Document:

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                                                                    Exhibit 10.2

                   FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT

     THIS FIRST AMENDMENT TO NOTE PURCHASE AGREEMENT (this "Amendment") is made
and entered as of April 7, 2003, by and between DIAMETRICS MEDICAL, INC., a
Minnesota corporation (the "Company"), BCC ACQUISITION II LLC, a Delaware
limited liability company ("BCC"), GERALD L. COHN REVOCABLE TRUST ("Cohn
Trust"), HANNAH S. AND SAMUEL A. COHN MEMORIAL FOUNDATION ("Cohn Foundation"),
and AEOW 96, LLC ("AEOW"; BCC, Cohn Trust, Cohn Foundation and AEOW may be
referred to herein collectively as the "Purchasers" and individually and without
distinction as a "Purchaser").

                                    RECITALS

     1. The Company and the Purchasers entered into a Note Purchase Agreement
dated as of August 4, 1998 (the "Note Purchase Agreement"); and

     2. The Company and the Purchasers have agreed to amend certain provisions
of the Note Purchase Agreement, subject to terms and conditions set forth in
this Amendment.

                                    AGREEMENT

     NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby covenant
and agree to be bound as follows:

     Section 1. Capitalized Terms. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the Note
Purchase Agreement, unless the context shall otherwise require.

     Section 2. Amendments. The Note Purchase Agreement is hereby amended as
follows:

          2.1 Definitions. Article I of the Note Purchase Agreement is amended
     by adding thereto the follow definitions in alphabetical order:

               "Cohn Trust" means the Gerald L. Cohn Revocable Trust.

               "First Amendment" means the First Amendment to Note Purchase
          Agreement dated as of April 7, 2003, made by and between the Company
          and the Purchasers.

               "First Amendment Closing Date" means the date on which the First
          Amendment becomes effective in accordance with its terms.

               "First Amendment Warrants" means the warrants issued pursuant to
          the First Amendment, substantially in the form of Exhibit 3A hereto.

               "Net Proceeds" means the aggregate cash consideration received by
          the Company in connection with (i) the sale or issuance, whether in a
          public offering, a private placement or otherwise, of any equity
          securities or other securities linked to equity securities (including,
          without limitation, any securities convertible into or exchangeable
          for, or any option, warrant, agreement or other right to purchase,
          securities), but excluding any proceeds from an equity investment made
          by any director, officer or employee of the Company pursuant to any
          stock option plan or any stock rights (e.g., warrants) issued prior to
          the First Amendment Closing Date, and (ii) the sale, license, lease or
          other disposition of any material asset, property or interest of the
          Company, in each case less the expenses (including reasonable
          out-of-pocket expenses) incurred by the Company in connection with
          such transaction (including without limitation underwriters'
          commissions and fees) and, with respect to clause (ii) above, less the
          amount of any federal and state taxes incurred by the Company in
          connection with such transaction.

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               "Ownership Limit" shall mean, with respect to any Purchaser, the
          greatest of (i) 20% or more of the Company's outstanding voting power,
          (ii) the percentage ownership and/or voting position in excess of 20%
          of the Company's outstanding voting power held by a shareholder, or an
          identified group of shareholders, unaffiliated with such Purchaser,
          (iii) the percentage ownership and/or voting position in excess of 20%
          of the Company's outstanding voting power held by the Company's
          officers and directors who are unaffiliated with such Purchaser, and
          (iv) such percentage of the Company's voting power as would be
          presumed to constitute a "change of control" for the purposes of
          Nasdaq shareholder approval rules.

               "Restricted Payments" has the meaning specified in Section
          6.7(iv).

          2.2 Mandatory Prepayment, Article IV of the Note Purchase Agreement is
     amended by adding thereto the following Section 4.5:

               Section 4.5 Mandatory Payments on Notes; Prepayment. Unless
          Purchasers holding in excess of 50.1% of the aggregate principal
          amounts of the Notes otherwise agree, the Company shall prepay the
          Notes in an amount equal to 50% of any cumulative Net Proceeds in
          excess of $10 million. In addition, with the consent of the Purchasers
          holding in excess of 50.1% of the aggregate principal amount of the
          Notes, at any time from April 7, 2003 through April 7, 2004, the
          Company may prepay the Notes in full without prepayment premium or
          penalty.

          2.3 Conversion Rights. Section 5.1 of the Note Purchase Agreement is
     amended in its entirety to read as follows:

               Section 5.1 Conversion. Subject to and upon compliance with the
          provisions of this Article V and subject to Section 4.4 hereof, the
          Holder of any Notes shall have the right, at its option, at any time,
          to convert any Note or any portion of the principal amount thereof
          which is $1,000 or an integral multiple of $1,000 into fully paid and
          nonassessable shares of Common Stock at the conversion price of (a)
          $3.51 per share of Common Stock for all Holders other than the Cohn
          Trust, and (b) $8.40 per share of Common Stock for the Cohn Trust,
          subject to adjustment as set forth below, by surrendering the Notes to
          be converted, in the manner provided in Section 5.2, provided that no
          such right shall be exercised during the period of six consecutive
          months from and after the First Amendment Closing Date unless a
          Redemption Event occurs during such six month period, and provided
          further, that no such right shall be exercised to the extent that such
          exercise would cause the Holder to equal or exceed the Ownership
          Limit, except in connection with a Redemption Event.

          2.4 Conversion Price. Section 5.6 of the Note Purchase Agreement is
     amended in its entirety to read as follows:

               Section 5.6 Conversion Price. For purposes of this Article V, the
          conversion price shall be (a) $3.51 in principal amount per share of
          Common Stock for the Notes held by all Purchasers other than the Cohn
          Trust, and (b) $8.40 in principal amount per share of Common Stock for
          the Note held by the Cohn Trust, subject in each case to adjustment as
          provided below (as applicable, the "Conversion Price").

          2.5 Limitations on Dividends. Section 6.7 of the Note Purchase
     Agreement is hereby amended by adding thereto the following clause (iv):

               (iv) Declare or pay any dividend (other than dividends payable
          solely in common stock of the Company or in capital stock of the
          Company of the same class and series as that on which such dividends
          are payable) on, or make any payment on account of, or set apart
          assets for a sinking or other analogous fund for, the purchase,
          redemption, defeasance, retirement or other acquisition of, any shares
          of any class of capital stock of the Company or any warrants or
          options to purchase any such stock, whether now or hereafter
          outstanding, or prepay any Debt not

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          specifically permitted under the terms of this Agreement, or make any
          other distribution in respect thereof, either directly or indirectly,
          whether in cash or property or in obligations of the Company (such
          declarations, payments, setting apart, purchases, redemptions,
          defeasances, retirements, acquisitions and distributions being herein
          called "Restricted Payments").

          2.6 Notice Addresses. Section 13.2 of the Note Purchase Agreement is
     amended in its entirety to read as follows:

               Section 13.2 Notices. All notices and other communications
          pertaining to this Agreement or the Notes shall be in writing, shall
          be sent by confirmed facsimile or mailed by first-class registered or
          certified airmail, or nationally recognized overnight express courier,
          postage prepaid, and shall be deemed to have been duly given when so
          sent in the case of facsimile transmission, or when so received in the
          case of mail or courier, and addressed as follows:

                    (i) If to a Purchaser, to the address and fax numbers set
               forth below its name on the signature pages hereto:

                    with a copy to:

                    Latham and Watkins Illinois LLC
                    Sears Tower, Suite 5800
                    Chicago, IL 60606
                    Attention: Michael A. Pucker and Thomas E. Keim, Jr.
                    Phone: (312) 876-7700
                    Fax: (312) 993-9767

                    (ii) If to the Company:

                    Diametrics Medical, Inc.
                    2658 Patton Road
                    Roseville, Minnesota 56113
                    Attention: David Kaysen, CEO and President
                    Phone: (612) 639-8035
                    Fax: (612) 638-1197

                    with a copy to:

                    Dorsey & Whitney LLP
                    50 South 6th Street, Suite 1500
                    Minneapolis, Minnesota 55402
                    Attention: Kenneth L. Cutler, Esq.
                    Phone: (612) 340-2740
                    Fax: (612) 340-8738

               or to such other person or address as shall be furnished to the
               other party in writing.

          2.7 Exhibit 1. Exhibit 1 to the Note Purchase Agreement is hereby
     amended to read as set forth on Exhibit 1 attached to this Amendment which
     is made a part of the Note Purchase Agreement as Exhibit 1 thereto. All
     references in this Amendment and the Note Purchase Agreement to "Notes" or
     a "Note" shall refer to the First Amended and Restated Convertible Senior
     Secured Fixed Rate Notes in the form of such Exhibit 1.

          2.8 Exhibit 3A. The Note Purchase Agreement is hereby amended to by
     adding thereto Exhibit 3A in the form attached hereto as Exhibit 3A.

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     Section 3. Closing Deliveries. Concurrently with the execution and delivery
of this Amendment, the Company shall deliver the following to the Purchasers:

          3.1 A First Amended and Restated Convertible Senior Secured Fixed Rate
     Note in favor of each Purchaser, in the amount for each Purchaser as set
     forth on Schedule 1 to the Note Purchase Agreement, in the form attached
     hereto as Exhibit 1, duly executed by the Company.

          3.2 The First Amendment Warrants in the form attached hereto as
     Exhibit 3A, in favor of each Purchaser in the number specified on Schedule
     1 to this Amendment, duly executed by the Company.

          3.3 An opinion of counsel of each of Dorsey & Whitney LLP's
     Minneapolis office and London office in form and substance satisfactory to
     the Purchasers (it being agreed that the Company shall deliver the opinion
     from the London office of Dorsey & Whitney LLP within three (3) business
     days following the Closing).

          3.4 A copy of any consent of any Person required in order to give
     effect to the agreements of the Company set forth in the Amendment
     Documents (as defined below) or in the Note Purchase Agreement as amended
     by this Amendment, or in order to prevent a violation of agreements with
     such Person by execution of this Amendment by the Company.

          3.5 A copy of any filings made with any Governmental Authority
     required to give effect to the agreements of the Company set forth in the
     Amendment Documents (as defined below) or in the Note Purchase Agreement as
     amended by this Amendment.

          3.6 A copy of the resolutions of the Board of Directors of the Company
     ratifying, confirming and authorizing the execution, delivery and
     performance of this Amendment and all other documents executed by the
     Company in connection with this Amendment (collectively, with this
     Amendment, the "Amendment Documents"), certified as true and accurate by an
     officer of the Company, along with a certification by such officer (i)
     certifying as to a true and correct copy of the current Articles of
     Incorporation of the Company, (ii) certifying as to a true and correct copy
     of the current Bylaws of the Company; and (iii) identifying each officer of
     the Company authorized to execute the Amendment Documents and certifying as
     to specimens of such officer's signature and such officer's incumbency in
     such offices as such officer holds.

          3.7 Evidence of the satisfaction by the Company of such other
     conditions as reasonably specified by the Purchasers.

     Section 4. Representations of the Company. Except as set forth on the
Schedule of Exceptions attached hereto, the Company hereby represents and
warrants to the Purchasers that, as of the date hereof and after giving effect
to this Amendment:

          4.1 Organization and Standing. Each of the Company and its Subsidiary
     (as hereinafter defined in this Section 4.1) has been duly incorporated and
     is validly existing as a corporation in good standing under the laws of the
     jurisdiction of its organization, has full corporate power and authority to
     own or lease its properties and conduct its business as presently
     conducted, and is duly qualified as a foreign corporation and is in good
     standing in all jurisdictions in which the character of the property owned
     or leased or the nature of the business transacted by it makes
     qualification necessary (except where the failure to be so qualified would
     not have a material adverse effect on the business, properties, financial
     condition or results or operations of the Company or its Subsidiary). Other
     than Diametrics Medical, Ltd., formerly known as Biomedical Sensors, Ltd.,
     (the "Subsidiary"), the Company has no subsidiaries or equity interest in
     any other entity.

          4.2 Corporate Power; Authorization. The Company has all requisite
     corporate power, and will have taken all requisite corporate action, to
     execute and deliver this Amendment, the Notes and the

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     First Amendment Warrants, to sell and issue the First Amendment Warrants,
     to issue the shares issuable upon exercise of the First Amendment Warrants
     (the "First Amendment Warrant Shares") and the Conversion Shares and to
     carry out and perform all of its obligations hereunder and thereunder. Each
     of this Amendment, the Notes and the First Amendment Warrants constitutes
     the legal, valid and binding obligation of the Company, enforceable in
     accordance with its terms, except (i) as limited by applicable bankruptcy,
     insolvency, reorganization, moratorium or similar laws relating to or
     affecting the enforcement of creditors' rights generally, (ii) as limited
     by equitable principles generally, and (iii) as rights to indemnity or
     contributions hereunder may be limited by federal or state securities laws
     or principles of public policy. The execution and delivery of this
     Amendment, the Notes and the First Amendment Warrants do not, and the
     performance of this Amendment, the Notes and the First Amendment Warrants
     and the compliance with the provisions hereof and thereof and the issuance,
     sale and delivery of the Notes, the First Amendment Warrants, the First
     Amendment Warrant Shares and the Conversion Shares by the Company will not,
     conflict with, or result in a breach or violation of the terms, conditions
     or provisions of, or constitute a default under, or result in the creation
     or imposition of any lien pursuant to the terms of, the Articles of
     Incorporation or Bylaws of the Company or any statute, law, rule or
     regulation applicable to the Company or its Subsidiary, or any state or
     federal order, judgment or decree applicable to the Company or its
     Subsidiary, or any indenture, mortgage, lease or other agreement or
     instrument to which the Company or its Subsidiary or any of the properties
     of such person is subject, except such as would not have a material adverse
     effect on the business, properties, financial condition or results of
     operations of the Company or its Subsidiary.

          4.3 Issuance and Delivery of the Conversion Shares and the First
     Amendment Warrant Shares; Grant of the First Amendment Warrants. The First
     Amendment Warrant Shares and the Conversion Shares when issued and paid for
     will be validly issued, fully paid and nonassessable, issued in compliance
     with all applicable federal and state securities laws, and will not be
     subject to preemptive, co-sale, right of first refusal or any other similar
     rights of the shareholders of the Company or any liens or encumbrances. The
     Company has not granted any registration rights which are still in effect
     with respect to its securities other than the registration rights set forth
     herein and the registration rights contained in the Common Stock Purchase
     Agreement. Issuance of the Notes, the First Amendment Warrants, the First
     Amendment Warrant Shares and the Conversion Shares or any of them does not
     and will not constitute a default under or give rise to a right of
     termination, cancellation, restriction or acceleration of any right or
     obligation of the Company or its Subsidiary or a loss of any benefit to
     which the Company or its Subsidiary is entitled under any provision of any
     agreement, contract or other instrument binding upon or applicable to the
     Company or its Subsidiary or any of the properties, assets, licenses,
     franchises, permits or other similar authorizations of either of them.

          4.4 SEC Documents; Financial Statements. Each of the Company and its
     Subsidiary has filed in a timely manner all documents that such person was
     required to file with the SEC under Sections 13, 14(a) and 15(d) of the
     Exchange Act since August 4, 1998. As of their respective filing dates (or,
     if amended, when amended), all documents filed by the Company or its
     Subsidiary with the SEC, whether under the Exchange Act or under the
     Securities Act since August 4, 1998 (the "SEC Documents") complied in all
     material respects with the requirements of the Exchange Act or the
     Securities Act, as the case may be. The Company satisfies the requirements
     for the use of Form S-3 under the Securities Act to register the offers and
     resales of the First Amendment Warrant Shares and the Conversion Shares
     contemplated by the Shelf Registration Statement (as defined in Section 8
     below). None of the SEC Documents as of their respective dates contained
     any untrue statement of material fact or omitted to state a material fact
     required to be stated therein or necessary to make the statements made
     therein, in light of the circumstances under which they were made, not
     misleading. The consolidated financial statements of the Company and its
     Subsidiary included in the SEC Documents (the "Financial Statements")
     comply as to form in all material respects with applicable accounting
     requirements and with the published rules and regulations of the SEC with
     respect thereto. The Financial Statements have been prepared in accordance
     with generally accepted accounting principles consistently applied and
     fairly present the consolidated financial position of the Company and its
     Subsidiary at the dates thereof and the results of their operations and
     cash flows for the periods then ended (subject, in the case of unaudited
     statements, to normal, recurring adjustments and the absence of footnotes).
     There is no material liability or commitment of the Company or its
     Subsidiary

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     which is not reflected in the most recent Financial Statements except
     commitments made since the date of such Financial Statements in the
     ordinary course of business. There have not been any changes in the assets,
     liabilities, financial condition or operations of the Company or its
     Subsidiary from those reflected in the most recent Financial Statements,
     except changes in the ordinary course of business that have not had and are
     not reasonably expected to have a material adverse effect on the business,
     properties, financial condition or results of operations of the Company or
     its Subsidiary.

          4.5 Intellectual Property.

               (a) Each of the Company and its Subsidiary has sufficient title
          and ownership of all material patents, patent rights, inventions,
          trademarks, service marks, copyrights, trade secrets, proprietary
          rights, processes and know-how (collectively, "Intellectual Property")
          owned or used by it or that are necessary for the conduct of its
          business as presently conducted and believes it can obtain, on
          commercially reasonable terms, any additional rights necessary for its
          business as proposed to be conducted, and the Intellectual Property
          does not, and will not, conflict with or constitute an infringement of
          the rights of others;

               (b) There are no outstanding options, licenses (whether to or
          from the Company) or agreements of any kind relating to the
          Intellectual Property described in paragraph (a) of this Section 4.5
          or granting rights to any other person to manufacture, license,
          produce, assemble, market or sell products or services derived or
          derivable from the Intellectual Property of the Company or its
          Subsidiary, nor is the Company or its Subsidiary bound by or a party
          to any options, licenses or agreements of any kind with respect to the
          Intellectual Property of any other person or entity;

               (c) Neither the Company nor its Subsidiary has received any
          communications alleging that such person or any of its employees has
          violated or infringed or, by conducting its business as proposed,
          would violate or infringe, any of the Intellectual Property of any
          other person or entity;

               (d) Neither the Company nor its Subsidiary is aware that any of
          its employees is obligated under any contract (including licenses,
          covenants, or commitments of any nature) or other agreement, or
          subject to any judgment, decree, or order of any court or
          administrative agency, that would interfere with the use of such
          employee's best efforts to promote the interests of the Company or its
          Subsidiary with respect to the Intellectual Property of the Company or
          its Subsidiary or otherwise or that would conflict with the business
          of the Company or its Subsidiary as proposed to be conducted; and

               (e) Neither the execution nor delivery of this Amendment, nor the
          carrying on of the business of the Company or its Subsidiary by the
          employees of such person, nor the conduct of the business of the
          Company or its Subsidiary as proposed, will, to the Company's
          knowledge, conflict with or result in a breach of the terms,
          conditions, or provisions of, or constitute a default under, any
          contract, covenant, or instrument under which any of such employees is
          now obligated. The Company does not believe it is or will be necessary
          to utilize any inventions of any of the employees of the Company or
          its Subsidiary (or people such person currently intends to hire) made
          prior to their employment by such person.

          4.6 Properties. The Company and its Subsidiary has good and valid
     title to all of the properties and assets reflected as owned by the Company
     or its Subsidiary in the Financial Statements, free and clear of all
     material liens, mortgages (statutory or otherwise), security interests,
     pledges, claims or encumbrances except those, if any, disclosed in the
     Financial Statements. The Company and its Subsidiary holds its leased
     properties under valid and binding leases, with such exceptions as are not
     materially significant in relation to the business of the Company or its
     Subsidiary. The Company and its Subsidiary owns or leases all of such
     properties as are necessary to its operations as now conducted.

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          4.7 Capitalization. The authorized capital stock of the Company
     consists of 45,000,000 shares of Common Stock and 5,000,000 shares of
     preferred stock. There are 27,182,732 shares of Common Stock and no shares
     of Preferred Stock outstanding as of the date hereof, and, excluding the
     exercise of vested options and warrants outstanding at the discretion of
     the holder thereof and shares purchased through the Company's existing
     employee stock purchase plan, immediately prior to the effectiveness of
     this Amendment, 27,182,732 shares of Common Stock and no shares of
     Preferred Stock will be outstanding. The certificates evidencing the First
     Amendment Warrant Shares and the Conversion Shares will be in due and
     proper legal form and will be duly authorized for issuance by the Company.
     All of the issued and outstanding securities of the Company have been duly
     authorized and validly issued, are fully paid and nonassessable, have been
     issued in compliance with federal, state and other applicable laws and were
     issued without violation of any preemptive, co-sale or other right. Except
     as otherwise disclosed in the SEC Documents and in the Financial
     Statements, there is no outstanding option, warrant, agreement or other
     right calling for the issuance or redemption of, and there is no
     commitment, plan or arrangement to issue or redeem, any securities of the
     Company. The Company does not have any binding agreement with respect to
     the acquisition or purchase of the securities of or owned by any person or
     entity or the acquisition of the business, assets or liabilities of any
     person or entity, and the Company does not have any agreement or
     understanding with respect to the disposition or sale of its business, or
     any of its material assets or property.

          4.8 Litigation. There is no pending or, to the Company's knowledge,
     threatened, action, suit or other proceeding to which the Company or its
     Subsidiary is a party or to which the property or assets of the Company or
     its Subsidiary is subject which might result in a material adverse effect
     on the business, properties, financial condition or results of operations
     of the Company or its Subsidiary.

          4.9 No Defaults. Neither the Company nor its Subsidiary is in
     violation or default of any provisions of its Articles of Incorporation or
     Bylaws, or any organizational documents, or in breach with respect to any
     provision of any agreement, judgment, decree, order, mortgage, deed of
     trust, lease, franchise, license, indenture, permit or other instrument to
     which it is a party or by which it or any of its properties are bound which
     violation, default or breach would have a material adverse effect on the
     business, properties, financial condition or results of operations of the
     Company or its Subsidiary, and there does not exist any state of facts
     which constitutes an event of default on the part of the Company or its
     Subsidiary as defined in such documents or which, with notice or lapse of
     time or both, would constitute such an event of default.

          4.10 Material Agreements. Each of the Company and its Subsidiary is a
     party to all agreements that are necessary for the conduct of the business
     of such person as presently conducted and all such agreements are currently
     in effect. Neither the Company nor its Subsidiary is in breach of any
     provision of any such agreement where such breach would have a material
     adverse effect on the business, properties, financial condition or results
     of operations of the Company or its Subsidiary.

          4.11 Governmental Consents; Compliance with Law. No consent, approval,
     order or authorization of, or registration, qualification, designation,
     declaration or filing with, any federal, state, or local governmental
     authority on the part of the Company is required in connection with the
     consummation of the transactions contemplated by this Amendment except for
     (i) the filing of a Shelf Registration Statement and all amendments thereto
     with the SEC as contemplated by Section 8.1 of this Amendment, (ii) any
     filings required by state securities laws and (iii) if required, the filing
     of a notification and report form under the United States Hart-Scott-Rodino
     Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Each of the
     Company and its Subsidiary is conducting business in compliance in all
     material respects with all applicable laws, rules and regulations of the
     jurisdictions in which it is conducting business, including but not limited
     to, all applicable local, state and federal environmental laws and
     regulations.

          4.12 Insurance. Each of the Company and its Subsidiary maintains
     insurance of the types and in the amounts generally deemed adequate for its
     business covering all risks customarily insured against, all of which
     insurance is in full force and effect.

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          4.13 Investment Company. The Company is not an "investment company"
     within the meaning of the Investment Company Act of 1940, as amended.

          4.14 Taxes. Each of the Company and its Subsidiary has filed all
     necessary federal, state, local, and foreign income and franchise tax
     returns and has paid or accrued all taxes shown as due thereon except for
     such taxes as are being contested in good faith, and the Company has no
     knowledge of any tax deficiency which has been or might be asserted or
     threatened against the Company or its Subsidiary which would have a
     material adverse effect on the business, properties, financial condition or
     results of operations of the Company or its Subsidiary.

          4.15 Listing. The Company's Common Stock is traded on The Nasdaq
     SmallCap Market.

          4.16 Broker's Fee. The Company represents that there are no brokers or
     finders entitled to compensation by the Company or its Subsidiary in
     connection with any of the transactions referred to or contemplated hereby,
     and shall indemnify the Purchasers for any such fees for which the Company
     or its Subsidiary is responsible.

          4.17 Disclosure. No representation or warranty of the Company
     contained in this Amendment or in the Schedule of Exceptions or in any
     bring-down certificate required to be delivered to the Purchasers at the
     Closing, contains or will contain any untrue statement of a material fact
     or omit to state a material fact required to make the statements herein or
     therein not misleading.

          4.18 Exemption from Registration. The purchase and sale of the Notes
     and the First Amendment Warrants are exempt from the registration
     requirements of the Securities Act. No form of general solicitation or
     general advertising was used by the Company in connection with the offer
     and sale of the Notes or the First Amendment Warrants, including, but not
     limited to, articles, notices or other communications published in any
     newspaper, magazine, or similar medium or broadcast over television or
     radio, or any seminar or meeting whose attendees have been invited by any
     general solicitation or general advertising. No securities of the same
     class as the Notes or the First Amendment Warrants have been issued or sold
     by the Company within the six-month period immediately prior to the date
     hereof. The Company agrees that neither it, nor anyone acting on its
     behalf, will offer the Notes or the First Amendment Warrants so as to bring
     the issuance and sale of any of the Notes or the First Amendment Warrants
     within the provisions of Section 5 of the Securities Act nor offer any
     similar securities for the issuance or sale to, or solicit any offer to
     acquire the same from, or otherwise approach or negotiate with respect
     thereto with, anyone if the sale of the Notes and/or the First Amendment
     Warrants and any such securities would be integrated as a single offering
     for the purposes of the Securities Act, including, without limitation,
     Regulation D thereunder.

     Section 5. Representations of the Purchasers. Each Purchaser, severally and
not jointly with other Purchasers, hereby represents and warrants to the
Company, as of the date hereof and after giving effect to this Amendment:

          5.1 Investment Purposes.

               (a) Such Purchaser acknowledges that the Notes and the First
          Amendment Warrants are being issued in reliance upon the exception
          from the registration requirements of the Securities Act provided by
          Section 4(2) thereof and as such the Notes and the First Amendment
          Warrants, the First Amendment Warrant Shares and the Conversion Shares
          will be "restricted securities" within the meaning of Rule 144.

               (b) Such Purchaser is acquiring the Notes and the First Amendment
          Warrants pursuant to this Amendment in the ordinary course of its
          business and for its own account for investment only and with no
          present intention of distributing any of such Notes and First
          Amendment Warrants or any arrangement or understanding with any other
          persons regarding the

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          distribution of the Notes or First Amendment Warrants except in each
          case as conforms with all applicable requirements of the Securities
          Act, applicable blue sky laws and all rules and regulations
          promulgated thereunder.

               (c) Such Purchaser will not, directly or indirectly, offer, sell,
          pledge, transfer or otherwise dispose of (or solicit any offers to
          buy, purchase or otherwise acquire or take a pledge of) any of the
          securities purchased hereunder except in compliance with the
          Securities Act, applicable blue sky laws, and the rules and
          regulations promulgated thereunder.

               (d) Such Purchaser has, in connection with its decision to
          acquire the Notes and the First Amendment Warrants, relied with
          respect to the Company and its affairs solely upon the SEC Documents
          and the representations and warranties of the Company contained
          herein.

               (e) Such Purchaser is an "accredited investor" within the meaning
          of Rule 501 of Regulation D promulgated under the Securities Act.

               (f) Such Purchaser has full right, power, authority and capacity
          to enter into this Amendment and to consummate the transactions
          contemplated hereby and has taken all necessary action to authorize
          the execution, delivery and performance of this Amendment. Upon the
          execution and delivery of this Amendment by such Purchaser, this
          Amendment shall constitute a valid and binding obligation of such
          Purchaser, enforceable in accordance with its terms, except (i) as
          limited by applicable bankruptcy, insolvency, reorganization,
          moratorium or similar laws relating to or affecting the enforcement of
          creditors' rights generally, (ii) as limited by equitable principles
          generally, including any specific performance, and (iii) as rights to
          indemnity or contributions hereunder may be limited by federal or
          state securities laws or principles of public policy.

          5.2 No Advice. Such Purchaser understands that nothing in this
     Amendment or any other materials presented to such Purchaser in connection
     with the acquisition of the Notes and the First Amendment Warrants
     constitutes legal, tax or investment advice to such Purchaser. Such
     Purchaser has consulted such legal, tax and investment advisors as it, in
     its sole discretion, has deemed necessary or appropriate in connection with
     its purchase of the Notes and the First Amendment Warrants.

          5.3 Broker's Fee. Such Purchaser represents that there are no brokers
     or finders entitled to compensation by such Purchaser in connection with
     any of the transactions referred to herein or contemplated hereby, and
     shall indemnify the Company for any such fees for which such Purchaser is
     responsible.

     Section 6. Affirmation, Further References, Confirmation and Continuation
of Security Interest. The Purchasers and the Company each acknowledge and affirm
that the Note Purchase Agreement, as hereby amended, is hereby ratified and
confirmed in all respects and all terms, conditions and provisions of the Note
Purchase Agreement, except as amended by this Amendment, shall remain unmodified
and in full force and effect. All references in any document or instrument to
the Note Purchase Agreement are hereby deemed amended and shall refer to the
Note Purchase Agreement as amended by this Amendment. The Company confirms to
the Purchasers that the payment obligations, as amended by this Amendment and
the Notes, are and continue to be secured by the security interest granted by
the Company in favor of the Purchasers under the Security Documents.

     Section 7. Survival of Representations, Warranties and Agreements;
Indemnification.

          7.1 Survival. Notwithstanding any investigation made by any party to
     this Amendment, all covenants, agreements, representations and warranties
     made by the Company and the Purchasers herein and in the certificates for
     the securities delivered pursuant hereto and in the Note Purchase Agreement
     as amended by this Amendment shall survive the execution of this Amendment,
     the delivery to the Purchasers of the certificates representing the First
     Amendment Warrants, and the payment of the Notes until the fifth

                                       -9-

<PAGE>

     anniversary of the First Amendment Closing Date, except for the
     representations set forth in Section 4.2, 4.7 and 4.16 and the
     representations set forth in Section 4.3, which shall survive indefinitely,
     and the representations as to taxes set forth in Section 4.14, which shall
     survive for the longer of (i) the fifth anniversary of the First Amendment
     Closing Date and (ii) the period expiring ninety (90) days after the
     expiration of the period during which a claim by the applicable taxing
     authority for a deficiency or other tax adjustment would not be barred by
     the statute of limitations applicable to such taxes (any such period an
     "Indemnity Period").

          7.2 Purchaser's Right to Indemnification. Subject to the provisions of
     this Section 7 and in addition to the indemnification provided in Article
     XII of the Note Purchase Agreement, the Company hereby agrees to indemnify
     and hold harmless the Purchasers and the employees, agents, directors,
     officers, equity holders, successors, predecessors, assigns and affiliates
     of any of them (collectively, the "Purchaser Indemnified Parties") from and
     against (i) any and all losses, obligations, liabilities, damages, claims,
     deficiencies, costs and expenses (including, but not limited to, the amount
     of any settlement entered into pursuant hereto and all reasonable legal and
     other expenses incurred in connection with the investigation, prosecution
     or defense of the matter but excluding consequential damages)
     (collectively, "Claims"), which may be asserted against or sustained or
     incurred by the Purchaser Indemnified Parties in connection with, arising
     out of, or relating to (A) any breach or alleged breach of any of the
     representations, warranties, agreements and covenants made by the Company
     herein or in any certificate or other document delivered to any Purchaser
     Indemnified Party by or on behalf of the Company in connection with this
     Amendment; or (B) any false, incorrect or misleading representation or
     warranty made by or on behalf of the Company herein or in any certificate
     or other document delivered to any Purchaser Indemnified Party by or on
     behalf of the Company in connection with this Amendment; and (ii) any and
     all costs and expenses (including, but not limited to, reasonable legal
     expenses) incurred by any Purchaser Indemnified Party in connection with
     the enforcement of its rights under this Amendment. No claim for
     indemnification pursuant to this Section 7 may be commenced after the
     relevant Indemnity Period; provided, however, that claims made within such
     Indemnity Period shall survive to the extent of the Claim covered thereby
     until such Claim is finally determined and, if applicable, paid.

          7.3 Procedure for Claims.

               (a) Promptly, but in any event within ten (10) days after
          obtaining knowledge of any claim or demand which may give rise to, or
          could reasonably give rise to, a claim for indemnification hereunder
          (an "Indemnification Claim"), the Purchaser affected by such claim
          shall give written notice to the Company of such Indemnification Claim
          ("Notice of Claim"). A Notice of Claim shall be given with respect to
          all Indemnification Claims; provided, however, that the failure to
          give a timely Notice of Claim to the Company shall not relieve the
          Company from any liability that it may have to the Purchaser
          Indemnified Parties hereunder to the extent that the Company is not
          prejudiced by such failure. The Notice of Claim shall set forth the
          amount (or a reasonable estimate) of the loss, damage or expense
          suffered, or which may be suffered, by the Purchaser Indemnified Party
          as a result of such Indemnification Claim and the aggregate amount of
          all Indemnification Claims to date and a brief description of the
          facts giving rise to such Indemnification Claim. Each Purchaser shall
          furnish to the Company such information (in reasonable detail) as such
          Purchaser may have with respect to such Indemnification Claim
          (including copies of any summons, complaint or other pleading which
          may have been served on it and any written claim, demand, invoice,
          billing or other document evidencing or asserting the same).

               (b) If the claim or demand set forth in the Notice of Claim is a
          claim or demand asserted by a third party (a "Third Party Claim"), the
          Company shall have fifteen (15) days (or such shorter period (but not
          less than ten (10) days) if any answer or other response or filing
          with respect to the pleadings served by the third party is required
          prior to the fifteenth day) after the date of receipt by the Company
          of the Notice of Claim (the "Notice Date") to notify the Purchasers in
          writing of the election by the Company to defend the Third Party Claim
          on behalf of the Purchaser Indemnified Parties.

                                      -10-

<PAGE>

               (c) If the Company elects to defend a Third Party Claim on behalf
          of the Purchaser Indemnified Parties, each Purchaser shall make
          available to the Company and its agents and representatives all
          records and other materials in such Purchaser's possession which are
          reasonably required in the defense of the Third Party Claim and the
          Company shall pay any expenses payable in connection with the defense
          of the Third Party Claim as they are incurred (whether incurred by the
          Purchasers or the Company).

               (d) If the Company has assumed control of the defense, the
          Company may contest or settle the Third Party Claim on such terms as
          the Company may choose, provided, however, that the Company will not
          have the right, without the prior written consent of the Purchaser
          affected by such claim, to settle any such claim if such settlement
          (i) arises from or is part of any criminal action, suit or proceeding
          (ii) contains a stipulation to, confession of judgment with respect
          to, or admission or acknowledgment of, any liability or wrongdoing on
          the part of any Purchaser Indemnified Party, (iii) relates to any
          foreign federal, state or local tax matters, (iv) provides for
          injunctive relief, or other relief other than damages, which is
          binding on any Purchaser Indemnified Party, (v) does not fully release
          all Purchaser Indemnified Parties with respect to the relevant Third
          Party Claim or (vi) has any res judicata or collateral estoppel effect
          that could be adverse to any Purchaser Indemnified Party.

               (e) If the Company elects to defend a Third Party Claim, the
          Purchaser Indemnified Parties shall have the right to participate in
          the defense of the Third Party Claim, at the Purchaser Indemnified
          Parties' expense (and without the right to indemnification for such
          expense under this Amendment); provided, however, that the reasonable
          fees and expenses of counsel retained by the Purchaser Indemnified
          Parties shall be at the expense of the Company if (A) the use of the
          counsel chosen by the Company to represent the Purchaser Indemnified
          Parties would present such counsel with a conflict of interest; (B)
          the parties to such proceeding include both Purchaser Indemnified
          Parties and the Company and there may be legal defenses available to
          Purchaser Indemnified Parties which are different from or additional
          to those available to the Company; (C) within ten (10) days after
          being advised by the Company of the identity of counsel to be retained
          to represent the Purchaser Indemnified Parties, the Purchaser
          Indemnified Party affected by such claim shall have objected to the
          retention of such counsel for valid reasons (which shall be stated in
          a written notice to the Company), and the Company shall not have
          retained different counsel reasonably satisfactory to such Purchaser
          Indemnified Party; or (iv) the Company shall authorize the Purchaser
          Indemnified Parties to retain separate counsel at the expense of the
          Company.

               (f) If the Company elects to defend a Third Party Claim, and does
          not defend a Third Party Claim in good faith, the Purchaser
          Indemnified Parties shall have the right, in addition to any other
          right or remedy it may have hereunder, at the sole and exclusive
          expense of the Company, to defend such Third Party Claim; provided,
          however, that such expenses shall be payable by the Company only if
          and when such Third Party Claim becomes payable.

               (g) The Purchasers shall cooperate with the Company in the
          defense of Third Party Claims. Subject to the foregoing, (i) the
          Purchaser Indemnified Parties shall not have any obligation to
          participate in the defense of or to defend any Third Party Claim and
          (ii) the Purchaser Indemnified Parties' defense of or participation in
          the defense of any Third Party Claim shall not in any way diminish or
          lessen the right to indemnification as provided in this Section 7.

     Section 8. Registration Rights; Compliance with the Securities Act.

          8.1  Registration Procedures and Expenses.

               (a) As soon as practicable following the First Amendment Closing
          Date and in any event no later than forty-five (45) days following the
          First Amendment Closing Date, the Company shall prepare and file with
          the SEC, and thereafter shall use its reasonable best efforts to

                                      -11-

<PAGE>

          cause to be declared effective, (i) a shelf registration statement on
          an appropriate form under the Securities Act, or (ii) an amendment to
          a currently effective shelf registration statement of the Company,
          relating to the offer and resale of the First Amendment Warrant Shares
          (which shall, together with the Shares and the Warrant Shares (as such
          terms are defined in the Common Stock Purchase Agreement) and the
          Conversion Shares to be "Registrable Securities") by the Purchasers
          and/or the Holders of Notes and by any holders thereof from time to
          time, in accordance with the methods of distribution set forth in such
          shelf registration statement, through The Nasdaq SmallCap Market or
          the facilities of any national securities exchange or market system on
          which the Company's Common Stock is then traded, or in
          privately-negotiated transactions (the "Shelf Registration
          Statement"). All Registrable Securities shall, together with the
          Shares and the Warrant Shares, be included in such Shelf Registration
          Statement.

               (b) The Company shall use its reasonable best efforts (including,
          without limitation, the preparation and filing with the SEC of
          amendments and supplements to the Shelf Registration Statement and a
          prospectus to be used in connection therewith) to keep the Shelf
          Registration Statement continuously effective and not misleading for a
          period of five (5) years from the First Amendment Closing Date or such
          shorter period that will terminate when all the Registrable Securities
          covered by the Shelf Registration Statement have been sold pursuant
          thereto. The Company shall be deemed not to have used its reasonable
          best efforts to keep the Shelf Registration Statement effective during
          the requisite period if it takes any action that would result in the
          holders of the Registrable Securities covered thereby not being able
          to offer and sell such Registrable Securities during that period,
          unless such action is required by applicable law. Notwithstanding the
          foregoing, following the effectiveness of the Shelf Registration
          Statement, the Company may, at any time, suspend the effectiveness of
          the Shelf Registration Statement for up to no longer than seventy-five
          (75) days, as appropriate (a "Suspension Period"), by giving notice to
          the Purchasers and Holders of the Notes, if (i) the Company shall have
          determined that the Company may be required to disclose any material
          corporate development or (ii) the Company shall be involved in an
          underwritten public offering of its securities. The Company will use
          its best efforts to minimize the length of any Suspension Period.
          Notwithstanding the foregoing, no more than two Suspension Periods may
          occur in any twelve (12) month period. Each Purchaser and Holder of a
          Note agrees that, upon receipt of any notice from the Company of a
          Suspension Period, it will not sell (subject to the limitations on the
          Company set forth above) any Registrable Securities pursuant to the
          Shelf Registration Statement until (i) such Purchase or Holder of a
          Note is advised in writing by the Company that the use of the
          applicable prospectus may be resumed, (ii) such Purchaser or Holder of
          a Note has received copies of any additional or supplemental or
          amended prospectus, if applicable, and (iii) such Purchaser or Holder
          of a Note has received copies of any additional or supplemental
          filings which are incorporated or deemed to be incorporated by
          reference in such prospectus.

               (c) In order to facilitate the public sale or other disposition
          of all or any of the Registrable Securities by the holders thereof,
          the Company shall furnish to the Purchasers with respect to the
          Registrable Securities registered under the Shelf Registration
          Statement such number of copies of prospectuses, prospectus
          supplements and preliminary prospectuses as the holders reasonably
          request in conformity with the requirements of the Securities Act.

               (d) The Company shall file any documents required of the Company
          for normal blue sky clearance in states specified in writing by the
          holders of Registrable Securities; provided, however, that the Company
          shall not be required to qualify to do business or consent to service
          of process in any jurisdiction in which it is not now so qualified or
          has not so consented.

               (e) Other than fees and expenses, if any, of counsel or other
          advisers to the holders of Registrable Securities, which fees and
          expenses shall be borne by them, the Company shall bear all expenses
          (exclusive of any brokerage fees, underwriting discounts and
          commissions) in connection with the procedures in paragraphs (a)
          through (d) of this Section 8.1.

                                      -12-

<PAGE>

          8.2 Transfer of Securities After Shelf Registration. Each Purchaser or
     Holder of a Note agrees that it will not effect any disposition of the
     Registrable Securities that would constitute a sale within the meaning of
     the Securities Act, except:

               (a) pursuant to the Shelf Registration Statement, in which case
          the transferring Purchaser or Holder of a Note shall submit the
          certificates evidencing the Registrable Securities to the Company's
          transfer agent, accompanied by a separate "Purchaser's Certificate"
          (A) in the form of Appendix I attached hereto, (B) executed by an
          officer of, or other authorized person designated by, such Purchaser
          or Holder of a Note, and (C) to the effect that (1) the Registrable
          Securities have been sold in accordance with the Shelf Registration
          Statement and (2) the requirement of delivering a current prospectus
          has been satisfied; or

               (b) in a transaction exempt from registration under the
          Securities Act.

          8.3 Indemnification in Connection with Registration. As used in this
     Section 8.3 the following terms shall have the following respective
     meanings:

               (a) "Selling Shareholder" shall mean each Purchaser or Holder of
          a Note and any transferee of either of them who is entitled to resell
          Registrable Securities pursuant to the Shelf Registration Statement,
          including any underwriter involved in such resale, and each person, if
          any, who controls such Selling Shareholder within the meaning of
          Section 15 of the Securities Act, and each officer and each director
          of such Selling Shareholder;

               (b) "Shelf Registration Statement" shall include any final
          prospectus, exhibit, supplement or amendment included in or relating
          to the Shelf Registration Statement referred to in Section 8.1; and

               (c) "Untrue Statement" shall include any untrue statement or
          alleged untrue statement, or any omission or alleged omission to state
          in the Shelf Registration Statement a material fact required to be
          stated therein or necessary to make the statements therein, in the
          light of the circumstances under which they were made, not misleading.

     The Company agrees to indemnify and hold harmless each Selling Shareholder
from and against any losses, claims, damages or liabilities to which such
Selling Shareholder may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any Untrue
Statement on or after the effective date of the Shelf Registration Statement, or
on or after the date of any prospectus or prospectus supplement or the date of
any sale by any purchaser thereunder, or arise out of any failure by the Company
to fulfill any undertaking included in the Shelf Registration Statement and the
Company will reimburse such Selling Shareholder for any reasonable legal or
other expenses reasonably incurred in investigating, defending or preparing to
defend any such action, proceeding or claim; provided, however, that the Company
shall not be liable to such Selling Shareholder in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon, an
Untrue Statement made in such Shelf Registration Statement in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of such Selling Shareholder specifically for use in preparation of the Shelf
Registration Statement, or the failure of such Selling Shareholder to comply
with the covenants and agreements contained in Section 8.1 or 8.2 hereof
respecting sale of the Registrable Securities or any statement or omission in
any prospectus that is corrected in any subsequent prospectus that was delivered
to the Selling Shareholder prior to the pertinent sale or sales by the Selling
Shareholder.

     Each Purchaser or Holder of a Note, severally and not jointly, agrees to
indemnify and hold harmless the Company (and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act, each officer
of the Company who signs the Shelf Registration Statement and each director of
the Company) from and against any losses, claims, damages or liabilities to
which the Company (or any such officer, director or controlling person) may
become subject (under the Securities Act or otherwise), insofar as such losses,
claims,

                                      -13-

<PAGE>

damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any failure by such Purchaser or Holder of a Note to
comply with the covenants and agreements contained in Section 8.1 or 8.2 hereof
respecting sale of the Registrable Securities, or any Untrue Statement contained
in the Shelf Registration Statement on or after the effective date thereof, or
in any prospectus supplement as of its issue date or date of any sale by any
Purchaser thereunder, if such Untrue Statement was made in reliance upon and in
conformity with written information furnished by or on behalf of such Purchaser
or Holder of a Note specifically for use in preparation of the Shelf
Registration Statement, and such Purchaser or a Holder of a Note will reimburse
the Company (or such officer, director or controlling person), as the case may
be, for any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim; provided
that in no event shall any indemnity by such Purchaser or Holder of a Note under
this Section 8.3 exceed the gross proceeds received by all of the Purchasers and
Holders of Notes from the sale of Registrable Securities covered by such Shelf
Registration Statement.

     Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 8.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and such
indemnifying person shall have been notified thereof, such indemnifying person
shall be entitled to participate therein, and, to the extent it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof; provided, however, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the opinion of counsel
to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel for all indemnified parties.

          8.4 Termination of Conditions and Obligations. The conditions
     precedent imposed by Section 5 or this Section 8 upon the transferability
     of the Registrable Securities shall cease and terminate as to any
     particular number of the Registrable Securities when such Registrable
     Securities shall have been sold or otherwise disposed of in accordance with
     the intended method of disposition set forth in the Shelf Registration
     Statement covering such Registrable Securities or at such time as an
     opinion of counsel satisfactory to the Company shall have been rendered to
     the effect that such conditions are not necessary in order to comply with
     the Securities Act.

          8.5 Information Available. So long as any Purchaser or Holder of a
     Note continues to own any of the Registrable Securities and the Shelf
     Registration Statement is effective covering the resale of Registrable
     Securities owned by such person, the Company will furnish to each such
     person:

               (a) as soon as practicable after available (but in the case of
          the Company's Annual Report to Shareholders, within one hundred twenty
          (120) days after the end of each fiscal year of the Company), one copy
          of (i) its Annual Report to Shareholders (which Annual Report shall
          contain financial statements audited in accordance with generally
          accepted auditing standards certified by a national firm of certified
          public accountants); (ii) its Annual Report on Form 10-K (excluding
          exhibits); (iii) its quarterly reports on Form 10-Q (excluding
          exhibits); (iv) its Proxy Statement; and (v) its current reports on
          Form 8-K, if any (excluding exhibits);

               (b) upon the request of any such person, all exhibits excluded by
          the parentheticals to subparagraphs (a)(ii),(iii) and (v) of this
          Section 8.5, in the form generally available to the public; and

               (c) upon the reasonable request of any such person, an adequate
          number of copies of the prospectuses and supplements to supply to any
          other party requiring such prospectuses.

                                      -14-

<PAGE>

          8.6 Changes in Information. Each Purchaser and each Holder of a Note
     agrees to promptly notify the Company of any changes in the information set
     forth in the Shelf Registration Statement regarding such person or such
     person's plan of distribution set forth in such Shelf Registration
     Statement.

          8.7 Third Party Beneficiaries. The Selling Shareholders (as defined in
     the Common Stock Purchase Agreement) are third party beneficiaries of this
     Section 8, and shall be entitled to rely upon and enforce the provisions of
     this Section 8 as though they were parties hereto.

     Section 9. Merger and Integration, Superseding Effect. The Note Purchase
Agreement, as amended by this Amendment, together with the Common Stock Purchase
Agreement, and the related instruments and documents contemplated hereby and
thereby (including, without limitation, the Note and the First Amendment
Warrants), embodies the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof, and supersedes and has merged
into it all prior oral and written agreements on the same subjects by and
between the parties hereto with the effect that this Amendment shall control
with respect to the specific subjects hereof.

     Section 10. Legal Expenses. As provided in (but not in limitation of)
Section 13.1 of the Note Purchase Agreement, the Company agrees to reimburse the
Purchasers for all reasonable out-of-pocket expenses (including attorneys' fees
and legal expenses of counsel for the Purchasers) incurred in connection with
the negotiation or preparation of the Amendment Documents and all other
documents negotiated and prepared in connection with this Amendment, and the
Company agrees to reimburse the Purchasers upon demand for all other reasonable
expenses, including attorneys' fees incurred as a result of or in connection
with the enforcement of the Note Purchase Agreement as amended hereby, and
including, without limitation, all expenses of collection of any loans made or
to be made under the Note Purchase Agreement as amended hereby.

     Section 11. Severability. Each provision of this Amendment and any other
statement, instrument or transactions contemplated hereby or relating hereto
shall be interpreted in such manner as to be effective, valid and enforceable
under the applicable law of any jurisdiction, but, if any provision of this
Amendment or relating hereto or thereto shall be held to be prohibited, invalid
or unenforceable under the applicable law, such provision shall be ineffective
in such jurisdiction only to the extent of such prohibition, invalidity or
unenforceability, without invalidating or rendering unenforceable the remainder
of such provision or the remaining provisions of this Amendment or any other
statement, instrument or transaction contemplated hereby or thereby or relating
hereto or thereto in such jurisdiction, or affecting the effectiveness, validity
or enforceability of such provision in any such jurisdiction.

     Section 12. Confidentiality. Unless required by law or in connection with
obtaining any required consent to the transactions contemplated hereby
(including without limitation filings, authorizations and consents from any
Governmental Authority), no party hereto shall issue any press release or make
any other communication pertaining to the transactions contemplated hereby
(including the terms hereof) without the prior consent of the other parties
hereto; provided, that any party may make such disclosure as is necessary in
connection with the evaluation and negotiation of the transactions contemplated
hereby.

     Section 13. Successors. This Amendment shall be binding upon the Company
and the Purchasers and their respective successors and assigns, and shall inure
to the benefit of the Company and the Purchasers and the successors and assigns
of the Company and the Purchasers.

     Section 14. Headings. The headings of various sections of this Amendment
have been inserted for reference only and shall not be deemed to be a part of
this Amendment.

     Section 15. Counterparts. This Amendment may be executed in several
counterparts, all or any of which shall be regarded as one and the same document
and either party to such agreements may execute any such agreement by executing
a counterpart of such agreement.

                                      -15-

<PAGE>

     Section 16. Governing Law. The validity, construction and enforceability of
this Amendment shall be governed by the internal law of the State of Minnesota,
without regard to conflict of law principle.

                            [Signature pages follow.]

                                      -16-

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date and year first above written.

                                    THE COMPANY:

                                    DIAMETRICS MEDICAL, INC.

                                    By: /s/ David Kaysen
                                        ----------------------------------------
                                    Name: David Kaysen
                                    Title: Chief Executive Officer and President

                                    THE PURCHASERS:

                                    [see attached signature pages]

         [Signature Page to First Amendment to Note Purchase Agreement]
                                      S - 1

<PAGE>

                                    PURCHASER:

                                    BCC ACQUISITION II LLC

                                    By: THE BAY CITY CAPITAL FUND I, L.P.
                                    Its: Manager

                                    By: Bay City Capital Management LLC
                                    Its: General Partner

                                    By: /s/ Fred Craves
                                        ----------------------------------------
                                    Name: Fred Craves
                                    Title: Managing Director

                                       -2-

<PAGE>

                                    PURCHASER:

                                    GERALD L. COHN REVOCABLE TRUST

                                    By: /s/ Gerald L. Cohn
                                        ----------------------------------------
                                    Name: Gerald L. Cohn
                                    Title: Trustee

                                       -3-

<PAGE>

                              PURCHASER:

                              HANNAH S. AND SAMUEL A. COHN MEMORIAL
                              FOUNDATION

                              By: /s/ Mary Ann Zubris
                                  --------------------------------------------
                              Name: Mary Ann Zubris
                              Title: Trust Officer, Northeast Pennsylvania Trust
                                     Company, Trustee

                                       -4-

<PAGE>

                                    PURCHASER:

                                    AEOW 96, LLC

                                    By: /s/
                                        ----------------------------------------
                                    Name:
                                         ---------------------------------------
                                    Title: Authorized Signatory

                                       -5-

<PAGE>

                                                                   Appendix 1 to
                                      First Amendment to Note Purchase Agreement

                                   APPENDIX I

                            DIAMETRICS MEDICAL, INC.
                 PURCHASER'S CERTIFICATE OF RESALE OF THE SHARES

     The undersigned, an officer of, or other person duly authorized by

--------------------------------------------------------------------------------
              [fill in official name of individual or institution]

hereby certifies that [he / she / said institution] is the Purchaser of the
Shares evidenced by the attached stock certificate(s) and as such, sold such
Shares on                    [date] in accordance with shelf registration
          ------------------
statement number
                ----------------------------------------------------------------

--------------------------------------------------------------------------------
   [fill in the number of or otherwise identify shelf registration statement]

and the requirement of delivering a current prospectus and current annual,
quarterly and current reports (Forms 10-K, 10-Q and 8-K) by the Company has been
complied with in connection with such sale.

Print or Type:

Name of Purchaser:
                                           -------------------------------------

Name of Individual representing Purchaser:
                                           -------------------------------------

Title of Individual representing Purchaser:
                                           -------------------------------------

Signature by:
Individual representing Purchaser:
                                           -------------------------------------

<PAGE>

                                                                   Schedule 1 to
                                      First Amendment to Note Purchase Agreement

                                   SCHEDULE 1

                     FIRST AMENDMENT WARRANTS TO PURCHASERS

<TABLE>
<CAPTION>
                                                                         Number of Shares under
                                                   Principal Amount of      First Amendment
Name of Purchaser                                        Notes                  Warrant
-----------------                                  -------------------   ----------------------
<S>                                                    <C>                   <C>
BCC ACQUISITION II LLC                                 $6,700,000            3,870,476.19
GERALD L. COHN REVOCABLE TRUST                            400,000              269,824.32
HANNAH S. AND SAMUEL A. COHN MEMORIAL FOUNDATION          100,000               57,768.30
AEOW 96, LLC                                              100,000               57,768.30
</TABLE><PAGE>

                                                                    Exhibit 10.3

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED ("TRANSFERRED") EXCEPT IN
COMPLIANCE WITH THE REGISTRATION REQUIREMENTS OF THE ACT OR PURSUANT TO AN
EXEMPTION THEREFROM.

                            DIAMETRICS MEDICAL, INC.

                       FORM OF FIRST AMENDED AND RESTATED
                   CONVERTIBLE SENIOR SECURED FIXED RATE NOTE

                               DUE AUGUST 4, 2005

Principal Amount [$7,300,000]
Interest Rate    7% p.a.
Date of Issue:   August 4, 1998

FOR VALUE RECEIVED, the undersigned, DIAMETRICS MEDICAL, INC. a corporation
incorporated in the State of Minnesota with its principal office at 2658 Patton
Road, St. Paul, Minnesota 56118 (herein called the "Company"), promises to pay
to the order of [Purchaser Name], a [ ] organized under the laws of [ ], with an
office at                           , or its registered assigns (the "Holder")
          --------------------------
the amount of [_________ DOLLARS ($________)] or such lesser amount as may be
owing hereunder on or before the Final Payment Date together with interest
thereon from the Issue Date at the rate and on the dates specified in Article 3,
in accordance with the terms hereof.

This is one of a duly authorized issue of Notes of the Company, originally
issued pursuant to a certain Note Purchase Agreement dated August 4, 1998 by the
Company and the signatories thereto, as amended by that certain First Amendment
to Note Purchase Agreement dated as of April 7, 2003 (as heretofore or hereafter
amended, the "Note Purchase Agreement") and is entitled to the benefit of the
Note Purchase Agreement, and each holder of this Note, by acceptance hereof,
agrees to be bound by the provisions of the Note Purchase Agreement. The Note
Purchase Agreement sets forth, among other things, certain covenants of the
Company and Events of Default and rights and remedies related thereto.

Capitalized terms used herein without definition shall have the meanings given
such terms in Article 9 hereof or the Note Purchase Agreement referred to below.

Article 1      Security

               The obligations of the Company under this Note are and continue
               to be secured pursuant to the provisions of the Security
               Documents.

Article 2      The Principal Amount

Section 2.1    Payment of the Principal Amount. The Principal Amount, to the
               extent not previously paid under the terms of this Note, shall be
               due and payable in full on the Final Payment Date.

Section 2.2    No Early Payment of Principal Amount. Except as otherwise
               provided in the Note Purchase Agreement, and subject to the other
               provisions of this Note (including, but not limited to, Sections
               2.3 and 4.5 below), the Company may not, prior to the Final
               Payment Date, pay all or any part of the Principal Amount.

<PAGE>

Section 2.3    Conversion. This Note shall be convertible by the Holder, in
               whole or in part, into shares of common stock of the Company on
               the terms and conditions set forth in the Note Purchase
               Agreement. If the Principal Amount is paid in part by such a
               conversion, then the Company shall execute and deliver to the
               Holder, at the expense of the Company, a new Note in accordance
               with Section 4.4 below.

Article 3      Interest and Default Interest

Section 3.1    Interest. Interest shall be payable at the rate of 7 per cent per
               annum by the Company on the outstanding Principal Amount from
               time to time. Such interest shall accrue, on a daily basis, from
               the Issue Date and be payable, at the Interest Rate, quarterly in
               arrears on 31 March, 30 June, 30 September and 31 December of
               each year, or if any such date is not a Business Day, then on the
               next Business Day. If the Principal Amount (or any part thereof)
               shall become due and payable, interest up to and including the
               relevant Payment Date shall also be due and payable on such
               Payment Date.

Section 3.2    Default Interest. If any sum due and payable by the Company is
               not paid on its due date for payment under this Note, interest
               shall accrue at the Interest Rate plus 2 per cent per annum on
               such unpaid sum until the date on which the full amount of such
               unpaid sum is paid to the Holder.

Section 3.3    Calculation Period. Interest in respect of a period of less than
               one year shall be calculated on the basis of the actual number of
               days elapsed and a 365 day year.

Article 4      Payments

Section 4.1    Place and Method of Payment. All payments made by the Company in
               respect of Principal Amount shall be made to the Holder, upon
               presentation and endorsement (in the case of part payment of
               Principal Amount) or, in the case of payment of the whole of the
               outstanding Principal Amount, surrender of this Note by the
               Holder to the Company, in same day funds to such account of the
               Holder as shall be notified by the Holder to the Company. All
               payments made by the Company in respect of Interest and Default
               Interest will be paid to the Holder as shown in the Register on
               the last Business Day preceding the date fixed for payment of any
               Interest or Default Interest. Payments of Interest and Default
               Interest will be made by electronic funds transfer for value on
               the due date to such US dollar account maintained by the Holder
               as shall be notified to the Company at least 5 Business Days
               before the due date for payment. Upon application by the Holder
               to the Company not less than 5 Business Days before the due date
               for payment of any Interest or Default Interest, payments of
               Interest and Default Interest will be made by US dollar check and
               mailed to the Holder (or the first named of joint Holders) at its
               address appearing in the Register.

Section 4.2    Currency of Payments. All payments made by the Company in respect
               hereof, whether for the Principal Amount, Interest, Default
               Interest or otherwise shall be made in US Dollars.

Section 4.3    Payment without Deduction, Etc. Each payment under this Note
               shall be made free and clear of and without any deduction for or
               on account of any set-off or counterclaim.

Section 4.4    Principal Amount Paid in Part. Upon surrender of this Note when
               the Principal Amount is paid in part the Company shall execute
               and deliver to the Holder a new Note in substitution for this
               Note reflecting the reduced outstanding Principal Amount.

Section 4.5    Setoffs by Holder Against Principal Amounts. Company hereby
               agrees to permit Holder to setoff any obligations owed by Holder
               to Company against the Principal Amount owed under this Note. If
               the Principal Amount is paid in part by such a setoff, then
               Company shall execute and deliver to the Holder a new Note in
               accordance with Section 4.4 above.

                                       2

<PAGE>

Article 5      Redemption.

               In the event of a Redemption Event, any Holder of this Note shall
               have the right to require that the Company repurchase all or any
               portion of this Note (equal to $1,000 or any integral multiple
               thereof) at a repurchase price in cash equal to 100% of the
               principal amount thereof plus accrued and unpaid interest, if
               any, to the date of repurchase in accordance with Section 4.3 of
               the Note Purchase Agreement.

Article 6      Covenants [Intentionally deleted. See Note Purchase Agreement
               Article VI.]

Article 7      Events of Default and Remedies. [Intentionally deleted. See Note
               Purchase Agreement Article VIII]

Article 8      Registration

               The Company will keep a register of the holders of the notes
               issued pursuant to the Note Purchase Agreement and outstanding
               from time to time, including the particulars of this Note. Any
               transfers or assignments of this Note will be recorded by the
               Company in the Register.

Article 9      Definitions

Section 9.1    Certain Defined Terms. As used herein, the following terms,
               unless the context otherwise requires, have the following
               meanings:

               "Company" has the meaning given such term in the preamble hereof
               and includes a corporation which shall succeed to or assume the
               obligations of the Company under this Note.

               "Default Interest" means interest in accordance with Section 3.2.

               "DML" means Diametrics Medical, Ltd., an English company formerly
               known as Biomedical Sensors Limited.

               "Dollars" means the lawful currency of the USA.

               "Final Payment Date" means August 4, 2005.

               "Group" means the Company and its Subsidiaries from time to time.

               "Holder" has the meaning given such term in the preamble hereof.

               "Interest Rate" means the rate of 7 per cent per annum.

               "Issue Date" means the date upon which this Note was originally
               issued.

               "Lien" means any pledge, mortgage, hypothecation, security
               interest, lien or encumbrance.

               "Note" means this note and any replacement therefor.

               "Note Purchase Agreement" has the meaning given such term in the
               preamble hereof.

               "Payment Date" means the Final Payment Date and/or, if earlier,
               any date fixed for payment of all or any part of the Principal
               Amount pursuant to Article 2.

                                       3

<PAGE>

               "Principal Amount" means the principal amount of this Note set
               forth on the face hereof, as reduced from time to time by any
               payment of part pursuant to Section 2.2 thereof.

               "Register" means the Register in respect of the Note maintained
               by the Company pursuant to Article 8.

               "Security Documents" means a mortgage of shares dated August 4,
               1998, executed by the Company in favor of the holders of the
               notes, or their agent or trustee on their behalf, in form and
               substance satisfactory to purchasers of at least 50.1% in
               aggregate principal amount of all of the notes purchased at the
               Closing of the Note Purchase Agreement, together with any other
               security documents or instruments from time to time executed by
               the Company in connection with its obligations under this Note or
               the Note Purchase Agreement.

               "Shares" means the ordinary, redeemable preference, and other
               shares of DML.

Article 10     Miscellaneous

Section 10.1   Transfer. Subject as hereafter mentioned, this Note may be
               transferred or assigned without any restriction thereon. This
               Note may only be transferred or assigned in whole and not in
               part. The transfer or assignment must not be in favor of more
               than four transferees as joint holders. No transfer of the Note
               may be made if in the reasonable opinion of the directors of the
               Company the proposed transferee is engaged in the business of
               commercializing products for critical care blood analysis in
               humans. The transfer or assignment documentation must be
               delivered for registration to the principal office for the time
               being of the Company together with the Note. The Company shall be
               entitled to retain the transfer or assignment documentation. The
               Company shall not be obliged to register any transfer during the
               14 days immediately preceding any interest payment date. No
               transfer or assignment shall be effective unless and until the
               transfer or assignment is registered in the Register. The Company
               shall be obliged to register any transfer or assignment subject
               to the foregoing.

Section 10.2   Article and Section Titles. The article and section titles
               contained in this Note are and shall be without substantive
               meaning or content of any kind whatsoever.

Section 10.3   Governing Law. This Note is governed by and is to be construed in
               accordance with the laws of Minnesota, excluding the body of law
               relating to conflict of laws.

Section 10.4   Existing Note. This Note amends, restates and continues that
               certain Convertible Senior Secured Fixed Rate Note made by the
               Company to the order of the Purchaser in the Principal Amount and
               dated August 4, 1998 (the "Existing Note"). The terms and
               conditions of this Note supersede the terms and conditions of the
               Existing Note, provided, however, that the obligations incurred
               under the Existing Note shall continue under this Note and shall
               not in any circumstance be terminated, extinguished or discharged
               hereby but shall hereafter be governed by the terms of this Note.

               IN WITNESS WHEREOF, the Company has executed this document as of
the date first above written.

                              DIAMETRICS MEDICAL, INC.

                              By:
                                   --------------------------------------------
                              Name:  David Kaysen
                              Title: Chief Executive Officer and President

                                       4

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