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                                                                    Exhibit 10.6

                         Portal Manufacturing Agreement

                                 By and between

                            Diametrics Medical, Inc.
                                2658 Patton Road
                             St. Paul, MN 55113, USA

                    (hereinafter referred to as "Diametrics")

                                       and

                             PHILIPS Medical Systems

                     (hereinafter referred to as "Philips")


         on the supply of Portal cartridge reader M3561A (M3561-60001);
                        exchange repair unit M3561-68000
        plus accessories edge connector cleaning kit M3672A (DMI 450000);
            temp card M3565A (DMI 467900); edge connector M3561-66403
     (DMI 516300); and DeviceSet with DeviceCom on a CD M3564A (DMI464218)

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                         Portal Manufacturing Agreement

     THIS PORTAL MANUFACTURING AGREEMENT (the "Manufacturing Agreement"), made
as of this 10th day of April, 2003 (the "Effective Date"), by and among
Diametrics Medical Incorporated, a Minnesota corporation having its principal
place of business at 2658 Patton Road, St. Paul, Minnesota 55113 ("Diametrics")
and Philips Medical Systems North America Company, a division of Philips
Electronics North America Corporation, a Delaware corporation with offices at
3000 Minuteman Road, Andover, Massachusetts ("Philips"). Diametrics and Philips
shall each be a "Party."

                                    RECITALS

     A.    Philips and Diametrics previously entered into a distribution
agreement dated June 6, 1999 (the "Distribution Agreement") the term of which
expired on October 31, 2002, and the parties are entering into an amendment to
the Distribution Agreement, dated as of the date of this Manufacturing Agreement
(the "Amendment") in order to clarify some of the surviving rights and
obligations under the Distribution Agreement. All capitalized terms shall have
the meanings set forth in this Manufacturing Agreement.

     B.    Whereas as governed by the Distribution Agreement, Philips and
Diametrics have jointly developed the M3650A Blood Analysis Portal System
consisting of the M3561A Portal Reader and the M3562A Interface Module.

     C.    Under the terms of the Distribution Agreement, Philips has surviving
rights to distribute the Portal Measurement Module as a part of the Portal
Product in a specific field of use until October 31, 2004, and Diametrics will
manufacture the Portal Measurement Products in accordance with the Amendment and
this Manufacturing Agreement and provide Portal Measurement Products to Philips
to allow for the completing of the postponement step by Philips of the Portal
Products.

     C.    The Parties desire to enter into this Manufacturing Agreement for the
purposes of Diametrics' manufacture of the Portal Measurement Products solely
for Philips on the terms of this Manufacturing Agreement.

     NOW THEREFORE, in consideration of the foregoing premises and of the mutual
covenants and subject to the terms and conditions set forth herein below,
Philips and Diametrics agree as follows:

1.   Definitions

     1.1   DeviceSet/DeviceCom Software. Means DeviceSet software with DeviceCom
           software on a CD M3564A (DMI 464218), as more particularly described
           in the Specifications.

     1.2   Portal Measurement Accessories. Means the following (a) accessories
           edge connector cleaning kit M3672A (DMI 450000); (b) temp card M3565A
           (DMI 467900); (c) edge connector M3561-66403 (DMI 516300), and (d)
           M3561-40003

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           edge connector cover (DMI 466400), as more particularly described in
           the Specifications.

     1.3   Portal Measurement Module. Means the Portal cartridge reader M3561A
           (M3561-60001), as more particularly described in the Specifications.

     1.4   Portal Measurement Products. Means the Portal Measurement Module, the
           exchange repair unit M3561-68000, Portal Measurement Accessories and
           DeviceSet/DeviceCom Software, collectively.

     1.5   Portal Products. Has the meaning set forth in Section 1.14 of the
           Amendment.

     1.6   Required Quality Data. Means the data and information described on
           Schedule 1.

     1.7   Specifications. Means the specifications set forth in Schedule 2.

     1.8   Term. Means the period from the Effective Date through October 31,
           2004.

     1.9   Schedule References. All Schedule references shall mean the Schedules
           to this Amendment.

2.   Effect of Agreement

     2.1   Portal Manufacturing Agreement. This Manufacturing Agreement
           stipulates the additional terms and conditions for the supply of
           Portal Measurement Products to Philips by Diametrics, including any
           Portal Measurement Products supplied by Diametrics prior to or during
           the Term hereof. The Portal Measurement Products will be manufactured
           and supported by Diametrics as provided herein and the Amendment.

     2.2   Supplementary Agreement. The Parties are executing this Manufacturing
           Agreement as a supplement to the Amendment in order to provide for
           certain additional terms and conditions relating to the manufacture
           of the Portal Measurement Products. This Manufacturing Agreement does
           not supercede the Amendment, and the terms of the Amendment shall
           apply to the Portal Measurement Products, except as expressly set
           forth herein.

3.   Examination and delivery of the Diametrics production units prior to
     shipment to Philips.

     3.1   Supplier Evaluation. Diametrics shall manufacture the Portal
           Measurement Products with material purchased directly by Diametrics.
           A list of suppliers and contacts have been provided by Philips to
           Diametrics. Philips agrees to provide initially the "Supplier
           Evaluation". Diametrics' and Philips' engineering contacts (listed on
           Schedule 5) will jointly agree as to which supplied components of the
           Portal Measurement Module are required to be periodically audited by
           the Diametrics quality personnel.

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     3.2   Certificate of Compliance. Each serialized Portal Measurement Module
           will be provided with a completed Diametrics "Certificate of
           Compliance" certifying that said product was inspected and tested per
           controlled manufacturing procedures.

     3.3   Production Units. Diametrics shall produce units of Portal
           Measurement Modules and other Portal Measurement Products in
           accordance with the terms and provisions hereof. The scope of
           delivery and supply shall be as set forth in this Manufacturing
           Agreement and the Amendment.

     3.4   Audit by Philips. Philips may periodically audit via a functional
           test a sample of the delivered Portal Measurement Module. Should
           Philips detect deviations from the Specifications or defects during
           the course of the functional check of the full production Portal
           Measurement Modules, Philips shall inform Diametrics thereof
           forthwith in writing via an SAR ( Supplier Action Request) per the
           Supplier Action Request Process Q2920-00224. In this event,
           Diametrics shall provide Philips with repaired or newly manufactured
           units of Portal Measurement Modules which are free of the defect(s)
           in question and shall provide a written corrective action plan within
           a reasonable period of time to be defined and agreed to by the
           Parties. Diametrics shall ensure that defects are remedied and
           rectified by certified employees. Subject to mutual agreement between
           the Parties, such rectification of defects may be carried out by
           Philips.

     3.5   Functional Checks after Delivery. Following delivery of the repaired
           / newly manufactured units, Philips shall conduct another functional
           check in accordance with Section 3.4 above. If deviations from the
           Specifications or defects are still detected in the repaired/newly
           manufactured Portal Measurement Modules and these are not remedied
           and rectified within mutually agreed upon date negotiated within the
           SAR process, subject to mutual agreement of the Parties, such
           rectification of defects may be carried out by Philips or a third
           party named by Diametrics and agreed by Philips prior to the
           implementation at Diametrics expense.

     3.6   Ship to Stock. The quality of the Portal Measurement Modules will
           allow ship-to-stock, without need of incoming inspection/test.
           Philips may periodically audit via a functional test a sample of the
           delivered Portal Measurement Module with a goal of acceptable failure
           rate of 1 per 100 units.

4.   Scope of Delivery.

     4.1   Forecasting and Ordering. Philips shall issue to Diametrics a monthly
           written, rolling, non-binding six (6) month forecast of its purchase
           of Portal Measurement Products. Such forecasts shall be updated
           monthly. Philips shall issue binding written purchase orders for
           Portal Measurement Products at least sixty (60) days prior to the
           proposed shipping date for such items. All purchase orders in excess
           of Philips' forecast shall be subject to written acceptance by
           Diametrics. Diametrics will use reasonable efforts to supply such
           items in a timely fashion,

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           subject to Diametrics' reasonable production capabilities and
           provided that such purchase orders are consistent with Philips'
           forecasts.

     4.2   Fluctuations in Orders. The parties shall address purchasing of
           components and materials as provided in Section 4.1(c) of the
           Amendment. In addition, Diametrics will diligently monitor its supply
           chain and its production processes and will promptly inform Philips
           of any anticipated interruption or inability to supply Portal
           Measurement Products to Philips to meet its forecasts or its firm,
           binding purchase orders, in order to permit Philips to assess the
           manufacturing situation, to inform its sales and planning personnel
           to attempt to adjust for such shortfall, and to advise and assist
           Diametrics, at Diametrics' expense in its efforts to minimize or
           avert such interruption in or inability to supply Portal Measurement
           Products.

5.   Delivery.

     5.1   Purchase Orders for Portal Measurement Products. Philips shall be
           entitled to use its then current standard purchase order for its
           purchases hereunder. In the event of a conflict between the terms of
           any such purchase order and the terms of this Manufacturing
           Agreement, the terms of this Manufacturing Agreement shall take
           precedence. Additional terms included in the purchase order that are
           not terms of this Manufacturing Agreement will be subject to prior
           mutual written agreement.

     5.2   Terms for Delivery. All deliveries of Portal Measurement Products and
           Consumables shall be made by Diametrics F.O.B. Diametrics U.S. or
           European facility. Title and risk of loss shall pass to Philips at
           the time of tender at Diametrics' facility to the carrier designated
           by Philips. Upon delivery to Philips' designated carrier, Philips
           will assume title and risk of loss, and will be responsible for
           transportation, and, if applicable, export of such products from the
           country of manufacture and shall be entitled to any duty drawback for
           which the products qualify. Diametrics shall provide Philips, upon
           Philips' reasonable request and at Philips' expense, reasonable
           substantiation and assistance with respect to such duty drawbacks.
           The pricing for products excludes, and Philips shall pay, all
           shipping, handling and insurance costs for and other costs of
           transporting such products after delivery to the F.O.B. point.

     5.3   Diametrics Supply Obligation. Diametrics shall manufacture the Portal
           Measurement Products in accordance with the applicable specifications
           and in accordance with the FDA, EU and all applicable regulations.

6.   Prices.

     6.1   Prices. Portal Measurement Products shall be supplied at the prices
           set forth in Schedule 4. All prices are F.O.B. Diametrics
           manufacturing facility.

     6.2   Price Changes. Prices may be changed upon ninety (90) days written
           notice by Diametrics. Any changes will not impact orders received
           prior to the date of such change.

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     6.3   Terms of Payment. All payments for Portal Measurement Products shall
           be due and payable within thirty-five (35) days of the date of the
           applicable invoice. Philips shall make all payments in immediately
           available funds to the location and in the manner reasonably
           designated by Diametrics from time to time. A late fee shall be paid
           by Philips on any amount not received by Diametrics when due at a
           rate of 1.5% per month on all unpaid amounts, or the maximum rate
           permitted by law, whichever is less. As between the Parties, Philips
           shall be responsible for all taxes relating to the Portal Measurement
           Products so purchased (except for taxes on Diametrics' net income).

7.   Invoice Address.

     All of Diametrics' invoices are the addressed to:

               Philips Medizin Systeme Boeblingen Gmbh
               Financial Service Center
               Postfach 1471
               71034  Boeblingen/ Germany

8.   Contact Persons. Diametrics and Philips shall each designate a Contact
     Person who will meet (by phone or in person) as required to discuss and
     monitor any manufacturing and manufacturing capacity issues for the Portal
     Measurement Products. Both Parties shall appoint additional contact persons
     in Schedule 5 to facilitate communication regarding specific aspects of the
     manufacture and supply of the Portal Measurement Products hereunder.

9.   Term and Termination of this Manufacturing Agreement.

     9.1   Term. This Manufacturing Agreement shall become effective on the
           Effective Date and shall terminate on October 31, 2004, unless
           terminated as provided herein.

     9.2   Termination for Material Breach. Either party may terminate this
           Manufacturing Agreement if the other party materially breaches this
           Manufacturing Agreement and fails to remedy such breach within ninety
           (90) days written notice from the non-breaching party. Material
           breaches shall include failure by Diametrics to meet the agreed
           quality standards for the Portal Measurement Products as set forth in
           Schedule 2.

     9.3   Effect of Termination. No termination or expiration of this
           Manufacturing Agreement shall affect or discharge any obligations,
           rights, disclaimers, conditions or limitations of either Party which
           arose prior to the effective date of such termination. In addition,
           Articles 15 (Confidentiality) and 21 (Miscellaneous) and any Sections
           necessary to give effect to this Article 9 shall survive any
           termination or expiration of this Manufacturing Agreement.

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10.  Technical Alteration. Diametrics agrees and undertakes to effect technical
     alterations (i.e., any required technical changes due to third party
     supplier changes, such as part obsolescence, revision changes and the like)
     to the Portal Measurement Modules only after written consent of Philips.

11.  Product Change Notification. No process changes, design changes,
     geographical relocation of manufacturing processes, or process step
     discontinuances affecting the electrical performance (whether specified or
     not), the mechanical form or fit, the environmental compatibility or
     material chemical characteristics, or the life reliability of Portal
     Measurement Products, but excluding any changes that do not affect the fit,
     form or function of the Portal Measurement Products (hereinafter
     collectively called "Changes") shall be made or incorporated in Portal
     Measurement Products without following the change notification process
     established herein. Diametrics shall give Philips written notice of any
     proposed change via the established Philips/Diametrics change order process
     and provide evaluation samples and other appropriate information as
     specified by Philips. For planned/scheduled changes that require
     re-qualification by Philips, Diametrics notice must be received by Philips
     at least three (3) months prior to the first proposed shipment of any such
     Products. For changes not requiring re-qualification by Philips, Diametrics
     notice must be received by Philips at least one (1) month prior to the
     first proposed shipment unless mutually agreed by the Parties. The Supplier
     Change Notification Agreement process Q2920-00094 will be followed. All
     product changes will be reflected in the 10 digit serial number by an
     appropriate change of the year (digit 3) and/or week of the change (digit
     4-5) as appropriate.

12.  Replacement Requirements/Exchange Products. Diametrics guarantees to
     Philips that replacement and or exchange Portal Measurement Modules will be
     supplied for a further seven (7) years following delivery of the last
     series/batch. After expiration of this seven (7) year period, Diametrics
     shall make available replacements (backward compatible or equivalent) in
     accordance with the respective technical possibilities or give Philips the
     possibility of placing a final order of a reasonable quantity, thus
     guaranteeing Philips a supply up until the end of the service period. The
     prices, terms and conditions as well as the technical feasibility of these
     two cases will form the subject of a separate agreement at the time of
     delivery of the last series/batch.

13.  Repaired / Exchanged Products.

     Diametrics will provide a test and repair service for Portal Measurement
     Modules returned from the customers (internal or external) as faulty
     whether still in warranty or out of warranty. Philips will provide
     Diametrics' field failure information. Philips will pay Diametrics the
     exchange repair cost per Schedule 4. Diametrics shall perform root cause
     analysis (sub-assembly level) on any failed unit in order to determine
     failure mode. Diametrics will provide a pareto trend analysis of failure
     data for all failed units to Philips on a monthly basis.

14.  Documentation

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     14.1  Rights of Access. Philips shall have the right to access and use
           Diametrics' manufacturing documentation for the Portal Measurement
           Products to comply with regulatory requirements.

     14.2  Record Retention. Diametrics shall retain records of any safety,
           quality and reliability related data relating to the Portal
           Measurement Products as well as any data necessary for "Current Good
           Manufacturing Practices" (CGMP, as required by FDA), the "In Vitro
           Diagnostics Directive" (the IVDD, as required by the European Union)
           and the "Medical Device Directive" (MDD, as required by the European
           Union), to the extent provided under Schedule 1, Required Quality
           Data.

     14.3  Access to Filings. Diametrics assures the access of DHR (Device
           History Record), DHT (Device History Traveler), and DMR (Device
           Master Record) in support of Philip's timely answering of Portal
           Measurement Product questions from the FDA. Diametrics shall
           cooperate with Philips in connection with its regulatory obligations
           to provide to Philips, on a timely basis, the necessary reports
           relating to complaints and product performance issues regarding the
           Portal Measurement Products. Upon reasonable request, Diametrics
           shall promptly make such reports (on behalf of Philips) directly to
           the appropriate regulatory authorities.

15.  Confidentiality.

     15.1  Non-Use and Non-Disclosure. Each Party acknowledges and agrees that
           all the other Party's Confidential Information is confidential to the
           disclosing Party. Each Party shall take the same reasonable measures
           as it uses to protect its own confidential information from the
           unauthorized disclosure or misuse to protect the other Party's
           Confidential Information from unauthorized disclosure or misuse,
           including without limitation, any disclosure by its employees,
           agents, contractors, permitted sublicensees, or consultants of the
           other Party's Confidential Information. As used herein, the term
           reasonable measures shall mean at least those measures a Party
           applies to the protection of its own Confidential Information and the
           term misuse shall mean use for any purpose other than as permitted or
           required hereunder.

     15.2  Marking. To be entitled to protection as Confidential Information,
           all Diametrics or Philips documents containing that Party's
           Confidential Information shall be appropriately and clearly marked as
           "Proprietary," "Secret," "Confidential," or other words to similar
           effect. If a disclosure of Confidential Information is made orally,
           as in a meeting, the disclosing Party shall indicate the nature of
           that information at the time of its disclosure and shall confirm such
           designation in writing within ten (10) days of the date of such
           disclosure to the receiving Party.

     15.3  Exclusions. Information shall not be considered Confidential
           Information hereunder if it:

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           (a)  was already in the possession of the receiving Party prior to
                its receipt from the disclosing Party;

           (b)  is, or becomes, part of the public knowledge or literature
                through no fault, act or omission of the receiving Party,
                provided, Confidential Information shall not be deemed to have
                entered the public domain by reason of its having been filed
                with any regulatory authority; provided the disclosing Party has
                taken advantage of any procedures available to protect
                confidentiality, including FOIA marking and protective orders;

           (c)  is, or becomes, available to the receiving Party from a source
                other than the disclosing Party, which source has rightfully
                obtained the same information and has no obligation of
                confidentiality to the disclosing Party with respect to it;

           (d)  is made available on an unrestricted basis by the disclosing
                Party to a third party unaffiliated with the disclosing Party;
                or

           (e)  is required to be revealed pursuant to law or requirements of
                any securities exchange on which a Party's shares are listed and
                traded, provided, however, the receiving Party which is under
                any such requirement of law shall give reasonable notice to the
                disclosing Party of such requirement and shall cooperate with
                the disclosing Party, at the disclosing Party's expense in
                reasonable legal efforts to limit or mitigate any such
                revelation so as to preserve the proprietary nature of any
                Confidential Information contained therein.

     15.4  Duration; Surviving Obligation. This Article 15 shall be deemed to
           cover and include any non-public information disclosed by a Party to
           the other during the course of their negotiations of this
           Manufacturing Agreement, whether or not marked or indicated as
           provided in Section 15.2. Each Party's obligations of non-use and
           non-disclosure of the other Party's Confidential Information shall
           apply during the term of this Manufacturing Agreement and shall also
           survive for a period of three (3) years after its termination for any
           reason.

     15.5  Confidentiality of this Agreement. The terms of this Manufacturing
           Agreement itself and the Schedules hereto shall be deemed to be
           Confidential Information hereunder. In the event that a Party is
           required to disclose the content of this Manufacturing Agreement
           pursuant SEC requirements or requirements of any securities exchange
           on which a Party's share are listed and traded, such Party shall use
           its reasonable efforts to obtain confidential treatment of at least
           the terms of Schedules 1, 2, 4, 6 and 7.

16.  Warranty.

     16.1  Warranty Terms. Diametrics warrants to Philips that the Portal
           Measurement Products at the time of their delivery by Diametrics to
           Philips (a) shall meet the Specifications as set forth on Schedule 2;
           (b) shall have been manufactured in

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           accordance with all laws and regulations applicable to their
           manufacture in those jurisdictions in which Philips is distributing
           the Portal Measurement Products (provided that Philips gives
           Diametrics at least ninety (90) days written notice of any
           jurisdictions in addition to those in effect as of the Effective Date
           of this Amendment); (c) shall be new or newly manufactured; and (d)
           shall be of good and merchantable title, free of liens and
           encumbrances. Diametrics shall, promptly, at Diametrics' sole option,
           replace, repair or make a purchase price (in the amount paid by
           Philips to Diametrics) refund for any of such Portal Measurement
           Products proved to be non-conforming, provided that written notice
           and reasonable documented evidence of each warranty claim and the
           fact that the failure occurred during the warranty period is received
           by Diametrics within thirty (30) days after the expiration thereof.
           Diametrics shall have the sole right to verify such non-conformance.
           Such replacement, repair or refund shall be Philips' sole remedy
           hereunder. Unless otherwise agreed by the Parties, the warranty
           period under this Section 16.1 for (1) the Portal Measurement Modules
           shall be eighteen (18) months from the date of shipment to Philips;
           (2) any DeviceSet/DeviceCom Software shall be forty-five (45) days
           from the date of delivery of such software to Philips' customer; and
           (3) any Portal Measurement Accessory shall be ninety (90) days from
           the date of shipment to Philips. If requested by Diametrics, Philips
           shall return the non-conforming Portal Measurement Products to
           Diametrics at the time of submission of the warranty claim therefore.
           Philips agrees to provide Diametrics sufficient notice of additional
           countries in which it intends to distribute the Portal Measurement
           Products to permit Diametrics to meet its obligations under
           subsection (b) of this Section 16.1.

     16.2  Exclusions. This warranty does not apply to Portal Measurement
           Modules or Portal Measurement Accessories that have been repaired,
           modified or tampered with by anyone other than Diametrics qualified
           technical personnel, nor to Portal Measurement Modules or Portal
           Measurement Accessories that have been exposed (by customer
           negligence) to adverse conditions through improper installation,
           application or maintenance.

     16.3  NFF Procedures. Any Portal Measurement Modules returned to Diametrics
           with no fault found (NFF) shall undergo twenty four (24) hour
           "burn-in" (i.e. 4 cycles of Treadmill test) upon no fault
           determination. Following completion of burn-in, the Portal
           Measurement Modules shall be subjected to a full functional test.
           Provided no fault is found, the Portal Measurement Modules shall be
           labeled (i.e. DHR annotated) prior to return to Philips in order to
           identify the Portal Measurement Modules, should they every be
           returned again. If the same Portal Measurement Modules should be
           returned to Diametrics' facility for a second time, and NFF, the
           Portal Measurement Modules shall be analyzed and replaced. For Portal
           Measurement Module's second NFF, the pc boards will be replaced and
           product fully tested before returned to Philips. If same Portal
           Measurement Module is returned a third time and NFF, the entire
           Portal Measurement Module will be removed from use and replaced at
           Diametrics' expense. The foregoing obligations apply only if the
           Portal Measurement Module is under warranty.

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     16.4  Warranty Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 16
           OF THIS AGREEMENT, DIAMETRICS MAKES NO REPRESENTATIONS OR WARRANTIES,
           EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
           MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

     16.5  Customer Warranties. Philips shall be entitled to warrant the Portal
           Measurement Products to its customers on terms it deems appropriate;
           provided that Philips shall bear any expenses it may incur with
           respect to such warranties, to the extent that such warranties exceed
           the scope or term of the express warranties made by Diametrics
           hereunder.

     16.6  Customer Complaints, Warranty and Out-of Warranty Repair. Philips
           will be responsible for handling customer complaints regarding the
           Portal Measurement Products. Diametrics will provide reasonable
           assistance to Philips in resolving such customer complaints.
           Diametrics will accept the return of any Portal Measurement Products
           that do not conform to the warranties set forth in Section 16.1, and
           will repair or replace any such defective Portal Measurement Product
           (or refund Philips' purchase price) as provided in Section 16.1.
           Philips agrees to maintain an inventory of Portal Measurement
           Products to meet its on-going repair obligations; provided that
           Diametrics agrees to maintain a reasonable inventory of Portal
           Measurement Products to support significant Product warranty issues.
           As between Diametrics and Philips, Philips will be responsible for
           providing its customers with such replacement Portal Measurement
           Products for use while such defective Products are being repaired or
           replaced. Diametrics will also provide out-of-warranty repair service
           on the Portal Measurement Modules, on the terms set forth on Schedule
           4 for a period of not less than seven (7) years after last production
           run of the Portal Measurement Module (or such longer period as may be
           required by local laws).

     16.7  Return Procedures. Reasonable attempts by Philips 1st Level
           Application Support (Response Centers) to determine failure mode(s)
           of the Portal Measurement Products is assumed. This information will
           be transferred to Diametrics prior to any Portal Measurement Products
           being returned from the field. This will provide initial information
           to assist in the investigation of the failed Portal Measurement
           Product. Upon receipt of a failed Portal Measurement Module, the unit
           will go through the standard repair process, which includes the known
           repair (if applicable) and then 1 cycle of Treadmill testing (roughly
           equivalent to 6 hour "burn-in"), and the subsequent quality tests. If
           the failure mechanism cannot be identified the unit will undergo the
           quality (diagnostic) tests, the repair pursued and then a full retest
           of the Portal Measurement Module (including Treadmill and the quality
           tests). If the fault cannot be re-created internally, and it passes
           all testing requirements the unit will be sent back out as acceptable
           (and documented as no fault found ("NFF") on the DHR). Diametrics
           will follow the Supplier Corrective Action Report ("SCAR") process or
           Distributor Action Request ("DAR") process to notify Philips if there
           is are multiple failures of any one component of any of the Philips
           engineered

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           components. Diametrics, likewise will also pursue a Corrective Action
           Report ("CAR") if there are multiple failures of any one component of
           any Diametrics engineered components. Philips will be notified at the
           time of the CAR initiation.

     16.8  Repair Period. Diametrics agrees to use commercially reasonable
           efforts to repair or replace the non-conforming Portal Measurement
           Products and return conforming Portal Measurement Products to Philips
           within four (4) weeks of receipt of Diametrics. Failed units returned
           from the field that are out-of-warranty will be repaired within 10
           working days for customer units and within 30 days for Service
           Logistics International ("SLI") exchange units.

17.  Quality Performance. If the failure rate of the Portal Measurement Module
     exceeds specified limits, (e.g. as per Section 3.5) and/or the Philips
     field failure rate is higher than the expectation (i.e. for Portal
     Measurement Module less than 4% the first year with a decrease to 1% the
     second year), Diametrics commits to initiate an SCAR, DAR or CAR driven
     corrective action project for quality / reliability improvements on Portal
     Measurement Modules (material, processes, subassemblies) effective per the
     SCAR or CAR.

     The goal for the Portal Measurement Module is not to exceed an annual
     failure rate (AFR) of 4% the first year with a decrease to 1% the second
     year for the Portal Measurement Module within a one year rolling period
     starting when the contract becomes effective:

           AFR =  # units failed/ #units shipped by Philips (annualized)

     Diametrics and Philips will do a monthly failure clearance on a common
     basis before entering the numbers into the calculation.

18.  Product Recall.

     18.1  If either Party believes that a recall of any Portal Measurement
           Product manufactured under this Manufacturing Agreement is desirable
           or required by law, it shall promptly notify the other Party. The
           Parties shall then discuss reasonably and in good faith whether such
           recall is appropriate or required and the manner in which any
           mutually agreed recall shall be handled. This Section 18 shall not
           limit the obligations of either Party under law with respect to
           recall of Portal Measurement Products required by law or properly
           mandated by governmental authority. Voluntary recalls shall be
           conducted by mutual agreement (with such agreement not to be
           unreasonably withheld) provided that if mutual agreement is not
           reached, either Party may individually conduct the voluntary recall
           in question in a manner consistent with its own regulatory guidelines
           and criteria. The "Recalling Party" shall bear all costs and expenses
           of any voluntary recall of any Portal Measurement Products and shall
           reimburse the "Other Party" for the reasonable, out-of-pocket costs
           incurred by the Other Party as a result of such recall, including the
           replacement cost of any Portal Measurement Products affected thereby,
           unless (i) such recall is unjustified and

                                       11

<PAGE>

           neither requested nor classified as a recall by a governmental agency
           or delegee or (ii) the cause or basis of such recall is attributable
           to a condition, fact or action that constitutes (A) a breach by the
           Other Party of any of its obligations hereunder or (B) negligence or
           willful misconduct of the Other Party in which case the Other Party
           will be liable for the costs and expenses of such recall, and shall
           reimburse the Recalling Party for the reasonable, out-of-pocket costs
           incurred by Recalling Party as a result of such recall, including the
           replacement cost of any Product affected thereby. The Parties shall
           cooperate fully with each other in effecting any recall of the
           Products pursuant to this Section 18, including communications with
           any customers or to the public.

     18.2  If any governmental agency having jurisdiction (including without
           limitation the FDA) shall request or order any corrective action with
           respect to Portal Measurement Products supplied hereunder, including
           any Portal Measurement Product recall, customer notice, restriction,
           corrective action or market action or any Product change, Diametrics
           shall bear the costs and expenses of such corrective action and shall
           reimburse Philips for the reasonable, out-of-pocket costs incurred by
           Philips as a result of such corrective action, including the
           replacement cost of any Products affected thereby, to the extent that
           the cause or basis of such corrective action is attributable to a
           condition, fact or action that constitutes (A) a breach by Diametrics
           of any of its obligations hereunder or (B) negligence or willful
           misconduct of Diametrics. Philips shall bear all other costs and
           expenses of such corrective action, and shall reimburse Diametrics
           for the reasonable out-of-pocket costs incurred by Diametrics as a
           result of such action, including the replacement cost of any Portal
           Measurement Product affected thereby.

19.  Environmental Considerations.

     Diametrics agrees to provide commercially reasonable support to Philips, at
     Philips' written request and at Philip's expense, as required to meet
     United States and international environmental laws, regulations and
     standards applicable to the manufacture of the Portal Measurement Products.

20.  Product Discontinuances. Diametrics acknowledges its obligation to
     manufacture the Portal Measurement Products during the term of this
     Manufacturing Agreement; however, if the Portal Measurement Products will
     not be available from Diametrics prior to the conclusion of the term,
     Diametrics shall give written notice to Philips. Diametrics notice shall be
     given immediately upon Diametrics knowing about the unavailability, but in
     any event no less than six (6) months in advance of the last order date of
     the Products. In any event of termination of this Manufacturing Agreement
     and subject to Diametrics' manufacturing capacity, and in addition to any
     other remedies that Philips may have at law or in equity, Philips shall be
     entitled to determine its lifetime-buy quantities and to purchase such
     quantities in accordance with this Manufacturing Agreement for purchase and
     shipment by the end of the Term.

21.  Miscellaneous Provisions

                                       12

<PAGE>

     21.1  Entire Agreement. This Manufacturing Agreement, together with any
           Schedules or other Attachments hereto and the Amendment, constitutes
           the entire agreement between the parties in relation to this subject
           matter and as such, supersedes all prior and contemporaneous
           negotiations, agreements, representations, understandings and
           commitments with respect thereto and shall take precedence over all
           terms, conditions and provisions on any purchase order form, or order
           acknowledgment, or order release purporting to address the same
           subject matter.

     21.2  Modification. This Manufacturing Agreement shall not be released,
           discharged, changed or modified in any manner except by a writing
           signed by the duly authorized officers or agents of each Party
           hereto, which writing shall make specific reference to this
           Manufacturing Agreement and shall express the plan or intention to
           modify same.

     21.3  Severability. If any provision or provisions of this Manufacturing
           Agreement shall be determined to be unenforceable, then the Parties
           shall in good faith negotiate for a substitute provision addressing
           the same subject matter as the unenforceable provision(s) as may then
           be considered to be enforceable, provided, however, if no substitute
           provision can be formulated which shall be accepted by the Parties as
           enforceable, this Manufacturing Agreement shall nonetheless continue
           in full force and effect with the unenforceable provision(s) stricken
           here from. In such case the applicable law shall apply with regard to
           unenforceable and / or void provisions.

     21.4  Governing Law. This Manufacturing Agreement shall be governed by and
           construed in accordance with the laws of the United States and the
           State of Delaware, excluding its choice of law rules. The Parties
           consent to the jurisdiction of the state and federal courts of
           Delaware.

22.  Schedules. Should conflicts occur between this Manufacturing Agreement and
     any part of the following Schedules, the requirements of this Manufacturing
     Agreement shall govern. The following Schedules form an integral part of
     this Manufacturing Agreement:

     Schedule 1:  Required Quality Data
     Schedule 2:  Portal Measurement Products and Specifications
     Schedule 3:  Philips Terms of Delivery
     Schedule 4:  Prices/Quantities
     Schedule 5:  Contact Persons
     Schedule 6:  Cosmetic Defect Guideline
     Schedule 7:  Cosmetic Inspection Guideline

                                       13

<PAGE>

DIAMETRICS MEDICAL, INC.                  PHILIPS MEDICAL SYSTEMS NORTH
                                          AMERICA COMPANY, A DIVISION OF
                                          PHILIPS ELECTRONICS NORTH
                                          AMERICA CORPOPRATION


By:  /s/ David B. Kaysen                  By:  /s/ Jay Mazelsky
   -----------------------------------       -----------------------------------
   David Kaysen, Chairman of the Board       Jay Mazelsky
   and Chief Executive Officer               Vice-President & General
                                             Manager - POCD

                                       14

<PAGE>

                                   Schedule 1

                              Required Quality Data

Diametrics assures 5 years of record retention of all the following quality and
reliability related data:

Starting on the Effective Date, Diametrics shall provide the following data to
Philips Procurement once every quarter:

1.  Outgoing data (Also known as F2 data) on each Portal Measurement Module:
          100% outgoing inspection means
          N = total (100%) each products tested.

2.  YIELD (overall - from incoming through outgoing -
          Philips expects a yield > 92%, per test station
          @ manufacturing, 1/st/ cycle)

          2.1)  and a pareto analysis of all materials failures,1/st/ cycle.

          2.2)  and a pareto analysis of all process failures, 1/st/ cycle.

3.  A pareto analysis of all root cause failures (sub-assembly level) for
    returned products.

                                       1

<PAGE>

                                   Schedule 2

                  Portal Measurement Products & Specifications

Item            Part Number                Respective             Date of
                Description               Specification        Specification

1.      M3561A Portal Reader              B-M3561-60000-1*     09/12/03
        (M3561-6001)

2.      M3561-68001                       B-M3561-60000-1      09/12/03
        Exchange repair Portal

3.      M3565A temp card                  B-M3561-60000-1      09/12/03
        (DMI 467900)

4.      M3561-66403 edge connector
        (DMI 516300)                      B-M3561-60000-1      09/12/03

5.      M3564A DeviceSet w/DeviceCom
        (DMI 464218)                      B-M3561-60000-1      09/12/03

6.      M3672A edge connector
        Cleaning kit (DMI 450000)         N/A                  N/A

7.      Cosmetic Defect Guideline         see schedule 6

8.      Cosmetic inspection               see schedule 7

* B-M3561-60000-1 is the M3561A Portal Product Specification. Rev. A of such
specification applied prior to 9/12/03. To the extent of any conflict between
Rev. A or B of the M3561A Portal Product Specification and Diametrics'
manufacturing process document MP46000 Rev. X., MP46000 shall apply.

                                       1

<PAGE>

                                   Schedule 3

                                Terms of Delivery

-  Delivery and Packaging Standard of Philips
   HP Dwg. A-5961-3658-1, Rev. D

-  EDI - capabilities for order receiving and acknowledgment

-  Shipping date as specified on Philips-Purchase Order

-  Date of dispatch:  Philips Delivery Date minus 7 days

-  Mode of transport :  Airfreight

-  Each shipment must indicate the exact address of the addressee on the outside
   of the packaging.

-  Products are shipped F.O.B. point of origin.

   For Shipping and Production and Failure Analysis:

        Philips Medizin Systeme Boeblingen Gmbh
        Hewlett Packard Str. 2
        71034 Boeblingen /Germany
        POCD Production Engineer
        Gebaeude 5/ Ebene 3 2 F15

-  The minimum order and ship quantity is 10 pieces.

-  Dangerous goods must be packed and labeled in accordance with the relevant
   regulations (Postal regulations, Regulation on the transport of dangerous
   goods, etc.).

-  Each shipment must contain a delivery voucher indicating the Philips order
   number and the Philips part
   number.

-  The total number of Portal Measurement Modules shipped shall be exactly as
   specified on the Philips purchase order.

                                       2

<PAGE>

                                   Schedule 4

                       Diametrics/Philips Transfer Prices

1.   M3561A Portal Reader                                     ***
            (M3561-60001)

2.   M3561-68000        Exchange repair Portal

The first two rates assume the unit is part of the exchange program, whereas the
third rate assumes the unit is not part of the exchange program.

-  Combined repair/recondition rate (if outside warranty):    ***
     (assumes part of exchange program, and covers
     reconditioning and functional repairs while
     outside of the standard warranty period)

-  Recondition only rate (would apply if within warranty):    ***
     (assumes part of exchange program, and covers
     reconditioning and functional repairs while within
     the standard warranty period, e.g., reconditioning
     is not covered by warranty)

-  Repair only rate (no recondition occurs):                  ***
     (assumes not part of exchange program)

3.   M3565A temp card                                         ***
      (DMI 467900)

4.   M3561-66403 edge connector                               ***
      (DMI 516300)

5.   M3564A DeviceSet w/DeviceCom                             ***
      (DMI 464218)

6.   M3672A edge connector                                    ***
      Cleaning kit (DMI 450000)

7.   M3561-40003 edge connector cover                         ***
      (DMI 466400)

----------
***  Denotes confidential  information that has been omitted from the
     exhibit and filed separately,  accompanied by a confidential  treatment
     request with the  Securities and Exchange  Commission  pursuant to Rule
     24b-2 of the Securities Exchange Act of 1934.

                                       3

<PAGE>

                                   Schedule 5

                                 Contact Persons

For Philips:
------------

Manufacturing              e-mail: guido.sarnowski@philips.com
                           telephone:+49 (07031) 463-1218
                           FAX:+49(7031)463-1660

Purchasing Dept.           e-mail: gabriele.southwood@philips.com
                           telephone:+49(07031)464-1770
                           FAX:+49 (07031)464-1881

Materials Engineering      e-mail: jochen.sponholz@philips.com
                           Telephone:+49(07031)463-1932
                           FAX:+49(7031)463-1660

Order Processing           e-mail:gabriele.southwood@philips.com
                           telephone:+49(07031)464-1770
                           FAX:+49(07031)464-1881

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

For Diametrics:
---------------

Operations                                e-mail:dnorton@diametrics.com
Diane Norton                              telephone:  651-638-1153
                                          FAX:  651-638-1060

Purchasing Dept.                          e-mail:vjereczek@diametrics.com
Vern Jereczek                             telephone:  651-638-1162
                                          FAX:  651-638-1060

Materials Engineering/Manufacturing       e-mail:jkurkowski@diametrics.com
Jim Kurkowski                             telephone:  651-638-1112
                                          FAX:  651-638-1060

Order Processing                          e-mail: acottrell@diametrics.com
Amy Cottrell                              telephone:  651-638-1191
                                          FAX:  651-638-1060

                                       4

<PAGE>

                                   Schedule 6
                            Cosmetic Defect Guideline

                    Exchange Portal Cosmetic Defect Guideline

Purpose

This document provides guidelines for inspecting used (also called exchange)
Portal Measurement Modules during the repair process. The overall purpose of
this guideline is to ensure that exchange products which are shipped to
customers are in a condition which will lead to consistent customer
satisfaction.

Scope

This document does not cover cosmetic specifications for individual recovered
parts of assemblies, nor cosmetic specifications for new whole units. This
guideline only applies to the Portal Measurement Module and its related exchange
parts.

Because this guide applies to refurbished product only, inspectors should be
examining the product for end-user and shipping induced damage, or wear, not
defects caused during manufacturing. Only cosmetic defects that could be caused
by end-user or shipment can fail the product since any manufacturing-induced
defects have already passed manufacturing inspection. For that reason,
manufacturing-caused cosmetic defects such as blush, flash, flow marks, haze,
sinks, and weld lines should not be considered as defects when examining
refurbished units.

General Guidelines

Cosmetics, in this context refer to superficial, visual appearance of the
product and as such do not affect the functioning of the product. Any defect
that interferes with the normal operation of the product, should be considered a
non-cosmetic defect. In the strictest sense, missing parts are not considered a
cosmetic defect, even if they are not needed for the operation of the product
(example: missing label). Note, however, that a missing part would be considered
a defect, and would necessitate some form of repair or action. Also, it is very
important to realize that cosmetics are largely subjective, so inspectors should
apply their best judgment in all cases.

The guiding principal when applying this judgment should be that this product is
not a new product and should not be considered as such. A balance needs to take
place between attempting to achieve near perfect cosmetic appearances which
would result in a large financial liability to the company versus the
possibility of having a high customer dissatisfaction rate if we were to ship
exchange product which looks shabby.

Evaluation Criteria

Cosmetic defects will be evaluated using a weighted criteria basis based on the
location of the defect and the severity of the defect. Guidance is provided in
Table 1.

Customer Added Labels

                                       5

<PAGE>

Any labels or marking put on a system by customers must be removed . This
includes such items as inventory tags and safety stickers. All glues used to
attach these labels must also be removed.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
    Surface
      Area
    Location                                      (a)  Type of Cosmetic Defect
                   ------------------------------------------------------------------------------------------
                                                                                   Small       Deep Scratches
                      Paint                                       Pits, Nicks     Scratches        (Very
                   Discoloration                    Heat Dis-      Gouges-      (minimally     visible- Note
                     or wear         Abrasion       coloration     (Note 2        visible)            2)
-------------------------------------------------------------------------------------------------------------
<S>                <C>            <C>              <C>           <C>           <C>            <C>
Product            Minor OK-      Minor OK-        Minor OK-     Minor OK      Minor OK       OK
Serial # Label
                   Note 1         Note 1           Note 1        Note 1        Note 1         Note 1
-------------------------------------------------------------------------------------------------------------
Logo "Portal"      Very minor;    Very minor;      Very minor;   None          Very minor;    None
(top)
                   Still          Still clearly    Still                       Still
                   clearly        read name        clearly                     clearly read
                   read name                       read name                   name
-------------------------------------------------------------------------------------------------------------
Display Screen
(glass area)       N/A            None             N/A           None          None           None
-------------------------------------------------------------------------------------------------------------
Case Top           Minor OK       Minor OK         Minor OK      None          Minor OK       None
-------------------------------------------------------------------------------------------------------------
Case Bottom        Minor OK       Minor OK         Minor OK      Minor OK      Minor OK       Minor OK
-------------------------------------------------------------------------------------------------------------
</TABLE>

Note 1: Damage to the label that makes the reading of the serial number, product
number, impossible or difficult to read are not acceptable.
Note 2: Judgment needed here. A scratch, gouge, or nick, could be deep but small
in size (width and length). If this defect is small in size it may be acceptable
if in a location where seldom seen).

                                       6

<PAGE>

                                   Schedule 7

                         Cosmetic Inspection Guideline

--------------------------------------------------------------------------------
Acceptance Criteria
--------------------------------------------------------------------------------
Checking Contents        Packaging / box labeling
                         Portal
                         Edge connector cleaning kit
                         Certification sheet

Checking Portal          Confirm Correct Label, Placement & Affixment for the
                         Unit
                         Ensure that there are 4 Rubber Feet and no abnormal
                         scuffing or damage, other than normal production
                         scuffs
                         Check for 4 torque screws on the bottom of Portal
                         Check for serial port cover and 2 torque screws
                         Check for light pipe
                         No scratches or fingerprints on screen
                         No dust between the touchscreen and display
                         No residues on portal
                         Sensor/IR probe flush or less
                         Discoloration, Flow marks, and Haze: Two per surface;
                         max dimension:0.5 mm (.02")
                         Weld Line Exceptions: Weld lines of up to 9.5mm
                         (.375") long shall be
                         allowed next to the IR Probe hole and the Light Pipe
                         hole in the M3561-40000 Top Housing
                         Pits and Specks: Two per surface; max
                         dimension: 0.5 mm (.02)
                         Scratches: Two per surface;
                         max dimension: 0.3 mm x 0.8 mm (.01" x .03")
                         Sinks: Two per surface; max dimension: 0.8mm (.03")
                         Weld Lines per surface: Two;
                         max dimension: 3 mm (.125")
                         No visual gasket btw. Touchscreen and top housing

Checking portal box      Edge  connector  cleaning kit in Box
                         Certificate  of  Conformance
                         No crumb or dirt in the box
                         No bent connector pins
                         Confirm Correct Label, Placement & Affixment / for
                         the BOX

                                      7