Document:

Subscription Agreement

 Exhibit 10.1 
  
 Diametrics Medical, Inc. 
 Shares of Series G Convertible Preferred Stock and Common Stock Warrant 
  
 SUBSCRIPTION AGREEMENT 
  
 May 28, 2004 
  
 BCC Acquisition II, LLC

 c/o Bay City Capital 
 750 Battery Street, Suite 600

 San Francisco, California 94111 
  
 Monarch Pointe, Ltd. 
 Mercator Momentum Fund, LP 
 Mercator Momentum Fund III, LP 
 c/o Mercator Advisory Group, LLC 

555 South Flower Street, Suite 4500 
 Los Angeles, California 90071

  
 Ladies and Gentlemen: 
  
 Diametrics Medical, Inc., a Minnesota corporation (the
“Company”), hereby confirms its agreement with BCC Acquisition II, LLC (“BCC”), Monarch Pointe, Ltd. (“Monarch”), Mercator Momentum Fund, LP (“MMF”), and
Mercator Momentum Fund III, LP, (“MMF III”) (collectively, the “Purchasers”), as set forth below. 
  
 1. The Securities. Subject to the terms and conditions herein contained, the Company proposes to issue and sell to the Purchasers an aggregate of
15,000 shares (the “Shares”) of its Series G Convertible Preferred Stock, par value $0.01 per share (the “Series G Stock”), which 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 Certificate of Designation further described below. In addition, the Company shall issue and sell
to the Purchasers, for no additional consideration, warrants, substantially in the form attached hereto at Exhibit A (the “Warrants”), to acquire up to an aggregate of 1,250,000 shares of Common Stock (the
“Warrant Shares”), which shall be allocated 1,000,000 shares to BCC, 83,334 shares to Monarch, 83,333 shares to MMF, and 83,333 to MMF III. The rights, preferences and privileges of the Series G Stock are as set forth in the
Certificate of Designation of Series G Preferred Stock as filed with the Secretary of State of the State of Minnesota (the “Certificate of Designation”) in the form attached hereto as Exhibit B. The numbers of
Conversion Shares and Warrant Shares that each of Monarch, MMF and MMF III may acquire at any time are subject to limitation in the Certificate of Designation and in the Warrants, respectively, so that the aggregate number of shares of Common Stock
of which Monarch, MMF and MMF III and all persons affiliated with Monarch, MMF and MMF III 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 and the Warrants are sometimes herein collectively referred to as the
“Securities.” This Agreement, the Warrants and the Certificate 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. 
  
 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 and Mercator Advisory Group, LLC 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 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), 
  

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 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 in the Disclosure Documents (including as described in Proposal Two in the
Company’s proxy statement for its Annual Meeting held on April 29, 2004 and approved by the Company’s shareholders at such meeting, and subject to the issuance of shares pursuant to options outstanding under the Company’s stock option
plans, employee stock purchase plans or outstanding warrants, 2,013,432 shares issuable upon conversion of convertible notes, or other rights to acquire shares described in the Disclosure Documents, and subject to the filing of the Certificate of
Designation); except as set forth in the Disclosure Documents, 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, if any, such agreements,
understandings and arrangements 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 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 and the Warrants have been duly authorized and, when issued upon payment thereof in accordance with this Agreement, will have been validly issued, 
  

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 fully paid and nonassessable. Based on a Floor Price (as that term is defined in the Certificate of Designation) of $0.06
per share, 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 Certificate of Designation, will have
been validly issued, fully paid and nonassessable. The Conversion Shares issuable with respect to the Shares based on a Floor Price below $0.06 per share will be subject to shareholder approval to increase the number of authorized shares of Company
Common Stock to an amount sufficient to issue such Conversion Shares. The Warrant Shares have been duly authorized and validly reserved for issuance, and when issued upon exercise of the Warrants in accordance with the terms thereof, 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 (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 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 based on a Floor Price below $0.06 per share) or (iii) any statute, judgment, 
  

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 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 KPMG LLP, which has examined certain of such financial statements as set forth in its report included in the Disclosure Documents, is an independent certified public accountant as required by the Securities Act for an offering
registered thereunder. 
  
 (i) Except as described in the
Disclosure Documents, 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 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 
  

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 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 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. Except as described in the Disclosure Documents, 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. 
  
 (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 
  

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 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) Except as set forth in the Disclosure Documents, 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) Except for a due diligence fee payable to Mercator Advisory Group, LLC, 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. 
  
 (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 
  

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 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 and the
Warrant Shares under the securities or “blue sky” laws of any jurisdiction within the United States that is the residence or domicile of any Purchaser. 
  
 3. Purchase, Sale and Delivery of the Shares. 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 Purchasers, and Purchasers agree to purchase from the Company, 15,000 Shares of Series G Stock at $100 per Share in the
amounts shown on the signature page hereto. In connection with the purchase and sale of Shares, the Purchasers will receive, for no additional consideration, Warrants to purchase up to an aggregate of 1,250,000 shares of Common Stock, subject to
adjustment as set forth in the Warrants. 
  
 One or more
certificates in definitive form for the Shares that the Purchasers have agreed to purchase, as well as the Warrants, shall be delivered by or on behalf of the Company, against payment by or on behalf of each of the Purchasers, of the purchase price
therefor by wire transfer of immediately available funds to the account of the Company previously designated by it in writing. Such delivery of and payment for the Shares and the Warrants shall be made, with respect to Monarch, at the offices of
Mercator Advisory Group, LLC, 555 South Figueroa Street, Suite 4500, Los Angeles, California 90071 and, with respect to BCC, at the offices of Latham & Watkins LLP, Sears Tower, Suite 5800, 233 South Wacker Drive, Chicago, Illinois 60606 on May
28, 2004 (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 pay to Mercator Advisory Group, LLC a due diligence fee of $55,000 and to reimburse Mercator Advisory Group, LLC for all out-of-pocket legal expenses related to the
transactions contemplated herein up to $15,000, payable by wire transfer of immediately available funds to an account of Mercator Advisory Group, LLC previously designated by them in writing. Upon the completion of the Closing, the Company agrees to
reimburse BCC for all out-of-pocket legal expenses related to the transactions contemplated herein up to $7,500 and to pay BCC $55,000 as partial reimbursement of accrued unpaid expenses under the terms of the Company’s Convertible Senior
Secured Fixed Rate Notes, as amended, payable by wire transfer of immediately available funds to an account of BCC previously designed in writing. 
  
 4. Certain Covenants of the Company. The Company covenants and agrees with each Purchaser as follows: 
  
 (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. 
  

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 (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 Series G Stock 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 and the Warrant 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 Board of Directors of the Company will propose to the Company’s
shareholders within 10 business days following the filing of the Registration Statement with the SEC an amendment to the Company’s Articles of Incorporation to increase the number of authorized shares of Company Common Stock to an amount at
least sufficient to issue the Conversion Shares upon conversion of the Shares assuming a Floor Price of $.03 per share, and to amend the certificates of designation for each of the Company’s Series E Convertible Preferred Stock
(“Series E Stock”) and Series F Convertible Preferred Stock (“Series F Stock”) to clarify (i) the seniority of the Series G Stock over the Series F Stock and Series E Stock, and (ii) the seniority of
the Series F Stock over the Series E Stock, with respect to liquidation preferences. 
  
 (g) 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. 
  

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 (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 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, the Warrants and the Warrant Shares and other customary matters in the form attached hereto as Exhibit
C. 
  
 (e) The Purchasers shall have a right of first refusal
on any financing in which the Company is the issuer of debt or equity securities between the Closing Date and the date of effectiveness of the Registration Statement. 
  
 (f) The Company shall have received the consent of the holders of the Company’s Convertible Senior Secured Fixed Rate
Notes, as amended, to defer payments due on the Notes and other matters in substantially the form attached hereto as Exhibit D. 
  
 (g) The Company shall have delivered to Mercator Advisory Group, LLC the share certificates for the shares of the Company’s Series E Convertible
Preferred Stock issued to MMF, MMF III and Focus Fund LP. 
  
 (h)
The Company and the respective holders of the Series F Stock shall have entered into an agreement that the Company will not issue and sell additional shares of Series F Stock. 
  
 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 and the Warrant Shares that it may acquire upon conversion or exercise thereof, as the case may be) are being acquired for its own account for investment and with no intention of distributing or reselling such Securities (including
the Conversion Shares and the Warrant Shares that it may acquire upon conversion or exercise thereof, as the case may be) 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 or 
  

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 Warrant 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 and the Warrant Shares that it may acquire upon conversion or exercise thereof, as the case may be) have not been registered under
the Securities Act and may not be offered, resold, pledged or otherwise transferred except (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 and the Warrant Shares that it may acquire upon conversion or exercise thereof, as the case may be): 
  
 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 or the Warrant Shares, as the case may be, 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, the Conversion Shares and the Warrant 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 or the
Warrant 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, the Conversion Shares or the Warrant Shares. 
  

 11 

 (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 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. 
  

 12 

 (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 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 short the Company Common Stock as long as shares of the Series G Stock are outstanding. 
  
 (b) Each of Bay City Capital Management LLC and Mercator Advisory Group, LLC consent to defer any and all payments due from the Company to Bay City
Capital Management LLC, Mercator Advisory Group, LLC and their respective affiliates prior to December 31, 2004, except for payments due under this Agreement, until December 31, 2004. 
  
 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; or 
  
 (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. 
  
 (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. 
  

 13 

 (c) This Agreement may be terminated by mutual written consent of all parties. 
  
 9. Registration. 
  
 (a) Within 15 business days from the Closing Date, the Company shall prepare
and file with the SEC a Registration Statement covering the resale of the maximum number of Conversion Shares issuable upon conversion of the Shares and the Warrant Shares (collectively, the “Registrable Securities”) for an
offering to be made on a continuous basis pursuant to Rule 415 (the “Registration Statement”) based on a Floor Price of $0.06 per share. The Company shall use diligent efforts to cause such Registration Statement to become
effective as soon as practicable, and in all events within 70 days after the initial filing with the SEC, but shall not be liable for any damages should such effectiveness be delayed by the SEC review process. 
  
 (b) Within 15 business days following receipt of shareholder approval to
increase the number of authorized shares of Company Common Stock as described in Section 4(f), the Company shall prepare and file with the SEC either an amendment to the Registration Statement or a new registration statement covering the resale of
the additional number of Conversion Shares issuable upon conversion of the Shares for an offering to be made on a continuous basis pursuant to Rule 415 (if applicable, the “Second Registration Statement”) based on a Floor
Price of $0.03 per share. The Company shall use diligent efforts to cause such amendment or Second Registration Statement to become effective as soon as practicable, and in all events within 70 days after the initial filing with the SEC, but shall
not be liable for any damages should such effectiveness be delayed by the SEC review process. 
  
 (c) 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 date which is two years after
the date that such Registration Statement (or Second Registration Statement, if applicable) is declared effective by the SEC or such earlier date when all Registrable Securities covered by such Registration Statement (or Second Registration
Statement, if applicable) have been sold or may be sold without volume restrictions pursuant to Rule 144(k) as determined by the counsel to the Company pursuant to a written opinion to such effect addressed and acceptable to the Company’s
transfer agent. 
  
 10. Event of Default. 
  
 (a) If an Event of Default (as defined below) occurs and remains uncured for
a period of 10 days, the Purchasers shall have the right to (i) exercise any or all of the rights given to the Purchasers relating to the Securities, as further described in the Certificate of Designation or (ii) immediately convert any or all of
the Series G Stock into shares of Common Stock. In addition, the price at which the shares of Series G Stock may be converted into Common Stock shall be reduced from 75% of the Market Price (as defined in the Certificate of Designation) to 65% of
the Market Price. An “Event of Default” shall include the commencement by the Company of a voluntary case or proceeding under the bankruptcy laws or the Company’s failure to: (v) discharge or stay a bankruptcy proceeding
within 60 days of such action being taken against the Company, (w) file the Registration Statement with the SEC within 
  

 14 

 15 business days after the Closing Date, other than due to a delay not caused by the Company, (x) the de-listing of the
Company’s Common Stock from the OTC Bulletin Board, (y) file the preliminary proxy with the SEC within 10 business days after the filing of the Registration Statement to obtain shareholder authorization for issuance of up to 200,000,000 shares
of Company common stock, or (z) file an amendment to the Registration Statement or the Second Registration Statement within 15 business days after shareholder approval of authorization for issuance of up to 200,000,000 shares of Company common
stock, other than due to a delay not caused by the Company,. 
  
 (b) If the Company fails to file the Registration Statement, as referenced above in clause (w) of Section 10(a), the Company shall pay the Purchasers an amount equal to one percent (1%) of the total consideration paid for the Shares for
each day that the filing is late, to be allocated pro rata according to each Purchaser’s individual investment in Series G 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 
 St. Paul, 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 

 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 the documented out-of-pocket expenses of Mercator Advisory Group, LLC and BCC 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, the Warrant or the Certificate of Designation, 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 

 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 MINNESOTA, 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. 
  
 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 

 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/ David B. Kaysen

	 Name:
	 	 David B. Kaysen

	 Title:
	 	 Chief Executive Officer

  

 18 

							
	 ACCEPTED AND AGREED:
	 	 	 	 
		
	 BCC Acquisition II LLC
	 	 Bay City Capital Management LLC

				
	 By:
	 	 The Bay City Capital Fund I, L.P.
	 	 By:
	 	 /s/ Fred Craves

	 Its:
	 	 Manager
	 	 Name:
	 	 Fred Craves

	 	 	 	 	 Title:
	 	 Managing Director

	 By:
	 	 Bay City Capital Management LLC
	 	 	 	 
	 Its:
	 	 General Partner
	 	 	 	 
				
	 By:
	 	 /s/ Fred Craves

	 	 	 	 
	 Name:
	 	 Fred Craves
	 	 	 	 
	 Title:
	 	 Managing Director
	 	 	 	 

  
 Number of Shares Purchased at Closing:
5,000 
  
 Purchase Price: $500,000 
  

							
	 Monarch Pointe, Ltd.
	 	 Mercator Momentum Fund, LP

				
	 By:
	 	 /s/ David Firestone

	 	 By:
	 	 /s/ David Firestone

	 Name:
	 	 David Firestone
	 	 Name:
	 	 David Firestone

	 Its:
	 	 Managing Member
	 	 Its:
	 	 Managing Member

		
	 Number of Shares Purchased at Closing: 3,334
	 	 Number of Shares Purchased at Closing: 3,333

		
	 Purchase Price: $333,334
	 	 Purchase Price: $333,333

		
	 Mercator Momentum Fund III, LP
	 	 Mercator Advisory Group, LLC

	 	 	 	 	 
	 By:
	 	 /s/ David Firestone

	 	 By:
	 	 /s/ David Firestone

	 Name:
	 	 David Firestone
	 	 Name:
	 	 David Firestone

	 Its:
	 	 Managing Member
	 	 Its:
	 	 Managing Member

  
 Number of Shares Purchased at Closing:
3,333 
  
 Purchase Price: $333,333 
  

 19 

			
	 Addresses for Notice:
	 	 
		
	 BCC Acquisition II, LLC
	 	 Monarch Pointe, Ltd.

	 c/o Bay City Capital
	 	 Mercator Momentum Fund, LP

	 750 Battery Street, Suite 600
	 	 Mercator Momentum Fund III, LP

	 San Francisco, California 94111
	 	 c/o Mercator Advisory Group, LLC

	 	 	 555 South Flower Street, Suite 4500

	 with copy to:
	 	 Los Angeles, California 90071

		
	 Michael A. Pucker
	 	 with copy to:

	 Latham & Watkins LLP
	 	 
	 233 South Franklin, Suite 5800
	 	 David C. Ulich, Esq.

	 Chicago, Illinois 60606
	 	 Sheppard, Mullin, Richter & Hampton LLP

	 Facsimile: (312) 993-9767
	 	 333 South Hope Street, 48th Floor

	 	 	 Los Angeles, California 90071

	 	 	 Facsimile: (213) 620-1398

  

 20 

 Schedule A 
  

Subsidiaries 
  

	
	 Diametrics Medical, Ltd.

 Exhibit A 
  

Form of Warrant 
 (filed separately)

 Exhibit B 
  

Certificate of Designation of 
 Series G
Convertible Preferred Stock 
 of 
 Diametrics Medical, Inc. 
  
 (filed separately)

 Exhibit C 
  

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 100,000,000 shares of Common Stock, $0.01 par value. The shares of the Company’s Series G 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. The shares of the Company’s Common Stock initially issuable upon conversion of the shares of Series G Stock (based
on a Floor Price of $0.06 per share) have been duly authorized and reserved for issuance and, upon issuance and delivery as described in the Certificate of Designation, will be validly issued, fully paid and nonassessable. The shares of the
Company’s Common Stock issuable upon exercise of the Warrants have been duly authorized and reserved for issuance, and upon issuance, delivery, and payment therefor, 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 United States or the State of Minnesota, any rule or regulation of any governmental authority or regulatory body
of the United States or 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 and Warrants 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 and the Warrants 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 and exercise of the Warrants
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 G Stock and Warrants pursuant to the Transaction Documents.Form of Stock Purchase Warrant

 Exhibit 10.2 
  
 WARRANT TO PURCHASE COMMON STOCK 
  
 THIS WARRANT AND THE SECURITIES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS. 
  
 WARRANT TO PURCHASE COMMON STOCK 
  

			
	 Number of Shares:
	 	 Up to [1,250,000] shares (subject to adjustment)

	 Warrant Price:
	 	 See Section 1.2 Below

	 Issuance Date:
	 	 May 28, 2004

	 Expiration Date:
	 	 May 28, 2007

  
 THIS WARRANT CERTIFIES THAT for
value received,             or its registered assigns (hereinafter called the “Holder”) is entitled to purchase from Diametrics Medical, Inc.
(hereinafter called the “Company”), the above referenced number of fully paid and nonassessable shares (the “Shares”) of common stock (the “Common Stock”), of Company, at the
Warrant Price per Share referenced above; the number of shares purchasable upon exercise of this Warrant referenced above being subject to adjustment from time to time as described herein. This Warrant is issued in connection with that certain
Subscription Agreement dated as of May 28, 2004, by and between the Company and Holder (the “Subscription Agreement”). The exercise of this Warrant shall be subject to the provisions, limitations and restrictions contained
herein. 
  
 1. Term and Exercise. 
  
 1.1 Term. This Warrant is exercisable in whole or in part (but not as to any
fractional share of Common Stock), at any time and from time to time after the date hereof but prior to 6:00 p.m. on the Expiration Date set forth above. 
  
 1.2 Warrant Price. 
  
 The Warrant shall be exercisable at the lower of (i) the average of the lowest ten inter-day closing prices of the Common Stock on the Over-the-Counter Bulletin Board
(the “OTC Bulletin Board”) during the 10 trading days immediately preceding the exercise date or (ii) the closing price of the Common Stock on May 28, 2004. Such ten day period will be extended by the number of trading days during
such period on which (i) trading in the Common Stock is suspended by, or not traded on the OTC Bulletin Board, (ii) after the date of the date of the Registration Statement for the underlying Common Stock is declared ineffective by the Securities
and Exchange Commission (the “SEC”), and the prospectus included in the Registration Statement for the underlying shares of Common Stock may not be used by the holder for resale of the underlying shares of Common Stock, or (iii)
after the date the Registration Statement for the underlying shares of Common Stock is declared effective by the SEC, the prospectus included in the Registration Statement for the underlying shares of Common Stock may not be used by the holder for
the resale of underlying shares of Common stock of the Series G Convertible Preferred Stock. 
  
 1.3 Maximum Number of Shares 
  
 The maximum number of Shares of Common Stock exercisable pursuant to this Warrant is [1,250,000] Shares. 
  
 1.4 Procedure for Exercise of Warrant. Holder may exercise this Warrant by delivering the following to the principal office of the Company in accordance
with Section 5.1 hereof: (i) a duly executed Notice of Exercise in substantially the form attached as Schedule A, (ii) payment of the Warrant Price then in effect for each of the Shares being purchased, as designated in the Notice of Exercise, and
(iii) this Warrant. Payment of the Warrant Price may be in cash, certified or official bank check payable to the order of the Company, or wire transfer of funds to the Company’s account (or any combination of any of the foregoing) in the amount
of the Warrant Price for each share being purchased. Notwithstanding any provisions herein to the contrary, if the Current Market Price (as defined below) is greater than the Warrant Price (at the date of calculation, as set forth below), the Holder
may elect to receive, without the payment by the Holder of any additional consideration, shares of Common Stock equal to the value of the “spread” on the Shares (or the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company in accordance with Section 5.1, together with the Notice of Exercise, in which event the Company shall issue to the Holder hereof a number of shares of Common Stock computed using the following formula:

  

	
	X = Y x (CMP-WP)
	CMP

  

							
	 Where:
	 	X	 	=	 	the number of shares of Common Stock to be issued to the Holder pursuant to this net exercise
				
	 	 	Y	 	=	 	the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, that portion of the Warrant requested to be
exercised
				
	 	 	CMP	 	=	 	the Current Market Price (as of the date of such calculation) of one share of Common Stock
				
	 	 	WP	 	=	 	the Warrant Price (as adjusted as of the date of such calculation)

 For purposes of this Warrant, the “Current Market Price” of one share of Common Stock as of a
particular date shall be determined as follows: (i) if traded on a national securities exchange or through the Nasdaq Stock Market, the Current Market Price shall be deemed to be the volume weighted average trading price of the Common Stock on such
exchange as of five business days immediately prior to the date of exercise indicated in the Notice of Exercise (or if no reported sales took place on such day, the last date on which any such sales took place prior to the date of exercise); (ii) if
traded over-the-counter but not on the Nasdaq Stock Market, the Current Market Price shall be deemed to be the average of the closing bid and asked prices as of five business days immediately prior to the date of exercise indicated in the Notice of
Exercise; and (iii) if there is no active public market, the Current Market Price shall be the fair market value of the Common Stock as of the date of exercise, as determined in good faith by the Board of Directors of the Company. 
  
 1.5 Delivery of Certificate and New Warrant. In the event of any exercise of
the rights represented by this Warrant, a certificate or certificates for the shares of Common Stock so purchased, registered in the name of the Holder or such other name or names as may be designated by the Holder, together with any other
securities or other property which the Holder is entitled to receive upon exercise of this Warrant, shall be delivered to the Holder hereof, at the Company’s expense, within a reasonable time, not exceeding fifteen (15) calendar days, after the
rights represented by this Warrant shall have been so exercised; and, unless this Warrant has expired, a new Warrant representing the number of Shares (except a remaining fractional share), if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the Holder hereof within such time. The person in whose name any certificate for shares of Common Stock is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of
record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price was received by the Company, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is
on a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such Shares at the close of business on the next succeeding date on which the stock transfer books are open.

  
 1.6 Restrictive Legend. Each certificate for Shares shall bear a
restrictive legend in substantially the form as follows, together with any additional legend required by (i) any applicable state securities laws and (ii) any securities exchange upon which such Shares may, at the time of such exercise, be
listed: 
  
 “The shares represented by this
certificate have not been registered under the Securities Act of 1933, as amended and may not be sold, offered for sale, transferred or pledged in the absence of such registration or an exemption therefrom under such Act.” 
  
 Any certificate issued at any time in exchange or substitution for any certificate bearing
such legend shall also bear such legend unless, in the opinion of counsel for the Holder thereof (which counsel shall be reasonably satisfactory to the Company), the securities represented thereby are not, at such time, required by law to bear such
legend. 
  
 1.7 Fractional Shares. No fractional Shares shall be
issuable upon exercise or conversion of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional share interest arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying to Holder an amount computed by multiplying the fractional interest by the Current Market Price of a full Share. 
  
 2. Representations, Warranties and Covenants. 
  
 2.1 Representations and Warranties. 
  
 (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation and has all necessary
power and authority to perform its obligations under this Warrant; 
  
 (b) The execution, delivery and performance of this Warrant has been duly authorized by all necessary actions on the part of the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms; and 
  
 (c) This Warrant does not
violate and is not in conflict with any of the provisions of the Company’s Amended and Restated Articles of Incorporation or Certificate of Designation, Bylaws and any resolutions of the Company’s Board of Directors or stockholders, or any
agreement of the Company, and no event has occurred and no condition or circumstance exists that might (with or without notice or lapse of time) constitute or result directly or indirectly in such a violation or conflict. 
  
 2.2 Issuance of Shares. The Company covenants and agrees that all shares
of Common Stock that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. The
Company further covenants and agrees that it will pay when due and payable any and all federal and state taxes which may be payable in respect of the issue of this Warrant or any Common Stock or certificates therefor issuable upon the exercise of
this Warrant. The Company further covenants and agrees that the Company will at all times have authorized and reserved, free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise in full of the rights
represented by this Warrant. If at any time the number of authorized but unissued shares of Common Stock of the Company shall not be sufficient to effect the exercise of the Warrant in full, subject to the limitations set forth in Section 1.3
hereto, then the Company will take all such corporate action as may, in the opinion of counsel to the Company, be necessary or advisable to increase the number of its authorized shares of Common Stock as shall be sufficient to permit the exercise of
the Warrant in full, subject to the limitations set forth in Section 1.3 hereto, including without limitation, using its best efforts to obtain any necessary stockholder approval of such increase. The Company further covenants and agrees that if any
shares of capital stock to be reserved for the purpose of the issuance of shares upon the exercise of this Warrant require registration with or approval of any governmental authority under any federal or state law before such shares may be validly
issued or delivered upon exercise, then the Company will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be. If and so long as the Common Stock issuable upon the exercise of this
Warrant is listed on any national securities exchange or the Nasdaq Stock Market, the Company will, if permitted by the rules of such exchange or market, list and keep listed on such exchange or market, upon official notice of issuance, all shares
of such Common Stock issuable upon exercise of this Warrant. 
  
 3. Other
Adjustments. 
  
 3.1 Subdivision or Combination of Shares.
In case the Company shall at any time subdivide its outstanding Common Stock into a greater number of shares or, conversely, combine its outstanding Common Stock into a smaller number of shares, the Warrant Price and the number of shares purchasable
hereunder shall be proportionately adjusted. 
  
 3.2 Dividends in Common
Stock, Other Stock or Property. If at any time or from time to time the holders of Common Stock (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to
receive, without payment therefor: 
  
 (a) Common Stock, Options
or any shares or other securities which are at any time directly or indirectly convertible into or exchangeable for Common Stock, or any rights or options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or
other distribution; 
  
 (b) any cash paid or payable otherwise
than as a regular cash dividend; or 
  
 (c) Common Stock or
additional shares or other securities or property (including cash) by way of spin-off, split-up, reclassification, combination of shares or similar corporate rearrangement (other than Common Stock issued as a stock split or adjustments in respect of
which shall be covered by the terms of Section 3.1 above) and additional shares, other securities or property issued in connection with a Change (as defined below) (which shall be covered by the terms of Section 3.4 below), then and in each such
case, the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Common Stock receivable thereupon, and without payment of any additional consideration therefor, the amount of stock and
other 
  

 Page 2 

 securities and property (including cash in the cases referred to in clause (b) above and this clause (c)) which such
Holder would hold on the date of such exercise had such Holder been the holder of record of such Common Stock as of the date on which holders of Common Stock received or became entitled to receive such shares or all other additional stock and other
securities and property. 
  
 3.3 Reorganization, Reclassification,
Consolidation, Merger or Sale. If any recapitalization, reclassification or reorganization of the share capital of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all
of its shares and/or assets or other transaction (including, without limitation, a sale of substantially all of its assets followed by a liquidation) shall be effected in such a way that holders of Common Stock shall be entitled to receive shares,
securities or other assets or property (a “Change”), then, as a condition of such Change, lawful and adequate provisions shall be made by the Company whereby the Holder hereof shall thereafter have the right to purchase and receive
(in lieu of the Common Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares, securities or other assets or property as may be issued or payable with respect to or in
exchange for the number of outstanding Common Stock which such Holder would have been entitled to receive had such Holder exercised this Warrant immediately prior to the consummation of such Change. The Company or its successor shall promptly issue
to Holder a new Warrant for such new securities or other property. The new Warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable to give effect to the adjustments provided for in this Section 3 including,
without limitation, adjustments to the Warrant Price and to the number of securities or property issuable upon exercise of the new Warrant. The provisions of this Section 3.3 shall similarly apply to successive Changes.  
  
 4. Ownership and Transfer. 
  
 4.1 Ownership of This Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof (notwithstanding any notations of ownership or writing hereon made by anyone other than the Company) for all purposes and shall not be affected by any notice to the contrary until
presentation of this Warrant for registration of transfer as provided in this Section 4. 
  
 4.2 Transfer and Replacement. This Warrant and all rights hereunder are transferable in whole or in part upon the books of the Company by the Holder hereof in person or by duly authorized attorney, and a
new Warrant or Warrants, of the same tenor as this Warrant but registered in the name of the transferee or transferees (and in the name of the Holder, if a partial transfer is effected) shall be made and delivered by the Company upon surrender of
this Warrant duly endorsed, at the office of the Company in accordance with Section 5.1 hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated, the Company will make and deliver a new Warrant of like tenor, in lieu of this Warrant; provided that if the Holder hereof is an instrumentality of a state or local
government or an institutional holder or a nominee for such an instrumentality or institutional holder an irrevocable agreement of indemnity by such Holder shall be sufficient for all purposes of this Warrant, and no evidence of loss or theft or
destruction shall be necessary. This Warrant shall be promptly cancelled by the Company upon the surrender hereof in connection with any transfer or replacement. Except as otherwise provided above, in the case of the loss, theft or destruction of a
Warrant, the Company shall pay all expenses, taxes and other charges payable in connection with any transfer or replacement of this Warrant, other than income taxes and stock transfer taxes (if any) payable in connection with a transfer of this
Warrant, which shall be payable by the Holder. Holder will not transfer this Warrant and the rights hereunder except in compliance with federal and state securities laws and except after providing evidence of such compliance reasonably satisfactory
to the Company. 
  
 5. Miscellaneous Provisions. 
  
 5.1 Notices. Any notice or other document required or permitted to be given or
delivered to the Holder shall be delivered or forwarded to the Holder at             or to such other address or number as shall have been furnished to the Company in writing by the
Holder. Any notice or other document required or permitted to be given or delivered to the Company shall be delivered or forwarded to the Company at 3050 Centre Pointe Road, Minnesota 55113, Attention: Chief Financial Officer (Facsimile No.
651/638-1197), with a copy to Dorsey & Whitney LLP, 50 South Sixth Street, Suite 1500, Minneapolis, Minnesota 55402, Attention: Kenneth L. Cutler, Esq. (Facsimile No. 612/340-7800), or to such other address or number as shall have been furnished
to Holder in writing by the Company. 
  
 5.2 All notices, requests and
approvals required by this Warrant shall be in writing and shall be conclusively deemed to be given (i) when hand-delivered to the other party, (ii) when received if sent by facsimile at the address and number set forth above; provided that notices
given by facsimile shall not be effective, unless either (a) a duplicate copy of such facsimile notice is promptly given by depositing the same in the mail, postage prepaid and addressed to the party as set forth below or (b) the receiving party
delivers a written confirmation of receipt for such notice by any other method permitted under this paragraph; and further provided that any notice given by facsimile received after 5:00 p.m. (recipient’s time) or on a non-business day shall be
deemed received on the next business day; (iii) five (5) business days after deposit in the United States mail, certified, return receipt requested, postage prepaid, and addressed to the party as set forth below; or (iv) the next business day after
deposit with an international overnight delivery service, postage prepaid, addressed to the party as set forth below with next business day delivery guaranteed; provided that the sending party receives confirmation of delivery from the delivery
service provider. 
  
 5.3 No Rights as Shareholder; Limitation of
Liability. This Warrant shall not entitle the Holder to any of the rights of a shareholder of the Company except upon exercise in accordance with the terms hereof. No provision hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the Warrant Price hereunder or as a shareholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company. 
  
 5.4 Governing
Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Minnesota as applied to agreements among Minnesota residents made and to be performed entirely within the State of Minnesota, without giving
effect to the conflict of law principles thereof. 
  
 5.5 Binding Effect on
Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company’s assets and/or securities. All of the obligations of the Company
relating to the Shares issuable upon the exercise of this Warrant shall survive the exercise and termination of this Warrant. All of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the Holder.

  
 5.6 Waiver, Amendments and Headings. This Warrant and any
provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by both parties (either generally or in a particular instance and either retroactively or prospectively). The headings in this Warrant are for
purposes of reference only and shall not affect the meaning or construction of any of the provisions hereof. 
  

 Page 3 

 WARRANT TO PURCHASE COMMON STOCK 
  
 IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its duly authorized officer this 28th day of May, 2004.

  
 COMPANY: 
  

			
	 DIAMETRICS MEDICAL, INC.

		
	 By
	 	  

	 Print Name:
	 	  

	 Title:
	 	  

  
  

 Page 4 

 SCHEDULE A 
  

FORM OF NOTICE OF EXERCISE 
  
 [To be signed only upon exercise of the Warrant] 
  
 TO BE EXECUTED BY THE REGISTERED HOLDER 
 TO EXERCISE THE WITHIN WARRANT 
  
 The undersigned
hereby elects to purchase                      shares of Common Stock (the “Shares”) of Diametrics Medical, Inc. under the Warrant
to Purchase Common Stock dated                     , which the undersigned is entitled to purchase pursuant to the terms of such Warrant, and
[check one]: 
  

	 ̈	Cash Exercise. The undersigned has delivered $                    ,
the aggregate Warrant Price for                      Shares purchased herewith, in full in cash or by certified or official bank check or wire
transfer; 

  

	 ̈	Net Exercise. In exchange for the issuance of                     
Shares, the undersigned hereby agrees to surrender the right to purchase                      shares of Common Stock pursuant to the net
exercise provisions set forth in Section 1.4 of the Warrant. 

  
 Please issue a certificate or certificates representing such shares of Common Stock in the name of the undersigned or in such other name as is specified below and in the denominations as is set forth below:

  
 _____________________________________________________________________________________ 
 [Type Name of Holder as it should
appear on the stock certificate] 
  
 _____________________________________________________________________________________ 
 [Requested Denominations – if no
denomination is specified, a single certificate will be issued] 
  
 The initial address of such Holder to be entered on the books of Company shall be: 
  
 __________________________________________________ 
  
 __________________________________________________ 
  
 __________________________________________________ 
  
 The undersigned hereby represents and warrants that the undersigned is acquiring such shares for his own account for investment purposes only, and not for resale or with a view to distribution of such shares or any
part thereof. 
  

			
	 By:
	 	  

	 Print Name:
	 	  

	 Title:
	 	  

	 Dated:
	 	  

 FORM OF ASSIGNMENT 
 (ENTIRE) 
  
 [To be
signed only upon transfer of entire Warrant] 
  
 TO BE
EXECUTED BY THE REGISTERED HOLDER 
 TO TRANSFER THE WITHIN WARRANT 
  
 FOR VALUE
RECEIVED                                 hereby sells, assigns and transfers
unto                              all rights of the undersigned under and pursuant to the within
Warrant, and the undersigned does hereby irrevocably constitute and appoint
                             Attorney to transfer the said Warrant on the books of Diametrics Medical,
Inc., with full power of substitution. 
  

			
	

	 [Type Name of Holder]

		
	 By:
	 	  

	 Title:
	 	  

	 Dated:
	 	  

  
 NOTICE 
  
 The signature to the foregoing Assignment must correspond exactly to the name as written
upon the face of the within Warrant, without alteration or enlargement or any change whatsoever. 
  

 FORM OF ASSIGNMENT 
 (PARTIAL) 
  
 [To be
signed only upon partial transfer of Warrant] 
  
 TO BE
EXECUTED BY THE REGISTERED HOLDER 
 TO TRANSFER THE WITHIN WARRANT 
  
 FOR VALUE RECEIVED
                             hereby sells, assigns and transfers unto
                             (i) the rights of the undersigned to purchase
                             shares of Common Stock under and pursuant to the within Warrant, and (ii)
on a non-exclusive basis, all other rights of the undersigned under and pursuant to the within Warrant, it being understood that the undersigned shall retain, severally (and not jointly) with the transferee(s) named herein, all rights assigned on
such non-exclusive basis. The undersigned does hereby irrevocably constitute and appoint
                             Attorney to transfer the said Warrant on the books of Diametrics Medical,
Inc., with full power of substitution. 
  

			
	

	 [Type Name of Holder]

		
	 By:
	 	  

	 Title:
	 	  

	 Dated:
	 	  

  
 NOTICE 
  
 The signature to the foregoing Assignment must correspond exactly to the name as written
upon the face of the within Warrant, without alteration or enlargement or any change whatsoever.

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