Document:

<PAGE>
                                                                    EXHIBIT 10.3

                               SECURITY AGREEMENT

      This Security Agreement (this "Agreement"), dated as of December 6th, 2005
is made by and among Diametrics Medical, Inc. ("Debtor") and those entities
listed on the Schedule of Secured Parties attached hereto as Schedule 1
(individually, a "Secured Party" and collectively, the "Secured Parties"), each
a holder of a Convertible Secured Promissory Note in the principal amount
indicated across from each Secured Party's name on the Schedule of Secured
Parties (individually, a "Note" and collectively, the "Notes").

                                    RECITALS

      A. Debtor has executed and delivered the Notes payable to the order of the
Secured Parties as of the date hereof.

      B. In connection with the Notes, Debtor desires to grant a security
interest in certain collateral to the Secured Parties as set forth herein.

                                    AGREEMENT

      NOW, THEREFORE, in consideration of the above recitals and the mutual
covenants hereinafter set forth, the parties hereby agree as follows:

      SECTION 1 Definitions; Interpretation.

            (a) All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to them in the Notes.

            (b) As used in this Agreement, the following terms shall have the
following meanings:

                  "Collateral" has the meaning set forth in Section 2.

                  "Documents" means this Agreement, the Notes and all other
certificates, documents, agreements and instruments delivered to Secured Parties
under the Notes or in connection with the Obligations.

                  "Event of Default" has the meaning set forth in Section 8.

                  "Lien" means any mortgage, deed of trust, pledge, security
interest, assignment, deposit arrangement, charge or encumbrance, lien, or other
type of preferential arrangement.

                  "Notes" has the meaning set forth in the preamble above, as
they may be amended, modified, renewed, extended or replaced from time to time.

                  "Obligations" means the indebtedness, liabilities and other
obligations of Debtor to the Secured Parties under or in connection with the
Notes or any of the other Documents, including, without limitation, all unpaid
principal of the Notes, all interest accrued
<PAGE>
thereon, all fees and all other amounts payable by Debtor to the Secured Parties
thereunder or in connection therewith, whether now existing or hereafter
arising, and whether due or to become due, absolute or contingent, liquidated or
unliquidated, determined or undetermined.

                  "Person" means an individual, corporation, partnership, joint
venture, trust, unincorporated organization, governmental agency or authority,
or any other entity of whatever nature.

                  "UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Minnesota.

            (c) Where applicable and except as otherwise defined herein, terms
used in this Agreement shall have the meanings assigned to them in the UCC.

            (d) In this Agreement, (i) the meaning of defined terms shall be
equally applicable to both the singular and plural forms of the terms defined;
and (ii) the captions and headings are for convenience of reference only and
shall not affect the construction of this Agreement.

      SECTION 2 Security Interest.

            (a) As security for the payment and performance of the Obligations,
Debtor hereby grants to each Secured Party a security interest in all of
Debtor's right, title and interest in, to and under all of its personal
property, wherever located and whether now existing or owned or hereafter
acquired or arising, including all accounts, chattel paper, commercial tort
claims, deposit accounts, documents, equipment (including all fixtures),
instruments, inventory, investment property, letter-of-credit rights, money,
general intangibles including, without limitation, all intellectual property and
all rights therein of any type or description, including, without limitation,
all inventions and discoveries, patents and patent applications, trademarks,
service marks and trade names, and applications for registration of such
trademarks, service marks and trade names, trade secrets, trade dress, trade
styles, logos, other source of business identifiers, mask-works, mask-work
registrations, mask-work applications, software, confidential and proprietary
information, and all licenses relating to any of the foregoing, all reissuance,
continuations and continuations-in-part of the foregoing, all other rights
derived from or associated with the foregoing, including the right to sue and
recover for past infringement, and all income and royalties with respect
thereto, and all products, proceeds and supporting obligations of any and all of
the foregoing (collectively, the "Collateral").

            (b) This Agreement shall create a continuing security interest in
the Collateral which shall remain in effect until terminated in accordance with
Section 20 hereof.

            (c) Secured Parties acknowledge that a principal amount of $15,917
of the Senior Secured Fixed Rate Note of the Company issued August 4, 1998 may
be considered outstanding and prior in right to the security interest granted
hereunder.

      SECTION 3 Financing Statements, Etc. Debtor shall execute and deliver to
each Secured Party concurrently with the execution of this Agreement, and Debtor
hereby authorizes each Secured Party to file (with or without Debtor's
signature), at any time and from time to time

                                      -2-
<PAGE>
thereafter, all financing statements, assignments, amendments, continuation
financing statements, termination statements, account control agreements, and
other documents and instruments, in form reasonably satisfactory to such Secured
Party, and take all other action, as a Secured Party may reasonably request, to
perfect and continue perfected, maintain the priority of or provide notice of
the security interest of each Secured Party in the Collateral. Debtor will
cooperate with each Secured Party in obtaining control (as defined in the UCC)
of Collateral consisting of deposit accounts, investment property, letter of
credit rights and electronic chattel paper. Debtor will join with the Secured
Parties in notifying any third party who has possession of any Collateral of the
Secured Parties' security interest therein and obtaining an acknowledgment from
the third party that it is holding the Collateral for the benefit of the Secured
Parties. Debtor will not create any chattel paper without placing a legend on
the chattel paper acceptable to each Secured Party indicating that the Secured
Parties have a security interest in the chattel paper.

      SECTION 4 Representations and Warranties. Debtor represents and warrants
to the Secured Parties that:

            (a) Debtor is duly organized, validly existing and in good standing
under the law of the jurisdiction of its organization and has all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement.

            (b) The execution, delivery and performance by Debtor of this
Agreement have been duly authorized by all necessary action of Debtor, and this
Agreement constitutes the legal, valid and binding obligation of Debtor,
enforceable against Debtor in accordance with its terms, except as enforcement
may be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors'
rights generally.

            (c) No authorization, consent, approval, license, exemption of, or
filing or registration with, any governmental authority or agency, or approval
or consent of any other Person is required for the due execution, delivery or
performance by Debtor of this Agreement, except for any filings necessary to
perfect any Liens on any Collateral.

            (d) Debtor's chief executive office and principal place of business
(as of the date of this Agreement) is located at the address set forth in
Schedule 2; Debtor's jurisdiction of organization is set forth in Schedule 2;
Debtor's exact legal name is as set forth in the first paragraph of this
Agreement; and all other locations where Debtor conducts business or Collateral
is kept (as of the date of this Agreement) are set forth in Schedule 2.

            (e) Debtor has rights in or the power to transfer the Collateral,
and Debtor is the sole and complete owner of the Collateral, free from any Lien,
except as set forth in Schedule 2.

            (f) All of Debtor's material U.S. and foreign patents and patent
applications, copyrights (whether or not registered), applications for
copyright, trademarks, service marks and trade names (whether registered or
unregistered), and applications for registration of such trademarks, service
marks and trade names, are set forth in Schedule 2.

                                      -3-
<PAGE>
            (g) No control agreements exist with respect to any Collateral other
than control agreements in favor of the Secured Parties.

            (h) As of the date hereof, Debtor does not have or hold any chattel
paper, letter-of-credit rights or commercial tort claims except as disclosed to
the Secured Parties; provided, however, that a failure to disclose such a claim
will not be construed to be a waiver of such claim.

            (i) The names and addresses of all financial institutions and other
Persons at which Debtor maintains its deposit and securities accounts, and the
account numbers and account names of such accounts, are set forth in Schedule 2.

      SECTION 5 Covenants. So long as any of the Obligations remain unsatisfied,
Debtor agrees that:

            (a) Debtor shall appear in and defend any action, suit or proceeding
which may affect to a material extent its title to, or right or interest in, or
a Secured Party's right or interest in, the Collateral, and shall do and perform
all reasonable acts that may be necessary and appropriate to maintain, preserve
and protect the Collateral.

            (b) Debtor shall comply in all material respects with all laws,
regulations and ordinances, and all policies of insurance, relating in a
material way to the possession, operation, maintenance and control of the
Collateral.

            (c) Debtor shall give prompt written notice to each Secured Party
(and in any event not later than 10 days following any change described below in
this subsection) of: (i) any change in the location of Debtor's chief executive
office or principal place of business; (ii) any change in the locations set
forth in Schedule 2; (iii) any change in its name; (iv) any changes in its
identity or structure in any manner which might make any financing statement
filed hereunder incorrect or misleading; (v) any change in its registration as
an organization (or any new such registration); or (vi) any change in its
jurisdiction of organization; provided that Debtor shall not locate any
Collateral outside of the United States nor shall Debtor change its jurisdiction
of organization to a jurisdiction outside of the United States.

            (d) Debtor shall not surrender or lose possession of, sell, lease,
rent, or otherwise dispose of or transfer any of the Collateral or any right or
interest therein, except in the ordinary course of business or unless such
Collateral is replaced by comparable Collateral of similar value; provided that
no such disposition or transfer of Collateral consisting of investment property
or instruments shall be permitted while any Event of Default exists.

            (e) Debtor shall keep the Collateral free of all Liens.

            (f) Debtor shall pay and discharge all taxes, fees, assessments and
governmental charges or levies imposed upon it with respect to the Collateral
prior to the date on which penalties attach thereto, except to the extent such
taxes, fees, assessments or governmental charges or levies are being contested
in good faith by appropriate proceedings.

                                      -4-
<PAGE>
            (g) Debtor shall maintain and preserve its legal existence, its
rights to transact business and all other material rights, franchises and
privileges necessary or desirable in the normal course of its business and
operations and the ownership of the Collateral, except in connection with any
transactions expressly permitted by the Notes or any other Document.

            (h) Upon the request of a Secured Party, Debtor shall (i)
immediately deliver to such Secured Party, or an agent designated by it,
appropriately endorsed or accompanied by appropriate instruments of transfer or
assignment, all documents and instruments, all certificated securities with
respect to any investment property, all letters of credit and all accounts and
other rights to payment at any time evidenced by promissory notes, trade
acceptances or other instruments, (ii) cause any securities intermediaries to
show on their books that the Secured Parties are the entitlement holders with
respect to any investment property, and/or obtain account control agreements in
favor of the Secured Parties from such securities intermediaries, in form and
substance satisfactory to each Secured Party, with respect to any investment
property, as requested by a Secured Party, and (iii) provide such notice, obtain
such acknowledgments and take all such other action, with respect to any chattel
paper, documents and letter-of credit rights, as a Secured Party shall
reasonably specify.

      SECTION 6 Collection of Accounts. Until the Secured Parties exercise their
rights hereunder to collect the accounts and other rights to payment, Debtor
shall endeavor in the first instance diligently to collect all amounts due or to
become due on or with respect to the accounts and other rights to payment. At
the request of a Secured Party, upon the occurrence and during the continuance
of any Event of Default, all remittances received by Debtor shall be held in
trust for the Secured Parties and, in accordance with such Secured Party's
instructions, remitted to the Secured Parties or deposited into account(s) of
the Secured Parties in the form received (with any necessary endorsements or
instruments of assignment or transfer). At the request of a Secured Party, upon
and after the occurrence of any Event of Default, the Secured Parties shall be
entitled to receive all distributions and payments of any nature with respect to
any investment property or instruments, and all such distributions or payments
received by the Debtor shall be held in trust for the Secured Parties and, in
accordance with a Secured Party's instructions, remitted to the Secured Parties
or deposited into account(s) with the Secured Parties in the form received (with
any necessary endorsements or instruments of assignment or transfer). Following
the occurrence of an Event of Default any such distributions and payments with
respect to any investment property held in any securities account shall be held
and retained in such securities account, in each case as part of the Collateral
hereunder. Additionally, each Secured Party shall have the right, upon the
occurrence of an Event of Default, following prior written notice to the Debtor,
to vote and to give consents, ratifications and waivers with respect to any
investment property and instruments, and to exercise all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining
thereto, as if such Secured Party were the absolute owner thereof; provided that
each Secured Party shall have no duty to exercise any of the foregoing rights
afforded to it and shall not be responsible to the Debtor or any other Person
for any failure to do so or delay in doing so.

      SECTION 7 Authorization; Secured Party Appointed Attorney-in-Fact. Each
Secured Party shall have the right to, in the name of Debtor, or in the name of
such Secured Party or otherwise, upon notice to but without the requirement of
assent by Debtor, and Debtor hereby constitutes and appoints each Secured Party
(and any of such Secured Party's officers,

                                      -5-
<PAGE>
employees or agents designated by such Secured Party) as Debtor's true and
lawful attorney-in-fact, with full power and authority to: (i) sign and file any
of the financing statements and other documents and instruments which must be
executed or filed to perfect or continue perfected, maintain the priority of or
provide notice of such Secured Party's security interest in the Collateral
(including any notices to or agreements with any securities intermediary); (ii)
assert, adjust, sue for, compromise or release any claims under any policies of
insurance; (iii) give notices of control, default or exclusivity (or similar
notices) under any account control agreement or similar agreement with respect
to exercising control over deposit accounts or securities accounts; and (iv)
execute any and all such other documents and instruments, and do any and all
acts and things for and on behalf of Debtor, which such Secured Party may deem
reasonably necessary or advisable to maintain, protect, realize upon and
preserve the Collateral and the Secured Parties' security interest therein and
to accomplish the purposes of this Agreement. Each Secured Party agrees that,
except upon and during the continuance of an Event of Default, it shall not
exercise the power of attorney, or any rights granted to such Secured Party,
pursuant to clauses (ii), (iii) and (iv). The foregoing power of attorney is
coupled with an interest and irrevocable so long as the Obligations have not
been paid and performed in full. Debtor hereby ratifies, to the extent permitted
by law, all that a Secured Party shall lawfully and in good faith do or cause to
be done by virtue of and in compliance with this Section 7.

      SECTION 8 Events of Default. Any of the following events which shall occur
and be continuing shall constitute an "Event of Default":

            (a) Debtor shall fail to pay when due any amount of principal of or
interest on the Notes or other amount payable hereunder or under any of the
Notes or any other Document or in respect of the Obligations.

            (b) Any representation or warranty by Debtor in this Agreement or in
any other Document shall prove to have been incorrect in any material respect
when made or deemed made.

            (c) Debtor shall fail to perform or observe in any material respect
any other term, covenant or agreement contained in this Agreement, the Notes or
any other Document on its part to be performed or observed.

            (d) Debtor shall admit in writing its inability to, or shall fail
generally or be generally unable to, pay its debts (including its payrolls) as
such debts become due, or shall make a general assignment for the benefit of
creditors; or Debtor shall file a voluntary petition in bankruptcy or a petition
or answer seeking reorganization, to effect a plan or other arrangement with
creditors or any other relief under any state or federal law relating to
bankruptcy or reorganization granting relief to debtors, whether now or
hereafter in effect ("Bankruptcy Laws"), or shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition filed against Debtor pursuant to any Bankruptcy Laws; or Debtor shall
be adjudicated a bankrupt, or shall make an assignment for the benefit of
creditors, or shall apply for or consent to the appointment of any custodian,
receiver or trustee for all or any substantial part of Debtor's property, or
shall take any action to authorize any of the actions set forth above in this
paragraph; or an involuntary petition seeking any of the relief specified in
this

                                      -6-
<PAGE>
paragraph shall be filed against Debtor; or any order for relief shall be
entered against Debtor in any involuntary proceeding under any Bankruptcy Laws.

            (e) Debtor shall be in default under any material indebtedness.

            (f) Debtor shall (i) liquidate, wind up or dissolve (or suffer any
liquidation, wind-up or dissolution), (ii) suspend its operations other than in
the ordinary course of business, or (iii) take any action to authorize any of
the actions or events set forth above in this subsection (e).

            (g) Any levy upon, seizure or attachment of any of the Collateral
which shall not have been rescinded or withdrawn.

            (h) Any loss, theft or substantial damage to, or destruction of, any
material portion of the Collateral (unless within 10 days after the occurrence
of any such event, Debtor furnishes to each Secured Party evidence reasonably
satisfactory to such Secured Party that the amount of any such loss, theft,
damage to or destruction of the Collateral is fully insured under policies
naming each Secured Party as an additional named insured or loss payee).

      SECTION 9 Remedies.

            (a) Upon the occurrence and continuance of any Event of Default, any
Secured Party may declare any of the Obligations to be immediately due and
payable and shall have, in addition to all other rights and remedies granted to
it in this Agreement, the Notes or any other Document, all rights and remedies
of a secured party under the UCC and other applicable laws. Without limiting the
generality of the foregoing, (i) each Secured Party may peaceably and without
notice enter any premises of Debtor, take possession of any the Collateral,
remove or dispose of all or part of the Collateral on any premises of such
Debtor or elsewhere, or, in the case of equipment, render it nonfunctional, and
otherwise collect, receive, appropriate and realize upon all or any part of the
Collateral, and demand, give receipt for, settle, renew, extend, exchange,
compromise, adjust, or sue for all or any part of the Collateral, as a Secured
Party may determine; (ii) each Secured Party may require any Debtor to assemble
all or any part of the Collateral and make it available to such Secured Party at
any place and time designated by such Secured Party; (iii) each Secured Party
may secure the appointment of a receiver of the Collateral or any part thereof
(to the extent and in the manner provided by applicable law); (iv) each Secured
Party may sell, resell, lease, use, assign, license, sublicense, transfer or
otherwise dispose of any or all of the Collateral in its then condition or
following any commercially reasonable preparation or processing (utilizing in
connection therewith any of Debtor's assets, without charge or liability to such
Secured Party therefor) at public or private sale, by one or more contracts, in
one or more parcels, at the same or different times, for cash or credit, or for
future delivery without assumption of any credit risk, all as such Secured Party
deems advisable; provided, however, that Debtor shall be credited with the net
proceeds of sale only when such proceeds are finally collected by such Secured
Party. Each Secured Party shall have the right upon any such public sale, and,
to the extent permitted by law, upon any such private sale, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption, which right or equity of redemption Debtor hereby releases, to the
extent

                                      -7-
<PAGE>
permitted by law. Each Secured Party shall give Debtor such notice of any
private or public sales as may be required by the UCC or other applicable law.

            (b) For the purpose of enabling the Secured Parties to exercise
their rights and remedies under this Section 9 or otherwise in connection with
this Agreement, Debtor hereby grants to each Secured Party an irrevocable,
non-exclusive and assignable license (exercisable without payment or royalty or
other compensation to Debtor) to use, license or sublicense any intellectual
property Collateral.

            (c) No Secured Party shall have any obligation to clean up or
otherwise prepare the Collateral for sale. No Secured Party has any obligation
to attempt to satisfy the Obligations by collecting them from any other Person
liable for them, and any Secured Party may release, modify or waive any
Collateral provided by any other Person to secure any of the Obligations, all
without affecting the Secured Parties' rights against Debtor. Debtor waives any
right it may have to require a Secured Party to pursue any third Person for any
of the Obligations. Each Secured Party may comply with any applicable state or
federal law requirements in connection with a disposition of the Collateral and
compliance will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. Each Secured Party may sell the
Collateral without giving any warranties as to the Collateral. Each Secured
Party may specifically disclaim any warranties of title or the like. This
procedure will not be considered adversely to affect the commercial
reasonableness of any sale of the Collateral. If a Secured Party sells any of
the Collateral upon credit, Debtor will be credited only with payments actually
made by the purchaser, received by a Secured Party and applied to the
indebtedness of the purchaser. In the event the purchaser fails to pay for the
Collateral, a Secured Party may resell the Collateral and Debtor shall be
credited with the proceeds of the sale.

            (d) To the extent Debtor uses the proceeds of any of the Obligations
to purchase Collateral, Debtor's repayment of the Obligations shall apply on a
"first-in, first-out" basis so that the portion of the Obligations used to
purchase a particular item of Collateral shall be paid in the chronological
order the Debtor purchased the Collateral.

            (e) The cash proceeds actually received from the sale or other
disposition or collection of Collateral, and any other amounts received in
respect of the Collateral the application of which is not otherwise provided for
herein, shall be applied first to the payment of the Obligations. Any surplus
thereof which exists after payment and performance in full of the Obligations
shall be promptly paid over to Debtor or otherwise disposed of in accordance
with the UCC or other applicable law. Debtor shall remain liable to each Secured
Party for any deficiency which exists after any sale or other disposition or
collection of Collateral.

      SECTION 10 Certain Waivers. Debtor waives, to the fullest extent permitted
by law, (i) any right of redemption with respect to the Collateral, whether
before or after sale hereunder, and all rights, if any, of marshalling of the
Collateral or other collateral or security for the Obligations; (ii) any right
to require a Secured Party (A) to proceed against any Person, (B) to exhaust any
other collateral or security for any of the Obligations, or (C) to make or give
any presentments, demands for performance, notices of nonperformance, protests,
notices of protests or notices of dishonor in connection with any of the
Collateral; and (iii) all claims, damages, and

                                      -8-
<PAGE>
demands against a Secured Party arising out of the repossession, retention, sale
or application of the proceeds of any sale of the Collateral, other than claims
for violations of law and willful misconduct.

      SECTION 11 Notices. All notices or other communications hereunder shall be
in writing (including by facsimile transmission or by email) and mailed, sent or
delivered to the respective parties hereto at or to their respective addresses,
facsimile numbers or email addresses set forth below their names on the
signature pages hereof, or at or to such other address, facsimile number or
email address as shall be designated by any party in a written notice to the
other parties hereto. All such notices and other communications shall be deemed
to be delivered when a record (within the meaning of the UCC) has been (i)
delivered by hand; (ii) sent by mail upon the earlier of the date of receipt or
five business days after deposit in the mail, first class (or air mail as to
communications sent to or from the United States); (iii) sent by facsimile
transmission; or (iv) received by email.

      SECTION 12 No Waiver; Cumulative Remedies. No failure on the part of a
Secured Party to exercise, and no delay in exercising, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies under this Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to a Secured Party.

      SECTION 13 Binding Effect. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by Debtor, each Secured Party and their
respective successors and assigns and shall bind any Person who becomes bound as
a debtor to this Agreement. Debtor may not assign, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder without
the prior express written consent of all of the Secured Parties. Any such
purported assignment, transfer, hypothecation or other conveyance by Debtor
without the prior express written consent of all of the Secured Parties shall be
void. Debtor acknowledges and agrees that in connection with an assignment of,
or grant of a participation in, the Obligations a Secured Party may assign, or
grant participations in, all or a portion of its rights and obligations
hereunder. Upon any assignment of a Secured Party's rights hereunder, such
assignee shall have, to the extent of such assignment, all rights of a Secured
Party hereunder. Debtor agrees that, upon any such assignment, such assignee may
enforce directly, without joinder of a Secured Party, the rights of a Secured
Party set forth in this Agreement. Any such assignee shall be entitled to
enforce a Secured Party's rights and remedies under this Agreement to the same
extent as if it were the original secured party named herein.

      SECTION 14 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of California, except as
required by mandatory provisions of law and to the extent the validity or
perfection of the security interests hereunder, or the remedies hereunder, in
respect of any Collateral are governed by the law of a jurisdiction other than
California.

                                      -9-
<PAGE>
      SECTION 15 Entire Agreement; Amendment. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and shall not
be amended except by the written agreement of the parties.

      SECTION 16 Acts of a Secured Party. Notwithstanding anything to the
contrary herein, all actions taken hereunder by the Secured Parties or a Secured
Party shall only be taken upon obtaining the prior written agreement of the
Secured Party or Secured Parties holding at least a majority of the outstanding
Obligations.

      SECTION 17 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.

      SECTION 18 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.

      SECTION 19 Termination. Upon payment and performance in full of all
Obligations, or upon conversion of the Notes, the security interest created
under this Agreement shall terminate and each Secured Party shall promptly
execute and deliver to Debtor such documents and instruments reasonably
requested by Debtor as shall be necessary to evidence termination of all
security interests given by Debtor to such Secured Party hereunder.

      SECTION 20 Conflicts. In the event of any conflict or inconsistency
between this Agreement or the Notes, the terms of this Agreement shall control.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                      -10-
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
as of the date first above written.

                                    DEBTOR:

                                    DIAMETRICS MEDICAL, INC.

                                    By: /s/ W. Bruce Comer
                                        --------------------------------------

                                    Its: Chief Executive Officer
                                         -------------------------------------

                                          SECURED PARTIES:

                                          ASSET MANAGERS INTERNATIONAL LIMITED

                                          By: /s/ Oskar P. Lewnowski
                                              --------------------------------
                                          Name:
                                          Title  Director

                                          MONARCH POINTE FUND, LTD.

                                          By: /s/ H. Harry Aharonian
                                              --------------------------------
                                          Name:
                                          Title  Portfolio Manager
<PAGE>
                                   SCHEDULE 1
                            to the Security Agreement
                           SCHEDULE OF SECURED PARTIES

<TABLE>
<CAPTION>
                                                       PRINCIPAL AMOUNT
             NAME OF SECURED PARTY                          OF NOTE
             ---------------------                          -------
<S>                                                    <C>

Asset Managers International Limited
c/o Pentagon Capital Management, Plc
88 Baker Street
London W1U 6TQ                                            $375,000

Monarch Pointe Fund, Ltd.
c/o M.A.G. Capital, LLC
555 South Flower Street, Suite 4200
Los Angeles, CA 90071                                     $375,000

      TOTAL                                               $750,000
</TABLE>
<PAGE>
                                   SCHEDULE 2
                            to the Security Agreement

1.    JURISDICTION OF ORGANIZATION:

            Minnesota.

2.    CHIEF EXECUTIVE OFFICE AND PRINCIPAL PLACE OF BUSINESS:

            3050 Centre Pointe Drive, Suite 150, Roseville, Minnesota, 55113.

3.    OTHER LOCATIONS WHERE DEBTOR CONDUCTS BUSINESS OR COLLATERAL IS KEPT:

            None.

4.    EXISTING LIENS:

        a)  Judgment no. 05-02389 entered in the Court of Common Pleas, Chester
            County, PA, on March 24, 2005 against Diametrics Medical, Inc. in
            favor of Liberty Property Limited Partnership for the amount of
            $136,945, relating to Debtor's default under the terms of a
            commercial lease agreement dated January 20, 1999 and as amended on
            March 25, 2002, for the lease of the premises at 293 Great Valley
            Parkway, Malvern, Pennsylvania.

5.    DEPOSIT ACCOUNTS AND SECURITY ACCOUNTS:

            M&I Marshall & Isley Bank
            6625 Lyndale Ave S
            Richfield, MN 55423
            Accounts # 25088426 and 25773594

            Bank of America
            4754 Admiralty Way
            Marina Del Rey, CA 90292
            Account # 09145-41651

6.    PATENTS AND PATENT APPLICATIONS, IF ANY:

            Not applicable.

7.    COPYRIGHTS (REGISTERED AND UNREGISTERED) AND COPYRIGHT APPLICATIONS, IF
      ANY:

            Not applicable.

8.    TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND TRADEMARK, SERVICE MARK
      AND TRADE NAME APPLICATIONS, IF ANY:

            Not applicable.<PAGE>
                                                                    Exhibit 10.4

                            DIAMETRICS MEDICAL, INC.
                 SHARES OF SERIES H CONVERTIBLE PREFERRED STOCK
                 SHARES OF SERIES I CONVERTIBLE PREFERRED STOCK

                             SUBSCRIPTION AGREEMENT

                                                                December 6, 2005

Camden International
Longview Fund
Longview Equity Fund
Longview International Equity Fund
c/o 600 Montgomery Street, 44th Floor
San Francisco, CA 94111

Monarch Pointe Fund, Ltd.
Mercator Momentum Fund, LP
Mercator Momentum Fund III, LP
c/o M.A.G. Capital, LLC
555 South Flower Street, Suite 4200
Los Angeles, California 90071

Ocean Park Advisors, LLC
5710 Crescent Park East, Suite 334
Playa Vista, CA 90094

Ladies and Gentlemen:

      Diametrics Medical, Inc., a Minnesota corporation (the "COMPANY"), hereby
confirms its agreement with Monarch Pointe Fund, Ltd. ("MONARCH"), Mercator
Momentum Fund, LP ("MMF"), Mercator Momentum Fund III, LP, ("MMF III"), M.A.G.
Capital, LLC ("MAG," and, together with Monarch, MMF and MMF III, the "MAG
GROUP"), Ocean Park Advisors, LLC ("OCEAN PARK"), Camden International
("CAMDEN"), Longview Fund ("LONGVIEW"), Longview Equity Fund ("LONGVIEW
EQUITY"), and Longview International Equity Fund ("LONGVIEW INTERNATIONAL," and,
together with Camden, Longview, Longview Equity and Longview International, the
"LONGVIEW GROUP"), as set forth below. The MAG Group, Ocean Park and the
Longview Group are sometimes herein referred to collectively as the
"PURCHASERS."

      1. The Securities. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the MAG Group and the Longview Group
an aggregate of 27,889 shares (the "H SHARES") of its Series H Convertible
Preferred Stock, par value $0.01 per share (the "SERIES H STOCK"), and to issue
and to sell to Ocean Park an aggregate of 13,940 shares (the "I SHARES," and,
together with the H Shares, the "SHARES") of its Series I Convertible Preferred
Stock, par value $0.01 per share (the "SERIES I STOCK"), which Shares shall be
convertible into shares (the "CONVERSION SHARES") of the Company's Common Stock
(the "COMMON STOCK") in accordance with the formula set forth in the
Certificates of Designation

                                      -1-
<PAGE>
further described below. The rights, preferences and privileges of the Series H
Stock and of the Series I Stock are as set forth in the Certificate of
Designation of Series H Preferred Stock and the Certificate of Designation of
the Series I Preferred Stock, respectively, as filed with the Secretary of State
of the State of Minnesota (the "CERTIFICATES OF DESIGNATION") in the forms
attached hereto as Exhibit A-1 and Exhibit A-2. The numbers of Conversion Shares
that each of the MAG Group and the Longview Group may acquire at any time are
subject to limitation in the Certificates of Designation so that the aggregate
number of shares of Common Stock of which each of (i) the MAG Group and all
persons affiliated with any of the entities comprising it and (ii) the Longview
Group and all persons affiliated with any of the entities comprising it have
beneficial ownership (calculated pursuant to Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) does not at any time exceed 9.99% of the
Company's then outstanding Common Stock.

      The Shares are sometimes herein referred to as the "SECURITIES." This
Agreement and the Certificates of Designation are sometimes herein collectively
referred to as the "TRANSACTION DOCUMENTS."

      The Securities will be offered and sold to the Purchasers without such
offers and sales being registered under the Securities Act of 1933, as amended
(together with the rules and regulations of the Securities and Exchange
Commission (the "SEC") promulgated thereunder, the "SECURITIES ACT"), in
reliance on exemptions therefrom. The Company acknowledges that the holding
period of the Securities for purposes of Rule 144 under the Securities Act shall
have commenced on the same date as the instruments tendered in exchange for the
Securities

      In connection with the sale of the Securities, the Company has made
available (including electronically via the Commission's EDGAR system) to
Purchasers its periodic and current reports, forms, schedules, proxy statements
and other documents (including exhibits and all other information incorporated
by reference) filed with the SEC under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") since January 1, 2000. These reports, forms,
schedules, statements, documents, filings and amendments, are collectively
referred to as the "DISCLOSURE DOCUMENTS." All references in this Agreement to
financial statements and schedules and other information which is "contained,"
"included" or "stated" in the Disclosure Documents (or other references of like
import) shall be deemed to mean and include all such financial statements and
schedules, documents, exhibits and other information which is incorporated by
reference in the Disclosure Documents.

      2. Representations and Warranties of the Company. The Company represents
and warrants to and agrees with Purchasers as follows:

         (a) The Disclosure Documents as of their respective dates did not
(after giving effect to any updated disclosures therein), and as of the Closing
Date as defined in Section 3 below will not, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The Disclosure Documents and the documents incorporated or deemed to
be incorporated by reference therein, at the time they were filed (after giving
effect to any updated disclosures therein) or hereafter are filed with

                                      -2-
<PAGE>
the Commission, complied and will comply in all material respects with the
requirements of the Securities Act and/or the Exchange Act, as the case may be,
as applicable.

         (b) Each of the Company and its subsidiaries set forth on Schedule A
attached hereto (the "SUBSIDIARIES") has been duly incorporated and each of the
Company and the Subsidiaries is validly existing in good standing as a
corporation under the laws of its jurisdiction of incorporation, with the
requisite corporate power and authority to own its properties and conduct its
business as now conducted as described in the Disclosure Documents and is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a material adverse
effect on the business, condition (financial or other), properties, prospects or
results of operations of the Company and the Subsidiaries, taken as a whole (any
such event, a "MATERIAL ADVERSE EFFECT"); as of the Closing Date, the Company
will have the authorized, issued and outstanding capitalization set forth on
Exhibit B attached hereto; except as set forth in the Disclosure Documents or on
Schedule A, the Company does not have any subsidiaries or own directly or
indirectly any of the capital stock or other equity or long-term debt securities
of or have any equity interest in any other person; all of the outstanding
shares of capital stock of the Company and the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights and are owned free and
clear of all liens, encumbrances, equities, and restrictions on transferability
(other than those imposed by the Securities Act and the state securities or
"Blue Sky" laws) or voting; except as set forth in the Disclosure Documents, all
of the outstanding shares of capital stock of the Subsidiaries are owned,
directly or indirectly, by the Company; except as set forth in the Disclosure
Documents, no options, warrants or other rights to purchase from the Company or
any Subsidiary, agreements or other obligations of the Company or any Subsidiary
to issue or other rights to convert any obligation into, or exchange any
securities for, shares of capital stock of or ownership interests in the Company
or any Subsidiary are outstanding; and except as set forth in the Disclosure
Documents, there is no agreement, understanding or arrangement among the Company
or any Subsidiary and each of their respective stockholders or any other person
relating to the ownership or disposition of any capital stock of the Company or
any Subsidiary or the election of directors of the Company or any Subsidiary or
the governance of the Company's or any Subsidiary's affairs, and such
agreements, understandings and arrangements, if any, will not be breached or
violated as a result of the execution and delivery of, or the consummation of
the transactions contemplated by, the Transaction Documents.

         (c) The Company has the requisite corporate power and authority to
execute and deliver this Agreement and the Transaction Documents to which it is
a party, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. Each of the Transaction
Documents has been duly and validly authorized by all necessary corporate and
shareholder action on the part of the Company and, when executed and delivered
by the Company, will constitute a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms except as
the enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to or

                                      -3-
<PAGE>
affecting creditors' rights generally or (ii) general principles of equity and
the discretion of the court before which any proceeding therefore may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity) (collectively, the "ENFORCEABILITY EXCEPTIONS").

         (d) The Shares have been duly authorized and, when issued upon payment
thereof in accordance with this Agreement, will have been validly issued, fully
paid and nonassessable. The Conversion Shares issuable with respect to the
Shares have been duly authorized and validly reserved for issuance, and when
issued upon conversion of the Shares in accordance with the terms of the
Certificates of Designation, will have been validly issued, fully paid and
nonassessable. The Common Stock of the Company conforms to the description
thereof contained in the Disclosure Documents. The stockholders of the Company
have no preemptive or similar rights with respect to the Common Stock.

         (e) No consent, approval, authorization, license, qualification,
exemption or order of any court or governmental agency or body or third party is
required for the execution, delivery, or performance of any obligations under
the Transaction Documents by the Company or for the consummation by the Company
of any of the transactions contemplated thereby, or the application of the
proceeds of the issuance of the Securities as described in this Agreement,
except for such consents, approvals, authorizations, licenses, qualifications,
exemptions or orders (i) as have been obtained on or prior to the Closing Date,
(ii) as are not required to be obtained on or prior to the Closing Date that
will be obtained when required, or (iii) the failure to obtain which would not,
individually or in the aggregate, have a Material Adverse Effect.

         (f) None of the Company or the Subsidiaries is, except as disclosed in
the Schedule B attached hereto (the "MATERIAL ADVERSE EVENTS"), (i) in material
violation of its articles of incorporation or bylaws (or similar organizational
document), (ii) in breach or violation of any statute, judgment, decree, order,
rule or regulation applicable to it or any of its properties or assets, which
breach or violation would, individually or in the aggregate, have a Material
Adverse Effect, or (iii) except as described in the Disclosure Documents, in
default (nor has any event occurred which with notice or passage of time, or
both, would constitute a default) in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate or agreement or instrument to which it
is a party or to which it is subject, which default would, individually or in
the aggregate, have a Material Adverse Effect.

         (g) The execution, delivery and performance by the Company of the
Transaction Documents and the consummation by the Company of the transactions
contemplated thereby and the fulfillment of the terms thereof will not (a)
violate, conflict with or constitute or result in a breach of or a default under
(or an event that, with notice or lapse of time, or both, would constitute a
breach of or a default under) any of (i) the terms or provisions of any
contract, indenture, mortgage, deed of trust, loan agreement, note, lease,
license, franchise agreement, permit, certificate or agreement or instrument to
which any of the Company or the Subsidiaries is a party or to which any of their
respective properties or assets

                                      -4-
<PAGE>
are subject, (ii) the articles of incorporation or bylaws of any of the Company
or the Subsidiaries (or similar organizational document) (subject to shareholder
approval of additional authorized shares in order to issue Conversion Shares) or
(iii) any statute, judgment, decree, order, rule or regulation of any court or
governmental agency or other body applicable to the Company or the Subsidiaries
or any of their respective properties or assets or (b) result in the imposition
of any lien upon or with respect to any of the properties or assets now owned or
hereafter acquired by the Company or any of the Subsidiaries, which violation,
conflict, breach, default or lien would, individually or in the aggregate, have
a Material Adverse Effect.

         (h) The audited consolidated financial statements included in the
Disclosure Documents present fairly the consolidated financial position, results
of operations, cash flows and changes in shareholders' equity of the entities,
at the dates and for the periods to which they relate and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis; the interim unaudited consolidated financial statements included in the
Disclosure Documents present fairly the consolidated financial position, results
of operations and cash flows of the entities, at the dates and for the periods
to which they relate subject to year-end audit adjustments and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis with the audited consolidated financial statements included
therein; the selected financial and statistical data included in the Disclosure
Documents present fairly the information shown therein and have been prepared
and compiled on a basis consistent with the audited financial statements
included therein, except as otherwise stated therein; and an independent
certified public accountant has examined certain of such financial statements as
set forth in its report included in the Disclosure Documents, as required by the
Securities Act for an offering registered thereunder.

         (i) Except as described in the Disclosure Documents and Schedule B,
there is not pending or, to the knowledge of the Company, threatened any action,
suit, proceeding, inquiry or investigation, governmental or otherwise, to which
any of the Company or the Subsidiaries is a party, or to which their respective
properties or assets are subject, before or brought by any court, arbitrator or
governmental agency or body, that, if determined adversely to the Company or any
such Subsidiary, would, individually or in the aggregate, have a Material
Adverse Effect or that seeks to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to be sold hereunder
or the application of the proceeds therefrom or the other transactions described
in the Disclosure Documents.

         (j) The Company and the Subsidiaries own or possess adequate licenses
or other rights to use all patents, trademarks, service marks, trade names,
copyrights and know-how that are necessary to conduct their businesses as
described in the Disclosure Documents. None of the Company or the Subsidiaries
has received any written notice of infringement of (or knows of any such
infringement of) asserted rights of others with respect to any patents,
trademarks, service marks, trade names, copyrights or know-how that, if such
assertion of infringement or conflict were sustained, would, individually or in
the aggregate, have a Material Adverse Effect.

         (k) Each of the Company and the Subsidiaries possesses all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made all

                                      -5-
<PAGE>
declarations and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals presently required or necessary to own or lease, as the case may be,
and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Disclosure
Documents ("PERMITS"), except where the failure to obtain such Permits would
not, individually or in the aggregate, have a Material Adverse Effect and none
of the Company or the Subsidiaries has received any notice of any proceeding
relating to revocation or modification of any such Permit, except as described
in the Disclosure Documents and except where such revocation or modification
would not, individually or in the aggregate, have a Material Adverse Effect.

         (l) Subsequent to the respective dates as of which information is given
in the Disclosure Documents and Schedule B and except as described therein, (i)
the Company and the Subsidiaries have not incurred any material liabilities or
obligations, direct or contingent, or entered into any material transactions not
in the ordinary course of business or (ii) the Company and the Subsidiaries have
not purchased any of their respective outstanding capital stock, or declared,
paid or otherwise made any dividend or distribution of any kind on any of their
respective capital stock or otherwise (other than, with respect to any of such
Subsidiaries, the purchase of capital stock by the Company), (iii) there has not
been any material increase in the long-term indebtedness of the Company or any
of the Subsidiaries, (iv) there has not occurred any event or condition,
individually or in the aggregate, that has a Material Adverse Effect, and (v)
the Company and the Subsidiaries have not sustained any material loss or
interference with respect to their respective businesses or properties from
fire, flood, hurricane, earthquake, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or governmental
proceeding.

         (m) There are no material legal or governmental proceedings nor are
there any material contracts or other documents required by the Securities Act
to be described in a prospectus that are not described in the Disclosure
Documents and Schedule B. Except as described in the Disclosure Documents and
Schedule B, none of the Company or the Subsidiaries is in default under any of
the contracts described in the Disclosure Documents, has received a notice or
claim of any such default or has knowledge of any breach of such contracts by
the other party or parties thereto, except for such defaults or breaches as
would not, individually or in the aggregate, have a Material Adverse Effect.

         (n) Each of the Company and the Subsidiaries has good and marketable
title to all real property described in the Disclosure Documents as being owned
by it and good and marketable title to the leasehold estate in the real property
described therein as being leased by it, free and clear of all liens, charges,
encumbrances or restrictions, except, in each case, as described in the
Disclosure Documents or such as would not, individually or in the aggregate,
have a Material Adverse Effect. All material leases, contracts and agreements to
which the Company or any of the Subsidiaries is a party or by which any of them
is bound are valid and enforceable against the Company or any such Subsidiary,
are, to the knowledge of the Company, valid and enforceable against the other
party or parties thereto and are in full force and effect, in each case subject
to the Enforceability Exceptions.

                                      -6-
<PAGE>
         (o) Each of the Company and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not, individually or in the aggregate,
have a Material Adverse Effect, and has paid all taxes shown as due thereon; and
other than tax deficiencies which the Company or any Subsidiary is contesting in
good faith and for which adequate reserves have been provided in accordance with
generally accepted accounting principles, there is no tax deficiency that has
been asserted against the Company or any Subsidiary that would, individually or
in the aggregate, have a Material Adverse Effect.

         (p) None of the Company or the Subsidiaries is, or immediately after
the Closing Date will be, required to register as an "investment company" or a
company "controlled by" an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT").

         (q) None of the Company or the Subsidiaries or, to the knowledge of any
of such entities' directors, officers, employees, agents or controlling persons,
has taken, directly or indirectly, any action designed, or that might reasonably
be expected, to cause or result in the stabilization or manipulation of the
price of the Common Stock.

         (r) None of the Company, the Subsidiaries or any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act)
directly, or through any agent, engaged in any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) in connection with the offering of the Securities or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act. Assuming the accuracy of the representations and warranties of
the Purchasers in Section 6 hereof, it is not necessary in connection with the
offer, sale and delivery of the Securities to the Purchasers in the manner
contemplated by this Agreement to register any of the Securities under the
Securities Act.

         (s) There is no strike, labor dispute, slowdown or work stoppage with
the employees of the Company or any of the Subsidiaries which is pending or, to
the knowledge of the Company or any of the Subsidiaries, threatened.

         (t) Each of the Company and the Subsidiaries carries general liability
insurance coverage comparable to other companies of its size and similar
business.

         (u) Each of the Company and the Subsidiaries maintains internal
accounting controls which provide reasonable assurance that (A) transactions are
executed in accordance with management's authorization, (B) transactions are
recorded as necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its material assets is
permitted only in accordance with management's authorization and (D) the
reported accountability for its material assets is compared with existing assets
at reasonable intervals.

         (v) The Company does not know of any claims for services, either in the
nature of a finder's fee or financial advisory fee, with respect to the offering
of the Shares and the transactions contemplated by the Transaction Documents.

                                      -7-
<PAGE>
         (w) The Common Stock is traded on the Over-the-Counter Bulletin Board
(the "OTC BULLETIN BOARD"). Except as described in the Disclosure Documents, the
Company currently is not in violation of, and the consummation of the
transactions contemplated by the Transaction Documents will not violate, any
rule of the National Association of Securities Dealers.

         (x) The Company has no reason to believe that it is not capable of
satisfying the registration or qualification requirements (or an exemption
therefrom) necessary to permit the resale of the Conversion Shares under the
securities or "blue sky" laws of any jurisdiction within the United States that
is the residence or domicile of any Purchaser.

         (y) To the Company's knowledge, none of the officers or directors of
the Company (i) has been convicted of any crime (other than traffic violations
or misdemeanors not involving fraud) or is currently under investigation or
indictment for any such crime, (ii) has been found by a court or governmental
agency to have violated any securities or commodities law or to have committed
fraud or is currently a party to any legal proceeding in which either is
alleged, or (iii) has been an officer, director, general partner, or managing
member of an entity which has been the subject of such a proceeding.

      3. Purchase, Sale and Delivery of the Shares.

         (a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to the MAG Group and the Longview
Group, and the MAG Group and the Longview Group agree to purchase from the
Company, 27,889 Shares of Series H Stock as follows:

(i) Monarch agrees to purchase 4,086 Shares of Series H Stock in exchange for
tendering 3,334 shares of Series G Convertible Preferred Stock of the Company
(the "SERIES G STOCK") owned by Monarch, the Convertible Note in the principal
amount of $510,000 plus accrued interest issued by the Company in favor of
Monarch on December 14, 2004, and the Convertible Note in the principal amount
of $85,000 plus accrued interest issued by the Company in favor of Monarch on
May 2, 2005;

(ii) MMF agrees to purchase 2,686 Shares of Series H Stock in exchange for
tendering 3,500 shares of Series F Convertible Preferred Stock of the Company
(the "SERIES F STOCK") owned by MMF, 3,333 shares of Series G Stock owned by
MMF, the Convertible Note in the principal amount of $230,000 plus accrued
interest issued by the Company in favor of MMF on December 14, 2004, and the
Convertible Note in the principal amount of $38,333 plus accrued interest issued
by the Company in favor of MMF on May 2, 2005;

(iii) MMF III agrees to purchase 2,478 Shares of Series H Stock in exchange for
tendering 6,500 shares of Series F Convertible Preferred Stock of the Company
owned by MMF III, 3,333 shares of Series G Stock owned by MMF III, the
Convertible Note in the principal amount of $160,000 plus accrued interest
issued by the Company in favor of MMF III on December 14, 2004, and the
Convertible Note in the principal amount of $26,667 plus accrued interest issued
by the Company in favor of MMF III on May 2, 2005;

                                      -8-
<PAGE>
(iv) MAG agrees to purchase 14,139 Shares of Series H Stock in exchange for
tendering all of the BCC Securities which will have been received by MAG upon
the closing of the BCC Transaction.

(v) Camden agrees to purchase 1,250 Shares of Series H Stock in exchange for
tendering the Convertible Note in the principal amount of $250,000 plus accrued
interest issued by the Company in favor of Camden on December 14, 2004;

(vi) Longview agrees to purchase 1,750 Shares of Series H Stock in exchange for
tendering the Convertible Note in the principal amount of $350,000 plus accrued
interest issued by the Company in favor of Longview on December 14, 2004;

(vii) Longview Equity agrees to purchase 1,000 Shares of Series H Stock in
exchange for tendering the Convertible Note in the principal amount of $200,000
plus accrued interest issued by the Company in favor of Longview Equity on
December 14, 2004; and

(viii) Longview International agrees to purchase 500 Shares of Series H Stock in
exchange for tendering the Convertible Note in the principal amount of $100,000
plus accrued interest issued by the Company in favor of Longview International
on December 14, 2004.

         (b) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to Ocean Park, and Ocean Park agrees
to purchase from the Company, 13,794 Shares of Series I Stock in exchange for
tendering all of the BCC Securities which will have been received by Ocean Park
upon the closing of the BCC Transaction.

         (c) One or more certificates in definitive form for the Shares that the
Purchasers have agreed to purchase shall be delivered by or on behalf of the
Company, against delivery by or on behalf of each of the Purchasers, of the
securities to be tendered or the cash purchase price to be paid, as applicable,
pursuant to Sections 3(a) and 3(b) above. Such delivery of and payment for the
Shares shall be made, with respect to Monarch, MMF, MMF III and MAG, at the
offices of M.A.G. Capital, LLC, 555 South Figueroa Street, Suite 4200, Los
Angeles, California 90071, with respect to Ocean Park at the offices of 5710
Crescent Park East, Suite 334, Playa Vista, California 90094, and, with respect
to Camden, Longview, Longview Equity and Longview International, at the offices
of 600 Montgomery Street, 44th Floor, San Francisco, CA 94111 on December 6,
2005 (the "CLOSING"), or at such other date and/or location as the Purchasers
and the Company may agree upon, such time and date of delivery against payment
being herein referred to as the "CLOSING DATE." Upon completion of the Closing,
the Company agrees to reimburse MAG (unless the Company shall have done so prior
to the Closing) for all legal fees and expenses incurred by the MAG Group
related to the transactions contemplated herein up to $30,000, payable by wire
transfer of immediately available funds to an account of MAG previously
designated in writing.

      4. Certain Covenants of the Company. The Company covenants and agrees with
each Purchaser as follows:

                                      -9-
<PAGE>
         (a) None of the Company or any of its Affiliates will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Securities Act) which could be integrated with the
sale of the Securities in a manner which would require the registration under
the Securities Act of the Securities.

         (b) The Company will not become, at any time prior to the expiration of
three years after the Closing Date, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under the Investment Company
Act.

         (c) None of the proceeds of the Shares will be used to reduce or
retire, any insider note or convertible debt held by an officer or director of
the Company.

         (d) Subject to Section 10 of this Agreement, the Conversion Shares will
be tradable on the OTC Bulletin Board, or such market on which the Company's
shares are subsequently listed or traded, immediately following their issuance.

         (e) The Company will use its best efforts to ensure that no officer or
director of the Company sells any shares of Company Common Stock from the
Closing Date until the date that is 90 days following the effective date of the
Registration Statement, as defined in Section 9 below. The Company represents
that each of its officers and directors is aware of this commitment and has
agreed to use his or her best efforts not to sell any shares of Company Common
Stock during this period.

         (f) The Company will use its best efforts to do and perform all things
required to be done and performed by it under this Agreement and the other
Transaction Documents and to satisfy all conditions precedent on its part to the
obligations of the Purchasers to purchase and accept delivery of the Securities.

      5. Conditions of the Purchasers' Obligations. The obligation of each
Purchaser to purchase and pay for the Securities is subject to the following
conditions unless waived in writing by each Purchaser:

         (a) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects (other than
representations and warranties with a Material Adverse Effect qualifier, which
shall be true and correct as written) on and as of the Closing Date; the Company
shall have complied in all material respects with all agreements and satisfied
all conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date.

         (b) None of the issuance and sale of the Securities pursuant to this
Agreement or any of the transactions contemplated by any of the other
Transaction Documents shall be enjoined (temporarily or permanently) and no
restraining order or other injunctive order shall have been issued in respect
thereof; and there shall not have been any legal action, order, decree or other
administrative proceeding instituted or, to the Company's knowledge, threatened
against the Company or against any Purchaser relating to the issuance of the
Securities or any Purchaser's activities in connection therewith or any other
transactions

                                      -10-
<PAGE>
contemplated by this Agreement, the other Transaction Documents or the
Disclosure Documents.

         (c) The Purchasers shall have received certificates, dated the Closing
Date and signed by the Chief Executive Officer and the Chief Financial Officer
of the Company, to the effect of paragraphs 5(a) and (b).

         (d) The Purchasers shall have received an opinion of Dorsey & Whitney
LLP, counsel to the Company, with respect to the authorization of the Shares and
other customary matters in the form attached hereto as Exhibit B.

         (e) Ocean Park, MAG and Asset Managers International Limited ("AMIL")
shall have entered into the letter agreement (the "Escrow Letter") dated
November 9, 2005 relating to the deposit in escrow with Ocean Park of $750,000
to be loaned to the Company, in amounts determined by the Company and subject to
approval by Ocean Park, against delivery of Convertible Secured Promissory Notes
to MAG and AMIL.

         (f) The BCC Transaction shall have been consummated. "BCC TRANSACTION"
shall mean a transaction in which BCC Acquisition II, LLC ("BCC"), AEOW 96, LLC,
Gerald L. Cohn Revocable Trust, and the Hannah S. and Samuel A. Cohn Memorial
Foundation (together with BCC, the "BCC GROUP") shall transfer to MAG and Ocean
Park the following securities: Convertible Subordinated Notes in the principal
amount of at least $7,284,083 issued by the Company on December 15, 2004, 5,000
shares of Series G Stock, and warrants to purchase 5,255,837 shares of the
Company's Common Stock.

         (g) Bruce Comer and Heng Chuk shall have become members of the Board of
Directors of the Company.

      6. Representations and Warranties of the Purchasers.

         (a) Each Purchaser represents and warrants to the Company that the
Securities to be acquired by it hereunder (including the Conversion Shares that
it may acquire upon conversion thereof) are being acquired for its own account
for investment and with no intention of distributing or reselling such
Securities (including the Conversion Shares that it may acquire upon conversion
thereof) or any part thereof or interest therein in any transaction which would
be in violation of the securities laws of the United States of America or any
State. Nothing in this Agreement, however, shall prejudice or otherwise limit a
Purchaser's right to sell or otherwise dispose of all or any part of such
Conversion Shares under an effective registration statement under the Securities
Act and in compliance with applicable state securities laws or under an
exemption from such registration. By executing this Agreement, each Purchaser
further represents that such Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to any Person with respect to any of the Securities.

         (b) Each Purchaser understands that the Securities (including the
Conversion Shares that it may acquire upon conversion thereof) have not been
registered under the Securities Act and may not be offered, resold, pledged or
otherwise transferred except

                                      -11-
<PAGE>
(a) pursuant to an exemption from registration under the Securities Act (and, if
requested by the Company, based upon an opinion of counsel acceptable to the
Company) or pursuant to an effective registration statement under the Securities
Act and (b) in accordance with all applicable securities laws of the states of
the United States and other jurisdictions.

            Each Purchaser agrees to the imprinting, so long as appropriate, of
the following legend on the Securities (including the Conversion Shares that it
may acquire upon conversion thereof):

      THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
      UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED,
      SOLD, PLEDGED OR OTHERWISE TRANSFERRED ("TRANSFERRED") IN THE ABSENCE OF
      SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. IN THE ABSENCE OF
      SUCH REGISTRATION, SUCH SHARES MAY NOT BE TRANSFERRED UNLESS, IF THE
      COMPANY REQUESTS, THE COMPANY HAS RECEIVED A WRITTEN OPINION FROM COUNSEL
      IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY STATING THAT SUCH
      TRANSFER IS BEING MADE IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE
      SECURITIES LAWS.

            The legend set forth above may be removed if and when the Conversion
Shares are disposed of pursuant to an effective registration statement under the
Securities Act or in the opinion of counsel to the Company experienced in the
area of United States Federal securities laws such legends are no longer
required under applicable requirements of the Securities Act. The Shares and the
Conversion Shares shall also bear any other legends required by applicable
Federal or state securities laws, which legends may be removed when in the
opinion of counsel to the Company experienced in the applicable securities laws,
the same are no longer required under the applicable requirements of such
securities laws. The Company agrees that it will provide each Purchaser, upon
request, with a substitute certificate, not bearing such legend at such time as
such legend is no longer applicable. Each Purchaser agrees that, in connection
with any transfer of the Conversion Shares by it pursuant to an effective
registration statement under the Securities Act, such Purchaser will comply with
all prospectus delivery requirements of the Securities Act. The Company makes no
representation, warranty or agreement as to the availability of any exemption
from registration under the Securities Act with respect to any resale of the
Shares or the Conversion Shares.

            (c) Each Purchaser is an "accredited investor" within the meaning of
Rule 501(a) of Regulation D under the Securities Act.

            (d) Each Purchaser represents and warrants to the Company that it
has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, having been represented by counsel,
and has so evaluated the merits and risks of such investment and is able to bear
the economic risk of such investment and, at the present time, is able to afford
a complete loss of such investment.

            (e) Each Purchaser represents and warrants to the Company that (i)
the purchase of the Securities to be purchased by it has been duly and properly
authorized and this Agreement has been duly executed and delivered by it or on
its behalf and constitutes the valid

                                      -12-

<PAGE>

and legally binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principals of equity; (ii) the purchase of the Securities to be
purchased by it does not conflict with or violate its charter, by-laws or any
law, regulation or court order applicable to it; and (iii) the purchase of the
Securities to be purchased by it does not impose any penalty or other onerous
condition on Purchaser under or pursuant to any applicable law or governmental
regulation.

            (f) Each Purchaser represents and warrants to the Company that
neither it nor any of its directors, officers, employees, agents, partners,
members, or controlling persons has taken, directly or indirectly, any actions
designed, or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock.

            (g) Each Purchaser acknowledges it or its representatives have
reviewed the Disclosure Documents and further acknowledges that it or its
representatives have been afforded (i) the opportunity to ask such questions as
it has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Securities
and the merits and risks of investing in the Securities; (ii) access to
information about the Company and the Company's financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment in the Securities; and (iii) the opportunity to
obtain such additional information which the Company possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
and completeness of the information contained in the Disclosure Documents.

            (h) Each Purchaser represents and warrants to the Company that it
has based its investment decision solely upon the information contained in the
Disclosure Documents and such other information as may have been provided to it
or its representatives by the Company in response to their inquiries, and has
not based its investment decision on any research or other report regarding the
Company prepared by any third party ("THIRD PARTY REPORTS"). Each Purchaser
understands and acknowledges that (i) the Company does not endorse any Third
Party Reports and (ii) its actual results may differ materially from those
projected in any Third Party Report.

            (i) Each Purchaser understands and acknowledges that (i) any
forward-looking information included in the Disclosure Documents supplied to
Purchaser by the Company or its management is subject to risks and
uncertainties, including those risks and uncertainties set forth in the
Disclosure Documents; and (ii) the Company's actual results may differ
materially from those projected by the Company or its management in such
forward-looking information.

            (j) Each Purchaser understands and acknowledges that (i) the
Securities are offered and sold without registration under the Securities Act in
a private placement that is exempt from the registration provisions of the
Securities Act and (ii) the availability of such exemption depends in part on,
and that the Company and its counsel will rely upon, the

                                      -13-
<PAGE>

accuracy and truthfulness of the foregoing representations and Purchaser hereby
consents to such reliance.

      7. Certain Covenants of the Purchasers.

            (a) Each Purchaser agrees not to sell short the Company Common Stock
as long as shares of the Series H Stock or Series I Stock are outstanding.

      8. Termination.

            (a) This Agreement may be terminated in the sole discretion of the
Company by notice to each Purchaser if at the Closing Date:

                  (i) the representations and warranties made by any Purchaser
in Section 6 are not true and correct in all material respects;

                  (ii) as to the Company, the sale of the Securities hereunder
(i) is prohibited or enjoined by any applicable law or governmental regulation
or (ii) subjects the Company to any penalty, or in its reasonable judgment,
other onerous condition under or pursuant to any applicable law or government
regulation that would materially reduce the benefits to the Company of the sale
of the Securities to the Purchasers, so long as such regulation, law or onerous
condition was not in effect in such form at the date of this Agreement;

                  (iii) the Escrow Letter has not been entered into by Ocean
Park, AMIL, and Monarch; or

                  (iv) the BCC Transaction has not been consummated.

            (b) This Agreement may be terminated in the discretion of the
Purchasers by notice to the Company given in the event that the Company shall
have failed, refused or been unable to satisfy all conditions on its part to be
performed or satisfied hereunder on or prior to the Closing Date, or if after
the execution and delivery of this Agreement and immediately prior to the
Closing Date trading in securities of the Company or in securities generally on
the New York Stock Exchange, the American Stock Exchange, the Nasdaq National or
Small Cap Market or the OTC Bulletin Board shall have been suspended or minimum
or maximum prices shall have been established on any such exchange.

            (c) This Agreement may be terminated by mutual written consent of
all parties.

      9. Registration.

            (a) Within 120 days from the Closing Date, the Company shall prepare
and file with the SEC a Registration Statement covering the resale of
420,160,000 Conversion Shares (the "REGISTRABLE SECURITIES") for an offering to
be made on a continuous basis pursuant to Rule 415 (the "REGISTRATION
STATEMENT"). The Company shall use diligent efforts to cause such Registration
Statement to become effective as soon as practicable within 90 days after the

                                      -14-
<PAGE>

initial filing with the SEC, but shall not be liable for any damages should such
effectiveness be delayed by the SEC review process.

            (b) The Company shall use diligent efforts to keep such Registration
Statement (and Second Registration Statement, if applicable) continuously
effective under the Securities Act until the earlier of (i) the date that all of
the Registrable Securities have been sold and (ii) the date that the Corporation
receives an opinion of counsel to the Corporation that all of the Registrable
Securities may be freely traded without registration under the Securities Act,
under Rule 144 promulgated under the Securities Act or otherwise.

      10. Failure to File Registration Statement. If the Company fails to file
the Registration Statement, as referenced above in Section 9(a), the Company
shall pay the Purchasers an amount equal to $200 for each day that the filing is
late, to be allocated pro rata according to each Purchaser's individual
investment in Series H Stock.

      11. Notices. All communications hereunder shall be in writing and shall be
hand delivered, mailed by first-class mail, couriered by next-day air courier or
by facsimile and confirmed in writing (i) if to the Company, at the addresses
set forth below, or (ii) if to a Purchaser, to the address(es) set forth on the
signature page hereto.

                              If to the Company:

                              Diametrics Medical, Inc.
                              3050 Centre Pointe Drive
                              Roseville, Minnesota 55113
                              Attention:  Chief Financial Officer
                              Facsimile:  651/639-8549

                              with a copy to:

                              Dorsey & Whitney LLP
                              50 South Sixth Street, Suite 1500
                              Minneapolis, Minnesota 55402
                              Attention:  Kenneth L. Cutler
                              Facsimile:  612/340-7800

            All such notices and communications shall be deemed to have been
duly given: (i) when delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed
certified mail, return receipt requested; (iii) one business day after being
timely delivered to a next-day air courier guaranteeing overnight delivery; (iv)
the date of transmission if sent via facsimile to the facsimile number as set
forth in this Section or the signature page hereof prior to 6:00 p.m. on a
business day, or (v) the business day following the date of transmission if sent
via facsimile at a facsimile number set forth in this Section or on the
signature page hereof after 6:00 p.m. or on a date that is not a business day.
Change of a party's address or facsimile number may be designated hereunder by
giving notice to all of the other parties hereto in accordance with this
Section.

                                      -15-
<PAGE>

      12. Survival Clause. The respective representations, warranties,
agreements and covenants of the Company and the Purchasers set forth in this
Agreement shall survive until the first anniversary of the Closing.

      13. Fees and Expenses. The Company agrees to pay, within three (3) days of
Closing, the documented legal fees and expenses of the Purchasers, as
contemplated in Section 3 hereto. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement or the Certificates of
Designation or either of them, the prevailing party or parties shall be entitled
to receive from the other party or parties reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which the prevailing
party or parties may be entitled.

      14. Successors. This Agreement shall inure to the benefit of and be
binding upon Purchasers and the Company and their respective successors and
legal representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person. Neither the Company nor any Purchaser may
assign this Agreement or any rights or obligation hereunder without the prior
written consent of the other party.

      15. No Waiver; Modifications in Writing. No failure or delay on the part
of the Company or any Purchaser in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Company or the Purchasers at law or in
equity or otherwise. No waiver of or consent to any departure by the Company or
the Purchasers from any provision of this Agreement shall be effective unless
signed in writing by the party entitled to the benefit thereof, provided that
notice of any such waiver shall be given to each party hereto as set forth
below. Except as otherwise provided herein, no amendment, modification or
termination of any provision of this Agreement shall be effective unless signed
in writing by or on behalf of each of the Company and the Purchasers. Any
amendment, supplement or modification of or to any provision of this Agreement,
any waiver of any provision of this Agreement, and any consent to any departure
by the Company or the Purchasers from the terms of any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required by
this Agreement, no notice to or demand on the Company in any case shall entitle
the Company to any other or further notice or demand in similar or other
circumstances.

      16. Entire Agreement. This Agreement, together with Transaction Documents,
constitutes the entire agreement among the parties hereto and supersedes all
prior agreements, understandings and arrangements, oral or written, among the
parties hereto with respect to the subject matter hereof and thereof.

                                      -16-
<PAGE>

      17. Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby.

      18. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND
THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO
PROVISIONS RELATING TO CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR FEDERAL
COURTS LOCATED IN THE CITY OF LOS ANGELES, CALIFORNIA AND HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE.

      19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                             Signature page follows.

                                      -17-
<PAGE>

      If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this Agreement shall constitute a binding agreement among the Company and the
Purchasers.

                              Very truly yours,

                              Diametrics Medical, Inc.

                              By: /s/ W. Bruce Comer
                                  -------------------------------
                                    Name:
                                    Title: CEO

ACCEPTED AND AGREED:

<TABLE>
<S>                                   <C>
Monarch Pointe Fund, Ltd.             Mercator Momentum Fund, LP

By:      /s/ H. Harry Aharonian       By:          /s/ H. Harry Aharonian
         ----------------------                   -----------------------
Name:                                 Name:
         ----------------------                   -----------------------
Its:     Portfolio Manager            Its:        Portfolio Manager
         ----------------------                   -----------------------

Mercator Momentum Fund III, LP        M.A.G. Capital, LLC

By:      /s/ H. Harry Aharonian       By:         /s/ H. Harry Aharonian
         ----------------------                   -----------------------
Name:                                 Name:
         ----------------------                   -----------------------
Its:     Portfolio Manager            Its:        Portfolio Manager
         ----------------------                   -----------------------

Ocean Park Advisors, LLC              Camden International

By:      /s/ W. Bruce Comer           By:         /s/ Dierdre M. McCoy
         ----------------------                   -----------------------
Name:                                 Name:
         ----------------------                   -----------------------
Its:     CEO                          Its:        Director
         ----------------------                   -----------------------

Longview Fund                         Longview Equity Fund

By:      /s/ S. Michael Rudolph       By:         /s/ S. Michael Rudolph
         ----------------------                   -----------------------
Name:                                 Name:
         ----------------------                   -----------------------
Its:     CFO                          Its:        CFO
         ----------------------                   -----------------------

Longview International Equity Fund

By:      /s/ S. Michael Rudolph
         ----------------------
Name:
         ----------------------
Its:     CFO
         ----------------------

</TABLE>

                                      -18-
<PAGE>

<TABLE>
<S>                                      <C>
Addresses for Notice:

Longview Fund                            Monarch Pointe Fund, Ltd.
Longview Equity Fund                     Mercator Momentum Fund, LP
Longview International Equity Fund       Mercator Momentum Fund III, LP
c/o 600 Montgomery 44th Floor            c/o M.A.G. Capital, LLC
San Francisco, CA 94111-2702             555 South Flower Street, Suite 4200
                                         Los Angeles, California 90071
with copy to:
                                         with copy to:
Edward Grushko, Esq.
551 5th Avenue, Suite 1601               David C. Ulich, Esq.
New York, NY 10176                       Sheppard, Mullin, Richter & Hampton LLP
Facsimile: (212) 697-3575                333 South Hope Street, 48th Floor
                                         Los Angeles, California 90071
                                         Facsimile: (213) 620-1398

Ocean Park Advisors, LLC                 Camden International, Ltd.
c/o Bruce Comer III                      c/o Euro-Dutch Trust Company, Ltd.
5710 Crescent Park E., Suite 334         Charlotte House
Playa Vista, CA 90034                    Charlotte Street
Fax: 310-745-0855                        P.O. Box N-9204
                                         Nassau, Bahamas
</TABLE>

                                      -19-
<PAGE>

                                   Schedule A

                                  Subsidiaries

      Diametrics Medical, Ltd.

      TGC Research Limited

                                       -1-
<PAGE>

                                   SCHEDULE B

                             Material Adverse Events

a) Judgment no. 05-02389 entered in the Court of Common Pleas, Chester County,
PA, on March 24, 2005 against the Company in favor of Liberty Property Limited
Partnership for the amount of $136,945, relating to the Company's default under
the terms of a commercial lease agreement dated January 20, 1999 and as amended
on March 25, 2002, for the lease of the premises at 293 Great Valley Parkway,
Malvern, Pennsylvania.

b) The Company's breach of the terms of a commercial lease agreement dated
September 26, 2003 with the AM Minnesota Funding Company, Inc., for lease of the
premises at 3050 Centre Pointe Drive, Roseville, Minnesota. The outstanding
contingent liability for past due rent and remaining rent under the lease
agreement, net of the security deposit held by the landlord, is $164,118.

c) BCC sold participations in the Convertible Senior Secured Notes due August 4,
2005 (the "2005 Notes") to certain investors. BCC secured the consent to the
assignment to MAG and OPA of the 2005 Notes from of all but one of the
participants (the "Remaining Participant"), whose interest is equal to $15,917
principal amount of the Note, plus accrued interest. This liability may remain
outstanding at the time of the Closing. BCC will use commercially reasonable
efforts to secure the consent of the Remaining Participant to transfer its
interest to Ocean Park and MAG and has agreed to indemnify Diametrics Medical,
Inc. if such consent is not secured by December 31, 2005.

                                      -2-
<PAGE>

                                   Exhibit A-1

                          Certificate of Designation of
                      Series H Convertible Preferred Stock
                                       of
                            Diametrics Medical, Inc.

                                      -3-
<PAGE>

                                   Exhibit A-2

                          Certificate of Designation of
                      Series I Convertible Preferred Stock
                                       of
                            Diametrics Medical, Inc.

                                      -4-
<PAGE>

                                    Exhibit B

                              Form of Legal Opinion

      1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Minnesota, with corporate power to
conduct any lawful business activity.

      2. The Company has the corporate power to execute, deliver and perform the
Transaction Documents. The Transaction Documents have been duly authorized by
all requisite corporate action by the Company and constitute the valid and
binding obligations of the Company, enforceable in accordance with their terms.

      3. The authorized capital stock of the Company consists of 5,000,000
shares of Preferred Stock, $0.01 par value and 1,000,000,000 shares of Common
Stock, $0.01 par value. Upon the filing of the Certificate of Designation, the
shares of the Company's Series H Stock and Series I Stock have been duly
authorized and, upon issuance, delivery, and payment therefor as described in
the Subscription Agreement, will be validly issued, fully paid and
nonassessable. 420,160,000 shares of the Company's Common Stock initially
issuable upon conversion of the shares of Series H Stock and Series I Stock have
been duly authorized and reserved for issuance and, upon issuance and delivery
as described in the Certificate of Designation, when filed, will be validly
issued, fully paid and nonassessable.

      4. The Company's execution and delivery of the Transaction Documents and
the issue and sale of the Shares, on the terms and conditions set forth in the
Subscription Agreement, will not violate any law of the State of Minnesota, any
rule or regulation of any governmental authority or regulatory body of the State
of Minnesota or any provision of the Company's Amended and Restated Articles of
Incorporation or Bylaws.

      5. No consent, approval, order or authorization of, and no notice to or
filing with, any governmental agency or body or any court is required to be
obtained or made by the Company for the issuance and sale of the Shares pursuant
to the Transaction Documents, except such as have been obtained or made and such
as may be required under applicable securities laws.

      6. On the assumption that the representations of the Purchasers in the
Subscription Agreement are correct, the offer and sale of the Shares pursuant to
the terms of the Subscription Agreement are exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended, and from
the qualification requirements of Minnesota securities statutes and regulations,
and, under such securities laws as they presently exist, the issuance of the
Company's Common Stock upon conversion of the Shares would also be exempt from
such registration and qualification requirements.

      7. We know of no pending or overtly threatened action, proceeding or
governmental investigation with respect to the Company's sale of Series H Stock
and Series I Stock pursuant to the Transaction Documents.

                                      -1-

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