cause their counsel to execute, deliver and promptly file on the Closing Date
(as such term is hereafter defined) a Stipulation of Dismissal with Prejudice
which provides, inter alia for the dismissal of the Litigation as against all
defendants with prejudice and without costs in the form annexed hereto as
Exhibit A.

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<PAGE>

2. Reaffirmation. The Company and the Cinnamons hereby expressly re-affirm
the validity and binding effect of the terms and conditions of the that certain
Settlement and General Release Agreement between the Cinnamons and the Company,
dated December 19, 1997 (the "Original Agreement"), which shall remain in full
force and effect, except as specifically modified herein by the terms and
conditions of this Agreement.

3. Releases. The parties hereto specifically reaffirm and restate the terms
of Section 5 of the Original Agreement as if repeated herein in full. The
parties hereto hereby confirm that the releases granted by the Company and the
Cinnamons pursuant to Sections 5(a) and (b) of the Original Agreement operate,
and shall continue to operate, as a release of any claim which might be brought
by each of them against the other which may have arisen or become known to exist
after December 19, 1997. This release of claims shall apply to and in favor of
the Cinnamons and the Company, its subsidiaries, and its and their respective
officers, directors, stockholders, employees, agents, attorneys, investment
bankers, subsidiaries, servants, successors, insurers, affiliates and their
successors and assigns. Further, the Cinnamons hereby specifically release,
without limiting the generality of the foregoing, Neil M. Kaufman, and all law
firms in which he has been or may be a partner or member, Martin Schacker, M.S.
Farrell & Co., Inc., Marc Jaffe, Neil R. Austrian, Jr., Mark Leininger and
Norman Alexander for all claims, provided that the Cinnamons shall receive a
release from said individuals or and/or companies for all claims. A copy of the
form of Releases to be exchanged between the parties is attached hereto as
Exhibit B.

4. Sale of Shares.

(a) On May 26, 1998 (the "Closing Date"), the Cinnamons shall irrevocably
sell, assign, transfer and deliver to certain third party investors a total of
895,320 shares of stock ("Shares") held in the Company, free and clear of all
liens, charges, security, interest and encumbrances, pursuant

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<PAGE>

to Share Purchase Agreements in the form annexed hereto as Exhibit C. Barry
Cinnamon hereby warrants and represents that he has sold all other shares
of stock in the Company which he has ever owned, including without limitation,
5,000 shares owned by him on April 1, 1998.

(b) Payment for all Shares purchased in a private sale shall be made by
wire transfer or attorney's trust account check. Simultaneously, with receipt of
such payment, the Cinnamons shall deliver to such third parties, or counsel to
the Company acting as escrow agent on their behalf, certificates evidencing all
Shares with stock powers duly endorsed by the Cinnamons in blank with signatures
guaranteed.

(c) It shall not be the Cinnamons' responsibility to ensure that the third
party investors acquiring their interest in the certificates receive their
Shares which are the subject matter of this sale.

(d) Effective on the Closing Date, the Cinnamons shall surrender to the
Company all of the outstanding stock options granted to them at any time by the
Company or any of its subsidiaries, or alternatively, said options shall be
deemed terminated.

(e) Any tax obligation incurred by the Cinnamons in connection with the
transfer or sale of his shares of stock, or termination/surrender of their
options, shall be the Cinnamons' sole responsibility.

5. Severance Payments and Other Adjustments.

The Cinnamons acknowledge their prior receipt of $86,249.85 as provided in
the Original Agreement, and on the Closing Date, the Company shall tender
payment of $114,000 to the Cinnamons by attorney's trust account check or wire
transfer to an account designated by the Cinnamons. Such total amount of
$200,249.85 shall be deemed tendered in full satisfaction of all obligations of
the Company to make payments to the Cinnamons under the Original Agreement or

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<PAGE>

otherwise.

6. Restraints on Interference.

(a) The Company agrees that it will not interfere, directly or indirectly,
with any future business endeavors undertaken by the Cinnamons which are not
competitive with the Company's business or that of its subsidiaries or their
respective successors in interest.

(b) The Cinnamons agree that they will take no action, directly or
indirectly, to interfere with the operation, business or management of the
Company or its subsidiaries. In that regard, the Cinnamons agree not to directly
or indirectly purchase or hold of record or beneficially, any shares of stock of
the Company, attend any meeting of shareholders, cooperate with any dissident
stockholders (except under subpoena or court order) or act as an agent or
representative or proxy holder for anyone else or otherwise interfere or harass
the Company's (or its subsidiaries') officers, directors, employees, attorneys,
contractors or investment bankers, including, but not limited to Marc Jaffe,
Neil Kaufman and Mark Leininger.

(c) Mark Leininger and Marc Jaffe are designated as the contact persons
within the Company that the Cinnamons should deal with should they have any
questions regarding the Original Agreement or this Agreement or any other
aspects of their prior employment with the Company or its subsidiaries.

(d) Neither of the Cinnamons shall have any discussions with any employee
of the Company or any of its subsidiaries for a period of twelve (12) months,
commencing on the date hereof: (i) regarding the Company, its subsidiaries, or
its or their respective businesses, operations or management personnel; or (ii)
in which the Cinnamons solicit the employment of such employee of the Company or
its subsidiary for the benefit of any other entity or person (regardless of
whether the Cinnamons would themselves derive a benefit from such new
employment), or encourage any

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<PAGE>

such employee to leave the employ of the Company or its subsidiaries, or
(iii) which are initiated by either of the Cinnamons other than in an unplanned
and spontaneous fashion (such as meeting by chance at an airport or on the
street), and which do not relate to the business operations or management of the
Company, except that the Cinnamons may have planned or non-spontaneous
discussions with Neil Nathenson, Wayne Zabel, June Marshall and Roxanne
Cinnamon, provided there is no discussion of the business, operations, affairs
or management of the Company or its subsidiaries with such persons. Nothing in
this Section shall affect or diminish the terms of Section 17(b) of the Original
Agreement, which shall remain in full force and effect.

(e) Notwithstanding the provisions of subsection (d)(i) or (iii) above, in
the event that Barry Cinnamon is employed by an entity which does business, or
may do business, with the Company, he shall be permitted to discuss the business
which is the subject of the transaction with employees of the Company, subject
to the restriction of Section 8 of the Original Agreement.

7. Bankruptcy and Insolvency.

(a) The Cinnamons warrant and represent that except as set forth on Exhibit
D, neither of them have had any discussions or communications with any third
party concerning any possible bankruptcy, insolvency, liquidation, receivership,
or assignment for the benefit of creditors of the assets, of the Company or any
of its subsidiaries, and each of the Cinnamons hereby covenants not to have such
discussions or communications in the future. Neither of the Cinnamons shall
participate or cooperate in placing the Company or any of its subsidiaries into
an involuntary bankruptcy, insolvency, liquidation, receivership or otherwise
affirmatively participate in any way in a creditor's action against the Company
or any of its subsidiaries.

(b) The Cinnamons agree and acknowledge that the purchasers of the Shares
pursuant to the Share Purchase Agreements shall be third party beneficiaries of
the representations, warranties

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<PAGE>

and covenants set forth in Paragraph 7(a) hereof, and have entered into the
Share Purchase Agreements in reliance thereon. Notwithstanding the foregoing,
the Cinnamons shall in no event be liable to any such purchasers to the extent
they do not have an interest in the Shares at the time any breach of Section
7(a) occurs; and provided further, that the provisions of this Section 7(b)
shall not be transferrable to any third party who purchases Shares from a person
or entity who is a party to any of the Share Purchase Agreements.

8. Lawsuits.

(a) The Cinnamons agree that they will cooperate with the Company, its
officers, directors, subsidiaries, employees, legal advisors and agents in its
and their defense to the suit captioned Ronald Altman and Harold Milstein v.
Software Publishing Corporation Holdings, Inc. et al., filed in the United
States District Court for the Southern District of New York, Docket
No. 98Civ-333 (the "Milstein Litigation"), and shall not assert against any
such party a cross-claim, third party complaint, affirmative defense,
counter-claim or otherwise, with respect to any claim of wrongdoing, such
as malfeasance, malpractice, conflict of interest, breach of fiduciary duty
or improper behavior, in defense to the allegations of the plaintiffs in
the Milstein Litigation, provided that neither the Company nor Leininger shall
have obtained, at any time, any release of claims, indemnification or insurance,
or received any other benefit, from any of the plaintiffs in the Milstein
Litigation, which is not available to the Cinnamons and such plaintiffs.

(b) The Company shall defend and indemnify the Cinnamons in connection with
the Milstein Litigation (or any other similar litigation) as provided in, and
subject to the applicable provisions of the Original Agreement, the Bylaws of
the Company, and Delaware law. It is expressly understood and agreed that the
Cinnamons shall not be indemnified by the Company if (i) the losses of the
Milstein plaintiffs were due to either of the Cinnamons' willful misconduct,
gross

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<PAGE>

negligence or fraud; or (ii) either of the Cinnamons have entered into or
received any benefit from any release, indemnity or insurance apart from a that
provided by the Company or entered into by the Company and such Milstein
plaintiffs; or (iii) either of the Cinnamons seek in any forum to have this
Agreement declared terminated or void on any grounds whatsoever.

(c) The Cinnamons agree to cooperate and execute all necessary documents to
effectuate a settlement in the Milstein Litigation by the Company, so long as
the Company or its subsidiaries satisfy any financial obligation owed to the
plaintiffs in the Milstein Litigation under any settlement.

(d) The Company and Leininger agree that with respect to the Milstein
Litigation, they shall not assert against the Cinnamons any cross-claim, third
party complaint, affirmative defense, counter-claim or otherwise, with respect
to any claim of wrong-doing, such as malfeasance, malpractice, conflict of
interest, breach of fiduciary duty or improper behavior, in defense to the
allegations of the plaintiffs in the Milstein Litigation, provided that neither
of the Cinnamons shall have obtained, at any time, any release of claims,
indemnification or insurance, or received any other benefit, from any of the
plaintiffs in the Milstein Litigation, separate and apart from a release entered
into by the Company and such plaintiffs.

9. Arbitration. Any claim, controversy or dispute arising between the
parties hereto, including but not limited to those pertaining to the formation,
validity, interpretation, effect or alleged breach of this Agreement, shall be
resolved exclusively by submission to arbitration in Manhattan under the
auspices of the American Arbitration Association ("AAA"), and otherwise in
conformance with the provisions of Section 12 of the Original Agreement.

10. Representation by Counsel. The Cinnamons and the Company each represent
to the other that they have been represented by counsel in the negotiation of
this Agreement and that they were not coerced into executing this Agreement.

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<PAGE>

11. Covenant of Good Faith and Fair Dealing. The Cinnamons and the Company
(provided neither of the Cinnamons, on the one hand, nor the Company and
Leininger, on the other hand, shall have obtained, at any time, any release of,
or indemnification from, or insurance against, claims brought by any of the
plaintiffs in the Milstein Litigation), covenant that they will take no action
which would have the effect, both directly or indirectly, of interfering with
their expressed obligations under this Agreement to comply with its terms and
conditions.

12. Representations, Warranties, and Agreements of the Cinnamons. The
Cinnamons hereby represent, warrant, and agree as follows:

(a) Barry Cinnamon is the record and beneficial owner of all of the Shares,
free and clear of all liens, charges, security interests and encumbrances, as
set forth herein and in the Share Purchase Agreements, and the Shares constitute
all shares of the capital stock of the Company owned by either of the Cinnamons.

(b) The Cinnamons are of full age and have the legal capacity, right and
power to execute and deliver this Agreement, to sell, transfer and deliver the
Shares as provided herein and to take such other action as may be required in
accordance with the terms hereof, to the extent applicable. This Agreement
constitutes the valid and legally binding obligation of the Cinnamons
enforceable in accordance with its terms. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
require the consent or approval of any governmental agency or authority or any
other entity or person or violate any provision of any state or local law or
ordinance or conflict with or result in any breach of, or constitute a default
under, any indenture, mortgage, deed of trust, franchise, agreement or other
instrument or undertaking, oral or written, to which the Cinnamons are a party
or by which the Cinnamons or their properties or assets may be bound or affected
or result in the creation of any lien, charge, or encumbrance upon any of

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<PAGE>

the properties or assets of the Cinnamons.

(c) The representations and warranties made by the Cinnamons in or pursuant
to this Agreement or in connection with the transactions contemplated hereby do
not contain and will not contain any statement which is materially false or
misleading with respect to any material fact and do not and will not omit to
state any material fact required to be stated herein or therein or necessary in
order to make the statement contained herein or therein not materially false or
misleading.

13. Representations, Warranties and Agreements of the Company. The Company
(as to clauses (a) and (d) hereof), Kaufman (as to clauses (b) and (d) hereof)
and Leininger (as to clauses (c) and (d) hereof) hereby represent, warrant and
agree (severally, and not jointly) as follows:

(a) The Company has full corporate power and authority to execute and
deliver this Agreement and to take such other action as may be required in
accordance with the terms hereof. This Agreement constitutes the valid and
legally binding obligations of the Company, enforceable in accordance with its
terms. The Company has duly authorized the execution and delivery of this
Agreement and the transactions contemplated hereby. No other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
and the transactions contemplated hereby. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
require the consent or approval of any governmental agency or authority or any
other entity or person except as otherwise set forth herein and in the Original
Agreement or violate any provision of any state or local law or ordinance or
conflict with or result in any breach of, or constitute a default under, any
indenture, mortgage, deed of trust, franchise, agreement or other instrument or
undertaking, oral or written, to which the Company is a party or by which any of
its properties or assets may be bound or affected or result in the creation of
any lien, charge or encumbrance upon any of its properties or assets. The
Company has filed with the Securities and

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<PAGE>

Exchange Commission all disclosure statements required to be filed up to
the date hereof under the Securities and Exchange Act of 1934, as amended, or
the Securities Act of 1933.

(b) Kaufman has full individual power and authority to execute and deliver
this Agreement and to take such other action as may be required in accordance
with the terms hereof. This Agreement constitutes the valid and legally binding
obligation of Kaufman, enforceable in accordance with its terms. Kaufman has
duly executed and delivered this Agreement and the transactions contemplated
hereby. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will require the consent or
approval of any governmental agency or authority or any other entity or person
except as otherwise set forth herein and in the Original Agreement or violate
any provision of any state or local law or ordinance or conflict with or result
in any breach of, or constitute a default under, any indenture, mortgage, deed
of trust, franchise, agreement or other instrument or undertaking, oral or
written, to which Kaufman is a party or by which any of his properties or assets
may be bound or affected or result in the creation of any lien, charge or
encumbrance upon any of his properties or assets.

(c) Leininger has full individual power and authority to execute and
deliver this Agreement and to take such other action as may be required in
accordance with the terms hereof. This Agreement constitutes the valid and
legally binding obligation of Leininger, enforceable in accordance with its
terms. Leininger has duly executed and delivered this Agreement and the
transactions contemplated hereby. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
require the consent or approval of any governmental agency or authority or any
other entity or person except as otherwise set forth herein and in the Original
Agreement or violate any provision of any state or local law or ordinance or
conflict with or result in any breach of, or constitute a default under, any
indenture, mortgage, deed

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<PAGE>

of trust, franchise, agreement or other instrument or undertaking, oral or
written, to which Leininger is a party or by which any of his properties or
assets may be bound or affected or result in the creation of any lien, charge or
encumbrance upon any of his properties or assets.

(d) The representations and warranties made by the Company, Kaufman and
Leininger, respectively, in or pursuant to this Agreement or in connection with
the transactions contemplated hereby do not contain and will not contain any
statement which is materially false or misleading. Notwithstanding the
foregoing, the Cinnamons hereby acknowledge that there may be information
concerning the Company which has not been disclosed to them and which may cause
the value of the Shares to be higher or lower than $0.40 per Share.
Notwithstanding that the value of the Shares may potentially be higher or lower
than $0.40 per Share, the Cinnamons have agreed to sell the Shares at $0.40
pursuant to the Share Purchase Agreements and otherwise in accordance with this
Agreement.

14. Fees and Expenses for This Agreement. Unless as otherwise agreed among
the parties, each of the parties hereto shall bear its or his own fees and
expenses as may be incurred in connection with the Agreement and the
transactions contemplated hereby.

15. Notices. Any notice or demand required or permitted to be given or made
to or upon any party hereto pursuant to any of the provisions of this Agreement
shall be deemed to have been duly given or made for all purposes if in writing
and delivered by reputable overnight courier, hand against receipt, or sent by
certified or registered mail, postage prepaid, return receipt requested directly
to the parties or to such other person or persons that may be designated from
time to time by the Cinnamons, the Company, Kaufman and Leininger, to receive
such notices. Any party refusing delivery of a notice shall be charged with
knowledge of its contents, provided that such notice is left at the premises to
which it was addressed.

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<PAGE>

16. Miscellaneous. Without limiting the general reaffirmation of the terms
of the Original Agreement, the terms and provisions of Sections 10 (Successors),
13 (Proper Construction), 14 (Severability), 16 (Third Party Beneficiaries,
which shall be in addition to Section 7(b) of this Agreement), 18
(Counterparts), 19 (Further Assurances) and 20 (Survival) of the Original
Agreement are hereby incorporated by reference as if repeated herein in full.

17. Closing. All of the transactions effected on the Closing Date in
accordance with the provisions of this Agreement shall be deemed to be effected
simultaneously and the consummation of each such transaction shall be deemed to
be a condition to the consummation of each other such transaction.

18. Future Arbitration. No more than one arbitration proceeding pursuant to
the terms of the Original Agreement (as incorporated herein) or this Agreement
may be brought by any party hereto in any twelve (12) month period. If at the
time any arbitration proceeding is commenced pursuant to the Original Agreement
or this Agreement, such proceedings shall, to the extent possible, be
consolidated.

19. Entire Agreement. This Agreement (including any Exhibits) embodies the
entire agreement of the parties hereto with respect to the subject matter
hereof, supersedes any prior agreement, commitment, or arrangement relating
thereto (except for the Original Settlement Agreement) entered into in this
matter and may not be altered except on written agreement of all of the parties.

20. Governing Law. This Agreement shall be governed by, and interpreted and
enforced in accordance with the laws of the State of New York (without giving
effect to conflicts of law principles).

21. Agreement Confidential. The settlement effected by this Agreement is
made on a

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<PAGE>

confidential basis and the parties agree to keep the substantive terms and
conditions hereof confidential, except to the extent that the Company is
required by rules and regulations of the Securities and Exchange Commission to
disclose the Cinnamons' sale of their stock interests or the terms or contents
of the Agreement, the Company shall do so.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date set forth in the first paragraph above.

Software Publishing Corporation
Holdings, Inc.

By: /s/ Marc Jaffe
Marc Jaffe, Chairman of the Board

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<PAGE>

Settlement Agreement
Dated May 22, 1998
Second signature page

/s/ Barry Cinnamon
Barry Cinnamon

/s/ Lori Cinnamon
Lori Cinnamon

/s/ Neil Kaufman
Neil Kaufman

/s/ Mark E. Leininger
Mark Leininger

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VOID AFTER DECEMBER 16, 2005
WARRANT TO PURCHASE 600,000 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. ML-1

This is to Certify That, for value received, Regency Investment Partners,
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
December 17, 1998 (the "Exercise Date"), and before 5:00 p.m., New York City
time, on December 16, 2005 (the "Expiration Time"), at the price of $.75 per
share (as adjusted as herein provided, the "Exercise Price"), up to 600,000
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
of this Warrant Certificate, as

<PAGE>

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) Subject to the provisions of Paragraph 1(e) below, 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.

(e) Notwithstanding anything to the contrary contained herein, this
Warrant may be exercised (a) with respect to 500,000 Warrant Shares, at any time
and from time to time commencing the Exercise Date and terminating at the
Expiration Time, and (b) with respect to the

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<PAGE>

balance of 100,000 Warrant Shares, at any time and from time to time commencing
six months from the Exercise Date and terminating at the Expiration Time.

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 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.

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<PAGE>

(b) 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 (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 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(b) shall be lawfully abandoned.

(c) 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.

(d) 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.

(e) 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

-4-

<PAGE>

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 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(e).

(f) 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 (e),
inclusive.

(g) 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.

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.

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<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 10, 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 reasonably 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.

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<PAGE>

8. Transfer.

9. 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.

10. 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.

11. Registration Rights.

(a) Defined Terms. As used in this Section 11, terms defined elsewhere
herein shall have their assigned meanings and each of the following terms shall
have the following meanings (such definitions to be applicable to both the
plural and singular of the terms defined):

(i) Registerable Securities. The term "Registerable
Securities" shall mean any of the Warrant Shares, including any shares of
Common Stock or other securities received in connection with any stock
split, stock divided, merger, reorganization, recapitalization,
reclassification or other distribution payable or issuable upon shares of

-7-

<PAGE>

Common Stock. For the purposes of this Agreement, securities will cease to
be Registerable Securities when (A) a registration statement under the
Securities Act covering such Registerable Securities has been declared
effective and either (1) such Registerable Securities have been disposed of
pursuant to such effective registration statement or (2) such Registrable
Securities remain covered by such effective Registration Statement, such
Registerable Securities have been withdrawn from such Registration
Statement at the request or demand of the holder of such Registerable
Securities or such registration statement has been withdrawn at the request
or demand of the holder of such Registerable Securities, (B) such
Registerable Securities are distributed to the public pursuant to the
Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act, including, but not limited to, Rules
144 and 144A promulgated under the Securities Act, or (C) such Registerable
Securities have been otherwise transferred and the Company, in accordance
with applicable law and regulations, has delivered new certificates or
other evidences of ownership for such securities which are not subject to
any stop transfer order or other restriction on transfer.

(ii) Rightsholders. The term "Rightsholders" shall include
the Warrantholder, all successors and assigns of the Warrantholder, and all
transferees of Registerable Securities where such transfer affirmatively
includes the transfer and assignment of the rights of the transferor
Rightsholder under this Agreement with respect to the transferred
Registerable Securities; provided, however, the term "Rightsholders" shall
not include any person or entity who has sold, transferred or assigned all
of such person's or entity's Registerable Securities.

(iii) The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Section 11 shall refer to this Section
4 as a whole and not to any particular provision of this Section 11, and
subsection, paragraph, clause, schedule and exhibit references are to this
Section 11 unless otherwise specified.

(b) Demand Registration.

(i) Right to Demand. Subject to Paragraph 11(b)(ii) hereof,
at any time on or after the Exercise Date and on or prior to two years from
the Expiration Time, the Initiating Holders (as defined in Paragraph
11(b)(vi) below) may make a written request (each, a "Demand Request") to
the Company for registration under the Securities Act of all or part of
their Registerable Securities (each, a "Demand Registration"). Within ten
days after receipt of a Demand Request, the Company shall deliver a written
notice (the "Notice") of such Demand Request to all other Rightsholders.
The Company will include in such Demand Registration all Registerable
Securities with respect to which the Company has been given written
requests (each, "Tag-Along Request") for inclusion therein within twenty
days after the giving of the Notice. Each and every Demand Request shall be
required to specify the aggregate amount of the Registerable Securities to
be included in such Demand Registration, the amount of Registerable
Securities to be registered for each of the Initiating Holders and the
intended method(s) of disposition thereof, including whether or not such
Demand Registration or portion thereof is to relate to an underwritten
offering, the name of

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<PAGE>

the managing underwriter(s), if any, and the terms of any such
underwriting. Each and every Tag-Along Request shall be required to
the amount of Registerable Securities to be registered in the
Demand Registration and the intended method(s) of disposition thereof,
including whether or not the Registerable Securities subject to such
Tag-Along Request or portion thereof is to relate to an underwritten
offering, the name of the managing underwriter(s), if any, and the terms of
any such underwriting.

(ii) Number of Demand Registrations; Expenses. Subject to
the provisions of Paragraph 11(b)(iii) hereof, the holders of Registerable
Securities shall be entitled, in the aggregate, to one Demand Registration,
the Registration Expenses (as defined in Paragraph 11(e) hereof) of which,
subject to the provisions of Paragraph 11(e), shall be borne by the
Company, but the Company shall not be responsible for the payment of any
underwriter's discount, commission or selling concession in connection with
any of the Registerable Securities. The Company shall not be deemed to have
effected a Demand Registration unless and until such Demand Registration is
declared effective.

(iii) Priority on Demand Registrations.

(A) Whenever the Company shall effect a Demand
Registration in connection with an underwritten offering by one or
more Initiating Holders, no other securities, including other
Registerable Securities shall be included in such Demand Registration,
unless (1) the managing underwriter(s) with respect to such Demand
Registration shall have advised the Company and each Initiating Holder
whose Registerable Securities were included in the Demand Request, in
writing, that the inclusion of such other securities would not
adversely affect such underwritten offering or (2) each of the
Initiating Holders shall each have consented in writing to the
inclusion of such other securities. In the event of such written
advice of the managing underwriter(s) or unanimous consent of such
Initiating Holders, the Company will include in such Demand
Registration securities in the following order of priority until the
maximum number of securities included in the written advice of the
managing underwriter(s) or unanimous consent of such Initiating
Holders shall be reached: (1) first, pro rata (based upon the amount
of Registerable Securities) among the Registerable Securities included
in the Demand Request which are subject to the underwritten offering,
(2) second, pro rata (based upon the amount of Registerable
Securities) among the Registerable Securities of the other holders
(each, a "Rightsholder") of registration rights granted by the Company
in connection with the sale of the Shares who have given a Tag-Along
Request with respect to such Demand Registration where the method of
distribution shall be pursuant to an underwritten offering, (3) third,
pro rata (based upon the amount of Registerable Securities) among all
other Registerable Securities included in the Demand Request and
Tag-Along Request(s) and (4) fourth, pro rata (based upon the amount
of securities owned which carry registration rights) among all other
securities to which the Company has granted registration rights and
for which a request for inclusion in the Demand Registration shall
have been made.

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<PAGE>

(B) Whenever the Company shall effect a Demand
Registration in connection with an offering of Registerable Securities
of Initiating Holders for which the intended method(s) of distribution
shall not include an underwritten offering, and the holders of a
majority of the Registerable Securities which were subject to the
Demand Request shall advise the Company in writing that, in the
opinion of such Initiating Holders, the number of securities proposed
to be sold in such Demand Registration would adversely affect such
offering, the Company will include in such Demand Registration
securities in the following order of priority until the maximum number
of securities included in the written advice of such Initiating
Holders shall be reached: (1) first, pro rata (based upon the amount
of Registerable Securities) among the Registerable Securities included
in the Demand Request, (2) second, pro rata (based upon the amount of
Registerable Securities) among the Registerable Securities of the
Rightsholders who have given a Tag-Along Request with respect to such
Demand Registration where the method of distribution shall be pursuant
to an underwritten offering, (3) third, pro rata (based upon the
amount of Registerable Securities) among all other Registerable
Securities included in the Demand Request and Tag-Along Request(s) and
(4) fourth, pro rata (based upon the amount of securities owned which
carry registration rights) among all other securities to which the
Company has granted registration rights and for which a request for
inclusion in the Demand Registration shall have been made.

(C) In the event that Initiating Holders and other
Rightsholders who have given a Tag-Along Request are unable to have
registered the full amount of Registerable Securities which they
requested to be registered pursuant to a Demand Request or Tag-Along
Request, pursuant to the provisions of this Paragraph 11(b), such
Initiating Holders and other Rightsholders shall retain the right to
one Demand Registration with respect to such unregistered Registerable
Securities subject to such Demand Request and Tag-Along Request.

(iv) Delay in Effecting Demand Registration. Notwithstanding
anything in the foregoing to the contrary, the Company shall not be
obligated to effect a Demand Registration at any time when the Company, in
the good faith judgment of its Board of Directors made no later than 30
days after the giving of the Demand Request with respect to such Demand
Registration, reasonably believes that the filing thereof at the time
requested, or the offering of securities pursuant thereto, would be
detrimental to the interests of Company or its stockholders. The
effectuation of a Demand Registration cannot be suspended, pursuant to the
provisions of the preceding sentence, for more than 120 days after the date
of the Board's determination referenced in the preceding sentence.

(v) Approval of Underwriter by the Company and Placement
Agent. If the Demand Registration is to involve an underwritten offering,
the managing underwriter(s) and each selling agent selected by those
Rightsholders participating in each such underwritten offering shall be
subject to the written approval of the Company, which approval may not be
unreasonably withheld.

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<PAGE>

(vi) "Initiating Holders" Defined. For purposes of this
Agreement, the term "Initiating Holders" shall mean, on any given date,
those Rightsholders holding Registerable Securities which would aggregate
50% or more of the total Registerable Securities that would be outstanding
on such date.

(i) If, at any time on or after the Exercise Date and on or
prior to two years from the Termination Date, the Company proposes to file
a registration statement under the Securities Act with respect to an
offering by the Company or any other party of any class of equity security
similar to any Registerable Securities (other than a registration statement
on Form S-4 or S-8 or any successor form or a registration statement filed
solely in connection with an exchange offer, a business combination
transaction or an offering of securities solely to the existing
stockholders or employees of the Company), then the Company, on each such
occasion, shall give written notice (each, a "Company Piggy-Back Notice")
of such proposed filing to all of the Rightsholders owning Registerable
Securities at least 30 days before the anticipated filing date of such
registration statement, and such Company Piggy-Back Notice also shall be
required to offer to such Rightsholders the opportunity to register such
aggregate number of Registerable Securities as each such Rightsholder may
request. Each such Rightsholder shall have the right, exercisable for the
twenty days immediately following the giving of the Company Piggy-Back
Notice, to request, by written notice (each, a "Holder Notice") to the
Company, the inclusion of all or any portion of the Registerable Securities
of such Rightsholders in such registration statement. The Company shall use
reasonable efforts to cause the managing underwriter(s) of a proposed
underwritten offering to permit the inclusion of the Registerable
Securities which were the subject of all Holder Notices in such
underwritten offering on the same terms and conditions as any similar
securities of the Company included therein. Notwithstanding anything to the
contrary contained in this Paragraph 11(c)(i), if the managing
underwriter(s) of such underwritten offering (or, in the case of an
offering not being underwritten, the Company) delivers a written opinion
(or, in the case of the Company, a resolution of its Board of Directors
certified by the President or Secretary of the Company) to the
Rightsholders of Registerable Securities which were the subject of all
Holder Notices that the total amount and kind of securities which they, the
Company and any other person intend to include in such offering is such as
to materially and adversely affect the success of such offering, then the
amount of securities to be offered for the accounts of such Rightsholders
and persons other than the Company shall be eliminated or reduced pro rata
(based on the amount of securities owned by such Rightsholders and other
persons which carry registration rights) to the extent necessary to reduce
the total amount of securities to be included in such offering to the
amount recommended by such managing underwriter(s) in its written opinion
(or the Board of Directors in its resolution).

(ii) Number of Piggy-Back Registrations; Expenses. The
obligations of the Company under this Paragraph 11(c) shall be unlimited
with respect to each Rightsholder. Subject to the provisions of Paragraph
11(e) hereof, the Company will pay all Registration Expenses in connection
with any registration of Registerable Securities effected

-11-

<PAGE>

pursuant to this Paragraph 11(c), but the Company shall not be responsible
for the payment of any underwriter's discount, commission or selling
concession in connection therewith.

(iii) Withdrawal or Suspension of Registration Statement.
Notwithstanding anything contained to the contrary in this Paragraph 11(c),
the Company shall have the absolute right, whether before or after the
giving of a Company Piggy-Back Notice or Holder Notice, to determine not to
file a registration statement to which the Rightsholders shall have the
right to include their Registerable Securities therein pursuant to this
Paragraph 11(c), to withdraw such registration statement or to delay or
suspend pursuing the effectiveness of such registration statement. In the
event of such a determination after the giving of a Company Piggy-Back
Notice, the Company shall give notice of such determination to all
Rightsholders and, thereupon, (A) in the case of a determination not to
register or to withdraw such registration statement, the Company shall be
relieved of its obligation under this Paragraph 11(c) to register any of
the Registerable Securities in connection with such registration and (B) in
the case of a determination to delay the registration, the Company shall be
permitted to delay or suspend the registration of Registerable Securities
pursuant to this Paragraph 11(c) for the same period as the delay in the
registration of such other securities. No registration effected under this
Paragraph 11(c) shall relieve the Company of its obligation to effect any
registration upon demand otherwise granted to a Rightsholder under
Paragraph 11(b) hereof or any other agreement with the Company.

(d) Registration Procedures.

(i) Obligations of the Company. The Company will, in
connection with any registration pursuant to Paragraph 11(b) or (c) hereof,
as expeditiously as possible:

(A) prepare and file with the Commission a
registration statement under the Securities Act on any appropriate
form chosen by the Company, in its sole discretion, which shall be
available for the sale of all Registerable Securities in accordance
with the intended method(s) of distribution thereof set forth in all
applicable Demand Requests, Tag-Along Requests and Holder Notices, and
use its commercially reasonable best efforts to cause such
registration statement to become effective as soon thereafter as
reasonably practicable; provided, that, at least five business days
before filing with the Commission of such registration statement, the
Company shall furnish to each Rightsholder whose Registerable
Securities are included therein draft copies of such registration
statement, including all exhibits thereto and documents incorporated
by reference therein, and, upon the reasonable request of any such
Rightsholder, shall continue to provide drafts of such registration
statement until filed, and, after such filing, the Company shall, as
diligently as practicable, provide to each such Rightsholders such
number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus), all exhibits
thereto and documents incorporated by reference therein and such other
documents as such Rightsholder may reasonably request in order to
facilitate the

-12-

<PAGE>

disposition of the Registerable Securities owned by such Rightsholder
and included in such registration statement; provided, further,
the Company shall modify or amend the registration statement as it
relates to such Rightsholder as reasonably requested by such
Rightsholder on a timely basis, and shall reasonably consider
other changes to the registration statement (but not including any
exhibit or document incorporated therein by reference) reasonably
requested by such Rightsholder on a timely basis, in light of the
requirements of the Securities Act and any other applicable laws and
regulations; and provided, further, that the obligation of the Company
to effect such registration and/or cause such registration statement
to become effective, may be postponed for (1) such period of time when
the financial statements of the Company required to be included in
such registration statement are not available (due solely to the fact
that such financial statements have not been prepared in the regular
course of business of the Company) or (2) any other bona fide
corporate purpose, but then only for a period not to exceed 90 days;

(B) prepare and file with the Commission such
amendments and post-effective amendments to a registration statement
as may be necessary to keep such registration statement effective for
up to nine months; and cause the related prospectus to be supplemented
by any required prospectus supplement, and as so supplemented to be
filed to the extent required pursuant to Rule 424 promulgated under
the Securities Act, during such nine-month period; and otherwise
comply with the provisions of the Securities Act with respect to the
disposition of all Registerable Securities covered by such
registration statement during the applicable period in accordance with
the intended method(s) of disposition of such Registerable Securities
set forth in such registration statement, prospectus or supplement to
such prospectus;

(C) notify the Rightsholders whose Registerable
Securities are included in such registration statement and the
managing underwriter(s), if any, of an underwritten offering of any of
the Registerable Securities included in such registration statement,
and confirm such advice in writing, (1) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and,
with respect to a registration statement or any post-effective
amendment, when the same has become effective, (2) of any request by
the Commission for amendments or supplements to a registration
statement or related prospectus or for additional information, (3) of
the issuance by the Commission of any stop order suspending the
effectiveness of a registration statement or the initiation of any
proceedings for that purpose, (4) if at any time the representations
and warranties of the Company contemplated by clause (1) of Paragraph
11(d)(i)(J) hereof cease to be true and correct, (5) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of any of the Registerable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose and (6) of the happening of any event which makes any
statement made in the registration statement, the prospectus or any
document incorporated therein by reference untrue or which requires
the making of any changes in the registration statement or prospectus
so that such registration statement, prospectus or document
incorporated

-13-

<PAGE>

by reference will not contain any untrue statement of material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;

(D) make reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of such
registration statement at the earliest possible moment and to prevent
the entry of such an order;

(E) use reasonable efforts to register or qualify
the Registerable Securities included in such registration statement
under such other securities or blue sky laws of such jurisdictions as
any Rightsholder whose Registerable Securities are included in such
registration statement reasonably requests in writing and do any and
all other acts and things which may be necessary or advisable to
enable such Rightsholder to consummate the disposition in such
jurisdictions of such Registerable Securities; provided, that the
Company will not be required to (1) qualify generally to do business
in any jurisdiction where it would not otherwise be required to
qualify but for this Paragraph 11(d)(i)(E), (2) subject itself to
taxation in any such jurisdiction or (3) take any action which would
subject it to general service of process in any such jurisdiction;

(F) make available for inspection by each
Rightsholder whose Registerable Securities are included in such
registration, any underwriter(s) participating in any disposition
pursuant to such registration statement, and any representative, agent
or employee of or attorney or accountant retained by any such
Rightsholder or underwriter(s) (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility (or establish a due diligence defense), and cause the
officers, directors and employees of the Company to supply all
information reasonably requested by any such Inspector in connection
with such registration statement; provided, that records which the
Company determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors, unless (1) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction or
(2) the disclosure of such Records is required by any applicable law
or regulation or any governmental regulatory body with jurisdiction
over such Rightsholder or underwriter; provided, further, that such
Rightsholder or underwriter(s) agree that such Rightsholder or
underwriter(s) will, upon learning the disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed
confidential;

(G) cooperate with the Rightsholder whose
Registerable Securities are included in such registration statement
and the managing underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing

-14-

<PAGE>

Registerable Securities to be sold thereunder, not bearing any
restrictive legends, and enable such Registerable Securities to be
in such denominations and registered in such names as such
Rightsholder or any managing underwriter(s) may reasonably request
at least two business days prior to any sale of Registerable
Securities;

(H) comply with all applicable rules and
regulations of the Commission and promptly make generally available to
its security holders an earnings statement covering a period of twelve
months commencing, (1) in an underwritten offering, at the end of any
fiscal quarter in which Registerable Securities are sold to
underwriter(s), or (2) in a non-underwritten offering, with the first
month of the Company's first fiscal quarter beginning after the
effective date of such registration statement, which earnings
statement in each case shall satisfy the provisions of Section 11(a)
of the Securities Act;

(I) provide a CUSIP number for all Registerable
Securities not later than the effective date of the registration
statement relating to the first public offering of Registerable
Securities of the Company pursuant hereto;

(J) enter into such customary agreements
(including an underwriting agreement in customary form) and take all
such other actions reasonably requested by the Rightsholders holding a
majority of the Registerable Securities included in such registration
statement or the managing underwriter(s) in order to expedite and
facilitate the disposition of such Registerable Securities and in such
connection, whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten registration,
(1) make such representations and warranties, if any, to the holders
of such Registerable Securities and any underwriter(s) with respect to
the registration statement, prospectus and documents incorporated by
reference, if any, in form, substance and scope as are customarily
made by issuers to underwriter(s) in underwritten offerings and
confirm the same if and when requested, (2) obtain opinions of counsel
to the Company and updates thereof addressed to each such Rightsholder
and the underwriter(s), if any, with respect to the registration
statement, prospectus and documents incorporated by reference, if any,
covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
requested by such Rightsholders and underwriter(s), (3) obtain a "cold
comfort" letter and updates thereof from the Company's independent
certified public accountants addressed to such Rightsholders and to
the underwriter(s), if any, which letters shall be in customary form
and cover matters of the type customarily covered in "cold comfort"
letters by accountants in connection with underwritten offerings, and
(4) deliver such documents and certificates as may be reasonably
requested by the Rightsholders holding a majority of such Registerable
Securities and managing underwriter(s), if any, to evidence compliance
with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company; each such action
required by this Paragraph 11(d)(i)(J) shall be done at each closing
under such underwriting or similar agreement or as and to the extent
required thereunder; and

-15-

<PAGE>

(K) if requested by the holders of a majority of
the Registerable Securities included in such registration statement,
use its best efforts to cause all Registerable Securities which are
included in such registration statement to be listed, subject to
notice of issuance, by the date of the first sale of such Registerable
Securities pursuant to such registration statement, on each securities
exchange, if any, on which securities similar to the Registered
Securities are listed.

(ii) Obligations of Rightsholders. In connection with any
registration of Registerable Securities of a Rightsholder pursuant to
Paragraph 11(b) or (c) hereof:

(A) The Company may require that each Rightsholder
whose Registerable Securities are included in such registration
statement furnish to the Company such information regarding the
distribution of such Registerable Securities and such Rightsholder as
the Company may from time to time reasonably request in writing; and

(B) Each Rightsholder, upon receipt of any notice
from the Company of the happening of any event of the kind described
in clauses (2), (3), (5) and (6) of Paragraph 11(d)(i)(C) hereof,
shall forthwith discontinue disposition of Registerable Securities
pursuant to the registration statement covering such Registerable
Securities until such Rightsholder's receipt of the copies of the
supplemented or amended prospectus contemplated by clause (1) of
Paragraph 11(d)(i)(C) hereof, or until such Rightsholder is advised in
writing (the "Advice") by the Company that the use of the applicable
prospectus may be resumed, and until such Rightsholder has received
copies of any additional or supplemental filings which are
incorporated by reference in or to be attached to or included with
such prospectus, and, if so directed by the Company, such Rightsholder
will deliver to the Company (at the expense of the Company) all
copies, other than permanent file copies then in the possession of
such Rightsholder, of the current prospectus covering such
Registerable Securities at the time of receipt of such notice; the
Company shall have the right to demand that such Rightsholder or other
holder verify its agreement to the provisions of this Paragraph
11(d)(ii)(B) in any Demand Request, Tag-Along Request or Holder Notice
of the Rightsholder or in a separate document executed by the
Rightsholder.

(e) Registration Expenses. All expenses incident to the performance of
or compliance with this Agreement by the Company, including, without imitation,
all registration and filing fees of the Commission, National Association of
Securities Dealers, Inc. and other agencies, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registerable
Securities), rating agency fees, printing expenses, messenger and delivery
expenses, internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the fees and expenses incurred in connection with the listing, if any, of the
Registerable Securities on any securities exchange and fees and disbursements of
counsel for the Company and the Company's independent certified public
accountants (including the expenses of

-16-

<PAGE>

any special audit or "cold comfort" letters required by or incidental to
such performance), Securities Act or other liability insurance (if the Company
elects to obtain such insurance), the fees and expenses of any special experts
retained by the Company in connection with such registration and the fees and
expenses of any other person retained by the Company (but not including any
underwriting discounts or commissions attributable to the sale of Registerable
Securities or other out-of-pocket expenses of the Rightsholders, or the agents
who act on their behalf, unless reimbursement is specifically approved by the
Company) will be borne by the Company. All such expenses are herein referred to
as "Registration Expenses." Notwithstanding the foregoing, the Company shall not
be required to pay for any Registration Expenses of any Demand Registration if
such Demand Request is subsequently withdrawn at the request of the holders of a
majority of the Registerable Securities included in such Demand Registration (in
which case all Rightsholders which requested the withdrawal of the Demand
Registration shall bear such expenses pro rata); provided that, if, at the time
of such withdrawal, such Rightsholders have learned of a material adverse change
in the condition, business or prospects of the Company from that known to such
Rightsholders at the time of their Demand Request, such Rightsholders shall not
be required to pay any of such expenses. In either event, if such Rightsholders
pay in full the expenses of such withdrawn Demand Registration, such
Rightsholders shall retain the right to one Demand Registration.

(f) Indemnification: Contribution.

(i) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each
Rightsholder, its officers and directors and each person who controls such
Rightsholder (within the meaning of the Securities Act), if any, and any
agent thereof against all losses, claims, damages, liabilities and expenses
incurred by such party pursuant to any actual or threatened suit, action,
proceeding or investigation (including reasonable attorney's fees and
expenses of investigation) arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in
the light of the circumstances under which they were made) not misleading,
except insofar as the same arise out of or are based upon, any such untrue
statement or omission based upon information with respect to such
Rightsholder furnished in writing to the Company by such Rightsholder
expressly for use therein.

(ii) Indemnification by Rightsholder. In connection with any
registration statement in which a Rightsholder is participating, each such
Rightsholder will be required to furnish to the Company in writing such
information with respect to such Rightsholder as the Company reasonably
requests for use in connection with any such registration statement or
prospectus, and each Rightsholder agrees to the extent it is such a holder
of Registerable Securities included in such registration statement, and
each other such holder of Registerable Securities included in such
Registration Statement will be required to agree, to indemnify, to the full
extent permitted by law, the Company, the directors and officers of the
Company and each person who controls the Company (within the meaning of the
Securities Act) and any agent thereof, against any losses, claims, damages,
liabilities and expenses (including

-17-

<PAGE>

reasonable attorney's fees and expenses of investigation incurred by such
party pursuant to any actual or threatened suit, action, proceeding
or investigation arising out of or based upon any untrue or alleged untrue
statement of a material fact or any omission or alleged omission of a
material fact necessary, to make the statements therein (in the case
of a prospectus, in the light of the circumstances under which they are
made) not misleading, to the extent, but only to the extent, that such
untrue statement or omission is based upon information relating to such
Rightsholder or other holder furnished in writing to the Company expressly
for use therein.

(iii) Conduct of Indemnification Proceedings. Promptly after
receipt by an indemnified party under this Paragraph 11(f) of written
notice of the commencement of any action, proceeding, suit or investigation
or threat thereof made in writing for which such indemnified party may
claim indemnification or contribution pursuant to this Agreement, such
indemnified party shall notify in writing the indemnifying party of such
commencement or threat; but the omission so to notify the indemnifying
party shall not relieve the indemnifying party from any liability which the
indemnifying party may have to any indemnified party (A) hereunder, unless
the indemnifying party is actually prejudiced thereby, or (B) otherwise
than under this Paragraph 11(f). In case any such action, suit or
proceeding shall be brought against any indemnified party, and the
indemnified party shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein
and the indemnifying party shall assume the defense thereof, with counsel
reasonably satisfactory to the indemnified party, and the obligation to pay
all expenses relating thereto. The indemnified party shall have the right
to employ separate counsel in any such action, suit or proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (A) the
indemnifying party has agreed to pay such fees and expenses, (B) the
indemnifying party shall have failed to assume the defense of such action,
suit or proceeding or to employ counsel reasonably satisfactory to the
indemnified party therein or to pay all expenses relating thereto or (C)
the named parties to any such action or proceeding (including any impleaded
parties) include both the indemnified party and the indemnifying party and
the indemnified party shall have been advised by counsel that there may be
one or more legal defenses available to the indemnified party which are
different from or additional to those available to the indemnifying party
and which may result in a conflict between the indemnifying party and such
indemnified party (in which case, if the indemnified party notifies the
indemnifying party in writing that the indemnified party elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such action or
proceeding on behalf of the indemnified party; it being understood,
however, that the indemnifying party shall not, in connection with any one
such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees
and expenses of more than one separate firm of attorneys at any time for
the indemnified party, which firm shall be designated in writing by the
indemnified party).

-18-

<PAGE>

(iv) Contribution. If the indemnification provided for in
this Paragraph 11(f) from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (A) in such proportion as
is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other
or (B) if the allocation provided by clause (A) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other but also the relative fault of the
indemnifying party and indemnified party, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
the indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied
by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages. liabilities and expenses referred to
above shall be deemed to include, subject to the limitation set forth in
Paragraph 11(f)(v), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.

The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Paragraph 11(f)(iv) were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to
in clauses (A) and (B) of the immediately preceding paragraph. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

(v) Limitation. Anything to the contrary contained in this
Paragraph 11(f) or in Paragraph 11(g) notwithstanding, no holder of
Registerable Securities shall be liable for indemnification and
contribution payments aggregating an amount in excess of the maximum amount
received by such holder in connection with any sale of Registerable
Securities as contemplated herein.

(g) Participation in Underwritten Registration. No Rightsholder may
participate in any underwritten registration hereunder unless such Rightsholder
(i) agrees to sell such holder's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and to comply with Rules 10b-6 and 10b-7 under the Exchange
Act and (ii) completes and executes all questionnaires, appropriate and limited
powers of attorney, escrow agreements, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangement; provided, that all such documents shall be consistent with the
provisions of Paragraph 11(e) hereof.

-19-

<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 December 17, 1998

SOFTWARE PUBLISHING
CORPORATION HOLDINGS, INC.

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

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

-20-
<PAGE>

EXERCISE FORM

Dated:_______________, ____

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.)

-21-
<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 setforth on the face of this Warrant
Certificate.)

-22-

CORPORATE BANKING

Services

Advice of Borrowing Terms

for

Serif (Europe) Limited

From:

Nottingham

29 December 1998

NatWest

<PAGE>

Advice of Borrowing Terms

Relationship Office: Nottingham Date: 29 December 1998

Borrower(s) Registered Number:
Serif (Europe) Limited 02117968

We intend that the facilities listed in Part 1 of the attached Facility Schedule
(the "on-demand facilities") should remain available to the borrower(s) until 24
July 1999 and all facilities should be reviewed on or before that date. The
facilities are, however, subject to the following:

- - the terms and conditions below,

- - the specific conditions applicable to an individual as detailed in the
Facility Schedule,

- - the Security detailed in the attached Security Schedule, and

- - the attached General Terms.

All amounts outstanding are repayable on demand which may be made by us at our
discretion at any time and the facilities may be withdrawn, reduced, made
subject to further conditions or otherwise varied by us giving notice in
writing.

Conditions:

The following conditions must be satisfied at all times while the facilities are
outstanding, but this will not affect our right to demand repayment at any time:
- - Production of monthly management information to include profit and loss
and balance sheet.

/s/ MM Wright
MM Wright
Corporate Manager
For an on behalf of
National Westminster Bank Plc

Acceptance:
To signify your agreement to the terms and conditions outlined above please sign
and return the enclosed copy of this Advice of Borrowing Terms within 28 days.

<PAGE>

Form of Acceptance
------------------

I accept the facility/facilities on the above terms and conditions and confirm
that I have been authorized by the Board(s) of Directors of the Borrower(s) to
sign this Form of Acceptance on behalf of the Borrower(s).

By (name and title): /s/ David Southgate Date: 6/1/99
----------------------
Financial Controller

For and on behalf of: Serif (Europe) Limited

<PAGE>

Facility Schedule

Part 1 - Facilities Repayable on Demand:

Overdraft: - Base rate
----------------------

Account Number: 36176931
Name of Borrower: Serif (Europe) Limited
Limit: BP60,000
Purpose: To finance working capital
Repayment: Fully fluctuating
1st Debit Interest Rate: 2.75% above the Bank's Base rate
2nd Debit Interest Rate: the Bank's unarranged borrowing rate on borrowing
over BP60,000 or in excess of agreed facilities
Interest Payable: Quarterly
Arrangement Fee: BP75 will be debited on the Bank's usual quarterly
charging dates
Excess Fees: We will be entitled to charge an excess fee at the
Bank's published rate for each day any agreed
limit is exceeded (see our "Services & Charges
for Business Customers" brochure for details).

Loan: - Base rate
-----------------

Account Number: 03-36176915
Name of Borrower: Serif (Europe) Limited
Limit: BP3,618
Purpose: Business Expansion
Current Repayment: BP1006.42 Monthly
Interest: 2.75% Above the Bank's Base Rate
Account to be debited: 36176931
Interest Payable: Quarterly

Documentary Credits
-------------------

Name of Borrower: Serif (Europe) Limited
Limit: BP250,000
Purpose: Trade Finance
Terms of Credit: Standby Letter of Credit for US $400,000 for the
purchase of Digital Cameras, to expire 27 July
1999. Subsequent extension of the letter of credit
may be agreed both in expiry date and amount.
Other Conditions: The outstanding Documentary Credit liability must
be covered 100% by credit balances held in the
NatWest Bank re Serif (Europe) Limited.
Fees: 2% per annum payable quarterly in advance.

Settlement Risk
---------------

Name of Borrower: Serif (Europe) Limited
Limit/Frequency: BP100,000 per day
Type and Purpose: Payments by BACS

<PAGE>

Part 2 - Facilities Subject to Separate Documentation:

The following facilities are made available on the terms of the separate
documentation between us.

<TABLE>
<CAPTION>
Amount Date Agreement
Name of Borrower Facility and Purpose BP Signed
- ---------------- -------------------- ------ ---------------
<S> <C> <C> <C>

Serif (Europe) Limited Business Development Loan 17,442 25/07/97
- Property Improvement

Serif (Europe) Limited Business Cards 7,000 23/03/95
-Working Capital
</TABLE>

<PAGE>

Security Schedule

We rely on the security detailed below (and require additional security where
specified) to repay, on demand, all your current and future liabilities (both
actual and contingent) to us. These liabilities include, without limitation,
those incurred by you under the facility(ies) specified in the Facility
Schedule.

Date Executed/New: Security: Given/to be given by:
- ------------------ --------- ---------------------
<S> <C> <C>

9/10/1989 Mortgage Debenture Serif (Europe) Limited
9/2/1993 Small Firms Loan Guarantee DTI
Credit Balance held in the name of Serif (Europe) Limited
NWB re Serif (Europe) Limited to
cover outstanding Documentary
Credit Liability
</TABLE>

<PAGE>

General Terms

This section sets out in more detail the basis on which we make facilities
available to you. It covers issues such as how limits and interest are
calculated, how we can vary agreed terms and what we mean by "on demand".

These General Terms apply to all on demand facilities listed in the Advice of
Borrowing Terms (the "AOBT"), but do not apply to those facilities which are
subject to separate documentation, unless such documentation expressly
incorporates these General Terms. In cases where the expression "you" includes
more than one person (for example joint account holders) it shall be taken to
refer to all or any one or more of you, and your obligations shall be joint and
several.

- - Independent Advice. Unless we expressly agree in writing to do so we do not
hold ourselves out as providing advice on or considering the general
suitability of facilities for your particular circumstances (including tax)
and neither we nor our employees shall be liable for any indications given as
to such suitability. We make no warranties or representations about the
advisability of any underlying transaction entered into by you. You should
obtain independent professional advice on such matters, and upon any security
or guarantee required by us.

- - Acceptance. Any offer of a facility must be accepted within the time period
specified in the AOBT. We may, at our option, treat any usage of any of these
facilities as acceptance (without amendment) of the terms and conditions of
the AOBT.

- - Availability. Our normal practice is to review all credit facilities
periodically. Any references in the AOBT to a review at, or availability
until, a future date are merely indicative of our current intention, and we
may, at our discretion, review on demand facilities at an earlier date.
Facilities which are not loans or overdrafts are offered on the basis that
there is no commitment on our part to enter into any such facility with you.
We may, at our absolute discretion, decide whether a utilisation may be made
an any conditions subject to which utilisations may be made.

- - Repayment. Notwithstanding any reference to review or availability or
repayment term in the AOBT, all facilities are repayable on demand which we
may make at our sole discretion at any time and may by notice be withdrawn
reduced or made subject to (further) conditions or otherwise varied. You must
ensure that we receive by way of repayment, the full amount of any
indebtedness irrespective of any taxes, duties or charges, in immediately
available funds in the currency in which the facility is outstanding at the
branch or office where the facilities are provided.

- - Variation and waiver. We may vary these General Terms by giving one month's
written notice to you. If a change in any currency of the United Kingdom
occurs (including introduction of the euro), the AOBT and these General Terms
will be amended to the extent we specify to reflect the change in currency and
put us in the same position, so far as possible, that we would have been in if
no change in currency had occurred. If we refrain from exercising any of our
rights this shall not preclude us from exercising any rights at a later date.

<PAGE>

- - Limits. The limits specified in the AOBT or the Facility Schedule for each
facility and/or each account (including any Group or Composite Facility
limits) must not at any time be exceeded. In addition, the aggregate
utilisation of any Composite and/or Group Limit specified for any group of
accounts and/or facilities must not be exceeded, notwithstanding the total of
any individual or sub limits allocated. If we have agreed that there will be a
gross limit for one or more facilities, this means that the aggregate
utilisation of those facilities must not at any time exceed the gross limit.
If we have agreed that there will be a net limit for one or more facilities,
this means that the aggregate utilisation of those facilities, less the
aggregate amount of the cleared credit balances on the accounts specified by
us in the AOBT, will not exceed the net limit (if no accounts are specified we
may determine which accounts are utilised for this purpose). We are not
obliged to allow or continue to allow any borrowing in excess of agreed
facilities. Any reference to a particular account will include any successor
account.

- - Interest. All interest rates are variable. Interest is payable monthly or
quarterly (as detailed in the AOBT) on our usual charging days and on final
repayment of the indebtedness. Interest accrues on the daily cleared debit
balance on the account(s) concerned at the annual rate or rates shown in the
AOBT (both before and after demand and/or judgement). It is calculated on the
basis of a 365 day year for sterling (and either a 365 or 360 day year for
currencies other than sterling or on such other basis as we may from time to
time specify) and the actual number of days elapsed and is compounded monthly
or quarterly. Our variable unarranged borrowing rate for the relevant currency
will apply to any indebtedness from time to time (i) in excess of agreed
facilities or (ii) outstanding after the expiry date of agreed facilities or,
in respect of (i) only, such other interest rate as we may specify.

- - Changes to Interest. We may alter the basis on which interest is calculated
including the size of the interest margin charged over our Base Rate or other
published rate and/or the amount of any regular repayments of facilities which
are repayable on demand by providing you with one month's written notice. As a
change in our Base Rate or other variable rate is not an alteration of the
basis upon which interest is calculated, no written notice need be given of
such a change. Changes in our Base Rate or other published rates take effect
when made. Details of current rates are available from any branch or office,
and are published in selected national newspapers. Omission to publish details
of any change in a newspaper shall not stop the change from taking effect. For
a currency account, written notice of changes to the relevant Currency Base
Rate will normally be given, although failure to do so will not stop the
change taking effect when made.

- - Fees. Fees quoted exclude charges for money transmission or similar services
which are either advised (i) separately, or (ii) at the time a facility is
used. All costs, charges and expenses incurred or suffered by us, including
legal costs and our internal management costs, arising at any time in
connection with any facility or with any related security or guarantee are
payable by you on demand.

- - Uncovered Payments. An "uncovered payment" is a payment where the cleared
credit balance or agreed credit facility is insufficient to meet that payment
and all other payments requested, disregarding uncleared credits to that
account. We do not accept any obligation to make

<PAGE>

uncovered payments to third parties unless we have agreed to do so in
writing. We need not make any uncovered payment which is in excess of any
settlement risk limit.

- - Set Off. We may, without notice, set-off against any credit balances on any
of your account(s) (in any currency), your liability in respect of any
facilities (including any uncovered payment) and may combine accounts. We are
authorised to use all or any such credit balances to buy such other currencies
as may be necessary in order to exercise any rights of set-off to which we may
be entitled.

- - Appropriation and Lien. Where more than one debt is owing to us we may use
the whole or any part of any repayment to reduce or discharge the principal
amount of your indebtedness as we may select, to meet any accrued interest or
to discharge any other liabilities to us. We shall have a lien over securities
of any kind and other items deposited by or on your behalf with us (including,
without limitation, cheques given to us for collection).

- - Security. Unless the AOBT expressly provides otherwise, any mortgage,
charge, or debenture must be a first legal mortgage, charge or debenture over
the unencumbered title of the property in question. You may not grant (or
allow to be created) without our prior written consent any other security
interest in the property in question or part with possession of it. We may, at
our sole discretion, require from time to time additional valuations (at your
expense) by such valuer as we may approve, of any or all of the assets held by
us as security.

- - Environment. You represent and warrant (both now and in the future) that you
have and will comply in all material respects with any applicable
environmental law, regulation or code of practice ("environmental law") and
with the terms and conditions of any applicable environmental licences or
other consents or approvals required by environmental law ("environmental
licences").

- - Information. You must provide us with any information which we may at any
time reasonably require, and must inform us of any material change of facts or
circumstances. You authorise us to disclose to your auditors any such
information concerning your accounts with us as they may from time to time
require.

- - Currency Accounts. If in our opinion deposits in a currency are unavailable
to us at any time to fund a currency drawing then we will not make a drawing
available in that currency. All payments (including interest) required to be
made by you under a facility in a currency other than sterling must be made in
the currency of the drawing (The "Agreed Currency") and by credit to our
account with such banking office as we may require.

Any amount payable by you which is received by us in a currency other than
the Agreed Currency, will be calculated by converting (at the prevailing spot
rate of exchange on such date and in such market as we shall determine as
being most appropriate) the Currency so received into the Agreed Currency. If
the amount received is less than the relevant amount of the Agreed Currency
then you will indemnify us for the deficiency and for any losses we may
sustain as a result. You will in addition pay the costs of such conversion.
All payments shall be deemed to

<PAGE>

have been made on such date as we shall determine in accordance with our
normal practice from time to time.

- - Currency Equivalents. The Sterling/Currency Equivalent of any amount
denominated in another currency shall be calculated by reference to the Bank's
then current spot rate of exchange for the purchase of the relevant currency
with the currency in which the facility is denominated. We may calculate the
aggregate Sterling/Currency Equivalents of all drawings outstanding/proposed
at any time to determine compliance or otherwise with the relevant facility
limit.

- - Contingent Liabilities. You will, on demand, pay to us an amount equal to
the full face value of any contingent or future liabilities incurred by us at
your request (such as letters of credit, bonds or guarantees). We may hold any
such payment in our own name and may use it to meet such liabilities. You must
in any event indemnify us against such liabilities and we will require you to
execute a formal counter-indemnity in our standard form.

- - Negotiations. You agree that all foreign cheques submitted to us for
negotiation and/or collection will be dealt with on the basis that you have
good title to all cheques and that you agree to indemnify us against all
liabilities claims losses costs and expenses including exchange fluctuations
and agents' charges which may be imposed upon, asserted against or incurred by
us in any way relating to or arising out of the negotiation and/or collection
of cheques on your behalf. If the cheque is subsequently returned unpaid you
authorise us to debit your account with the amount credited to your account
plus any losses, costs, expenses or charges which we may have incurred.

- - Forward Exchange. Where we make a forward exchange facility available to
you, you confirm and understand that no forward purchase or sale of foreign
currency shall be made for investment purposes (see paragraph 8 of Schedule 1
of the Financial Services Act 1986) without our prior written consent.

- - General.

a) Whenever facilities are subject to Part V of the Consumer Credit Act 1974
additional documents and procedures may be necessary before facilities
can be drawn.

b) If we consider that any proposed payment or use of a facility might be
made for an unlawful purpose, then we may refuse to make such a payment or
allow such use.

c) We may give written notice or make demand by post or by hand or by
facsimile machine or by other form of electronic communication. A notice
or demand may be addressed to you at your Registered Office or address or
the place of business last known to us and shall be deemed to have
been received when transmitted or (if posted) on the business day after
posting. We may use the facsimile number or electronic address last known
to us.

d) The relationship between us, these General Terms and the AOBT are
governed by English law and the English courts shall have jurisdiction in
respect thereof. However when we

<PAGE>

consider it appropriate we may take proceedings against you in any other
court of competent jurisdiction (whether concurrently or not with any
other proceedings). These terms are in addition to the usual terms which
apply to the relationship between a bank and its customer and to the
operation of bank accounts (whether in credit or debit) and to the terms
of your mandate with us and to all other consistent terms which may be
implied by law.

e) You must maintain a current account with us throughout the life of any
facilities and we may charge to your current account all amounts including
interest, due in respect of any facility.

<PAGE>

To National Westminster Bank Plc

You at the request of the Undersigned having given or agreed to give the
commitment (Obligation) for USD 400,00.00 (Say United States Dollars four
hundred thousand) together with any other fees payable thereunder to Teco Image
Systems Co Limited in respect of payment for Digital Camera in the form attached
hereto the Undersigned in consideration therefore agree(s) from time to time and
at all times to keep you indemnified from and against all actions proceedings
claims and demands which may be brought or made against you and all losses costs
charges damages and expenses which you may incur or sustain or for which you may
become liable by reason either directly or indirectly of your having undertaken
the Obligation. You are hereby irrevocably authorised and directed to pay
forthwith on any demand appearing or purporting to be made in relation of the
Obligation any sums which may be demanded of you from time to time without any
inquiry into its justification or into the validity genuineness or accuracy of
any statement or certificate received by you and without any reference to or any
necessity for confirmation or verification by the Undersigned and despite any
contestation on the part of the Undersigned. It is expressly agreed that any
such demand shall as between the Undersigned and you be conclusive evidence (and
admissible as such) that the sum stated therein is properly due and payable and
that you may treat the Obligation as an obligation simply to pay on first
demand. It is acknowledged that you are not prepared to enter into the
Obligation on any other basis.

You are further irrevocably authorised (without prejudice to any other right or
remedy) to debit any existing account(s) of or an new account in the name of the
Undersigned with the whole or any part of the amount of any payment which you
may make thereunder and/or any other liability arising hereunder (including the
obligation to provide cash cover referred to below) irrespective of whether any
such account shall be or become overdrawn following any such debit. If there are
no or insufficient credit balances in the currency of any liability of the
Undersigned hereunder then you shall have the right at your option to purchase
at your spot rate of exchange (or failing such rate at any spot rate available
to you) an amount of that currency not exceeding the amount of the deficiency
and to debit the cost to one or more existing or new accounts of the Undersigned
and to apply the currency so purchased in or towards satisfaction of any such
deficiency. When the Undersigned comprises more than one references to an
account or accounts shall be construed as references to any account(s) of all or
any one or more of the Undersigned.

The Undersigned also agree(s) to pay to you on demand (which may be made at your
complete discretion at any time) an amount equal to the full face value of the
Obligation (in the currency of the Obligation) and you may hold such amount so
paid in your own name and may (without prejudice to any other right or remedy)
apply it towards any of the aforesaid liabilities of the Undersigned to you
and/or any liability you incur in connection with the Obligation and such amount
shall not be repayable unless and until you are satisfied that the Undersigned
has/have no further liabilities (whether present or future actual or contingent)
to you hereunder.

The Undersigned further agree(s) that if as the result of any provision (or
changed provision) of any law or regulation directive or guideline your cost of
maintaining or making available the Obligation increases or your return in
connection with the Obligation is reduced or your position is otherwise

<PAGE>

prejudiced then the Undersigned will pay to you on demand such amount(s) as you
may from time to time certify will in your opinion compensate you in respect
thereof. In the absence of manifest error a certificate signed by any of your
officers shall be conclusive evidence (and shall be admissible as such) for all
purposes against the Undersigned.

The Undersigned agrees that all payments to be made hereunder to you shall be
made in full without any deduction or withholding and in funds freely and
immediately available to you.

And we agree that where the Undersigned is more than one our liability hereunder
shall be joint and several.

This Counter Indemnity shall be additional to any other counter indemnity which
you now or hereafter may hold.

This Counter Indemnity shall be governed by and construed in accordance with the
laws of England.

Dated this Third day of September
One thousand nine hundred and ninety eight

Signed /s/ D. Southgate Signed /s/ Gary Bates
----------------------- --------------------

Name David Southgate Name Gary Bates
----------------------- --------------------

Director(s) of SERIF EUROPE LIMITED
acting for and on behalf of the Company

+ enter full name of Director(s) in Block letters

I acknowledge receipt of a completed copy of this document. /s/ D. Southgate
-------------------

The acknowledgement should be signed
by a Director or by the Company Secretary

<PAGE>

This Mortgage Debenture is made the ninth day of October one thousand nine
hundred and eighty nine between SERIF (EUROPE) LIMITED whose registered office
is at CENTRE FOR PRODUCT DEVELOPMENT LENTON BOULEVARD NOTTINGHAM (the Company)
of the one part and National Westminster Bank (the Bank) of the other part.

1. The Company hereby covenants to pay the Bank on demand the sum of One pound
(BP1)and to pay and discharge on demand all monies obligations and liabilities
which may now or at any time hereafter may be or become due owing or incurred by
the Company tho the Bank on any account (whether solely or jointly with any
other person and whether as principal or surety) present or future actual or
contingent of the Company to the Bank together with interest and other bank
charges so that interest shall be calculated and compounded in accordance with
the practice of the Bank from time to time as well as after as before any demand
made or judgment obtained hereunder.

2. The Company as beneficial owner and to the intent that the security created
shall rank as a continuing security hereby charges with the payment or discharge
of all monies obligations and liabilities hereby covenanted to be paid or
discharged (together with all costs and expenses howsoever incurred by the Bank
in connection with this Mortgage Debenture on a full indemnity basis):

(i) by way of legal mortgage any property referred to in the Schedule
hereto (the legally mortgaged property) and/or the proceeds of sale
thereof
(ii) by way of specific equitable charge all estates or interests in any
freehold and leasehold property (except the legally mortgaged
property) now and at any time during the continuance of this security
belonging to or charged to the Company (the equitably charged
property) and/or the proceeds of sale thereof
(iii) by way of specific charge all stocks shares and/or other securities
now and at any time during the continuance of this security belonging
to the Company in any of its subsidiary companies or any other
company and all dividends and other rights in relation thereto
(iv) by way of specific charge all book debts and other debts now and from
time to time due or owing to the Company
(v) by way of specific charge its goodwill and the benefit of any
licences
(vi) by way of floating security its undertaking and all its property
assets and rights whatsoever and wheresoever present and/or future
including those for the time being charged by way of specific charge
pursuant to the foregoing paragraphs if and to the extent that such
charges as aforesaid shall fail as specific charges but without
prejudice to any such specific charges as shall continue to be
effective.

The costs and expenses in clause 2 hereof shall include (for avoidance of doubt)
all amounts the Bank may from time to time require to compensate it for its
internal management and administrative costs and expenses incurred in connection
with the enforcement of this mortgage debenture and recovery of the liabilities
secured by it. A certificate signed by an Officer of the Bank as to the amount
of such costs and expenses incurred by the Bank from time to time shall (save in
the case of any manifest error) for all purposes be conclusive evidence against
and binding upon the Company.

<PAGE>

3. With reference to the equitably charged property and the property charged
pursuant to Clause 2(iii) the Company undertakes:

(i) to deposit with the Bank the deeds and documents of title or share
certificates relating thereto

(ii) at any time upon request to execute over all or any part thereof
a charge by way of legal mortgage and appropriate stock transfer
forms in the case of the stocks and shares in favour of the Bank in
such form as the Bank shall require.

4. With reference to the legally mortgaged property and the equitably charged
property the Company agrees:

(i) to keep it in a good state of repair and condition and insured
against such risks and in such office and for such amounts as the
Bank may require or approve and that failure to do so will entitle
the Bank to do so at the expense of the Company and as agent of the
Company without thereby becoming a mortgagee in possession

(ii) that the statutory power of leasing and/or accepting surrenders
of leases conferred on mortgagors shall not be exercised by the
Company without the consent in writing of the Bank but the Bank
may grant or accept surrenders of leases without restriction

(iii) not to part with the possession of it or any part thereof nor
confer upon any person firm company or body whatsoever any
licence right or interest to occupy it or may part thereof without
the consent in writing of the Bank.

5. With reference to the book debts and other debts hereby specifically charged
the Company shall pay into the Company's account with the Bank all moneys which
it may receive in respect of such debts and shall not without the prior consent
in writing of the Bank sell factor discount or otherwise charge or assign the
same in favour of any other person or purport to do so and the Company shall if
called upon to do so by the Bank from time to time execute legal assignments of
such book debts and other debts to the Bank.

6. With reference to the property assets and rights subject to the floating
charge:
(i) the Company shall not be at liberty without the consent in writing
of the Bank to:-
(a) create an mortgage or charge ranking in priority to or pari
passu with that charge and/or
(b) sell the whole or except in the ordinary course of business
any part of the Company's undertaking
(ii) the Company agrees to effect and maintain such insurances as are
normally maintained by prudent companies carrying on similar
businesses
(iii) the Bank may by notice to the Company convert the floating charge
into a specific charge as regards any assets specified in the
notice which the Bank shall consider to be in danger of being
seized or sold under any form of distress or execution levied or
threatened and may appoint a receiver thereof.

<PAGE>

7. Section 103 of the Law of Property Act 1925 (the 1925 Act) shall not apply
to this security which shall immediately become enforceable and the power of
sale and other powers conferred by section 101 of the 1925 Act as varied or
extended by this security shall be immediately exercisable at any time after
notice demanding payment of any moneys hereby secured shall have been served
by the Bank on the Company.

8. At any time after this security shall have become enforceable and in any
event immediately upon or at any time after the presentation of a petition
applying for an administration order to be made in relation to the Company, the
Bank may by writing under the hand of any Manager of the Bank appoint any person
(or persons) to be receiver of the property hereby charged or any part thereof
(Receiver). Where two or more persons are appointed to be Receiver the Bank will
in the appointment declare whether any act required or authorised to be done by
such Receivers is to be done by any one or more of such Receivers for the time
being holding office. Any Receiver shall be the agent of the Company and the
Company shall be solely responsible for his acts or defaults and for his
remuneration. Where any Receiver is appointed by the Bank as an Administrative
Receiver (as that term is used in the Insolvency Act 1986) such Administrative
Receiver shall have all the powers of an Administrative Receiver specified in
Schedule 1 of the Insolvency Act 1986 or any statutory modification or
re-enactment thereof. Any references in this security to Receiver shall, except
where the context does not permit include a reference to any such Administrative
Receiver.

9. All monies received by any Receiver shall be applied by him in the following
order:
(i) in payment of the costs charges and expenses of and incidental to the
appointment of the Receiver and the exercise of all or any of his
powers and of all outgoings paid by him
(ii) in payment of remuneration of the Receiver at such rates as may be
agreed between him and the Bank at or at any time after his
appointment
(iii) in or towards discharge of the liabilities hereby secured in such
order as the Bank may from time to time require
(iv) the surplus (if any) shall be paid to the Company or other person
entitled to it.

10. The powers conferred on mortgagees or receivers by the 1925 Act shall apply
to this security except in so far as they are expressly or impliedly excluded
and where there is any ambiguity or conflict between the powers contained in the
1925 Act and those contained in this security the terms of this security shall
prevail.

11. If the Bank receives or is deemed to be affected by notice whether actual
or constructive of any subsequent charge or other interest affecting any part
of the property hereby charged and/or the proceeds of sale thereof the Bank may
open a new account or accounts with any person for whose liabilities this
Mortgage Debenture is available as security. If the Bank does not open a new
account it shall nevertheless be treated as if it had done so at the time when
it received or was deemed to have received notice and as from that time all
payments made to the Bank shall be credited or be treated as having been
credited to the new account and shall not operate to reduce the amount for which
this Mortgage Debenture is security.

<PAGE>

12. The Company hereby irrevocably appoints each of the Bank and any person
nominated in writing under the hand of any officer of the Bank including every
Receiver appointed hereunder as Attorney of the Company with full power of
substitution for the Company and in its name and on its behalf and as its act
and deed to execute seal and deliver and otherwise perfect any deed assurance
agreement instrument or act which may be required or deemed proper for any of
the purposes of this security.

13. In the exercise of the powers hereby conferred the Bank or any Receiver may
sever and sell plant machinery or other fixtures separately from the property to
which they may be annexed.

14. The Company shall from time to time supply to the Bank such accounts or
other information concerning the assets liabilities and affairs of the Company
its subsidiary or associated companies as the Bank may require.

15. In case the Company shall have more than one account with the Bank it shall
be lawful for the Bank at any time and without any prior notice forthwith to
transfer all or any part of any balance standing to the credit of any such
account to any other such account which may be in debit but the Bank shall
notify the Company of the transfer having been made.

16. The security from time to time constituted by or pursuant to this Mortgage
Debenture shall be in addition to and shall be independent of any other security
which the Bank may now or at any time hold on all or any part of the assets of
the Company for or in respect of all or any part of the monies obligations and
liabilities hereby covenanted to be paid or discharged and it is hereby declared
that no prior security held by the Bank over the property hereby charged or any
part of it shall merge in the security created hereby or pursuant hereto.

17. A demand or notice hereunder shall be in writing signed by an officer or
agent of the Bank and may be served on the Company by hand or by post and either
by delivering the same to any officer of the Company at any place or by
addressing the same to the Company at its registered office or a place of
business last known to the Bank; if such demand or notice is sent by post it
shall be deemed to have been received on the day following the day on which it
was posted and shall be effective notwithstanding it be returned undelivered.

18. It is hereby certified that this Mortgage Debenture does not contravene any
of the provisions of the Company's Memorandum or Articles of Association and has
been executed in accordance therewith.

In Witness whereof the Company has caused its Common Seal to be hereunto affixed
the Day and year first before written.

The Schedule

<PAGE>

The Common Seal of )
)
SERIF (EUROPE) LIMITED was )
)
hereunto affixed in the presence of )

Director /s/ Gwyn Jones
-------------------

Director /s/ Jonathan Burn
-------------------

The
Acknowledgment
should be signed We acknowledge receipt of a completed copy of this document.
by a Director or
by the Company
Secretary /s/ M Larnjorn
-----------------
Signature

Certificate of the Registration of a Mortgage or Charge
Pursuant of Section 401 (2) of the Companies Act 1985

I hereby certify that a Mortgage or Charge dated the 9th day of October one
thousand nine hundred and eighty nine and created by SERIF (EUROPE) LIMITED for
securing all moneys now due, or hereafter to become due, or from time to time
accruing due from the Company to National Westminster Bank PLC on any account
whatsoever was registered pursuant to Section 395 of the Companies Act on the
20th day of October one thousand nine hundred and eighty nine given under my
hand at Cardiff this 30th day of October one thousand nine hundred and eighty
nine.

Registrar of Companies

Exhibit 21

SOFTWARE PUBLISHING CORPORATION HOLDINGS, INC.

List of Subsidiaries

State or Other Jurisdiction of
Name Incorporation or Organization
Digital Paper, Inc. . . . . . . . . . . . . . . . . . . . . California
Grafox Limited. . . . . . . . . . . . . . . . . . . . . . . United Kingdom
Precision Software Limited. . . . . . . . . . . . . . . . . United Kingdom
PSL GmbH. . . . . . . . . . . . . . . . . . . . . . . . . . Germany
Serif (Europe) Limited. . . . . . . . . . . . . . . . . . . England
Serif GmbH. . . . . . . . . . . . . . . . . . . . . . . . . Germany
Serif Inc.. . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Software Publishing Asia Pacific Corporation. . . . . . . . California
Software Publishing Corporation . . . . . . . . . . . . . . Delaware
Software Publishing Corporation Belgium . . . . . . . . . . California
Software Publishing Corporation Europe. . . . . . . . . . . California
Software Publishing Corporation SPC (Italia) s.r.l. . . . . Italy
Software Publishing Corporation Netherlands . . . . . . . . California
Software Publishing Corporation (Scandinavia) AB. . . . . . Sweden
Software Publishing Deutschland GmbH. . . . . . . . . . . . Germany
Software Publishing France, SARL. . . . . . . . . . . . . . France
Software Publishing International Corporation (FSC) . . . . Barbados
Software Publishing Limited . . . . . . . . . . . . . . . . United Kingdom
VisualCities.com Inc. . . . . . . . . . . . . . . . . . . . Delaware

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in (a) the Registration
Statement on Form S-8, as amended (No. 333-13059), of Software Publishing
Corporation Holdings, Inc. (the "Company") pertaining to the Company's 1994 Long
Term Incentive Plan, (b) the Company's Registration Statement on Form S-8 (No.
333-19169) pertaining to the Company's Outside Director and Advisor Stock Option
Plan, (c) the Company's Registration Statement on Form S-8 (No. 333-19059)
pertaining to the Software Publishing Corporation's 1987 Stock Option Plan,
Software Publishing Corporation's 1989 Stock Option Plan and Software Publishing
Corporation's 1991 Stock Option Plan and (d) the Company's Registration
Statement on Form S-3 (No. 333-55677) pertaining to 2,107,712 shares of the
Company's Common Stock and 29,267 options to purchase shares of the Company's
Common Stock of our report, dated April 8, 1999, which included an emphasis
paragraph regarding a tax contingency with respect to our audit of the financial
statements of the Company, included in the Company's Annual Report on Form
10-KSB for the year ended December 31, 1998, filed with the Securities and
Exchange Commission.

/s/ Richard A. Eisner & Company, LLP
Richard A. Eisner & Company, LLP

New York, New York
April 14, 1999

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333- 13059) of Software Publishing Corporation Holdings, Inc. (the
"Company") pertaining to the Company's 1994 Long Term Incentive Plan, the
Company's Registration Statement (Form S-8 No. 333-19169) pertaining to the
Company's Outside Director and Advisor Stock Option Plan, the Company's
Registration Statement (Form S-8 No. 333-19059) pertaining to the Company's 1987
Stock Option Plan, the Company's 1989 Stock Option Plan and the Company's 1991
Stock Option Plan and the Company's Registration Statement (Form S-3 No.
333-55677) with respect to 2,107,712 shares of the Company's Common Stock and
29,267 options to purchase shares of the Company's Common Stock, of our Report
dated April 1, 1999 with respect to the financial statements of Serif (Europe)
Limited, included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998, filed with the Securities and Exchange Commission.

s/Ernst & Young
Ernst & Young

Nottingham, United Kingdom
April 13, 1999

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,377,648
<SECURITIES> 1,020,000
<RECEIVABLES> 2,646,992
<ALLOWANCES> 859,441
<INVENTORY> 706,704
<CURRENT-ASSETS> 6,576,171
<PP&E> 1,103,432
<DEPRECIATION> 657,985
<TOTAL-ASSETS> 10,312,696
<CURRENT-LIABILITIES> 6,141,099
<BONDS> 0
0
930,000
<COMMON> 5,084
<OTHER-SE> 3,136,959
<TOTAL-LIABILITY-AND-EQUITY> 10,312,696
<SALES> 18,271,733
<TOTAL-REVENUES> 18,271,733
<CGS> 4,348,002
<TOTAL-COSTS> 4,348,002
<OTHER-EXPENSES> 1,266,163
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,377,174)
<INCOME-TAX> 29,541
<INCOME-CONTINUING> (2,406,715)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,406,715)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> (.65)

</TABLE>