<PAGE>

                                                                    EXHIBIT 10.1

                            STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into
effective as of June 23, 2003, by and among Optical Sensors Incorporated, a
Delaware corporation (the "Company"), with its principal place of business at
7615 Golden Triangle Drive, Suite C, Eden Prairie, Minnesota 55344, and the
investors listed on Schedule A hereto (the "Investors").

     A.   The Investors have advanced to Company the amount of $2,689,000 since
March 6, 2002 (the "Advances"), and the Investors are willing to convert the
Advances into shares of Series B preferred stock, $.01 par value, of the Company
(the "Series B Preferred Stock").

     B.   The Investors are willing to invest an additional $865,005 of equity
capital in the Company through the purchase of shares of Series B Preferred
Stock.

     C.   The Company desires to convert the Advances into Series B Preferred
Stock and to accept an additional investment in the Company from the Investors
on the terms and conditions set forth in this Agreement.

     Accordingly, in consideration of the foregoing, the mutual promises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1.   Authorization of Securities. The Company shall authorize the Series B
     Preferred Stock, which shall be entitled to the preferences, rights and
     benefits set forth in the Certificate of Designation, in substantially the
     form set forth in Exhibit A attached hereto. Any shares of Common Stock
     issuable upon conversion of the Series B Preferred Stock, when issued, are
     referred to as "Conversion Shares."

2.   Purchase of Securities.

     (a)  Subject to the terms and conditions hereof, the Company agrees to sell
          to the Investors, and the Investors agree to purchase from the Company
          in accordance with this Agreement, Fifty Seven Thousand Six Hundred
          Sixty-Seven (57,667) shares of the Company's Series B Preferred Stock
          at a purchase price of $15.00 per share and an aggregate purchase
          price of $865,005. The number of shares of Series B Preferred Stock to
          be purchased by each Investor is set forth on Schedule A.

     (b)  At the time of delivery of the purchase price (via check or wire
          transfer), the Company shall deliver to the Investors stock
          certificate(s) for the number of shares of Series B Preferred Stock
          being purchased by such Investor, registered in the Investor's name or
          as otherwise designated by the Investor.

3.   Conversion of Advances.

     (a)  The Company and the Investors agree to convert the Advances into One
          Hundred Seventy-Nine Thousand Two Hundred Sixty-Seven (179,267) shares
          of Series B

<PAGE>

          Preferred Stock at a conversion price of $15.00 per share. The amount
          of Advances made by each Investor and the number of shares of Series B
          Preferred Stock to be issued to each Investor upon conversion thereof
          is set forth on Schedule A. The Investors agree that upon conversion
          of the Advances any indebtedness represented thereby shall be
          discharged and paid in full.

     (b)  Upon the effective date of this Agreement, the Company shall deliver
          to the Investors stock certificate(s) for the number of shares of
          Series B Preferred Stock being issued to each Investor upon conversion
          of the Advances, registered in the Investor's name or as otherwise
          designated by the Investor.

4.   Representations and Warranties of the Company. The Company represents and
     warrants to the Investors as follows:

     (a)  Organization. The Company is a corporation duly organized, validly
          existing and in good standing under the laws of the State of Delaware
          and has the requisite corporate power and authority to own, lease or
          operate its properties and to carry on its business as it is now being
          conducted and as it is proposed to be conducted. The Company has no
          subsidiaries or direct or indirect ownership in any firm, corporation
          or business which either, individually or in the aggregate, is
          material to the business of the Company. The Company is qualified to
          do business and is in good standing as a foreign corporation in every
          jurisdiction in which its ownership of property or conduct of business
          requires it so to be qualified and in which the failure to so qualify
          would have a material adverse effect on the financial condition or
          business of the Company.

     (b)  Authorization. This Agreement has been duly authorized by all
          necessary corporate action on behalf of the Company, has been duly
          executed and delivered by authorized officers of the Company, and is
          the valid and binding agreement of the Company enforceable against the
          Company in accordance with its terms, except as the enforceability
          thereof may be limited by bankruptcy, insolvency, moratorium,
          reorganization or other similar laws affecting the enforcement of
          creditors rights generally and to judicial limitations on the
          enforcement of the remedy of specific performance and other equitable
          remedies. All corporate actions necessary to the authorization,
          creation, issuance and delivery of the Series B Preferred Stock and
          reservation and issuance of the Conversion Shares contemplated
          hereunder has been taken.

     (c)  Valid Issuance. The Company has the requisite corporate power and
          authority to execute and deliver this Agreement and to perform its
          obligations hereunder, and to issue the Series B Preferred Stock and
          the Conversion Shares. The Series B Preferred Stock, when issued and
          paid for pursuant to the terms of this Agreement, will be duly
          authorized and validly issued, fully paid and nonassessable. The
          Conversion Shares have been reserved for issuance upon conversion of
          the Series B Preferred Stock and, when issued upon conversion of the
          Series B Preferred Stock in accordance with the terms of this
          Agreement, will be duly authorized, validly issued, fully paid and
          nonassessable.

                                        2

<PAGE>

     (d)  No Violation. Neither the execution and delivery of this Agreement,
          nor the performance by the Company of its obligations hereunder will:
          (a) conflict with or result in any breach of any provision of the
          Certificate of Incorporation or By-Laws of the Company; (b) result in
          a default (or give rise to any right of termination, cancellation or
          acceleration) under any of the terms, conditions or provisions of any
          note, lease, mortgage, license, agreement or other instrument or
          obligation to which the Company is a party or by which any of its
          assets may be bound, except for such defaults (or rights of
          termination, cancellation or acceleration) as to which requisite
          waivers or consents have been obtained or which, in the aggregate,
          would not result in a material adverse effect on the Company; (c)
          violate any order, writ, injunction, decree, statute, rule or
          regulation applicable to the Company or any of its assets, except for
          violations which would not result in a material adverse effect on the
          Company; or (d) result in the creation or imposition of any liens,
          charges or encumbrances upon any assets of the Company.

     (e)  SEC Reports. The Company has filed all reports, registration
          statements and other filings with the Securities and Exchange
          Commission (the "Commission") required to be filed by it pursuant to
          the Securities Act of 1933, as amended (the "Securities Act"), and the
          Securities Exchange Act of 1934, as amended (the "Exchange Act"). All
          such reports, registration statements and other filings (including all
          notes, exhibits and schedules thereto, all documents incorporated by
          reference therein, and any amendments thereto) are collectively
          referred to herein as the "SEC Reports." As of their respective dates
          of filing with the Commission, the SEC Reports complied in all
          material respects with all of the rules and regulations of the
          Commission and did not contain any untrue statement of a material fact
          or omit to state a material fact required to be stated therein or
          necessary in order to make the statements made therein, in light of
          the circumstances under which they were made, not misleading. The
          Investors acknowledge that the Company has received comments from the
          Commission with respect to the Registration Statement on Form SB-2
          (File No. 333-71076) and Annual Report on Form 10-KSB for the year
          ended December 31, 2002, and that the Company is responding to such
          comments. The Investors acknowledge that the Company's representations
          in this Section 4(e) are made subject to the foregoing comments from
          the SEC.

     (f)  Financial Statements. The financial statements of the Company included
          in the SEC Reports (the "Financial Statements") have been prepared in
          accordance with United States generally accepted accounting principles
          consistently applied and fairly present the financial position of the
          Company at the dates thereof and the results of the Company's
          operations and cash flows for the periods then ended (subject, in the
          case of unaudited statements, to normal adjustments and the omission
          of footnotes). The Company has no material liabilities, known or
          unknown, absolute, contingent or otherwise, except for (i) liabilities
          that are set forth in the Financial Statements, the notes thereto or
          the SEC Reports, (ii) the Advances received from Investors since March
          31, 2003, and (iii) liabilities that have been incurred in the
          ordinary course of business since March 31, 2003.

                                        3

<PAGE>

     (g)  No Material Adverse Change. There have not been any changes in the
          assets, properties, liabilities, financial condition, business or
          operations of the Company from that reflected in the Financial
          Statements except for (i) changes in the ordinary course of business
          which have not been, either individually or in the aggregate,
          materially adverse, (ii) the Advances received from Investors since
          March 31, 2003, and (ii) the Company's continued operating losses and
          negative cash flow.

     (h)  Authorized Capital Stock. The authorized capital stock of the Company
          is as set forth in the SEC Reports. The issued and outstanding shares
          of capital stock of the Company have been duly authorized, validly
          issued and are fully paid and nonassessable. As of the date hereof,
          the Company has outstanding options and warrants to purchase 987,968
          shares of Common Stock, and there are no other outstanding warrants,
          options or other rights to acquire any shares of capital stock of the
          Company. All of the above securities of the Company were issued in
          compliance with all applicable federal and state securities laws and
          were not issued in violation of or subject to any preemptive rights or
          other rights to subscribe for or purchase securities.

     (i)  Intellectual Property. The Company owns or possesses adequate rights
          to use all patents, patent rights, inventions, trademarks, trade
          names, copyrights, licenses, domain names, governmental
          authorizations, trade secrets and know-how that are used or necessary
          for the conduct of its business. The Company has not received any
          notice of, or has any knowledge of, any infringement of or conflict
          with asserted rights of others with respect to any patents, patent
          rights, inventions, trademarks, trade names, copyrights, licenses,
          governmental authorizations, trade secret or know-how that,
          individually or in the aggregate, if the subject of an unfavorable
          decision, ruling or finding, would have a material adverse effect on
          the condition (financial or otherwise), earnings, operations or
          business of the Company.

     (j)  Securities Laws. Subject to the accuracy of the representations of the
          Investors in Section 5, no consent, authorization, approval, permit or
          order of or filing with any governmental or regulatory authority is
          required under current laws and regulations in connection with the
          execution and delivery of this Agreement or the offer, issuance, sale
          or delivery to the Investors of the Series B Preferred Stock other
          than (i) the filing with the Commission of a Form D pursuant to
          Regulation D under the Securities Act, and the qualification thereof,
          if required, under applicable state securities laws, which
          qualification has been or will be effected as a condition of the
          issuance of the Series B Preferred Stock, and (ii) the filing of a
          registration statement or statements pursuant to Section 6. Under the
          circumstances contemplated by this Agreement, the offer, issuance,
          sale and delivery of the Series B Preferred Stock will not, under
          current laws and regulations, require compliance with the prospectus
          delivery or registration requirements of the Securities Act.

                                        4

<PAGE>

     (k)  Litigation. There are no actions, suits, proceedings or investigations
          pending or, to the best of the Company's knowledge, threatened against
          the Company or any of its properties before or by any court or
          arbitrator or any governmental body, agency or official in which there
          is a reasonable likelihood (in the judgment of the Company) of an
          adverse decision that (a) would have a material adverse effect on the
          Company's properties or assets or the business of the Company as
          presently conducted or proposed to be conducted or (b) would impair
          the ability of the Company to perform in any material respect its
          obligations under this Agreement. The Company is not in default with
          respect to any judgment, order or decree of any court or governmental
          agency or instrumentality which, individually or in the aggregate,
          would have a material adverse effect on the assets, properties or
          business of the Company.

     (l)  Properties. The Company has good and marketable title to all the
          properties and assets reflected as owned in the Financial Statements,
          subject to no lien, mortgage, pledge, charge or encumbrance of any
          kind except (i) those, if any, reflected in such Financial Statements,
          or (ii) those which are not material in amount and do not adversely
          affect the use made and promised to be made of such property by the
          Company. The Company holds its leased properties under valid and
          binding leases, with such exceptions as are not materially significant
          in relation to the business of the Company. The Company owns or leases
          all such properties as are necessary to its operations as now
          conducted or as proposed to be conducted.

     (m)  Brokers or Finders. To the knowledge of the Company, no person, firm
          or corporation has or will have, as a result of any act or omission of
          the Company, any right, interest or valid claim against any Investor
          for any commission, fee or other compensation as a finder or broker in
          connection with the transactions contemplated by this Agreement. The
          Company shall indemnify and hold the Investor harmless for any claims
          made for any commission, fee or other compensation concerning the
          transactions contemplated by this Agreement.

5.   Representations and Warranties of the Investors. The Investors represent
     and warrant to the Company as follows:

     (a)  The Series B Preferred Stock and Conversion Shares are being purchased
          for investment for such Investor's own account and not with the view
          to, or for resale in connection with, any distribution or public
          offering thereof. Each Investor understands that neither the Series B
          Preferred Stock, nor the Conversion Shares have been registered under
          the Securities Act or any state securities laws by reason of their
          contemplated issuance in transactions exempt from the registration
          requirements of the Securities Act and applicable state securities
          laws and that the reliance of the Company and others upon these
          exemptions is predicated in part upon this representation by the
          Investors. The Investors further understand that neither the Series B
          Preferred Stock, nor the Conversion Shares may be transferred or
          resold without registration under the Securities Act and any

                                        5

<PAGE>

          applicable state securities laws, or pursuant to an exemption from the
          requirements of the Securities Act and applicable state securities
          laws.

     (b)  Each Investor's principal place of business is located at the address
          set forth on Schedule A. Each Investor qualifies as an "accredited
          investor," as defined in Rule 501 of Regulation D under the Securities
          Act. Each Investor acknowledges that the Company has made available to
          such Investor at a reasonable time prior to the execution of this
          Agreement the opportunity to ask questions and receive answers
          concerning the business, operations and financial condition of the
          Company and the terms and conditions of the sale of securities
          contemplated by this Agreement and to obtain any additional
          information requested by such Investor. Each Investor is able to bear
          the loss of its entire investment in the Series B Preferred Stock and
          the Conversion Shares and has such knowledge and experience of
          financial and business matters that he is capable of evaluating the
          merits and risks of the investment to be made pursuant to this
          Agreement. However, neither the foregoing nor any other due diligence
          investigation conducted by such Investor or on its behalf shall limit,
          modify or affect the representations and warranties of the Company set
          forth in Section 4 of this Agreement or the right of such Investor to
          rely thereon.

     (c)  This Agreement has been duly authorized by all necessary action on the
          part of each Investor, has been duly executed and delivered by such
          Investor and is a valid and binding agreement of such Investor.

6.   Registration Rights.

     (a)  Filing of Registration Statement. Company will upon written request
          made by the Investors, as expeditiously as possible, use its best
          efforts at any time after the date of this Agreement, take all
          necessary actions to effect registration and qualification under the
          Securities Act and under any state securities statute of all or such
          portion of the Conversion Shares as such Investors shall specify;
          provided, however, that the Investors shall not be entitled to more
          than two required registrations (except that the Investors shall be
          entitled to an unlimited number of required registrations at the
          Investors' expense on Forms S-2 or S-3 or any similar short form
          registration statement prescribed by the Securities and Exchange
          Commission (the "Commission") if the Company then qualifies for such
          short-form registration). The Company may, on not more than one
          occasion, delay the filing of any registration statement required
          hereunder for a period of not more than 90 days in the event that the
          Company has furnished the Investors with a certificate executed by the
          Company's President or Chief Executive Officer stating that such delay
          is necessary in order to (i) not significantly adversely affect
          financing efforts then underway at the Company or (ii) avoid
          disclosure of material non-public information.

     (b)  Registration Procedures. If and whenever the Company is required by
          the provisions of Section 6(a) to effect the registration of the
          Conversion Shares under the Securities Act, the Company will:

                                        6

<PAGE>

          (i)   prepare and file with the Commission a registration statement
                (on any available form to effect registration) with respect to
                such securities, and use its best efforts to cause such
                registration statement to become and remain effective until such
                securities are sold pursuant to such registration statement or
                are eligible to be sold pursuant to Rule 144(k);

          (ii)  prepare and file with the Commission such amendments to such
                registration statement and supplements to the prospectus
                contained therein as may be necessary to keep such registration
                statement effective until such securities are sold pursuant to
                such registration statement or are eligible to be sold pursuant
                to Rule 144(k);

          (iii) furnish to the Investors and to any underwriters of the
                securities being registered such reasonable number of copies of
                the registration statement, preliminary prospectus, final
                prospectus and such other documents as the Investor and
                underwriters may reasonably request in order to facilitate the
                public offering of such securities;

          (iv)  use its best efforts to register or qualify the securities
                covered by such registration statement under such state
                securities or blue sky laws of such jurisdictions as the
                Investor may reasonably request, except that the Company shall
                not for any purpose be required to execute a general consent to
                service of process or to qualify to do business as a foreign
                corporation in any jurisdiction wherein it is not so qualified;

          (v)   prepare and promptly file with the Commission and promptly
                notify the Investors of the filing of such amendment or
                supplement to such registration statement or prospectus as may
                be necessary to correct any statements or omissions if, at the
                time when a prospectus relating to such securities is required
                to be delivered under the Securities Act, any event shall have
                occurred as the result of which any such prospectus or any other
                prospectus as then in effect would include an untrue statement
                of a material fact or omit to state any material fact necessary
                to make the statements therein, in the light of the
                circumstances in which they were made, not misleading; and

          (vi)  use its best efforts to cause all securities covered by such
                registration statement to be listed on any securities exchange,
                quotation system, market or over-the-counter bulletin board, if
                any, on which the Common Stock shall then be listed and trading.

     (c)  Expenses. Except as set forth in the last sentence of this Section
          6(c), with respect to any registration of securities pursuant to
          Section 6(a), the Company shall bear all fees, costs and expenses,
          including, without limitation: all registration, filing fees, printing
          expenses, fees and disbursements of counsel and accountants for the
          Company, all internal Company expenses, the premiums and other costs
          of policies of insurance against liability arising out of the public

                                        7

<PAGE>

          offering, and all legal fees and disbursements and other expenses of
          complying with state securities or blue sky laws of any jurisdictions
          in which the securities to be offered are to be registered or
          qualified. Fees and disbursements of counsel and accountants for the
          Investors, underwriting discounts and commissions and transfer taxes
          for the Investors and any other expenses incurred by the Investors not
          expressly included above shall be borne by the Investors.

     (d)  Indemnification. In the event that any Conversion Shares owned by the
          Investors are included in a registration statement under Section 6(a):

          (i)   The Company will indemnify and hold harmless the Investors
                (including for this purpose its directors, officers and
                partners) and any underwriter (as defined in the Securities Act)
                from and against any and all loss, damage, liability, cost and
                expense (including, subject to Section 6(d)(iii), reasonable
                fees and expenses of counsel) to which any such Investor or any
                such underwriter may become subject under the Securities Act or
                otherwise, insofar as such losses, damages, liabilities, costs
                or expenses are caused by any untrue statement or alleged untrue
                statement of any material fact contained in such registration
                statement, any prospectus contained therein or any amendment or
                supplement thereto, or arise out of or are based upon the
                omission or alleged omission to state therein a material fact
                required to be stated therein or necessary to make the
                statements therein, in light of the circumstances in which they
                were made, not misleading; provided, however, that the Company
                will not be liable in any such case to the extent that any such
                loss, damage, liability, cost or expense arises out of or is
                based upon an untrue statement or alleged untrue statement or
                omission or alleged omission so made in conformity with written
                information furnished by such Investor or such underwriter.

          (ii)  The Investors will indemnify and hold harmless the Company and
                any underwriter from and against any and all loss, damage,
                liability, cost or expense (including, subject to Section
                6(d)(iii), reasonable fees and expenses of counsel) to which the
                Company or any underwriter may become subject under the
                Securities Act or otherwise, insofar as such losses, damages,
                liabilities, costs or expenses are caused by any untrue or
                alleged untrue statement of any material fact contained in such
                registration statement, any prospectus contained therein or any
                amendment or supplement thereto, or arise out of or are based
                upon the omission or the alleged omission to state therein a
                material fact required to be stated therein or necessary to make
                the statements therein, in light of the circumstances in which
                they were made, not misleading, in each case to the extent, but
                only to the extent, that such untrue statement or alleged untrue
                statement or omission or alleged omission was so made in
                reliance upon and in strict conformity with written information
                furnished by such Investor. Notwithstanding the provisions of
                this clause (ii), no Investor shall be required to indemnify any
                person pursuant to this Section 6 in an amount in excess of the
                amount of the aggregate net proceeds received by

                                        8

<PAGE>

                such Investor in connection with any such registration under the
                Securities Act.

          (iii) Promptly after receipt by an indemnified party pursuant to the
                provisions of paragraph (i) or (ii) of this Section 6(d) of
                notice of the commencement of any action involving the subject
                matter of the foregoing indemnity provisions, such indemnified
                party will, if a claim thereof is to be made against the
                indemnifying party pursuant to the provisions of said paragraph
                (i) or (ii), promptly notify the indemnifying party of the
                commencement thereof; but the omission to so notify the
                indemnifying party will not relieve the indemnifying party from
                any liability which it may have to any indemnified party
                otherwise than hereunder nor of its obligations or liabilities
                pursuant to this Agreement, except to the extent that the
                failure to so notify materially prejudices the indemnifying
                party. In case such action is brought against any indemnified
                party and it notifies the indemnifying party of the commencement
                thereof, the indemnifying party shall have the right to
                participate in, and, to the extent that it may wish, jointly
                with any other indemnifying party similarly notified, to assume
                the defense thereof, with counsel satisfactory to such
                indemnified party; provided, however, if the defendants in any
                action include both the indemnified party and the indemnifying
                party and there is a conflict of interest which would prevent
                counsel for the indemnifying party from also representing the
                indemnified party, the indemnified party or parties shall have
                the right to select one separate counsel to participate in the
                defense of such action on behalf of such indemnified party or
                parties, which counsel shall be reasonably satisfactory to the
                indemnifying party. After notice from the indemnifying party to
                such indemnified party of its election so to assume the defense
                thereof, the indemnifying party will not be liable to such
                indemnified party pursuant to the provisions of said paragraph
                (i) or (ii) for any legal or other expense subsequently incurred
                by such indemnified party in connection with the defense thereof
                other than reasonable costs of investigation, unless (x) the
                indemnified party shall have employed counsel in accordance with
                the proviso of the preceding sentence, (y) the indemnifying
                party shall not have employed counsel satisfactory to the
                indemnified party to represent the indemnified party within a
                reasonable time after the notice of the commencement of the
                action, or (z) the indemnifying party has authorized the
                employment of counsel for the indemnified party at the expense
                of the indemnifying party. No indemnifying party shall, without
                the prior written consent of the indemnified party, consent to
                entry of any judgment or enter into any settlement which does
                not include as an unconditional term thereof the giving by the
                claimant or the plaintiff to such indemnified party of a release
                from all liability in respect of such action, and no indemnified
                party shall consent to entry of any judgment or settle such
                action without the prior written consent of the indemnifying
                party.

                                        9

<PAGE>

     (e)  SEC Reports. The Company will file with the Commission, on a timely
          basis, all SEC Reports required to be filed under the Exchange Act and
          any other documents required to meet the public information
          requirements of Rule 144(c) under the Securities Act.

7.   Miscellaneous.

     (a)  This Agreement and the rights and obligations of the parties hereunder
          shall not be assignable, in whole or in part, by the Company without
          the prior written consent of the Investors. This Agreement and the
          rights and obligations of the parties hereunder shall not be
          assignable, in whole or in part, by an Investor without the prior
          written consent of the Company, except that any Investor may assign
          its rights under this Agreement to any affiliate without the prior
          written consent of the Company. This Agreement shall inure to the
          benefit of and be binding upon and be enforceable by the successors
          and permitted assigns of the parties hereto. Neither this Agreement
          nor any provision hereof may be amended, modified, waived or
          discharged without the written consent of the parties hereto.

     (b)  This Agreement, including the exhibits attached hereto, constitutes
          the entire agreement of the parties relative to the subject matter
          hereof and supersedes any and all other agreements and understanding,
          whether written or oral, relative to the matters discussed herein.

     (c)  All representations and warranties contained herein shall survive
          after the execution and delivery of this Agreement for a period of two
          (2) years from the date hereof. All covenants and agreements which by
          their terms are to be performed after the date hereof will survive
          indefinitely, unless such covenants and agreements by their terms
          expire at an earlier date, in which case they will expire on such
          earlier date.

     (d)  All notices, requests, consents and other communications required or
          permitted hereunder shall be in writing and shall be given in writing
          by personal delivery, facsimile, commercial air delivery service or by
          registered or certified mail, postage prepaid, return receipt
          requested, addressed to the Company at the address set forth in the
          introductory paragraph to this Agreement and to the Investors at the
          addresses set forth on Schedule A, or at such other address as the
          respective parties may designate by like notice from time to time.
          Notices so given shall be effective upon the earlier of: (a) receipt
          by the party to which notice is given (which, in the instance of a
          facsimile, shall be deemed to have occurred at the time that the
          machine transmitting the facsimile verifies a successful transmission
          of the facsimile); (b) on the fifth business day following the date
          such notice was deposited in the mail; or (c) on the second business
          day following the date such notice was delivered to a commercial air
          delivery service.

     (e)  This Agreement shall be construed and enforced in accordance with the
          laws of the State of Minnesota.

                                       10

<PAGE>

     (f)  This Agreement may be executed in two or more counterparts, each of
          which shall be deemed an original, but all of which together shall
          constitute one and the same instrument. This Agreement may be executed
          by facsimile.

                          [NEXT PAGE IS SIGNATURE PAGE]

                                       11

<PAGE>

     IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement effective as of the date first written above.

                                   OPTICAL SENSORS INCORPORATED


                                   By  /s/ Paulita M. LaPlante
                                      ------------------------------------------
                                       Paulita LaPlante,
                                       President and Chief Executive Officer


                                   CIRCLE F VENTURES, LLC


                                   By  /s/ Hayden R. Fleming
                                      ------------------------------------------

                                   Its Managing Member
                                      ------------------------------------------


                                   CIRCLE F VENTURES II, LLC


                                   By  /s/ Hayden R. Fleming
                                      ------------------------------------------

                                   Its Managing Member
                                      ------------------------------------------

                                       12

<PAGE>

                                   SCHEDULE A

<TABLE>
<CAPTION>
                                    Amount of    Number of    Additional    Number of
          Name of Investor           Advance      Shares      Investment     Shares
          ----------------           -------      ------      ----------     ------
<S>                                <C>           <C>          <C>           <C>
Circle F Ventures, LLC             $  845,000      56,333             0           0
17797 North Perimeter Drive
Scottsdale, Arizona 85255
Circle F Ventures II, LLC          $1,844,000     122,934      $865,005      57,667
17797 North Perimeter Drive
Scottsdale, Arizona 85255

Totals                             $2,689,000     179,267      $865,005      57,667
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