Document:

<PAGE>

                                                                     EXHIBIT 4.1

                               [TheraSense LOGO]

                                    SHARES

                             --------------------
                                   TS NUMBER

                        INCORPORATED UNDER THE LAWS OF
                             THE STATE OF DELAWARE

                                 COMMON STOCK

                             --------------------
                                    SHARES

                                SEE REVERSE FOR
                              CERTAIN DEFINITIONS

                               CUSIP 883381 10 5

This certificate is transferable in The Cities of Chicago, IL and New York, New
York

THIS CERTIFIES THAT

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

IS THE RECORD HOLDER OF

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

<PAGE>

           FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
                        $0.001 PAR VALUE PER SHARE, OF

                               THERASENSE, INC.

transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and Registrar.

      Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

                            [CERTIFICATE OF STOCK]

Dated:
       ---------------

                                    [SEAL]

/s/  KAREN A. DEMPSEY                                    /s/  W. MARK LORTZ
------------------------                                 -----------------------
CORPORATE SECRETARY                                      CHAIRMAN, PRESIDENT AND
                                                         CHIEF EXECUTIVE OFFICER

                               THERASENSE, INC.

THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS
THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE PARTICIPATING, OPTIONAL OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
SUCH REQUEST MUST BE MADE TO THE CORPORATION'S SECRETARY AT THE PRINCIPAL
EXECUTIVE OFFICE OF THE CORPORATION.

Keep this certificate in a safe place. If it is lost, stolen or destroyed, the
Corporation will require a bond of indemnity as a condition to the issuance of a
replacement certificate.

     The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

                                       UNIF GIFT MIN ACT:_______Custodian_______
                                                          (Cust)         (Minor)

                                               under Uniform Gifts to Minors
                                               Act______________________________
                                                          (State)

TEN COM - as tenants in common         UNIF TRANS MIN ACT:______Custodian_______
TEN ENT - as tenants by the entireties                    (Cust)         (Minor)
 JT TEN - as joint tenants with
          right of survivorship and            under Uniform Transfers to Minors
          not as tenants in common             Act______________________________
                                                          (State)

     Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, _____________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
  IDENTIFYING NUMBER OF ASSIGNEE

________________________________________________________________________________

________________________________________________________________________________
 (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

________________________________________________________________________________

<PAGE>

________________________________________________________________________________

__________________________________________________________________________Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint_________________________________________________________________Attorney
to transfer the said shares on the books of the within named corporation with
full power of substitution in the premises.

Dated
     __________________________

                                  X
                                  ______________________________________________

                                  X
                                  ______________________________________________
                                  NOTICE:  THE SIGNATURE TO THIS ASSIGNMENT
                                  MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
                                  THE FACE OF THE CERTIFICATE IN EVERY
                                  PARTICULAR, WITHOUT ALTERATION OR
                                  ENLARGEMENT, OR ANY CHANGE WHATEVER.

In presence of

__________________________________

__________________________________

SIGNATURE (S) GUARANTEED

By:

__________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

================================================================================<PAGE>

                                                                    EXHIBIT 10.1

                               THERASENSE, INC.

                                1997 STOCK PLAN

     1.  Purposes of the Plan.  The purposes of this Stock Option Plan are to
         --------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business.  Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant.

     2.  Definitions.  As used herein, the following definitions shall apply:
         -----------

          (a) "Administrator" means the Board or any of its Committees as shall
               -------------
be administering the Plan, in accordance with Section 4 hereof.

          (b) "Applicable Laws" means the requirements relating to the
               ---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are granted under the Plan.

          (c) "Board" means the Board of Directors of the Company.
               -----

          (d) "Code" means the Internal Revenue Code of 1986, as amended.
               ----

          (e) "Committee"  means a committee of Directors appointed by the Board
               ---------
in accordance with Section 4 hereof.

          (f) "Common Stock" means the Common Stock of the Company.
               ------------

          (g) "Company" means Therasense, Inc., a Delaware corporation.
               -------

          (h) "Consultant" means any person who is engaged by the Company or any
               ----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services.

          (i) "Director" means a member of the Board of Directors of the
               --------
Company.

          (j) "Employee" means any person, including Officers and Directors,
               --------
employed by the Company or any Parent or Subsidiary of the Company.  A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract.  If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st
<PAGE>

day of such leave any Incentive Stock Option held by the Optionee shall cease to
be treated as an Incentive Stock Option and shall be treated for tax purposes as
a Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.

          (k) "Exchange Act" means the Securities Exchange Act of 1934, as
               ------------
amended.

          (l) "Fair Market Value" means, as of any date, the value of Common
               -----------------
Stock determined as follows:

              (i)    If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

              (ii)   If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;

              (iii)  In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (m) "Incentive Stock Option" means an Option intended to qualify as an
               ----------------------
incentive stock option within the meaning of Section 422 of the Code.

          (n) "Nonstatutory Stock Option" means an Option not intended to
               -------------------------
qualify as an Incentive Stock Option.

          (o) "Officer" means a person who is an officer of the Company within
               -------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

          (p) "Option" means a stock option granted pursuant to the Plan.
               ------

          (q) "Option Agreement" means an agreement between the Company and an
               ----------------
Optionee evidencing the terms and conditions of an individual Option grant.  The
Option Agreement is subject to the terms and conditions of the Plan.

          (r) "Option Exchange Program" means a program whereby outstanding
               -----------------------
Options are exchanged for Options with a lower exercise price.

          (s) "Optioned Stock" means the Common Stock subject to an Option.
               --------------

                                      A-2
<PAGE>

          (t) "Optionee" means the holder of an outstanding Option granted under
               --------
the Plan.

          (u) "Parent" means a "parent corporation," whether now or hereafter
               ------
existing, as defined in Section 424(e) of the Code.

          (v) "Plan" means this 1997 Stock Option Plan.
               ----

          (w) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
               -------------
of 1934, as amended.

          (x) "Service Provider" means an Employee, Director or Consultant.
               ----------------

          (y) "Share" means a share of the Common Stock, as adjusted in
               -----
accordance with Section 11 below.

          (z) "Subsidiary" means a "subsidiary corporation," whether now or
               ----------
hereafter existing, as defined in Section 424(f) of the Code.

     3.  Stock Subject to the Plan.  Subject to the provisions of Section 11 of
         -------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 7,607,032 Shares.  The Shares may be authorized, but unissued,
or reacquired Common Stock.

          If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
                                                               --------
however, that Shares that have actually been issued under the Plan shall not be
-------
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.

     4.  Administration of the Plan.
         --------------------------

          (a) Procedure.  The Plan shall be administered by the Board or a
              ---------
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable laws.

          (b) Powers of the Administrator.  Subject to the provisions of the
              ---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:

              (i)     to determine the Fair Market Value;

              (ii)    to select the Service Providers to whom Options may from
time to time be granted hereunder;

                                      A-3
<PAGE>

              (iii)   to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

              (iv)    to approve forms of agreement for use under the Plan;

              (v)     to determine the terms and conditions of any option
granted hereunder;

              (vi)    to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;

              (vii)   to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;

              (viii)  to institute an Option Exchange Program;

              (ix)    to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

              (x)     to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and

              (ix)    to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.

          (c) Effect of Administrator's Decision.  All decisions, determinations
              ----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.

     5.   Eligibility.
          -----------

          (a) Nonstatutory Stock Options may be granted to Service Providers.
Incentive Stock Options may be granted only to Employees.

          (b) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option.  However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year

                                      A-4
<PAGE>

(under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,
such Options shall be treated as Nonstatutory Stock Options. For purposes of
this Section 5(b), Incentive Stock Options shall be taken into account in the
order in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

          (c) The Plan shall not confer upon any Optionee any right with respect
to continuing the Optionee's relationship as a Service Provider with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate such relationship at any time, with or without
cause.

     6.  Term of Plan.  The Plan shall become effective upon its adoption by the
         ------------
Board.  It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 13 of the Plan.

     7.  Term of Option.  The term of each Option shall be stated in the Option
         --------------
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof.  In the case of an Incentive Stock Option
granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant or such shorter term as may be provided
in the Option Agreement.

     8.  Option Exercise Price and Consideration.
         ---------------------------------------

          (a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:

              (i)   In the case of an Incentive Stock Option

                    (A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.

                    (B) granted to any Employee other than an Employee described
in the preceding subparagraph, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.

              (ii)  In the case of a Nonstatutory Stock Option

                    (A) granted to a Service Provider who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of the grant.

                                      A-5
<PAGE>

                    (B) granted to any Service Provider other than a Service
Provider described in the preceding subparagraph, the exercise price shall be no
less than 85% of the Fair Market Value per Share on the date of grant.

              (iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price of less than 100% of Fair Market Value on the date of
grant pursuant to a merger or other corporate transaction.

          (b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) consideration received by the Company
under a formal cashless exercise program adopted by the Company in connection
with the Plan, or (6) any combination of the foregoing methods of payment.  In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.

     9.  Exercise of Option.
         ------------------

          (a) Procedure for Exercise; Rights as a Stockholder. Any Option
              -----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement, but in no case at a rate of less than 20% per
year over five (5) years from the date of grant.  An Option may not be exercised
for a fraction of a Share.

              An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised.  Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan.  Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option.  The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised.  No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 11 of the Plan.

                                      A-6
<PAGE>

              Exercise of an Option in any manner shall result in a decrease in
the number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

          (b) Termination of Relationship as a Service Provider.  If an Optionee
              -------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time (of at least thirty (30) days) as is specified in the Option Agreement to
the extent that the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement).  In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for three (3) months following the Optionee's
termination.  If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan.  If, after termination, the Optionee does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

          (c) Disability of Optionee.  If an Optionee ceases to be a Service
              ----------------------
Provider as a result of the Optionee's disability, the Optionee may exercise an
Option to the extent the Option is vested on the date of termination, but only
within twelve (12) months from the date of such termination (and in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement).  If such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall automatically cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option on the day three months and one day following such termination.
If, on the date of termination, the Optionee is not vested as to the entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan.  If, after termination, the Option is not exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

          (d) Death of Optionee.  If an Optionee dies while a Service Provider,
              -----------------
the Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant) to the extent vested on the date of
death.  If, at the time of death, the Optionee is not vested as to the entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan.  The Option may be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to exercise the Option
under the Optionee's will or the laws of descent or distribution.  If the Option
is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

          (e) Buyout Provisions.  The Administrator may at any time offer to buy
              -----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

                                      A-7
<PAGE>

     10.  Non-Transferability of Options.  Options may not be sold, pledged,
          ------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

     11.  Adjustments Upon Changes in Capitalization or Merger.
          ----------------------------------------------------

          (a) Changes in Capitalization.  Subject to any required action by the
              -------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration."  Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive.  Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.

          (b) Dissolution or Liquidation.  In the event of the proposed
              --------------------------
dissolution or liquidation of the Company, the Administrator shall notify the
Optionee at least fifteen (15) days prior to such proposed action.  To the
extent it has not been previously exercised, the Option will terminate
immediately prior to the consummation of such proposed action.

          (c) Merger.  In the event of a merger of the Company with or into
              ------
another corporation, the Option may be assumed or an equivalent option may be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation.  If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger.  For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option for
each Share of Optioned Stock subject to the Option to be solely common stock of
the successor corporation or its Parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger.

                                      A-8
<PAGE>

     12.  Date of Grant.  The date of grant of an Option shall, for all
          -------------
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board.  Notice
of the determination shall be given to each Service Provider to whom an Option
is so granted within a reasonable time after the date of such grant.

     13.  Amendment and Termination of the Plan.
          -------------------------------------

          (a) Amendment and Termination.  The Board may at any time amend,
              -------------------------
alter, suspend or terminate the Plan.

          (b) Stockholder Approval.  The Board shall obtain stockholder approval
              --------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.

          (c) Effect of Amendment or Termination.  No amendment, alteration,
              ----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.

     14.  Conditions Upon Issuance of Shares.
          ----------------------------------

          (a) Legal Compliance.  Shares shall not be issued pursuant to the
              ----------------
exercise of an Option  unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

          (b) Investment Representations.  As a condition to the exercise of an
              --------------------------
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

     15.  Inability to Obtain Authority.  The inability of the Company to obtain
          -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

     16.  Reservation of Shares.  The Company, during the term of this Plan,
          ---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

                                      A-9
<PAGE>

     17.  Stockholder Approval.  The Plan shall be subject to approval by the
          --------------------
stockholders of the Company within twelve (12) months after the date the Plan is
adopted.  Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.

     18.  Information to Optionees and Purchasers.  The Company shall provide to
          ---------------------------------------
each Optionee, not less frequently than annually, copies of annual financial
statements.  The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to Service
Providers whose duties in connection with the Company assure their access to
equivalent information.

                                      A-10
<PAGE>

                               THERASENSE, INC.
                                1997 STOCK PLAN
                            STOCK OPTION AGREEMENT

     Unless otherwise defined herein, the terms defined in the 1997 Stock Plan
(the "Plan") shall have the same defined meanings in this Option Agreement.

     1.  NOTICE OF STOCK OPTION GRANT

((Name))
((Address))

     The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:

Grant Number                        ____________

Date of Grant                       ____________

Vesting Commencement Date           ((Vest_Date))

Exercise Price per Share            $

Total Number of Shares Granted      ((Shares_Granted))

Total Exercise Price                $((Total_Price))

Type of Option:                     X    Incentive Stock Option
                                    -
                                    ____  Nonstatutory Stock Option

Term/Expiration Date:               10 years from date of grant

                                      A-11
<PAGE>

Vesting Schedule:
----------------

     This Option shall be exercisable according to the following vesting
schedule: ((Vest_Schedule))

Termination Period:
------------------

     This Option shall be exercisable for 30 days after Optionee ceases to
be a Service Provider.  Upon Optionee's death or disability, this Option may be
exercised for such longer period as provided in the Plan.  In no event may
Optionee exercise this Option after the Term/Expiration Date as provided above.

     2.  AGREEMENT

          (a)  Grant of Option.  The Plan Administrator of the Company hereby
               ---------------
grants to the Optionee named in the Notice of Grant (the "Optionee"), an option
(the "Option") to purchase the number of Shares set forth in the Notice of
Grant, at the exercise price per Share set forth in the Notice of Grant (the
"Exercise Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 13(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.

          If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code.  Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").

          (b)  Exercise of Option.
               ------------------

                    (i)  Right to Exercise.  This Option shall be exercisable
                         -----------------
during its term in accordance with the Vesting Schedule set out in the Notice of
Grant and with the applicable provisions of the Plan and this Option Agreement.

                    (ii) Method of Exercise. This Option shall be exercisable
                         ------------------
by delivery of an exercise notice in the form attached as Exhibit A (the
                                                          ---------
"Exercise Notice") which shall state the election to exercise the Option, the
number of Shares with respect to which the Option is being exercised, and such
other representations and agreements as may be required by the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by the
aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option unless such
issuance and such exercise complies with Applicable Laws.  Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.

                                      A-12
<PAGE>

          (c)  Optionee's Representations.  In the event the Shares have not
               --------------------------
been registered under the Securities Act of 1933, as amended, at the time this
Option is exercised, the Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Option, deliver to
the Company his or her Investment Representation Statement in the form attached
hereto as Exhibit B, and shall read the applicable rules of the Commissioner of
          ---------
Corporations attached to such Investment Representation Statement.

          (d)  Lock-Up Period.  Optionee hereby agrees that, if so requested by
               --------------
the Company or any representative of the underwriters (the "Managing
Underwriter") in connection with any registration of the offering of any
securities of the Company under the Securities Act, Optionee shall not sell or
otherwise transfer any Shares or other securities of the Company during the 180-
day period (or such other period as may be requested in writing by the Managing
Underwriter and agreed to in writing by the Company) (the "Market Standoff
Period") following the effective date of a registration statement of the Company
filed under the Securities Act. Such restriction shall apply only to the first
registration statement of the Company to become effective under the Securities
Act that includes securities to be sold on behalf of the Company to the public
in an underwritten public offering under the Securities Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such Market Standoff Period.

          (e)  Method of Payment.  Payment of the aggregate Exercise Price
               -----------------
shall be by any of the following, or a combination thereof, at the election of
the Optionee:

                    (i)    cash or check;

                    (ii)   consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with the Plan; or

                    (iii)  surrender of other Shares which, (i) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (ii) have a Fair Market
Value on the date of surrender equal to the aggregate Exercise Price of the
Exercised Shares.

          (f)  Restrictions on Exercise.  This Option may not be exercised
               ------------------------
until such time as the Plan has been approved by the stockholders of the
Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
Applicable Law.

          (g)  Non-Transferability of Option.  This Option may not be
               -----------------------------
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of the Plan and this Option Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns of the Optionee.

          (h)  Term of Option.  This Option may be exercised only within the
               --------------
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option.

                                      A-13
<PAGE>

          (i)  Tax Consequences.  Set forth below is a brief summary as of the
               ----------------
date of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

                    (i)   Exercise of ISO.  If this Option qualifies as an ISO,
                          ---------------
there will be no regular federal income tax liability upon the exercise of the
Option, although the excess, if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price will be treated as an adjustment to
the alternative minimum tax for federal tax purposes and may subject the
Optionee to the alternative minimum tax in the year of exercise.

                    (ii)  Exercise of ISO Following Disability.  If the
                          ------------------------------------
Optionee ceases to be an Employee as a result of a disability that is not a
total and permanent disability as defined in Section 22(e)(3) of the Code, to
the extent permitted on the date of termination, the Optionee must exercise an
ISO within three months of such termination for the ISO to be qualified as an
ISO.

                    (iii) Exercise of Nonstatutory Stock Option.  There may be
                          -------------------------------------
a regular federal income tax liability upon the exercise of a Nonstatutory Stock
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
Optionee is an Employee or a former Employee, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

                    (iv)  Disposition of Shares.  In the case of an NSO, if
                          ---------------------
Shares are held for at least one year, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and of at least two years after
the Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal income tax purposes. If Shares
purchased under an ISO are disposed of within one year after exercise or two
years after the Date of Grant, any gain realized on such disposition will be
treated as compensation income (taxable at ordinary income rates) to the extent
of the difference between the Exercise Price and the lesser of (1) the Fair
Market Value of the Shares on the date of exercise, or (2) the sale price of the
Shares. Any additional gain will be taxed as capital gain, short-term or long-
term depending on the period that the ISO Shares were held.

                    (v)   Notice of Disqualifying Disposition of ISO Shares.
                          -------------------------------------------------
If the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.

                                      A-14
<PAGE>

          (j)  Entire Agreement; Governing Law.  The Plan is incorporated
               -------------------------------
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee. This agreement is governed by the internal substantive
laws but not the choice of law rules of California.

          (k)  No Guarantee of Continued Service.  OPTIONEE ACKNOWLEDGES AND
               ---------------------------------
AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS
EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.

          Optionee acknowledges receipt of a copy of the Plan and represents
that he or she is familiar with the terms and provisions thereof, and hereby
accepts this Option subject to all of the terms and provisions thereof.
Optionee has reviewed the Plan and this Option in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option and
fully understands all provisions of the Option.  Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.

                                      A-15
<PAGE>

OPTIONEE:  Name                         THERASENSE, INC.

______________________________          __________________________________
Signature                               By

______________________________          __________________________________
Print Name                              Title

______________________________

______________________________
Residence Address

                                      A-16
<PAGE>

                                   EXHIBIT A
                                   ---------
                                1997 STOCK PLAN
                                EXERCISE NOTICE

TheraSense, Inc.
1360 South Loop Road
Alameda, CA  94502
Attention:  Secretary

     1.  Exercise of Option.  Effective as of today, ___________, 20____, the
         ------------------
undersigned ("Optionee") hereby elects to exercise Optionee's Option to purchase
_________ shares of the Common Stock (the "Shares") of TheraSense, Inc. (the
"Company") under and pursuant to the 1997 Stock Plan (the "Plan") and the Stock
Option Agreement dated___________________, 20 ______ (the "Option Agreement").

     1.  Delivery of Payment.  Purchaser herewith delivers to the Company the
         -------------------
full purchase price of the Shares, as set forth in the Option Agreement.

     2.  Representations of Optionee.  Optionee acknowledges that Optionee has
         ---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

     3.  Rights as Stockholder.  Until the issuance of the Shares (as evidenced
         ---------------------
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option.  The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised.  No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 11 of the Plan.

     4.  Company's Right of First Refusal.  Before any Shares held by Optionee
         --------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").

          (a)  Notice of Proposed Transfer.  The Holder of the Shares shall
               ---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
<PAGE>

          (b)  Exercise of Right of First Refusal.  At any time within thirty
               ----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.

          (c)  Purchase Price.  The purchase price ("Purchase Price") for the
               --------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.

          (d)  Payment.  Payment of the Purchase Price shall be made, at the
               -------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.

          (e)  Holder's Right to Transfer.  If all of the Shares proposed in
               --------------------------
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.

          (f)  Exception for Certain Family Transfers.  Anything to the
               --------------------------------------
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.

          (g)  Termination of Right of First Refusal.  The Right of First
               -------------------------------------
Refusal shall terminate as to any Shares upon the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.

     5.  Tax Consultation.  Optionee understands that Optionee may suffer
         ----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents

                                      A-2
<PAGE>

that Optionee has consulted with any tax consultants Optionee deems advisable in
connection with the purchase or disposition of the Shares and that Optionee is
not relying on the Company for any tax advice.

     6.  Restrictive Legends and Stop-Transfer Orders.
         ---------------------------------------------

          (a)  Legends.  Optionee understands and agrees that the Company shall
               -------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:

          THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
          THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT
          BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
          HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE
          OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE
          SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
          IS IN COMPLIANCE THEREWITH.

          THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
          RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
          ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
          BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
          COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
          ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE
          BINDING ON TRANSFEREES OF THESE SHARES.

          (b)  Stop-Transfer Notices.  Optionee agrees that, in order to
               ---------------------
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

          (c)  Refusal to Transfer.  The Company shall not be required (i) to
               -------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

     7.  Successors and Assigns.  The Company may assign any of its rights
         ----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

                                      A-3
<PAGE>

     8.  Interpretation.  Any dispute regarding the interpretation of this
         --------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

     9.  Governing Law; Severability.  This Agreement is governed by the
         ---------------------------
internal substantive laws but not the choice of law rules, of California.

     10. Entire Agreement.  The Plan and Option Agreement are incorporated
         ----------------
herein by reference. This Exercise Notice, the Plan, the Option Agreement and
the Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.

Submitted by:                      Accepted by:

OPTIONEE: Name                     THERASENSE, INC.

_____________________________      ____________________________________
Signature                          By

_____________________________      ____________________________________
Print Name                         Its

Address:                           Address:
-------                            -------

_____________________________      ____________________________________

_____________________________      ____________________________________

                                   ____________________________________
                                   Date Received

                                      A-4
<PAGE>

                                   EXHIBIT B
                                   ---------
                      INVESTMENT REPRESENTATION STATEMENT

OPTIONEE:      ((Name))
COMPANY:       THERASENSE, INC.
SECURITY:      COMMON STOCK
AMOUNT:
DATE:

     In connection with the purchase of the above-listed Securities, the
undersigned Optionee represents to the Company the following:

               (i)    Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").

               (ii)   Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this regard,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, and any other legend
required under applicable state securities laws.

               (iii)  Optionee is familiar with the provisions of Rule 701 and
Rule 144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions

                                      -5-
<PAGE>

specified by Rule 144, including: (1) the resale being made through a broker in
an unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934); and,
in the case of an affiliate, (2) the availability of certain public information
about the Company, (3) the amount of Securities being sold during any three
month period not exceeding the limitations specified in Rule 144(e), and (4) the
timely filing of a Form 144, if applicable.

               In the event that the Company does not qualify under Rule 701 at
the time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.

               (iv)   Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.

                                    Signature of Optionee:

                                    ____________________________________

                                    Date:____________________, 20_______

                                      -6-

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