Document:

<PAGE>

                                                                    Exhibit 10.2

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                        DEVELOPMENT AND LICENSE AGREEMENT

         THIS AGREEMENT ("Agreement") is made and entered into as of the
Effective Date by and between OPTICAL SENSORS INCORPORATED, a Delaware
corporation ("Licensor" and sometimes "OSI"), with an address at 7615 Golden
Triangle Drive, Suite C, Minneapolis, Minnesota 55344, and NELLCOR PURITAN
BENNETT, INC., a Delaware corporation ("Licensee" and sometimes "NPB") and a
division of Tyco Healthcare Group LP, with an address at 4280 Hacienda Drive,
Pleasanton, California 94588.

                                    RECITALS:

         A. Licensor is the exclusive licensee of issued U.S. Patent No.
6,055,447 and U.S. Patent No. 6,216,024 B1, and related patents and applications
owned by the Institute of Critical Care Medicine ("ICCM"), a California
nonprofit corporation, with an address at 1695 North Sunrise Way, Building #3,
Palm Springs, California 92262, all such patents and applications relating to a
method and device for taking measurements in the alimentary canal region between
the stomach and the mouth, or in the respiratory canal region between the lungs
and face (including mouth and nasal regions) to assess or help assess systemic
hypoperfusion, each as listed in Exhibit A1 attached hereto; and OSI owns other
related patents and pending patent applications, each listed in Exhibit A2
attached hereto (collectively all patent and patent applications in Exhibits A1
and A2 being hereinafter referred to as "Patents" and "Patent Applications").

         B. Licensee desires to obtain from Licensor, and Licensor desires to
grant to Licensee, an exclusive, worldwide Field of Use sublicense and license
under the Patent Rights (as defined below), including but not limited to the
Patents and Patent Applications listed in Exhibits A1 and A2, on the terms and
conditions set forth in this Agreement.

         C. Licensee desires Licensor to complete development of the Model 3000,
to manufacture the Model 3000, and then transfer such manufacturing capability
to Licensee.

                                                                               1
<PAGE>

         D. Licensor desires to retain exclusive, worldwide right and license,
with the right to grant sublicenses, to practice the Patent Rights and to have
made, use, promote, market and sell products in connection with practicing the
Patent Rights that are not covered within the Field of Use.

         NOW THEREFORE, in consideration of the foregoing recitals and the
mutual representations, warranties, covenants and agreements contained herein,
the parties hereto agree as follows:

         1. Definitions.

                  a. "Affiliate" as used in this Agreement with respect to a
         person or entity means any corporation, company, partnership, joint
         venture, entity and/or firm which controls, is controlled by or is
         under common control with such person or entity.

                  b. "Average Selling Price" as used in this Agreement means
         with respect to each country (i) the aggregate Net Sales of Sensors
         during a particular period sold for use in each country divided by (ii)
         the aggregate number of Sensors sold, net of returns, during the same
         period for use in each country. Average Selling Price shall be
         calculated separately for each country.

                  c. "Date of First Commercial Sale" shall mean that date on
         which an initial transfer by Licensee of a Section 3.a(3)
         "manufactured" Model 3000 Sensor and related Instrument is made to a
         third party in exchange for value, which Sensor and Instrument shall
         constitute "manufactured" product made after an "effective transfer"
         from development to manufacturing and after the Section 3.a(3)
         milestone has been met.

                  d. "Effective Date" shall mean the date of complete execution
         of this Agreement.

                  e. "Field Forward Military Applications" means specially
         hardened designs or products made to comply with non-civilian
         specifications delineated by the U.S. or a

                                                                               2
<PAGE>

         foreign military for the detection and monitoring of regional and/or
         systemic hypoperfusion of military personnel prior to and during combat
         from a location remote from a military critical care unit.

                  f. "Field of Use" means applications for taking measurements
         in the alimentary canal region between the stomach and the mouth, or in
         the respiratory canal region between the lungs and face (including
         mouth and nasal regions) to assess or help assess systemic
         hypoperfusion, and specifically excludes all Field Forward Military
         Applications and all other applications not directly related to taking
         measurements in the alimentary and respiratory regions referred to
         herein to assess or help assess systemic hypoperfusion (e.g.,
         measurements for regional tissue perfusion of any internal organ,
         appendage, etc.).

                  g. "Gross Margin" as used in this Agreement means the
         difference between Net Sales of Sensors or Instruments and Licensee's
         direct cost of manufacturing Sensors or Instruments (i.e., direct
         material cost, direct labor cost and manufacturing overhead) or having
         third parties manufacture Instruments, as calculated in accordance with
         generally accepted accounting principles consistently applied as
         utilized by Licensee in its normal financial reporting. Freight costs
         for product shipped from OSI to Licensee shall be included in
         Licensee's direct cost of manufacturing regardless of Licensee's normal
         financial reporting standards. As of the date of this Agreement,
         Licensee calculates direct cost of manufacturing for its other products
         in accordance with the methodology described in Exhibit B.

                  h. "ICCM License" shall mean the "patent license agreement"
         entered into as of July 20, 1998, between Institute of Critical Care
         Medicine and Licensor.

                  i. "Instrument" as used in this Agreement means any device
         which connects to a Sensor and processes signals obtained therefrom to
         assess or help assess systemic hypoperfusion, and which is covered by a
         validly issued U.S. patent included in the Patent Rights. An Instrument
         can comprise a standalone monitor, an OEM board for sale

                                                                               3
<PAGE>

         to third parties who make monitors (which monitors shall not be
         considered "Instruments", just the OEM boards), and that portion of any
         multiparameter monitor dedicated to assessing or helping to assess
         systemic hypoperfusion using signals obtained from the alimentary canal
         region between the stomach and the mouth, or the respiratory canal
         region between the lungs and face (including mouth and nasal regions).

                  j. "Know-How" shall mean any and all techniques, processes and
         apparatus for designing and/or making Instruments and/or Sensors,
         including but not limited to the Model 3000 system.

                  k. "Major Countries" as used in this Agreement means each of
         the following geographic territories: United States, Japan, United
         Kingdom, France, Germany and Italy.

                  l. "Model 3000" is a next generation Instrument and Sensor in
         development at OSI which constitutes an improvement to a model 2000
         Instrument and Sensor previously developed by OSI. The Model 2000 has
         been cleared by OSI to market by the U.S. Food and Drug Administration
         (FDA).

                  m. "Net Sales" as used in this Agreement means the amount
         actually received by Licensee and its Affiliates from the sale of
         Sensors or Instruments, as the case may be, less the sum of the
         following deductions where applicable: cash, trade or quantity
         discounts, sales, use, tariff, import/export duties or other excise or
         similar taxes imposed upon particular sales, transportation and related
         insurance charges and allowances or credits to customers because of
         rejections or returns, as calculated in accordance with consistently
         applied and generally accepted accounting principles as utilized by
         Licensee in its normal financial reporting. In the event Sensors or
         Instruments are bundled with or included as part of another product (a
         "Combined Product"), the amount received by Licensee for the Sensor
         and/or Instrument shall be deemed to be that portion of the total
         amount received by Licensee for the Combined Product that the cost of
         the Sensor and/or Instrument bears to the total cost of the Combined
         Product. "Net Sales" shall not include any mark-up charged by sales
         agents of Licensee which are not Affiliates and shall only

                                                                               4
<PAGE>

         include amounts actually received by Licensee as specified herein.

                  n. "Patent Rights" as used in this Agreement means all right,
         title and interest of Licensor and its Affiliates in (i) the Patents;
         (ii) any patents that issue on the Patent Applications; (iii) any
         patents issuing from any reissues, renewals, extensions, divisionals,
         continuations and continuations-in-part of the Patents and Patent
         Applications; (iv) any foreign patents corresponding to such patents;
         and (v) any patents issuing on any and all improvements, modifications,
         enhancements or new ideas developed or conceived by Licensor and/or
         ICCM, and their respective Affiliates, and in which Licensor and/or
         ICCM retain Field of Use rights in and to, and which is usable in
         connection with the Patents and the Patent Applications for use in the
         Field of Use.

                  o. "Sensor" as used in this Agreement means any device which
         detects signals either in or around

                           (1) the alimentary canal between the stomach and the
                  mouth;

                           (2) the mouth;

                           (3) the nasal passages; or

                           (4) the respiratory region between the lungs and face
                  (nose/mouth),

         to assess or help assess systemic hypoperfusion and that is covered by
         a validly issued U.S. patent included in the Patent Rights. Sensors can
         be disposable or reusable, and shall not include any part of an
         Instrument, which may connect to the Sensor to process electrical or
         optical signals from the Sensor.

                  p. "Supplemental Agreement" means the agreement being executed
         contemporaneously herewith by Licensee and ICCM.

                                                                               5
<PAGE>

                  q. "Supply Agreement" means the supply agreement between
         Licensor and Licensee being executed contemporaneously herewith.

                  r. "Third Party Infringement" shall mean any activity by any
         third party that constitutes infringement of any of the Patent Rights.

                  s. "Year 1" shall extend for one year and shall begin on the
         first day of the first calendar quarter after the Date of First
         Commercial Sale.

                  t. "Year 2" shall extend for one year and begin upon
         termination of Year 1.

                  u. "Year 3" shall extend for one year and begin upon
         termination of Year 2.

                  v. "Year 4" shall extend for one year and begin upon
         termination of Year 3.

         2. License.

                  a. Grant. Licensor hereby grants to Licensee an exclusive,
         worldwide, right and license to practice the Patent Rights and Know-How
         in the Field of Use to make, have made, develop, improve, use, promote,
         market and sell Sensors and Instruments, including the right to have
         third parties manufacture, sell and distribute on behalf of Licensee.
         Licensee shall inform Licensor of the identities of third parties that
         are selling Instruments or Sensors on behalf of Licensee, and Licensee
         shall inform Licensor of the identities of third parties that are
         manufacturing Instruments or Sensors on behalf of Licensee. Licensor
         hereby reserves the right to practice the Patent Rights to make or have
         made Sensors or Instruments in the Field of Use as necessary to perform
         under the Supply Agreement to supply Sensors and Instruments
         exclusively to Licensee. Licensor hereby reserves all rights to
         practice the Patent Rights and the Know-How outside the Field of Use.

                                                                               6
<PAGE>

                  b. Conversion to Non-Exclusive License. If Licensee elects not
         to make Minimum Royalty Payments to Licensor for an entire year as
         permitted by Section 3.e, the license granted in Section 2.a may
         become, at the option of Licensor, non-exclusive upon sixty (60) days
         written notice if the past due Minimum Royalty Payments are not paid
         during this sixty (60) day period.

                  c. Repurchase Rights. If Licensee elects not to make Minimum
         Royalty Payments for two (2) consecutive years as permitted by Section
         3.e, OSI, on thirty (30) days notice, may purchase back from Licensee
         worldwide distribution, development and manufacturing rights for the
         sum of two million dollars ($2,000,000) plus fifty percent (50%) of
         Licensee's prior year's gross margin on worldwide Sensors and
         Instruments. This repurchase right shall expire if not exercised within
         six (6) months of Licensee's failure to make Minimum Royalty Payments
         for two (2) consecutive years.

         3. Payments; Royalties; Fees.

                  a. Manufacturing Milestone Payments. In the first year after
         the Effective Date, Licensee shall pay Licensor the following product
         development and manufacturing development milestone payment amounts
         (which amounts are not license fees):

                           (1) Seven hundred fifty thousand dollars ($750,000)
                  upon complete execution of this Agreement (net ten (10) days).

                           (2) Five hundred thousand dollars ($500,000) upon
                  agreement in writing between Licensee and Licensor on detailed
                  Model 3000 customer functional requirements which are
                  consistent in detail with Nellcor's product development
                  process for customer requirements. The parties expect such
                  requirements to be agreed upon within one (1) month of the
                  Effective Date. If such agreement cannot be reached within
                  three (3) months of the Effective Date, Licensee may terminate
                  this Agreement on thirty (30) days written notice and owe no
                  additional

                                                                               7
<PAGE>

                  monies hereunder.

                           (3) Four hundred thousand dollars ($400,000) net
                  forty-five (45) days after effectively transferring the design
                  of the Model 3000 from the Licensor's development organization
                  to the Licensor's manufacturing operation. An effective
                  transfer will occur when the Licensor has demonstrated that
                  its quality system, the product design of the Model 3000, and
                  the processes involved in its manufacture are in compliance
                  with the Quality System Regulation (QSR, 21 CFR Part 820).
                  Evidence of compliance will include ***. An effective transfer
                  shall require that OSI pass all three audits referenced above,
                  and successfully demonstrate completion of OSI's QSR
                  procedure. If the Model 3000 as manufactured by Licensor is
                  subject to a quality recall, all costs associated with the
                  recall shall be borne *** percent (***%) by Licensor and ***
                  percent (***%) by Licensee. Licensee shall be entitled to take
                  a credit against Minimum Royalty Payments and running
                  royalties for any Licensor recall costs paid or incurred by
                  Licensee.

                           (4) Three hundred fifty thousand dollars ($350,000)
                  net forty-five (45) days after: the Date of First Commercial
                  Sale, Licensor has demonstrated to Licensee's reasonable
                  satisfaction a first pass yield of 95% while meeting the labor
                  and material costs specified in the Supply Agreement on
                  standard production lots of probes and monitors (minimum of
                  1,000 probes and 100 monitors required), Licensor obtains U.S.
                  clearance to market or documentation satisfying FDA letter to
                  file requirements, and Licensor has transferred all Know-How
                  associated with such Model 3000 manufacturing to Licensee.

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                               8
<PAGE>

                  b. License Percentage Royalty to ICCM. Licensee shall pay to
         ICCM, on behalf of Licensor, a royalty on Net Sales of any Sensors and
         Instruments sold by Licensee equal to the amounts owed by OSI under
         Section 3(a) of the ICCM License.

                  c. Percentage Royalty to Licensor in Patented Countries.
         Subject to royalty amounts being reduced as provided by subsection 3.d,
         in Year 1 Licensee shall pay to Licensor a royalty on Net Sales of any
         Sensors sold by Licensee equal to *** percent (***%) of Net Sales of
         Sensors minus all amounts payable by Licensee to ICCM for Sensors under
         Section 3.b. In Year 2 and thereafter, Licensee shall pay to Licensor a
         royalty on Net Sales of any Sensors sold by Licensee equal to the
         percentage set forth below (minus all amounts payable by Licensee to
         ICCM for Sensors under Section 3.b) which is dependent on Licensee's
         gross margin.

            Nellcor Sensor Gross Margin %, before          Licensor Royalty %
          payment of Royalties to Licensor and ICCM            on Sensors
          -----------------------------------------            ----------

                         ***% +                                   ***%

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                               9
<PAGE>

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

                         ***%                                     ***%

                     ***% or less                                 ***%

         Subject to royalty amounts being reduced as provided by subsection 3.d,
         royalties payable with respect to Net Sales of Sensors shall be
         calculated separately for each country based on the Average Selling
         Price in each country. Subject to royalty amounts being reduced as
         provided by subsection 3.d, Licensee shall pay to Licensor a royalty on
         Net Sales of any Instruments sold by Licensee equal to *** percent
         (***%) of the aggregate Gross Margin with respect to Instruments that
         are sold by Licensee minus all amounts payable by Licensee to ICCM for
         Instruments under Section 3.b. Royalties under this Section 3.c shall
         by payable with respect to sales of Sensors and related Instruments
         only if a valid patent (or an application is pending as provided in
         subsection 3.d), included in the Patent Rights with claims covering the
         Sensor or Instruments, as the case may be, has issued (or is pending),
         and is in force in the country where the sales occur, prior to the date
         of sale.

                  d. Percentage Royalty to Licensor in Non-Patented Countries.
         For sales of Sensors and Instruments in countries in which a valid
         patent, included in the Patent Rights, with claims covering the Sensor
         or Instruments, as the case may be, has not issued prior to the date of
         sale, royalties to Licensor, but not ICCM, shall be *** those set forth
         in Section 3.c. However, Licensor may file patent applications in
         non-patented countries, and if it does so, Licensee shall pay Licensor
         full royalties as defined in Section 3.c (rather than *** royalties) on
         Net Sales in those countries where the application is pending, so long
         as the Sensor or Instrument, as the case may be, is covered

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                              10
<PAGE>

         by enforceable issued claims in a corresponding U.S. case. If, for some
         reason, the application(s) never issues as a patent in a reasonable
         period of time with claims covering the Sensor or Instruments, as the
         case may be, in the non-patented country(ies), Licensee shall deduct
         the *** percent (***%) overpayment, if any, in royalties for that
         country from future royalty, minimum and/or milestone payments.

                  e. Minimum Royalty. Notwithstanding Sections 3.a-3.d, Licensee
         shall pay to Licensor, or its designee, a minimum royalty equal to:

                       Year               Minimum Royalty
                       ----               ---------------
                      Year 2                   $***
                      Year 3                   $***
                      Year 4                   $***

         (hereinafter, "Minimum Royalty Payment"). Prior to October 1, 2003,
         minimum royalties payable by Licensee during any year shall first be
         paid by Licensee to ICCM on behalf of Licensor to fulfill Licensor's
         minimum royalty payment obligation to ICCM under Section 3(b) of the
         ICCM License, with any remainder then being paid to OSI. Minimum
         royalties shall be paid in equal quarterly installments within
         forty-five (45) days of the end of each calendar quarter, beginning
         with the first calendar quarter of Year 2; provided that any royalties
         paid pursuant to Sections 3.b-3.d with respect to Net Sales received or
         Gross Margins earned by Licensee for any minimum royalty year shall be
         applied as a credit against the Minimum Royalty Payment for such year.
         Licensee may elect to stop making Minimum Royalty Payments. If Licensee
         makes such election for an entire year, Licensor shall have the right
         to convert the license granted to Licensee to a non-exclusive license
         pursuant to Section 2.b, and if such election extends over two (2)
         years Licensor shall have the right to repurchase the license rights
         pursuant to Section 2.c.

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                              11
<PAGE>

                  f. Payments. All royalties payable to Licensor and ICCM under
         this Agreement shall be paid within forty-five (45) days after the end
         of each calendar quarter to which such royalty payment relates. The
         Minimum Royalty Payment, if any, shall be paid within forty-five (45)
         days after the end of each calendar quarter. Each royalty payment shall
         be accompanied by a written statement, showing (i) aggregate Net Sales
         received by Licensee during such quarter in connection with the sale of
         Sensors; (ii) Gross Margin earned by Licensee during such quarter in
         connection with the sale or placement of Instruments; (iii) any
         sublicense fees received; and (iv) the amount of royalty and sublicense
         fees, as the case may be, payable to Licensor and ICCM with respect to
         each of the foregoing, on a country by country basis. Licensee shall
         submit such quarterly statements beginning with the first royalty
         payment made pursuant to Sections 3.b-3.d.

                  g. Books and Records. Licensee agrees to keep for three (3)
         years complete and accurate books of account and records covering all
         transactions relating to this Agreement. Licensor, at its expense,
         shall have the right to have an independent accounting firm, mutually
         agreeable to both parties, one time in each calendar year on reasonable
         notice, to audit Licensee's books of account and records that related
         to the subject matter and terms of this Agreement. Licensor shall not
         have any right to audit any other books of account or records of
         Licensee. Such firm shall only disclose to Licensor (and copy Licensee)
         such information as is necessary to verify the accuracy of Licensee's
         statements.

         4. Licensee's Development and Commercialization Efforts.

                  So long as the license granted herein remains exclusive,
         Licensee shall use reasonable commercial efforts to develop and
         commercialize Sensors and Instruments. Licensee shall be responsible
         for:

                  a. funding and monitoring any clinical trial and/or outcome
         studies as Licensee in its sole discretion deems appropriate;

                                                                              12
<PAGE>

                  b. R&D support and redesign of Sensors and Instruments (but
         not manufacturing engineering support during Year 1);

                  c. manufacturing Sensors and Instruments and engineering
         manufacturing support after Year 1; and

                  d. developing sales and marketing infrastructure.

         5. Licensor's Development and Commercialization Efforts.

                  a. Licensor shall use reasonable commercial efforts to create
         Model 3000 customer functional requirements which are agreeable to
         Licensee so as to complete the Section 3.a(2) milestone as soon as
         possible after the Effective Date.

                  b. Licensor shall use reasonable commercial efforts to achieve
         the Model 3000 development to manufacturing transfer milestone set
         forth in Section 3.a(3).

                  c. Licensor shall use reasonable commercial efforts to supply
         Licensee with manufactured Sensors and Instruments in accordance with
         the terms of the Supply Agreement, and to effectively transfer
         manufacturing equipment, processes and knowledge to Licensee during the
         term of the Supply Agreement.

                  d. Other than the amounts set forth in Section 3 and in the
         Supply Agreement, Licensor shall not be entitled to any compensation
         whatsoever for development and manufacturing of Sensors and
         Instruments, or for providing support therefor. All amounts payable
         under Section 3.a are for development and manufacturing support, and
         are not prepaid royalties.

         6. Licensee's Representations and Warranties.

                                                                              13
<PAGE>

                  Licensee hereby represents and warrants to Licensor that as of
         the date hereof:

                  a. Licensee is a corporation duly organized, validly existing
         and in good standing under the laws of the State of Delaware, and this
         Agreement has been duly authorized by all necessary corporate action.

                  b. This Agreement is the legal, valid and binding obligation
         of Licensee, enforceable against Licensee in accordance with its terms.

                  c. Neither the execution and delivery of this Agreement nor
         the compliance with the terms and conditions hereof will conflict with,
         result in a breach or violation by Licensee of or constitute a default
         under any of the terms, conditions or provisions of any contract,
         agreement or other instrument to which Licensee is or may be bound or
         affected.

                  d. Licensee is under no obligation or subject to any judicial,
         administrative or other proceeding which would limit licensee's ability
         to fully perform its obligations hereunder.

         7. Licensor's Representations and Warranties.

                  Licensor hereby represents and warrants to Licensee that as of
         the date hereof:

                  a. Licensor is a corporation duly organized, validly existing
         and in good standing under the laws of the State of Delaware, and this
         Agreement has been duly authorized by all necessary corporate action.

                  b. This Agreement is the legal, valid and binding obligation
         of Licensor, enforceable against Licensor in accordance with its terms.

                                                                              14
<PAGE>

                  c. Neither the execution and delivery of this Agreement nor
         the compliance with the terms and conditions hereof will conflict with,
         result in a breach or violation by Licensor of or constitute a default
         under any of the terms, conditions or provisions of any contract,
         agreement or other instrument to which Licensor is or may be bound or
         affected.

                  d. The Patent Rights include all patents and patent
         applications that Licensor has any interest in and which are useable in
         connection with making, using or selling Sensors and/or Instruments in
         the Field of Use.

                  e. Except for the non exclusive rights Nihon Kohden has in
         U.S. Patent No. 5,579,763 and foreign equivalents in conjunction with
         ISFET pCO2 and CO2 sensors, Licensor is the sole and exclusive licensee
         of the Exhibit A1 Patent Rights and Licensor has not granted any
         licenses or any other rights in the Exhibit A1 Patent Rights to any
         party other than Licensee. Licensor is the sole and exclusive owner of
         the Exhibit A2 Patent Rights, free and clear of any license, security
         interests, known claims, encumbrances or known charges of any kind, and
         has full right, power and authority to enter into this Agreement and to
         grant to Licensee the rights to be granted hereunder. Licensor has not
         granted to any third party any rights of first refusal with respect to
         the licenses granted herein or any other rights to obtain a license
         from Licensor to practice the Patent Rights, other than as set forth in
         the ICCM License.

                  f. Licensor is not under any obligations inconsistent with the
         provisions of this Agreement.

                  g. To the best of Licensor's knowledge, (i) the Patent Rights
         are valid and enforceable, including inventorship, and (ii) the rights
         granted under this Agreement do not infringe any patent, copyright,
         trademark, license, trade secret or other intellectual property right
         of any third party. Licensor is not aware of any information which
         could render any of the claims of any of the Patent Rights invalid or
         unenforceable.

                  h. There is no legal, administrative, arbitration, or other
         proceeding, suit, claim or action of any nature, judgment, decree,
         decision, injunction, writ or order pending or,

                                                                              15
<PAGE>

         to the knowledge of Licensor, threatened or contemplated by or against
         or involving Licensor or its shareholders, directors or officers (but
         only in their capacity as such), pertaining to the Patent Rights or
         this Agreement, whether at law or in equity, before or by any person,
         entity governmental or quasi-governmental, administrative or regulatory
         agency or any court, other than pending patent applications.

                  i. OSI is in compliance with all, and not in breach of any of,
         the terms of the ICCM License, including but not limited to all royalty
         payments and development and commercialization obligations.

         8. Term and Termination.

                  a. Term. The term of this Agreement shall commence on the
         Effective Date and shall remain in force, unless terminated earlier in
         accordance with Section 8.b, until the latest expiration date of a
         validly issued U.S. or foreign patent subject to this Agreement.

                  b. Termination. Notwithstanding the provisions of Section 8.a,
         this Agreement may be terminated in accordance with the following
         provisions:

                           (1) By Licensor under Section 3.a(2).

                           (2) Upon mutual written agreement of the parties.

                           (3) Either party may terminate this Agreement by
                  giving notice in writing to the other party in the event the
                  other party is in material breach of this Agreement, so long
                  as the other party does not, in good faith, dispute the
                  validity of the breach, and the other party shall have failed
                  to cure such breach within ninety (90) days of receipt of
                  written notice thereof from the first party, unless such
                  breach cannot reasonably be cured within ninety (90) days, in
                  which case the breaching party shall have undertaken good
                  faith efforts to cure such breach within ninety (90) days. If
                  the breach is disputed, in good faith, the Agreement

                                                                              16
<PAGE>

                  can only be terminated on ninety (90) days notice after the
                  dispute is resolved unless such breach cannot reasonably be
                  cured within ninety (90) days, in which case the breaching
                  party shall have undertaken good faith efforts to cure such
                  breach within ninety (90) days.

                           (4) Licensee may terminate this Agreement immediately
                  if any material claim of ***.

                           (5) Licensee may terminate this Agreement for any
                  reason upon one hundred eighty (180) days notice anytime after
                  December 31, 2002.

                  c. Rights and Obligation on Termination. In the event of
         termination of this Agreement for any reason, the parties shall have
         the following rights and obligation:

                           (1) Licensee shall remain responsible for any payment
                  due to Licensor that has accrued prior to the effective date
                  of termination.

                           (2) The license granted to Licensee hereunder shall
                  immediately terminate and be of no further force and effect
                  for products not yet manufactured.

                           (3) Sections 10, 11.a, 11.b and 12 shall survive
                  termination of this Agreement.

                           (4) Licensee, its Affiliates and sublicensees shall
                  be permitted to sell any inventory of Sensors and Instruments
                  on hand at the effective date of termination, provided that no
                  provision of this Agreement shall prevent Licensee, its
                  Affiliates or sublicensees from practicing the Patent Rights
                  or selling Sensors and Instruments after termination of this
                  Agreement if the relevant Patent Rights have expired.

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                              17
<PAGE>

         9. Patent Prosecution and Maintenance.

                  a. Existing Patents and Patent Applications and Licensor
         Improvements. Licensor shall pay when due all maintenance fees for the
         Patent Rights in accordance with applicable law and regulation.
         Licensor shall prosecute the Patent Applications and any other
         applications comprising the Patent Rights, at Licensor's expense. If
         Licensor prosecutes any such patent application and a valid patent
         issues thereon, then Licensor shall maintain, including payment of any
         maintenance fees, any patents that issue on such patent application
         that Licensor prosecuted. If Licensor (and ICCM) fails to prosecute or
         maintain any such patent or patent application, Licensor shall so
         notify Licensee in a timely manner, and Licensee shall have the right,
         but not the obligation, to prosecute and maintain any such patent or
         patent application, at Licensee's expense, and Licensor shall then
         promptly assign to Licensee ownership of such patent or patent
         application if owned by Licensor or assign its license to Licensee if
         the patent or patent application is licensed to Licensor. Licensor
         shall provide Licensee with copies of all relevant documentation on a
         confidential basis so that Licensee may undertake such prosecution or
         maintenance it assumes, and both parties shall keep the other informed
         and apprised of the continuing prosecution and maintenance with respect
         to all Patent Rights.

                  b. Future Patents and Patent Applications Covering Licensee
         Improvements. Licensee shall have the right, but not the obligation, to
         prosecute and maintain any patent applications covering any
         modifications or improvements it creates to the Sensors and
         Instruments, at Licensee's expense. All such modifications and
         improvements shall be solely owned by Licensee. Licensee shall
         determine in its sole discretion whether any particular patent
         application shall be filed or prosecuted or any patent shall be
         maintained pursuant to this Section 9.b. Any such patent application
         and patent shall be in the name of Licensee and shall not be part of
         the Patent Rights.

                                                                              18
<PAGE>

         10. Infringement.

                  a. Action by Licensor. When information comes to the attention
         of Licensor or Licensee to the effect that any of the Patent Rights
         have been or are threatened to be infringed by a third party, Licensor
         shall have the initial right, but not the obligation, at its expense,
         to take such action as Licensor may deem necessary to prosecute or
         prevent such Third Party Infringement, including the right to bring any
         suit, action or proceeding (or defend a declaratory judgement action)
         involving any such Third Party Infringement. Licensor shall notify
         Licensee promptly of the receipt of any such information and of the
         commencement of any such suit, action or proceeding. If Licensor
         determines that it is necessary or desirable for Licensee to join any
         such suit, action or proceeding, Licensee shall execute all documents
         and perform such other acts as may be reasonably required. In the event
         that Licensor brings a suit, any sums recovered in such suit or in
         settlement thereof shall be distributed as follows: (i) first to
         Licensor for reimbursement for all costs and expenses, including
         reasonable attorneys' fees, involved in such suit; (ii) second to
         Licensor for accrued and unpaid royalties, if any; and (iii) the
         balance, if any, *** percent (***%) to Licensee and *** percent (***%)
         to Licensor.

                  b. Action by Licensee. If, within ninety (90) days after
         receipt of infringement information described in Section 10.a or after
         giving ninety (90) days notice to Licensee of such information,
         Licensor does not notify Licensee that Licensor has commenced suit
         against any infringer, Licensee shall have the right, but not the
         obligation, to bring suit (or defend a declaratory judgement action)
         for such alleged Third Party Infringement. Licensee may join Licensor
         and/or ICCM as party plaintiff (or declaratory judgement defendant), if
         appropriate, or if Licensor and/or ICCM is not joined Licensor and/or
         ICCM shall assign the relevant Patent Rights to Licensee. Licensor and
         ICCM shall execute all documents and take all other actions, including
         giving testimony, which may reasonably be required in connection with
         such suit, action or proceeding. Licensor hereby grants to Licensee the
         right to exclusive control of any such suit, action or

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                              19
<PAGE>

         proceeding and the exclusive right to compromise, litigate, settle or
         otherwise dispose of any such suit, action or proceeding. In the event
         that Licensee brings a suit, any sums recovered in such suit or in
         settlement thereof shall be distributed as follows: (i) first to
         Licensee for reimbursement for all costs and expenses, including
         reasonable attorneys' fees, involved in such suit; (ii) second to
         Licensor for accrued and unpaid royalties, if any; and (iii) the
         balance, in any, *** percent (***%) to Licensee and *** percent (***%)
         to Licensor.

                  c. Joint Action. If a third party infringes any Patent Rights
         and any relevant patent owned by Licensee, Licensor and Licensee may
         elect to jointly bring (or jointly defend in a declaratory judgement
         action) a suit, action or proceeding to stop all Third Party
         Infringement and infringement of patents owned by Licensee, and will
         equally share all costs and expenses, including reasonable attorneys'
         fees, involved in such suit. In the event that Licensor and Licensee
         jointly bring a suit, any sums recovered in such suit or in settlement
         thereof shall be distributed as follows: (i) first to Licensor and
         Licensee for reimbursement for all costs and expenses, including
         reasonable attorneys' fees, involved in such suit; (ii) second to
         Licensor for accrued and unpaid royalties; if any; and (iii) the
         balance, if any, *** percent (***%) to Licensee and *** percent (***%)
         to Licensor. If one party hereto elects not to join in such suit after
         ninety (90) days notice, the other party many proceed with the suit as
         provided in Section 10.a or 10.b, as the case may be.

                  d. Enforcement of Licensee Patents. Licensee shall have sole
         authority and responsibility for enforcing Licensee-owned patents
         against infringement.

                  e. Reduction of License Payments Due to Competitive Product
         and Suit. Notwithstanding the parties' efforts pursuant to Sections
         10.a-10.c, if a competitor is selling or offering to sell a product
         that infringes any of the independent claims of U.S. Patent No. *** (or
         reissue or reexamination patents thereof) and which is competitive with
         Sensors or Instruments, then:

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                              20
<PAGE>

                           (1) if the Third Party Infringement is in a Major
                  Country, the Minimum Royalty Payments shall be suspended as
                  long as the Third Party Infringement continues, and will only
                  resume when all such Third Party Infringement ceases in all
                  Major Countries, the resumption being at the minimum royalty
                  rate in effect at the time the suspension began;

                           (2) if the Third Party Infringement is anywhere in
                  the world and Licensee's fiscal annual Net Sales are decreased
                  in any given country by *** percent (***%) or more of any
                  prior fiscal annual level in the previous three (3) years in
                  such given country, then the royalties owed to Licensor under
                  Sections 3.c and 3.d for such country(ies) shall continue to
                  accrue but the amount that is payable shall be reduced by ***
                  with respect to sales in the country in which Net Sales have
                  so decreased by *** percent (***%) so long as the Third Party
                  Infringement continues in such country, and unpaid accrued
                  amounts shall only be payable out of any sums recovered from
                  actions brought under Sections 10.a-c, and in addition;

                           (3) if Licensee brings a suit, action or proceeding
                  (or defends a declaratory judgement action) associated with
                  the Third Party Infringement, all royalties thereafter
                  accruable to Licensor under Sections 3.c and 3.d (but not
                  including amounts payable under Section 3.b) shall be
                  creditable against all costs and expenses, including
                  reasonable attorneys' fees, and damages involved in such suit
                  (and to the extent so credited such royalties shall not be
                  payable to Licensor) until all such costs, expenses and
                  damages have been recovered by Licensee using credited
                  royalties and any settlement or judgement amount collected
                  from the infringer. Ongoing Licensor royalties shall only
                  restart and be payable to Licensor for Net Sales which result
                  in royalties which exceed all such Licensee costs, expenses
                  and damages.

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                              21
<PAGE>

                  f. Action Against Licensee. Licensor will cooperate with
         Licensee in the defense of any suit, action or proceeding against
         Licensee, or any Affiliate or sublicensee of Licensee, alleging the
         infringement of a patent or other intellectual property right owned by
         a third party by reason of the use of the Patent Rights in the
         manufacture, use, promotion or sale of Sensors and/or Instruments.
         Licensee shall give Licensor prompt notice of the commencement of any
         such suit, action or proceeding or claim of infringement. Licensor
         hereby grants to Licensee the right to exclusive control of any such
         suit, action or proceeding and the exclusive right to compromise,
         litigate, settle or otherwise dispose of any such suit, action or
         proceeding and shall provide all information and assistance necessary
         to defend or settle any such suit, action or proceeding. Licensee may
         join Licensor as a defendant, if necessary or desirable, and Licensor
         shall execute all documents and take all other actions, including
         giving testimony, which may reasonably be required in connection with
         the defense of such suit, action or proceeding. Licensee shall be
         solely responsible for all out-of-pocket defense costs (including
         attorney fees) incurred by Licensee with the defense of such suit,
         action or proceeding, and Licensee shall be entitled to retain any
         recovery associated with such suit, action or proceeding. Licensor
         shall be responsible to Licensee for half of any damages awarded to
         such third party in such suit, action or proceeding, or in settlement
         thereof. Licensor shall pay Licensee its share of such damages as
         follows:

                  Within thirty (30) days of a final judgement or settlement, an
                  amount not to exceed all royalties paid to Licensor during the
                  period the suit, action or proceeding was pending, and to the
                  extent any amount of Licensor's share of such damages remains,
                  Licensee shall take a credit against all royalties thereafter
                  payable to Licensor under Section 3.c (but not including
                  amounts payable under Section 3.b) until all such Licensor's
                  share of damages is paid.

         g. ***

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                              22
<PAGE>

         11. Indemnification and Insurance.

                  a. Indemnification by Licensor. Licensor shall indemnify, hold
         harmless, defend and protect Licensee and its Affiliates, sublicensees,
         successors, assigns, employees, representatives and agents from and
         against any and all claims, causes of action, costs, expenses, losses,
         damages and liabilities (including, without limitation, reasonable
         attorneys' fees) arising out of or resulting from (i) any breach by
         Licensor of this Agreement, (ii) any claim by ICCM that OSI is in
         breach of the ICCM License and which breach is cured by Nellcor, (iii)
         any claim that any rights within Patent Rights were granted by Licensor
         to any third party, or (iv) any unlawful misappropriation by Licensor
         of trade secrets or proprietary rights belonging to any third party.
         Licensee shall have the right to deduct any amount to which it is
         entitled to indemnification hereunder against royalties or other
         payments due under Sections 3.a, 3.c and 3.d as long as Licensee pays
         all such deducted amounts to a third party escrow agent, which is
         reasonably satisfactory to Licensee and Licensor, to be held until the
         indemnification claim is resolved.

                  b. Indemnification by Licensee. Licensee shall indemnify, hold
         harmless, defend and protect Licensor and its Affiliates, successors,
         assigns, employees, representatives and agents, from and against any
         and all claims, causes of action, costs, expenses, losses, damages and
         liabilities (including, without limitation, reasonable attorneys' fees)
         arising out of or resulting from any breach by Licensee of this
         Agreement.

                  c. OSI Breach of ICCM License. In addition to rights NPB has
         under Section 11.a, if OSI breaches the ICCM License more than once,
         and NPB chooses to cure such breaches, the ICCM License shall
         immediately revert from OSI and be assigned to NPB by OSI and NPB shall
         immediately assume all OSI rights and obligations under the ICCM
         License. In addition, if the cure of any single breach by OSI costs NPB
         one million dollars ($1,000,000) or more to correct, the ICCM License
         shall immediately revert from OSI and be assigned to NPB by OSI and NPB
         shall immediately assume all OSI rights and obligations under the ICCM
         License. NPB may only exercise its rights under this Section 11.c only
         if NPB is in compliance with this Agreement.

                                                                              23
<PAGE>

         12. Confidentiality.

                  Each party agrees not to disclose to any third party or use
         the other party's Confidential Information, as defined in this Section
         12, other than for purposes of this Agreement. Upon termination of this
         Agreement, all Confidential Information shall be returned to the
         disclosing party. "Confidential Information" means any information
         which is disclosed in any tangible form and is clearly labeled or
         marked as confidential, proprietary or its equivalent, or information
         which is disclosed orally or visually, is designated confidential,
         proprietary or its equivalent at the time of its disclosure and is
         reduced to writing and clearly marked or labeled as confidential,
         proprietary or its equivalent within thirty (30) days of disclosure;
         provided that "Confidential Information" shall not include information
         that (i) was in the receiving party's possession or was known to it
         prior to its receipt from the disclosing party; (ii) is or becomes
         public knowledge without the fault of the receiving party; (iii) is or
         becomes rightfully available on an unrestricted basis to the receiving
         party from a source other than the disclosing party; (iv) becomes
         available on an unrestricted basis to a third party from the disclosing
         party or from someone acting under its control; (v) is independently
         developed by the receiving party as demonstrated by its written
         records.

         13. Covenant Not to Compete

                  So long as Licensee's license is in force and is exclusive,
         Licensor agrees not to compete with Licensee by making and/or selling
         any product for any third party or providing any service to any third
         party in the Field of Use. Licensor retains the right to make and/or
         sell any existing or future product for any third party or to provide
         service to any third party outside of the Field of Use.

         14. Miscellaneous.

                                                                              24
<PAGE>

                  a. Public Announcements. Each of the parties hereto agrees
         that it will not, without the prior written consent of the other party,
         make any public announcement of this Agreement or any of the terms and
         conditions of this Agreement, except for such disclosure to the public
         or to governmental agencies as its counsel shall deem necessary to
         comply with applicable law, rule or regulation. Notwithstanding the
         foregoing, either party may disclose publicly that Licensor has granted
         Licensee an exclusive, worldwide license to manufacture and sell
         Sensors and Instruments within the Field of Use.

                  b. Assignment. Neither party may assign or otherwise transfer
         its rights and obligations under this Agreement without the prior
         written consent of the other party, except to (i) an Affiliate,
         provided that the original party to the Agreement remains obligated to
         perform under this Agreement or (ii) any successor in interest of all
         or substantially all of the business of such party relating to the
         licensed Patent Rights, whether by merger, operation of law,
         assignment, purchase or otherwise. Any prohibited assignment shall be
         null and void. All terms and conditions of this Agreement shall be
         binding on and inure to the benefit of the successors and permitted
         assigns of the parties.

                  c. Relationship. This Agreement shall not constitute either
         party as the legal representative, partner, joint venturer or agent of
         the other party hereto, nor shall either party have the right or
         authority to assume, create or incur any liability or any obligation of
         any kind, express or implied, against or in the name of or on behalf of
         the other party hereto.

                  d. Entire Agreement; Amendment. This Agreement, the
         Supplemental Agreement, the ICCM License and the Supplier Agreement
         constitute the entire agreement between the parties hereto relative to
         the subject matter hereof, and supersedes any and all prior agreements,
         written or oral, between the parties relating to such subject matter.
         No modifications or amendments of any of the terms hereof shall be
         valid or binding unless made in writing and signed by Licensor and
         Licensee.

                  e. Waiver. No waiver of any breach of any provision of this
         Agreement shall constitute a waiver of any prior, concurrent or
         subsequent breach of the same or any other

                                                                              25
<PAGE>

         provision hereof, and no waiver shall be effective unless made in
         writing.

                  f. Patent Recording. Licensor agrees to execute documents in
         the form given in Exhibit C for recording (at Licensee's expense) with
         the United States Patent Office for each patent included in the Patent
         Rights which issues in the United States. Licensor will cause such
         documents to be filed with the United States Patent Office for
         recording within thirty (30) days of the Effective Date of this
         Agreement or within thirty (30) days of issuance, whichever occurs
         later. Licensor further agrees to cooperate in executing and filing any
         additional forms necessary to perfect rights of Licensee granted
         herein. Licensee agrees to cooperate in executing and filing any
         additional forms desired by Licensor (at Licensor's expense) in the
         event the license to Licensee becomes nonexclusive or is terminated.

                  g. Notices. Notice permitted or required to be given under
         this Agreement shall be deemed sufficient if given in writing by
         facsimile, commercial air delivery service or by registered or
         certified air mail, postage prepaid, return receipt requested,
         addressed to the respective addresses of the parties set forth below 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: (i) 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); (ii) on the fifth business day
         following the date such notice was deposited in the mail; or (iii) on
         the second business day following the date such notice was delivered to
         a commercial air delivery service. Notices shall be given as follows:

                      If to Licensor:   Optical Sensors Incorporated
                                        7615 Golden Triangle Drive
                                        Suite C
                                        Minneapolis, Minnesota  55344
                                        Attn:  Chief Executive Officer
                                        Fax:  (952) 914-9441

                      If to Licensee:   Nellcor Puritan Bennett, Inc.
                                        4280 Hacienda Drive
                                        Pleasanton, California  94588

                                                                              26
<PAGE>

                                        Attn:  President, Nellcor Business Unit
                                        Fax:  (925) 463-4420

                      With a copy to:   Nellcor Puritan Bennett, Inc.
                                        4280 Hacienda Drive
                                        Pleasanton, California  94588
                                        Attn:  General Counsel
                                        Fax:  (925) 463-4420

                  h. Severability. If any provision of this Agreement shall be
         held invalid or unenforceable by any court of competent jurisdiction,
         the remaining provisions of this Agreement shall remain in full force
         and effect. Further, should any provision of this Agreement be deemed
         unenforceable by virtue of its scope, such provision shall be deemed
         limited to the extent necessary to render the same enforceable.

                  i. Governing Law. This Agreement will be construed in
         accordance with, and governed by, the laws of the State of California
         in all respects, including, without limitation, interpretation,
         performance, effect and remedies (without regard to the laws of
         conflict of any jurisdiction).

                  j. Headings. The headings of sections and subsections of this
         Agreement have been inserted for the convenience of reference only and
         shall in no way restrict or otherwise modify the terms on this
         Agreement.

                  k. Counterparts. This Agreement may be executed in one or more
         counterparts, each of which shall be deemed to be an original, but each
         of which together shall constitute one and the same document.

                                                                              27
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this License
Agreement as of the date and year written below.

                                        OPTICAL SENSORS INCORPORATED

                                        By   /s/ Paulita M. LaPlante
                                           ----------------------------
                                            Paulita M. LaPlante
                                            President

                                        Date:  September 28, 2001
                                             --------------------------

                                        NELLCOR PURITAN BENNETT INCORPORATED

                                        By  /s/ Doris E. Engibous
                                          -------------------------------------
                                            Doris E. Engibous
                                            President

                                        Date:  September 28, 2001
                                             --------------------------

                                                                              28
<PAGE>

                                   EXHIBIT A1
                                   ----------

                         Patents and Patent Applications
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
OSI           Country    Patent No. or     Title                               Status
Reference                Appl. No.
No.
-----------------------------------------------------------------------------------------------------------------------------
<S>           <C>        <C>               <C>                                 <C>
0379-0046     US         5,579,763         MEASUREMENT OF SYSTEMIC PERFUSION   Issued, 2nd Maintenance Fee due June 3,
                                                                               2004, no foreign filings
-----------------------------------------------------------------------------------------------------------------------------
0379-0046.20  US         08/710,208        MINIMALLY INVASIVE MEASUREMENT OF   Abandoned, Filed September 13, 1996.
                                           SYSTEMIC PERFUSION
-----------------------------------------------------------------------------------------------------------------------------
0379-0046.21  US         08/939,591        MINIMALLY INVASIVE MEASUREMENT OF   Abandoned, Filed September 29, 1997.
                                           SYSTEMIC PERFUSION
-----------------------------------------------------------------------------------------------------------------------------
0379-0046.22  US         6,055,447         MINIMALLY INVASIVE MEASUREMENT OF   Issued, 1st Maintenance Fee due October
                                           SYSTEMIC PERFUSION                  24, 2003
-----------------------------------------------------------------------------------------------------------------------------
0379-0046.23  US         6,216,024         METHOD AND DEVICE FOR ASSESSING     Issued, 1st Maintenance Fee due March 24,
                                           PERFUSION FAILURE IN A PATIENT      2002
-----------------------------------------------------------------------------------------------------------------------------
0379-0046.40  PCT Pub.   PCT/US98/20118    MINIMALLY INVASIVE MEASUREMENT OF   In National Phase in EPO, Australia,
from                     WO 99/16346       SYSTEMIC PERFUSION                  Canada, Japan, Filed September 25, 1998,
00379-0046.23                                                                  Published
-----------------------------------------------------------------------------------------------------------------------------
***           ***        ****              ***                                 ***
-----------------------------------------------------------------------------------------------------------------------------
***           ***        ****              ***                                 ***
-----------------------------------------------------------------------------------------------------------------------------
0379-0046.43  EPO        98948547.9        METHOD AND DEVICE FOR ASSESSING     Pending, Filed September 25, 1998,
                                           PERFUSION FAILURE IN A PATIENT      Designated France, Germany, UK, Italy,
                                                                               Netherlands, and Spain. Bibliographic
                                                                               data published July 19, 2000 under
                                                                               EP-A-1018933.
-----------------------------------------------------------------------------------------------------------------------------
0379-0046.44  Japan      2000-513493       METHOD AND DEVICE FOR ASSESSING     Pending, Filed September 25, 1998
                                           PERFUSION FAILURE IN A PATIENT
-----------------------------------------------------------------------------------------------------------------------------
0379-0046.24  US         6,258,046         METHOD AND DEVICE FOR ASSESSING     Issued,
                                           PERFUSION FAILURE IN A PATIENT BY
                                           MEASUREMENT OF BLOOD FLOW
-----------------------------------------------------------------------------------------------------------------------------
***           ***        ****              ***                                 ***
-----------------------------------------------------------------------------------------------------------------------------
0379-0046WO2  PCT Pub.   PCT.US00/08683    METHOD AND DEVICE FOR ASSESSING     In National Phase, entered during
                         WO 00/59372       PERFUSION FAILURE IN A PATIENT BY   September 2001 designating EPO, Japan,
                                           MEASUREMENT OF BLOOD FLOW           Australia, and Canada
-----------------------------------------------------------------------------------------------------------------------------
TBD           Austrailia NA                METHOD AND DEVICE FOR ASSESSING     NA
                                           PERFUSION FAILURE IN A PATIENT BY
                                           MEASUREMENT OF BLOOD FLOW
-----------------------------------------------------------------------------------------------------------------------------
TBD           Canada     NA                METHOD AND DEVICE FOR ASSESSING     NA
                                           PERFUSION FAILURE IN A PATIENT BY
                                           MEASUREMENT OF BLOOD FLOW
-----------------------------------------------------------------------------------------------------------------------------
TBD           EPO        NA                METHOD AND DEVICE FOR ASSESSING     NA
                                           PERFUSION FAILURE IN A PATIENT BY
                                           MEASUREMENT OF BLOOD FLOW
-----------------------------------------------------------------------------------------------------------------------------
TBD           Japan      NA                METHOD AND DEVICE FOR ASSESSING     NA
                                           PERFUSION FAILURE IN A PATIENT BY
                                           MEASUREMENT OF BLOOD FLOW
-----------------------------------------------------------------------------------------------------------------------------
0379-0048     US         6,071,237         pCO2 DETERMINATION IN THE TRACHEA   Issued, 1st Maintenance Fee due December
                                                                               6, 2003
-----------------------------------------------------------------------------------------------------------------------------
0379-0048.40  PCT Pub.   PCT/US00/04305    pCO2 DETERMINATION IN THE TRACHEA   In National Phase, entered during month of
                                                                               August 2001 designating EPO, Japan,
                                                                               Australia, and Canada
-----------------------------------------------------------------------------------------------------------------------------
TBD           Austrailia NA                pCO2 DETERMINATION IN THE TRACHEA   NA
-----------------------------------------------------------------------------------------------------------------------------
TBD           Canada     NA                pCO2 DETERMINATION IN THE TRACHEA   NA
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                              29
<PAGE>

<TABLE>
<CAPTION>
<S>           <C>        <C>               <C>                                 <C>
-----------------------------------------------------------------------------------------------------------------------------
TBD           EPO        NA                pCO2 DETERMINATION IN THE TRACHEA   NA
-----------------------------------------------------------------------------------------------------------------------------
TBD           Japan      NA                pCO2 DETERMINATION IN THE TRACHEA   NA
-----------------------------------------------------------------------------------------------------------------------------
***           ***        ****              ***                                 ***
-----------------------------------------------------------------------------------------------------------------------------
***           ***        ****              ***                                 ***
-----------------------------------------------------------------------------------------------------------------------------
***           ***        ****              ***                                 ***
-----------------------------------------------------------------------------------------------------------------------------
***           ***        ****              ***                                 ***
-----------------------------------------------------------------------------------------------------------------------------
***           ***        ****              ***                                 ***
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
***      Portions of this Exhibit have been omitted pending a confidential
         treatment request by the Company.

                                                                              30
<PAGE>

                                   EXHIBIT A2
                                   ----------

                         Patents and Patent Applications

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
OSI           Country    Patent No. or     Title                               Status
Reference                Appl. No.
No.
-----------------------------------------------------------------------------------------------------------------------------
<S>           <C>        <C>               <C>                                 <C>
0379-0031     US         5,672,515         SIMULTANEOUS DUAL EXCITATION /      Issued, 2nd Maintenance fee due March 30th,
                                           SINGLE EMISSION FLUORESCENT         2005.
                                           SENSING TECHNIQUE FOR pH
-----------------------------------------------------------------------------------------------------------------------------
0379-0031.40  PCT Pub.   PCT/US96/13791    SIMULTANEOUS DUAL EXCITATION /      In National Phase in EPO, Canada, and Japan,
                         WO 97/10495       SINGLE EMISSION FLUORESCENT         Filed August 27, 1996, Published
                                           SENSING TECHNIQUE FOR pH
-----------------------------------------------------------------------------------------------------------------------------
0379-0031.41  Canada     2,231,771         SIMULTANEOUS DUAL EXCITATION /      Pending, 1st Office Action Received
                                           SINGLE EMISSION FLUORESCENT
                                           SENSING TECHNIQUE FOR pH
-----------------------------------------------------------------------------------------------------------------------------
0379-0031.42  EPO        96929074.1        SIMULTANEOUS DUAL EXCITATION /      Pending, August 27, 1996 Filing Date.
                                           SINGLE EMISSION FLUORESCENT         Designated France, Germany, UK, Italy,
                                           SENSING TECHNIQUE FOR pH            Netherlands, and Spain. Bibliographic data
                                                                               published July 1, 1998 under EP-A-0850409
-----------------------------------------------------------------------------------------------------------------------------
0379-0031.43  Japan      9-511977          SIMULTANEOUS DUAL EXCITATION /      Pending, August 27, 1996 Filing Date.
                                           SINGLE EMISSION FLUORESCENT         Published October 26, 1999 under 11-512521.
                                           SENSING TECHNIQUE FOR pH            Request for examination not filed.
-----------------------------------------------------------------------------------------------------------------------------
0379.0034 &   US         5,714,121         OPTICAL CARBON DIOXIDE SENSOR AND   Issued, 1st maintenance fee due August 3,
 .10                                        ASSOCIATED METHODS OF MANUFACTURE   2001.
-----------------------------------------------------------------------------------------------------------------------------
0379.0034.40  PCT Pub.   PCT/US96/15353    OPTICAL CARBON DIOXIDE SENSOR AND   In National Phase in EPO, Australia, Canada,
                         WO 97/12227       ASSOCIATED METHODS OF MANUFACTURE   and Japan, Filed September 25, 1996, Published
-----------------------------------------------------------------------------------------------------------------------------
0379.0034.41  Austrailia 715,086           OPTICAL CARBON DIOXIDE SENSOR AND   Issued
                                           ASSOCIATED METHODS OF MANUFACTURE
-----------------------------------------------------------------------------------------------------------------------------
0379.0034.42  Canada     2,233,284         OPTICAL CARBON DIOXIDE SENSOR AND   Pending, Filed September 25, 1996, A Request
                                           ASSOCIATED METHODS OF MANUFACTURE   for Examination not filed.
-----------------------------------------------------------------------------------------------------------------------------
0379.0034.43  EPO        96933131.3        OPTICAL CARBON DIOXIDE SENSOR AND   Pending, Filed September 25, 1996, Designated
                                           ASSOCIATED METHODS OF MANUFACTURE   France, Germany, UK, Italy, Netherlands, and
                                                                               Spain. Bibliographic data published August 19,
                                                                               1998 under EP-A-0858594. Response to 1st
                                                                               office action filed September of 2000.
-----------------------------------------------------------------------------------------------------------------------------
0379.0034.44  Japan      9-513592          OPTICAL CARBON DIOXIDE SENSOR AND   Pending, Filed September 25, 1996, Published
                                           ASSOCIATED METHODS OF MANUFACTURE   on November 2, 1999 under 11-512819. Request
                                                                               for examination not filed.
-----------------------------------------------------------------------------------------------------------------------------
0379-0039     US         5,690,215         DEVICE FOR MAINTAING THE PARTIAL    Issued, 2nd Maintenance Fee due May 25, 2005.
                                           PRESSURE OF A DISSOLVED GAS IN A
                                           FLUID AND RELATED METHODS OF USE
-----------------------------------------------------------------------------------------------------------------------------
0379-0039.40  PCT Pub.   PCT/US97/08795    DEVICE FOR MAINTAING THE PARTIAL    In National Phase in EPO, Australia, Canada,
                         WO 98/01365       PRESSURE OF A DISSOLVED GAS IN A    Japan, Filed May 21, 1997, Published
                                           FLUID AND RELATED METHODS OF USE
-----------------------------------------------------------------------------------------------------------------------------
0379-0039.41  Austrailia 712,791           DEVICE FOR MAINTAING THE PARTIAL    Issued
                                           PRESSURE OF A DISSOLVED GAS IN A
                                           FLUID AND RELATED METHODS OF USE
-----------------------------------------------------------------------------------------------------------------------------
0379-0039.42  Canada     2,259,412         DEVICE FOR MAINTAING THE PARTIAL    Pending, Filed September 21, 1997, A Request
                                           PRESSURE OF A DISSOLVED GAS IN A    for Examination filed May of 2001.
                                           FLUID AND RELATED METHODS OF USE
-----------------------------------------------------------------------------------------------------------------------------
0379-0039.43  EPO        97928652.3        DEVICE FOR MAINTAING THE PARTIAL    Pending, Filed September 21, 1997,
                                           PRESSURE OF A DISSOLVED GAS IN A    Designated France, Germany, UK, Italy,
                                           FLUID AND RELATED METHODS OF USE    Netherlands, and Spain. Bibliographic data
                                                                               published July 21, 1999 under EP-A-0929470.
-----------------------------------------------------------------------------------------------------------------------------
0379-0039.44  Japan      10-505185         DEVICE FOR MAINTAING THE PARTIAL    Pending, Filed September 21, 1997
                                           PRESSURE OF A DISSOLVED GAS IN A
                                           FLUID AND RELATED METHODS OF USE
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                              31
<PAGE>

                                    EXHIBIT B
                                    ---------

     Methodology Currently Used for Calculating Direct Cost of Manufacturing

         At the beginning of each calendar year, Licensee projects total
manufacturing overhead costs, total purchased materials cost, and total direct
labor hours to produce product for sale for such year. Manufacturing overhead
costs consist of the costs of facilities, utilities, staff, travel and expenses
related to the production of product as accumulated in individual departmental
budgets. Total purchased materials costs are estimated by suppliers. Total
direct labor hours are estimated by extending engineered per unit direct labor
hours multiplied by the projected unit production of products. Total
manufacturing overhead costs are then divided by total direct labor hours to
arrive at a per direct labor hour manufacturing overhead rate. The average cost
of any individual product is determined by applying a direct labor rate and a
manufacturing overhead rate against the estimated direct labor hours for that
product, plus direct material costs. Total cost of sales for that product for
the year is determined by multiplying unit sales by the per unit standard cost.

                                                                              32
<PAGE>

                                    EXHIBIT C
                                    ---------

                                Notice of License

To Whom It May Concern

         Notice is hereby given by Optical Sensors Incorporated, having its
principal office at 7615 Golden Triangle Drive, Suite C, Minneapolis, Minnesota
55344 ("OSI"), and Nellcor Puritan Bennett, Inc., having its principle office at
4280 Hacienda Drive, Pleasanton, California 94588 ("Nellcor"), wherein OSI
granted Nellcor an exclusive Field of Use license to practice the invention
claimed by the following patent:

__________________, which was issued on ______________, entitled
____________________, including all divisionals, continuations,
continuations-in-part, reissues, reexaminations or extensions thereof and any
letters of patent that issue thereon.

OPTICAL SENSORS INCORPORATED

By:
   -------------------------------

Print Name:
           -----------------------

Title:
      ----------------------------

Date:
     -----------------------------

                                                                              33Second Amendment of Indenture

SECOND AMENDMENT OF INDENTURE

THIS SECOND AMENDMENT OF INDENTURE
 (this "Amendment"), made and entered into as of December 7, 2001 (the "Second Amendment Date"), by and between NATIONAL VISION, INC., a Georgia corporation (the "Company"), and State Street Bank and Trust Company, as Trustee (the "Trustee").

W  I T N E S S E T H:

WHEREAS, the Company and the Trustee are parties to that certain Indenture, dated as of June 15, 2001, as amended by the First Amendment of Indenture, dated as of July 6, 2001 (collectively, the "Indenture"); and

WHEREAS,  certain ambiguities, defects or inaccuracies have been discovered in the Indenture after it was executed and delivered, and pursuant to Section 9.01 of the Indenture, the parties hereto desire to amend the Indenture in certain respects to resolve or eliminate such ambiguities, defects or inaccuracies, all as set forth in and subject to the terms and conditions of this Amendment.

NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.          Defined Terms.  All capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in the Indenture as amended by this Amendment.

2.          Amendments of Indenture.  Subject to the terms and conditions of this Amendment, the Indenture shall be amended by: 

(a)          adding on the following definition to Section 1.01 after the definition of "Physical Notes" and before the definition of "plan of liquidation" therein the following:

" "Plan" means, collectively, the First Amended Joint Plan of Reorganization Under Chapter 11, Title 11, United States Code, filed by Vista Eyecare, Inc. and Certain of its Debtor Subsidiaries and the First Amended Joint Plan of Reorganization Under Chapter 11, Title 11, United States Code, Filed by Frame-N-Lens Optical, Inc.; Midwest Vision, Inc.; New West Eyeworks, Inc., and Certain of Their Debtor Subsidiaries, each as modified by the Modification to First Amended Joint Plan of Reorganization Under Chapter 11, Title 11, United States Code, filed by Vista Eyecare, Inc. and Certain of its Debtor Subsidiaries and First Amended Joint Plan of Reorganization Under Chapter 11, Title 11, United States Code, Filed by Frame-N-Lens Optical, Inc.; Midwest Vision, Inc.; New West Eyeworks, Inc., and Certain of Their Debtor Subsidiaries.";

 

(b)          adding on the third line of Section 2.12 after the word "2%" and before the "." therein the following:

"; provided, that interest and principal payments paid into an account held by the Trustee for the benefit of Persons entitled to receive distributions of Notes from the Disputed Claims Reserve (as defined in the Plan) shall not be deemed overdue and shall not accrue Default Interest";

(c)          deleting Section 3.02 in its entirety, and by substituting, in lieu thereof, the following replacement paragraph:

"SECTION 3.02.          Selection of Notes To Be Redeemed.

In the event that less than all of the Notes are to be redeemed at any time, selection of such Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed or, if such Notes are not then listed on a national securities exchange, on a pro rata basis; provided, however, that if a partial redemption is made with the proceeds of an Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to DTC procedures), unless such method is otherwise prohibited.  Notice of redemption shall be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address.  If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed, and contain a written statement showing the remaining principal amount of such Note.  The remaining aggregate principal amount of each Note shall thereafter be reflected on the records of the Trustee as provided by Section 2.01.  On and after the redemption date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the applicable redemption price pursuant to this Indenture.";

(d)          adding on the first line of Section 3.04 after the word "Date" and before the "," therein the following:

"caused to exist by Section 3.03";

(e)          adding on the first line of the second paragraph of Section 3.04 after the word "redemption" and prior to the word "shall" therein the following:

"caused to exist by Section 3.03";

(f)          deleting subparagraph (5) of Section 3.04 and by substituting, in lieu thereof, the following replacement subparagraph:

"(5)          Intentionally omitted.";

(g)          deleting subparagraph (7) of Section 3.04 and by substituting, in lieu thereof, the following replacement subparagraph:

2

 

"(7)          if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed; and";

(h)          adding on the third line of Section 3.06 after the word "3.07" and prior to the "." therein the following:

", to the registered Holders at the close of business on each February 13 or August 15, respectively, immediately preceding such Mandatory Redemption Payment Date";

(i)          deleting Section 3.08 in its entirety, and by substituting, in lieu thereof, the following replacement paragraph:

"SECTION 3.08.          Notes Redeemed in Part.

Upon any surrender, for transfer, exchange or otherwise, of a Note that has been redeemed in part, the Trustee shall authenticate for the Holder a new Note or Notes of equal face amount to the Note or Notes surrendered to be delivered with a written statement showing the aggregate principal amount of such Notes or Notes that remains due and owing pursuant to the terms thereof.";

(j)          deleting the third sentence of Paragraph 2 on the reverse side of the Note set forth as Exhibit A in its entirety; and

(k)          adding on the fourth line of Paragraph 7 after the word "3.07" and prior to the "." therein the following:

", to the registered Holders at the close of business on each February 13 or August 15, respectively, immediately preceding such Mandatory Redemption Payment Date";

3.          No Other Amendments.  Except for the amendments expressly set forth and referred to in Section 2 above, the Indenture shall remain unchanged and in full force and effect. 

4.          Ratification.  The Company hereby ratifies and reaffirms each and every term, covenant and condition set forth in the Indenture and all other documents delivered by the Company in connection therewith, effective as of the date hereof.

5.          Waiver by the Company    The Company hereby waives any claim, defense, demand, action or suit of any kind or nature whatsoever against the Trustee arising on or prior to the date hereof in connection with the Indenture or the transactions contemplated thereunder.

6.          Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK FOR CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SAID STATE.

3

 

7.          Severability of Provisions.  Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.  To the extent permitted by applicable law, the Company hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect.

8.          Counterparts.  This Amendment may be executed in any number of several counterparts, all of which shall be deemed to constitute but one original and shall be binding upon all parties, their successors and permitted assigns.

9.          Entire Agreement.  The Indenture as amended by this Amendment embodies the entire agreement between the parties hereto relating to the subject matter hereof and supersedes all prior agreements, representations and understandings, if any, relating to the subject matter hereof.

 

4

 

 

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed by their respective officers thereunto duly authorized, as of the date first above written.

	 	NATIONAL VISION, INC.

 

By        /s/
Mitchell Goodman
    

    
    Name:  Mitchell Goodman

Title:    Sr. Vice President and General Counsel
 

STATE STREET BANK AND TRUST COMPANY,

as Trustee

 

By        /s/ 
Kathy A. Larimore
    

    
    Name:  Kathy A. Larimore

Title:    Vice President

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