QUANTECH LTD.

                             1998 STOCK OPTION PLAN


                                   SECTION 1.

                                   DEFINITIONS

         As used herein, the following terms shall have the meanings indicated
below:

         (a) "Committee" shall mean a Committee of two or more directors who
         shall be appointed by and serve at the pleasure of the Board. As long
         as the Company's securities are registered pursuant to Section 12 of
         the Securities Exchange Act of 1934, as amended, then, to the extent
         necessary for compliance with Rule 16b-3, or any successor provision,
         each of the members of the Committee shall be a "Non-Employee
         Director." For purposes of this Section 1(a) "Non-Employee Director"
         shall have the same meaning as set forth in Rule 16b-3, or any
         successor provision, as then in effect, of the General Rules and
         Regulations under the Securities Exchange Act of 1934, as amended.

         (b) The "Company" shall mean Quantech Ltd., a Minnesota corporation.

         (c) "Fair Market Value" shall mean (i) if such stock is reported by the
         Nasdaq National Market or Nasdaq SmallCap Market or is listed upon an
         established stock exchange or exchanges, the reported closing price of
         such stock by the Nasdaq National Market or Nasdaq SmallCap Market or
         on such stock exchange or exchanges on the date the option is granted
         or, if no sale of such stock shall have occurred on that date, on the
         next preceding day on which there was a sale of stock; (ii) if such
         stock is not so reported by the Nasdaq National Market or Nasdaq
         SmallCap Market or listed upon an established stock exchange, the
         average of the closing "bid" and "asked" prices quoted by the National
         Quotation Bureau, Inc. (or any comparable reporting service) on the
         date the option is granted, or if there are no quoted "bid" and "asked"
         prices on such date, on the next preceding date for which there are
         such quotes; or (iii) if such stock is not publicly traded as of the
         date the option is granted, the per share value as determined by the
         Board, or the Committee, in its sole discretion by applying principles
         of valuation with respect to all such options.

         (d) The "Internal Revenue Code" is the Internal Revenue Code of 1986,
         as amended from time to time.

         (e) "Non-Employee Director" shall mean members of the Board who are not
         employees of the Company or any Subsidiary.

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         (f) "Option Stock" shall mean Common Stock of the Company (subject to
         adjustment as described in Section 13) reserved for options pursuant to
         this Plan.

         (g) The "Optionee" means an employee of the Company or any Subsidiary
         to whom an incentive stock option has been granted pursuant to Section
         9; a consultant or advisor to or director (including a Non-Employee
         Director), employee or officer of the Company or any Subsidiary to whom
         a nonqualified stock option has been granted pursuant to Section 10; or
         a Non-Employee Director to whom a nonqualified stock option has been
         granted pursuant to Section 11.

         (h) "Parent" shall mean any corporation which owns, directly or
         indirectly in an unbroken chain, fifty percent (50%) or more of the
         total voting power of the Company's outstanding stock.

         (i) The "Plan" means the Quantech 1998 Stock Option Plan, as amended
         hereafter from time to time, including the form of Option Agreements as
         they may be modified by the Board from time to time.

         (j) A "Subsidiary" shall mean any corporation of which fifty percent
         (50%) or more of the total voting power of outstanding stock is owned,
         directly or indirectly in an unbroken chain, by the Company.


                                   SECTION 2.

                                     PURPOSE

         The purpose of the Plan is to promote the success of the Company and
its Subsidiaries by facilitating the retention of competent personnel and by
furnishing incentive to officers, directors, employees, consultants, and
advisors upon whose efforts the success of the Company and its Subsidiaries will
depend to a large degree.

         It is the intention of the Company to carry out the Plan through the
granting of stock options which will qualify as "incentive stock options" under
the provisions of Section 422 of the Internal Revenue Code, or any successor
provision, pursuant to Section 9 of this Plan, and through the granting of
"nonqualified stock options" pursuant to Sections 10 and 11 of this Plan.
Adoption of this Plan shall be and is expressly subject to the condition of
approval by the shareholders of the Company within twelve (12) months before or
after the adoption of the Plan by the Board of Directors. Any incentive stock
options granted after adoption of the Plan by the Board of Directors shall be
treated as nonqualified stock options if shareholder approval is not obtained
within such twelve-month period.

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                                   SECTION 3.

                             EFFECTIVE DATE OF PLAN

         The Plan shall be effective as of the date of adoption by the Board of
Directors, subject to approval by the shareholders of the Company as required in
Section 2.


                                   SECTION 4.

                                 ADMINISTRATION

         The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the "Board") or by a Committee which may be
appointed by the Board from time to time (collectively referred to as the
"Administrator"). The Administrator shall have all of the powers vested in it
under the provisions of the Plan, including but not limited to exclusive
authority (where applicable and within the limitations described in this Plan)
to determine, in its sole discretion, whether an incentive stock option or
nonqualified stock option shall be granted, the individuals to whom, and the
time or times at which, options shall be granted, the number of shares subject
to each option and the option price and terms and conditions of each option. The
Administrator shall have full power and authority to administer and interpret
the Plan, to make and amend rules, regulations and guidelines for administering
the Plan, to prescribe the form and conditions of the respective stock option
agreements (which may vary from Optionee to Optionee) evidencing each option and
to make all other determinations necessary or advisable for the administration
of the Plan. The Administrator's interpretation of the Plan, and all actions
taken and determinations made by the Administrator pursuant to the power vested
in it hereunder, shall be conclusive and binding on all parties concerned.

         No member of the Board or the Committee shall be liable for any action
taken or determination made in good faith in connection with the administration
of the Plan. In the event the Board appoints a Committee as provided hereunder,
any action of the Committee with respect to the administration of the Plan shall
be taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.


                                   SECTION 5.

                                  PARTICIPANTS

         The Administrator shall from time to time, at its discretion and
without approval of the shareholders, designate those employees, officers,
directors (including Non-Employee Directors), consultants, and advisors of the
Company or of any Subsidiary to whom nonqualified stock options shall be granted
pursuant to Section 10 of this Plan; provided, however, that consultants or
advisors shall not be eligible to receive stock options hereunder unless such

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consultant or advisor renders bona fide services to the Company or Subsidiary
and such services are not in connection with the offer or sale of securities in
a capital raising transaction; and, provided further, that Non-Employee
Directors will be granted options pursuant to Section 11 of this Plan without
any further action by the Administrator. The Administrator shall, from time to
time, at its discretion and without approval of the shareholders, designate
those employees of the Company or any Subsidiary to whom incentive stock options
shall be granted under Section 9 of this Plan. The Administrator may grant
additional incentive stock options or nonqualified stock options under this Plan
to some or all participants then holding options or may grant options solely or
partially to new participants. In designating participants, the Administrator
shall also determine the number of shares to be optioned to each such
participant. The Board may from time to time designate individuals as being
ineligible to participate in the Plan.


                                   SECTION 6.

                                      STOCK

         The Stock to be optioned under this Plan shall consist of authorized
but unissued shares of Option Stock. Forty Million (40,000,000) shares of Option
Stock shall be reserved and available for options under the Plan; provided,
however, that the total number of shares of Option Stock reserved for options
under this Plan shall be subject to adjustment as provided in Section 13 of the
Plan. In the event that any outstanding option under the Plan for any reason
expires or is terminated prior to the exercise thereof, the shares of Option
Stock allocable to the unexercised portion of such option shall continue to be
reserved for options under the Plan and may be optioned hereunder.


                                   SECTION 7.

                                DURATION OF PLAN

         Incentive stock options may be granted pursuant to the Plan from time
to time during a period of ten (10) years from the effective date as defined in
Section 3. Nonqualified stock options may be granted pursuant to the Plan from
time to time after the effective date of the Plan and until the Plan is
discontinued or terminated by the Board. Any incentive stock option granted
during such ten-year period and any nonqualified stock option granted prior to
the termination of the Plan by the Board shall remain in full force and effect
until the expiration of the option as specified in the written stock option
agreement and shall remain subject to the terms and conditions of this Plan.


                                   SECTION 8.

                                     PAYMENT

         Optionees may pay for shares upon exercise of options granted pursuant
to this Plan with cash, personal check, certified check or, if approved by the
Administrator in its sole discretion, Common Stock of the Company valued at such
Stock's then Fair Market Value, or such other form of payment as may be

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authorized by the Administrator. The Administrator may, in its sole discretion,
limit the forms of payment available to the Optionee and may exercise such
discretion any time prior to the termination of the option granted to the
Optionee or upon any exercise of the option by the Optionee.

         With respect to payment in the form of Common Stock of the Company, the
Administrator may require advance approval or adopt such rules as it deems
necessary to assure compliance with Rule 16b-3, or any successor provision, as
then in effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934, if applicable.


                                   SECTION 9.

                 TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS

         Each incentive stock option granted pursuant to this Section 9 shall be
evidenced by a written stock option agreement (the "Option Agreement"). The
Option Agreement shall be in such form as may be approved from time to time by
the Administrator and may vary from Optionee to Optionee; provided, however,
that each Optionee and each Option Agreement shall comply with and be subject to
the following terms and conditions:

         (a) Number of Shares and Option Price. The Option Agreement shall state
         the total number of shares covered by the incentive stock option. To
         the extent required to qualify the Option as an incentive stock option
         under Section 422 of the Internal Revenue Code, or any successor
         provision, the option price per share shall not be less than one
         hundred percent (100%) of the Fair Market Value of the Common Stock per
         share on the date the Administrator grants the option; provided,
         however, that if an Optionee owns stock possessing more than ten
         percent (10%) of the total combined voting power of all classes of
         stock of the Company or of its Parent or any Subsidiary, the option
         price per share of an incentive stock option granted to such Optionee
         shall not be less than one hundred ten percent (110%) of the Fair
         Market Value of the Common Stock per share on the date of the grant of
         the option. The Administrator shall have full authority and discretion
         in establishing the option price and shall be fully protected in so
         doing.

         (b) Term and Exercisability of Incentive Stock Option. The term during
         which any incentive stock option granted under the Plan may be
         exercised shall be established in each case by the Administrator. To
         the extent required to qualify the Option as an incentive stock option
         under Section 422 of the Internal Revenue Code, or any successor
         provision, in no event shall any incentive stock option be exercisable
         during a term of more than ten (10) years after the date on which it is
         granted; provided, however, that if an Optionee owns stock possessing
         more than ten percent (10%) of the total combined voting power of all
         classes of stock of the Company or of its parent or any Subsidiary, the
         incentive stock option granted to such Optionee shall be exercisable
         during a term of not more than five (5) years after the date on which
         it is granted.

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         The Option Agreement shall state when the incentive stock option
         becomes exercisable and shall also state the maximum term during which
         the option may be exercised. In the event an incentive stock option is
         exercisable immediately, the manner of exercise of the option in the
         event it is not exercised in full immediately shall be specified in the
         Option Agreement. The Administrator may accelerate the exercisability
         of any incentive stock option granted hereunder which is not
         immediately exercisable as of the date of grant.

         (c) Other Provisions. The Option Agreement authorized under this
         Section 9 shall contain such other provisions as the Administrator
         shall deem advisable. Any such Option Agreement shall contain such
         limitations and restrictions upon the exercise of the option as shall
         be necessary to ensure that such option will be considered an
         "incentive stock option" as defined in Section 422 of the Internal
         Revenue Code or to conform to any change therein.


                                   SECTION 10.

               TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS

         Each nonqualified stock option granted pursuant to this Section 10
shall be evidenced by a written Option Agreement. The Option Agreement shall be
in such form as may be approved from time to time by the Administrator and may
vary from Optionee to Optionee; provided, however, that each Optionee and each
Option Agreement shall comply with and be subject to the following terms and
conditions:

         (a) Number of Shares and Option Price. The Option Agreement shall state
         the total number of shares covered by the nonqualified stock option.
         Unless otherwise determined by the Administrator, the option price per
         share shall be one hundred percent (100%) of the Fair Market Value of
         the Common Stock per share on the date the Administrator grants the
         option; provided, however, that the option price may not be less than
         eighty-five percent (85%) of the Fair Market Value of the Common Stock
         per share on the date of grant.

         (b) Term and Exercisability of Nonqualified Stock Option. The term
         during which any nonqualified stock option granted under the Plan may
         be exercised shall be established in each case by the Administrator.
         The Option Agreement shall state when the nonqualified stock option
         becomes exercisable and shall also state the maximum term during which
         the option may be exercised. In the event a nonqualified stock option
         is exercisable immediately, the manner of exercise of the option in the
         event it is not exercised in full immediately shall be specified in the
         stock option agreement. The Administrator may accelerate the
         exercisability of any nonqualified stock option granted hereunder which
         is not immediately exercisable as of the date of grant.

         (c) Withholding. The Company or its Subsidiary shall be entitled to
         withhold and deduct from future wages of the Optionee all legally
         required amounts necessary to satisfy any and all withholding and
         employment-related taxes attributable to the Optionee's exercise of a

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         nonqualified stock option. In the event the Optionee is required under
         the Option Agreement to pay the Company, or make arrangements
         satisfactory to the Company respecting payment of, such withholding and
         employment-related taxes, the Administrator may, in its discretion and
         pursuant to such rules as it may adopt, permit the Optionee to satisfy
         such obligation, in whole or in part, by electing to have the Company
         withhold shares of Common Stock otherwise issuable to the Optionee as a
         result of the option's exercise equal to the amount required to be
         withheld for tax purposes. Any stock elected to be withheld shall be
         valued at its Fair Market Value, as of the date the amount of tax to be
         withheld is determined under applicable tax law. The Optionee's
         election to have shares withheld for this purpose shall be made on or
         before the date the option is exercised or, if later, the date that the
         amount of tax to be withheld is determined under applicable tax law.
         Such election shall be approved by the Administrator and otherwise
         comply with such rules as the Administrator may adopt to assure
         compliance with Rule 16b-3, or any successor provision, as then in
         effect, of the General Rules and Regulations under the Securities
         Exchange Act of 1934, if applicable.

         (d) Other Provisions. The Option Agreement authorized under this
         Section 10 shall contain such other provisions as the Administrator
         shall deem advisable.


                                   SECTION 11.

                  GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS

         (a) Upon Joining Board. Each Non-Employee Director of the Company whose
         initial election or appointment to the Board of Directors occurs on or
         after the date this Plan is approved by the Company's shareholders
         shall, as of the date of such election, automatically be granted an
         option to purchase 200,000 shares of the Common Stock at an option
         price per share equal to 100% of the Fair Market Value of the Common
         Stock on such date. Options granted pursuant to this subsection (a)
         shall be immediately exercisable to the extent of 66,667 shares subject
         to such option and to the extent of an additional 66,667 and 66,666
         shares on each of the first and second anniversaries, respectively, of
         the date of grant.

         (b) Upon Re-election to Board. Each Non-Employee Director who, on and
         after the date this Plan is approved by the Company's shareholders, is
         re-elected as a director of the Company or whose term of office
         continues after a meeting of shareholders at which directors are
         elected shall, as of the date of such re-election or shareholder
         meeting, automatically be granted an option to purchase 50,000 shares
         of the Common Stock at an option price per share equal to 100% of the
         Fair Market Value of the Common Stock on the date of such re-election
         or shareholder meeting. Options granted pursuant to this subsection (b)
         shall be immediately exercisable in full.

         (c) General. No director shall receive more than one option pursuant to
         subsection (b) of this Section 11 in any one fiscal year. All options
         granted pursuant to this Section 11 shall be designated as nonqualified


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         options and shall be subject to the same terms and provisions as are
         then in effect with respect to granting of nonqualified options to
         officers and employees of the Company except that the option shall
         expire on the earlier of (i) three months after the Optionee ceases to
         be a director (except by death) and (ii) ten (10) years after the date
         of grant. Notwithstanding the foregoing, in the event of the death of a
         Non-Employee Director, any option granted to such Non-Employee Director
         pursuant to this Section 11 may be exercised at any time within six
         months of the death of such Non-Employee Director or on the date on
         which the option, by its terms expires, whichever is earlier.


                                   SECTION 12.

                               TRANSFER OF OPTION

         No incentive stock option shall be transferable, in whole or in part,
by the Optionee other than by will or by the laws of descent and distribution
and, during the Optionee's lifetime, the option may be exercised only by the
Optionee. If the Optionee shall attempt any transfer of any incentive stock
option granted under the Plan during the Optionee's lifetime, such transfer
shall be void and the incentive stock option, to the extent not fully exercised,
shall terminate.

         The Administrator may, in its sole discretion, permit the Optionee to
transfer any or all nonqualified stock options to any member of the Optionee's
"immediate family" as such term is defined in Rule 16a-1(e) promulgated under
the Securities Exchange Act of 1934, or any successor provision, or to one or
more trusts whose beneficiaries are members of such Optionee's "immediate
family" or partnerships in which such family members are the only partners;
provided, however, that the Optionee receives no consideration for the transfer
and such transferred nonqualified stock option shall continue to be subject to
the same terms and conditions as were applicable to such nonqualified stock
option immediately prior to its transfer.


                                   SECTION 13.

                    RECAPITALIZATION, SALE, MERGER, EXCHANGE
                                 OR LIQUIDATION

         In the event of an increase or decrease in the number of shares of
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the Company,
the number of shares of Option Stock reserved under Section 6 hereof and the
number of shares of Option Stock covered by each outstanding option and the
price per share thereof shall be adjusted by the Board to reflect such change.
Additional shares which may be credited pursuant to such adjustment shall be
subject to the same restrictions as are applicable to the shares with respect to
which the adjustment relates.

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         Unless otherwise provided in the stock option agreement, in the event
of an acquisition of the Company through the sale of substantially all of the
Company's assets and the consequent discontinuance of its business or through a
merger, consolidation, exchange, reorganization, reclassification, extraordinary
dividend, divestiture or liquidation of the Company (collectively referred to as
a "transaction"), all outstanding options shall become immediately exercisable,
whether or not such options had become exercisable prior to the transaction;
provided, however, that if the acquiring party seeks to have the transaction
accounted for on a "pooling of interests" basis and, in the opinion of the
Company's independent certified public accountants, accelerating the
exercisability of such options would preclude a pooling of interests under
generally accepted accounting principles, the exercisability of such options
shall not accelerate. In addition to the foregoing, in the event of such a
transaction, the Board may provide for one or more of the following:

         (a) the complete termination of this Plan and cancellation of
         outstanding options not exercised prior to a date specified by the
         Board (which date shall give Optionees a reasonable period of time in
         which to exercise the options prior to the effectiveness of such
         transaction);

         (b) that Optionees holding outstanding incentive or nonqualified
         options shall receive, with respect to each share of Option Stock
         subject to such options, as of the effective date of any such
         transaction, cash in an amount equal to the excess of the Fair Market
         Value of such Option Stock on the date immediately preceding the
         effective date of such transaction over the option price per share of
         such options; provided that the Board may, in lieu of such cash
         payment, distribute to such Optionees shares of stock of the Company or
         shares of stock of any corporation succeeding the Company by reason of
         such transaction, such shares having a value equal to the cash payment
         herein; or

         (c) the continuance of the Plan with respect to the exercise of options
         which were outstanding as of the date of adoption by the Board of such
         plan for such transaction and provide to Optionees holding such options
         the right to exercise their respective options as to an equivalent
         number of shares of stock of the corporation succeeding the Company by
         reason of such transaction.

The Board may restrict the rights of or the applicability of this Section 13 to
the extent necessary to comply with Section 16(b) of the Securities Exchange Act
of 1934, the Internal Revenue Code or any other applicable law or regulation.
The grant of an option pursuant to the Plan shall not limit in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.

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                                   SECTION 14.

                            SECURITIES LAW COMPLIANCE

         No shares of Common Stock shall be issued pursuant to the Plan unless
and until there has been compliance, in the opinion of Company's counsel, with
all applicable legal requirements, including without limitation, those relating
to securities laws and stock exchange listing requirements. As a condition to
the issuance of Option Stock to Optionee, the Administrator may require Optionee
to (i) represent that the shares of Option Stock are being acquired for
investment and not resale and to make such other representations as the
Administrator shall deem necessary or appropriate to qualify the issuance of the
shares as exempt from the Securities Act of 1933 and any other applicable
securities laws, and (ii) represent that Optionee shall not dispose of the
shares of Option Stock in violation of the Securities Act of 1933 or any other
applicable securities laws.

         As a further condition to the grant of any incentive or nonqualified
stock option or the issuance of Option Stock to Optionee, Optionee agrees to the
following:

         (a) In the event the Company advises Optionee that it plans an
         underwritten public offering of its Common Stock in compliance with the
         Securities Act of 1933, as amended, and the underwriter(s) seek to
         impose restrictions under which certain shareholders may not sell or
         contract to sell or grant any option to buy or otherwise dispose of
         part or all of their stock purchase rights of the underlying Common
         Stock, Optionee will not, for a period not to exceed 180 days from the
         prospectus, sell or contract to sell or grant an option to buy or
         otherwise dispose of any incentive or nonqualified stock option granted
         to Optionee pursuant to the Plan or any of the underlying shares of
         Common Stock without the prior written consent of the underwriter(s) or
         its representative(s).

         (b) In the event the Company makes any public offering of its
         securities and determines in its sole discretion that it is necessary
         to reduce the number of issued but unexercised stock purchase rights so
         as to comply with any states securities or Blue Sky law limitations
         with respect thereto, the Board of Directors of the Company shall have
         the right (i) to accelerate the exercisability of any incentive or
         nonqualified stock option and the date on which such option must be
         exercised, provided that the Company gives Optionee prior written
         notice of such acceleration, and (ii) to cancel any options or portions
         thereof which Optionee does not exercise prior to or contemporaneously
         with such public offering.

         (c) In the event of a transaction (as defined in Section 13 of the
         Plan) which is treated as a "pooling of interests" under generally
         accepted accounting principles, Optionee will comply with Rule 145 of
         the Securities Act of 1933 and any other restrictions imposed under
         other applicable legal or accounting principles if Optionee is an
         "affiliate" (as defined in such applicable legal and accounting
         principles) at the time of the transaction, and Optionee will execute
         any documents necessary to ensure compliance with such rules.

         The Company reserves the right to place a legend on any stock
certificate issued upon exercise of an option granted pursuant to the Plan to
assure compliance with this Section 14.

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                                   SECTION 15.

                             RIGHTS AS A SHAREHOLDER

         An Optionee (or the Optionee's successor or successors) shall have no
rights as a shareholder with respect to any shares covered by an option until
the date of the issuance of a stock certificate evidencing such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 13 of the Plan).


                                   SECTION 16.

                              AMENDMENT OF THE PLAN

         The Board may from time to time, insofar as permitted by law, suspend
or discontinue the Plan or revise or amend it in any respect; provided, however,
that no such revision or amendment, except as is authorized in Section 13, shall
impair the terms and conditions of any option which is outstanding on the date
of such revision or amendment to the material detriment of the Optionee without
the consent of the Optionee. Notwithstanding the foregoing, no such revision or
amendment shall (i) materially increase the number of shares subject to the Plan
except as provided in Section 13 hereof, (ii) change the designation of the
class of employees eligible to receive options, (iii) decrease the price at
which options may be granted, or (iv) materially increase the benefits accruing
to Optionees under the Plan without the approval of the shareholders of the
Company if such approval is required for compliance with the requirements of any
applicable law or regulation. Furthermore, the Plan may not, without the
approval of the shareholders, be amended in any manner that will cause incentive
stock options to fail to meet the requirements of Section 422 of the Internal
Revenue Code.


                                   SECTION 17.

                        NO OBLIGATION TO EXERCISE OPTION

         The granting of an option shall impose no obligation upon the Optionee
to exercise such option. Further, the granting of an option hereunder shall not
impose upon the Company or any Subsidiary any obligation to retain the Optionee
in its employ for any period

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                        INCENTIVE STOCK OPTION AGREEMENT

                                  QUANTECH LTD.
                             1998 STOCK OPTION PLAN

         THIS AGREEMENT, made effective as of this _________ day of __________,
by and between Quantech Ltd., a Minnesota corporation (the "Company"), and
_________ ("Optionee").

                              W I T N E S S E T H:

         WHEREAS, Optionee on the date hereof is a key employee or officer of
the Company or one of its Subsidiaries; and

         WHEREAS, the Company wishes to grant an incentive stock option to
Optionee to purchase shares of the Company's Common Stock pursuant to the
Company's 1998 Stock Option Plan (the "Plan"); and

         WHEREAS, the Administrator of the Plan has authorized the grant of an
incentive stock option to Optionee and has determined that, as of the effective
date of this Agreement, the fair market value of the Company's Common Stock is
$_____ per share;

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

         1. Grant of Option. The Company hereby grants to Optionee on the date
set forth above (the "Date of Grant"), the right and option (the "Option") to
purchase all or portions of an aggregate of __________________ shares of Common
Stock at a per share price of $_______ on the terms and conditions set forth
herein, and subject to adjustment pursuant to Section 12 of the Plan. Except as
otherwise provided in Paragraphs 2(b) and 2(c), this Option is intended to be an
incentive stock option within the meaning of Section 422, or any successor
provision, of the Internal Revenue Code of 1986, as amended (the "Code"), and
the regulations thereunder.

         2.  Duration and Exercisability.

         a. The term during which this Option may be exercised shall terminate
on ___________________, except as otherwise provided in Paragraphs 2(b) through
2(e) below. This Option shall become exercisable according to the following
schedule:

                  Vesting Date                       Percentage/Number of Shares
                  _____________                            _________
                  _____________                            _________
                  _____________                            _________

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Once the Option becomes exercisable to the extent of one hundred percent (100%)
of the aggregate number of shares specified in Paragraph 1, Optionee may
continue to exercise this Option under the terms and conditions of this
Agreement until the termination of the Option as provided herein. If Optionee
does not purchase upon an exercise of this Option the full number of shares
which Optionee is then entitled to purchase, Optionee may purchase upon any
subsequent exercise prior to this Option's termination such previously
unpurchased shares in addition to those Optionee is otherwise entitled to
purchase.

b. Termination of Employment (other than Change of Control, Disability or
Death). If Optionee's employment with the Company or any Subsidiary is
terminated for any reason other than because of a "change of control
transaction" as described in Paragraph 2(c) or because of disability or death,
this Option shall completely terminate on the earlier of (i) the close of
business on the three-month anniversary date of such termination of employment,
and (ii) the expiration date of this Option stated in Paragraph 2 above.
Notwithstanding the foregoing, if, upon such termination of employment, Optionee
continues to serve as a consultant, advisor or nonemployee director of the
Company or Subsidiary, this Option shall terminate on the earlier of (i) the
close of business on the three-month anniversary date of the termination of all
of Optionee's relationships with the Company or Subsidiary, and (ii) the
expiration date of this Option stated in Paragraph 2(a) above, and the Option
shall not, upon Optionee's termination of employment, be treated as an incentive
stock option within the meaning of Code Section 422.

         In such period following the termination of Optionee's employment or,
if applicable, such other relationship, this Option shall be exercisable only to
the extent the Option was exercisable on the vesting date immediately preceding
such termination of employment or such other relationship, but had not
previously been exercised. To the extent this Option was not exercisable upon
such termination of employment or such other relationship, or if Optionee does
not exercise the Option within the time specified in this Paragraph 2(b), all
rights of Optionee under this Option shall be forfeited.

         c. Change of Control. If (i) Optionee's employment with the Company or
any Subsidiary is terminated because of a "change of control transaction," (ii)
such transaction is treated as a "pooling of interests" under generally accepted
accounting principles, and (iii) Optionee is an "affiliate" of the Company or
Subsidiary under applicable legal and accounting principles, this Option shall
completely terminate on the later of (A) the close of business on the
three-month anniversary date of such termination of employment or (B) the close
of business on the date that is sixty (60) days after the date on which
affiliates are no longer restricted from selling, transferring or otherwise
disposing of the shares of stock received in the change of control transaction.
Notwithstanding the foregoing, if, upon such termination of employment, Optionee
continues to serve as a consultant, advisor or nonemployee director of the
Company or Subsidiary, this Option shall terminate on the later of (X) the close
of business on the three-month anniversary date of the termination of all of
Optionee's relationships with the Company or Subsidiary, and (Y) the close of
business on the date that is sixty (60) days after the date on which affiliates
are no longer restricted from selling, transferring or otherwise disposing of
the shares of stock received in the change of control transaction, and this
Option shall not, upon Optionee's termination of employment, be treated as an
incentive stock option within the meaning of Code Section 422.

                                       2
<PAGE>

         In such period following the termination of Optionee's employment or,
if applicable, such other relationship, this Option shall be exercisable only to
the extent the Option was exercisable on the vesting date immediately preceding
such termination of employment or such other relationship, but had not
previously been exercised, unless the exercisability of this Option has been
accelerated as provided in Section 12 of the Plan. To the extent this Option was
not exercisable upon such termination of employment or such other relationship,
or if Optionee does not exercise the Option within the time specified in this
Paragraph 2(c), all rights of Optionee under this Option shall be forfeited. If
Optionee exercises this Option on a date that is after the three-month
anniversary of the termination of Optionee's employment or on a date that is
more than ten years (or five years, if applicable) after the Date of Grant, this
Option shall not be treated as an incentive stock option within the meaning of
Code Section 422.

         For purposes of this Paragraph 2(c), a "change of control transaction"
means an acquisition of the Company through the sale of substantially all of the
Company's assets and the consequent discontinuance of its business or through a
merger, consolidation, exchange, reorganization, reclassification, extraordinary
dividend, divestiture (including a spin-off) or liquidation of the Company.

         d. Disability. If Optionee ceases to be an employee of the Company or
any Subsidiary due to disability (as such term is defined in Code Section
22(e)(3), or any successor provision), this Option shall completely terminate on
the earlier of (i) the close of business on the twelve-month anniversary date of
such termination of employment, and (ii) the expiration date under this Option
stated in Paragraph 2(a) above. In such period following such termination of
employment, this Option shall be exercisable only to the extent the Option was
exercisable on the vesting date immediately preceding the date of Optionee's
termination of employment. If Optionee does not exercise the Option within the
time specified in this Paragraph 2(d), all rights of Optionee under this Option
shall be forfeited.

         e. Death. In the event of Optionee's death, this Option shall terminate
on the expiration date of this Option stated in Paragraph 2(a) above. In such
period following Optionee's death, this Option shall be exercisable by the
person or persons to whom Optionee's rights under this Option shall have passed
by Optionee's will or by the laws of descent and distribution only to the extent
the Option was exercisable on the vesting date immediately preceding the date of
Optionee's death. If such person or persons do not exercise this Option within
the time specified in this Paragraph 2(e), all rights under this Option shall be
forfeited.

         3.   Manner of Exercise.

         a. General. The Option may be exercised only by Optionee (or other
proper party in the event of death or incapacity), subject to the conditions of
the Plan and subject to such other administrative rules as the Administrator may
deem advisable, by delivering within the Option Period written notice of
exercise to the Company at its principal office. The notice shall state the
number of shares as to which the Option is being exercised and shall be
accompanied by payment in full of the Option price for all shares designated in

                                       3
<PAGE>

the notice. The exercise of the Option shall be deemed effective upon receipt of
such notice by the Company and upon payment that complies with the terms of the
Plan and this Agreement. The Option may be exercised with respect to any number
or all of the shares as to which it can then be exercised and, if partially
exercised, may be so exercised as to the unexercised shares any number of times
during the Option period as provided herein.

         b. Form of Payment. Subject to approval by the Administrator, payment
of the Option price by Optionee shall be in the form of cash, personal check,
certified check or previously acquired shares of Common Stock of the Company, or
any combination thereof. Any stock so tendered as part of such payment shall be
valued at its Fair Market Value as provided in the Plan. For purposes of this
Agreement, "previously acquired shares of Common Stock" shall include shares of
Common Stock that are already owned by Optionee at the time of exercise.

         c. Stock Transfer Records. As soon as practicable after the effective
exercise of all or any part of the Option, Optionee shall be recorded on the
stock transfer books of the Company as the owner of the shares purchased, and
the Company shall deliver to Optionee one or more duly issued stock certificates
evidencing such ownership. All requisite original issue or transfer documentary
stamp taxes shall be paid by the Company.

         4.  Miscellaneous.

         a. Employment; Rights as Shareholder. This Agreement shall not confer
on Optionee any right with respect to continuance of employment by the Company
or any of its Subsidiaries, nor will it interfere in any way with the right of
the Company to terminate such employment. Optionee shall have no rights as a
shareholder with respect to shares subject to this Option until such shares have
been issued to Optionee upon exercise of this Option. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is
prior to the date such shares are issued, except as provided in Section 12 of
the Plan.

         b. Securities Law Compliance. The exercise of all or any parts of this
Option shall only be effective at such time as counsel to the Company shall have
determined that the issuance and delivery of Common Stock pursuant to such
exercise will not violate any state or federal securities or other laws.
Optionee may be required by the Company, as a condition of the effectiveness of
any exercise of this Option, to agree in writing that all Common Stock to be
acquired pursuant to such exercise shall be held, until such time that such
Common Stock is registered and freely tradable under applicable state and
federal securities laws, for Optionee's own account without a view to any
further distribution thereof, that the certificates for such shares shall bear
an appropriate legend to that effect and that such shares will be not
transferred or disposed of except in compliance with applicable state and
federal securities laws.

         c. Mergers, Recapitalizations, Stock Splits, Etc. Pursuant and subject
to Section 12 of the Plan, certain changes in the number or character of the
Common Stock of the Company (through sale, merger, consolidation, exchange,
reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Optionee's rights with
respect to any unexercised portion of the Option (i.e., Optionee shall have such
"anti-dilution" rights under the Option with respect to such events, but shall
not have "preemptive" rights).

                                       4

<PAGE>

         d. Shares Reserved. The Company shall at all times during the option
period reserve and keep available such number of shares as will be sufficient to
satisfy the requirements of this Agreement.

         e. Withholding Taxes on Disqualifying Disposition. In the event of a
disqualifying disposition of the shares acquired through the exercise of this
Option, Optionee hereby agrees to inform the Company of such disposition. Upon
notice of a disqualifying disposition, the Company may take such action as it
deems appropriate to insure that, if necessary to comply with all applicable
federal or state income tax laws or regulations, all applicable federal and
state payroll, income or other taxes are withheld from any amounts payable by
the Company to Optionee. If the Company is unable to withhold such federal and
state taxes, for whatever reason, Optionee hereby agrees to pay to the Company
an amount equal to the amount the Company would otherwise be required to
withhold under federal or state law. Optionee may, subject to the approval and
discretion of the Administrator or such administrative rules it may deem
advisable, elect to have all or a portion of such tax withholding obligations
satisfied by delivering shares of the Company's Common Stock having a fair
market value equal to such obligations.

         f. Nontransferability. During the lifetime of Optionee, the accrued
Option shall be exercisable only by Optionee or by the Optionee's guardian or
other legal representative, and shall not be assignable or transferable by
Optionee, in whole or in part, other than by will or by the laws of descent and
distribution.

         g. 1998 Stock Option Plan. The Option evidenced by this Agreement is
granted pursuant to the Plan, a copy of which Plan has been made available to
Optionee and is hereby incorporated into this Agreement. This Agreement is
subject to and in all respects limited and conditioned as provided in the Plan.
The Plan governs this Option and, in the event of any questions as to the
construction of this Agreement or in the event of a conflict between the Plan
and this Agreement, the Plan shall govern, except as the Plan otherwise
provides.

         h. Lockup Period Limitation. Optionee agrees that in the event the
Company advises Optionee that it plans an underwritten public offering of its
Common Stock in compliance with the Securities Act of 1933, as amended, and that
the underwriter(s) seek to impose restrictions under which certain shareholders
may not sell or contract to sell or grant any option to buy or otherwise dispose
of part or all of their stock purchase rights of the underlying Common Stock,
Optionee hereby agrees that for a period not to exceed 180 days from the
prospectus, Optionee will not sell or contract to sell or grant an option to buy
or otherwise dispose of this option or any of the underlying shares of Common
Stock without the prior written consent of the underwriter(s) or its
representative(s).

         i. Blue Sky Limitation. Notwithstanding anything in this Agreement to
the contrary, in the event the Company makes any public offering of its
securities and determines in its sole discretion that it is necessary to reduce
the number of issued but unexercised stock purchase rights so as to comply with
any state securities or Blue Sky law limitations with respect thereto, the Board
of Directors of the Company shall have the right (i) to accelerate the
exercisability of this Option and the date on which this Option must be
exercised, provided that the Company gives Optionee 15 days' prior written

                                       5

<PAGE>

notice of such acceleration, and (ii) to cancel any portion of this Option or
any other option granted to Optionee pursuant to the Plan which is not exercised
prior to or contemporaneously with such public offering. Notice shall be deemed
given when delivered personally or when deposited in the United States mail,
first class postage prepaid and addressed to Optionee at the address of Optionee
on file with the Company.

         j. Accounting Compliance. Optionee agrees that, in the event a "change
of control transaction" (as defined in Paragraph 4(g) above) is treated as a
"pooling of interests" under generally accepted accounting principles and
Optionee is an "affiliate" of the Company or any Subsidiary (as defined in
applicable legal and accounting principles) at the time of such change of
control transaction, Optionee will comply with all requirements of Rule 145 of
the Securities Act of 1933, as amended, and the requirements of such other legal
or accounting principles, and will execute any documents necessary to ensure
such compliance.

         k. Stock Legend. The certificates for any shares of Common Stock
purchased by Optionee (or, in the case of death, Optionee's successors) shall
bear an appropriate legend to reflect the restrictions of Paragraphs 4(b), 4(h),
4(i) and 4(j) of this Agreement.

         l. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and Optionee and any
successor or successors of Optionee permitted by Paragraph 4(f) above.

         m. Arbitration. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of any
such controversy. If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an attorney
who has practiced securities or business litigation for at least 10 years. If
the parties cannot agree on an arbitrator within 20 days, any party may request
that the chief judge of the District Court for Hennepin County, Minnesota,
select an arbitrator. Arbitration will be conducted pursuant to the provisions
of this Agreement, and the commercial arbitration rules of the American
Arbitration Association, unless such rules are inconsistent with the provisions
of this Agreement. Limited civil discovery shall be permitted for the production
of documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator's fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys' fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Hennepin
County, Minnesota.

                                       6
<PAGE>


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.


                                             QUANTECH LTD.


                                             ________________________________
                                             Gregory G. Freitag, COO


                                             ________________________________
                                             _________



                                       7

<PAGE>


                       NONQUALIFIED STOCK OPTION AGREEMENT

                                  QUANTECH LTD.
                             1998 STOCK OPTION PLAN


         THIS AGREEMENT, made effective as of this day of _________, 19__, by
and between Quantech Ltd., a Minnesota corporation (the "Company"), and
_________________ ("Optionee").

                              W I T N E S S E T H:

         WHEREAS, Optionee on the date hereof is a key employee, officer,
consultant, nonemployee director or advisor of the Company or one of its
Subsidiaries; and

         WHEREAS, the Company wishes to grant a nonqualified stock option to
Optionee to purchase shares of the Company's Common Stock pursuant to the
Company's 1998 Stock Option Plan (the "Plan"); and

         WHEREAS, the Administrator has authorized the grant of a nonqualified
stock option to Optionee and has determined that, as of the effective date of
this Agreement, the fair market value of the Company's Common Stock is
$_________ per share;

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

         1. Grant of Option. The Company hereby grants to Optionee on the date
set forth above (the "Date of Grant"), subject to shareholders of the Company
approving an increase in the number of shares available under the Plan, the
right and option (the "Option") to purchase all or portions of an aggregate of
______________ shares of Common Stock at a per share price of $__________ on the
terms and conditions set forth herein, and subject to adjustment pursuant to
Section 12 of the Plan. This Option is a nonqualified stock option and will not
be treated as an incentive stock option, as defined under Section 422, or any
successor provision, of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations thereunder.

         2.  Duration and Exercisability.

         a. The term during which this Option may be exercised shall terminate
on ____________, except as otherwise provided in Paragraphs 2(b) through 2(e)
below. This Option shall become exercisable according to the following schedule:

                  Vesting Date                         Number of Shares
                  _____________                            _________
                  _____________                            _________
                  _____________                            _________


                                       1
<PAGE>

Once the Option becomes exercisable to the extent of one hundred percent (100%)
of the aggregate number of shares specified in Paragraph 1, Optionee may
continue to exercise this Option under the terms and conditions of this
Agreement until the termination of the Option as provided herein. If Optionee
does not purchase upon an exercise of this Option the full number of shares
which Optionee is then entitled to purchase, Optionee may purchase upon any
subsequent exercise prior to this Option's termination such previously
unpurchased shares in addition to those Optionee is otherwise entitled to
purchase.

         b. Termination of Relationship (other than Change of Control,
Disability or Death). If Optionee ceases to be an employee, consultant,
nonemployee director or an advisor of the Company or any Subsidiary for any
reason other than because of a "change of control transaction" as described in
Paragraph 2(c) or because of disability or death, this Option shall completely
terminate on the expiration date of this Option as stated in paragraph 2(a). In
such period following the termination of Optionee's relationship with the
Company, this Option shall be exercisable only to the extent the Option was
exercisable on the vesting date immediately preceding such termination of
relationship, but had not been previously exercised.

         c. Change of Control. If Optionee ceases to be an employee, consultant,
nonemployee director or advisor of the Company or any Subsidiary because of a
"change of control transaction", this Option shall terminate on the expiration
date of this Option as stated in paragraph 2(a) above.

         For purposes of this Paragraph 2(c), a "change of control transaction"
means an acquisition of the Company through the sale of substantially all of the
Company's assets and the consequent discontinuance of its business or through a
merger, consolidation, exchange, reorganization, reclassification, extraordinary
dividend, divestiture or liquidation of the Company.

         d. Disability. If Optionee ceases to be an employee, consultant,
nonemployee director or advisor of the Company or any Subsidiary because of
disability (as such term is defined in Code Section 22(e)(3), or any successor
provision), this Option shall completely terminate on the earlier of (i) the
close of business on the three-month anniversary date of the termination of all
such relationships, and (ii) the expiration date under this Option stated in
Paragraph 2(a) above. In such period following such termination, this Option
shall be exercisable only to the extent the Option was exercisable on the
vesting date immediately preceding the termination of all of Optionee's
relationships. If Optionee does not exercise the Option within the time
specified in this Paragraph 2(d), all rights of Optionee under this Option shall
be forfeited.

         e. Death. In the event of Optionee's death, this Option shall terminate
on the earlier of (i) the close of business on the three-month anniversary date
of the date of Optionee's death, and (ii) the expiration date of this Option
stated in Paragraph 2(a) above. In such period following Optionee's death, this
Option may be exercised by the person or persons to whom Optionee's rights under
this Option shall have passed by Optionee's will or by the laws of descent and
distribution only to the extent the Option was exercisable on the vesting date
immediately preceding the date of Optionee's death. If such person or persons
fail to exercise this Option within the time specified in this Paragraph 2(e),
all rights under this Option shall be forfeited.

                                       2

<PAGE>

         3.   Manner of Exercise.

         a. General. The Option may be exercised only by Optionee (or other
proper party in the event of death or incapacity), subject to the conditions of
the Plan and subject to such other administrative rules as the Administrator may
deem advisable, by delivering within the option period written notice of
exercise to the Company at its principal office. The notice shall state the
number of shares as to which the Option is being exercised and shall be
accompanied by payment in full of the option price for all shares designated in
the notice. The exercise of the Option shall be deemed effective upon receipt of
such notice by the Company and upon payment that complies with the terms of the
Plan and this Agreement. The Option may be exercised with respect to any number
or all of the shares as to which it can then be exercised and, if partially
exercised, may be exercised as to the unexercised shares any number of times
during the option period as provided herein.

         b. Form of Payment. Subject to the approval of the Administrator,
payment of the option price by Optionee shall be in the form of cash, personal
check, certified check or previously acquired shares of Common Stock of the
Company, or any combination thereof. Any stock so tendered as part of such
payment shall be valued at its Fair Market Value as provided in the Plan. For
purposes of this Agreement, "previously acquired shares of Common Stock" shall
include shares of Common Stock that are already owned by Optionee at the time of
exercise.

         c. Stock Transfer Records. As soon as practicable after the effective
exercise of all or any part of the Option, Optionee shall be recorded on the
stock transfer books of the Company as the owner of the shares purchased, and
the Company shall deliver to Optionee one or more duly issued stock certificates
evidencing such ownership. All requisite original issue or transfer documentary
stamp taxes shall be paid by the Company.

         4.  Miscellaneous.

         a. Rights as Shareholder. This Agreement shall not confer on Optionee
any right with respect to the continuance of any relationship with the Company
or any of its Subsidiaries, nor will it interfere in any way with the right of
the Company to terminate any such relationship. Optionee shall have no rights as
a shareholder with respect to shares subject to this Option until such shares
have been issued to Optionee upon exercise of this Option. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date is
prior to the date such shares are issued, except as provided in Section 12 of
the Plan.

         b. Securities Law Compliance. The exercise of all or any parts of this
Option shall only be effective at such time as counsel to the Company shall have
determined that the issuance and delivery of Common Stock pursuant to such
exercise will not violate any state or federal securities or other laws.
Optionee may be required by the Company, as a condition of the effectiveness of
any exercise of this Option, to agree in writing that all Common Stock to be
acquired pursuant to such exercise shall be held, until such time that such
Common Stock is registered and freely tradable under applicable state and
federal securities laws, for Optionee's own account without a view to any

                                       3

<PAGE>

further distribution thereof and that such shares will be not transferred or
disposed of except in compliance with applicable state and federal securities
laws.

         c. Mergers, Recapitalizations, Stock Splits, Etc. Pursuant and subject
to Section 12 of the Plan, certain changes in the number or character of the
Common Stock of the Company (through sale, merger, consolidation, exchange,
reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Optionee's rights with
respect to any unexercised portion of the Option (i.e., Optionee shall have such
"anti-dilution" rights under the Option with respect to such events, but shall
not have "preemptive" rights).

         d. Shares Reserved. The Company shall at all times during the option
period reserve and keep available such number of shares as will be sufficient to
satisfy the requirements of this Agreement.

         e. Withholding Taxes. In order to permit the Company to comply with all
applicable federal or state income tax laws or regulations, the Company may take
such action as it deems appropriate to insure that, if necessary, all applicable
federal or state payroll, income or other taxes are withheld from any amounts
payable by the Company to Optionee. If the Company is unable to withhold such
federal and state taxes, for whatever reason, Optionee hereby agrees to pay to
the Company an amount equal to the amount the Company would otherwise be
required to withhold under federal or state law. Optionee may, subject to the
approval and discretion of the Administrator or such administrative rules it may
deem advisable, elect to have all or a portion of such tax withholding
obligations satisfied by delivering shares of the Company's Common Stock having
a fair market value equal to such obligations.

         f. Transferability of Options. Optionee may, for no consideration,
transfer this Option to a member of Optionee's immediate family, to a trust for
the benefit of Optionee's immediately family member(s) or to a partnership in
which such family member(s) are the only partners. The family member to whom, or
the trust or partnership to which, this Option has been transferred shall be
subject to all terms and conditions set forth herein, and shall not subsequently
assign or transfer this Option, either voluntarily or involuntarily, unless such
transfer is to another family member, trust or partnership which meets the
requirements of this Paragraph 4(f). If Optionee does not transfer this Option
to such a family member, trust or partnership, this Option shall be exercisable
only by Optionee or by Optionee's guardian or other legal representative and,
upon Optionee's death, shall be exercisable by the person or persons to whom
Optionee's rights under this Option have passed by will or by the laws of
descent and distribution.

         g. 1998 Stock Option Plan. The Option evidenced by this Agreement is
granted pursuant to the Plan, a copy of which Plan has been made available to
Optionee and is hereby incorporated into this Agreement. This Agreement is
subject to and in all respects limited and conditioned as provided in the Plan.
The Plan governs this Option and, in the event of any questions as to the
construction of this Agreement or in the event of a conflict between the Plan
and this Agreement, the Plan shall govern, except as the Plan otherwise
provides.

                                       4
<PAGE>

         h. Lockup Period Limitation. Optionee agrees that in the event the
Company advises Optionee that it plans an underwritten public offering of its
Common Stock in compliance with the Securities Act of 1933, as amended, and that
the underwriter(s) seek to impose restrictions under which certain shareholders
may not sell or contract to sell or grant any option to buy or otherwise dispose
of part or all of their stock purchase rights of the underlying Common Stock,
Optionee hereby agrees that for a period not to exceed 180 days from the
prospectus, Optionee will not sell or contract to sell or grant an option to buy
or otherwise dispose of this option or any of the underlying shares of Common
Stock without the prior written consent of the underwriter(s) or its
representative(s).

         i. Blue Sky Limitation. Notwithstanding anything in this Agreement to
the contrary, in the event the Company makes any public offering of its
securities and determines in its sole discretion that it is necessary to reduce
the number of issued but unexercised stock purchase rights so as to comply with
any state securities or Blue Sky law limitations with respect thereto, the Board
of Directors of the Company shall have the right (i) to accelerate the
exercisability of this Option and the date on which this Option must be
exercised, provided that the Company gives Optionee 15 days' prior written
notice of such acceleration, and (ii) to cancel any portion of this Option or
any other option granted to Optionee pursuant to the Plan which is not exercised
prior to or contemporaneously with such public offering. Notice shall be deemed
given when delivered personally or when deposited in the United States mail,
first class postage prepaid and addressed to Optionee at the address of Optionee
on file with the Company.

         j. Accounting Compliance. Optionee agrees that, in the event a "change
of control transaction" (as defined in Paragraph 4(g) above) is treated as a
"pooling of interests" under generally accepted accounting principles and
Optionee is an "affiliate" of the Company or any Subsidiary (as defined in
applicable legal and accounting principles) at the time of such change of
control transaction, Optionee will comply with all requirements of Rule 145 of
the Securities Act of 1933, as amended, and the requirements of such other legal
or accounting principles, and will execute any documents necessary to ensure
such compliance.

         k. Stock Legend. The certificates for any shares of Common Stock
purchased by Optionee (or, in the case of death, Optionee's successors) shall
bear an appropriate legend to reflect the restrictions of Paragraph 4(b), 4(h),
4(i) and 4(j) of this Agreement.

         l. Scope of Agreement. This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and Optionee and any
successor or successors of Optionee permitted by Paragraph 2(b) above.

         m. Arbitration. Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of any
such controversy. If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an attorney
who has practiced securities or business litigation for at least 10 years. If
the parties cannot agree on an arbitrator within 20 days, any party may request
that the chief judge of the District Court for Hennepin County, Minnesota,
select an arbitrator. Arbitration will be conducted pursuant to the provisions

                                       5

<PAGE>

of this Agreement, and the commercial arbitration rules of the American
Arbitration Association, unless such rules are inconsistent with the provisions
of this Agreement. Limited civil discovery shall be permitted for the production
of documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator's fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys' fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Hennepin
County, Minnesota.

                                       6
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Nonqualified
Stock Option Agreement to be executed on the day and year first above written.

                                        "Company"

                                        QUANTECH LTD.


                                        ____________________________________
                                        Gregory G. Freitag, COO


                                        "Optionee"

                                        ____________________________________
                                        ______________


                                       7