<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>ex_99-3.txt
<DESCRIPTION>PORTAL MANUFACTURING AGREEMENT (REDACTED)
<TEXT>

                         PORTAL MANUFACTURING AGREEMENT

                                 By and between

                            DIAMETRICS MEDICAL, INC.

                                2658 PATTON ROAD

                             ST. PAUL, MN 55113, USA

                    (hereinafter referred to as "DIAMETRICS")

                                       and

                             PHILIPS MEDICAL SYSTEMS

                     (hereinafter referred to as "PHILIPS")

         on the supply of Portal cartridge reader M3561A (M3561-60001);
                        exchange repair unit M3561-68000
        plus accessories edge connector cleaning kit M3672A (DMI 450000);
           temp card M3565A (DMI 467900); edge connector M3561-66403
      (DMI 516300); and DeviceSet with DeviceCom on a CD M3564A (DMI464218)



<PAGE>


                         PORTAL MANUFACTURING AGREEMENT

         THIS PORTAL MANUFACTURING AGREEMENT (the "Manufacturing Agreement"),
made as of this 10th day of April, 2003 (the "Effective Date"), by and among
Diametrics Medical Incorporated, a Minnesota corporation having its principal
place of business at 2658 Patton Road, St. Paul, Minnesota 55113 ("Diametrics")
and Philips Medical Systems North America Company, a division of Philips
Electronics North America Corporation, a Delaware corporation with offices at
3000 Minuteman Road, Andover, Massachusetts ("Philips"). Diametrics and Philips
shall each be a "Party."

                                    RECITALS

         A. Philips and Diametrics previously entered into a distribution
agreement dated June 6, 1999 (the "Distribution Agreement") the term of which
expired on October 31, 2002, and the parties are entering into an amendment to
the Distribution Agreement, dated as of the date of this Manufacturing Agreement
(the "Amendment") in order to clarify some of the surviving rights and
obligations under the Distribution Agreement. All capitalized terms shall have
the meanings set forth in this Manufacturing Agreement.

         B. Whereas as governed by the Distribution Agreement, Philips and
Diametrics have jointly developed the M3650A Blood Analysis Portal System
consisting of the M3561A Portal Reader and the M3562A Interface Module.

         C. Under the terms of the Distribution Agreement, Philips has surviving
rights to distribute the Portal Measurement Module as a part of the Portal
Product in a specific field of use until October 31, 2004, and Diametrics will
manufacture the Portal Measurement Products in accordance with the Amendment and
this Manufacturing Agreement and provide Portal Measurement Products to Philips
to allow for the completing of the postponement step by Philips of the Portal
Products.

         C. The Parties desire to enter into this Manufacturing Agreement for
the purposes of Diametrics' manufacture of the Portal Measurement Products
solely for Philips on the terms of this Manufacturing Agreement.

         NOW THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and subject to the terms and conditions set forth herein below,
Philips and Diametrics agree as follows:

1.   Definitions

     1.1  DeviceSet/DeviceCom Software. Means DeviceSet software with DeviceCom
          software on a CD M3564A (DMI 464218), as more particularly described
          in the Specifications.

     1.2  Portal Measurement Accessories. Means the following (a) accessories
          edge connector cleaning kit M3672A (DMI 450000); (b) temp card M3565A
          (DMI 467900); (c) edge connector M3561-66403 (DMI 516300), and (d)
          M3561-40003

                                       1
<PAGE>

          edge connector cover (DMI 466400), as more particularly described in
          the Specifications.

     1.3  Portal Measurement Module. Means the Portal cartridge reader M3561A
          (M3561-60001), as more particularly described in the Specifications.

     1.4  Portal Measurement Products. Means the Portal Measurement Module, the
          exchange repair unit M3561-68000, Portal Measurement Accessories and
          DeviceSet/DeviceCom Software, collectively.

     1.5  Portal Products. Has the meaning set forth in Section 1.14 of the
          Amendment.

     1.6  Required Quality Data. Means the data and information described on
          Schedule 1.

     1.7  Specifications. Means the specifications set forth in Schedule 2.

     1.8  Term. Means the period from the Effective Date through October 31,
          2004.

     1.9  Schedule References. All Schedule references shall mean the Schedules
          to this Amendment.

2.   EFFECT OF AGREEMENT

     2.1  Portal Manufacturing Agreement. This Manufacturing Agreement
          stipulates the additional terms and conditions for the supply of
          Portal Measurement Products to Philips by Diametrics, including any
          Portal Measurement Products supplied by Diametrics prior to or during
          the Term hereof. The Portal Measurement Products will be manufactured
          and supported by Diametrics as provided herein and the Amendment.

     2.2  Supplementary Agreement. The Parties are executing this Manufacturing
          Agreement as a supplement to the Amendment in order to provide for
          certain additional terms and conditions relating to the manufacture of
          the Portal Measurement Products. This Manufacturing Agreement does not
          supercede the Amendment, and the terms of the Amendment shall apply to
          the Portal Measurement Products, except as expressly set forth herein.

3.   EXAMINATION AND DELIVERY OF THE DIAMETRICS PRODUCTION UNITS PRIOR TO
     SHIPMENT TO PHILIPS.

     3.1  Supplier Evaluation. Diametrics shall manufacture the Portal
          Measurement Products with material purchased directly by Diametrics. A
          list of suppliers and contacts have been provided by Philips to
          Diametrics. Philips agrees to provide initially the "Supplier
          Evaluation". Diametrics' and Philips' engineering contacts (listed on
          Schedule 5) will jointly agree as to which supplied components of the
          Portal Measurement Module are required to be periodically audited by
          the Diametrics quality personnel.

                                       2
<PAGE>

     3.2  Certificate of Compliance. Each serialized Portal Measurement Module
          will be provided with a completed Diametrics "Certificate of
          Compliance" certifying that said product was inspected and tested per
          controlled manufacturing procedures.

     3.3  Production Units. Diametrics shall produce units of Portal Measurement
          Modules and other Portal Measurement Products in accordance with the
          terms and provisions hereof. The scope of delivery and supply shall be
          as set forth in this Manufacturing Agreement and the Amendment.

     3.4  Audit by Philips. Philips may periodically audit via a functional test
          a sample of the delivered Portal Measurement Module. Should Philips
          detect deviations from the Specifications or defects during the course
          of the functional check of the full production Portal Measurement
          Modules, Philips shall inform Diametrics thereof forthwith in writing
          via an SAR ( Supplier Action Request) per the Supplier Action Request
          Process Q2920-00224. In this event, Diametrics shall provide Philips
          with repaired or newly manufactured units of Portal Measurement
          Modules which are free of the defect(s) in question and shall provide
          a written corrective action plan within a reasonable period of time to
          be defined and agreed to by the Parties. Diametrics shall ensure that
          defects are remedied and rectified by certified employees. Subject to
          mutual agreement between the Parties, such rectification of defects
          may be carried out by Philips.

     3.5  Functional Checks after Delivery. Following delivery of the repaired /
          newly manufactured units, Philips shall conduct another functional
          check in accordance with Section 3.4 above. If deviations from the
          Specifications or defects are still detected in the repaired/newly
          manufactured Portal Measurement Modules and these are not remedied and
          rectified within mutually agreed upon date negotiated within the SAR
          process, subject to mutual agreement of the Parties, such
          rectification of defects may be carried out by Philips or a third
          party named by Diametrics and agreed by Philips prior to the
          implementation at Diametrics expense.

     3.6  Ship to Stock. The quality of the Portal Measurement Modules will
          allow ship-to-stock, without need of incoming inspection/test. Philips
          may periodically audit via a functional test a sample of the delivered
          Portal Measurement Module with a goal of acceptable failure rate of 1
          per 100 units.

4.   SCOPE OF DELIVERY.

     4.1  Forecasting and Ordering. Philips shall issue to Diametrics a monthly
          written, rolling, non-binding six (6) month forecast of its purchase
          of Portal Measurement Products. Such forecasts shall be updated
          monthly. Philips shall issue binding written purchase orders for
          Portal Measurement Products at least sixty (60) days prior to the
          proposed shipping date for such items. All purchase orders in excess
          of Philips' forecast shall be subject to written acceptance by
          Diametrics. Diametrics will use reasonable efforts to supply such
          items in a timely fashion,

                                       3
<PAGE>

          subject to Diametrics' reasonable production capabilities and provided
          that such purchase orders are consistent with Philips' forecasts.

     4.2  Fluctuations in Orders. The parties shall address purchasing of
          components and materials as provided in Section 4.1(c) of the
          Amendment. In addition, Diametrics will diligently monitor its supply
          chain and its production processes and will promptly inform Philips of
          any anticipated interruption or inability to supply Portal Measurement
          Products to Philips to meet its forecasts or its firm, binding
          purchase orders, in order to permit Philips to assess the
          manufacturing situation, to inform its sales and planning personnel to
          attempt to adjust for such shortfall, and to advise and assist
          Diametrics, at Diametrics' expense in its efforts to minimize or avert
          such interruption in or inability to supply Portal Measurement
          Products.

5.   DELIVERY.

     5.1  Purchase Orders for Portal Measurement Products. Philips shall be
          entitled to use its then current standard purchase order for its
          purchases hereunder. In the event of a conflict between the terms of
          any such purchase order and the terms of this Manufacturing Agreement,
          the terms of this Manufacturing Agreement shall take precedence.
          Additional terms included in the purchase order that are not terms of
          this Manufacturing Agreement will be subject to prior mutual written
          agreement.

     5.2  Terms for Delivery. All deliveries of Portal Measurement Products and
          Consumables shall be made by Diametrics F.O.B. Diametrics U.S. or
          European facility. Title and risk of loss shall pass to Philips at the
          time of tender at Diametrics' facility to the carrier designated by
          Philips. Upon delivery to Philips' designated carrier, Philips will
          assume title and risk of loss, and will be responsible for
          transportation, and, if applicable, export of such products from the
          country of manufacture and shall be entitled to any duty drawback for
          which the products qualify. Diametrics shall provide Philips, upon
          Philips' reasonable request and at Philips' expense, reasonable
          substantiation and assistance with respect to such duty drawbacks. The
          pricing for products excludes, and Philips shall pay, all shipping,
          handling and insurance costs for and other costs of transporting such
          products after delivery to the F.O.B. point.

     5.3  Diametrics Supply Obligation. Diametrics shall manufacture the Portal
          Measurement Products in accordance with the applicable specifications
          and in accordance with the FDA, EU and all applicable regulations.

6.   PRICES.

     6.1  Prices. Portal Measurement Products shall be supplied at the prices
          set forth in Schedule 4. All prices are F.O.B. Diametrics
          manufacturing facility.

                                       4
<PAGE>

     6.2  Price Changes. Prices may be changed upon ninety (90) days written
          notice by Diametrics. Any changes will not impact orders received
          prior to the date of such change.

     6.3  Terms of Payment. All payments for Portal Measurement Products shall
          be due and payable within thirty-five (35) days of the date of the
          applicable invoice. Philips shall make all payments in immediately
          available funds to the location and in the manner reasonably
          designated by Diametrics from time to time. A late fee shall be paid
          by Philips on any amount not received by Diametrics when due at a rate
          of 1.5% per month on all unpaid amounts, or the maximum rate permitted
          by law, whichever is less. As between the Parties, Philips shall be
          responsible for all taxes relating to the Portal Measurement Products
          so purchased (except for taxes on Diametrics' net income).

7.   INVOICE ADDRESS.

     All of Diametrics' invoices are the addressed to:

              Philips Medizin Systeme Boeblingen Gmbh
              Financial Service Center
              Postfach 1471
              71034  Boeblingen/ Germany

8.   CONTACT PERSONS. Diametrics and Philips shall each designate a Contact
     Person who will meet (by phone or in person) as required to discuss and
     monitor any manufacturing and manufacturing capacity issues for the Portal
     Measurement Products. Both Parties shall appoint additional contact persons
     in Schedule 5 to facilitate communication regarding specific aspects of the
     manufacture and supply of the Portal Measurement Products hereunder.

9.   TERM AND TERMINATION OF THIS MANUFACTURING AGREEMENT.

     9.1  Term. This Manufacturing Agreement shall become effective on the
          Effective Date and shall terminate on October 31, 2004, unless
          terminated as provided herein.

     9.2  Termination for Material Breach. Either party may terminate this
          Manufacturing Agreement if the other party materially breaches this
          Manufacturing Agreement and fails to remedy such breach within ninety
          (90) days written notice from the non-breaching party. Material
          breaches shall include failure by Diametrics to meet the agreed
          quality standards for the Portal Measurement Products as set forth in
          Schedule 2.

     9.3  Effect of Termination. No termination or expiration of this
          Manufacturing Agreement shall affect or discharge any obligations,
          rights, disclaimers, conditions or limitations of either Party which
          arose prior to the effective date of

                                       5
<PAGE>

          such termination. In addition, Articles 15 (Confidentiality) and 21
          (Miscellaneous) and any Sections necessary to give effect to this
          Article 9 shall survive any termination or expiration of this
          Manufacturing Agreement.

10.  TECHNICAL ALTERATION. Diametrics agrees and undertakes to effect technical
     alterations (i.e., any required technical changes due to third party
     supplier changes, such as part obsolescence, revision changes and the like)
     to the Portal Measurement Modules only after written consent of Philips.

11.  Product Change Notification. No process changes, design changes,
     geographical relocation of manufacturing processes, or process step
     discontinuances affecting the electrical performance (whether specified or
     not), the mechanical form or fit, the environmental compatibility or
     material chemical characteristics, or the life reliability of Portal
     Measurement Products, but excluding any changes that do not affect the fit,
     form or function of the Portal Measurement Products (hereinafter
     collectively called "Changes") shall be made or incorporated in Portal
     Measurement Products without following the change notification process
     established herein. Diametrics shall give Philips written notice of any
     proposed change via the established Philips/Diametrics change order process
     and provide evaluation samples and other appropriate information as
     specified by Philips. For planned/scheduled changes that require
     re-qualification by Philips, Diametrics notice must be received by Philips
     at least three (3) months prior to the first proposed shipment of any such
     Products. For changes not requiring re-qualification by Philips, Diametrics
     notice must be received by Philips at least one (1) month prior to the
     first proposed shipment unless mutually agreed by the Parties. The Supplier
     Change Notification Agreement process Q2920-00094 will be followed. All
     product changes will be reflected in the 10 digit serial number by an
     appropriate change of the year (digit 3) and/or week of the change (digit
     4-5) as appropriate.

12.  REPLACEMENT REQUIREMENTS/EXCHANGE PRODUCTS. Diametrics guarantees to
     Philips that replacement and or exchange Portal Measurement Modules will be
     supplied for a further seven (7) years following delivery of the last
     series/batch. After expiration of this seven (7) year period, Diametrics
     shall make available replacements (backward compatible or equivalent) in
     accordance with the respective technical possibilities or give Philips the
     possibility of placing a final order of a reasonable quantity, thus
     guaranteeing Philips a supply up until the end of the service period. The
     prices, terms and conditions as well as the technical feasibility of these
     two cases will form the subject of a separate agreement at the time of
     delivery of the last series/batch.

13.  REPAIRED / EXCHANGED PRODUCTS.

     Diametrics will provide a test and repair service for Portal Measurement
     Modules returned from the customers (internal or external) as faulty
     whether still in warranty or out of warranty. Philips will provide
     Diametrics' field failure information. Philips will pay Diametrics the
     exchange repair cost per Schedule 4. Diametrics shall perform root cause
     analysis (sub-assembly level) on any failed unit in order to determine
     failure mode.

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     Diametrics will provide a pareto trend analysis of failure data for all
     failed units to Philips on a monthly basis.

14.  DOCUMENTATION

     14.1 Rights of Access. Philips shall have the right to access and use
          Diametrics' manufacturing documentation for the Portal Measurement
          Products to comply with regulatory requirements.

     14.2 Record Retention. Diametrics shall retain records of any safety,
          quality and reliability related data relating to the Portal
          Measurement Products as well as any data necessary for "Current Good
          Manufacturing Practices" (CGMP, as required by FDA), the "In Vitro
          Diagnostics Directive" (the IVDD, as required by the European Union)
          and the "Medical Device Directive" (MDD, as required by the European
          Union), to the extent provided under Schedule 1, Required Quality
          Data.

     14.3 Access to Filings. Diametrics assures the access of DHR (Device
          History Record), DHT (Device History Traveler), and DMR (Device Master
          Record) in support of Philip's timely answering of Portal Measurement
          Product questions from the FDA. Diametrics shall cooperate with
          Philips in connection with its regulatory obligations to provide to
          Philips, on a timely basis, the necessary reports relating to
          complaints and product performance issues regarding the Portal
          Measurement Products. Upon reasonable request, Diametrics shall
          promptly make such reports (on behalf of Philips) directly to the
          appropriate regulatory authorities.

15.  CONFIDENTIALITY.

     15.1 Non-Use and Non-Disclosure. Each Party acknowledges and agrees that
          all the other Party's Confidential Information is confidential to the
          disclosing Party. Each Party shall take the same reasonable measures
          as it uses to protect its own confidential information from the
          unauthorized disclosure or misuse to protect the other Party's
          Confidential Information from unauthorized disclosure or misuse,
          including without limitation, any disclosure by its employees, agents,
          contractors, permitted sublicensees, or consultants of the other
          Party's Confidential Information. As used herein, the term reasonable
          measures shall mean at least those measures a Party applies to the
          protection of its own Confidential Information and the term misuse
          shall mean use for any purpose other than as permitted or required
          hereunder.

     15.2 Marking. To be entitled to protection as Confidential Information, all
          Diametrics or Philips documents containing that Party's Confidential
          Information shall be appropriately and clearly marked as
          "Proprietary," "Secret," "Confidential," or other words to similar
          effect. If a disclosure of Confidential Information is made orally, as
          in a meeting, the disclosing Party shall indicate the nature of that

                                       7
<PAGE>

          information at the time of its disclosure and shall confirm such
          designation in writing within ten (10) days of the date of such
          disclosure to the receiving Party.

     15.3 Exclusions. Information shall not be considered Confidential
          Information hereunder if it:

          (a)  was already in the possession of the receiving Party prior to its
               receipt from the disclosing Party;

          (b)  is, or becomes, part of the public knowledge or literature
               through no fault, act or omission of the receiving Party,
               provided, Confidential Information shall not be deemed to have
               entered the public domain by reason of its having been filed with
               any regulatory authority; provided the disclosing Party has taken
               advantage of any procedures available to protect confidentiality,
               including FOIA marking and protective orders;

          (c)  is, or becomes, available to the receiving Party from a source
               other than the disclosing Party, which source has rightfully
               obtained the same information and has no obligation of
               confidentiality to the disclosing Party with respect to it;

          (d)  is made available on an unrestricted basis by the disclosing
               Party to a third party unaffiliated with the disclosing Party; or

          (e)  is required to be revealed pursuant to law or requirements of any
               securities exchange on which a Party's shares are listed and
               traded, provided, however, the receiving Party which is under any
               such requirement of law shall give reasonable notice to the
               disclosing Party of such requirement and shall cooperate with the
               disclosing Party, at the disclosing Party's expense in reasonable
               legal efforts to limit or mitigate any such revelation so as to
               preserve the proprietary nature of any Confidential Information
               contained therein.

     15.4 Duration; Surviving Obligation. This Article 15 shall be deemed to
          cover and include any non-public information disclosed by a Party to
          the other during the course of their negotiations of this
          Manufacturing Agreement, whether or not marked or indicated as
          provided in Section 15.2. Each Party's obligations of non-use and
          non-disclosure of the other Party's Confidential Information shall
          apply during the term of this Manufacturing Agreement and shall also
          survive for a period of three (3) years after its termination for any
          reason.

     15.5 Confidentiality of this Agreement. The terms of this Manufacturing
          Agreement itself and the Schedules hereto shall be deemed to be
          Confidential Information hereunder. In the event that a Party is
          required to disclose the content of this Manufacturing Agreement
          pursuant SEC requirements or requirements of any securities exchange
          on which a Party's share are listed and traded, such Party

                                       8
<PAGE>

          shall use its reasonable efforts to obtain confidential treatment of
          at least the terms of Schedules 1, 2, 4, 6 and 7.

16.  WARRANTY.

     16.1 Warranty Terms. Diametrics warrants to Philips that the Portal
          Measurement Products at the time of their delivery by Diametrics to
          Philips (a) shall meet the Specifications as set forth on Schedule 2;
          (b) shall have been manufactured in accordance with all laws and
          regulations applicable to their manufacture in those jurisdictions in
          which Philips is distributing the Portal Measurement Products
          (provided that Philips gives Diametrics at least ninety (90) days
          written notice of any jurisdictions in addition to those in effect as
          of the Effective Date of this Amendment); (c) shall be new or newly
          manufactured; and (d) shall be of good and merchantable title, free of
          liens and encumbrances. Diametrics shall, promptly, at Diametrics'
          sole option, replace, repair or make a purchase price (in the amount
          paid by Philips to Diametrics) refund for any of such Portal
          Measurement Products proved to be non-conforming, provided that
          written notice and reasonable documented evidence of each warranty
          claim and the fact that the failure occurred during the warranty
          period is received by Diametrics within thirty (30) days after the
          expiration thereof. Diametrics shall have the sole right to verify
          such non-conformance. Such replacement, repair or refund shall be
          Philips' sole remedy hereunder. Unless otherwise agreed by the
          Parties, the warranty period under this Section 16.1 for (1) the
          Portal Measurement Modules shall be eighteen (18) months from the date
          of shipment to Philips; (2) any DeviceSet/DeviceCom Software shall be
          forty-five (45) days from the date of delivery of such software to
          Philips' customer; and (3) any Portal Measurement Accessory shall be
          ninety (90) days from the date of shipment to Philips. If requested by
          Diametrics, Philips shall return the non-conforming Portal Measurement
          Products to Diametrics at the time of submission of the warranty claim
          therefore. Philips agrees to provide Diametrics sufficient notice of
          additional countries in which it intends to distribute the Portal
          Measurement Products to permit Diametrics to meet its obligations
          under subsection (b) of this Section 16.1.

     16.2 Exclusions. This warranty does not apply to Portal Measurement Modules
          or Portal Measurement Accessories that have been repaired, modified or
          tampered with by anyone other than Diametrics qualified technical
          personnel, nor to Portal Measurement Modules or Portal Measurement
          Accessories that have been exposed (by customer negligence) to adverse
          conditions through improper installation, application or maintenance.

     16.3 NFF Procedures. Any Portal Measurement Modules returned to Diametrics
          with no fault found (NFF) shall undergo twenty four (24) hour
          "burn-in" (i.e. 4 cycles of Treadmill test) upon no fault
          determination. Following completion of burn-in, the Portal Measurement
          Modules shall be subjected to a full functional test. Provided no
          fault is found, the Portal Measurement Modules shall be labeled (i.e.

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<PAGE>

          DHR annotated) prior to return to Philips in order to identify the
          Portal Measurement Modules, should they every be returned again. If
          the same Portal Measurement Modules should be returned to Diametrics'
          facility for a second time, and NFF, the Portal Measurement Modules
          shall be analyzed and replaced. For Portal Measurement Module's second
          NFF, the pc boards will be replaced and product fully tested before
          returned to Philips. If same Portal Measurement Module is returned a
          third time and NFF, the entire Portal Measurement Module will be
          removed from use and replaced at Diametrics' expense. The foregoing
          obligations apply only if the Portal Measurement Module is under
          warranty.

     16.4 Warranty Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 16
          OF THIS AGREEMENT, DIAMETRICS MAKES NO REPRESENTATIONS OR WARRANTIES,
          EXPRESSED OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF
          MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

     16.5 Customer Warranties. Philips shall be entitled to warrant the Portal
          Measurement Products to its customers on terms it deems appropriate;
          provided that Philips shall bear any expenses it may incur with
          respect to such warranties, to the extent that such warranties exceed
          the scope or term of the express warranties made by Diametrics
          hereunder.

     16.6 Customer Complaints, Warranty and Out-of Warranty Repair. Philips will
          be responsible for handling customer complaints regarding the Portal
          Measurement Products. Diametrics will provide reasonable assistance to
          Philips in resolving such customer complaints. Diametrics will accept
          the return of any Portal Measurement Products that do not conform to
          the warranties set forth in Section 16.1, and will repair or replace
          any such defective Portal Measurement Product (or refund Philips'
          purchase price) as provided in Section 16.1. Philips agrees to
          maintain an inventory of Portal Measurement Products to meet its
          on-going repair obligations; provided that Diametrics agrees to
          maintain a reasonable inventory of Portal Measurement Products to
          support significant Product warranty issues. As between Diametrics and
          Philips, Philips will be responsible for providing its customers with
          such replacement Portal Measurement Products for use while such
          defective Products are being repaired or replaced. Diametrics will
          also provide out-of-warranty repair service on the Portal Measurement
          Modules, on the terms set forth on Schedule 4 for a period of not less
          than seven (7) years after last production run of the Portal
          Measurement Module (or such longer period as may be required by local
          laws).

     16.7 Return Procedures. Reasonable attempts by Philips 1st Level
          Application Support (Response Centers) to determine failure mode(s) of
          the Portal Measurement Products is assumed. This information will be
          transferred to Diametrics prior to any Portal Measurement Products
          being returned from the field. This will provide initial information
          to assist in the investigation of the failed Portal Measurement
          Product. Upon receipt of a failed Portal Measurement

                                       10
<PAGE>

          Module, the unit will go through the standard repair process, which
          includes the known repair (if applicable) and then 1 cycle of
          Treadmill testing (roughly equivalent to 6 hour "burn-in"), and the
          subsequent quality tests. If the failure mechanism cannot be
          identified the unit will undergo the quality (diagnostic) tests, the
          repair pursued and then a full retest of the Portal Measurement Module
          (including Treadmill and the quality tests). If the fault cannot be
          re-created internally, and it passes all testing requirements the unit
          will be sent back out as acceptable (and documented as no fault found
          ("NFF") on the DHR). Diametrics will follow the Supplier Corrective
          Action Report ("SCAR") process or Distributor Action Request ("DAR")
          process to notify Philips if there is are multiple failures of any one
          component of any of the Philips engineered components. Diametrics,
          likewise will also pursue a Corrective Action Report ("CAR") if there
          are multiple failures of any one component of any Diametrics
          engineered components. Philips will be notified at the time of the CAR
          initiation.

     16.8 Repair Period. Diametrics agrees to use commercially reasonable
          efforts to repair or replace the non-conforming Portal Measurement
          Products and return conforming Portal Measurement Products to Philips
          within four (4) weeks of receipt of Diametrics. Failed units returned
          from the field that are out-of-warranty will be repaired within 10
          working days for customer units and within 30 days for Service
          Logistics International ("SLI") exchange units.

17.  QUALITY PERFORMANCE. If the failure rate of the Portal Measurement Module
     exceeds specified limits, (e.g. as per Section 3.5) and/or the Philips
     field failure rate is higher than the expectation (i.e. for Portal
     Measurement Module less than 4% the first year with a decrease to 1% the
     second year), Diametrics commits to initiate an SCAR, DAR or CAR driven
     corrective action project for quality / reliability improvements on Portal
     Measurement Modules (material, processes, subassemblies) effective per the
     SCAR or CAR.

     The goal for the Portal Measurement Module is not to exceed an annual
     failure rate (AFR) of 4% the first year with a decrease to 1% the second
     year for the Portal Measurement Module within a one year rolling period
     starting when the contract becomes effective:

          AFR =  # units failed/ #units shipped by Philips  (annualized)

     Diametrics and Philips will do a monthly failure clearance on a common
     basis before entering the numbers into the calculation.

18.  PRODUCT RECALL.

     18.1 If either Party believes that a recall of any Portal Measurement
          Product manufactured under this Manufacturing Agreement is desirable
          or required by law, it shall promptly notify the other Party. The
          Parties shall then discuss reasonably and in good faith whether such
          recall is appropriate or required and the

                                       11
<PAGE>

          manner in which any mutually agreed recall shall be handled. This
          Section 18 shall not limit the obligations of either Party under law
          with respect to recall of Portal Measurement Products required by law
          or properly mandated by governmental authority. Voluntary recalls
          shall be conducted by mutual agreement (with such agreement not to be
          unreasonably withheld) provided that if mutual agreement is not
          reached, either Party may individually conduct the voluntary recall in
          question in a manner consistent with its own regulatory guidelines and
          criteria. The "Recalling Party" shall bear all costs and expenses of
          any voluntary recall of any Portal Measurement Products and shall
          reimburse the "Other Party" for the reasonable, out-of-pocket costs
          incurred by the Other Party as a result of such recall, including the
          replacement cost of any Portal Measurement Products affected thereby,
          unless (i) such recall is unjustified and neither requested nor
          classified as a recall by a governmental agency or delegee or (ii) the
          cause or basis of such recall is attributable to a condition, fact or
          action that constitutes (A) a breach by the Other Party of any of its
          obligations hereunder or (B) negligence or willful misconduct of the
          Other Party in which case the Other Party will be liable for the costs
          and expenses of such recall, and shall reimburse the Recalling Party
          for the reasonable, out-of-pocket costs incurred by Recalling Party as
          a result of such recall, including the replacement cost of any Product
          affected thereby. The Parties shall cooperate fully with each other in
          effecting any recall of the Products pursuant to this Section 18,
          including communications with any customers or to the public.

     18.2 If any governmental agency having jurisdiction (including without
          limitation the FDA) shall request or order any corrective action with
          respect to Portal Measurement Products supplied hereunder, including
          any Portal Measurement Product recall, customer notice, restriction,
          corrective action or market action or any Product change, Diametrics
          shall bear the costs and expenses of such corrective action and shall
          reimburse Philips for the reasonable, out-of-pocket costs incurred by
          Philips as a result of such corrective action, including the
          replacement cost of any Products affected thereby, to the extent that
          the cause or basis of such corrective action is attributable to a
          condition, fact or action that constitutes (A) a breach by Diametrics
          of any of its obligations hereunder or (B) negligence or willful
          misconduct of Diametrics. Philips shall bear all other costs and
          expenses of such corrective action, and shall reimburse Diametrics for
          the reasonable out-of-pocket costs incurred by Diametrics as a result
          of such action, including the replacement cost of any Portal
          Measurement Product affected thereby.

                                       12
<PAGE>

19.  ENVIRONMENTAL CONSIDERATIONS.

     Diametrics agrees to provide commercially reasonable support to Philips, at
     Philips' written request and at Philip's expense, as required to meet
     United States and international environmental laws, regulations and
     standards applicable to the manufacture of the Portal Measurement Products.

20.  PRODUCT DISCONTINUANCES. Diametrics acknowledges its obligation to
     manufacture the Portal Measurement Products during the term of this
     Manufacturing Agreement; however, if the Portal Measurement Products will
     not be available from Diametrics prior to the conclusion of the term,
     Diametrics shall give written notice to Philips. Diametrics notice shall be
     given immediately upon Diametrics knowing about the unavailability, but in
     any event no less than six (6) months in advance of the last order date of
     the Products. In any event of termination of this Manufacturing Agreement
     and subject to Diametrics' manufacturing capacity, and in addition to any
     other remedies that Philips may have at law or in equity, Philips shall be
     entitled to determine its lifetime-buy quantities and to purchase such
     quantities in accordance with this Manufacturing Agreement for purchase and
     shipment by the end of the Term.

21.  MISCELLANEOUS PROVISIONS

     21.1 Entire Agreement. This Manufacturing Agreement, together with any
          Schedules or other Attachments hereto and the Amendment, constitutes
          the entire agreement between the parties in relation to this subject
          matter and as such, supersedes all prior and contemporaneous
          negotiations, agreements, representations, understandings and
          commitments with respect thereto and shall take precedence over all
          terms, conditions and provisions on any purchase order form, or order
          acknowledgment, or order release purporting to address the same
          subject matter.

     21.2 Modification. This Manufacturing Agreement shall not be released,
          discharged, changed or modified in any manner except by a writing
          signed by the duly authorized officers or agents of each Party hereto,
          which writing shall make specific reference to this Manufacturing
          Agreement and shall express the plan or intention to modify same.

     21.3 Severability. If any provision or provisions of this Manufacturing
          Agreement shall be determined to be unenforceable, then the Parties
          shall in good faith negotiate for a substitute provision addressing
          the same subject matter as the unenforceable provision(s) as may then
          be considered to be enforceable, provided, however, if no substitute
          provision can be formulated which shall be accepted by the Parties as
          enforceable, this Manufacturing Agreement shall nonetheless continue
          in full force and effect with the unenforceable provision(s) stricken
          here from. In such case the applicable law shall apply with regard to
          unenforceable and / or void provisions.

                                       13
<PAGE>

     21.4 Governing Law. This Manufacturing Agreement shall be governed by and
          construed in accordance with the laws of the United States and the
          State of Delaware, excluding its choice of law rules. The Parties
          consent to the jurisdiction of the state and federal courts of
          Delaware.

22.  SCHEDULES. Should conflicts occur between this Manufacturing Agreement and
     any part of the following Schedules, the requirements of this Manufacturing
     Agreement shall govern. The following Schedules form an integral part of
     this Manufacturing Agreement:

     Schedule 1:  Required Quality Data
     Schedule 2:  Portal Measurement Products and Specifications
     Schedule 3:  Philips Terms of Delivery
     Schedule 4:  Prices/Quantities
     Schedule 5:  Contact Persons
     Schedule 6:  Cosmetic Defect Guideline
     Schedule 7:  Cosmetic Inspection Guideline


DIAMETRICS MEDICAL, INC.               PHILIPS MEDICAL SYSTEMS NORTH AMERICA
                                       COMPANY, A DIVISION OF PHILIPS
                                       ELECTRONICS NORTH AMERICA CORPORATION


By:                                    By:
   ---------------------------------      -------------------------------------
   David Kaysen, Chairman of the          Jay Mazelsky
   Board and Chief Executive Officer      Vice-President & General
                                          Manager - POCD

                                       14
<PAGE>



                                   SCHEDULE 1

                              REQUIRED QUALITY DATA

Diametrics assures 5 years of record retention of all the following quality and
reliability related data:

Starting on the Effective Date, Diametrics shall provide the following data to
Philips Procurement once every quarter:

1.   Outgoing data (Also known as F2 data) on each Portal Measurement Module:
          100% outgoing inspection means
          N = total (100%) each products tested.

2.   YIELD (overall - from incoming through outgoing -
          Philips expects a yield > 92%, per test station
          @ manufacturing, 1st cycle)

          2.1) and a pareto analysis of all materials failures,1st cycle.

          2.2) and a pareto analysis of all process failures, 1st cycle.

3.   A pareto analysis of all root cause failures (sub-assembly level) for
     returned products.



                                       1
<PAGE>


                                   SCHEDULE 2

                  PORTAL MEASUREMENT PRODUCTS & SPECIFICATIONS

Item         Part Number                Respective               Date of
             Description                Specification            Specification

1.     M3561A Portal Reader             B-M3561-60000-1*         09/12/03
       (M3561-6001)

2.     M3561-68001                      B-M3561-60000-1          09/12/03
       Exchange repair Portal

3.     M3565A temp card                 B-M3561-60000-1          09/12/03
       (DMI 467900)

4.     M3561-66403 edge connector
       (DMI 516300)                     B-M3561-60000-1          09/12/03

5.     M3564A DeviceSet w/DeviceCom
       (DMI 464218)                     B-M3561-60000-1          09/12/03

6.     M3672A edge connector
       Cleaning kit (DMI 450000)        N/A                      N/A

7.     Cosmetic Defect Guideline        see schedule 6

8.     Cosmetic inspection              see schedule 7

*B-M3561-60000-1 is the M3561A Portal Product Specification. Rev. A of such
specification applied prior to 9/12/03. To the extent of any conflict between
Rev. A or B of the M3561A Portal Product Specification and Diametrics'
manufacturing process document MP46000 Rev. X., MP46000 shall apply.


                                       1
<PAGE>


                                   SCHEDULE 3

                                TERMS OF DELIVERY

-    Delivery and Packaging Standard of Philips HP Dwg. A-5961-3658-1, Rev. D

-    EDI - capabilities for order receiving and acknowledgment

-    Shipping date as specified on Philips-Purchase Order

-    Date of dispatch:  Philips Delivery Date minus 7 days

-    Mode of transport:  Airfreight

-    Each shipment must indicate the exact address of the addressee on the
     outside of the packaging.

-    Products are shipped F.O.B. point of origin.

     FOR SHIPPING AND PRODUCTION AND FAILURE ANALYSIS:

              PHILIPS MEDIZIN SYSTEME BOEBLINGEN GMBH
              HEWLETT PACKARD STR. 2
              71034 BOEBLINGEN /GERMANY
              POCD PRODUCTION ENGINEER
              GEBAEUDE 5/ EBENE 3 2 F15

-    The minimum order and ship quantity is 10 pieces.
-    Dangerous goods must be packed and labeled in accordance with the relevant
     regulations (Postal regulations, Regulation on the transport of dangerous
     goods, etc.).

-    Each shipment must contain a delivery voucher indicating the Philips order
     number and the Philips part number.

-    The total number of Portal Measurement Modules shipped shall be exactly as
     specified on the Philips purchase order.



                                       2
<PAGE>


                                   SCHEDULE 4

                       DIAMETRICS/PHILIPS TRANSFER PRICES

1.        M3561A Portal Reader                  *
          (M3561-60001)

2.        M3561-68000           Exchange repair Portal

The first two rates assume the unit is part of the exchange program, whereas the
third rate assumes the unit is not part of the exchange program.

<TABLE>
<S>                                                           <C>
- Combined repair/recondition rate (if outside warranty):     *
         (assumes part of exchange program, and covers
         reconditioning and functional repairs while
         outside of the standard warranty period)

- Recondition only rate (would apply if within warranty):     *
         (assumes part of exchange program, and covers
         reconditioning and functional repairs while within
         the standard warranty period, e.g., reconditioning
         is not covered by warranty)

- Repair only rate (no recondition occurs):                   *
     (assumes not part of exchange program)

3.        M3565A temp card                                    *
          (DMI 467900)

4.        M3561-66403 edge connector                          *
          (DMI 516300)

5.        M3564A DeviceSet w/DeviceCom                        *
          (DMI 464218)

6.        M3672A edge connector                               *
          Cleaning kit (DMI 450000)

7.        M3561-40003 edge connector cover                    *
          (DMI 466400)
</TABLE>


*  Confidential treatment requested


                                       3
<PAGE>


                                   SCHEDULE 5

                                 CONTACT PERSONS

FOR PHILIPS:

MANUFACTURING            E-MAIL: GUIDO.SARNOWSKI@PHILIPS.COM
                         TELEPHONE:+49 (07031) 463-1218
                         FAX:+49(7031)463-1660

PURCHASING DEPT.         E-MAIL: GABRIELE.SOUTHWOOD@PHILIPS.COM
                         TELEPHONE:+49(07031)464-1770
                         FAX:+49 (07031)464-1881

MATERIALS ENGINEERING    E-MAIL: JOCHEN.SPONHOLZ@PHILIPS.COM
                         TELEPHONE:+49(07031)463-1932
                         FAX:+49(7031)463-1660

ORDER PROCESSING         E-MAIL:GABRIELE.SOUTHWOOD@PHILIPS.COM
                         TELEPHONE:+49(07031)464-1770
                         FAX:+49(07031)464-1881

--------------------------------------------------------------------------------


FOR DIAMETRICS:

OPERATIONS                                E-MAIL:dnorton@diametrics.com
Diane Norton                              TELEPHONE:  651-638-1153
                                          FAX:  651-638-1060

PURCHASING DEPT.                          E-MAIL:   vjereczek@diametrics.com
Vern Jereczek                             TELEPHONE:  651-638-1162
                                          FAX:  651-638-1060

MATERIALS ENGINEERING/MANUFACTURING       E-MAIL:   jkurkowski@diametrics.com
Jim Kurkowski                             TELEPHONE:  651-638-1112
                                          FAX:  651-638-1060

ORDER PROCESSING                          E-MAIL: acottrell@diametrics.com
Amy Cottrell                              TELEPHONE:  651-638-1191
                                          FAX:  651-638-1060

                                       4
<PAGE>



                                   SCHEDULE 6
                            COSMETIC DEFECT GUIDELINE

                    Exchange Portal Cosmetic Defect Guideline

PURPOSE

This document provides guidelines for inspecting used (also called exchange)
Portal Measurement Modules during the repair process. The overall purpose of
this guideline is to ensure that exchange products which are shipped to
customers are in a condition which will lead to consistent customer
satisfaction.

SCOPE

This document does not cover cosmetic specifications for individual recovered
parts of assemblies, nor cosmetic specifications for new whole units. This
guideline only applies to the Portal Measurement Module and its related exchange
parts.

Because this guide applies to refurbished product only, inspectors should be
examining the product for end-user and shipping induced damage, or wear, not
defects caused during manufacturing. Only cosmetic defects that could be caused
by end-user or shipment can fail the product since any manufacturing-induced
defects have already passed manufacturing inspection. For that reason,
manufacturing-caused cosmetic defects such as blush, flash, flow marks, haze,
sinks, and weld lines should not be considered as defects when examining
refurbished units.

GENERAL GUIDELINES

Cosmetics, in this context refer to superficial, visual appearance of the
product and as such do not affect the functioning of the product. Any defect
that interferes with the normal operation of the product, should be considered a
non-cosmetic defect. In the strictest sense, missing parts are not considered a
cosmetic defect, even if they are not needed for the operation of the product
(example: missing label). Note, however, that a missing part would be considered
a defect, and would necessitate some form of repair or action. Also, it is very
important to realize that cosmetics are largely subjective, so inspectors should
apply their best judgment in all cases.

The guiding principal when applying this judgment should be that this product is
not a new product and should not be considered as such. A balance needs to take
place between attempting to achieve near perfect cosmetic appearances which
would result in a large financial liability to the company versus the
possibility of having a high customer dissatisfaction rate if we were to ship
exchange product which looks shabby.

EVALUATION CRITERIA

Cosmetic defects will be evaluated using a weighted criteria basis based on the
location of the defect and the severity of the defect. Guidance is provided in
Table 1.


                                       5
<PAGE>

CUSTOMER ADDED LABELS

Any labels or marking put on a system by customers must be removed . This
includes such items as inventory tags and safety stickers. All glues used to
attach these labels must also be removed.

<TABLE>
<CAPTION>

                                (a)   Type of Cosmetic Defect
    SURFACE
      AREA        --------------------------------------------------------------------------------------
    LOCATION         PAINT                         HEAT                        SMALL          DEEP
-----------------  DISCOLOR-      ABRASION       DISCOLOR-      PITS,        SCRATCHES      SCRATCHES
                   ATION OR                       ATION         NICKS        (MINIMAL-        (VERY
                    OR WEAR                                    GOUGES-      LY VISIBLE)      VISIBLE
                                                               (NOTE 2                       NOTE 2)
                  ------------- --------------- ------------ ------------ -------------- ---------------

<S>               <C>           <C>             <C>          <C>          <C>            <C>
PRODUCT           Minor OK-     Minor OK-       Minor OK-    Minor OK     Minor OK       OK
SERIAL # LABEL

                  Note 1        Note 1          Note 1       Note 1       Note 1         Note 1


LOGO "PORTAL"     Very minor;   Very minor;     Very minor;     None      Very minor;       None
(TOP)
                  Still         Still clearly   Still                     Still
                  clearly       read name       clearly                   clearly read
                  read name                     read name                 name

DISPLAY SCREEN
(GLASS AREA)          N/A            None           N/A         None          None          None

CASE TOP          Minor OK      Minor OK        Minor OK     None         Minor OK       None

CASE BOTTOM       Minor OK      Minor OK        Minor OK     Minor OK     Minor OK       Minor OK
----------------- ------------- --------------- ------------ ------------ -------------- ---------------
</TABLE>

NOTE 1: Damage to the label that makes the reading of the serial number, product
number, impossible or difficult to read are not acceptable.
NOTE 2: Judgment needed here. A scratch, gouge, or nick, could be deep but small
in size (width and length). If this defect is small in size it may be acceptable
if in a location where seldom seen).



                                       6
<PAGE>



                                   SCHEDULE 7

                          COSMETIC INSPECTION GUIDELINE


<TABLE>
<CAPTION>
ACCEPTANCE CRITERIA

<S>                      <C>
Checking Contents        Packaging / box labeling
                         Portal
                         Edge connector cleaning kit
                         Certification sheet

Checking Portal          Confirm Correct Label, Placement & Affixment for the Unit
                         Ensure that there are 4 Rubber Feet and no abnormal
                         scuffing or damage, other than normal production scuffs
                         Check for 4 torque screws on the bottom of Portal
                         Check for serial port cover and 2 torque screws
                         Check for light pipe
                         No scratches or fingerprints on screen
                         No dust between the touchscreen and display
                         No residues on portal
                         Sensor/IR probe flush or less
                         Discoloration, Flow marks, and Haze:  Two per surface; max dimension;
                         0.5 mm (.02")
                         Weld Line Exceptions:  Weld lines of up to 9.5mm (.375") long shall be
                         allowed next to the IR Probe hole and the Light Pipe hole in the M3561-
                         40000 Top Housing
                         Pits and Specks:  Two per surface; max dimension; 0.5 mm (.02)
                         Scratches:  Two per surface; max dimension: 0.3 mm x 0.8 mm (.01" x
                         .03")
                         Sinks:  Two per surface; max dimension: 0.8mm (.03")
                         Weld Lines per surface:  Two; max dimension:  3 mm (.125")
                         No visual gasket btw. Touchscreen and top housing

Checking portal box      Edge connector cleaning kit in Box
                         Certificate of Conformance
                         No crumb or dirt in the box
                         No bent connector pins
                         Confirm Correct Label, Placement & Affixment / for the BOX
</TABLE>



                                       7

</TEXT>
</DOCUMENT>
