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                                                                    Exhibit 10.2

                          OPTICAL SENSORS INCORPORATED
                           CONVERTIBLE PROMISSORY NOTE

$1,500,000                                                         July 26, 2001
                                                          Minneapolis, Minnesota

         Optical Sensors Incorporated, a Delaware corporation (the "Company"),
for value received, hereby promises to pay to the order of Circle F Ventures
LLC, or any person to whom this Note is subsequently transferred and who becomes
a registered holder of this Note (the "Holder"), at the Holder's office or to
any account designated by the Holder to the Company in writing, the principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000) or, if less,
the aggregate unpaid principal amount of all Advances (as defined in the Bridge
Loan Agreement, effective as of May 1, 2001, by and among the Company and Circle
F Ventures LLC (the "Agreement")) made by the Company under the Agreement. Each
Advance shall be reflected on a schedule (Schedule A) attached to this Note, and
a portion of the outstanding principal amount of the Note, if any, that is equal
to an Advance, or any portion thereof, that has not been repaid on the year
anniversary date of such Advance shall be due and payable on such anniversary
date. This Note shall not bear interest.

         This Note is issued pursuant to the Agreement and is subject to the
terms and conditions of the Agreement, which is hereby incorporated by
reference.

         The Company waives demand, presentment, protest, notice of dishonor and
any other form of notice, not expressly required by the Agreement, that may be
required to hold the Company liable hereunder.

         This Note is subject to the following terms and conditions:

1. Payment. Any Advance may be prepaid, in whole or in part, after thirty days
from the date of such Advance, or from time to time thereafter, on ten (10)
days' prior written notice to the Holder, without premium or penalty. Any
principal payments made by the Company on the Note shall be applied against the
Advances in the order in which the Advances were made.

2.       Conversion.

         2.1 Terms of Conversion. The Holder shall have the right to convert all
or any portion of principal balance and accrued interest under this Note, at the
option of the Holder, into shares of the Company's common stock, $.01 par value
(the "Common Stock") at any time, and from time to time. The conversion price of
the Note shall be equal to $.25 per share; provided, however, that the
conversion price for the portion of the principal amount of this Note, if any,
representing Advances made after the date hereof and during thirty (30) day
period preceding the date on which the Company completes a private placement of
equity securities (a "Financing") shall be equal to the per share price of the
securities sold in such Financing The conversion price is subject to adjustment
pursuant to Section 2.4 below. Upon conversion, this Note must be surrendered
and accompanied by a written conversion notice (hereinafter referred to as the
"Conversion Notice") delivered to the Company at its principal office during
usual business hours.
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         2.2 Conversion Securities. The securities issuable upon conversion of
this Note pursuant to this Article 2 are referred to herein as the "Conversion
Securities."

         2.3 Issuance of Common Stock. The conversion of this Note will be
deemed to have been made at the close of business on the date on which this Note
has been surrendered for conversion with the Conversion Notice duly executed
(the "Conversion Date"). As of the Conversion Date, the rights of the Holder as
a noteholder with respect to that portion of this Note which is so converted
will cease and the Holder will be treated for all purposes as having become the
record holder or holders of the Conversion Securities as of such Conversion
Date. No fractional shares of Conversion Securities will be issued upon the
conversion of this Note, but, instead of any fraction of a share which would
otherwise be issuable, the Company will deliver an amount of cash equal to such
fraction multiplied by the then applicable conversion price.

         2.4 Adjustment of Conversion Price for Optional Conversion. The
conversion price shall be subject to adjustment from time to time as follows:

                  (a) In case the Company shall subdivide its outstanding shares
         of Common Stock into a greater number of shares at any time, the then
         applicable conversion price in effect immediately prior to such
         subdivision shall be proportionately reduced, and conversely, in case
         the outstanding shares of Common Stock of the Company shall be combined
         into a smaller number of shares, the then applicable conversion price
         in effect immediately prior to such combination shall be
         proportionately increased.

                  (b) If any capital reorganization or reclassification of the
         capital stock of the Company, or consolidation or merger of the Company
         with another corporation, or the sale of all or substantially all of
         its assets to another corporation shall be effected in such a way that
         holders of Common Stock shall be entitled to receive stock, securities
         or assets with respect to or in exchange for Common Stock, then, as a
         condition of such reorganization, reclassification, consolidation,
         merger or sale, lawful and adequate provision shall be made whereby the
         Holder shall thereafter have the right to receive upon the basis and
         upon the terms and conditions specified herein and in lieu of the
         Conversion Securities immediately theretofore receivable upon the
         conversion of this Note, such shares of stock, securities or assets as
         may be issued or payable with respect to or in exchange for a number of
         outstanding shares of such Common Stock equal to the number theretofore
         receivable upon the conversion of this Note had such reorganization,
         reclassification, consolidation, merger or sale not taken place, and in
         any such case appropriate provision shall be made with respect to the
         rights and interests of the Holder to the end that the provisions
         hereof (including, without limitation, provisions for adjustments of
         the then applicable conversion price and of the number of securities
         receivable upon the conversion of this Note) shall thereafter be
         applicable, as nearly as may be practicable, in relation to any shares
         of stock, securities or assets thereafter receivable upon the
         conversion of this Note.

                  (c) In any case in which this Section 2.4 shall require that
         an adjustment shall become effective immediately after a record date
         for an event, and if the Holder should convert after such record date
         and before the occurrence of such event, then the Company may defer
         until the occurrence of such event (i) issuing the additional shares of
         Common Stock issuable upon such conversion by reason of the adjustment
         required by such event over and above the shares issuable upon such
         conversion before giving effect to such

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         adjustment and (ii) paying to the Holder any amount of cash in lieu of
         a fractional share pursuant to Section 2.3 above.

                  (d) All calculations under this Article 2 shall be made to the
         nearest cent or to the nearest one-hundredth of a share, as the case
         may be.

                  (e) Upon any adjustment of the conversion price, then and in
         each such case, the Company shall give written notice thereof, by
         first-class mail, postage prepaid, addressed to the Holder, at the
         address of the Holder as shown on the books of the Company, which
         notice shall state the conversion price resulting from such adjustment
         and the increase or decrease, if any, in the number of Conversion
         Securities issuable upon conversion of this Note at such price, setting
         forth in reasonable detail the method of calculation and the facts upon
         which such calculation is based.

                  (f) The Company shall give the Holder 20 days' written notice
         prior to the effective date of any of the events described in Sections
         2.4(a) or 2.4(b) above.

         2.5 Adjustment of Number of Shares. Upon each adjustment of the
conversion price pursuant to Section 2.4, the number of Conversion Securities
shall be adjusted by dividing the then unpaid principal amount hereof by the
applicable per share conversion price in effect immediately following such
adjustment.

         2.6 Covenants of Company. The Company covenants that all of the
Conversion Securities will, upon issuance, be duly authorized and issued, fully
paid, nonassessable and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants that during the period within
which this Note may be converted, the Company will at all times have authorized,
and reserved free of preemptive or other rights for the purpose of issue, such
number of shares of Conversion Securities as shall then be issuable upon
conversion of this Note as herein provided.

3.       Consolidation, Merger, Sale or Conveyance

         3.1 Generally. Nothing contained in this Note will prevent any
consolidation or merger of the Company with or into any other corporation or
corporations or successive consolidations or mergers in which the Company or its
successor or successors is a party or parties, or will prevent any sale or
conveyance of the property of the Company as an entirety or substantially as an
entirety to any other corporation authorized to acquire and operate the same.
However, the Company hereby covenants and agrees that any such consolidation,
merger, sale or conveyance will be upon the condition that (a) immediately after
such consolidation, merger, sale or conveyance the corporation (whether the
Company or such other corporation) formed by or surviving any such consolidation
or merger, or to which such sale or conveyance will have been made, will not be
in default in the performance or observance of any of the terms, covenants and
conditions of this Note to be kept or performed by the Company; and (b) the
corporation (whether the Company or such other corporation) formed by or
surviving any such consolidation or merger, or to which such sale or conveyance
will have been made, will expressly assume the due and punctual payment of the
principal of this Note, according to the terms of this Note, and the faithful
performance and observance of all of the covenants, conditions, and requirements
of this Note to be performed by the Company by a supplemental instrument
executed and delivered to the Holder by such corporation.

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         3.2 Release; Liability of Successor Corporation. In case of any such
consolidation, merger, sale or conveyance, and upon the assumption by any
successor corporation pursuant to Section 3.1 above, such successor corporation
will succeed to and be substituted for the Company, with the same effect as if
it had been named in this Note in the Company's place, and the Company
(including any intervening successor to the Company which has become obligated
under this Note) will be relieved of any further obligation under this Note. All
of the covenants, stipulations, promises, and agreements contained in this Note
by or on behalf of the Company will bind its successors and assigns, whether so
expressed or not.

4.       Default

         4.1 Events of Default. An "Event of Default" will be deemed to occur
upon the happening of any of the following: (a) the failure to pay when due any
amount of principal payable hereunder, (b) the filing against the Company which
is not dismissed within 60 days thereafter, or by the Company, of a petition in
bankruptcy or for an arrangement or reorganization, (c) the making by the
Company of a general assignment for the benefit of creditors, (d) the
appointment of a receiver or trustee for the Company, (e) the institution of
liquidation or dissolution or reorganization proceedings with respect to the
Company, (f) the Company becoming unable or admitting in writing an inability to
pay its debts generally as they become due, or (g) the occurrence of any breach
by the Company of any representation, warranty or covenant of the Company under
the Agreement, which is not cured within thirty (30) days of written notice from
the Holder.

         4.2 Rights on Default. If an Event of Default occurs and is continuing,
the Holder may declare the principal of this Note, if not already due, to be due
and payable immediately, by written notice to the Company; provided, however,
that all amounts due under this Note shall be automatically due and payable,
without any action of the Holder, upon an Event of Default pursuant to Sections
4.1(b) - 4.1(f) above. Upon any such declaration, such principal will become due
and payable immediately, anything contained in this Note to the contrary
notwithstanding.

         4.3 Enforcement. If the principal of this Note becomes due and payable
immediately, whether by declaration of the Holder or automatically, the Holder
may proceed to protect and enforce its rights by an action at law, suit in
equity, or other appropriate proceeding. The Company shall pay all costs and
expenses of collection, including, without limitation, attorneys' fees and
disbursements in the event that any action, suit or proceeding shall be brought
by the Holder hereof to collect this Note.

5.       Miscellaneous.

         5.1 Headings. The headings in this Note are inserted for convenience
only and will not affect the meaning or interpretation of all or any part of
this Note.

         5.2 Governing Law. This Note will be deemed to be a contract made under
the laws of the State of Minnesota, and for all purposes will be construed in
accordance with the laws of the State of Minnesota.

         5.3 Construction. Wherever possible, each provision of this Note will
be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Note is prohibited by or invalid under
applicable law, such provision will be ineffective only to

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the extent of such prohibition or invalidity without invalidating the remainder
of such provision or the remaining provisions of this Note.

         5.4 Amendments. This Note may not be and will not be deemed or
construed to have been modified, amended, rescinded, canceled or waived, in
whole or in part, except by a written instrument signed by the Company and the
Holder.

         5.5 Payment Date. In case the Maturity Date or the date fixed for
prepayment of this Note is not a business day, then payment of principal to the
Holder need not be made on such date, but may be made on the next succeeding
business day with the same force and effect as if made on the Maturity Date or
the date fixed for prepayment.

         IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed as of the date set forth above.

                                         OPTICAL SENSORS INCORPORATED

                                         By
                                           ------------------------------------
                                           Paulita LaPlante
                                           President and Chief Executive Officer

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

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND SUCH LAWS COVERING THIS NOTE OR THE
COMPANY RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT, OFFER, PLEDGE OR OTHER DISTRIBUTION FOR VALUE
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
AND SUCH LAWS.
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                                   SCHEDULE A

    Date                                                               Amount
    ----                                                               ------
    Circle F Ventures
    -----------------
    May 3, 2001                                                       114,000
    May 11, 2001                                                       75,000
    May 17, 2001                                                       80,000
    May 31, 2001                                                       55,000
    June 5, 2001                                                       55,000
    June 15, 2001                                                      74,000
    June 28, 2001                                                      40,000
    July 12, 2001                                                      76,000

    Fleming Trust
    -------------
    June 28, 2001                                                      50,000
    July 26, 2001                                                      50,000

                                       6<PAGE>

                                                                    Exhibit 10.3

                                AMENDMENT TO THE
                          OPTICAL SENSORS INCORPORATED
                             1993 STOCK OPTION PLAN
                       (AS AMENDED THROUGH APRIL 19, 2001)

This Amendment to the Optical Sensors Incorporated 1993 Stock Option Plan, as
previously amended through April 19, 2001, is made effective as of July 26,
2001.

                                    RECITALS

WHEREAS, the Board of Directors of Optical Sensors Incorporated (the "Company")
approved an amendment to the Optical Sensors Incorporated 1993 Stock Option Plan
(the "Option Plan") by unanimous written consent effective July 26, 2001; and

WHEREAS, this Amendment is entered into to give effect to such action of the
Board of Directors of the Company;

NOW, THEREFORE, the Option Plan is hereby amended as follows effective as of
July 26, 2001:

         1. Section 4.1 of the Option Plan is hereby amended in its entirety to
read as follows:

                  "Subject to adjustment as provided in Section 4.3 below, the
                  maximum number of shares of Common Stock that shall be
                  authorized and reserved for issuance under the Plan shall be
                  2,500,000 shares of Common Stock or such greater number as may
                  be approved by the Board pursuant to this Section 4.1."

         2. To record this Amendment to the Option Plan as set forth above, the
Company has caused this Amendment to be signed on its behalf by its Chief
Executive Officer and its Chief Financial Officer as of the date first set forth
above.

OPTICAL SENSORS INCORPORATED

By:
   -------------------------------------
   Paulita M. LaPlante
   President and Chief Executive Officer

By:
   -------------------------------------
   Wesley G. Peterson
   Chief Financial Officer

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