Document:

EX-10.4

Exhibit 10.4

SECURITY AND PLEDGE AGREEMENT

(Diametrics)

1. Identification.

This Security and Pledge Agreement (the “Agreement”), dated as of December 15, 2004, is
entered into by and between Diametrics Medical, Inc., a Minnesota corporation (“Diametrics” or
“Debtor”), and Barbara Mittman, as collateral agent acting in the manner and to the extent
described in the Collateral Agent Agreement defined below (the “Collateral Agent”), for the benefit
of the parties identified on Schedule A hereto (collectively, the “Lenders”).

2. Recitals.

2.1 The Lenders have made or are making loans and will make additional loans to Diametrics
(the “Loans”). It is beneficial to Diametrics that the Loans were made, are being made and will be
made.

2.2 The Loans are and will be evidenced by certain variable interest rate convertible
promissory notes (each a “Convertible Note”) issued by Diametrics on or about the date of this
Agreement and issuable after the date of this Agreement, pursuant to subscription agreements (each
a “Subscription Agreement”) to which Diametrics and Lenders are parties. The Notes are further
identified on Schedule A hereto and were and will be executed by Diametrics as “Borrower” or
“Debtor” for the benefit of each Lender as the “Holder” or “Lender” thereof.

2.3 In consideration of the Loans made by Lenders to Diametrics and for other good and
valuable consideration, and as security for the performance by Diametrics of its obligations under
the Notes and as security for the repayment of the Loans and all other sums due from Debtor to
Lenders arising under the Notes presently outstanding or to be outstanding in the future,
Subscription Agreements, and any other agreement between or among them (collectively, the
“Obligations”), Diametrics, for good and valuable consideration, receipt of which is acknowledged,
has agreed to grant to the Collateral Agent, for the benefit of the Lenders, a security interest in
the Collateral (as such term is hereinafter defined), on the terms and conditions hereinafter set
forth. Obligations include all future advances by Lenders to Diametrics advanced by all Lenders on
a pro rata basis on substantially the same terms.

2.4 The Lenders have appointed Barbara Mittman as Collateral Agent pursuant to that certain
Collateral Agent Agreement dated at or about December 15, 2004 (“Collateral Agent Agreement”),
among the Lenders and Collateral Agent.

2.5 The following defined terms which are defined in the Uniform Commercial Code in effect in
the State of New York on the date hereof are used herein as so defined: Accounts, Chattel Paper,
Documents, Equipment, General Intangibles, Instruments, Inventory and Proceeds.

3. Grant of General Security Interest in Collateral.

3.1 As security for the Obligations of Debtor, Diametrics hereby grants the Collateral Agent,
for the benefit of the Lenders, a security interest in the Collateral.

3.2 “Collateral” shall mean all of the following property of Diametrics:

(A) All now owned and hereafter acquired right, title and interest of Diametrics in, to and in
respect of all Accounts, Goods, real or personal property, all present and future books and records
relating to the foregoing and all products and Proceeds of the foregoing, and set forth below:

(i) Accounts: All now owned and hereafter acquired right, title and interest of
Diametrics in, to and in respect of all: Accounts, interests in goods represented by Accounts,
returned, reclaimed or repossessed goods with respect thereto and rights as an unpaid vendor;
contract rights; Chattel Paper; investment property; General Intangibles (including but not limited
to, tax and duty claims and refunds, registered and unregistered patents, trademarks, service
marks, certificates, copyrights trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as licensor or
licensee, choses in action and other claims, and existing and future leasehold interests in
equipment, real estate and fixtures); Documents; Instruments; letters of credit, bankers’
acceptances or guaranties; cash moneys, deposits; securities, bank accounts, deposit accounts,
credits and other property now or hereafter owned or held in any capacity by Diametrics, as well as
its affiliates, agreements or property securing or relating to any of the items referred to above;

(ii) Goods: All now owned and hereafter acquired right, title and interest of
Diametrics in, to and in respect of goods, including, but not limited to:

(a) All Inventory, wherever located, whether now owned or hereafter acquired, of whatever
kind, nature or description, including all raw materials, work-in-process, finished goods, and
materials to be used or consumed in Diametrics’ business; and all names or marks affixed to or to
be affixed thereto for purposes of selling same by the seller, manufacturer, lessor or licensor
thereof and all Inventory which may be returned to Diametrics by its customers or repossessed by
Diametrics and all of Diametrics’ right, title and interest in and to the foregoing (including all
of Diametrics’ rights as a seller of goods);

(b) All Equipment and fixtures, wherever located, whether now owned or hereafter acquired,
including, without limitation, all machinery, motor vehicles, furniture and fixtures, and any and
all additions, substitutions, replacements (including spare parts), and accessions thereof and
thereto (including, but not limited to Diametrics’ rights to acquire any of the foregoing, whether
by exercise of a purchase option or otherwise);

(iii) Property: All now owned and hereafter acquired right, title and interests of
Diametrics in, to and in respect of any real or other personal property in or upon which Diametrics
has or may hereafter have a security interest, lien or right of setoff;

(iv) Books and Records: All present and future books and records relating to any of
the above including, without limitation, all computer programs, printed output and computer
readable data in the possession or control of Diametrics, any computer service bureau or other
third party; and

(v) Products and Proceeds: All products and Proceeds of the foregoing in whatever
form and wherever located, including, without limitation, all insurance proceeds and all claims
against third parties for loss or destruction of or damage to any of the foregoing.

(B) All now owned and hereafter acquired right, title and interest of Diametrics in, to and in
respect of the following:

(i) the shares of stock, partnership interests, member interests or other equity interests at
any time and from time to time acquired by Diametrics of any and all entities now or hereafter
existing, all or a portion of such stock or other equity interests which are acquired by such
entities at any time (such entities, together with the existing issuers, being hereinafter referred
to collectively as the “Pledged Issuers” and individually as a “Pledged Issuer”), the certificates
representing such shares, partnership interests, member interests or other interests, all options
and other rights, contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such shares, partnership
interests, member interests or other interests;

(ii) all additional shares of stock, partnership interests, member interests or other equity
interests from time to time acquired by Diametrics, of any Pledged Issuer, the certificates
representing such additional shares, all options and other rights, contractual or otherwise, in
respect thereof and all dividends, distributions, cash, instruments, investment property and other
property from time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares, interests or equity; and

(iii) all security entitlements of Diametrics in, and all Proceeds of any and all of the
foregoing in each case, whether now owned or hereafter acquired by Diametrics and howsoever its
interest therein may arise or appear (whether by ownership, security interest, lien, claim or
otherwise).

3.3 The Collateral Agent is hereby specifically authorized, after the Maturity Date (defined
in the Notes) whether accelerated or otherwise, or after an Event of Default (as defined herein)
and the expiration of any applicable cure period, to transfer any Collateral into the name of the
Collateral Agent and to take any and all action deemed advisable to the Collateral Agent to remove
any transfer restrictions affecting the Collateral.

4. Perfection of Security Interest.

4.1 Diametrics shall prepare, execute and deliver to the Collateral Agent UCC-1 Financing
Statements. The Collateral Agent is instructed to prepare and file at Diametrics’ cost and
expense, financing statements in such jurisdictions deemed advisable to the Collateral Agent,
including but not limited to Minnesota. The Financing Statements are deemed to have been filed for
the benefit of the Collateral Agent and Lenders identified on Schedule A hereto.

4.2 All other certificates and instruments constituting Collateral from time to time required
to be pledged to Collateral Agent pursuant to the terms hereof (the “Additional Collateral”) shall
be delivered to Collateral Agent promptly upon receipt thereof by or on behalf of Diametrics. All
such certificates and instruments shall be held by or on behalf of Collateral Agent pursuant hereto
and shall be delivered in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment or undated stock powers executed in blank, all in
form and substance satisfactory to Collateral Agent. If any Collateral consists of uncertificated
securities, unless the immediately following sentence is applicable thereto, Diametrics shall cause
Collateral Agent (or its custodian, nominee or other designee) to become the registered holder
thereof, or cause each issuer of such securities to agree that it will comply with instructions
originated by Collateral Agent with respect to such securities without further consent by
Diametrics. If any Collateral consists of security entitlements, Diametrics shall transfer such
security entitlements to Collateral Agent (or its custodian, nominee or other designee) or cause
the applicable securities intermediary to agree that it will comply with entitlement orders by
Collateral Agent without further consent by Diametrics.

4.3 Within five (5) days after the receipt by Diametrics of any Additional Collateral, a
Pledge Amendment, duly executed by Diametrics, in substantially the form of Annex I hereto (a
“Pledge Amendment”), shall be delivered to Collateral Agent in respect of the Additional Collateral
to be pledged pursuant to this Agreement. Diametrics hereby authorizes Collateral Agent to attach
each Pledge Amendment to this Agreement and agrees that all certificates or instruments listed on
any Pledge Amendment delivered to Collateral Agent shall for all purposes hereunder constitute
Collateral.

4.4 If Diametrics shall receive, by virtue of Diametrics’s being or having been an owner of
any Collateral, any (i) stock certificate (including, without limitation, any certificate
representing a stock dividend or distribution in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of shares, stock
split, spin-off or split-off), promissory note or other instrument, (ii) option or right, whether
as an addition to, substitution for, or in exchange for, any Collateral, or otherwise, (iii)
dividends payable in cash (except such dividends permitted to be retained by Diametrics pursuant to
Section 5.2 hereof) or in securities or other property or (iv) dividends or other distributions in
connection with a partial or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in surplus, Diametrics shall receive such stock certificate,
promissory note, instrument, option, right, payment or distribution in trust for the benefit of
Collateral Agent, shall segregate it from Diametrics’ other property and shall deliver it forthwith
to Collateral Agent, in the exact form received, with any necessary endorsement and/or appropriate
stock powers duly executed in blank, to be held by Collateral Agent as Collateral and as further
collateral security for the Obligations.

5. Distribution on Liquidation.

5.1 If any sum is paid as a liquidating distribution on or with respect to the Collateral,
Diametrics shall deliver same to the Collateral Agent to be applied to the Obligations, then due,
in accordance with the terms of the Convertible Notes.

5.2 So long as no Event of Default exists, Diametrics shall be entitled (i) to exercise all
voting power pertaining to any of the Collateral, provided such exercise is not contrary to the
interests of the Lenders and does not impair the Collateral and (ii) may receive and retain any and
all dividends, interest payments or other distributions paid in respect of the Collateral.

5.3. Upon the occurrence and during the continuation of an Event of Default, all rights of
Diametrics, upon notice given by Collateral Agent, to exercise the voting power and receive
payments, which it would otherwise be entitled to pursuant to Section 5.2, shall cease and all such
rights shall thereupon become vested in Collateral Agent, which shall thereupon have the sole right
to exercise such voting power and receive such payments.

5.4 All dividends, distributions, interest and other payments which are received by Diametrics
contrary to the provisions of Section 5.3 shall be received in trust for the benefit of Collateral
Agent, shall be segregated from other funds of Diametrics, and shall be forthwith paid over to
Collateral Agent as Collateral in the exact form received with any necessary endorsement and/or
appropriate stock powers duly executed in blank, to be held by Collateral Agent as Collateral and
as further collateral security for the Obligations.

6. Further Action By Diametrics; Covenants and Warranties.

6.1 Collateral Agent at all times shall have a perfected security interest in the Collateral.
Subject to the security interests described herein, Diametrics has and will continue to have full
title to the Collateral free from any liens, leases, encumbrances, judgments or other claims.
Collateral Agent’s security interest in the Collateral constitutes and will continue to constitute
a first, prior and indefeasible security interest in favor of Collateral Agent. Diametrics will do
all acts and things, and will execute and file all instruments (including, but not limited to,
security agreements, financing statements, continuation statements, etc.) reasonably requested by
Collateral Agent to establish, maintain and continue the perfected security interest of Collateral
Agent in the Collateral, and will promptly on demand, pay all costs and expenses of filing and
recording, including the costs of any searches reasonably deemed necessary by Collateral Agent from
time to time to establish and determine the validity and the continuing priority of the security
interest of Collateral Agent, and also pay all other claims and charges that, in the opinion of
Collateral Agent, exercised in good faith, are reasonably likely to materially prejudice, imperil
or otherwise affect the Collateral or Collateral Agent’s or Lenders’ security interests therein.

6.2 Other than in the ordinary course of business, and except for Collateral which is
substituted by assets of identical or greater value or which has become obsolete or is of
inconsequential in value, Diametrics will not sell, transfer, assign or pledge those items of
Collateral (or allow any such items to be sold, transferred, assigned or pledged), without the
prior written consent of Collateral Agent other than a transfer of the Collateral to a wholly-owned
subsidiary on prior notice to Collateral Agent, and provided the Collateral remains subject to the
security interest herein described. Although Proceeds of Collateral are covered by this Agreement,
this shall not be construed to mean that Collateral Agent consents to any sale of the Collateral,
except as provided herein. Sales of Collateral in the ordinary course of business shall be free of
the security interest of Lenders and Collateral Agent and Lenders and Collateral Agent shall
promptly execute such documents (including without limitation releases and termination statements)
as may be required by Debtor to evidence or effectuate the same.

6.3 Diametrics will, at all reasonable times and upon reasonable notice, allow Collateral
Agent or its representatives free and complete access to the Collateral and all of Diametrics’
records which in any way relate to the Collateral, for such inspection and examination as
Collateral Agent reasonably deems necessary.

6.4 Diametrics, at its sole cost and expense, will protect and defend this Security Agreement,
all of the rights of Collateral Agent and Lenders hereunder, and the Collateral against the claims
and demands of all other persons.

6.5 Diametrics will promptly notify Collateral Agent of any levy, distraint or other seizure
by legal process or otherwise of any part of the Collateral, and of any threatened or filed claims
or proceedings that are reasonably likely to affect or impair any of the rights of Collateral Agent
under this Security Agreement in any material respect.

6.6 Diametrics, at its own expense, will obtain and maintain in force insurance policies
covering losses or damage to those items of Collateral which constitute physical personal property.
The insurance policies to be obtained by Diametrics shall be in form and amounts reasonably
acceptable to Collateral Agent. Diametrics shall make the Collateral Agent a first loss payee
thereon to the extent of its interest in the Collateral. Collateral Agent is hereby irrevocably
(until the Obligations are paid in full) appointed Diametrics’ attorney-in-fact to endorse any
check or draft that may be payable to Diametrics so that Collateral Agent may collect the proceeds
payable for any loss under such insurance. The proceeds of such insurance (subject to the rights
of senior secured parties), less any costs and expenses incurred or paid by Collateral Agent in the
collection thereof, shall be applied either toward the cost of the repair or replacement of the
items damaged or destroyed, or on account of any sums secured hereby, whether or not then due or
payable.

6.7 Collateral Agent may, at its option, and without any obligation to do so, pay, perform and
discharge any and all amounts, costs, expenses and liabilities herein agreed to be paid or
performed by Diametrics. Upon Diametrics’ failure to do so, all amounts expended by Collateral
Agent in so doing shall become part of the Obligations secured hereby, and shall be immediately due
and payable by Diametrics to Collateral Agent upon demand and shall bear interest at the lesser of
18% per annum or the highest legal amount from the dates of such expenditures until paid.

6.8 Upon the request of Collateral Agent, Diametrics will furnish to Collateral Agent within
five (5) business days thereafter, or to any proposed assignee of this Security Agreement, a
written statement in form reasonably satisfactory to Collateral Agent, duly acknowledged,
certifying the amount of the principal and interest and any other sum then owing under the
Obligations, whether to its knowledge any claims, offsets or defenses exist against the Obligations
or against this Security Agreement, or any of the terms and provisions of any other agreement of
Diametrics securing the Obligations. In connection with any assignment by Collateral Agent of this
Security Agreement, Diametrics hereby agrees to cause the insurance policies required hereby to be
carried by Diametrics, if any, to be endorsed in form satisfactory to Collateral Agent or to such
assignee, with loss payable clauses in favor of such assignee, and to cause such endorsements to be
delivered to Collateral Agent within ten (10) calendar days after request therefore by Collateral
Agent.

6.9 Diametrics will, at its own expense, make, execute, endorse, acknowledge, file and/or
deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports and other reasonable assurances or instruments and take further steps
relating to the Collateral and other property or rights covered by the security interest hereby
granted, as the Collateral Agent may reasonably require to perfect its security interest hereunder.

6.10 Diametrics represents and warrants that it is the true and lawful exclusive owner of the
Collateral, free and clear of any liens and encumbrances (except as otherwise set forth in that
certain Subordination Agreement of even date herewith).

6.11 Diametrics hereby agrees not to divest itself of any right under the Collateral except as
permitted herein absent prior written approval of the Collateral Agent.

6.12 Diametrics shall cause each Subsidiary of Diametrics not in existence on the date hereof
to execute and deliver to Collateral Agent promptly and in any event within 10 days after the
formation, acquisition or change in status thereof (A) a guaranty guaranteeing the Obligations and
(B) a security and pledge agreement substantially in the form of this Agreement, together with (x)
certificates evidencing all of the capital stock of any entity owned by such Subsidiary, (y)
undated stock powers executed in blank with signature guaranteed, and (z) such opinion of counsel
and such approving certificate of such Subsidiary as Collateral Agent may reasonably request in
respect of complying with any legend on any such certificate or any other matter relating to such
shares and (C) such other agreements, instruments, approvals, legal opinions or other documents
reasonably requested by Collateral Agent in order to create, perfect, establish the first priority
of or otherwise protect any lien purported to be covered by any such pledge and security agreement
or otherwise to effect the intent that all property and assets of such Subsidiary shall become
Collateral for the Obligations. For purposes of this Agreement, “Subsidiary” means, with
respect to any entity at any date, any corporation, limited or general partnership, limited
liability company, trust, estate, association, joint venture or other business entity of which more
than 50% of (A) the outstanding capital stock having (in the absence of contingencies) ordinary
voting power to elect a majority of the board of directors or other managing body of such entity,
(B) in the case of a partnership or limited liability company, the interest in the capital or
profits of such partnership or limited liability company or (C) in the case of a trust, estate,
association, joint venture or other entity, the beneficial interest in such trust, estate,
association or other entity business is, at the time of determination, owned or controlled directly
or indirectly through one or more intermediaries, by such entity; provided, however, “Subsidiary”
as it applies to Diametrics does not include Diametrics Medical Limited.

7. Power of Attorney.

After the occurrence and during the uncured continuation of an Event of Default as defined in
Section 9 below, Diametrics hereby irrevocably constitutes and appoints the Collateral Agent as the
true and lawful attorney of Diametrics, with full power of substitution, in the place and stead of
Diametrics and in the name of Diametrics or otherwise, at any time or times, in the discretion of
the Collateral Agent, to take any action and to execute any instrument or document which the
Collateral Agent may deem necessary or advisable to accomplish the purposes of this Agreement.
This power of attorney is coupled with an interest and is irrevocable until the Obligations are
satisfied.

8. Performance By The Collateral Agent.

If Diametrics fails to perform any material covenant, agreement, duty or obligation of
Diametrics under this Agreement, the Collateral Agent may, after any applicable cure period, at any
time or times in its discretion, take action to effect performance of such obligation. All
reasonable expenses of the Collateral Agent incurred in connection with the foregoing authorization
shall be payable by Diametrics as provided in Paragraph 12.1 hereof. No discretionary right,
remedy or power granted to the Collateral Agent under any part of this Agreement shall be deemed to
impose any obligation whatsoever on the Collateral Agent with respect thereto, such rights,
remedies and powers being solely for the protection of the Collateral Agent.

9. Event of Default.

An event of default (“Event of Default”) shall be deemed to have occurred hereunder upon the
occurrence of any event of default as defined and described in this Agreement, in the Notes,
Subscription Agreement, and any other agreement to which Diametrics and Collateral Agent or a
Lender are parties. Upon and after any Event of Default, after the applicable cure period, if
any, any or all of the Obligations shall become immediately due and payable at the option of the
Collateral Agent, for the benefit of the Lenders, and the Collateral Agent may dispose of
Collateral as provided below. A default by Diametrics of any of its material obligations pursuant
to this Agreement shall be an Event of Default hereunder and an event of default as defined in the
Notes, and Subscription Agreement.

10. Disposition of Collateral.

Upon and after any Event of Default which is then continuing,

10.1 The Collateral Agent may exercise its rights with respect to each and every component of
the Collateral, without regard to the existence of any other security or source of payment for the
Obligations. In addition to other rights and remedies provided for herein or otherwise available
to it, the Collateral Agent shall have all of the rights and remedies of a lender on default under
the Uniform Commercial Code then in effect in the State of New York.

10.2 If any notice to Diametrics of the sale or other disposition of Collateral is required by
then applicable law, five business (5) days prior written notice (which Diametrics agrees is
reasonable notice within the meaning of Section 9.612(a) of the Uniform Commercial Code) shall be
given to Diametrics of the time and place of any sale of Collateral, which Diametrics hereby agrees
may be by private sale. The rights granted in this Section are in addition to any and all rights
available to Collateral Agent under the Uniform Commercial Code.

10.3 The Collateral Agent is authorized, at any such sale, if the Collateral Agent deems it
advisable to do so, in order to comply with any applicable securities laws, to restrict the
prospective bidders or purchasers to persons who will represent and agree, among other things, that
they are purchasing the Collateral for their own account for investment, and not with a view to the
distribution or resale thereof, or otherwise to restrict such sale in such other manner as the
Collateral Agent deems advisable to ensure such compliance. Sales made subject to such
restrictions shall be deemed to have been made in a commercially reasonable manner.

10.4 All proceeds received by the Collateral Agent for the benefit of the Lenders in respect
of any sale, collection or other enforcement or disposition of Collateral, shall be applied (after
deduction of any amounts payable to the Collateral Agent pursuant to Paragraph 12.1 hereof) against
the Obligations pro rata among the Lenders in proportion to their interests in the Obligations.
Upon payment in full of all Obligations, Diametrics shall be entitled to the return of all
Collateral, including cash, which has not been used or applied toward the payment of Obligations or
used or applied to any and all costs or expenses of the Collateral Agent incurred in connection
with the liquidation of the Collateral (unless another person is legally entitled thereto). Any
assignment of Collateral by the Collateral Agent to Diametrics shall be without representation or
warranty of any nature whatsoever and wholly without recourse. To the extent allowed by law, each
Lender may purchase the Collateral and pay for such purchase by offsetting up to such Lender’s pro
rata portion of the proceeds with sums owed to such Lender by Diametrics arising under the
Obligations or any other source.

11. Waiver of Automatic Stay. Diametrics acknowledges and agrees that should a proceeding
under any bankruptcy or insolvency law be commenced by or against Diametrics, or if any of the
Collateral should become the subject of any bankruptcy or insolvency proceeding, then the
Collateral Agent should be entitled to, among other relief to which the Collateral Agent or Lenders
may be entitled under the Note, Subscription Agreement and any other agreement to which the Debtor,
Lenders or Collateral Agent are parties, (collectively “Loan Documents”) and/or applicable law, an
order from the court granting immediate relief from the automatic stay pursuant to 11 U.S.C.
Section 362 to permit the Collateral Agent to exercise all of its rights and remedies pursuant to
the Loan Documents and/or applicable law. DIAMETRICS EXPRESSLY WAIVES THE BENEFIT OF THE AUTOMATIC
STAY IMPOSED BY 11 U.S.C. SECTION 362. FURTHERMORE, DIAMETRICS EXPRESSLY ACKNOWLEDGES AND AGREES
THAT NEITHER 11 U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE OR
RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY, INTERDICT, CONDITION,
REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE COLLATERAL AGENT TO ENFORCE ANY OF ITS RIGHTS AND
REMEDIES UNDER THE LOAN DOCUMENTS AND/OR APPLICABLE LAW. Diametrics hereby consents to any motion
for relief from stay which may be filed by the Collateral Agent in any bankruptcy or insolvency
proceeding initiated by or against Diametrics, and further agrees not to file any opposition to any
motion for relief from stay filed by the Collateral Agent. Diametrics represents, acknowledges and
agrees that this provision is a specific and material aspect of this Agreement, and that the
Collateral Agent would not agree to the terms of this Agreement if this waiver were not a part of
this Agreement. Diametrics further represents, acknowledges and agrees that this waiver is
knowingly, intelligently and voluntarily made, that neither the Collateral Agent nor any person
acting on behalf of the Collateral Agent has made any representations to induce this waiver, that
Diametrics has been represented (or has had the opportunity to be represented) in the signing of
this Agreement and in the making of this waiver by independent legal counsel selected by Diametrics
and that Diametrics has had the opportunity to discuss this waiver with counsel. Diametrics
further agrees that any bankruptcy or insolvency proceeding initiated by Diametrics will only be
brought in the Federal Court within the Southern District of New York.

12. Miscellaneous.

12.1 Expenses. Diametrics shall pay to the Collateral Agent, on demand, the amount of
any and all reasonable expenses, including, without limitation, attorneys’ fees, legal expenses and
brokers’ fees, which the Collateral Agent may incur in connection with (a) sale, collection or
other enforcement or disposition of Collateral; (b) exercise or enforcement of any the rights,
remedies or powers of the Collateral Agent hereunder or with respect to any or all of the
Obligations upon breach or threatened breach; or (c) failure by Diametrics to perform and observe
any agreements of Diametrics contained herein which are performed by the Collateral Agent.

12.2 Waivers, Amendment and Remedies. No course of dealing by the Collateral Agent
and no failure by the Collateral Agent to exercise, or delay by the Collateral Agent in exercising,
any right, remedy or power hereunder shall operate as a waiver thereof, and no single or partial
exercise thereof shall preclude any other or further exercise thereof or the exercise of any other
right, remedy or power of the Collateral Agent. No amendment, modification or waiver of any
provision of this Agreement and no consent to any departure by Diametrics therefrom, shall, in any
event, be effective unless contained in a writing signed by the Collateral Agent, and then such
waiver or consent shall be effective only in the specific instance and for the specific purpose for
which given. The rights, remedies and powers of the Collateral Agent, not only hereunder, but also
under any instruments and agreements evidencing or securing the Obligations and under applicable
law are cumulative, and may be exercised by the Collateral Agent from time to time in such order as
the Collateral Agent may elect.

12.3 Notices. All notices or other communications given or made hereunder shall be in
writing and shall be personally delivered or deemed delivered the first business day after being
faxed (provided that a copy is delivered by first class mail) to the party to receive the same at
its address set forth below or to such other address as either party shall hereafter give to the
other by notice duly made under this Section:

	 	 	 
	To Diametrics:

	 	Diametrics Medical, Inc.

3050 Centre Pointe Drive, Suite 150

St. Paul, MN 55113

Attn: David B. Kaysen, President & CEO

Fax: (651) 639-8549
	 
	 	 
	With a copy to:

	 	Kenneth L. Cutler, Esq.

Dorsey & Whitney LLP

50 South Sixth Street, Suite 1500

Minneapolis, MN 55402

Fax: (612) 340-7800
	 
	 	 
	To Lenders:

	 	To the addresses and telecopier numbers set forth

on Schedule A
	 
	 	 
	To the Collateral Agent:

	 	Barbara R. Mittman

Grushko & Mittman, P.C.

551 Fifth Avenue, Suite 1601

New York, New York 10176

Fax: (212) 697-3575

Any party may change its address by written notice in accordance with this paragraph.

12.4 Term; Binding Effect. This Agreement shall (a) remain in full force and effect
until payment and satisfaction in full of all of the Obligations; (b) be binding upon Diametrics,
and its successors and permitted assigns; and (c) inure to the benefit of the Collateral Agent, for
the benefit of the Lenders and their respective successors and assigns. All the rights and
benefits granted by Debtor to the Collateral Agent and Lenders in the Loan Documents and other
agreements and documents delivered in connection therewith are deemed granted to both the
Collateral Agent and Lenders.

12.5 Captions. The captions of Paragraphs, Articles and Sections in this Agreement
have been included for convenience of reference only, and shall not define or limit the provisions
hereof and have no legal or other significance whatsoever.

12.6 Governing Law; Venue; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to principles of
conflicts or choice of law, except to the extent that the perfection of the security interest
granted hereby in respect of any item of Collateral may be governed by the law of another
jurisdiction. Any legal action or proceeding against Diametrics with respect to this Agreement may
be brought in the courts in the State of New York or of the United States for the Southern District
of New York, and, by execution and delivery of this Agreement, Diametrics hereby irrevocably
accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. Diametrics hereby irrevocably waives any objection which they may now or
hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of
or in connection with this Agreement brought in the aforesaid courts and hereby further irrevocably
waives and agrees not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum. If any provision of this
Agreement, or the application thereof to any person or circumstance, is held invalid, such
invalidity shall not affect any other provisions which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be severable and the
remaining, valid provisions shall remain of full force and effect.

12.7 Counterparts/Execution. This Agreement may be executed in any number of
counterparts and by the different signatories hereto on separate counterparts, each of which, when
so executed, shall be deemed an original, but all such counterparts shall constitute but one and
the same instrument. This Agreement may be executed by facsimile signature and delivered by
facsimile transmission.

[THIS SPACE INTENTIONALLY LEFT BLANK]

1

IN WITNESS WHEREOF, the undersigned have executed and delivered this Security Agreement, as of
the date first written above.

	 	 	 
	“DEBTOR”

DIAMETRICS MEDICAL, INC.

a Minnesota corporation

	 	“THE COLLATERAL AGENT”

BARBARA R. MITTMAN

	 
	 	 
	By: /s/ David B. Kaysen

	 	/s/ Barbara R. Mittman

Its: President and CEO

APPROVED BY “LENDERS”:

	 	 	 
	LONGVIEW EQUITY FUND, L.P.

	 	LONGVIEW FUND L.P.
	 
	 	 
	By: /s/ Wayne H. Coleson

Its: Investment Advisor

	 	By: /s/ S. Michael Rudolph

Its: Investment Advisor
	 
	 	 
	LONGVIEW INTERNATIONAL EQUITY

FUND, L.P.

	 	CAMDEN INTERNATIONAL

	 
	 	 
	By: /s/ Wayne H. Coleson

Its: Investment Advisor

	 	By: /s/ Deirdre M. McCoy

Its: Director
	 
	 	 
	MERCATOR MOMENTUM FUND III L.P.

By: Mercator Advisory Group, LLC

Its: General Partner

	 	MERCATOR MOMENTUM FUND L.P.

By: Mercator Advisory Group, LLC

Its: General Partner
	 
	 	 
	By: /s/ David Firestone

Its: Managing Member

	 	By: /s/ David Firestone

Its: Managing Member
	 
	 	 
	MONARCH POINTE FUND, LTD.

By: Mercator Advisory Group, LLC

Its: General Partner

	 	

	 
	 	 
	By: /s/ David Firestone

Its: Managing Member

	 	

This Security Agreement may be signed by facsimile signature and

delivered by confirmed facsimile transmission.

2

SCHEDULE A TO SECURITY AND PLEDGE AGREEMENT

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	INITIAL CLOSING                 	 	INITIAL CLOSING                 	 	 	 	 	 	SECOND CLOSING
	SUBSCRIBER
	 	NOTES                           	 	WARRANTS                        	 	SECOND CLOSING NOTES            	 	WARRANTS
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	LONGVIEW EQUITY FUND, LP

600 Montgomery Street, 44th Floor

San Francisco, CA 94111

Fax: (415) 981-5302
	 	$	200,000.00		 		5,000,000		 	$	133,333.00		 		3,333,325	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	LONGVIEW FUND, LP

600 Montgomery Street, 44th Floor

San Francisco, CA 94111

Fax: (415) 981-5302
	 	$	350,000.00		 		8,750,000		 	$	233,333.00		 		5,833,325	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	LONGVIEW INTERNATIONAL EQUITY

FUND, LP

600 Montgomery Street, 44th Floor

San Francisco, CA 94111

Fax: (415) 981-5302
	 	$	100,000.00		 		2,500,000		 	$	66,667.00		 		1,666,675	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MERCATOR MOMENTUM FUND III L.P.

555 South Flower Street, Suite 4200

Los Angeles, CA 90071

Fax: (213) 533-8285

Additional Copy:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	David C. Ulich, Esq.

Fax: (213) 620-1398
	 	$	160,000.00		 		4,000,000		 	$	106,667.00		 		2,666,675	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MERCATOR MOMENTUM FUND L.P.

555 South Flower Street, Suite 4200

Los Angeles, CA 90071

Fax: (213) 533-8285

Additional Copy:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	David C. Ulich, Esq.

Fax: (213) 620-1398
	 	$	230,000.00		 		5,750,000		 	$	153,333.00		 		3,833,325	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	MONARCH POINTE FUND, LTD.

555 South Flower Street, Suite 4200

Los Angeles, CA 90071

Fax: (213) 533-8285

Additional Copy:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	David C. Ulich, Esq.

Fax: (213) 620-1398
	 	$	510,000.00		 		12,750,000		 	$	340,000.00		 		8,500,000	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CAMDEN INTERNATIONAL

Charlotte House, Charlotte Street

P.O. Box N 9204

Nassau, Bahamas

Fax: 415-835-8320
	 	$	250,000.00		 		6,250,000		 	$	166,667.00		 		4,166,675	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL
	 	$	1,800,000.00		 		45,000,000		 	$	1,200,000.00		 		30,000,000	
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

3

ANNEX I

TO

SECURITY AND PLEDGE AGREEMENT

PLEDGE AMENDMENT

This Pledge Amendment, dated    200_, is delivered pursuant to Section 4.3 of the
Security and Pledge Agreement referred to below. The undersigned hereby agrees that this Pledge
Amendment may be attached to the Security and Pledge Agreement, dated December    , 2004, as it may
heretofore have been or hereafter may be amended, restated, supplemented or otherwise modified from
time to time and that the shares listed on this Pledge Amendment shall be hereby pledged and
assigned to Collateral Agent and become part of the Collateral referred to in such Security and
Pledge Agreement and shall secure all of the Obligations referred to in such Security and Pledge
Agreement.

	 	 	 	 	 	 	 
	Name of Issuer

	 	Number

of Shares
	 	Class
	 	Certificate

Number(s)
	 

	 	 
	 	 
	 	 

	 	 	 	 	 
	DIAMETRICS MEDICAL, INC.

	By:
	 	 	—	 
	   Name:

	   Title:

4EX-10.5

Exhibit 10.5

TRADEMARK SECURITY AGREEMENT

TRADEMARK SECURITY AGREEMENT, dated as of December 15, 2004, by Diametrics Medical, Inc., a
Minnesota corporation (“Grantor”), in favor of Barbara R. Mittman (“Collateral
Agent”), acting on behalf of certain obligees of Grantor, namely Longview Equity Fund, LP,
Longview Fund L.P., Longview International Equity Fund L.P., Mercator Momentum Fund III L.P.,
Mercator Momentum Fund L.P., Monarch Pointe Fund, Ltd., and Camden International (collectively with
Collateral Agent referred to herein as the “Note Holders”).

W I T N E S S E T H:

WHEREAS, Grantor, Barbara R. Mittman, Longview Equity Fund, LP, Longview Fund L.P., Longview
International Equity Fund L.P., Mercator Momentum Fund III L.P., Mercator Momentum Fund L.P.,
Monarch Pointe Fund, Ltd., and Camden International are parties to that certain Subscription
Agreement, dated as of December 14, 2004; and

WHEREAS, Grantor agreed to grant a security interest to Barbara R. Mittman as Collateral Agent
for the Note Holders in all of Grantor’s right, title and interest in and to all Collateral as
defined in, and pursuant to a Security and Pledge Agreement, dated as of December 15, 2004
(“Security Agreement”); and

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Grantor hereby agrees as follows:

1. GRANT OF SECURITY INTEREST IN TRADEMARK COLLATERAL. Grantor hereby
grants to Collateral Agent, on behalf of itself and the Note Holders, a continuing first priority
security interest in all of Grantor’s right, title and interest in, to and under the following,
whether presently existing or hereafter created or acquired (collectively, the “Trademark
Collateral”):

(a) all of its trademarks, trade names, trade styles, corporate
names, business names, service marks, logos, internet domain names, other sources of
business identifiers, prints and labels on which any of the foregoing have appeared
or appear, and trademark and service mark applications (“Trademarks”) and
all licenses and rights to use any of the Trademarks (“Trademark Licenses”)
to which it is a party including but not limited to those referred to on Schedule 1
hereto which Grantor represents and warrants is a complete list of all such
Trademarks and Trademark Licenses owned by Grantor as of the date hereof;

(b) all reissues, continuations or extensions of the foregoing;

(c) all goodwill of the business connected with the use of, and
symbolized by each Trademark and each Trademark License; and

(d) all products and proceeds of the foregoing, including, without
limitation, any claim or right to claim by Grantor against third parties for past,
present or future (i) infringement or dilution of any Trademark or Trademark
licensed under any Trademark License or (ii) injury to the goodwill associated with
any Trademark or any Trademark licensed under any Trademark License.

2. SECURITY AGREEMENT. The security interests granted pursuant to this
Trademark Security Agreement are granted in conjunction with the security interests granted to the
Collateral Agent and the Note Holders, pursuant to the Security Agreement. Grantor hereby
acknowledges and affirms that the rights and remedies of the Collateral Agent with respect to the
security interest in the Trademark Collateral made and granted hereby are more fully set forth in
the Security Agreement, the terms and provisions of which are incorporated by reference herein as
if fully set forth herein.

[signature page follows]

1

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

GRANTOR

DIAMETRICS MEDICAL, INC.

By: /s/ David Kaysen

	 	 	 	Name: David Kaysen

Title: Chief Executive Officer and President

THE SECURED PARTY

/s/ Barbara R. Mittman

BARBARA R. MITTMAN, as Collateral Agent

	 	 	 
	LONGVIEW EQUITY FUND, L.P.

	 	LONGVIEW FUND L.P.
	 
	 	 
	By: /s/ Wayne H. Coleson

Its: Investment Advisor

	 	By: /s/ S. Michael Rudolph

Its: Investment Advisor
	 
	 	 
	LONGVIEW INTERNATIONAL EQUITY

FUND, L.P.

	 	CAMDEN INTERNATIONAL

	 
	 	 
	By: /s/ Wayne H. Coleson

Its: Investment Advisor

	 	By: /s/ Deirdre M. McCoy

Its: Director
	 
	 	 
	MERCATOR MOMENTUM FUND III L.P.

By: Mercator Advisory Group, LLC

Its: General Partner

	 	MERCATOR MOMENTUM FUND L.P.

By: Mercator Advisory Group, LLC

Its: General Partner
	 
	 	 
	By: /s/ David Firestone

Its: Managing Member

	 	By: /s/ David Firestone

Its: Managing Member
	 
	 	 
	MONARCH POINTE FUND, LTD.

	 	

	 
	 	 
	By: /s/ David Firestone

	 	

Its: Managing Member

2

SCHEDULE 1

to

TRADEMARK SECURITY AGREEMENT

TRADEMARK REGISTRATIONS

MarkReg. No. Date

Diametrics Medical, Incorporated (trademark & logo) 1,865,236, S/N 74/344,546 Renewal required
11.29.2004

Diametrics Medical, Inc. 1,864,228, S/N 74-343,125 Renewal required 11.22.2004

TrendCare 2,318,862, S/N 75- 611,207

TRADEMARK APPLICATIONS

TRADEMARK LICENSES

3

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