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                                                                   Exhibit 10.42

EXECUTION COPY



                         COMMON STOCK PURCHASE AGREEMENT

                                     between

                               i-STAT CORPORATION

                                       and

                               ABBOTT LABORATORIES

                                   dated as of

                                 August 3, 1998
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                         COMMON STOCK PURCHASE AGREEMENT


         THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
August 3, 1998, between i-STAT Corporation, a Delaware corporation (the
"Company"), and Abbott Laboratories, an Illinois corporation ("Purchaser").

                                    ARTICLE I
                              SALE OF COMMON STOCK

         1.1 Sale and Issuance of Common Stock. Subject to the terms and
conditions in this Agreement, the Company will issue and sell to Purchaser, and
Purchaser will purchase from the Company, at the Closing (as defined in Section
1.2), 2,000,000 shares (the "Shares") of Common Stock, $0.15 par value, of the
Company (the "Common Stock") at a purchase price (the "Purchase Price") of
$11.35 per share, for a total Purchase Price of $22,700,000. The number of
Shares and the Purchase Price per Share are subject to appropriate adjustment in
the event of any stock split, reverse stock split, stock dividend,
recapitalization or other similar event which may occur prior to the Closing (as
defined below).

         1.2 Closing Dates. The closing of the purchase and sale of the Shares
(the "Closing") shall be held at the offices of Paul, Hastings, Janofsky &
Walker LLP, 399 Park Avenue, New York, New York at 10:00 a.m., as soon as
practicable, but in any event no later than the fifth Business Day (as defined
in Section 10.1) following expiration or early termination of all waiting
periods imposed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended ("HSR Act") and satisfaction (or waiver, if permissible) of all other
closing conditions set forth in Articles IV and V of this Agreement, or at such
other time and place upon which the Company and Purchaser shall mutually agree
(the date of the Closing is hereinafter referred to as the "Closing Date").

         1.3 Delivery of Shares; Payment of Purchase Price. At the Closing, the
Company will deliver to Purchaser a certificate or certificates representing the
Shares purchased by Purchaser against payment of the Purchase Price therefor by
wire transfer at the Closing of immediately available funds to the account or
accounts specified by the Company in writing at least two Business Days prior to
the Closing Date.

         1.4 Legend. The certificate or certificates evidencing the Shares shall
be subject to a legend restricting transfer under the Securities Act of 1933, as
amended (the "Securities Act"), and referring to restrictions on transfer and
rights of first refusal herein, such legend to be substantially as follows:

                  (a)      "The shares represented by this certificate have not
                           been registered under the Securities Act of 1933, as
                           amended, or any state securities law. Such shares may
                           not be sold or transferred in the absence of such
                           registration or an opinion of counsel reasonably
                           satisfactory to the Company as to the availability of
                           an exemption from registration."
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                  (b)      "The shares represented by this certificate are
                           subject to restrictions on transfer, including any
                           sale, pledge or other hypothecation, and rights of
                           first refusal set forth in a Stock Purchase Agreement
                           dated August 3, 1998 between the Company and
                           Purchaser, a copy of which is on file at the
                           Company's principal executive offices."

                                   ARTICLE II
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Purchaser as follows:

         2.1 Organization, Standing and Power.

                  (a) Each of the Company and the Company Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted and as proposed to be conducted. Each of the
Company and the Company Subsidiary is duly qualified as a foreign corporation
and is in good standing in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except for
such failures, if any, to be so qualified and in good standing, which either
individually or in the aggregate would not have a "Material Adverse Effect" (as
hereinafter defined) on the Company. Material Adverse Effect when used in
connection with any entity means any change or effect that is materially adverse
to the business, financial condition, results of operations, properties, assets
or liabilities of such entity taken as a whole. Except as set forth on Schedule
2.1(a), the Company has no direct or indirect equity interest in or loans to any
partnership, corporation, joint venture, business association or other entity.
The Company has delivered to Purchaser complete and correct copies of the
Certificate of Incorporation and Bylaws, or similar charter documents, of the
Company and the Company Subsidiary, in each case as amended to the date hereof
and will furnish to Purchaser true and correct copies of any amendments thereto
through the term of this Agreement.

                  (b) Except for the Company Subsidiary, which is wholly-owned
by the Company, the Company has no Subsidiaries or affiliated companies and does
not otherwise own or control, directly or indirectly, any equity interest in any
corporation, association or business entity.

         2.2 Capital Structure. The authorized capital stock of the Company
consists of 25,000,000 shares of Common Stock and 7,000,000 shares of Preferred
Stock, $.10 par value per share. Of the 7,000,000 shares of Preferred Stock
authorized, 1,500,000 shares have been designated Series A Junior Participating
Preferred Stock (the "Series A Stock") and 2,138,702 shares have been designated
as Series B Preferred Stock (the "Series B Stock"). At July 31, 1998, there were
13,244,415 shares of Common Stock issued and outstanding, no shares of Series A
Stock issued and outstanding, and 2,138,702 shares of Series B Stock issued and
outstanding. All such issued and outstanding shares have been duly authorized
and validly
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issued and are fully paid and non-assessable and no issued and outstanding
shares are subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws or any agreement to which the Company is a party or by
which the Company may be bound. All outstanding shares of the Company's capital
stock have been issued in compliance with applicable federal and state
securities laws. The Company has reserved for issuance shares of Common Stock in
connection with the following options and convertible securities: (i) 3,000,000
shares of Common Stock, reserved for issuance pursuant to the Company's 1985
Stock Option Plan, of which, at July 31, 1998, options to purchase 2,240,650
shares were outstanding and 234,036 shares remain available for issuance
pursuant to options that may be granted under such Plan; (ii) 60,000 shares of
Common Stock, reserved for issuance pursuant to the Company's 1994 Stock Award
Plan, of which, at July 31, 1998, 2,600 shares remained available for future
awards; (iii) 2,300,000 shares of Common Stock, reserved for issuance pursuant
to the Company's 1998 Stock Option Plan, of which, at July 31, 1998, options to
purchase 27,000 shares were outstanding and 2,273,000 shares remain available
for issuance pursuant to options that may be granted under such Plan. 1,500,000
shares of the Series A Stock have been reserved for issuance pursuant to the
Rights Agreement. Except as set forth on Schedule 2.2, there are no other
options, warrants, conversion privileges or other contractual rights presently
outstanding or in existence to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities or the
capital stock or other securities of the Company Subsidiary.

         2.3      Authority.

                  (a) The Company has all requisite corporate power and
authority to enter into this Agreement and each of the other Alliance
Agreements, and to consummate the transactions contemplated hereby and thereby.
All corporate action on the part of the Company, its directors and stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement and the other Alliance Agreements, and the authorization, sale,
issuance and delivery of the Shares contemplated hereby, has been taken. This
Agreement and each of the other Alliance Agreements when duly executed and
delivered by the Company shall each constitute legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies, except that
the availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought. The issuance and sale of
the Shares contemplated hereby will not give rise to any preemptive rights or
rights of first refusal in existence as of the date hereof on behalf of any
person pursuant to any provision of any agreement between the Company and any
such person or the Company's Certificate of Incorporation or Bylaws.

         (b) The Shares have been duly authorized and, upon the issuance and
delivery of the Shares and the payment of the Purchase Price therefor pursuant
to this Agreement, the Shares will be duly and validly issued and outstanding,
fully paid and non-assessable, and Purchaser shall have good and marketable
title to the Shares free of any liens or restrictions (unless created by the
Purchaser or any of its Affiliates), other than restrictions expressly set forth
in the Alliance
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Agreements (as defined in Section 10.1) or restrictions on transferability under
applicable securities laws.

         2.4 No Conflict. Except as set forth on Schedule 2.4, and subject to
compliance with the HSR Act and such filings as may be required pursuant to
federal and state securities laws, the execution and delivery of each of the
Alliance Agreements does not, and the consummation of the transactions
contemplated hereby and thereby will not, result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation pursuant
to, or a loss of benefits under, any provision of the Certificate of
Incorporation or Bylaws of the Company, or any mortgage, indenture, lease or
other agreement or instrument, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company, its properties or
assets, (including, without limitation, any agreement with HP (as defined in
Section 10.1) or FUSO Pharmaceutical Industries, Ltd.) the effect of which would
have a Material Adverse Effect on the Company or restrict its power to perform
its obligations as contemplated hereby.

         2.5 SEC Reports. All reports required to be filed by the Company since
January 1, 1997 to the date of this Agreement under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), copies of which have been furnished to
Purchaser (the "SEC Reports"), have been duly filed, were substantially in
compliance with the requirements of their respective forms as of the dates at
which the information was furnished, were complete and correct in all material
respects as of their respective dates, and contained (as of such respective
dates) no untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated interim financial
statements of the Company included in the SEC Reports fairly present in all
material respects, in conformity with United States generally accepted
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto), the consolidated financial position of the Company as of
the dates thereof and the Company's consolidated results of operations and cash
flows for the periods then ended. Except as reflected or reserved against in the
consolidated balance sheet of the Company at March 31, 1998, the Company has no
liabilities of any nature (whether accrued, absolute, contingent or otherwise),
except for liabilities incurred in the ordinary course of business since March
31, 1998 and liabilities which would not, individually or in the aggregate, have
a Material Adverse Effect on the Company.

         2.6 Absence of Changes. Except as and to the extent specifically
disclosed in the SEC Reports filed prior to the date of this Agreement or as set
forth on Schedule 2.6 hereof, since March 31, 1998: (a) there has not been one
or more events, occurrences or developments or state of circumstances or facts,
particular to the Company, which individually or collectively has had or
reasonably would be expected to result in a Material Adverse Effect on the
Company; and (b) there has not been one or more breaches or defaults or events
that have resulted, or which, with notice or lapse of time or both, would result
in any breach or default under any material contract of the Company or the
Company Subsidiary, except for any such breaches or defaults that individually
or collectively would not reasonably be expected to have a Material Adverse
Effect on the Company.
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         2.7 Governmental Consent, etc. No consent, approval or authorization
of, or designation, declaration or filing with, any governmental authority on
the part of the Company is required in connection with the execution and
delivery of this Agreement, or the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby, except the filing of
such forms with the United States Department of Justice and the Federal Trade
Commission as shall be required by the HSR Act, and the expiration or
termination of any waiting periods thereunder and such filings as may be
required to be made with the Securities and Exchange Commission (the "SEC"), the
National Association of Securities Dealers (the "NASD"), and any state
securities commission.

         2.8 Rights Agreement. The execution of this Agreement, the consummation
of the transactions contemplated hereby and any future acquisitions or proposed
acquisitions of shares of Common Stock by Purchaser or its Affiliates pursuant
to and in conformance with the terms of this Agreement and the Standstill
Agreement (as defined in Section 10.1) will not cause any adverse consequence to
Purchaser or its Affiliates or the Company as a consequence of the Rights
Agreement, including, without limitation, the occurrence of the Separation Time
(as defined in the Rights Agreement) or any adjustment to the Exercise Price (as
defined in the Rights Agreement). Without limiting the generality of the
foregoing, the Company's Board of Directors has taken all necessary and
appropriate action prior to the date of this agreement such that (a) Purchaser
and its Affiliates collectively constitute a "Minority Investor" (as such term
is defined in the Rights Agreement) and (b) the "Minority Percentage" (as such
term is defined in the Rights Agreement) applicable to Purchaser and its
Affiliates is twenty-five (25) percent.

         2.9 DGCL Section 203. Any transaction or series of transactions in
which Purchaser or any of its Affiliates may become "interested stockholders"
(as defined in Section 203 of the Delaware General Corporation Law) which
transaction or series of transactions do not violate the terms of this Agreement
or the Standstill Agreement are authorized and approved effective at the Closing
by the Board of Directors of the Company for the purposes of Section 203 of the
Delaware General Corporation Law.


                                   ARTICLE III
                   REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to the Company as follows:

         3.1 Investment. Purchaser will acquire the Shares pursuant to this
Agreement for investment for its own account, not as a nominee or agent, and not
with a view or any present intention to, or for resale in connection with, any
distribution thereof. Purchaser understands that the Shares and any other shares
purchased by Purchaser from the Company pursuant to this Agreement have not
been, and will not be, registered under the Securities Act or any state
securities laws for sale to Purchaser by reason of a specific exemption from the
registration provisions of the Securities Act and such state securities laws,
which depends upon, among other things, the bona fide nature of Purchaser's
investment intent and the accuracy of Purchaser's
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representations as expressed herein. Should Purchaser in the future decide to
offer to dispose of any Shares, or any interest therein, it agrees to do so only
in compliance with the Securities Act and such state securities laws, and this
Agreement.

         3.2 Organization. Purchaser is a corporation duly organized and validly
existing in good standing under the laws of the State of Illinois, with all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as presently conducted and as proposed
to be conducted.

         3.3 Authority. Purchaser has all requisite corporate right, power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Purchaser
and the consummation by Purchaser of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on behalf of Purchaser.
This Agreement, when duly executed and delivered by Purchaser, shall constitute
the legal, valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies,
except that the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought.

         3.4 No Conflict. Subject to compliance with the HSR Act and such
filings as may be required pursuant to federal and state securities laws, the
execution and delivery of each of the Alliance Agreements does not, and the
consummation of the transactions contemplated hereby will not, result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation pursuant to, or a loss of benefits under, any provision of the
Certificate of Incorporation or Bylaws of Purchaser, or any mortgage, indenture,
lease or other agreement or instrument, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Purchaser, its
properties or assets, the effect of which would have a Material Adverse Effect
on Purchaser or restrict its power to perform its obligations as contemplated
hereby.

         3.5 Governmental Consents, etc. No consent, approval or authorization
of, or designation, declaration or filing with any governmental authority on the
part of Purchaser is required in connection with the valid execution and
delivery of this Agreement, or the purchase of the Shares, or the consummation
of any other transaction contemplated hereby, except the filing of such forms
with the United States Department of Justice and the Federal Trade Commission as
shall be required by the HSR Act, and the expiration or termination of any
waiting periods thereunder and such filings, as may be required to be made with
the SEC, the NASD and any state securities commission.

         3.6 Investigation. The Company or its representatives have made
available to Purchaser all documents and information that Purchaser has
requested relating to its acquisition of the Shares. Purchaser has had a
reasonable opportunity to discuss the Company's business, management and
financial affairs with the Company's management and Purchaser has received
satisfactory responses from management of the Company to Purchaser's inquiries.
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         3.7 Purchaser. Purchaser has such knowledge and experience in business
and financial matters that it is capable of evaluating the merits and risks of
its investment in the Shares. Purchaser is able to bear the economic risk of
ownership of the Shares for an indefinite period of time.

                                   ARTICLE IV
                     CONDITIONS TO OBLIGATIONS OF PURCHASER

                  Purchaser's obligation to purchase the Shares at the Closing
is subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, unless waived in writing by Purchaser:

         4.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Article II hereof and in Section 14.5 of the
Distribution Agreement shall be true and correct in all material respects when
made and on the Closing Date with the same force and effect as if they had been
made on and as of said date.

         4.2 Covenants. All covenants and agreements contained in this Agreement
to be performed or complied with by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.

         4.3 Opinion of Counsel to the Company. Purchaser shall have received
from Paul, Hastings, Janofsky & Walker LLP, counsel to the Company, an opinion
addressed to it, dated the Closing Date, in substantially the form of Exhibit A.

         4.4 No Order Pending. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.

         4.5 HSR Act. Both Purchaser and the Company shall have filed such forms
with the United States Department of Justice and the Federal Trade Commission as
shall be required by the HSR Act. The applicable waiting periods under the HSR
Act shall have expired or earlier been terminated without notice from such
governmental agencies that additional inquiries are being made.

         4.6 No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law, rule or regulation prohibiting or restricting the purchase and
sale of the Shares or requiring any consent or approval of any person which
shall not have been obtained to issue the Shares.

         4.7 Compliance Certificate. The Company shall have delivered to the
Purchaser a certificate, in substantially the form of Exhibit B, executed on
behalf of the Company by the President of the Company, dated the Closing Date,
and certifying to the fulfillment of the conditions specified in Sections 4.1
and 4.2.

         4.8 Alliance Agreements. (a) The Company shall have executed and
delivered to Purchaser each of the Alliance Agreements; and
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                  (b) The "Closing" referred to in Section 1.22 of the
Distribution Agreement shall have occurred or shall be occurring simultaneously.

         4.9 Authorizing Resolutions. Purchaser shall have received a
Secretary's Certificate certifying as to the resolutions adopted by the
Company's Board of Directors approving this Agreement and the transactions
contemplated hereby, including resolutions relating to Sections 2.8 and 2.9
hereof, in form and substance reasonably acceptable to Purchaser.

         The non-fulfillment of any of the foregoing conditions (whether or not
the Closing occurs) shall not result in any liability to any party hereto unless
such non-fulfillment is a result of a breach of this Agreement or any of the
other Alliance Agreements by such party.

                                    ARTICLE V
                    CONDITIONS TO OBLIGATIONS OF THE COMPANY

         The Company's obligation to sell and issue the Shares at the Closing is
subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, unless waived in writing by the Company:

         5.1 Representations and Warranties Correct. The representations and
warranties made by Purchaser in Article III hereof shall be true and correct in
all material respects when made and on the Closing Date with the same force and
effect as if they had been made on and as of said date.

         5.2 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by Purchaser on or prior to the
Closing Date shall have been performed or complied with in all material
respects.

         5.3 Opinion of Counsel to Purchaser. The Company shall have received
from David S. Fishman, counsel to the Purchaser, an opinion addressed to it,
dated the Closing Date, in substantially the form of Exhibit G.

         5.4 No Order Pending. There shall not then be in effect any order
enjoining or restraining the transactions contemplated by this Agreement.

         5.5 HSR Act. Both Purchaser and the Company shall have filed such forms
with the United States Department of Justice and the Federal Trade Commission as
shall be required by the HSR Act. The applicable waiting periods under the HSR
Act shall have expired or earlier been terminated without notice from such
governmental agencies that additional inquiries are being made.

         5.6 No Law Prohibiting or Restricting Such Sale. There shall not be in
effect any law rule or regulation prohibiting or restricting the purchase and
sale of the Shares or requiring any consent or approval of any person which
shall not have been obtained to issue the Shares.
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         5.7 Compliance Certificate. Purchaser shall have delivered to the
Company a certificate in substantially the form of Exhibit H, executed on behalf
of Purchaser by an officer of Purchaser, dated the Closing Date, and certifying
to the fulfillment of the conditions specified in Sections 5.1 and 5.2.

         5.8 Alliance Agreements. (a) Purchaser shall have executed and
delivered to the Company the Standstill Agreement, the Registration Rights
Agreement, the Research Agreement and the Distribution Agreement (each as
defined in Section 10.1); and

                  (b) The "Closing" referred to in Section 1.22 of the
Distribution Agreement shall have occurred or shall be occurring simultaneously.

         The non-fulfillment of any of the foregoing conditions (whether or not
the Closing occurs) shall not result in any liability to any party hereto unless
such non-fulfillment is a result of a breach of this Agreement or any of the
Alliance Agreements by such party.


                                   ARTICLE VI
                            COVENANTS OF THE COMPANY

         6.1 Attendance at Meetings of the Board of Directors.

                  (a) Nothing herein shall be deemed to confer upon Purchaser
any contractual right to designate a member of the Company's Board of Directors.
For so long as Purchaser holds shares of Voting Stock (as defined in Section
10.1) representing at least 10% of the then outstanding Total Voting Power of
the Company (as defined in Section 10.1), the Company shall permit Purchaser to
designate an employee of Purchaser, who shall be approved by the Company, such
approval not to be unreasonably withheld or delayed, to have visitation rights
to all proceedings and activities of the Company's Board of Directors (the
"Attendance Right"). The Attendance Right shall not include the right to attend
either (1) executive sessions (as defined in paragraph (c) below) of the
Company's Board of Directors or (2) meetings of committees of the Company's
Board of Directors.

                  (b) A reduction in Purchaser's percentage ownership of Voting
Stock below 10% shall not cause the loss of Purchaser's Attendance Right under
paragraph (a) above if the event causing the reduction is the sale or issuance
by the Company of additional shares of Voting Stock resulting in dilution of
Purchaser's percentage ownership level, and not a disposition by Purchaser of
its Voting Stock; except, however, where such reduction is a result of
Purchaser's failure to exercise its maintenance rights as provided in Article
VIII.

                  (c) For purposes of this Section 6.1, an "executive session"
shall mean those portions of Board of Directors meetings at which only members
of the Board of Directors are permitted to be present, together with their
invited counsel, advisors and executive officers of the Company. Purchaser shall
cause its designee under paragraph (a) above to execute a confidential
<PAGE>   11
disclosure agreement with the Company mutually agreeable to the Company and
Purchaser prior to attendance at any proceeding of the Company's Board of
Directors. Except as provided in paragraph (d) below, the Company shall provide
to Purchaser's representative all notices and materials at the same time as it
provides the same to the members of the Board of Directors.

                  (d) Any designee of Purchaser shall be entitled, and the
Company may require such designee, to excuse himself or herself from all
discussions and deliberations of the Board of Directors of the Company (or any
committee constituted by the Board) concerning competitors of Purchaser or
relationships between the Company and Purchaser. Upon notice to Purchaser's
designee, the Company may refrain from sending or providing to Purchaser, or
Purchaser may refuse to receive, any information otherwise disseminated to the
directors of the Company concerning competitors of Purchaser or relationships
between the Company and Purchaser.

         6.2 Notice of Certain Transactions. From and after the Closing Date, in
addition to any other notices required or permitted by this Agreement, the
Company shall give Purchaser written notice within two (2) Business Days if any
person or group of persons makes, announces an intention to make, or the Company
otherwise receives, an Acquisition Proposal (as defined in Section 10.1). In
addition, from and after the Closing Date, the Company shall give Purchaser
written notice within two (2) Business Days of receipt by the Company of filing
of (i) any notice under the HSR Act relating to an acquisition of assets or
Voting Securities of the Company, (ii) any statement on Schedule 13D or Schedule
14D-1 (or any successor schedule to such schedules) under the Exchange Act
relating to any Voting Stock, and (iii) any amendments to any of the foregoing,
other than those filed by an Institutional Investor (as defined in Section
10.1). In its written notice to Purchaser, the Company shall disclose the
material terms of such event, except that the Company need not disclose the name
of the person making such Acquisition Proposal or filing. From and after the
Closing Date, the Company shall also give Purchaser written notice of its
engagement in negotiations with HP pursuant to Section 6.6(b) of the HP Purchase
Agreement (as defined in Section 10.1) (which notice shall specify the date on
which such negotiations commenced and the date on which the exclusive
negotiation period under such Section 6.6(b) will expire) and, subject to any
confidentiality restrictions to which the Company may be subject, shall notify
Purchaser in writing of the occurrence of any material events with respect to
any such negotiations during the 30-day exclusive negotiating period under such
section.

         6.3 Rights Agreement. From and after the Closing Date:

                  (a) the Company will not amend, interpret or enforce the
Rights Agreement, or adopt any new shareholder rights agreement or other similar
arrangement, plan or measure, if such amendment, interpretation, enforcement or
adoption would prohibit the ability of Purchaser to hold or acquire Beneficial
Ownership of shares of Voting Stock which do not exceed 25% of the outstanding
shares of Voting Stock; and

                  (b) if the Company amends or interprets the Rights Agreement
(or any new shareholder rights agreement or other similar arrangement, plan or
measure) to permit any person or persons (including HP) other than an
Institutional Investor (as defined in the Rights Agreement) to acquire
Beneficial Ownership of 25% or more of the outstanding shares of Voting
<PAGE>   12
Stock without becoming an Acquiring Person (as defined in the Rights Agreement),
then the Company shall also amend or interpret, as the case may be, the Rights
Agreement to provide that Purchaser shall also be able to acquire Beneficial
Ownership of the number of shares of Voting Stock necessary to reach the same
percentage ownership position in the Company that such person or persons are
permitted to reach without becoming an Acquiring Person.

         6.4 No Objection. Except as required by law, the Company shall not
interpose any objection or take any legal action as a plaintiff in connection
with the acquisition by Purchaser of such number of shares of Voting Stock as is
permitted to be owned by Purchaser pursuant to and in conformance with this
Agreement and the Standstill Agreement.

         6.5 Sale of Shares. The Company shall take such action as is reasonably
necessary, subject to compliance with applicable law, to issue and sell to
Purchaser the Shares and any additional shares of capital stock which Purchaser
shall be entitled to purchase from the Company pursuant to and in conformance
with this Agreement and the Standstill Agreement.

         6.6 HSR Act. The Company shall file such forms with the United States
Department of Justice and the Federal Trade Commission as shall be required by
the HSR Act as promptly as practicable upon execution of this Agreement, shall
promptly respond to any requests for additional information and shall cooperate
fully with Purchaser with respect to compliance with the HSR Act.


                                   ARTICLE VII
                             COVENANTS OF PURCHASER

         7.1 Voting. From and after the Closing Date, Purchaser shall take such
action as may be required so that all shares of Common Stock owned by Purchaser
are voted in favor of nominees to the Board of Directors of the Company in
accordance with the recommendation of the Board of Directors, provided that
Purchaser shall not be so obligated if Purchaser, in its sole discretion,
determines that doing so would be adverse to Purchaser's interest in the
Company. Unless the Company otherwise consents in writing, Purchaser shall take
such action as may be required so that all shares of Common Stock owned by
Purchaser are voted in accordance with the recommendations of the Board of
Directors on all other matters, other than Significant Events (as defined in
Section 10.1 below), to be voted on by holders of Voting Stock; provided,
however, that if Purchaser disagrees with the Board's recommendation as to any
matter, the Voting Stock Beneficially Owned by Purchaser may be voted with
respect to such matter in not less than the same proportion as the votes cast by
all holders of Voting Stock (excluding Purchaser) with respect to such matter.
With respect to Significant Events, (i) Purchaser may vote all shares of Voting
Stock Beneficially Owned by Purchaser up to and including that number of shares
representing 15% of the Total Voting Power of the Company (the "15% Threshold")
as Purchaser determines in its sole discretion on any Significant Event
presented to be voted on by the holders of Voting Stock, and (ii) Purchaser
shall vote any shares of Voting Stock Beneficially Owned by Purchaser
representing more than the 15% Threshold, at its election, either in accordance
with the recommendations of the Board of Directors or in the same
<PAGE>   13
proportion as the votes cast by all holders of Voting Stock with respect to such
matter.

         7.2 Acquisition of Stock. Subject to the rights and obligations of
Purchaser set forth in the Standstill Agreement, Purchaser shall advise
management of the Company as to Purchaser's general plans to increase by 1% or
more its percentage interest in the Total Voting Power of the Company reasonably
in advance of any such acquisitions. Purchaser shall advise management of the
Company as promptly as practicable, but in no event later than seven (7)
Business Days, following any acquisition by Purchaser of additional shares of
Voting Stock representing increments of 1% or more of the Total Voting Power of
the Company.

         7.3 Transfers of the Shares. (a) For so long as the Standstill
Agreement is in effect, and subject to the provisions of the Standstill
Agreement and Article IX hereof, except pursuant to an effective registration
statement, Purchaser may not sell more than 200,000 Shares in any three (3)
month period (a sale by Purchaser of a portion of the Shares which is permitted
by this Section 7.3 but is not made pursuant to an effective registration
statement shall be a "Permitted Sale"). In connection with any Permitted Sale,
other than a Permitted Sale in connection with an acquisition of the Company or
a tender or exchange offer for all of the Voting Stock, Purchaser agrees to use
its best efforts to effect as wide a distribution as reasonably practicable,
including, but not limited to, preventing any buyer from owning more than 5%
(calculated from publicly available filings as of the time not more than five
(5) Business Days before the date of signing any definitive agreement relating
to a Permitted Sale and, in the absence of any such filing, determined on the
basis of the Purchaser's actual knowledge after due inquiry) of the Voting
Stock.

                  (b) Purchaser agrees to take and hold the Shares subject to
the provisions of federal and state securities laws. Purchaser agrees that prior
to any Permitted Sale, it will obtain (i) a written opinion of Purchaser's legal
counsel (who shall be reasonably acceptable to the Company) addressed to the
Company and which shall be reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed Permitted Sale may be
effected without registration under the Securities Act, (ii) a "no action"
letter from the SEC to the effect that the proposed Permitted Sale of such
securities without registration will not result in a recommendation by the staff
of the SEC that action be taken with respect thereto, or (iii) such other
showing that may be reasonably satisfactory to legal counsel to the Company.
Each certificate representing shares of the Common Stock transferred as above
provided shall bear a restrictive legend substantially as set forth in Section
1.4 above.

                  (c) Purchaser will cause any proposed transferee of Common
Stock in a Permitted Sale, prior to such transfer, to agree, in a writing
reasonably satisfactory to the Company, to take and hold such securities subject
to the foregoing conditions.

         7.4 HSR Act. Purchaser shall file such forms with the United States
Department of Justice and the Federal Trade Commission as shall be required by
the HSR Act as promptly as practicable upon execution of this Agreement, shall
promptly respond to any requests for additional information and shall cooperate
fully with the Company with respect to compliance with the HSR Act.
<PAGE>   14
                                  ARTICLE VIII
                                RIGHT TO MAINTAIN

         For purposes of this Article VIII, the term "Maintenance Percentage"
shall mean the percentage interest in Total Voting Power of the Company
Beneficially Owned by Purchaser immediately prior to an issuance by the Company
of any Voting Stock.

         8.1 Stock Plan Issuances. Notwithstanding the provisions of Section 8.2
below, Purchaser shall have no rights to purchase additional shares of Voting
Stock from the Company to maintain the Maintenance Percentage if the percentage
interest of Purchaser in the Total Voting Power of the Company is reduced as a
result of an issuance after the date hereof by the Company of any Voting Stock
(including any issuance resulting from the conversion or exercise of any
security or other right to acquire Voting Stock) pursuant to the Company's
present or future stock option, stock purchase or other stock plans or otherwise
for compensatory purposes for the benefit of employees, directors, consultants
or others.

         8.2 Other Issuances. From and after the Closing Date, in the event that
the Company issues additional shares of Voting Stock (other than an issuance to
which Section 8.1 applies) including, without limitation, in a public offering
registered under the Securities Act, a private sale to a third party or in
connection with a merger (other than any merger in which the holders of Voting
Stock of the Company immediately prior to such merger will cease to Beneficially
Own 50% or more of the outstanding voting stock of the surviving parent entity)
or acquisition by the Company, including any issuance following conversion of
any security convertible into or exchangeable for Voting Stock or upon exercise
of any option, warrant or other right to acquire any Voting Stock, as a result
of which issuance the percentage interest of Purchaser in the Total Voting Power
of the Company is reduced below the Maintenance Percentage, then, subject to the
rights and obligations of Purchaser set forth in the Standstill Agreement,
Purchaser shall be entitled to purchase additional whole shares of Voting Stock
from the Company as provided in this Section 8.2.

                  (a)      Negotiated Purchases.

                           (i) In the event that a person or group (the "Buyer")
         wishes to acquire any Voting Stock pursuant to a Negotiated Purchase
         (as defined in Section 10.1) (the "Negotiated Purchase Shares"), the
         Company shall notify Purchaser in writing (the "Company Notice") before
         entering into an agreement to sell Negotiated Purchase Shares.
         Purchaser shall notify the Company by written notice ("Purchaser's
         Notice") within thirty (30) calendar days after receipt of the
         Company's Notice (the "Reply Period") as to whether Purchaser desires
         to acquire additional shares of Voting Stock from the Company to
         maintain its percentage ownership at the Maintenance Percentage.

                           (ii) If Purchaser notifies the Company within the
         Reply Period that Purchaser desires to purchase additional shares
         directly from the Company, then Purchaser shall have the option to
         purchase from the Company such number of shares of
<PAGE>   15
         Voting Stock as will cause Purchaser's percentage interest in the Total
         Voting Power of the Company to be maintained at the Maintenance
         Percentage. If Purchaser does not elect to participate in the
         Negotiated Purchase within the Reply Period, then Purchaser shall no
         longer have the right to acquire additional shares from the Company in
         connection with the Negotiated Purchase to which the notice referred.

                  (b) Public Offering. In the event of a proposed issuance of
Voting Stock pursuant to a public offering registered under the Securities Act
(a "Registered Offering"), the Company shall, not later than thirty (30)
calendar days prior to the effective date of the registration statement for such
Registered Offering, give written notice to Purchaser, which notice shall
include the number of shares of Voting Stock which the Company believes
Purchaser is entitled to acquire as a result of the Registered Offering (the
"Public Issuance Notice"). Upon receipt of the Public Issuance Notice, Purchaser
shall have fifteen (15) Business Days to notify the Company in writing (the
"Registered Offering Reply Period") of its decision to acquire additional Voting
Stock. If Purchaser elects to acquire additional Voting Stock within the
Registered Offering Reply Period, then the Company shall be obligated to sell
and Purchaser shall be obligated to purchase such Voting Stock concurrently with
the Registered Offering that would result in Purchaser's retaining or achieving
the Maintenance Percentage.

         8.3 Price. Purchaser must exercise its option as to all shares
described in any notice that it gives to the Company under this Article VIII
(provided that Purchaser is permitted to do so pursuant to the terms of this
Agreement and the Standstill Agreement and that such exercise would not result
in any adverse effects to Purchaser under the Rights Plan) or such option may
not be exercised at all. If Purchaser exercises its option to purchase such
shares from the Company pursuant to this Article VIII, the shares shall be sold
to Purchaser at the price per share determined as follows:

                  (a) If the event giving rise to Purchaser's right is an
issuance of Voting Stock upon conversion of any security convertible into or
exchangeable for Voting Stock, or upon exercise of any option, warrant or right
to acquire any Voting Stock, and is not treated under Section 8.3(b) or (c), the
price shall be the lower of (i) the conversion price per share of Voting Stock
set forth in the convertible security, option, warrant or right, and (ii) the
Average Market Price per share of Common Stock determined as of the date of such
conversion or exercise.

                  (b) If the event giving rise to Purchaser's rights is a sale
or issuance of Voting Stock other than a Registered Offering for cash or
property, including, without limitation, for securities or assets by way of a
merger with or acquisition of another company, then such shares shall be
purchased on the same terms as such shares were purchased from the Company by
the Buyer. If the purchase price paid by the Buyer for Voting Stock sold by the
Company includes any property or other form of consideration other than cash,
the value of such property or other consideration included in such purchase
price shall be jointly determined by the Company and Purchaser in good faith. If
the Company and Purchaser cannot agree on the purchase price paid by the Buyer,
then the parties hereby agree that the purchase price shall be deemed to be
equal to the Average Market Price as of the date that the transactions
contemplated by the Negotiated Purchase are publicly announced.
<PAGE>   16
                  (c) If the event giving rise to Purchaser's rights is a
Registered Offering, the price shall be the price per share at which the Common
Stock is sold by the Company in the Registered Offering.

                  (d) In all other cases, the price shall be the Average Market
Price per share of Common Stock determined as of the date of the issuance and
sale of such Common Stock.

         8.4 Closing. The purchase and sale of any shares of Common Stock to be
issued by the Company to Purchaser pursuant to this Article VIII shall take
place at 10:00 a.m. not later than the fifth Business Day following the issuance
of shares by the Company which gives rise to Purchaser's rights under this
Article VIII and the expiration or early termination of all waiting periods
imposed on such sale by the HSR Act and the receipt of all other applicable
regulatory approvals or, if no waiting period is imposed on such sale by the HSR
Act, not later than the third Business Day following the issuance of shares by
the Company which gives rise to Purchaser's rights under this Article VIII in
compliance with applicable laws, rules and regulations, at the principal offices
of the Company, or at such other time and place as the Company and Purchaser may
agree. The purchase price shall be payable in cash by wire transfer of
immediately available funds. The Company and Purchaser will use their reasonable
efforts to comply with all federal and state laws, rules and regulations and
requirements of the NASD and of any stock exchange applicable to any purchase
and sale of shares of Voting Stock under this Article VIII. The issuance of such
shares shall be subject to compliance with applicable laws, rules and
regulations and requirements of any applicable stock exchange and the absence of
any order in effect enjoining or restraining such exercise or issuance.

         8.5 Notice. Every three (3) months, the Company will provide, if
requested by Purchaser, a statement from the Company of the number of shares of
Voting Stock outstanding and the nature of any transaction resulting in any
increase in the number of shares of Voting Stock outstanding from the number
outstanding at the time of the immediately preceding statement and the number of
shares of Common Stock which the Company believes Purchaser is entitled to
acquire under this Article VIII at such time.

                                   ARTICLE IX
                      THE COMPANY'S RIGHT OF FIRST REFUSAL

         For so long as Purchaser or any of its Affiliates owns any Shares:

         9.1 Right of First Refusal. Prior to making any sale or transfer of the
Shares (other than to any Affiliate of Purchaser), Purchaser shall give the
Company the opportunity to purchase such Common Stock in the following manner:

                  (a) Purchaser shall give notice (the "Transfer Notice") to the
Company in writing of such intention specifying the portion of the Shares
proposed to be sold or transferred. If Purchaser (i) has received an offer from
a third party with a proposed price per share, then Purchaser shall include in
the Transfer Notice such price therefor and the other material terms
<PAGE>   17
upon which such disposition is proposed to be made, or (ii) if Purchaser has not
received an offer from a third party with a proposed price per share and the
other material terms upon which such disposition may be made, then Purchaser
shall include in the Transfer Notice the price and other material terms in which
it wishes to dispose of such Shares. The Company shall have the right
exercisable by written notice (the "Company Notice") to Purchaser within twenty
(20) Business Days after receipt of the Transfer Notice, to elect to purchase
all, but not less than all, of the Common Stock that Purchaser proposes to
transfer at the price (the "Transfer Price") and on the other terms set forth in
the Transfer Notice. For purposes of this Section 9.1, the "Transfer Price" may
refer to a predetermined formula for calculating a price at the time of the
closing of the disposition, which formula is based on the market price of the
Common Stock over a given period ending on or prior to the closing date of the
disposition.

                  (b) If the Company exercises its right of first refusal under
Section 9.1(a), the closing of the purchase of the Common Stock with respect to
which such right has been exercised shall take place within thirty (30) calendar
days after the date Purchaser receives the Company Notice, and the Company and
Purchaser shall be legally obligated to consummate the purchase contemplated
thereby and shall use their reasonable efforts to secure any approvals required
in connection therewith.

                  (c) If the Company does not exercise its right of first
refusal hereunder within the time specified for such exercise or does not
purchase the Common Stock within the time specified for such purchase, then
Purchaser shall be free, during the period of ninety (90) calendar days
following the expiration of such time for exercise or purchase, to sell the
Common Stock specified in such Transfer Notice, at a price equal to or greater
than the applicable Transfer Price and with other terms no less favorable to
Purchaser than the terms set forth in the Transfer Notice. Such transferee of
Purchaser shall acquire such Common Stock free from any of the provisions of
this Agreement (other than Section 1.4, if applicable); provided, however, such
Common Stock shall be subject to the provisions of the Registration Rights
Agreement and any restrictions imposed under applicable securities laws.

                  (d) The Company's rights under this Section 9.1 shall
terminate upon the termination of this Agreement by Purchaser or the Company in
accordance with Section 11.1(a).

         9.2 Assignment of Rights. In the event that the Company elects to
exercise a right of first refusal under this Article IX, the Company may
specify, prior to closing such purchase, and upon not less than three (3)
Business Days' prior notice to the Purchaser, one or more persons as its
designee to purchase any portion of the Common Stock to which such notice
relates. If the Company shall designate another person or persons as the
purchaser(s) pursuant to this Section 9.2, the giving of notice of acceptance of
the right of first refusal by the Company shall constitute a legally binding
obligation of the Company to complete such purchase if any such designee shall
fail to do so.

         9.3 Transfer of Shares to Affiliates. If Purchaser sells or transfers
any of the Shares to any Affiliate of Purchaser, such Affiliate of Purchaser
shall be subject to this Article IX with respect to such Shares to the same
extent as Purchaser and Purchaser shall cause any such
<PAGE>   18
Affiliate to comply with this Article IX.

                                    ARTICLE X
                                   DEFINITIONS

         10.1     Certain Definitions.  As used in this Agreement:

                  (a) The term "Acquisition Proposal" shall mean one or more of
the following: (i) a third party (other than an Institutional Investor or HP)
publicly discloses that it has acquired, or has the right to acquire Voting
Stock of the Company and such acquisition will result in such third party
Beneficially Owning 15% or more of the Total Voting Power of the Company; (ii)
the Company executes a definitive agreement in principle with a third party
which, if consummated, would result in the then current stockholders of the
Company owning less than a majority of the Total Voting Power of the Company or
its successor, or involving a sale of all or substantially all of the assets of
the Company; (iii) a third party makes a tender offer or exchange offer to
purchase the Company's Voting Stock to which the Company's response is to redeem
the Rights Agreement, respond neutrally or respond favorably; or (iv) a third
party solicits proxies with respect to the Company's Voting Stock in connection
with, or participates in an "election contest" as such term is used in Rule
14a-11 of Regulation 14A of the Exchange Act, relating to the election of
directors.

                  (b) The term "Affiliate", when used to indicate a relationship
with a specified person, shall mean a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such specified person.

                  (c) The term "Alliance Agreements" means this Agreement, the
Standstill Agreement, the Registration Rights Agreement, the Research Agreement
and the Distribution Agreement.

                  (d) The term "Average Market Price" of any security at any
date shall be the average of the closing prices for a share or other single unit
of such security on the thirty (30) consecutive trading days ending on the
trading date last preceding the date of determination of such price on the
principal national securities exchange on which such security is listed, or, if
such security is not listed on any national securities exchange, the average of
the closing sales prices for a share of such security on the National
Association of Securities Dealers Automated Quotation Systems ("NASDAQ") or, if
such closing sales prices shall not be reported on NASDAQ, the average of the
mean between the closing bid and asked prices of a share of such security in
such case as reported by The Wall Street Journal, or, if such prices shall not
be so reported, as the same shall be reported by the National Quotation Bureau
Incorporated, or, in all other cases, the fair market value of such securities
at such date as determined by a single nationally recognized investment banking
firm jointly selected by the Company and Purchaser. For this purpose, the
parties shall use all commercially reasonable efforts to cause any determination
of such fair market value to be made within ten (10) Business Days after the
date on which the value is to be measured. The determination of such fair market
value by the investment banking firm selected in the manner set forth above
shall be conclusive.
<PAGE>   19
                  (e) The term "Beneficial Ownership" shall have the meaning
contemplated by Rule 13d-3 promulgated under the Exchange Act.

                  (f) The term "Business Day" shall mean any day other than a
day which is a Saturday or Sunday or other day on which commercial banks in New
York, New York are authorized or required to remain closed.

                  (g) "Company Subsidiary" shall mean i-STAT Canada Limited, a
corporation organized under the laws of Canada.

                  (h) The term "Distribution Agreement" means the Marketing and
Distribution Agreement in the form of Exhibit F to this Agreement.

                  (i) The term "group" shall have the meaning contemplated by
Section 13-3(d)(3) of the Exchange Act, and the rules and regulations
promulgated thereunder.

                  (j) The term "HP" shall mean Hewlett-Packard Company, a
Delaware corporation (as successor by merger to Hewlett-Packard Company, a
California corporation).

                  (k) The term "HP Purchase Agreement" shall mean that certain
Series B Preferred Stock Purchase Agreement dated as of June 23, 1995, between
the Company and HP.

                  (l) The term "Negotiated Purchase" means a transaction between
the Company and any person or group pursuant to which such person or group
acquires from the Company (or has the right to acquire from the Company) Voting
Stock or any securities convertible into or exchangeable for voting stock or any
other right to acquire voting stock. Notwithstanding the foregoing, the term
"Negotiated Purchase" shall not include (i) any agreement between the Company
and any underwriter(s) in connection with a public offering, or (ii) issuances
of Voting Stock pursuant to any present or future compensatory stock, stock
purchase or option plan or other compensatory issuances to employees, directors,
officers, consultants, or others.

                  (m) The term "person" shall mean any person, individual,
corporation, partnership, trust or other nongovernmental entity or any
governmental agency, court, authority or other body (whether foreign, federal,
state, local or otherwise).

                  (n) The term "Registration Rights Agreement" means the
Registration Rights Agreement in the form of Exhibit C to this Agreement.

                  (o) The term "Research Agreement" means the Funded Research &
Development and License Agreement in the form of Exhibit E to this Agreement.

                  (p) The term "Rights Agreement" means the Stockholder
Protection Agreement dated as of June 26, 1995 between the Company and First
Fidelity Bank, National
<PAGE>   20
Association, as rights agent.

                  (q) The term "Significant Event" means any (i) proposed
amendment to the Certificate of Incorporation or Bylaws of the Company that
would be materially detrimental to the interest of Purchaser in the Company,
(ii) Acquisition Proposal, (iii) sale of the Company (by way of merger,
disposition of all or substantially all assets or otherwise), (iv)
recapitalization of the Company, (v) liquidation or dissolution of the Company,
(vi) transaction the effect of which is to cause the Voting Stock of the Company
to be neither listed on any national securities exchange nor authorized to be
quoted on any national inter-dealer quotation system or (vii) action which
Purchaser, in its sole discretion, determines would be adverse to Purchaser's
interest in the Company.

                  (r) The term "Standstill Agreement" means the Standstill
Agreement in the form of Exhibit D to this Agreement.

                  (s) The term "Subsidiary" of a person means any corporation
more than fifty percent (50%) of whose outstanding voting securities are, or any
partnership, joint venture or other entity more than fifty percent (50%) of
whose total equity interest is, directly or indirectly, owned by such person.

                  (t) The term "Total Voting Power of the Company" means the
total number of votes which may be cast in the election of directors of the
Company at any meeting of stockholders of the Company if all securities entitled
to vote in the election of directors of the Company were present and voted at
such meeting (other than votes that may be cast only upon the happening of a
contingency).

                  (u) The term "Voting Stock" means the Common Stock, Preferred
Stock and any other securities issued by the Company having the ordinary power
to vote in the election of directors of the Company (other than securities
having such power only upon the happening of a contingency).

                                   ARTICLE XI
                                  MISCELLANEOUS

         11.1     Termination of Agreement.

                  (a) The Company may terminate its obligation to perform or
observe any of its covenants and agreements hereunder if Purchaser materially
violates or fails to perform materially any of the covenants or agreements of
Purchaser under this Agreement, and Purchaser may terminate its obligations to
perform or observe any of its covenants and agreements hereunder if the Company
materially violates or fails to perform materially any of the covenants or
agreements of the Company under this Agreement; provided, however, the Company
or Purchaser, as the case may be, may not terminate any of its obligations under
this Agreement pursuant to this sentence unless it shall have delivered written
notice of such default to the other party and such default shall not have been
cured within thirty (30) calendar days after the
<PAGE>   21
delivery of such notice.

                  (b) This Agreement may be terminated, and the transactions
contemplated abandoned, by either the Company or Purchaser by written notice to
the other if the Closing does not occur on or before the date which is one
hundred and thirty (130) days from the execution of this Agreement.

                  (c) This Agreement may be terminated by Purchaser or the
Company at any time after the date that a permanent injunction or order by any
governmental authority, including under the HSR Act, preventing consummation of
the transactions contemplated by this Agreement has become final and
non-appealable.

                  (d) This Agreement shall terminate if at any time after the
date hereof, Purchaser beneficially owns less than one (1) million shares of
Common Stock (as adjusted to give effect to any stock splits, reverse stock
splits, stock dividends, recapitalizations or any similar transactions or
events).

                  (e) Notwithstanding anything to the contrary in this
Agreement, the provisions of Sections 11.4 (to the extent such Section 11.4 has
not been earlier terminated pursuant to its terms) shall survive the termination
of this Agreement and the transactions contemplated herein for a period to last
indefinitely.

         11.2 Reasonable Efforts. As long as the other party hereto is not in
default of any material obligation under this Agreement, each of the Company and
Purchaser shall use its reasonable efforts to take all actions required under
the HSR Act and under any law, rule or regulation adopted subsequent to the date
hereto in order that the respective agreements and covenants of the parties
hereto may be carried out on a timely basis in the manner contemplated by this
Agreement.

         11.3 Governing Law; Alternative Dispute Resolution. This Agreement and
the legal relations between the parties arising hereunder shall be governed by
and interpreted in accordance with the laws of the State of New York without
regard to its conflict of laws principles. The parties hereto agree that any
disputes which may arise during the term of this Agreement which relate to
either party's rights and/or obligations hereunder shall be resolved in
accordance with the ADR provisions attached hereto as Exhibit I.

         11.4 Indemnification and Survival of Representations and Warranties.

                  (a) Subsequent to the Closing Date, the Company shall
indemnify and hold harmless Purchaser from and against any liability, loss or
damage, together with all reasonable costs or expenses related thereto,
including reasonable attorney's fees and expenses but excluding consequential,
indirect or similar types of damage not the direct result of the harm suffered
or incurred (collectively, "Losses"), actually suffered or incurred by Purchaser
to the extent such Losses arise out of or result from the untruth and inaccuracy
of any of the representations and warranties of the Company contained in Section
2.3, Section 2.4 or Section
<PAGE>   22
2.8 hereof.

                  (b) Subsequent to the Closing Date, Purchaser shall indemnify
and hold harmless the Company from and against any Loss actually suffered or
incurred by the Company and arising out of or resulting from the untruth and
inaccuracy of any of the representations and warranties of Purchaser contained
in Sections 3.1, 3.3, 3.6 or 3.7 hereof.

                  (c) No person shall be liable for any claim for
indemnification under this Section 11.4 unless written notice of a claim for
indemnification is delivered by the person seeking indemnification (the
"Indemnitee") to the person from whom indemnification is sought (the
"Indemnitor") with respect to breaches of the representation and warranties
before the expiration of the applicable survival period and within 30 days after
the Indemnitee has received notice or knowledge of the matter giving rise to
such claim for indemnification. All notices given pursuant to this subsection
(c) shall set forth with reasonable specificity the basis for the claim for
indemnification and the amount of Losses with respect to such claim. Failure of
the Indemnitee to give notice within said 30-day period shall not be deemed a
waiver of its rights under this Section 11.4 except to the extent such failure
shall have actually prejudiced the Indemnitor or caused it to incur additional
costs, expenses or liabilities.

                  (d) Promptly, and in any event within 30 days, after the
assertion by any third party of any claim, demand or notice (a "Third Party
Claim") against an Indemnitee that results or may result in the incurrence by
such Indemnitee of any Loss for which such Indemnitee would be entitled to
indemnification hereunder, such Indemnitee shall notify the Indemnitor of such
Third Party Claim in writing. By written notice (the "Defense Notice") to the
Indemnitee within 30 days after receipt by the Indemnitor of notice of the Third
Party Claim (or sooner if such claim so requires), the Indemnitor shall notify
the Indemnitee that the Indemnitor will conduct, at its own expense, the defense
against the Third Party Claim in its own name or, if necessary, in the name of
the Indemnitee. The Indemnitee, at its own expense, shall have the right to
employ separate counsel in any such Third Party Claim and/or to participate in
the defense thereof; provided, however, that if (i) the Indemnitee shall have
received an opinion of counsel reasonably acceptable to the Indemnitor to the
effect that the interests of the Indemnitee and the Indemnitor with respect to
the Third Party Claim are sufficiently adverse to prohibit the representation by
the same counsel of both parties or (ii) the employment of such separate counsel
has been specifically authorized in writing by the Indemnitor, the reasonable
fees and expenses of such separate counsel shall be borne by the Indemnitor. If
the Indemnitor shall fail to give the Defense Notice within such 30-day period
(or such shorter period if such claim so requires), the Indemnitor shall be
deemed to have elected not to conduct the defense of the subject claim. The
party conducting the defense of any Third Party Claim shall use reasonable
efforts to keep the other party appraised of all significant developments with
respect thereto. No Third Party Claim may be settled by the Indemnitor without
the written consent of the Indemnitee, which consent shall not be unreasonably
withheld; provided, however, that if such settlement involves the payment of
money only and the Indemnitee is completely indemnified therefor the Indemnitee
shall not be entitled to withhold its consent. The Indemnitee shall not settle
any Third Party Claim that is being defended in good faith by the Indemnitor.
Failure of the Indemnitee to give timely, complete or accurate notice as
provided in this subsection (d) will
<PAGE>   23
not affect the rights or obligations of any party hereunder except and only to
the extent that, as a result of such failure, any party entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise damaged or prejudiced as a result of such
failure to give timely notice.

                  (e) The amount of any Loss subject to indemnification under
this Section 11.4 shall be calculated net of any amounts which have been
previously recovered by the Indemnitee under insurance policies or other
collateral sources (such as contractual indemnities of any person which are
contained outside this Agreement). In the event any such amounts that may be
recoverable under such insurance policies or other collateral sources are not
received before any claim for indemnification is paid pursuant to this Section
11.4, then the Indemnitee shall, at its election, either pursue such insurance
policies or collateral sources with reasonable diligence or assign all such
rights to the Indemnitor. In the event any such recovery is received after any
claim for indemnification is paid by the Indemnitor, the amount of such recovery
shall be applied as follows: first, to reimburse the Indemnitee or the
Indemnitor, as the case may be, for its out-of-pocket expenses (including
reasonable attorneys' fees and expenses) expended in pursuing such recovery;
second, to refund any payments made by the Indemnitor which would not have been
so paid had such recovery been obtained prior to such payment; and third, any
excess to the Indemnitee. If the Indemnitee either fails to pursue any such
insurance policies or collateral sources with reasonable diligence or to assign
all such rights to the Indemnitor, then the Indemnitor shall have the right of
subrogation to pursue such insurance policies or collateral sources and may take
any reasonable actions necessary to pursue such rights of subrogation in its
name or the name of the party from whom subrogation is obtained. The Indemnitee
shall cooperate with the Indemnitor in pursuing any such subrogation claim.

                  (f) The rights of the parties for indemnification relating to
this Agreement and the transactions contemplated hereby shall be strictly
limited to those contained in this Section 11.4, and such indemnification rights
shall be the exclusive remedy available to the parties subsequent to the Closing
Date with respect to any matter in any way relating to this Agreement or any of
the other documents contemplated by this Agreement or arising in connection
herewith or therewith. To the maximum extent permitted by law, Purchaser and the
Company hereby waive, and shall cause their Affiliates to waive, all other
rights and remedies with respect to any such matter.

                  (g) The representations and warranties contained in Articles
II and III of this Agreement (other than those contained in Sections 2.3 and 2.8
and Sections 3.1, 3.3, 3.6 and 3.7 which shall survive indefinitely) shall not
survive the Closing Date.

         11.5 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective permitted
successors and assigns. This Agreement may not be transferred or assigned by
operation of law or otherwise without the prior written consent of the other
party; except that Purchaser may assign this Agreement to any direct or indirect
Subsidiary; provided, however, that no such assignment shall relieve or limit
Purchaser's obligations hereunder; and provided, further, that Purchaser shall
promptly notify the Company of any such assignment and provide the Company with
copies of any instrument
<PAGE>   24
evidencing such assignment.

         11.6 Entire Agreement; Amendment. This Agreement, the other Alliance
Agreements and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, both written and oral, between the parties relating to the
subject matter hereof and thereof. Neither party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein. Neither this Agreement nor any term hereof may
be amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.

         11.7 Notices and Dates. Any notice or other communication given under
this Agreement shall be sufficient if in writing and delivered by hand, by
messenger or by courier, or transmitted by facsimile, to a party at its address
set forth below (or at such other address as shall be designated for such
purpose by such party in a written notice to the other party hereto):

                  (a)      if to the Company, to it at:

                           i-STAT Corporation
                           303A College Road East
                           Princeton, NJ 08540
                           Chief Financial Officer
                           Fax: (609) 243-0507

with a copy addressed as set forth above but to the attention of:

                           Paul, Hastings, Janofsky & Walker LLP
                           1055 Washington Boulevard
                           Stamford, CT 06901
                           Attention: Esteban A. Ferrer, Esq.
                           Fax: (203) 359-3031

                  (b)      if to Purchaser, to it at:

                           Abbott Laboratories
                           100 Abbott Park Road
                           Dept. 9RK; Bldg. AP6C
                           Abbott Park, IL 60064
                           Attention: Director, Technology Acquisitions,
                              Diagnostics Division
                           Fax: (847) 937-6951

with a copy addressed as set forth above but to the attention of:

                           Dept. 322; Bldg. AP6D
<PAGE>   25
                           Attention: Divisional Vice President,
                                      Domestic Legal Operations
                           Fax: (847) 938-1206

         Each such notice or other communication shall for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, by messenger or by courier, or upon confirmation of
receipt if sent by facsimile.

         11.8 Further Assurances. The parties hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments or
documents as any other party may reasonably request from time to time in order
to carry out the intent and purposes of this Agreement and the consummation of
the transactions contemplated thereby. Neither the Company nor Purchaser shall
voluntarily undertake any course of action inconsistent with satisfaction of the
requirements applicable to them set forth in this Agreement, and each shall
promptly do all such acts and take all such measures as may be appropriate to
enable them to perform as early as practicable the obligations herein and
therein required to be performed by them.

         11.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

         11.10 Severability. If any provision of this Agreement is determined to
be unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties. In any event, all of the other
provisions shall be deemed valid and enforceable to the greatest possible
extent.

         11.11 Interpretation. When a reference is made in this Agreement to
Sections or Exhibits, such references shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The table of contents and headings contained in this
Agreement have been inserted for convenience of reference only and shall not be
relied upon in construing this Agreement. Use of any gender herein to refer to
any person shall be deemed to comprehend masculine, feminine, and neuter unless
the context clearly requires otherwise.

         11.12 Public Statements. Each of Purchaser and the Company shall not,
without the prior approval of the other party, make or cause to be made any
press release or other public statement concerning the transactions contemplated
by this Agreement or disclose any of the terms and conditions hereof, except as
and only to the extent that any party hereto is advised by legal counsel to be
so obligated by law or the regulations of any stock exchange or the NASD. The
parties hereby acknowledge the Company's obligation, subject to Section 19.3 of
the Distribution Agreement, to disclose the Alliance Agreements pursuant to the
rules and regulations under the Exchange Act.

         11.13    Brokers.
<PAGE>   26
                  (a) To the extent that the Company has engaged, consented to
or authorized any broker, finder or intermediary to act on its behalf, directly
or indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement, all fees, commissions, and other
payments owing to such person as a result of its or its employees participation,
negotiations, or other actions taken in connection with this Agreement are the
sole responsibility and obligation of the Company. The Company hereby agrees to
indemnify and hold harmless Purchaser from and against all fees, commissions or
other payments owing to any such person acting or claiming to act on behalf of
the Company hereunder.

                  (b) Purchaser has not engaged, consented to or authorized any
broker, finder or intermediary, to act on its behalf, directly or indirectly, as
a broker, finder or intermediary in connection with the transactions
contemplated by this Agreement. Purchaser hereby agrees to indemnify and hold
harmless the Company from and against all fees, commissions or other payments
owning to any such person or firm acting or claiming to act on behalf of
Purchaser hereunder.

         11.14 Costs and Expenses. Each party hereto shall pay its own costs and
expenses incurred in connection herewith, including the fees of its counsel,
auditors and other representatives, whether or not the transactions contemplated
herein are consummated.

         11.15 No Third Party Rights. Nothing in this Agreement shall create or
be deemed to create any rights in any person or entity not a party to this
Agreement.

         11.16 Specific Performance. Each party's obligations under this
Agreement is unique. Because the breach by any party of the provisions of this
Agreement would cause irreparable harm and significant injury that would be
difficult to ascertain and would not be compensable by damages alone, the
parties agree that each party will have the right to seek enforcement hereof by
injunction, specific performance or other equitable relief without prejudice to
any other rights and remedies the party seeking enforcement may have.

         11.17 Mutual Drafting. This Agreement is the joint product of Purchaser
and the Company, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Purchaser and the Company and their
respective legal counsel and advisers and any rule of construction that a
document shall be interpreted or construed against the drafting party shall not
be applicable.

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<PAGE>   27
         IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be signed by their respective representatives as of the date first
above written.



                                        I-STAT CORPORATION


                                        By:      ___________________________
                                                 Name:
                                                 Title:


                                        ABBOTT LABORATORIES



                                        By:      ___________________________
                                                 Name:
                                                 Title: