<PAGE>
                                                                    EXHIBIT 10.2

                             BCC ACQUISITION II LLC
                        C/O BAY CITY CAPITAL FUND I, L.P.
                          750 BATTERY STREET, SUITE 400
                             SAN FRANCISCO, CA 94109

                                November 21, 2005

CONFIDENTIAL

Diametrics Medical, Inc.
3050 Centre Pointe Drive, Suite 150
St. Paul, MN 55113

Ladies and Gentlemen:

          BCC Acquisition II LLC, a Delaware limited liability company
("BCCAII"), hereby agrees to deliver into escrow with Ocean Park Advisors, LLC
("OPA"), pursuant to the terms of the Escrow Agreement (as defined below), for
the benefit of Diametrics Medical, Inc., a Minnesota corporation ("DMED"), the
amount of $75,000 (the "Commitment"), which Commitment shall be payable to or on
behalf of DMED from the escrow from time to time upon the written request of
DMED in connection with the compromise and settlement of the liabilities set
forth on Exhibit A hereto; provided that BCCAII's obligation to make such
payment is conditioned upon (i) the prior or concurrent completion of the
transfer of certain DMED securities owned by BCCAII to OPA and M.A.G. Capital,
LLC ("MAG") pursuant to a letter agreement of even date herewith and (ii) BCCAII
shall receive from DMED a duly executed general release substantially in the
form attached hereto as Exhibit B.

          The Commitment shall become part of the Escrow Deposit described in
and held subject to the escrow letter agreement dated as of the date hereof
among BCCAII, OPA, MAG and DMED (the "Escrow Agreement").

          This letter agreement shall in no way obligate, or be deemed to
obligate, BCCAII to pay any amounts to any creditors of DMED with respect to the
liabilities set forth on Exhibit A and neither such creditors nor any other
party shall be a third party beneficiary of the agreements set forth herein.

          This letter agreement shall be interpreted in accordance with and
governed by the laws of the State of California applicable to agreements made
and to be performed wholly within that jurisdiction, without reference to the
conflicts of laws principles thereof.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

          This letter agreement may be executed in counterparts, each one of
which shall be deemed an original and all of which taken together shall
constitute one and the same document.

                                        Sincerely,

                                        BCC ACQUISITION II, LLC

                                        By: Bay City Capital Fund I, L.P.,
                                            its Manager

                                        By: Bay City Capital Management LLC,
                                            its general partner


                                        By: /s/ Fred Craves
                                            ------------------------------------
                                            Fred Craves, Manager and Managing
                                            Director

ACCEPTED AND AGREED TO THIS
21ST DAY OF NOVEMBER, 2005

DIAMETRICS MEDICAL, INC.


By: /s/ W. Glen Winchell
    ---------------------------------
Name: W. Glen Winchell
Its: Sr. Vice President of Finance
     and CFO

<PAGE>

                                    EXHIBIT A

                               CERTAIN LIABILITIES

<TABLE>
<CAPTION>
       VENDOR          ESTIMATED AMOUNTS
       ------          -----------------
<S>                    <C>
Dorsey & Whitney            $288,839
Easton Associates           $ 22,309
Bay City Capital LLC        $ 13,289
William Moffitt             $  6,839
Venturi Group               $  3,572
Entero Medics               $  1,677
AM Minnesota                $183,014
Liberty Property Ltd        $112,770
RR Donnelley                $ 27,494
</TABLE>

<PAGE>

                                    EXHIBIT B

                    FORM OF RELEASE OF BCC ACQUISITION II LLC

                                 [SEE ATTACHED]

<PAGE>

                                 GENERAL RELEASE

          For good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the undersigned party ("Releasor") hereby agrees
as follows:

          1. Release. Releasor releases BCC Acquisition II LLC and its
predecessor entities, affiliates and subsidiaries (collectively "BCCAII"), and
its past and present shareholders, employees and former employees, agents,
directors, officers, attorneys, predecessors, successors, assigns, heirs,
executors, administrators, and all other persons, firms, corporations,
associations, partnerships, or entities having any legal relationship to BCCAII
(collectively, "Releasees"), from any and all claims, demands and causes of
action of any kind or nature, whether known or unknown or suspected or
unsuspected to Releasor, which Releasor now owns or holds, or has at any time
before this owned or held against any of them relating to, arising out of, or in
any way connected with BCCAII.

          2. California Civil Code Section 1542. It is Releasor's intention that
Releasor's execution of this Agreement will forever bar any released claims,
demand, cause of action, charge and grievance related to BCCAII and the
Releasees. Because this is Releasor's intention, Releasor expressly waives any
and all rights and benefits conferred upon Releasor by the provisions of Section
1542 of the California Civil Code. Section 1542 provides:

          "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR."

          3. Remedies, Attorney Fees, Binding Arbitration. Releasor will not
bring any action against BCCAII or the Releasees with respect to any claims,
demands or causes of action released pursuant to in this Agreement. In the event
Releasor brings any such action: (a) BCCAII will be entitled to all lawful
remedies; and (b) all other provisions of this Agreement will remain in full
force and effect. In the event of any dispute arising out of or related to this
Agreement, the parties agree to enter into binding arbitration under the
commercial rules of the American Arbitration Association. The location for such
arbitration shall be Minneapolis, Minnesota. The governing law shall be
Minnesota law. The prevailing party shall be entitled to recover reasonable
attorney's fees and costs.

          4. Enforceability. If any term or provision of this Agreement is held
to be invalid or unenforceable, the remaining terms or provisions of this
Agreement will continue to be valid and will be performed, construed and
enforced to the fullest extent permitted by law, and the invalid or
unenforceable term will be deemed amended and limited in accordance with the
intent of the parties, as determined from the face of the Agreement, to the
extent necessary to permit the maximum enforceability or validation of the term
or provision.

          5. Headings. Paragraph headings are for the convenience of the parties
only.

<PAGE>

          IN WITNESS WHEREOF, Releasor has executed and delivered this General
Release as of the day and year set forth below.

Date: ___________ __, 2005

                                        DIAMETRICS MEDICAL, INC.


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Its:
                                             -----------------------------------