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                                                                   EXHIBIT 10.3

                                                       FORM OF OPTION AGREEMENT

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS OPTION SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

                         OPTION TO PURCHASE COMMON STOCK

                                       OF

                          MICROWARE SYSTEMS CORPORATION

     THIS CERTIFIES that, for value received, * (the "INVESTOR") is entitled,
upon the terms and subject to the conditions hereinafter set forth, at any time
and from time to time on or after the date hereof and on or prior to 8:00 p.m.
New York City Time on the Expiration Date (as defined below) (such period
hereinafter referred to as the "EXERCISE PERIOD"), to purchase from MICROWARE
SYSTEMS CORPORATION, an Iowa corporation (the "COMPANY") shares (the "OPTION
SHARES") of the Company's Common Stock, no par value ("COMMON STOCK"), for a
purchase price per share (as adjusted from time to time pursuant to the terms
hereof, the "EXERCISE PRICE") equal to 105% of the Closing Price (as defined in
Section 12(a) below) for an aggregate purchase price of up to One Million Five
Hundred Thousand U.S. Dollars ($1,500,000). The Exercise Price and the number of
shares for which the Option is exercisable shall be subject to adjustment as
provided herein. This Option is being issued in connection with the Securities
Purchase Agreement dated April 19, 2000 (the "PURCHASE AGREEMENT") entered into
between the Company, the Investor and Westgate International, L.P. Capitalized
terms used herein and not otherwise defined shall have the meaning ascribed
thereto in the Purchase Agreement. The "EXPIRATION DATE" shall mean the date
which is one year following the date on which the Registration Statement (as
defined in the Registration Rights Agreement) is declared effective by the SEC;
PROVIDED, HOWEVER, that such Expiration Date shall be deferred, at the sole
option of a holder hereof, for such number of days as is equal to 1.5 times the
number of days (A) there is a lack of Effective Registration (as defined below),
but not including the first 90 days

------------
* One option agreement was issued to Elliott Associates, L.P. and a second
  identical agreement was issued to Westgate International, L.P.

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after the Closing; (B) there is not a sufficient amount of Common Stock
available for conversion of all outstanding Preferred Shares and exercise of all
the Options and Warrants; (C) for any other reason the Corporation refuses or
announces its refusal to honor conversion of Preferred Shares or exercise of the
Options or Warrants; or (D) for any other reason there is a suspension,
restriction or limitation in the ability of holders of Preferred Shares, Options
or Warrants to sell Common Shares received upon conversion of Preferred Shares
or exercise of the Options or Warrants pursuant to the prospectus included in
the Registration Statement; PROVIDED, FURTHER, that such Expiration Date shall
be subject to the provisions of Section 3(c) below.

1.   TITLE OF OPTION. Prior to the expiration hereof and subject to compliance
     with applicable laws, this Option and all rights hereunder are
     transferable, in whole or in part, at the office or agency of the Company
     by the Holder hereof in person or by duly authorized attorney, upon
     surrender of this Option together with (a) the Assignment Form annexed
     hereto properly endorsed, and (b) any other documentation reasonably
     necessary to satisfy the Company that such transfer is in compliance with
     all applicable securities laws. The term "HOLDER" shall refer to the
     Investor or any subsequent transferee of this Option.

2.   AUTHORIZATION OF SHARES. The Company covenants that all shares of Common
     Stock which may be issued upon the exercise of rights represented by this
     Option will, upon exercise of the rights represented by this Option and
     payment of the Exercise Price as set forth herein will be duly authorized,
     validly issued, fully paid and nonassessable and free from all taxes, liens
     and charges in respect of the issue thereof (other than taxes in respect of
     any transfer occurring contemporaneously with such issue or otherwise
     specified herein).

3.   EXERCISE OF OPTION.

(a)  MECHANICS OF EXERCISE. The Holder may exercise this Option, in whole or in
     part, at any time and from time to time, by delivering to the offices of
     the Company or any transfer agent for the Common Stock this Option,
     together with a Notice of Exercise in the form annexed hereto specifying
     the dollar amount and number of Option Shares with respect to which this
     Option is being exercised, together with payment to the Company of the
     Exercise Price therefor.

     In the event that this Option is not exercised in full, the aggregate
     purchase price hereunder shall be reduced by the dollar amount for which
     this Option is exercised and/or surrendered, and the Company, at its
     expense, shall within three (3) Trading Days (as defined below) issue and
     deliver to the Holder a new Option of like tenor in the name of the Holder
     or as the Holder (upon payment by Holder of any applicable transfer taxes)
     may request, reflecting such adjusted Option.

     Certificates for shares of Common Stock purchased hereunder shall be
     delivered to the Holder hereof within two (2) Trading Days after the date
     on which this Option shall have been exercised as aforesaid. The Holder may
     withdraw its Notice of Exercise at any time

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                                                                          Page 3

     if the Company fails to timely deliver the relevant certificates to the
     Holder as provided in this Agreement.

     In lieu of delivering physical certificates representing the Option Shares
     issuable upon conversion of this Option, provided the Company's transfer
     agent is participating in the Depository Trust Company ("DTC") Fast
     Automated Securities Transfer ("FAST") program, upon request of the Holder,
     the Company shall use its best efforts to cause its transfer agent to
     electronically transmit the Option Shares issuable upon exercise to the
     Holder, by crediting the account of the Holder's prime broker with DTC
     through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
     periods for delivery described above shall apply to the electronic
     transmittals through the DWAC system. The Company agrees to coordinate with
     DTC to accomplish this objective.

(b)  CASHLESS EXERCISE. Notwithstanding the foregoing provision regarding
     payment of the Exercise Price in cash, during any time that any of the
     Option Shares are not subject to an effective Registration Statement in
     accordance with the terms of the Registration Rights Agreement (as defined
     in the Purchase Agreement) after 180 days following the Closing Date, the
     Holder may elect to receive a reduced number of Option Shares in lieu of
     tendering the Exercise Price in cash. In such case, the number of Option
     Shares to be issued to the Holder shall be computed using the following
     formula:

                                    X = Y x (A-B)
                                        ---------
                                            A

     where: X = the number of Option Shares to be issued to the Holder;
            Y = the number of Option Shares to be exercised under this Option;
            A = the Market Value (defined below) of one share of Common Stock;
                and
            B = the Exercise Price.

     As used herein, "MARKET VALUE" refers to the closing bid price of the
     Common Stock (as reported by Bloomberg, L.P.) on the day before the Notice
     of Exercise and this Option are duly surrendered to the Company for a full
     or partial exercise hereof. Notwithstanding the foregoing definition, if
     the Common Stock is not listed on a national securities exchange or quoted
     in the Nasdaq System at the time said Notice of Exercise is submitted to
     the Company in the foregoing manner, the Market Value of the Common Stock
     shall be as reasonably determined in good faith by the Board of Directors
     of the Company and such Holder, unless the Company shall become subject to
     a merger, acquisition, or other consolidation pursuant to which the Company
     is not the surviving entity, in which case the Market Value of the Common
     Stock shall be deemed to be the value received by the Company's common
     shareholders pursuant to the Company's acquisition (subject to Section 12
     below).

     The term "TRADING DAY" means (x) if the Common Stock is not listed on the
     New York or American Stock Exchange but sale prices of the Common Stock are
     reported on

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     Nasdaq National Market or another automated quotation system, a day on
     which trading is reported on the principal automated quotation system on
     which sales of the Common Stock are reported, (y) if the Common Stock is
     listed on the New York Stock Exchange or the American Stock Exchange, a day
     on which there is trading on such stock exchange, or (z) if the foregoing
     provisions are inapplicable, a day on which quotations are reported by
     National Quotation Bureau Incorporated.

(c)  FORCED EXERCISE. During the Exercise Period, if the Option Shares have been
     and continue to be registered with the SEC pursuant to the Registration
     Rights Agreement and the requirements of subsection (d) below have been
     met, the Company shall have the right, upon 10 Trading Days' prior written
     notice (the "Termination Notice") and subject to the terms of this
     subsection (c) and subsection (d) below, to notify the Investor that it
     must exercise this Option within 10 Trading Days or this Option will
     terminate at the end of such 10 Trading Day period ("Termination Date").
     The right to issue a Termination Notice and to terminate this Option as
     provided in the foregoing sentence will only be available if the closing
     bid price (as reported by the Bloomberg financial network) of the Common
     Stock recorded on the Principal Market exceeds 175% of the Exercise Price
     for the 30 consecutive Trading Days (as defined in the Certificate)
     immediately preceding delivery of the Termination Notice and at all times
     thereafter through the Termination Date. In the event that the closing bid
     price of the Common Stock recorded on the Principal Market falls below 175%
     of the Exercise Price at any time before the Termination Date, any
     Termination Notice in effect shall become null and void, and this Option
     shall remain in full force and effect until the Expiration Date; PROVIDED,
     HOWEVER, that the Company shall again have the right to deliver a
     Termination Notice if the closing bid price of the Common Stock recorded on
     the Principal Market thereafter exceeds 175% of the Exercise Price for 30
     consecutive Trading Days pursuant to the terms of this Section 3(c) and
     subject to Section 3(d) below.

(d)  Notwithstanding anything contained in Section 3(c) above, the right of the
     Company to terminate this Option pursuant to Section 3(c) above shall
     terminate if any of the following shall occur or have occurred or be
     continuing:

     (A) there is a lack of Effective Registration (as defined below) during the
     Exercise Period; (B) there is not a sufficient amount of Common Stock
     available for conversion of all outstanding Preferred Shares, exercise of
     all Warrants and issuance of all Option Shares; (C) for any other reason
     the Corporation refuses or announces its refusal to honor conversion of
     Preferred Shares, exercise of all Warrants and issuance of all Option
     Shares; or (D) for any other reason there is a suspension or restriction in
     the ability of holders of Preferred Shares, Warrants or Options to sell
     Common Shares or Option Shares received upon conversion or exercise,
     respectively, pursuant to the prospectus included in the Registration
     Statement.

     A lack of "Effective Registration" shall be deemed to have occurred at any
     time the Common Shares or Option Shares issuable upon conversion of the
     Preferred Shares,

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                                                                          Page 5

     exercise of the Warrants or exercise of this Option are not legally capable
     of being sold on an Approved Market (as defined below) pursuant to an
     effective registration statement and deliverable prospectus.

     Notwithstanding the preceding provisions of this Section 3(d) or Section
     3(c) above, the Company shall have no right to terminate this Option unless
     each of the following conditions has been satisfied or exists at all times
     during the 30 consecutive Trading Days immediately preceding delivery of
     the Termination Notice and at all times thereafter through the Termination
     Date, each of which shall be a condition precedent to any such termination:

          (i) no material default or breach exists which has not been cured, and
          no event shall have occurred which constitutes (or would constitute
          with notice or the passage of time or both) a material default or
          breach of this Option, the Purchase Agreement, the Registration Rights
          Agreement, the Warrants or the Certificate, which has not been cured;

          (ii) none of the events described in clauses (i) through (iv) of
          Section 2(b) of the Registration Rights Agreement shall have occurred
          and be continuing;

          (iii) the Registration Statement is effective and holders have
          received unlegended certificates representing Option Shares (to the
          extent this Option has been exercised) and Common Shares with respect
          to all conversions for which Conversion Notices have been given and
          with respect to all exercises of the Warrants for which Notices of
          Exercise have been given; and

          (iv) the Company and its subsidiaries on a consolidated basis has
          assets with a net realizable fair market value exceeding its
          liabilities and is able to pay all its debts as they become due in the
          ordinary course of business, and the Company is not subject to any
          liquidation, dissolution or winding up of its affairs, or any
          bankruptcy, insolvency or similar proceeding.

4.   NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing
     fractional shares shall be issued upon the exercise of this Option. In lieu
     of issuance of a fractional share upon any exercise hereunder, the Company
     will either round up to nearest whole number of shares or pay the cash
     value of that fractional share calculated on the basis of the Fair Market
     Value (as defined below).

5.   CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of Common
     Stock upon the exercise of this Option shall be made without charge to the
     Holder hereof for any issue or transfer tax or other incidental expense in
     respect of the issuance of such certificate, all of which taxes and
     expenses shall be paid by the Company, and such certificates shall be
     issued in the name of the Holder of this Option or in such name or names as
     may be directed by the Holder of this Option; PROVIDED, HOWEVER, that in
     the event certificates for shares of Common Stock are to be issued in a
     name other than the name of the Holder of this Option, this Option when
     surrendered for exercise shall be

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     accompanied by the Assignment Form attached hereto duly executed by the
     Holder hereof; and PROVIDED FURTHER, that the Company shall not be required
     to pay any tax or taxes which may be payable in respect of any transfer
     involved in the issuance of any Option certificates or any certificates for
     the Option Shares other than the issuance of a Option Certificate to the
     Holder in connection with the Holder's surrender of a Option Certificate
     upon the exercise of all or less than all of the Options evidenced thereby.

6.   CLOSING OF BOOKS. The Company will at no time close its shareholder books
     or records in any manner which interferes with the timely exercise of this
     Option.

7.   NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. Subject to Section 12 of this
     Option and the provisions of any other written agreement between the
     Company and the Investor, the Investor shall not be entitled to vote or
     receive dividends or be deemed the holder of Option Shares or any other
     securities of the Company that may at any time be issuable on the exercise
     hereof for any purpose, nor shall anything contained herein be construed to
     confer upon the Investor, as such, any of the rights of a stockholder of
     the Company or any right to vote for the election of directors or upon any
     matter submitted to stockholders at any meeting thereof, or to give or
     withhold consent to any corporate action (whether upon any
     recapitalization, issuance of stock, reclassification of stock, change of
     par value, or change of stock to no par value, consolidation, merger,
     conveyance or otherwise) or to receive notice of meetings, or to receive
     dividends or subscription rights or otherwise until the Option shall have
     been exercised as provided herein. However, at the time of the exercise of
     this Option pursuant to Section 3 hereof, the Option Shares so purchased
     hereunder shall be deemed to be issued to such Holder as the record owner
     of such shares as of the close of business on the date on which this Option
     shall have been exercised.

8.   ASSIGNMENT AND TRANSFER OF OPTION. This Option may be assigned by the
     surrender of this Option and the Assignment Form annexed hereto duly
     executed at the office of the Company (or such other office or agency of
     the Company or its transfer agent as the Company may designate by notice in
     writing to the registered Holder hereof at the address of such Holder
     appearing on the books of the Company); PROVIDED, HOWEVER, that this Option
     may not be resold or otherwise transferred except (i) in a transaction
     registered under the Securities Act of 1933, as amended (the "ACT"), or
     (ii) in a transaction pursuant to an exemption, if available, from
     registration under the Act and whereby, if reasonably requested by the
     Company, an opinion of counsel reasonably satisfactory to the Company is
     obtained by the Holder of this Option to the effect that the transaction is
     so exempt. If this Option is duly assigned in accordance with the terms
     hereof, then the Company agrees, upon the request of the assignee, to amend
     or supplement promptly any effective registration statement covering the
     Option Shares so that the direct assignee of the original holder is added
     as a selling stockholder thereunder.

9.   LOSS, THEFT, DESTRUCTION OR MUTILATION OF OPTION; EXCHANGE. The Company
     represents, warrants and covenants that (a) upon receipt by the Company of
     evidence reasonably satisfactory to it of the loss, theft, destruction or
     mutilation of any Option or stock

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     certificate representing the Option Shares, and in case of loss, theft or
     destruction, of indemnity reasonably satisfactory to it, and (b) upon
     surrender and cancellation of such Option or stock certificate, if
     mutilated, the Company will make and deliver a new Option or stock
     certificate of like tenor and dated as of such cancellation, in lieu of
     this Option or stock certificate, without any charge therefor. This Option
     is exchangeable at any time for an equal aggregate number of Options of
     different denominations, as requested by the holder surrendering the same,
     or in such denominations as may be requested by the Holder following
     determination of the Exercise Price. No service charge will be made for
     such registration or transfer, exchange or reissuance.

10.  SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for the
     taking of any action or the expiration of any right required or granted
     herein shall be a Saturday, Sunday or a legal holiday, then such action may
     be taken or such right may be exercised on the next succeeding day not a
     legal holiday.

11.  EFFECT OF CERTAIN EVENTS. If at any time while this Option or any portion
     thereof is outstanding and unexpired there shall be a transaction (by
     merger or otherwise) in which more than 50% of the voting power of the
     Company is disposed of (collectively, a "SALE OR MERGER TRANSACTION"), the
     Holder of this Option shall have the right thereafter to purchase, by
     exercise of this Option and payment of the aggregate Exercise Price in
     effect immediately prior to such action, the kind and amount of shares and
     other securities and property which it would have owned or have been
     entitled to receive after the happening of such transaction had this Option
     been exercised immediately prior thereto, subject to further adjustment as
     provided in Section 12.

12.  ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF OPTION SHARES. The number of
     and kind of securities purchasable upon exercise of this Option and the
     Exercise Price shall be subject to adjustment from time to time as set
     forth in this Section 12.

(a)  SUBDIVISIONS, COMBINATIONS, STOCK DIVIDENDS AND OTHER ISSUANCES. If the
     Company shall, at any time while this Option is outstanding, (A) pay a
     stock dividend or otherwise make a distribution or distributions on any
     equity securities (including instruments or securities convertible into or
     exchangeable for such equity securities) in shares of Common Stock, (B)
     subdivide outstanding shares of Common Stock into a larger number of
     shares, or (C) combine outstanding Common Stock into a smaller number of
     shares, then each Affected Exercise Price (as defined below) shall be
     multiplied by a fraction, the numerator of which shall be the number of
     shares of Common Stock outstanding before such event and the denominator of
     which shall be the number of shares of Common Stock outstanding after such
     event. Any adjustment made pursuant to this Section 12(a) shall become
     effective immediately after the record date for the determination of
     stockholders entitled to receive such dividend or distribution and shall
     become effective immediately after the effective date in the case of a
     subdivision or combination. As used herein, the Affected Exercise Prices
     (each an "AFFECTED EXERCISE PRICE") shall refer to: (i) the

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     Exercise Price and (ii) each reported price for the Common Stock on the
     Principal Market (as defined in the Purchase Agreement) occurring on any
     Trading Day included in the period used for determining the Closing Price,
     which Trading Day occurred before the record date in the case of events
     referred to in clause (A) of this subparagraph 12(a) and the effective date
     in the case of the events referred to in clauses (B) and (C) of this
     subparagraph 12(a). "CLOSING PRICE" shall mean the average of the closing
     bid prices of the Common Stock recorded on the Principal Market (as
     reported by the Bloomberg Financial Network or any successor reporting
     source) for the five (5) Trading Days immediately following the Closing
     Date (as defined in the Purchase Agreement).

(b)  OTHER DISTRIBUTIONS. If at any time after the date hereof the Company
     distributes to holders of its Common Stock, other than as part of its
     dissolution, liquidation or the winding up of its affairs, any shares of
     its capital stock, any evidence of indebtedness or any of its assets (other
     than Common Stock), then the Exercise Price shall be reduced to equal: (i)
     the Exercise Price in effect immediately prior to such event, (ii)
     multiplied by a fraction, (A) the numerator of which shall be the Fair
     Market Value (as defined below) per share of Common Stock on the record
     date for the dividend or distribution minus the amount allocable to one
     share of Common Stock of the value (as jointly determined in good faith by
     the Board of Directors of the Company and the Holder) of any and all such
     evidences of indebtedness, shares of capital stock, other securities or
     property, so distributed, and (B) the denominator of which shall be the
     Fair Market Value per share of Common Stock on the record date for the
     dividend or distribution. For purposes of this Option, "FAIR MARKET VALUE"
     shall equal the average closing sale price of the Common Stock on the
     Principal Market for the 5 Trading Days preceding the date of determination
     or, if the Common Stock is not listed or admitted to trading on any
     Principal Market, and the average price cannot be determined as
     contemplated above, the Fair Market Value of the Common Stock shall be as
     reasonably determined in good faith by the Company's Board of Directors and
     the Holder.

(c)  MERGER, ETC. If at any time after the date hereof there shall be a merger
     or consolidation of the Company with or into or a transfer of all or
     substantially all of the assets of the Company to another entity, then the
     Holder shall be entitled to receive upon or after such transfer, merger or
     consolidation becoming effective, and upon payment of the Exercise Price
     then in effect, the number of shares or other securities or property of the
     Company or of the successor corporation resulting from such merger or
     consolidation, which would have been received by the Holder for the shares
     of stock subject to this Option had this Option been exercised just prior
     to such transfer, merger or consolidation becoming effective or to the
     applicable record date thereof, as the case may be. The Company will not
     merge or consolidate with or into any other corporation, or sell or
     otherwise transfer its property, assets and business substantially as an
     entirety to another corporation, unless the corporation resulting from such
     merger or consolidation (if not the Company), or such transferee
     corporation, as the case may be, shall expressly assume in writing the due
     and punctual performance and observance of each and every covenant and
     condition of this Option to be performed and observed by the Company.

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(d)  RECLASSIFICATION, ETC. If at any time after the date hereof there shall be
     a reorganization or reclassification of the securities as to which purchase
     rights under this Option exist into the same or a different number of
     securities of any other class or classes, then the Holder shall thereafter
     be entitled to receive upon exercise of this Option, during the period
     specified herein and upon payment of the Exercise Price then in effect, the
     number of shares or other securities or property resulting from such
     reorganization or reclassification, which would have been received by the
     Holder for the shares of stock subject to this Option had this Option at
     such time been exercised.

(e)  EXERCISE PRICE ADJUSTMENT. In the event that the Company issues or sells
     any Common Stock or securities which are convertible into or exchangeable
     for its Common Stock or any convertible securities, or any warrants or
     other rights to subscribe for or to purchase or any options for the
     purchase of its Common Stock or any such convertible securities (other than
     shares or options issued or which may be issued pursuant to (i) the
     Company's current employee option plans or shares issued upon exercise of
     options, warrants or rights outstanding on the date of the Agreement and
     listed in the Company's most recent periodic report filed under the
     Exchange Act, or (ii) arrangements with the Investor) at an effective price
     per share which is less than the greater of the Exercise Price then in
     effect or the Fair Market Value (as described in Section 12(b) above) of
     the Common Stock on the Trading Day next preceding such issue or sale, then
     in each such case, the Exercise Price in effect immediately prior to such
     issue or sale shall be reduced effective concurrently with such issue or
     sale to an amount determined by multiplying the Exercise Price then in
     effect by a fraction, (x) the numerator of which shall be the sum of (1)
     the number of shares of Common Stock outstanding immediately prior to such
     issue or sale, plus (2) the number of shares of Common Stock which the
     aggregate consideration received by the Company for such additional shares
     would purchase at such Fair Market Value or Exercise Price, whichever is
     greater, then in effect; and (y) the denominator of which shall be the
     number of shares of Common Stock of the Company outstanding immediately
     after such issue or sale.

     For the purposes of the foregoing adjustment, in the case of the issuance
     of any convertible securities, warrants, options or other rights to
     subscribe for or to purchase or exchange for, shares of Common Stock
     ("CONVERTIBLE SECURITIES"), the maximum number of shares of Common Stock
     issuable upon exercise, exchange or conversion of such Convertible
     Securities shall be deemed to be outstanding, provided that no further
     adjustment shall be made upon the actual issuance of Common Stock upon
     exercise, exchange or conversion of such Convertible Securities.

     In the event of any such issuance for a consideration which is less than
     such Fair Market Value and also less than the Exercise Price then in
     effect, than there shall be only one such adjustment by reason of such
     issuance, such adjustment to be that which results in the greatest
     reduction of the Exercise Price computed as aforesaid.

(f)  The terms of any reorganization, consolidation, merger, sale, transfer or
     share exchange shall include such terms so as to continue to give to the
     holder hereof the right to receive

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                                                                         Page 10

     the securities or property set forth in this Section 12 upon any exercise
     following any such reclassification, consolidation, merger, sale, transfer
     or share exchange.

13.  VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at its option, at any
     time during the term of this Option, reduce but not increase the then
     current Exercise Price to any amount and for any period of time deemed
     appropriate by the Board of Directors of the Company.

14.  NOTICE OF ADJUSTMENT; NOTICE OF EVENTS. (i) Whenever the number of Option
     Shares or number or kind of securities or other property purchasable upon
     the exercise of this Option or the Exercise Price is adjusted, the Company
     shall promptly mail to the Holder of this Option a notice setting forth the
     number of Option Shares (and other securities or property) purchasable upon
     the exercise of this Option and the Exercise Price of such Option Shares
     after such adjustment and setting forth the computation of such adjustment
     and a brief statement of the facts requiring such adjustment. (ii) If: (A)
     the Company shall declare a dividend (or any other distribution) on its
     Common Stock; or (B) the Company shall declare a special nonrecurring cash
     dividend on or a redemption of its Common Stock; or (C) the Company shall
     authorize the granting to all holders of the Common Stock rights or
     warrants to subscribe for or purchase any shares of capital stock of any
     class or of any rights; or (D) the approval of any stockholders of the
     Company shall be required in connection with any reclassification of the
     Common Stock of the Company, any consolidation or merger to which the
     Company is a party, any sale or transfer of all or substantially all of the
     assets of the Company, or any compulsory share exchange whereby the Common
     Stock is converted into other securities, cash or property; or (E) the
     Company shall authorize the voluntary dissolution, liquidation or winding
     up of the affairs of the Company, then the Company shall cause to be mailed
     to each Option holder at their last addresses as they shall appear upon the
     Option register of the Company, at least 30 calendar days prior to the
     applicable record or effective date hereinafter specified, a notice stating
     (x) the date on which a record is to be taken for the purpose of such
     dividend, distribution, redemption, rights or warrants, or if a record is
     not to be taken, the date as of which the holders of Common Stock of record
     to be entitled to such dividend, distributions, redemption, rights or
     warrants are to be determined or (y) the date on which such
     reclassification, consolidation, merger, sale, transfer or share exchange
     is expected to become effective or close, and the date as of which it is
     expected that holders of Common Stock of record shall be entitled to
     exchange their shares of Common Stock for securities, cash or other
     property deliverable upon such reclassification, consolidation, merger,
     sale, transfer, share exchange, dissolution, liquidation or winding up.

15.  AUTHORIZED SHARES. The Company covenants that during the Exercise Period it
     will reserve from its authorized and unissued Common Stock a sufficient
     number of shares to provide for the issuance of the Option Shares upon the
     exercise of any and all purchase rights under this Option. The Company
     further covenants that its issuance of this Option shall constitute full
     authority to its officers who are charged with the duty of executing stock
     certificates to execute and issue the necessary certificates for the Option
     Shares

<PAGE>
                                                                         Page 11

     upon the exercise of the purchase rights under this Option. The Company
     will take all such reasonable action as may be necessary to assure that
     such Option Shares may be issued as provided herein without violation of
     any applicable law, regulation, or rule of any applicable market or
     exchange.

16.  9.99% LIMITATION.

          (i) Notwithstanding anything to the contrary contained herein, the
     number of shares of Common Stock that may be acquired by the holder upon
     exercise pursuant to the terms hereof shall not exceed a number that, when
     added to the total number of shares of Common Stock deemed beneficially
     owned by such holder (other than by virtue of the ownership of securities
     or rights to acquire securities that have limitations on the holder's right
     to convert, exercise or purchase similar to the limitation set forth
     herein), together with all shares of Common Stock deemed beneficially owned
     by the holder's "affiliates" (as defined in Rule 144 of the Act)
     ("Aggregation Parties") that would be aggregated for purposes of
     determining whether a group under Section 13(d) of the Securities Exchange
     Act of 1934 as amended, exists, would exceed 9.99% of the total issued and
     outstanding shares of the Common Stock (the "Restricted Ownership
     Percentage"); PROVIDED that (w) each holder shall have the right at any
     time and from time to time to reduce its Restricted Ownership Percentage
     immediately upon notice to the Company and (x) each holder shall have the
     right (subject to waiver) at any time and from time to time, to increase
     its Restricted Ownership Percentage immediately in the event of the
     announcement as pending or planned, of a transaction or event referred to
     in Section 5(m) of the Certificate.

          (ii) Each time (a "COVENANT TIME") the holder or an Aggregation Party
     makes a Triggering Acquisition (as defined below) of shares of Common Stock
     (the "TRIGGERING SHARES"), the holder will be deemed to covenant that it
     will not, during the balance of the day on which such Triggering
     Acquisition occurs, and during the 61-day period beginning immediately
     after that day, acquire additional shares of Common Stock pursuant to
     rights-to-acquire existing at that Covenant Time, if the aggregate amount
     of such additional shares so acquired (without reducing that amount by any
     dispositions) would exceed (x) 9.99% of the number of shares of Common
     Stock outstanding at that Covenant Time (including the Triggering Shares)
     minus (y) the number of shares of Common Stock actually owned by the holder
     at that Covenant Time (regardless of how or when acquired, and including
     the Triggering Shares). A "TRIGGERING ACQUISITION" means the giving of a
     Notice of Exercise or any other acquisition of Common Stock by the holder
     or an Aggregation Party; PROVIDED, however, that with respect to the giving
     of such Notice of Exercise, if the associated issuance of shares of Common
     Stock does not occur, such event shall cease to be a Triggering Acquisition
     and the related covenant under this paragraph shall terminate. At each
     Covenant Time, the holder shall be deemed to waive any right it would
     otherwise have to acquire shares of Common Stock to the extent that such
     acquisition would violate any covenant given by the holder under this
     paragraph. Notwithstanding anything to the contrary in the Transaction
     Documents, in the event of a conflict between any covenant given under this
     paragraph and any obligation of the holder to exercise this Option pursuant
     to the Transaction Documents,

<PAGE>
                                                                         Page 12

     the former shall supersede the latter, and the latter shall be reduced
     accordingly. For the avoidance of doubt:

          (A)  The covenant to be given pursuant to this paragraph will be given
               at every Covenant Time and shall be calculated based on the
               circumstances then in effect. The making of a covenant at one
               Covenant Time shall not terminate or modify any prior covenants.

          (B)  The holder may therefore from time to time be subject to multiple
               such covenants, each one having been made at a different Covenant
               Time, and some possibly being more restrictive than others. The
               holder must comply with all such covenants then in effect.

17.  COMPLIANCE WITH SECURITIES LAWS. (a) The Holder hereof acknowledges that
     the Option Shares acquired upon the exercise of this Option, if not
     registered (or if no exemption from registration exists), will have
     restrictions upon resale imposed by state and federal securities laws. Each
     certificate representing the Option Shares issued to the Holder upon
     exercise (if not registered, for resale or otherwise, or if no exemption
     from registration exists) will bear substantially the following legend:

     THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH
     THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
     COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
     ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF
     EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
     ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
     SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
     ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

(b)  Without limiting the Investor's right to transfer, assign or otherwise
     convey the Option or Option Shares in compliance with all applicable
     securities laws, the Investor of this Option, by acceptance hereof,
     acknowledges that this Option and the Option Shares to be issued upon
     exercise hereof are being acquired solely for the Investor's own account
     and not as a nominee for any other party, and that the Investor will not
     offer, sell or otherwise dispose of this Option or any Option Shares to be
     issued upon exercise hereof except under circumstances that will not result
     in a violation of applicable federal and state securities laws.

18.  MISCELLANEOUS.

(a)  ISSUE DATE; CHOICE OF LAW; VENUE; JURISDICTION. THE PROVISIONS OF THIS
     OPTION SHALL BE CONSTRUED AND SHALL BE GIVEN EFFECT IN ALL

<PAGE>
                                                                         Page 13

     RESPECTS AS IF IT HAD BEEN ISSUED AND DELIVERED BY THE COMPANY ON THE DATE
     HEREOF. THIS OPTION SHALL BE BINDING UPON ANY SUCCESSORS OR ASSIGNS OF THE
     COMPANY. THIS OPTION WILL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
     GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT FOR MATTERS ARISING
     UNDER THE ACT, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF
     THE PARTIES CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
     COURTS SITTING IN THE COUNTY OF NEW YORK IN THE STATE OF NEW YORK IN
     CONNECTION WITH ANY DISPUTE ARISING UNDER THIS OPTION AND HEREBY WAIVES, TO
     THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION
     BASED ON FORUM NON CONVENIENS OR VENUE, TO THE BRINGING OF ANY SUCH
     PROCEEDING IN SUCH JURISDICTION. EACH PARTY HEREBY AGREES THAT IF THE OTHER
     PARTY TO THIS OPTION OBTAINS A JUDGMENT AGAINST IT IN SUCH A PROCEEDING,
     THE PARTY WHICH OBTAINED SUCH JUDGMENT MAY ENFORCE SAME BY SUMMARY JUDGMENT
     IN THE COURTS OF ANY COUNTRY HAVING JURISDICTION OVER THE PARTY AGAINST
     WHOM SUCH JUDGMENT WAS OBTAINED, AND EACH PARTY HEREBY WAIVES ANY DEFENSES
     AVAILABLE TO IT UNDER LOCAL LAW AND AGREES TO THE ENFORCEMENT OF SUCH A
     JUDGMENT. EACH PARTY TO THIS OPTION IRREVOCABLY CONSENTS TO THE SERVICE OF
     PROCESS IN ANY SUCH PROCEEDING BY THE MAILING OF COPIES THEREOF BY
     REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS
     IN ACCORDANCE WITH SECTION 18(C). NOTHING HEREIN SHALL AFFECT THE RIGHT OF
     ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

(b)  MODIFICATION AND WAIVER. This Option and any provisions hereof may be
     changed, waived, discharged or terminated only by an instrument in writing
     signed by the party against which enforcement of the same is sought. Any
     amendment effected in accordance with this paragraph shall be binding upon
     the Investor, each future holder of this Option and the Company. No waivers
     of, or exceptions to, any term, condition or provision of this Option, in
     any one or more instances, shall be deemed to be, or construed as, a
     further or continuing waiver of any such term, condition or provision.

(c)  NOTICES. Any notice, request or other document required or permitted to be
     given or delivered to the Investor or future holders hereof or the Company
     shall be personally delivered or shall be sent by certified or registered
     mail, postage prepaid, to the Investor or each such holder at its address
     as shown on the books of the Company or to the Company at the address set
     forth in the Purchase Agreement. All notices under this Option shall be
     deemed to have been given when received.

     A party may from time to time change the address to which notices to it are
     to be delivered or mailed hereunder by notice in accordance with the
     provisions of this Section 18(c).

<PAGE>
                                                                         Page 14

(d)  SEVERABILITY. Whenever possible, each provision of this Option shall be
     interpreted in such manner as to be effective and valid under applicable
     law, but if any provision of this Option is held to be invalid, illegal or
     unenforceable in any respect under any applicable law or rule in any
     jurisdiction, such invalidity, illegality or unenforceability shall not
     affect the validity, legality or enforceability of any other provision of
     this Option in such jurisdiction or affect the validity, legality or
     enforceability of any provision in any other jurisdiction, but this Option
     shall be reformed, construed and enforced in such jurisdiction as if such
     invalid, illegal or unenforceable provision had never been contained
     herein.

(e)  NO IMPAIRMENT. The Company will not, by amendment of its Restated and
     Amended 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 Option, but will at all times in
     good faith assist in the carrying out of all such terms and in the taking
     of all such action as may be necessary or appropriate in order to protect
     the rights of the Holder against impairment. Without limiting the
     generality of the foregoing, the Company (a) will not increase the par
     value of any Option Shares above the amount payable therefor on such
     exercise, and (b) will take all such action as may be reasonably necessary
     or appropriate in order that the Company may validly and legally issue
     fully paid and nonassessable Option Shares on the exercise of this Option.

(f)  SPECIFIC ENFORCEMENT. The Company and the Holder acknowledge and agree
     that irreparable damage would occur in the event that any of the
     provisions of this Option were not performed in accordance with their
     specific terms or were otherwise breached. It is accordingly agreed that
     the parties shall he entitled to an injunction or injunctions to prevent
     or cure breaches of the provisions of this Option and to enforce
     specifically the terms and provisions hereof, this being in addition to
     any other remedy to which either of them may be entitled by law or
     equity.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>
                                                                         Page 15

IN WITNESS WHEREOF, the Company has caused this Option to be executed by its
officers thereunto duly authorized.

Dated: April 19, 2000

                                 MICROWARE SYSTEMS CORPORATION

                                 By: /s/ Kenneth B. Kaplan
                                 Name:  Kenneth B. Kaplan
                                 Title:  President and Chief Executive Officer

ATTEST:

------------------------------
Name:

<PAGE>

                               NOTICE OF EXERCISE

Microware Systems Corporation
1500 N.W. 118th Street
Des Moines, Iowa  50325
Telephone:        (515) 223-8000
Facsimile:        (515) 224-1352
Attention:        Kenneth B. Kaplan

This undersigned hereby elects to exercise the right of purchase represented by
the within Option ("Option") for _______________ shares of Common Stock*
("Option Shares") provided for therein at an aggregate purchase of
$_______________, and to purchase such Option Shares by (CHECK AS APPLICABLE):

       / /   payment by cash, wire transfer or certified check,

       / /   exercise of the within Option by cashless exercise pursuant to
             Section 3(b) thereof, resulting in ______ shares of Common Stock
             issuable upon surrender of the Option,

and requests that certificates for the Option Shares be issued as follows:

                           -------------------------------
                           Name
                           --------------------------------
                           Address
                           --------------------------------
                           --------------------------------

and, if the number of Option Shares shall not be all the Option Shares
purchasable upon exercise of the Option, that a new Option for the balance of
the Option Shares be issued.

In lieu of delivering physical certificates representing the Option Shares
purchasable upon exercise of this Option, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Holder, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Option Shares issuable upon conversion or exercise to the
undersigned, by crediting the account of the undersigned's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system.

Dated:                               Signature:
      ---------------                          --------------------------------

                                               --------------------------------
                                               Name (please print)

                                               --------------------------------
                                               Address (please print)

                                               --------------------------------

----------------
*    NOTE: If conversion of the Option is made by surrender of the Option and
     the number of shares indicated exceeds the maximum number of shares to
     which a holder is entitled, the Company will issue such maximum number of
     shares purchasable upon exercise of the Option registered in the name of
     the undersigned Optionholder or the undersigned's Assignee as below
     indicated and deliver same to the address stated below.

<PAGE>

                                 ASSIGNMENT FORM

                     (To assign the foregoing Option, execute
                     this form and supply required information.
                    Do not use this form to exercise the Option.)

     FOR VALUE RECEIVED, the foregoing Option and all rights evidenced thereby
are hereby assigned to

_______________________________________________ whose address is

___________________________________________________________________.

___________________________________________________________________

                                            Dated:  ______________,

                         Holder's Signature: _________________________________

                         Holder's Address:____________________________________

                                          ____________________________________

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Option, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Option.<PAGE>

                                                                   EXHIBIT 10.4

                                  EXHIBIT 10.4

                            FORM OF WARRANT AGREEMENT

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN OFFER
TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE SECURITIES ARE
"RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE
ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.

                          COMMON STOCK PURCHASE WARRANT

       To Purchase Shares of No Par Value Common Stock ("Common Stock") of

                          MICROWARE SYSTEMS CORPORATION

     THIS CERTIFIES that, for value received, * (the "INVESTOR") is entitled,
upon the terms and subject to the conditions hereinafter set forth, at any time
on or after the date hereof and on or prior to 8:00 p.m. New York City Time on
April 19, 2005 (the "TERMINATION DATE"), but not thereafter, to subscribe for
and purchase from MICROWARE SYSTEMS CORPORATION, an Iowa corporation (the
"COMPANY"), 43,750 shares of Common Stock (the "WARRANT SHARES") at an exercise
price (as adjusted from time to time pursuant to the terms hereof, the "EXERCISE
PRICE") equal to 115% of the Closing Price (as defined in Section 12(a) below).
The Exercise Price and the number of shares for which the Warrant is exercisable
shall be subject to adjustment as provided herein. This Warrant is being issued
in connection with the Securities Purchase Agreement dated April 19, 2000 (the
"PURCHASE AGREEMENT") entered into between the Company, the Investor and
Westgate International, L.P. Capitalized terms used herein and not otherwise
defined shall have the meaning ascribed thereto in the Purchase Agreement.

1.   TITLE OF WARRANT. Prior to the expiration hereof and subject to compliance
     with applicable laws, this Warrant and all rights hereunder are
     transferable, in whole or in part, at the office or agency of the Company
     by the Holder hereof in person or by duly authorized attorney, upon
     surrender of this Warrant together with (a) the Assignment Form annexed
     hereto properly endorsed, and (b) any other documentation reasonably
     necessary to satisfy the Company that such transfer is in compliance with
     all applicable securities laws. The term "HOLDER" shall refer to the
     Investor or any subsequent transferee of this Warrant.

-----------
* One warrant agreement was issued to Elliott Associates, L.P. and a second
identical agreement was issued to Westgate International, L.P.

<PAGE>
                                                                          Page 2

2.   AUTHORIZATION OF SHARES. The Company covenants that all shares of Common
     Stock which may be issued upon the exercise of rights represented by this
     Warrant will, upon exercise of the rights represented by this Warrant and
     payment of the Exercise Price as set forth herein will be duly authorized,
     validly issued, fully paid and nonassessable and free from all taxes, liens
     and charges in respect of the issue thereof (other than taxes in respect of
     any transfer occurring contemporaneously with such issue or otherwise
     specified herein).

3.   EXERCISE OF WARRANT.

(a)  MECHANICS OF EXERCISE. The Holder may exercise this Warrant, in whole or in
     part, at any time and from time to time, by delivering to the offices of
     the Company or any transfer agent for the Common Stock this Warrant,
     together with a Notice of Exercise in the form annexed hereto specifying
     the number of Warrant Shares with respect to which this Warrant is being
     exercised, together with payment to the Company of the Exercise Price
     therefor.

     In the event that the Warrant is not exercised in full, the number of
     Warrant Shares shall be reduced by the number of such Warrant Shares for
     which this Warrant is exercised and/or surrendered, and the Company, at its
     expense, shall within three (3) Trading Days (as defined below) issue and
     deliver to the Holder a new Warrant of like tenor in the name of the Holder
     or as the Holder (upon payment by Holder of any applicable transfer taxes)
     may request, reflecting such adjusted Warrant Shares.

     Certificates for shares of Common Stock purchased hereunder shall be
     delivered to the Holder hereof within two (2) Trading Days after the date
     on which this Warrant shall have been exercised as aforesaid. The Holder
     may withdraw its Notice of Exercise at any time if the Company fails to
     timely deliver the relevant certificates to the Holder as provided in this
     Agreement.

     In lieu of delivering physical certificates representing the Warrant Shares
     issuable upon conversion of this Warrant, provided the Company's transfer
     agent is participating in the Depository Trust Company ("DTC") Fast
     Automated Securities Transfer ("FAST") program, upon request of the Holder,
     the Company shall use its best efforts to cause its transfer agent to
     electronically transmit the Warrant Shares issuable upon exercise to the
     Holder, by crediting the account of the Holder's prime broker with DTC
     through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
     periods for delivery described above shall apply to the electronic
     transmittals through the DWAC system. The Company agrees to coordinate with
     DTC to accomplish this objective.

     (b) CASHLESS EXERCISE. Notwithstanding the foregoing provision regarding
     payment of the Exercise Price in cash, the Holder may elect to receive a
     reduced number of Warrant Shares in lieu of tendering the Exercise Price in
     cash. In such case, the number of Warrant Shares to be issued to the Holder
     shall be computed using the following formula:

<PAGE>
                                                                          Page 3

                                  X = Y x (A-B)
                                  -------------
                                        A

         where:   X = the number of Warrant Shares to be issued to the Holder;
                  Y = the number of Warrant Shares to be exercised under this
                      Warrant Certificate;
                  A = the Market Value (defined below) of one share of Common
                      Stock; and
                  B = the Exercise Price.

     As used herein, "MARKET VALUE" refers to the closing bid price of the
     Common Stock (as reported by Bloomberg, L.P.) on the Trading Day before the
     Notice of Exercise and this Warrant are duly surrendered to the Company for
     a full or partial exercise hereof. Notwithstanding the foregoing
     definition, if the Common Stock is not listed on a national securities
     exchange or quoted in the Nasdaq System at the time said Notice of Exercise
     is submitted to the Company in the foregoing manner, the Market Value of
     the Common Stock shall be as reasonably determined in good faith by the
     Board of Directors of the Company and such Holder, unless the Company shall
     become subject to a merger, acquisition, or other consolidation pursuant to
     which the Company is not the surviving entity, in which case the Market
     Value of the Common Stock shall be deemed to be the value received by the
     Company's common shareholders pursuant to the Company's acquisition
     (subject to Section 12 below).

(c)  The term "TRADING DAY" means (x) if the Common Stock is not listed on the
     New York or American Stock Exchange but sale prices of the Common Stock are
     reported on Nasdaq National Market or another automated quotation system, a
     day on which trading is reported on the principal automated quotation
     system on which sales of the Common Stock are reported, (y) if the Common
     Stock is listed on the New York Stock Exchange or the American Stock
     Exchange, a day on which there is trading on such stock exchange, or (z) if
     the foregoing provisions are inapplicable, a day on which quotations are
     reported by National Quotation Bureau Incorporated.

4.   NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing
     fractional shares shall be issued upon the exercise of this Warrant. In
     lieu of issuance of a fractional share upon any exercise hereunder, the
     Company at its option will either round up to nearest whole number of
     shares or pay the cash value of that fractional share calculated on the
     basis of the Fair Market Value (as defined below).

5.   CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares of Common
     Stock upon the exercise of this Warrant shall be made without charge to the
     Holder hereof for any issue or transfer tax or other incidental expense in
     respect of the issuance of such certificate, all of which taxes and
     expenses shall be paid by the Company, and such certificates shall be
     issued in the name of the Holder of this Warrant or in such name or names
     as may be directed by the Holder of this Warrant; PROVIDED, HOWEVER, that
     in the event certificates for shares of Common Stock are to be issued in a
     name other than the name of the Holder of this Warrant, this Warrant when
     surrendered for exercise shall be accompanied by the Assignment Form
     attached hereto duly executed by the Holder

<PAGE>
                                                                          Page 4

     hereof; and PROVIDED FURTHER, that the Company shall not be required to pay
     any tax or taxes which may be payable in respect of any transfer involved
     in the issuance of any Warrant certificates or any certificates for the
     Warrant Shares other than the issuance of a Warrant Certificate to the
     Holder in connection with the Holder's surrender of a Warrant Certificate
     upon the exercise of all or less than all of the Warrants evidenced
     thereby.

6.   CLOSING OF BOOKS. The Company will at no time close its shareholder books
     or records in any manner which interferes with the timely exercise of this
     Warrant.

7.   NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. Subject to Section 12 of this
     Warrant and the provisions of any other written agreement between the
     Company and the Investor, the Investor shall not be entitled to vote or
     receive dividends or be deemed the holder of Warrant Shares or any other
     securities of the Company that may at any time be issuable on the exercise
     hereof for any purpose, nor shall anything contained herein be construed to
     confer upon the Investor, as such, any of the rights of a stockholder of
     the Company or any right to vote for the election of directors or upon any
     matter submitted to stockholders at any meeting thereof, or to give or
     withhold consent to any corporate action (whether upon any
     recapitalization, issuance of stock, reclassification of stock, change of
     par value, or change of stock to no par value, consolidation, merger,
     conveyance or otherwise) or to receive notice of meetings, or to receive
     dividends or subscription rights or otherwise until the Warrant shall have
     been exercised as provided herein. However, at the time of the exercise of
     this Warrant pursuant to Section 3 hereof, the Warrant Shares so purchased
     hereunder shall be deemed to be issued to such Holder as the record owner
     of such shares as of the close of business on the date on which this
     Warrant shall have been exercised.

8.   ASSIGNMENT AND TRANSFER OF WARRANT. This Warrant may be assigned by the
     surrender of this Warrant and the Assignment Form annexed hereto duly
     executed at the office of the Company (or such other office or agency of
     the Company or its transfer agent as the Company may designate by notice in
     writing to the registered Holder hereof at the address of such Holder
     appearing on the books of the Company); PROVIDED, HOWEVER, that this
     Warrant may not be resold or otherwise transferred except (i) in a
     transaction registered under the Securities Act of 1933, as amended (the
     "ACT"), or (ii) in a transaction pursuant to an exemption, if available,
     from registration under the Act and whereby, if reasonably requested by the
     Company, an opinion of counsel reasonably satisfactory to the Company is
     obtained by the Holder of this Warrant to the effect that the transaction
     is so exempt. If this Warrant is duly assigned in accordance with the terms
     hereof, then the Company agrees, upon the request of the assignee, to amend
     or supplement promptly any effective registration statement covering the
     Warrant Shares so that the direct assignee of the original holder is added
     as a selling stockholder thereunder.

9.   LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT; EXCHANGE. The Company
     represents warrants and covenants that (a) upon receipt by the Company of
     evidence reasonably satisfactory to it of the loss, theft, destruction or
     mutilation of any Warrant or stock certificate representing the Warrant
     Shares, and in case of loss, theft or destruction, of

<PAGE>
                                                                          Page 5

     indemnity reasonably satisfactory to it, and (b) upon surrender and
     cancellation of such Warrant or stock certificate, if mutilated, the
     Company will make and deliver a new Warrant or stock certificate of like
     tenor and dated as of such cancellation, in lieu of this Warrant or stock
     certificate, without any charge therefor. This Warrant is exchangeable at
     any time for an equal aggregate number of Warrants of different
     denominations, as requested by the holder surrendering the same, or in such
     denominations as may be requested by the Holder following determination of
     the Exercise Price. No service charge will be made for such registration or
     transfer, exchange or reissuance.

10.  SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for the
     taking of any action or the expiration of any right required or granted
     herein shall be a Saturday, Sunday or a legal holiday, then such action may
     be taken or such right may be exercised on the next succeeding day not a
     legal holiday.

11.  EFFECT OF CERTAIN EVENTS. If at any time while this Warrant or any portion
     thereof is outstanding and unexpired there shall be a transaction (by
     merger or otherwise) in which more than 50% of the voting power of the
     Company is disposed of (collectively, a "SALE OR MERGER TRANSACTION"), the
     Holder of this Warrant shall have the right thereafter to purchase, by
     exercise of this Warrant and payment of the aggregate Exercise Price in
     effect immediately prior to such action, the kind and amount of shares and
     other securities and property which it would have owned or have been
     entitled to receive after the happening of such transaction had this
     Warrant been exercised immediately prior thereto, subject to further
     adjustment as provided in Section 12.

12.  ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The number of
     and kind of securities purchasable upon exercise of this Warrant and the
     Exercise Price shall be subject to adjustment from time to time as set
     forth in this Section 12.

(a)  SUBDIVISIONS, COMBINATIONS, STOCK DIVIDENDS AND OTHER ISSUANCES. If the
     Company shall, at any time while this Warrant is outstanding, (A) pay a
     stock dividend or otherwise make a distribution or distributions on any
     equity securities (including instruments or securities convertible into or
     exchangeable for such equity securities) in shares of Common Stock, (B)
     subdivide outstanding shares of Common Stock into a larger number of
     shares, or (C) combine outstanding Common Stock into a smaller number of
     shares, then each Affected Exercise Price (as defined below) shall be
     multiplied by a fraction, the numerator of which shall be the number of
     shares of Common Stock outstanding before such event and the denominator of
     which shall be the number of shares of Common Stock outstanding after such
     event. Any adjustment made pursuant to this Section 12(a) shall become
     effective immediately after the record date for the determination of
     stockholders entitled to receive such dividend or distribution and shall
     become effective immediately after the effective date in the case of a
     subdivision or combination. As used herein, the Affected Exercise Prices
     (each an "AFFECTED EXERCISE PRICE") shall refer to: (i) the Exercise Price
     and (ii) each reported price for the Common Stock on the Principal Market

<PAGE>
                                                                          Page 6

     (as defined in the Purchase Agreement) occurring on any Trading Day
     included in the period used for determining the Closing Price, which
     Trading Day occurred before the record date in the case of events referred
     to in clause (A) of this subparagraph 12(a) and the effective date in the
     case of the events referred to in clauses (B) and (C) of this subparagraph
     12(a). "CLOSING PRICE" shall mean the average of the closing bid prices of
     the Common Stock recorded on the Principal Market (as reported by the
     Bloomberg Financial Network or any successor reporting source) for the five
     (5) Trading Days immediately following the Closing Date (as defined in the
     Purchase Agreement). The number of shares which may be purchased hereunder
     shall be increased proportionately to any reduction in Exercise Price
     pursuant to this paragraph 12(a), so that after such adjustments the
     aggregate Exercise Price payable hereunder for the increased number of
     shares shall be the same as the aggregate Exercise Price in effect just
     prior to such adjustments.

(b)  OTHER DISTRIBUTIONS. If at any time after the date hereof the Company
     distributes to holders of its Common Stock, other than as part of its
     dissolution, liquidation or the winding up of its affairs, any shares of
     its capital stock, any evidence of indebtedness or any of its assets (other
     than Common Stock), then the number of Warrant Shares for which this
     Warrant is exercisable shall be increased to equal: (i) the number of
     Warrant Shares for which this Warrant is exercisable immediately prior to
     such event, (ii) multiplied by a fraction, (A) the numerator of which shall
     be the Fair Market Value (as defined below) per share of Common Stock on
     the record date for the dividend or distribution, and (B) the denominator
     of which shall be the Fair Market Value price per share of Common Stock on
     the record date for the dividend or distribution minus the amount allocable
     to one share of Common Stock of the value (as jointly determined in good
     faith by the Board of Directors of the Company and the Holder) of any and
     all such evidences of indebtedness, shares of capital stock,
     other securities or property, so distributed. For purposes of this Warrant,
     "FAIR MARKET VALUE" shall equal the 5 Trading Day average closing trading
     price of the Common Stock on the Principal Market (as defined in the
     Purchase Agreement) for the 5 Trading Days preceding the date of
     determination or, if the Common Stock is not listed or admitted to trading
     on any Principal Market, and the average price cannot be determined as
     contemplated above, the Fair Market Value of the Common Stock shall be as
     reasonably determined in good faith by the Company's Board of Directors and
     the Holder. The Exercise Price shall be reduced to equal: (i) the Exercise
     Price in effect immediately before the occurrence of any event (ii)
     multiplied by a fraction, (A) the numerator of which is the number of
     Warrant Shares for which this Warrant is exercisable immediately before the
     adjustment, and (B) the denominator of which is the number of Warrant
     Shares for which this Warrant is exercisable immediately after the
     adjustment.

(c)  MERGER, ETC. If at any time after the date hereof there shall be a merger
     or consolidation of the Company with or into or a transfer of all or
     substantially all of the assets of the Company to another entity, then the
     Holder shall be entitled to receive upon or after such transfer, merger or
     consolidation becoming effective, and upon payment of the Exercise Price
     then in effect, the number of shares or other securities or property of the
     Company

<PAGE>
                                                                          Page 7

     or of the successor corporation resulting from such merger or
     consolidation, which would have been received by the Holder for the shares
     of stock subject to this Warrant had this Warrant been exercised just prior
     to such transfer, merger or consolidation becoming effective or to the
     applicable record date thereof, as the case may be. The Company will not
     merge or consolidate with or into any other corporation, or sell or
     otherwise transfer its property, assets and business substantially as an
     entirety to another corporation, unless the corporation resulting from such
     merger or consolidation (if not the Company), or such transferee
     corporation, as the case may be, shall expressly assume in writing the due
     and punctual performance and observance of each and every covenant and
     condition of this Warrant to be performed and observed by the Company.

(d)  RECLASSIFICATION, ETC. If at any time after the date hereof there shall be
     a reorganization or reclassification of the securities as to which purchase
     rights under this Warrant exist into the same or a different number of
     securities of any other class or classes, then the Holder shall thereafter
     be entitled to receive upon exercise of this Warrant, during the period
     specified herein and upon payment of the Exercise Price then in effect, the
     number of shares or other securities or property resulting from such
     reorganization or reclassification, which would have been received by the
     Holder for the shares of stock subject to this Warrant had this Warrant at
     such time been exercised.

(e)  EXERCISE PRICE ADJUSTMENT. In the event that the Company issues or sells
     any Common Stock or securities which are convertible into or exchangeable
     for its Common Stock or any convertible securities, or any warrants or
     other rights to subscribe for or to purchase or any options for the
     purchase of its Common Stock or any such convertible securities (other than
     shares or options issued or which may be issued pursuant to (i) the
     Company's current employee option plans or shares issued upon exercise of
     options, warrants or rights outstanding on the date of the Agreement and
     listed in the Company's most recent periodic report filed under the
     Exchange Act, or (ii) arrangements with the Investor) at an effective price
     per share which is less than the greater of the Exercise Price then in
     effect or the Fair Market Value (as described in Section 12(b) above) of
     the Common Stock on the trading day next preceding such issue or sale, then
     in each such case, the Exercise Price in effect immediately prior to such
     issue or sale shall be reduced effective concurrently with such issue or
     sale to an amount determined by multiplying the Exercise Price then in
     effect by a fraction, (x) the numerator of which shall be the sum of (1)
     the number of shares of Common Stock outstanding immediately prior to such
     issue or sale, plus (2) the number of shares of Common Stock which the
     aggregate consideration received by the Company for such additional shares
     would purchase at such Fair Market Value or Exercise Price, whichever is
     greater, then in effect; and (y) the denominator of which shall be the
     number of shares of Common Stock of the Company outstanding immediately
     after such issue or sale.

     For the purposes of the foregoing adjustment, in the case of the issuance
     of any convertible securities, warrants, options or other rights to
     subscribe for or to purchase or exchange for, shares of Common Stock
     ("CONVERTIBLE SECURITIES"), the maximum number of shares of Common Stock
     issuable upon exercise, exchange or conversion of

<PAGE>
                                                                          Page 8

     such Convertible Securities shall be deemed to be outstanding, provided
     that no further adjustment shall be made upon the actual issuance of Common
     Stock upon exercise, exchange or conversion of such Convertible Securities.

     The number of shares which may be purchased hereunder shall be increased
     proportionately to any reduction in Exercise Price pursuant to this
     paragraph 12(e), so that after such adjustments the aggregate Exercise
     Price payable hereunder for the increased number of shares shall be the
     same as the aggregate Exercise Price in effect just prior to such
     adjustments.

     In the event of any such issuance for a consideration which is less than
     such Fair Market Value and also less than the Exercise Price then in
     effect, than there shall be only one such adjustment by reason of such
     issuance, such adjustment to be that which results in the greatest
     reduction of the Exercise Price computed as aforesaid.

(f)  (i) The terms of any reorganization, consolidation, merger, sale, transfer
     or share exchange shall include such terms so as to continue to give to the
     holder hereof the right to receive the securities or property set forth in
     this Section 12 upon any exercise following any such reclassification,
     consolidation, merger, sale, transfer or share exchange.

     (ii) In the event of any adjustment in the number of Warrant Shares
     issuable hereunder upon exercise, the Exercise Price shall be inversely
     proportionately increased or decreased as the case may be, such that
     aggregate purchase price for Warrant Shares upon full exercise of this
     Warrant shall remain the same. Similarly, in the event of any adjustment in
     the Exercise Price, the number of Warrant Shares issuable hereunder upon
     exercise shall be inversely proportionately increased or decreased as the
     case may be, such that aggregate purchase price for Warrant Shares upon
     full exercise of this Warrant shall remain the same.

13.  VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at its option, at any
     time during the term of this Warrant, reduce but not increase the then
     current Exercise Price to any amount and for any period of time deemed
     appropriate by the Board of Directors of the Company.

14.  NOTICE OF ADJUSTMENT; NOTICE OF EVENTS. (i) Whenever the number of Warrant
     Shares or number or kind of securities or other property purchasable upon
     the exercise of this Warrant or the Exercise Price is adjusted, the Company
     shall promptly mail to the Holder of this Warrant a notice setting forth
     the number of Warrant Shares (and other securities or property) purchasable
     upon the exercise of this Warrant and the Exercise Price of such Warrant
     Shares after such adjustment and setting forth the computation of such
     adjustment and a brief statement of the facts requiring such adjustment.
     (ii) If: (A) the Company shall declare a dividend (or any other
     distribution) on its Common Stock; or (B) the Company shall declare a
     special nonrecurring cash dividend on or a redemption of its Common Stock;
     or (C) the Company shall authorize the granting to all holders of the
     Common Stock rights or warrants to subscribe for or purchase any shares of
     capital stock

<PAGE>

                                                                         Page 9

     of any class or of any rights; or (D) the approval of any
     stockholders of the Company shall be required in connection with any
     reclassification of the Common Stock of the Company, any consolidation or
     merger to which the Company is a party, any sale or transfer of all or
     substantially all of the assets of the Company, or any compulsory share
     exchange whereby the Common Stock is converted into other securities, cash
     or property; or (E) the Company shall authorize the voluntary dissolution,
     liquidation or winding up of the affairs of the Company, then the Company
     shall cause to be mailed to each Warrant holder at their last addresses as
     they shall appear upon the Warrant register of the Company, at least 30
     calendar days prior to the applicable record or effective date hereinafter
     specified, a notice stating (x) the date on which a record is to be taken
     for the purpose of such dividend, distribution, redemption, rights or
     warrants, or if a record is not to be taken, the date as of which the
     holders of Common Stock of record to be entitled to such dividend,
     distributions, redemption, rights or warrants are to be determined or (y)
     the date on which such reclassification, consolidation, merger, sale,
     transfer or share exchange is expected to become effective or close, and
     the date as of which it is expected that holders of Common Stock of record
     shall be entitled to exchange their shares of Common Stock for securities,
     cash or other property deliverable upon such reclassification,
     consolidation, merger, sale, transfer, share exchange, dissolution,
     liquidation or winding up.

15.  AUTHORIZED SHARES. The Company covenants that during the period the Warrant
     is outstanding and exercisable, it will reserve from its authorized and
     unissued Common Stock a sufficient number of shares to provide for the
     issuance of the Warrant Shares upon the exercise of any and all purchase
     rights under this Warrant. The Company further covenants that its issuance
     of this Warrant shall constitute full authority to its officers who are
     charged with the duty of executing stock certificates to execute and issue
     the necessary certificates for the Warrant Shares upon the exercise of the
     purchase rights under this Warrant. The Company will take all such
     reasonable action as may be necessary to assure that such Warrant Shares
     may be issued as provided herein without violation of any applicable law,
     regulation, or rule of any applicable market or exchange.

16.  9.99% LIMITATION.

          (i) Notwithstanding anything to the contrary contained herein, the
     number of shares of Common Stock that may be acquired by the holder upon
     exercise pursuant to the terms hereof shall not exceed a number that, when
     added to the total number of shares of Common Stock deemed beneficially
     owned by such holder (other than by virtue of the ownership of securities
     or rights to acquire securities that have limitations on the holder's right
     to convert, exercise or purchase similar to the limitation set forth
     herein), together with all shares of Common Stock deemed beneficially owned
     by the holder's "affiliates" (as defined in Rule 144 of the Act)
     ("Aggregation Parties") that would be aggregated for purposes of
     determining whether a group under Section 13(d) of the Securities Exchange
     Act of 1934 as amended, exists, would exceed 9.99% of the total issued and
     outstanding shares of the Common Stock (the "Restricted Ownership
     Percentage"); PROVIDED that (w) each holder shall have the right at any
     time and from time to time to reduce its Restricted

<PAGE>
                                                                         Page 10

     Ownership Percentage immediately upon notice to the Company and (x) each
     holder shall have the right (subject to waiver) at any time and from time
     to time, to increase its Restricted Ownership Percentage immediately in the
     event of the announcement as pending or planned, of a transaction or event
     referred to in Section 5(m) of the Certificate.

          (ii) Each time (a "COVENANT TIME") the holder or an Aggregation Party
     makes a Triggering Acquisition (as defined below) of shares of Common Stock
     (the "TRIGGERING SHARES"), the holder will be deemed to covenant that it
     will not, during the balance of the day on which such Triggering
     Acquisition occurs, and during the 61-day period beginning immediately
     after that day, acquire additional shares of Common Stock pursuant to
     rights-to-acquire existing at that Covenant Time, if the aggregate amount
     of such additional shares so acquired (without reducing that amount by any
     dispositions) would exceed (x) 9.99% of the number of shares of Common
     Stock outstanding at that Covenant Time (including the Triggering Shares)
     minus (y) the number of shares of Common Stock actually owned by the holder
     at that Covenant Time (regardless of how or when acquired, and including
     the Triggering Shares). A "TRIGGERING ACQUISITION" means the giving of a
     Notice of Exercise or any other acquisition of Common Stock by the holder
     or an Aggregation Party; PROVIDED, however, that with respect to the giving
     of such Notice of Exercise, if the associated issuance of shares of Common
     Stock does not occur, such event shall cease to be a Triggering Acquisition
     and the related covenant under this paragraph shall terminate. At each
     Covenant Time, the holder shall be deemed to waive any right it would
     otherwise have to acquire shares of Common Stock to the extent that such
     acquisition would violate any covenant given by the holder under this
     paragraph. Notwithstanding anything to the contrary in the Transaction
     Documents, in the event of a conflict between any covenant given under this
     paragraph and any obligation of the holder to exercise this Warrant
     pursuant to the Transaction Documents, the former shall supersede the
     latter, and the latter shall be reduced accordingly. For the avoidance of
     doubt:

          (A)  The covenant to be given pursuant to this paragraph will be given
               at every Covenant Time and shall be calculated based on the
               circumstances then in effect. The making of a covenant at one
               Covenant Time shall not terminate or modify any prior covenants.

          (B)  The holder may therefore from time to time be subject to multiple
               such covenants, each one having been made at a different Covenant
               Time, and some possibly being more restrictive than others. The
               holder must comply with all such covenants then in effect.

17.  COMPLIANCE WITH SECURITIES LAWS. (a) The Holder hereof acknowledges that
     the Warrant Shares acquired upon the exercise of this Warrant, if not
     registered (or if no exemption from registration exists), will have
     restrictions upon resale imposed by state and federal securities laws. Each
     certificate representing the Warrant Shares issued to the Holder

<PAGE>
                                                                         Page 11

     upon exercise (if not registered, for resale or otherwise, or if no
     exemption from registration exists) will bear substantially the following
     legend:

     THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
     WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
     COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
     UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
     ACCORDINGLY, MAY NOT BE OFFERED, TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF
     EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
     ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
     SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
     ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

(b)  Without limiting the Investor's right to transfer, assign or otherwise
     convey the Warrant or Warrant Shares in compliance with all applicable
     securities laws, the Investor of this Warrant, by acceptance hereof,
     acknowledges that this Warrant and the Warrant Shares to be issued upon
     exercise hereof are being acquired solely for the Investor's own account
     and not as a nominee for any other party, and that the Investor will not
     offer, sell or otherwise dispose of this Warrant or any Warrant Shares to
     be issued upon exercise hereof except under circumstances that will not
     result in a violation of applicable federal and state securities laws.

18.  MISCELLANEOUS.

(a)  ISSUE DATE; CHOICE OF LAW; VENUE; JURISDICTION. THE PROVISIONS OF THIS
     WARRANT SHALL BE CONSTRUED AND SHALL BE GIVEN EFFECT IN ALL RESPECTS AS IF
     IT HAD BEEN ISSUED AND DELIVERED BY THE COMPANY ON THE DATE HEREOF. THIS
     WARRANT SHALL BE BINDING UPON ANY SUCCESSORS OR ASSIGNS OF THE COMPANY.
     THIS WARRANT WILL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED
     BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT FOR MATTERS ARISING UNDER THE
     ACT, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE
     PARTIES CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE
     COURTS SITTING IN THE COUNTY OF NEW YORK IN THE STATE OF NEW YORK IN
     CONNECTION WITH ANY DISPUTE ARISING UNDER THIS WARRANT AND HEREBY WAIVES,
     TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY
     OBJECTION BASED ON FORUM NON CONVENIENS OR VENUE, TO THE BRINGING OF ANY
     SUCH PROCEEDING IN SUCH JURISDICTION. EACH PARTY HEREBY AGREES THAT IF THE
     OTHER PARTY TO THIS WARRANT OBTAINS A JUDGMENT AGAINST IT IN SUCH A
     PROCEEDING, THE PARTY WHICH OBTAINED SUCH JUDGMENT MAY ENFORCE SAME BY
     SUMMARY JUDGMENT IN THE COURTS OF ANY

<PAGE>
                                                                         Page 12

     COUNTRY HAVING JURISDICTION OVER THE PARTY AGAINST WHOM SUCH JUDGMENT WAS
     OBTAINED, AND EACH PARTY HEREBY WAIVES ANY DEFENSES AVAILABLE TO IT UNDER
     LOCAL LAW AND AGREES TO THE ENFORCEMENT OF SUCH A JUDGMENT. EACH PARTY TO
     THIS WARRANT IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH
     PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
     MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS IN ACCORDANCE WITH
     SECTION 18(C). NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE
     PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

(b)  MODIFICATION AND WAIVER. This Warrant and any provisions hereof may be
     changed, waived, discharged or terminated only by an instrument in writing
     signed by the party against which enforcement of the same is sought. Any
     amendment effected in accordance with this paragraph shall be binding upon
     the Investor, each future holder of this Warrant and the Company. No
     waivers of, or exceptions to, any term, condition or provision of this
     Warrant, in any one or more instances, shall be deemed to be, or construed
     as, a further or continuing waiver of any such term, condition or
     provision.

(c)  NOTICES. Any notice, request or other document required or permitted to be
     given or delivered to the Investor or future holders hereof or the Company
     shall be personally delivered or shall be sent by certified or registered
     mail, postage prepaid, to the Investor or each such holder at its address
     as shown on the books of the Company or to the Company at the address set
     forth in the Purchase Agreement. All notices under this Warrant shall be
     deemed to have been given when received.

     A party may from time to time change the address to which notices to it are
     to be delivered or mailed hereunder by notice in accordance with the
     provisions of this Section 18(c).

(d)  SEVERABILITY. Whenever possible, each provision of this Warrant shall be
     interpreted in such manner as to be effective and valid under applicable
     law, but if any provision of this Warrant is held to be invalid, illegal or
     unenforceable in any respect under any applicable law or rule in any
     jurisdiction, such invalidity, illegality or unenforceability shall not
     affect the validity, legality or enforceability of any other provision of
     this Warrant in such jurisdiction or affect the validity, legality or
     enforceability of any provision in any other jurisdiction, but this Warrant
     shall be reformed, construed and enforced in such jurisdiction as if such
     invalid, illegal or unenforceable provision had never been contained
     herein.

(e)  NO IMPAIRMENT. The Company will not, by amendment of its Restated and
     Amended 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, but will at all times in
     good faith assist in the carrying out of all such terms and in the taking
     of all such

<PAGE>
                                                                         Page 13

     action as may be necessary or appropriate in order to protect the rights of
     the Holder against impairment. Without limiting the generality of the
     foregoing, the Company (a) will not increase the par value of any Warrant
     Shares above the amount payable therefor on such exercise, and (b) will
     take all such action as may be reasonably necessary or appropriate in order
     that the Company may validly and legally issue fully paid and nonassessable
     Warrant Shares on the exercise of this Warrant.

(f)  SPECIFIC ENFORCEMENT. The Company and the Holder acknowledge and agree that
     irreparable damage would occur in the event that any of the provisions of
     this Warrant were not performed in accordance with their specific terms or
     were otherwise breached. It is accordingly agreed that the parties shall he
     entitled to an injunction or injunctions to prevent or cure breaches of the
     provisions of this Warrant and to enforce specifically the terms and
     provisions hereof, this being in addition to any other remedy to which
     either of them may be entitled by law or equity.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>
                                                                         Page 14

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
officers thereunto duly authorized.

Dated: April 19, 2000

                          MICROWARE SYSTEMS CORPORATION

                             By: /s/ Kenneth B. Kaplan
                             Name:  Kenneth B. Kaplan
                             Title:  President and Chief Executive Officer

ATTEST:

------------------------------
Name:

<PAGE>

                               NOTICE OF EXERCISE

MICROWARE SYSTEMS CORPORATION
1500 N.W. 118th Street
Des Moines, Iowa  50325
Telephone:  (515) 223-8000
Facsimile:   ___________________
Attention:   ___________________

This undersigned hereby elects to exercise the right of purchase represented by
the within Warrant ("Warrant") for _______________ shares of Common Stock*
("Warrant Shares") provided for therein, and to purchase such Warrant Shares by
(CHECK AS APPLICABLE):

        / /  payment by cash, wire transfer or certified check,

        / /  exercise of the within Warrant by cashless exercise pursuant to
             Section 3(b) thereof, resulting in ______ shares of Common Stock
             issuable upon surrender of the Warrant,

and requests that certificates for the Warrant Shares be issued as follows:

                           -------------------------------
                           Name

                           --------------------------------
                           Address

                           --------------------------------

and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the balance of
the Warrant Shares be issued.

In lieu of delivering physical certificates representing the Warrant Shares
purchasable upon exercise of this Warrant, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Holder, the Company
shall use its best efforts to cause its transfer agent to electronically
transmit the Warrant Shares issuable upon conversion or exercise to the
undersigned, by crediting the account of the undersigned's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system.

Dated:_______________________          Signature:______________________________

                                                 ______________________________
                                                 Name (please print)

                                                 ______________________________
--------------
*  NOTE: If conversion of the Warrant is made by surrender of the Warrant and
   the number of shares indicated exceeds the maximum number of shares to which
   a holder is entitled, the Company will issue such maximum number of shares
   purchasable upon exercise of the Warrant registered in the name of the
   undersigned Warrantholder or the undersigned's Assignee as below indicated
   and deliver same to the address stated below.

<PAGE>

                                                 Address (please print)
                                                ______________________________

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                      Do not use this form to exercise the
                                   warrant.)

     FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to

_______________________________________________ whose address is

__________________________________________________________________.

___________________________________________________________________

                                            Dated:  ______________,

                       Holder's Signature:_________________________

                       Holder's Address:___________________________

                                        ___________________________

Signature Guaranteed:  ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.

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