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                                                                     EXHIBIT 4.1

                             MULTIMEDIA GAMES, INC.

                             2001 STOCK OPTION PLAN

SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.

         The name of this plan is the Multimedia Games, Inc. 2001 Stock Plan
(the "Plan"). The Plan was adopted by the Board on September 21, 2001. The
purpose of the Plan is to enable the Company to attract and retain highly
qualified personnel who will contribute to the Company's success by their
ability, ingenuity and industry and to provide incentives to the participating
officers, employees, directors, consultants and advisors that are linked
directly to increases in stockholder value and will therefore inure to the
benefit of all stockholders of the Company.

         For purposes of the Plan, the following terms shall be defined as set
forth below:

         "Act" means Securities Exchange Act of 1934, as amended.

         "Administrator" means the Board, or if the Board does not administer
the Plan, the Committee in accordance with Section 2.

         "Board" means the Board of Directors of the Company.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.

         "Committee" means the Committee of the Board designated from time to
time by the Board to be the Administrator.

         "Commission" means Securities and Exchange Commission.

         "Company" means Multimedia Games, Inc., a Texas corporation (or any
successor corporation).

         "Disability" means the inability of a Participant to perform
substantially his duties and responsibilities to the Company by reason of a
physical or mental disability or infirmity (i) for a continuous period of six
months, or (ii) at such earlier time as the Participant submits medical evidence
satisfactory to the Company that he has a physical or mental disability or
infirmity which will likely prevent him from returning to the performance of his
work duties for six months or longer. The date of such Disability shall be on
the last day of such six-month period or the day on which the Participant
submits such satisfactory medical evidence, as the case may be.

         "Effective Date" shall mean the date provided pursuant to Section 9.

         "Eligible Employee" means an employee of the Company eligible to
participate in the Plan pursuant to Section 4.

         "Fair Market Value" means, as of any given date, with respect to any
awards granted hereunder, at the discretion of the Administrator and subject to
such limitations as the Administrator may impose,

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(A) if the Stock is publicly traded, the closing sale price of the Stock on such
date as reported in the Wall Street Journal, or the average of the closing price
of the Stock on each day on which the Stock was traded over a period-of up to
twenty trading days immediately prior to such date, (B) the fair market value of
the Stock as determined in accordance with a method prescribed in the agreement
evidencing any award hereunder, or (C) the fair market value of the Stock as
otherwise determined by the Administrator in the good faith exercise of its
discretion.

         "Incentive Stock Option" or "ISO" means any Stock Option intended to be
designated as an "incentive stock option" within the meaning of Section 422 of
the Code (and any successor provision of the Code having a similar intent).

         "Non-Qualified Stock Option" or "NQSO" means any Stock Option that is
not an Incentive Stock Option, including any Stock Option that provides (as of
the time such option is granted) that it will not be treated as an Incentive
Stock Option.

         "Parent Corporation" means any corporation (other the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations in the chain (other than the Company) owns stock possessing 50% or
more of the combined voting power of all classes of stock in one of the other
corporations in the chain.

         "Participant" means any Eligible Employee, consultant or advisor to the
Company selected by the Administrator, pursuant to the Administrator's authority
in Section 2 below, to receive grants of Stock Options.

         "Stock" means the Common Stock, $0.01 par value, of the Company.

         "Stock Option" means any option to purchase shares of Stock granted
pursuant to Section 5.

         "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations (other than the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.

         SECTION 2. ADMINISTRATION.

         The Plan shall be administered by the Board or by the Committee which
shall be appointed by the Board and which shall serve at the pleasure of the
Board.

         The Administrator shall have the power and authority to grant Stock
Options to Eligible Employees, consultants and advisors to the Company, pursuant
to the terms of the Plan.

         In particular, the Administrator shall have the authority:

         (a) to determine whether and to what extent Stock Options are to be
granted hereunder to Eligible Employees, consultants and advisors to the
Company;

         (b) to determine the number of shares to be covered by each Stock
Option granted hereunder;

         (c) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Stock Option granted hereunder; and

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         (d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, which shall govern all written instruments evidencing the
Stock Options.

         The Administrator shall have the authority, in its discretion, to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; to interpret
the terms and provisions of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan.

         All decisions made by the Administrator pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company and
the Participants.

         SECTION 3. STOCK SUBJECT TO PLAN.

         The total number of shares of Stock reserved and available for issuance
under the Plan (and the total number of shares that may be granted as ISO's)
shall be 1,750,000 shares of Stock. Such shares may consist, in whole or in
part, of authorized and unissued shares or treasury shares.

         To the extent that a Stock Option expires or is otherwise terminated
without being exercised, such shares shall again be available for issuance in
connection with future awards under the Plan. If any shares of Stock have been
pledged as collateral for indebtedness incurred by a Participant in connection
with the exercise of a Stock Option and such shares are returned to the Company
in satisfaction of such indebtedness, such shares shall again be available for
issuance in connection with future awards under the Plan. To the extent that a
Participant is eligible to use, and uses, shares of Stock to exercise a Stock
Option, the number of Shares of Stock so used shall be available for issuance in
connection with future awards under the Plan.

         In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend or other change in corporate structure
affecting the Stock, an appropriate substitution or adjustment shall be made in
the aggregate number of shares reserved for issuance under the Plan as may be
determined by the Administrator, in its sole discretion. Any other substitutions
or adjustments shall be made as may be determined by the Administrator, in its
sole discretion. In connection with any event described in this paragraph, the
Administrator may provide, in its discretion, for the cancellation of any
outstanding awards and payment in cash or other property therefor.

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         SECTION 4. ELIGIBILITY.

         Officers (including officers who are directors of the Company),
employees of the Company, and consultants and advisors to the Company who are
responsible for or contribute to the management, growth and/or profitability of
the business of the Company shall be eligible to be granted Stock Options. The
Participants under the Plan shall be selected from time to time by the
Administrator, in its sole discretion, from among the Eligible Employees,
consultants and advisors to the Company recommended by the senior management of
the Company, and the Administrator shall determine, in its sole discretion, the
number of shares covered by each award.

         SECTION 5. STOCK OPTIONS.

         Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve, and the provisions of Stock Option
awards need not be the same with respect to each optionee. Recipients of Stock
Options shall enter into a subscription and/or award agreement with the Company,
in such form as the Administrator shall determine, which agreement shall set
forth, among other things, the exercise price of the option, the term of the
option and provisions regarding exercisability of the option granted thereunder.

         The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options.

         The Administrator shall have the authority to grant any Eligible
Employee Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options. Consultants and advisors may only be granted Non-Qualified Stock
Options. To the extent that any Stock Option does not qualify as an Incentive
Stock Option, it shall constitute a separate Non-Qualified Stock Option. More
than one option may be granted to the same optionee and be outstanding
concurrently hereunder.

         Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:

         (1) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Administrator in its sole discretion
at the time of grant but shall not, (i) in the case of Incentive Stock Options,
be less than 100% of the Fair Market Value of the Stock on such date, (ii) in
the case of Non-Qualified Stock Options, be less than 85% of the Fair Market
Value of the Stock on such date, and (iii) in any event, be less than the par
value of the Stock. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 425(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any Parent
Corporation and an Incentive Stock Option is granted to such employee, the
option price of such Incentive Stock Option (to the extent required by the Code
at the time of grant) shall be no less than 110% of the Fair Market Value of the
Stock on the date such Incentive Stock Option is granted.

         (2) Option Term. The term of each Stock Option shall be fixed by the
Administrator, but no Stock Option shall be exercisable more than ten years
after the date such Stock Option is granted; provided, however, that if an
employee owns or is deemed to own (by reason of the attribution rules of Section
425(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation and an Incentive Stock Option is
granted to such employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five years from
the date of grant.

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         (3) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant. The Administrator may provide, in its
discretion, that any Stock Option shall be exercisable only in installments, and
the Administrator may waive such installment exercise provisions at any time in
whole or in part based on such factors as the Administrator may determine, in
its sole discretion.

         (4) Method of Exercise. Subject to Section 5(3) above, Stock Options
may be exercised in whole or in part at any time during the option period, by
giving written notice of exercise to the Company satisfying the number of shares
to be purchased, accompanied by payment in full of the purchase price in cash or
in such other form of consideration as is set forth in the related Stock Option
agreement as determined by the Administrator. As determined by the
Administrator, in its sole discretion, payment in whole or in part may also be
made in the form of unrestricted Stock already owned by the optionee; provided,
however, that the right to make payment in the form of already owned shares may
be authorized only at the time of grant. An optionee shall generally have the
rights to dividends and any other rights of a stockholder with respect to the
Stock subject to the option only after the optionee has given written notice of
exercise, has paid in full for such shares, and, if requested, has given the
representation described in paragraph (1) of Section 10.

         The Administrator may require the voluntary surrender of all or a
portion of any Stock Option granted under the Plan as a condition precedent to
the grant of a new Stock Option. Subject to the provisions of the Plan, such new
Stock Option shall be exercisable at the price, during such period and on such
other terms and conditions as are specified by the Administrator at the time the
new Stock Option is granted. Upon their surrender, Stock Options shall be
canceled and the shares previously subject to such canceled Stock Options shall
again be available for grants of Stock Options and other awards hereunder.

         (5) Loans. The Company may make loans available to Stock Option holders
in connection with the exercise of outstanding options granted under the Plan,
as the Administrator, in its discretion, may determine; provided, however, that
the right to make payment in the form of loans may be authorized only at the
time of grant and the terms of such loans shall be specified in the related
Stock Option agreement. Such loans shall (i) be evidenced by promissory notes
entered into by the Stock Option holders in favor of the Company, (ii) be
subject to the terms and conditions set forth in this Section 5(5) and such
other terms and conditions, not inconsistent with the Plan, as the Administrator
shall determine, (iii) bear interest, if any, at such rate as the Administrator
shall determine, and (iv) be subject to Board approval (or to approval by the
Administrator to the extent the Board may delegate such authority). In no event
may the principal amount of any such loan exceed the sum of (x) the exercise
price less the-par value of the shares of Stock covered by the option, or
portion thereof, exercised by the holder, and (y) any federal, state, and local
income tax attributable to such exercise. The initial term of the loan, the
schedule of payments of principal and interest (if any) under the loan, the
extent to which the loan is to be with or without recourse against the holder
with respect to principal or interest and the conditions upon which the loan
will become payable in the event of the holder's termination of employment shall
be determined by the Administrator. Unless the Administrator determines
otherwise, when a loan is made, shares of Stock having a Fair Market Value at
least equal to the principal amount of the loan shall be pledged by the holder
to the Company as security for payment of the unpaid balance of the loan, and
such pledge shall be evidenced by a pledge agreement, the terms of which shall
be determined by the Administrator, in its discretion; provided, however, that
each loan shall comply with all applicable laws, regulations and rules of the
Board of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.

         (6) Non-transferability of Options. Unless otherwise determined by the
Administrator, no Stock Option shall be transferable by the optionee, and all
Stock Options shall be exercisable, during the optionee's lifetime, only by the
optionee.

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         (7) Termination of Employment or Service. If an optionee's employment
with or service as a director of or consultant or advisor to the Company
terminates by reason of death, Disability or for any other reason, the Stock
Option may thereafter be exercised to the extent provided in the applicable
subscription or award agreement, or as otherwise determined by the
Administrator.

         (8) Annual Limit on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of shares of Stock with respect to which Incentive Stock
Options granted to an Optionee under this Plan and all other option plans of the
Company or its Parent Corporation become exercisable for the first time by the
Optionee during any calendar year exceeds $100,000, such Stock Options shall be
treated as Non-Qualified Stock Options.

         SECTION 6. AMENDMENT AND TERMINATION.

         The Board may amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would impair the rights of a
Participant under any award theretofore granted without such Participant's
consent.

         The Administrator may amend the terms of any award theretofore granted,
prospectively or retroactively, but, subject to Section 3 above, no such
amendment shall impair the rights of any holder without his or her consent.

         SECTION 7. UNFUNDED STATUS OF PLAN.

         The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.

         SECTION 8. GENERAL PROVISIONS.

         (1) The Administrator may require each person purchasing shares
pursuant to a Stock Option to represent to and agree with the Company in writing
that such person is acquiring the shares without a view to distribution thereof.
The certificates for such shares may include any legend which the Administrator
deems appropriate to reflect any restrictions on transfer.

         All certificates for shares of Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.

         (2) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee, director, consultant or advisor of the Company any
right to continued employment or service with the Company, as the case may be,
nor shall it interfere in any way with the right of the Company to terminate the
employment or service of any of its employees, directors, consultants or
advisors at any time.

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         (3) Each Participant shall, no later than the date as of which the
value of an award first becomes includible in the gross income of the
Participant for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on the making of such payments or arrangements, and the Company
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Participant.

         (4) No member of the Board or the Administrator, nor any officer or
employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administrator and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.

         SECTION 9. EFFECTIVE DATE OF PLAN.

         The Plan became effective (the "Effective Date") on September 21, 2001,
subject to, in the case of Incentive Stock Options, approval by the Company's
stockholders. The Company's stockholders approved the Plan on May 29, 2002.

         SECTION 10. TERM OF PLAN.

         No Stock Option shall be granted pursuant to the Plan on or after the
tenth anniversary of the Effective Date, but awards theretofore granted may
extend beyond that date.

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                                                                     Exhibit 4.1
                              AMENDED AND RESTATED
                            CLASS A WARRANT AGREEMENT

         WARRANT AGREEMENT dated as of October 17, 2002 by and between
Hypertension Diagnostics, Inc., a Minnesota corporation (the "Company"), and
Mellon Investor Services LLC, a New Jersey limited liability company, as Warrant
Agent (the "Warrant Agent").

         A. The Company has issued up to 2,587,500 Redeemable Class A Warrants
(the "Warrants") evidencing the right to purchase an aggregate of up to
2,587,500 authorized but previously unissued shares of Common Stock, $.01 par
value per share, of the Company (the "Common Stock"). Pursuant to that certain
Amendment No. 4 to the Redeemable Class A Warrant Agreement dated as of
September 11, 2002, the Warrant Agent was appointed as the warrant agent with
respect to the Warrants under that certain Warrant Agreement dated as of July
23, 1998 (as from time to time heretofore or hereafter amended, the "Class A
Warrant Agreement");

         B. The Company desires to extend the expiration of the Warrant and
reduce the exercise price. The Company and the Warrant Agent desire to amend and
restate the Class A Warrant Agreement to set forth the rights and obligations of
each with respect to the Warrant.

         NOW THEREFORE, it is agreed as follows:

                                   ARTICLE 1.
                     APPOINTMENT OF WARRANT AGENT; ISSUANCE,
                   FORM AND EXECUTION OF WARRANT CERTIFICATES

         Section 1.1 Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as Agent for the Company, and the Warrant Agent hereby
accepts the agency established herein and agrees to perform its agency duties in
accordance with the terms and conditions of this Warrant Agreement.

         Section 1.2 Warrant Certificates. The Company shall execute and deliver
to the Warrant Agent certificates which the Company has authorized to represent
the Warrants ("Warrant Certificates"). The Warrant Certificates shall be
substantially as set forth in Exhibit A hereto and may have such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate (but which do not affect the rights, immunities,
duties or liabilities of the Warrant Agent) and as are not inconsistent with the
provisions of this Warrant Agreement, or as may be required to comply with any
law or with any rule or regulation relating to listing of the Warrants on The
Nasdaq Stock Market ("Nasdaq"), including the SmallCap Market, or on any stock
exchange or to conform to usage. The Warrant Certificates shall be dated with
the date of their issuance.

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         Section 1.3 Execution of Warrant Certificates. The Warrant Certificates
shall be executed on behalf of the Company by a duly authorized officer of the
Company, either manually or by facsimile signature printed thereon. The Warrant
Certificates shall be manually countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. Any Warrant Certificate may be
signed on behalf of the Company by the person who at the actual date of the
signing of such Warrant Certificate shall have been the proper officer of the
Company, although at the date of issuance of such Warrant Certificate any such
person has ceased to be such officer of the Company.

                                   ARTICLE II.
                              EXERCISE OF WARRANTS

         Section 2.1 Exercise. Any or all of the Warrants represented by each
Warrant Certificate may be exercised by the holder thereof on or before 5:00
p.m., Minneapolis time, on November 14, 2002, unless extended by the Company, by
surrender of the Warrant Certificate with the Purchase Form, which is printed on
the reverse thereof (or a reasonable facsimile thereof) duly executed by such
holder, to the Warrant Agent at its office designated for such purpose,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in an amount equal to the product of the number of
shares of Common Stock issuable upon exercise of the Warrant represented by such
Warrant Certificate, as adjusted pursuant to the provisions of Article III
hereof, multiplied by the exercise price of $1.00, as adjusted pursuant to the
provisions of Article III hereof (such price as so adjusted from time to time
being herein called the "Exercise Price"), and such holder shall be entitled to
receive such number of fully paid and nonassessable shares of Common Stock, as
so adjusted, at the time of such exercise. The Warrant Agent shall have no duty
(i) to determine or calculate the Exercise Price or (ii) confirm or verify the
accuracy or correctness of the Exercise Price; the Warrant Agent's sole duty
under this paragraph being the acceptance of the certificates evidencing the
Warrants and taking possession for the benefit of the Company of the Exercise
Price delivered to it by a Warrant holder.

         Section 2.2 Time of Exercise. Each exercise of Warrants shall be deemed
to have been effective immediately prior to the close of business on the
business day on which the Warrant Certificate relating to such Warrants shall
have been surrendered to the Warrant Agent as provided in Section 2.1, and at
such time the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such exercise as
provided in Section 2.3, shall be deemed to have become the holder or holders of
record thereof.

         Section 2.3 Issuance of Shares of Common Stock; No Fractional Shares.
As soon as practicable after the exercise of any Warrant, and in any event
within ten (10) days after receipt by the Warrant Agent of the notice of
exercise under Section 2.1, 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 holder thereof or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct,

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                  (a) certificate or certificates for the number of fully paid
         and nonassessable shares of Common Stock to which such holder shall be
         entitled upon such exercise plus, in lieu of any fractional share to
         which such holder would otherwise be entitled, an amount in cash equal
         to such fraction multiplied by the then current value of a share of
         Common Stock, determined as follows:

                           (i) if the Common Stock is listed or admitted to
                  unlisted trading privileges on any single stock exchange, then
                  such current value shall be computed on the basis of the last
                  reported sale price of the Common Stock on such exchange on
                  the last business day prior to the date of the exercise of
                  such Warrant upon which a sale shall have been effected; or

                           (ii) if the Common Stock is not so listed or admitted
                  to unlisted trading privileges and bid and ask prices are
                  reported by Nasdaq, including the SmallCap Market system (or,
                  if not so quoted on Nasdaq, by the National Quotation Bureau,
                  Inc.), then the current value shall be the last reported sale
                  on the last business day prior to the date of the exercise of
                  such Warrant, or, in the event the last reported sale is
                  unavailable, the average of the closing bid and ask prices on
                  the last business day prior to the date of the exercise of
                  such Warrant as so reported; or

                           (iii) if the Common Stock is listed or admitted to
                  unlisted trading privileges on more than one stock exchange or
                  one or more stock exchanges and quoted on Nasdaq, then the
                  current value shall, if different as a result of calculation
                  under the applicable method(s) described above in this
                  Section, be deemed to be the higher number calculated in
                  connection therewith; or

                           (iv) if the Common Stock is not so listed or admitted
                  to unlisted trading privileges and bid and ask prices are not
                  so reported, then the current value shall be computed on the
                  basis of the book value of Common Stock as of the close of
                  business on the last day of the month immediately preceding
                  the date upon which such Warrant was exercised, as determined
                  by the Company,

                  and

                  (b) in case such exercise includes only part of the Warrants
         represented by any Warrant Certificate, a new Warrant Certificate or
         Warrant Certificates of like tenor, calling in the aggregate on the
         face or faces thereof for the number of shares of Common Stock equal
         (without giving effect to any adjustment therein) to the number of such
         shares called for on the face of such Warrant Certificate minus the
         number of such shares designated by the holder for such exercise as
         provided in Section 2.1. Warrants, represented by a properly assigned
         Warrant Certificate, may be exercised by a new holder without first
         having a new Warrant Certificate issued.

         Section 2.4 Extension of Exercise Period; Change of Exercise Price. The
Company may, upon notice given to the Warrant Agent, and without the consent of
the holders of the

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Warrant Certificates, (i) reduce the Exercise Price during all or any portion of
the originally stated exercise period, or (ii) extend the period over which the
Warrants are exercisable beyond November 14, 2002 and increase the Exercise
Price for any period the Warrant exercise period is extended. In the case of the
extension of the exercise period or a change in the Exercise Price, the Company
must provide the Warrant Agent and the Warrant holders of record notice of such
extension of the exercise period, specifying, as the case may be, the time to
which such exercise period is extended, or specifying the new Exercise Price and
the periods for which such new Exercise Price is in effect, a reasonable time
prior to the date such extension or new Exercise Price is to take effect, such
reasonable time to be commercially reasonable and consistent with applicable
securities laws and regulations.

                                  ARTICLE III.
                             ANTIDILUTION PROVISIONS

         Section  3.1 Adjustment of Exercise Price.

                  (a) The Exercise Price shall be subject to the following
         adjustments. In the event that:

                           (i) any dividends on any class of stock of the
                  Company payable in Common Stock or securities convertible into
                  Common Stock shall be paid by the Company; or

                           (ii) the Company shall subdivide its then outstanding
                  shares of Common Stock into a greater number of shares; or

                           (iii) the Company shall combine outstanding shares of
                  Common Stock, by reclassification or otherwise;

         then, in any such event, the Exercise Price in effect immediately prior
         to such event shall (until adjusted again pursuant hereto) be adjusted
         immediately after such event to a price (calculated to the nearest full
         cent) determined by dividing (A) the number of shares of Common Stock
         outstanding immediately prior to such event, multiplied by the then
         existing Exercise Price, by (B) the total number of shares of Common
         Stock outstanding immediately after such event (including the maximum
         number of shares of Common Stock issuable in respect of any securities
         convertible into Common Stock), and the resulting quotient shall be the
         adjusted Exercise Price per share.

                  (b) No adjustment of the Exercise Price shall be made if the
         amount of such adjustments shall be less than one cent per share, but
         in such case any adjustment that would otherwise be required to be made
         shall be carried forward and shall be made at the time and together
         with the next subsequent adjustment which, together with any adjustment
         or adjustments so carried forward, shall amount to not less than one
         cent per share.

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         Section 3.2 Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to Section 3.1,
the registered holder of each Warrant shall thereafter (until another such
adjustment) be entitled to purchase at the adjusted Exercise Price the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares specified in such Warrant (as adjusted as a result of all adjustments
in the Exercise Price in effect prior to such adjustment) by the Exercise Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.

         Section 3.3 Notice as to Adjustment. Upon any adjustment of the
Exercise Price and an increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of the Warrants, then, and in each such
case, the Company shall within ten (10) days after the effective date of such
adjustment give written notice thereof, by first class mail, postage prepaid,
addressed to each registered Warrant holder at the address of such Warrant
holder as shown on the books of the Company (and written notice thereof to the
Warrant Agent), which notice shall state the adjusted Exercise Price and the
increased or decreased number of shares purchasable upon the exercise of the
Warrants, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.

         Section 3.4 Effect of Reorganization, Reclassification, Merger, Etc. If
at any time while any Warrant is outstanding there should be any capital
reorganization or reclassification of the capital stock of the Company (other
than the issue of any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise and other than a
combination of shares provided for in Section 3.1 hereof) or any consolidation
or merger of the Company with another corporation or any sale, conveyance, lease
or other transfer by the Company of all or substantially all of its assets to
any other corporation, the holder of any Warrant shall, during the remainder of
the period such Warrant is exercisable, be entitled to receive, upon payment of
the Exercise Price, the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
consolidation or merger, or of the corporation to which the assets of the
Company has been sold, conveyed, leased or otherwise transferred, as the case
may be, to which the Common Stock (and any other securities and property) of the
Company, deliverable upon the exercise of such Warrant, would have been entitled
upon such capital reorganization, reclassification of capital stock,
consolidation, merger, sale, conveyance, lease or other transfer if such Warrant
had been exercised immediately prior to such capital reorganization,
reclassification of capital stock, consolidation merger, sale, conveyance, lease
or other transfer; and, in any such case, appropriate adjustment (as determined
by the Board of Directors of the Company) shall be made in the application of
the provisions set forth in this Warrant Agreement with respect to the rights
and interests thereafter of the Warrant holders to the end that the provisions
set forth in this Warrant Agreement (including the adjustment of the Exercise
Price and the number of shares issuable upon the exercise of the Warrants) shall
thereafter be applicable, as near as may be reasonably practicable, in relation
to any shares or other property thereafter deliverable upon the exercise of the
Warrants as if the Warrants had been exercised immediately prior to such capital
reorganization, reclassification of capital stock, such consolidation, merger,
sale, conveyance, lease or other transfer and the Warrant holders had carried
out the terms of the exchange as provided for by such capital reorganization,
reclassification, consolidation or merger. The

                                       5
<PAGE>

Company shall not effect any such capital reorganization, consolidation, merger
or transfer unless, upon or prior to the consummation thereof, the successor
corporation or the corporation to which the property of the Company has been
sold, conveyed, leased or otherwise transferred shall assume by written
instrument the obligation to deliver to the holder of each Warrant such shares
of stock, securities, cash or property as in accordance with the foregoing
provisions such holder shall be entitled to purchase.

         Section 3.5 Prior Notice as to Certain Events. In case at any time:

                  (a) The Company shall pay any dividend upon its Common Stock
         payable in stock or make any distribution (other than cash dividends)
         to the holders of its Common Stock; or

                  (b) The Company shall offer for subscription pro rata to the
         holders of its Common Stock any additional shares of stock of any class
         or any other rights; or

                  (c) There shall be any capital reorganization or
         reclassification of the capital stock of the Company, or consolidation
         or merger of the Company with, or sale, conveyance, lease or other
         transfer of all or substantially all of its assets to, another
         corporation; or

                  (d) There shall be a voluntary or involuntary dissolution,
         liquidation or winding up of the Company;

then in any one or more of such cases, the Company shall give prior written
notice, by first class mail, postage prepaid, addressed to each registered
Warrant holder at the address of such Warrant holder as shown on the books of
the Company (and written notice thereof to the Warrant Agent), of the date on
which (i) the books of the Company shall close or a record shall be taken for
such stock dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall participate in such dividend, distribution or subscription rights
or shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up, as the case may be. Such
written notice shall be given at least twenty (20) days prior to the action in
question and not less than twenty (20) days prior to the record date or the date
on which the Company's transfer books are closed in respect thereto.

         Section 3.6 Certain Obligations of the Company. The Company will not,
by amendment of its articles of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant Agreement or the Warrant
Certificate, but will at all times in good faith assist in the carrying out of
all such terms. Without limiting the generality of the foregoing, the Company
(a) will take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully

                                       6
<PAGE>

paid and nonassessable shares of such stock upon the exercise of all Warrants
from time to time outstanding, and (b) will not (i) transfer all or
substantially all of its properties and assets to any other person or entity, or
(ii) consolidate with or merge into any other entity where the Company is not
the continuing or surviving entity, or (iii) permit any other entity to
consolidate with or merge into the Company where the Company is the continuing
or surviving entity but, in connection with such consolidation or merger, the
Common Stock then issuable upon the exercise of the Warrants shall be changed
into or exchanged for shares or other securities or property of any other entity
unless, in any such case, the other entity acquiring such properties and assets,
continuing or surviving after such consolidation or merger or issuing or
distributing such shares or other securities or property, as the case may be,
shall expressly assume in writing and be bound by all the terms of this Warrant
Agreement and the Warrant Certificates.

         Section 3.7 Reservation and Listing of Common Stock. The Company will
at all times reserve and keep available, solely for issuance and delivery upon
the exercise of the Warrants, all shares of Common Stock from time to time
issuable upon such exercise. All such shares shall be duly and validly issued,
fully paid and nonassessable with no liability on the part of the holder
thereof. The Company, at its expense, will list on The Nasdaq SmallCap Market
(subject to official notice of issuance) and will maintain such listing of, the
shares of Common Stock from time to time issuable upon the exercise of the
Warrants.

         Section 3.8 Registration or Exemption of Common Stock. The Company will
use its best efforts (a) at all times the Warrants are exercisable to maintain
an effective registration statement under the Securities Act of 1933, as amended
(the "Act"), covering Common Stock issuable upon exercise of the Warrants, (b)
from time to time to amend or supplement the prospectus contained in such
registration statement to the extent necessary in order to comply with
applicable law, (c) to qualify for exemption from the registration requirements
of the Act the Common Stock issuable upon exercise of the Warrants, and (d) to
maintain exemptions or qualifications, in those jurisdictions in which the
original registration statement relating to the Warrants was initially
qualified, to permit the exercise of the Warrants and the issuance of the Common
Stock pursuant to such exercise. The Warrant Agent shall have no responsibility
or liability for the maintenance of such exemptions or qualifications or for
liabilities arising from the exercise or attempted exercise of Warrants in
jurisdictions where exemptions or qualifications have not been maintained or are
otherwise unavailable.

                                   ARTICLE IV.
                              REDEMPTION OF WARRANT

         Section 4.1 Redemption Price. The Warrants may be redeemed at the
option of the Company, anytime following a period of fourteen (14) consecutive
trading days where the per share closing bid price of the Common Stock exceeds
$6.50, on notice as set forth in Section 4.2, and at a redemption price equal to
$.01 per Warrant. For purposes of this Section, the closing bid price of the
Common Stock shall be determined by the closing bid price as reported by The
Nasdaq SmallCap Market so long as the Common Stock is quoted on The Nasdaq
SmallCap

                                       7
<PAGE>

Market and, if the Common Stock is listed on a stock exchange, shall be
determined by the last reported sale price on the primary exchange on which the
Common Stock is traded.

         Section 4.2 Notice of Redemption. In the case of any redemption of
Warrants, the Company or, at its request, the Warrant Agent in the name of and
at the expense of the Company shall give notice of such redemption to the
holders of the Warrants to be redeemed as hereinafter provided in this Section
4.2. Notice of redemption to the holders of Warrants shall be given by mailing
by first-class mail a notice of such redemption within 10 business days
following the fourteen-day consecutive trading period referenced in Section 4.1
and not less than 30 days prior to the date fixed for redemption. Any notice
which is given in the manner herein provided shall be conclusively presumed to
have been duly given, whether or not the holder receives the notice. In any
case, failure to duly give such notice, or any defect in such notice, to the
holder of any Warrant Certificate shall not affect the validity of the
proceedings for the redemption of Warrants represented by any other Warrant
Certificate. Each such notice shall specify (1) the date fixed for redemption;
(2) the place of redemption; (3) the redemption price of $.01 at which each
Warrant is to be redeemed; and (4) shall state that payment of the redemption
price of the Warrants will be made on surrender of the Warrants at such place of
redemption, and that if not exercised by the close of business on the date fixed
for redemption the exercise rights of the Warrants identified for redemption
shall expire unless extended by the Company. Such notice shall also state the
current Exercise Price and the date on which the right to exercise the Warrants
will expire unless extended by the Company.

         Section 4.3 Payment of Warrants on Redemption; Deposit of Redemption
Price. If notice of redemption shall have been given as provided in Section 4.2,
the redemption price of $.01 per Warrant shall, unless the Warrant is
theretofore exercised pursuant to the terms hereof, become due and payable on
the date and at the place stated in such notice. On and after such date of
redemption, provided that cash sufficient for the redemption thereof shall then
be deposited by the Company with the Warrant Agent for that purpose, the
exercise rights of the Warrants identified for redemption shall expire. On
presentation and surrender of Warrant Certificates at such place of payment in
such notice specified, the Warrants identified for redemption shall be paid and
redeemed at the redemption price of $.01 per Warrant. Prior to the date fixed
for redemption, the Company shall deposit with the Warrant Agent an amount of
money sufficient to pay the redemption price of all the Warrants identified for
redemption. Any monies which shall have been deposited with the Warrant Agent
for redemption of Warrants and which are not required for that purpose by reason
of exercise of Warrants shall be repaid to the Company upon delivery to the
Warrant Agent of evidence satisfactory to it of such exercise.

                                   ARTICLE V.
                      CERTAIN OTHER PROVISIONS RELATING TO
                    RIGHTS OF HOLDERS OF WARRANT CERTIFICATES

         Section 5.1 No Rights of Shareholders. The Warrant Certificates shall
be issued in registered form only. No Warrant Certificate shall entitle the
holder thereof to any of the rights of a holder of shares of Common Stock of the
Company, including, without limitation, the right

                                       8
<PAGE>

to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of holders of Common Stock or any other proceedings
of the Company.

         Section 5.2 Loss, Theft, Destruction or Mutilation of Warrant
Certificates. Upon receipt by the Warrant Agent of evidence reasonably
satisfactory to the Warrant Agent of the loss, theft, destruction or mutilation
of any Warrant Certificate, and (a) in the case of any such loss, theft, or
destruction, upon delivery to the Warrant Agent of an indemnity bond in form and
amount, and issued by a bonding company, satisfactory to the Company and to the
Warrant Agent, or (b) in the case of any such mutilation upon surrender to and
cancellation by the Warrant Agent of such Warrant Certificate, the Company at
its expense will execute and cause the Warrant Agent to countersign and deliver,
in lieu thereof, a new Warrant Certificate of like tenor.

         Section 5.3 Transfer Agent; Cancellation of Warrant Certificates;
Unexercised Warrants. Mellon Investor Services LLC (and any successor), as
transfer agent (the "Transfer Agent"), is hereby irrevocably authorized and
directed at all times to reserve such number of authorized and unissued shares
of Common Stock as shall be sufficient to permit the exercise in full of all
Warrants from time to time outstanding. The Company will keep a copy of this
Agreement on file with the Transfer Agent. The Warrant Agent, and any successor
thereto, is hereby irrevocably authorized to requisition from time to time from
the Transfer Agent certificates for shares of Common Stock required for exercise
of Warrants. The Company will supply the Transfer Agent with duly executed
certificates for shares of Common Stock for such purpose and will make available
any cash required in settlement of fractional share interests. All Warrant
Certificates surrendered upon the exercise or redemption of Warrants shall be
canceled by the Warrant Agent and shall thereafter be delivered to the Company;
such canceled Warrant Certificates, with the Purchase Form on the reverse
thereof duly filled in and signed, shall constitute conclusive evidence as
between the parties hereto of the numbers of shares of Common Stock which shall
have been issued upon exercises of Warrants. Promptly after the last day on
which the Warrants are exercisable (set forth in Section 2.1 above), the Warrant
Agent shall certify to the Company the aggregate number of Warrants then
outstanding and unexercised. No shares of Common Stock shall be subject to
reservation with respect to Warrants not exercised prior to the time and date
identified in Section 2.1 above as the last time and date at which Warrants may
be exercised.

                                   ARTICLE VI.
                  TRANSFER AND EXCHANGE OF WARRANT CERTIFICATES

         Section 6.1 Warrant Register; Transfer or Exchange of Warrant
Certificates. The Warrant Agent shall cause to be kept at the office of the
Warrant Agent designated for such purpose a register (the "Warrant Register") in
which, subject to such reasonable regulations as the Company may prescribe,
provisions shall be made for the registration of transfers and exchanges of
Warrant Certificates. Upon surrender for transfer or exchange of any Warrant
Certificates, properly endorsed, to the Warrant Agent, the Warrant Agent at the
Company's expense will issue and deliver to or upon the order of the holder
thereof a new Warrant

                                       9
<PAGE>

Certificate or Warrant Certificates of like tenor, in the name of such holder or
as such holder (upon payment by such holder of any applicable taxes or
governmental charges) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face of the
Warrant Certificate so surrendered. Any Warrant Certificate surrendered for
transfer or exchange shall be canceled by the Warrant Agent and shall thereafter
be delivered to the Company. The Warrant Agent shall have no duty or obligation
to take any action under any Section of this Agreement which requires the
payment by a Warrant holder of applicable taxes and governmental charges unless
and until the Warrant Agent is satisfied that all such taxes and/or charges have
been paid.

         Section 6.2 Identity of Warrant holders. Until a Warrant Certificate is
transferred in the Warrant Register, the Company and the Warrant Agent may treat
the person in whose name the Warrant Certificate is registered as the absolute
owner thereof and of the Warrants represented thereby for all purposes,
notwithstanding any notice to the contrary, except that, if and when any Warrant
Certificate is properly assigned in blank, the Company and the Warrant Agent may
(but shall not be obligated to) treat the bearer thereof as the absolute owner
of the Warrant Certificate and of the Warrants represented thereby for all
purposes, notwithstanding any notice to the contrary.

                                  ARTICLE VII.
                          CONCERNING THE WARRANT AGENT

         Section 7.1 Taxes. The Company will, from time to time, promptly pay to
the Warrant Agent, or make provision satisfactory to the Warrant Agent for the
payment of, all taxes and charges that may be imposed by the United States or
any State upon the Company or the Warrant Agent upon the transfer or delivery of
shares of Common Stock upon the exercise of Warrants, but the Company shall not
be obligated to pay any tax imposed in connection with any transfer involved in
the delivery of a certificate for shares of Common Stock in any name other than
that of the registered holder of the Warrant Certificate surrendered in
connection with the purchase thereof.

         Section 7.2 Replacement of Warrant Agent in Certain Circumstances.

                  (a) The Warrant Agent or any successor Warrant Agent may
         resign its duties and be discharged from all further duties and
         liabilities hereunder after giving thirty (30) days' notice in writing
         to the Company, except that such shorter notice may be given as the
         Company shall, in writing, accept as sufficient. The Company may
         discharge the Warrant Agent at any time with or without reason,
         effective upon thirty (30) days written notice to the Warrant Agent or
         such shorter period as the Warrant Agent shall, in writing, accept as
         sufficient. If the office of Warrant Agent becomes vacant by
         resignation, discharge, incapacity to act or otherwise, the Company
         shall appoint in writing a new Warrant Agent. If the Company shall fail
         to make such appointment within a period of thirty (30) days after it
         has been notified in writing of such resignation or incapacity by the
         resigning or incapacitated Warrant Agent or by the holder of a Warrant
         Certificate,

                                       10
<PAGE>

         then the holder of any Warrant Certificate may apply to any court of
         competent jurisdiction for the appointment of a new Warrant Agent. Any
         new Warrant Agent, whether appointed by the Company or by such a court,
         shall be a person authorized to do business in Minnesota and is subject
         to supervision or examination by Federal or State authority. Any new
         Warrant Agent appointed hereunder shall execute, acknowledge and
         deliver to the Company an instrument accepting such appointment
         hereunder and thereupon such new Warrant Agent without any further act
         or deed shall become vested with all the rights, powers, duties and
         responsibilities of the Warrant Agent hereunder with like effect as if
         it had been named as the Warrant Agent; but if for any reason it
         becomes necessary or expedient to have the former Warrant Agent execute
         and deliver any further assurance, conveyance, act or deed, the same
         shall be done and shall be legally and validly executed and delivered
         by the former Warrant Agent. Not later than the effective date of any
         such appointment, the Company shall file notice thereof with the former
         Warrant Agent. The Company shall promptly give notice of any such
         appointment to the holders of the Warrant Certificates by mail to their
         addresses as shown in the Warrant Register. Failure to file or give
         such notice, or any defect therein, shall not affect the legality or
         validity of the appointment of the successor Warrant Agent.

                  (b) Any person into which the Warrant Agent or any new Warrant
         Agent may be merged or converted or with which it may be consolidated
         or any person resulting from any merger, conversion or consolidation to
         which the Warrant Agent shall be a party shall be the successor Warrant
         Agent under this Warrant Agreement without any further act; provided
         that if such person would not be eligible for appointment as a
         successor Warrant Agent under the provisions of paragraph (a) of this
         Section 7.2, the Company shall forthwith appoint a new Warrant Agent in
         accordance with such provisions. Any such successor Warrant Agent may
         adopt the prior countersignature of any predecessor Warrant Agent and
         deliver Warrant Certificates countersigned and not delivered by such
         predecessor Warrant Agent or may countersign Warrant Certificates
         either in the name of any predecessor Warrant Agent or the name of the
         successor Warrant Agent.

         Section 7.3 Remuneration of Warrant Agent. The Company will pay the
Warrant Agent reasonable remuneration for its services as Warrant Agent
hereunder and will reimburse the Warrant Agent upon demand for all expenditures
that the Warrant Agent may reasonably incur in the preparation, administration,
delivery, execution and amendment of this Agreement and the performance of its
duties under this Agreement.

         Section 7.4 Further Assurances. The Company will perform, exercise,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing
by the Warrant Agent of the provisions of this Warrant Agreement.

                                       11
<PAGE>

         Section 7.5       Limitations on Liabilities of the Warrant Agent.

                  (a) The Warrant Agent may consult with legal counsel (who may
         be legal counsel for the Company), and the advice or opinion of such
         counsel shall be full and complete authorization and protection of the
         Warrant Agent as to any action taken, suffered or omitted by it in
         accordance with such advice or opinion.

                  (b) Whenever, in the performance of its duties under this
         Warrant Agreement, the Warrant Agent shall deem it necessary or
         desirable that any matter be proved or established, or that any
         instructions with respect to the performance of its duties hereunder be
         given, by the Company prior to taking, suffering or omitting any action
         hereunder, such matter (unless other evidence in respect thereof be
         herein specifically prescribed) may be deemed to be conclusively proved
         and established, or such instructions may be given, by a certificate or
         instrument signed by an officer of the Company and delivered to the
         Warrant Agent; and such certificate or instrument shall be full
         authorization and protection to the Warrant Agent for any action taken.
         Suffered or omitted by it under the provisions of this Warrant
         Agreement in reliance upon such certificate or instrument; but in its
         discretion the Warrant Agent may in lieu thereof accept other evidence
         of such matter or may require such further or additional evidence as it
         may deem reasonable.

                  (c) The Warrant Agent shall be liable hereunder only for its
         own gross negligence or willful misconduct (each as finally determined
         by a court of competent jurisdiction). The Warrant Agent shall act
         hereunder solely as agent, and its duties shall be determined solely by
         the provisions hereof. The Company agrees to indemnify the Warrant
         Agent and save it harmless against any and all losses, liabilities and
         expenses, including judgments, damages, fines, penalties, claims,
         demands, settlements, costs and reasonable counsel fees and expenses,
         for anything done or omitted by the Warrant Agent arising out of or in
         connection with this Agreement except as a result of its gross
         negligence or willful misconduct (each as finally determined by a court
         of competent jurisdiction). The costs and expenses incurred by the
         Warrant Agent in enforcing the right to indemnification shall be paid
         by the Company unless it is determined by a final order, judgment,
         decree or ruling of a court of competent jurisdiction that the Warrant
         Agent is not entitled to indemnification due to its own gross
         negligence or willful misconduct. In no event will the Warrant Agent be
         liable for special, indirect, incidental, punitive or consequential
         loss or damage of any kind whatsoever, even if the Warrant Agent has
         been advised of the possibility of such loss or damage. Any liability
         of the Warrant Agent under this Agreement to the Company will be
         limited to the amount of fees paid by the Company to the Warrant Agent.

                  (d) The Warrant Agent shall not be liable for or by reason of
         any of the statements of fact or recitals contained in this Warrant
         Agreement or in the Warrant Certificates (except its countersignature
         thereof) or be required to verify the same, but all such statements and
         recitals are and shall be deemed to have been made by the Company only.

                                       12
<PAGE>

                  (e) The Warrant Agent shall not be under any responsibility in
         respect to the validity or execution of any Warrant Certificate (except
         its countersignature thereof); nor shall it be responsible for any
         breach by the Company of any covenant or condition contained in this
         Warrant Agreement or in any Warrant Certificate; nor shall it be
         responsible for the making of any adjustment in the Exercise Price, or
         number of shares issuable upon exercise of the Warrant Certificates or
         responsible for the manner, method or amount of any such adjustment or
         the facts that would require any such adjustment; nor shall it by any
         act hereunder be deemed to make any representation or warranty as to
         the authorization or reservation of any shares of Common Stock to be
         issued pursuant to this Warrant Agreement or any Warrant Certificate or
         as to whether any shares of Common Stock or other securities are or
         will be validly authorized and issued and fully paid and nonassessable.

                  (f) The Warrant Agent is hereby authorized and directed to
         accept instructions with respect to the performance of its duties
         hereunder from any one of the Chairman of the Board, the President, a
         Vice President, the Secretary or the Treasurer of the Company, and to
         apply to such officers for advice or instructions in connection with
         its duties, and such instructions shall be full authorization and
         protection to the Warrant Agent, and the Warrant Agent shall not be
         liable for any action taken, suffered or omitted to be taken by it in
         accordance with instructions of any such officer.

                  (g) The Warrant Agent may execute and exercise any of the
         rights or powers hereby vested in it or perform any duty hereunder
         either itself or by or through its attorneys or non-employee agents,
         and the Warrant Agent shall not be answerable or accountable for any
         act, default, neglect or misconduct of any such attorneys or
         non-employee agents or for any loss to the Company resulting from any
         such act, default, neglect or misconduct, absent gross negligence or
         willful misconduct (each as finally determined by a court of competent
         jurisdiction) in the selection and continued employment thereof.

                  (h) No provision of this Agreement shall require the Warrant
         Agent to expend or risk its own funds or otherwise incur any financial
         liability in the performance of any of its duties hereunder or in the
         exercise of its rights if it believes that repayment of such funds or
         adequate indemnification against such risk or liability is not
         reasonably assured to it.

                  (i) The provisions of this Section 7.5 and Section 7.3 above
         shall survive the termination of this Agreement, the exercise or
         expiration of the Warrants and the resignation or removal of the
         Warrant Agent.

         Section 7.6 Amendment and Modification. The Warrant Agent may (but is
not required if the supplement or amendment changes the rights, immunities,
duties or liabilities of the Warrant Agent), without the consent or concurrence
of the holders of the Warrant Certificates, by supplemental agreement or
otherwise, join with the Company in making any

                                       13
<PAGE>

changes or corrections in this Warrant Agreement that they shall have been
advised by counsel (a) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained, (b) add to the obligations of the Company in this
Warrant Agreement further obligations thereafter to be observed by it, or
surrender any right or power reserved to or conferred upon the Company in this
Warrant Agreement, or (c) do not or will not adversely affect, alter or change
the rights, privileges or immunities of the holders of Warrant Certificates not
provided for under this Warrant Agreement; provided, however, that any term of
this Warrant Agreement or any Warrant Certificate may be changed, waived,
discharged or terminated by an instrument in writing signed by each party
against which enforcement of such change, waiver, discharge or termination is
sought, or by which the same is to be performed or observed.

                                  ARTICLE VIII.
                                  OTHER MATTERS

         Section 8.1 Successors and Assigns. All the covenants and provisions of
this Warrant Agreement by or for the benefit of the Company or the Warrant Agent
shall bind and inure to the benefit of their respective successors and assigns.

         Section 8.2 Notices. Any notice or demand authorized by this Warrant
Agreement to be given or made by the Warrant Agent or by the holder of any
Warrant Certificate to or on the Company shall be sufficiently given or made if
sent by first class or registered mail, postage prepaid, addressed (until
another address is filed in writing by the Company with the Warrant Agent) or by
facsimile transmission as follows:

                  Attn:  President
                  Hypertension Diagnostics, Inc.
                  2915 Waters Road, Suite 108
                  Eagan, MN 55121-1562
                  Facsimile No.:  651-687-0485

                  With a copy to:

                  Girard P. Miller, Esq.
                  Lindquist & Vennum P.L.L.P.
                  4200 IDS Center
                  80 South Eighth Street
                  Minneapolis, MN 55402-2205
                  Facsimile No.:  612-371-3207

Any notice or demand authorized by this Warrant Agreement to be given or made by
the holder of any Warrant Certificate or by the Company to or on the Warrant
Agent shall be sufficiently given or made if sent by first class or registered
mail, postage prepaid, addressed (until another

                                       14
<PAGE>

address is filed in writing by the Warrant Agent with the Company) or by
facsimile transmission as follows:

                  Mellon Investor Services LLC
                  150 N Wacker Drive
                  Chicago, IL  60606
                  Attention: Relationship Manager
                  Facsimile No.:  312-704-7112

                  With a copy to:

                  Mellon Investor Services LLC
                  85 Challenger Road
                  Ridgefield Park, New Jersey  07660
                  Attention:  General Counsel
                  Facsimile No.:  201-296-4004

                                       15
<PAGE>

         Section 8.3 Governing Law. This Warrant Agreement and the Warrant
Certificates are being delivered in the State of Minnesota and shall be
construed and enforced in accordance with and governed by the laws of such
state; provided, however, that all provisions regarding the rights, immunities,
duties and liabilities of the Warrant Agent shall be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State.

         Section 8.4 No Benefits Conferred. Nothing in this Warrant Agreement
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any person or
corporation other than the Company, the Warrant Agent, and the holders of the
Warrant Certificates, any right, remedy or claim under or by reason of this
Warrant Agreement or of any covenant, condition, stipulation, promise or
agreement herein; and all covenants, conditions, stipulations, promises and
agreements in this Warrant Agreement contained shall be for the sole and
exclusive benefit of the Company, the Warrant Agent, their respective successors
and the holders of the Warrant Certificates.

         Section 8.5 Headings. The descriptive headings used in this Warrant
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.

         IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by
the parties hereto as of the day and year first above written.

                                             HYPERTENSION DIAGNOSTICS, INC.

                                             By:  /s/  Greg H. Guettler
                                               ---------------------------------
                                                  Its President

                                             MELLON INVESTOR SERVICES LLC

                                             By:  /s/  Kenneth Franke
                                               ---------------------------------
                                                  Its Vice President

                                       16

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