June 12, 2006

James A. Wylie, Jr.
President and Chief Executive Officer
Diomed Holdings, Inc.
One Dundee Park
Andover, MA 01810

Dear Jim:

This letter will confirm the agreement ("Agreement") under which Musket Research
Associates,  Inc.,  a  Massachusetts  corporation  ("MRA")  is engaged by Diomed
Holdings,  Inc., or any affiliate of Diomed Holdings,  Inc. (collectively "DIO",
"Diomed" or the "Company") to assist the Company as described below.

1. Engagement

1.1. Diomed hereby engages and retains MRA as a nonexclusive  finder/advisor  in
connection with a proposed private placement to MRA Contacts (as defined herein)
and  other  investors  in the  aggregate  amount  of at least  $7.5  million  in
equity-related  securities such as common stock or preferred stock  exchangeable
for DIO common stock and warrants to purchase DIO common  stock,  or pursuant to
such other terms and  conditions  as the Company may approve (the  "Placement").
MRA hereby  represents  and warrants to the Company that MRA is a  duly-licensed
broker-dealer and has all requisite approvals, power, licenses and registrations
as are required to provide its services to the Company as set forth herein.


2. Services

2.1. MRA's services hereunder shall include the following:

      (a) Analyze the financial  performance  and projections of the Company and
provide advice regarding the appropriate financing structure for the Placement;

      (b) Assist in the  development  of  presentation  materials  for  investor
solicitations. MRA will only send materials approved by the Company or otherwise
already in the public domain to prospective investors;

      (c) Contact qualified  investors and send the necessary documents directly
or through  Diomed.  Documents  sent by the  Company at MRA's  request  shall be
accompanied  by a cover letter  and/or  business card from MRA, or, if these are
not available, a specific reference to the introduction by MRA;

      (d) After appropriate  screening by MRA, in consultation with the Company,
schedule  meetings  and  accompany  Diomed   representatives   to  meetings  (or
participate  in  telephonic  conferences)  with  interested  parties  and  other
advisors  to the  Company as  reasonably  requested  by the  Company as often as
scheduling allows;



<PAGE>

      (e) Assist the Company in negotiating the restructure of certain covenants
in  the  outstanding   preferred  stock  to  permit  its   reclassification   to
stockholders' equity; and

      (f) Assist the Company in the negotiation of the definitive  documentation
pertaining to the  Placement,  manage  ongoing  discussions  and  coordinate the
execution  and delivery of definitive  Placement  documents and the purchase and
sale of DIO securities to MRA Contacts pursuant to the Placement.

2.2.  MRA  acknowledges  and agrees  that the  Placement  offering  will be made
pursuant to the private offering  exemption from registration under Section 4(2)
of the Securities Act of 1933 and Rule 506 promulgated thereunder,  and that DIO
securities are to be offered and sold only to "accredited investors" (as defined
in the SEC's Regulation D) who also satisfy any applicable  securities laws. MRA
will not make any general solicitation in connection with the Placement and will
conduct its obligations  hereunder in a manner  consistent with the requirements
of Rule 506. Before each closing,  DIO will validate the  "accredited  investor"
status  of each MRA  Contact  with  assistance  from  MRA,  via the  traditional
suitability questionnaire, copies of which will be provided to MRA upon request

2.3. The potential investors to be contacted by MRA are subject to acceptance by
DIO in its sole and absolute discretion,  and DIO is under no obligation to sell
any of its  securities  to such parties or to any persons.  MRA is and shall for
all purposes be deemed to be an independent  contractor and shall have no right,
power  or  authority  to  create  any  obligations  on  behalf  of DIO.  Without
limitation of the generality of the foregoing,  Diomed shall retain in its Board
of Directors  full  discretion as to the terms and  conditions of the Placement,
whether or not to consummate  the Placement and whether to accept any investment
by any  particular  investor  (including  any  MRA  Contact)  in the  Placement.
However,  DIO will keep MRA informed of any developments,  positive or negative,
that would be  presumed  to be  relevant  to the  successful  completion  of the
Placement.

3. Cash Fees and Placement Warrants

3.1. DIO agrees to pay or to issue to MRA at any closing of a Placement finder's
fees (the  "Finder's  Fees")  of: (i) six  percent  (6%) of the  aggregate  cash
proceeds  received by DIO from MRA Contacts,  as defined below,  and (ii) common
stock  purchase  warrants  (the  "Placement  Warrants")  equal in number to five
percent  (5%) of the  number  of  common  share  equivalents  that are  actually
purchased  by MRA  Contacts  in the  Placement.  Common  share  equivalents  for
convertible  preferred stock or convertible debt will be based on the conversion
price at the  time of  purchase.  Consideration  paid by  Edwin  Snape,  PhD/New
England  Partners (and  affiliates)  or existing  investors  that exchange their
existing  positions  for new  securities  will not be  subject  to or  result in
Finder's Fees. The Placement  Warrants will have terms identical with the common
stock purchase warrants issued to MRA Contacts in the Placement. If there are no
common stock placement warrants issued to investors in the Placement,  the terms
of the  Placement  Warrant will  conform to those in the warrants  issued in the
October 2005 PIPE financing to MRA. The shares underlying the Placement Warrants
will be included in the registration statement covering the shares issued in the
Placement for which they were earned.

Additionally,  DIO  agrees  to pay  MRA a cash  fee of six  percent  (6%) of any
aggregate cash proceeds received by DIO within twelve12 months of the closing of
the  Placement in  connection  with any  payments,  equity  purchases or warrant
exercises by MRA Contacts resulting from rights,  obligations,  contingencies or
issuances negotiated as part of the Placement.  The closing of a Placement shall
be any date when the  investors in the  Placement  deliver funds in exchange for
the  debt  or  equity   instrument,   including  such   investments   that  were
contractually  obligated as part of the Placement but dependent upon shareholder
approval.

<PAGE>

Such fees described in this Section 3.1. shall  constitute the complete and full
compensation  payable to MRA and its agents  arising from the  Placement and the
sale by DIO of securities thereunder to the MRA Contacts and any other investors
in the Placement,  and neither MRA nor any of its agents,  successors or assigns
shall be entitled to any  additional  payment  whatsoever  hereunder,  except as
provided for under of Sections 3.3 , 4.1, or 6.1 below.

3.2.  "MRA  Contacts" are defined as  prospective  investors who are persons (a)
identified by MRA and approved by the Company as  prospective  investors and who
are listed on the Schedule A hereto,  (b) are  contacted by MRA relative to this
Placement,  (c)  with  whom  members  of the  Company's  management  have  had a
telephone  conversation  or a  face-to-face  meeting or (d) who  participate  as
investors in the Placement. MRA Contacts will be updated on Schedule A, which is
hereby incorporated by reference,  from time to time with the written consent of
the Company, such consent to not be unreasonably withheld. DIO acknowledges that
Funds affiliated with North Sound,  SDS Capital Group and ProMed  Management are
preapproved on Schedule A.

3.3. The Company will inform MRA promptly if it engages any  additional  finders
in  connection  with  the  Placement,   including  in  such  notice  a  complete
description of any fee agreement  with such  additional  finder.  If the Company
agrees to pay fees in excess of those  described in this  Agreement for services
similar to those being provided by MRA  hereunder,  then the fees payable to MRA
will  be  increased  to the  same  level,  if  requested  by  MRA,  in its  sole
discretion.

3.4. All  payments of the Finders  Fees and of unpaid  expenses due to MRA under
this Agreement will be made within 10 days of the consummation of the Placement.
Cash and equity will be payable  directly to or registered in the name of Musket
Research Associates, Inc., unless otherwise specified by MRA.


4. Expenses

4.1.  Whether  or not the  Placement  contemplated  herein is  consummated,  the
Company will reimburse MRA for its reasonable out-of-pocket expenses incurred in
connection  with this  prospective  financing,  provided such expenses have been
approved  in advance by DIO,  such  approval  to not be  unreasonably  withheld,
subject to a ceiling of $25,000.  A  non-refundable  retainer  of $5,000  toward
these  expenses  will be paid at the  time  of the  signing  of this  Agreement.
DIO-approved  expenses  incurred  by MRA prior to  closing of the  Placement  or
earlier  termination of the Agreement will be submitted for reimbursement by DIO
and, should be paid within two weeks of receipt.

5. Public Disclosures; Press Releases

5.1.  Concurrently with its execution and delivery of this Agreement,  MRA shall
execute  and  deliver  to the  Company  a  counterpart  of  the  Confidentiality
Agreement attached hereto as Exhibit 2 (the  "Confidentiality  Agreement").  The
Company  represents  that,  except  for  the  details  related  to the  proposed
Placement and for certain  information  related to its financial  performance in
the current quarter, it has disclosed no confidential  information to MRA. After
the  Company  publicly   discloses  the  existence  and  details  regarding  the
Placement,  the Company will list MRA as a participating  placement agent in any
description of this financing it issues  directly (i.e.  press release) and will
use its own  discretion to list MRA similarly in any further  communications  it
makes to the investment  community regarding this financing.  MRA will not issue
any  independent  press  release  regarding  its  relationship  with  DIO or any
financing  that may result  therefrom  without the prior  approval of DIO,  such
approval to not be unreasonably  withheld.  After the Company publicly discloses
the Placement, MRA will be allowed to list DIO and the amounts MRA raised in any
Placement for DIO in its general deal summaries without any further consent from
or notification of Diomed.


<PAGE>

6. Termination

6.1. This Agreement shall  automatically  terminate upon the consummation of the
Placement.  This  Agreement  may  also be  terminated  by DIO or MRA at any time
without  cause,  upon 10 days written  notice to that effect by the other party,
provided,  however,  that,  MRA shall still be entitled to the fees described in
Section  3  above,  in the  event  that,  at any  time  within  180  days  after
termination of this engagement,  a financing,  loan,  credit facility,  or other
investment is consummated by DIO with an MRA Contact listed on Schedule A at the
time of  termination.  Any  expenses  incurred by MRA prior to such  termination
notice and owed under  Section 4 above will be paid within two weeks of receipt.
The  provisions  of  the  Indemnification   Agreement  and  the  Confidentiality
Agreement shall also survive the termination of this Agreement.

7. Indemnification

7.1. The Company agrees to indemnify MRA under the terms set forth in Exhibit 1,
which is incorporated herein by reference.


8. Governing Law

8.1 This  Agreement  shall be governed by and construed in  accordance  with the
laws of the Commonwealth of Massachusetts  applicable to contracts  executed and
to be wholly  performed  therein  without giving effect to its conflicts of laws
principles or rules. The Company and MRA agree that any dispute  concerning this
Agreement shall be resolved through binding arbitration  conducted by a panel of
three  arbitrators,  one chosen by the Company,  one chosen by MRA and the third
chosen  by  the  two  arbitrators  selected  by  the  parties,  pursuant  to the
commercial  arbitration rules of the American  Arbitration  Association.  In the
event that the parties are unable to reach agreement on the  arbitration  panel,
the arbitrators will be appointed pursuant to the applicable commercial rules of
the American Arbitration Association.  Arbitration will be venued in the city of
Boston in the Commonwealth of Massachusetts.


9. Agreement

9.1.  This  Agreement  (together  with  the  Indemnification  Agreement  and the
Confidentiality  Agreement)  constitutes  the entire and complete  understanding
with respect to the subject matter hereof and supersedes any prior discussion or
agreement  between  the  parties  with  respect  hereto.  No  provision  of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an  amendment,  by Diomed  and MRA or,  in the case of a waiver,  by the
party against whom enforcement of such waiver is sought.


<PAGE>



Sincerely,


David B. Musket
President
Musket Research Associates, Inc.
                                     Agreed and Accepted:


                                     -------------------------------------------
                                     David B. Swank                      Date
                                     Chief Financial Officer
                                     Diomed Holdings, Inc.


<PAGE>


                           EXHIBIT 1: Indemnification

Diomed  Holdings,  Inc.  ("DIO")  agrees to indemnify and hold  harmless  Musket
Research Associates, Inc. ("MRA") and each of MRA's officers, directors, agents,
employees and  controlling  persons (within the meaning of each of Section 20 of
the  Securities  Exchange  Act  of  1934,  as  amended,  and  Section  15 of the
Securities Act of 1933, as amended) (each of the foregoing, including MRA, being
hereinafter  referred  to as an  "Indemnified  Person")  to the  fullest  extent
permitted by law from and against any and all losses, claims, damages,  expenses
(including  reasonable fees and disbursements for counsel),  actions  (including
shareholder derivative actions), proceedings,  investigations (whether formal or
informal, or in tort, contract or otherwise),  inquiries or threats thereof (all
of the foregoing being hereinafter  referred to as  "Liabilities"),  based upon,
relating  to or arising out of MRA's  engagement  hereunder  or any  Indemnified
Person's role therein including, without limitation, any liabilities relating to
or  arising  out of the  engagement  by DIO of any other  financial  advisor  or
investment banker;  provided,  however,  that DIO shall not be liable under this
paragraph to the extent that it is finally  judicially  determined by a court of
competent   jurisdiction  that  such  Liabilities   resulted  from  the  willful
misconduct or gross  negligence of any  Indemnified  Person.  In connection with
DIO's  obligation  to indemnify  for  expenses as set forth  above,  DIO further
agrees to  advance  or  reimburse  each  Indemnified  Person  for such  expenses
(including reasonable fees for counsel) as they are incurred by such Indemnified
Person:  provided,  however,  that  if  any  Indemnified  Person  is  reimbursed
hereunder for any expenses,  such reimbursement of expenses shall be refunded by
the  Indemnified  Person who received  such expenses to the extent it is finally
judicially determined by a court of competent  jurisdiction that the Liabilities
in question  resulted from the willful  misconduct  or gross  negligence of such
Indemnified Person.

Each  Indemnified  Party shall,  upon the service of a summons or other  initial
legal  process upon it in any action or suit  instituted  against it or upon its
receipt of written  notification  of the  commencement of any  investigation  or
inquiry  of, or  proceeding  against,  it or upon its  receipt of other  written
notification of the assertion  against it of any  Liabilities,  such Indemnified
Party will promptly give written notice  (hereinafter  the "Notice")  thereof to
DIO  (provided  that delay in giving  such  notice  shall not relieve DIO of its
indemnification  obligations hereunder except to the extent, if at all, that DIO
shall have been  prejudiced  thereby).  DIO shall be  entitled,  if it so elects
within  fifteen  days after  receipt of the  Notice,  by giving  written  notice
(hereinafter  the  "Defense  Notice") to the  Indemnified  Party,  to assume the
entire  defense  of such  Liabilities,  in which  event  such  defense  shall be
conducted  at the  expense  of DIO  by  counsel  chosen  by DIO  and  reasonably
satisfactory  to  the  Indemnified  Party;   provided,   however,  that  if  the
Indemnified  Party reasonably  determines (i) that there may be conflict between
the positions of DIO and the Indemnified Party in conducting the defense of such
Liabilities  or  (ii)  that  there  may  be  legal  defenses  available  to  the
Indemnified  Party different from or in addition to those available to DIO, then
one counsel for the  Indemnified  Party shall be entitled to participate in such
defenses,  or conduct the defense to the extent  reasonably  determined  by such
counsel to be necessary to protect the interests of the Indemnified  Party,  and
such  participation  in or separate  conduct of such defense shall be covered by
the indemnification by DIO hereunder.  In any event, any Indemnified Party shall
retain the right to participate in the defense of any Liabilities  with separate
counsel,  where the  defense  of such  Liabilities  has been  assumed  by DIO in
accordance with the provisions hereof and the circumstances described in clauses
(i) or (ii) of the above  proviso are not  present,  but the  Indemnified  Party
shall  bear  and be  solely  responsible  for  its own  costs  and  expenses  in
connection with any such participation.

If the  indemnification  or  reimbursement  provided  for  hereunder  is finally
judicially determined by a court of competent  jurisdiction to be unavailable to
an Indemnified Person in respect to any Liabilities (other than as a consequence
of a final judicial determination by such a court of willful misconduct or gross
negligence of such Indemnified Person), then DIO agrees, in lieu of indemnifying
such  Indemnified  Person,  to  contribute to the amount paid or payable by such
Indemnified  Person as a result of such Liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received, or sought to be received,
by DIO on the one hand and by such  Indemnified  Person  on the  other  from the
transaction in connection with which MRA has been engaged,  or (ii) if (but only
if) the  allocation  provided in clause (i) of this sentence is not permitted by
applicable  law, in such  proportion as is  appropriate  to reflect not only the
relative  benefits referred to in such clause (i) but also the relative fault of
DIO and of such Indemnified Person:  provided,  however,  that in no event shall
the aggregate amount  contributed by the Indemnified Person exceed the amount of
fees  actually  received by his or its  affiliate  or employer  pursuant to such
engagement.  The relative  benefits  received or sought to be received by DIO on
the  one  hand  and by MRA  on the  other  shall  be  deemed  to be in the  same
proportion as (i) the gross proceeds raised in the transactions  subject to this
Agreement bears to (ii) the fees paid or payable to MRA hereunder, including the
value of any warrants or other securities issued to MRA.


<PAGE>

                      EXHIBIT 3: CONFIDENTIALITY AGREEMENT

This Confidentiality Agreement ("Agreement") is made as of June __, 2006 between
Diomed Holdings,  Inc. (the "Company") and Musket Research  Associates,  Inc., a
Massachusetts  corporation (together with its affiliates,  the "Disclosee").  In
consideration of the opportunity to enter into a business  relationship,  and as
an  inducement  for the Company to disclose to  Disclosee  certain  Confidential
Information, the parties hereby agree as follows:

1.  Confidential  Information.   "Confidential   Information"  means  non-public
information  pertaining  to  the  Company,  its  markets,  products,   financial
condition, internal structure and all other information that is expressly marked
"confidential" when disclosed by the Company to Disclosee. By way of example but
without limitation,  Confidential Information includes technical information and
data, knowhow, algorithms,  designs,  specifications,  processes, plans, product
concepts, samples, reports, computer programs, works of authorship,  inventions,
financial  information,  cost and expense  data,  marketing  and customer  data,
vendor data,  and other  information  that is not generally  ascertainable  from
public or published  information or trade  sources.  Disclosee  understands  and
agrees  that  the  Confidential   Information   will  be  material,   non-public
information and that  accordingly,  pursuant to United States  securities  laws,
Disclosee  will  not  be  permitted  to  engage,  directly  or  indirectly,   in
transactions  in  the  Company's   securities  so  long  as  such   Confidential
Information remains non-public.

2. Non-Disclosure and Non-Use. Disclosee shall hold all Confidential Information
in  strict  confidence,  and  shall not use or  disclose,  or permit  the use or
disclosure by any other person, except for the purposes of evaluating whether to
enter into a business  relationship  with the  Company.  Disclosee  may disclose
Confidential  Information  only  to  such of its  officers,  employees,  agents,
consultants and professional  advisors who have a need to know such Confidential
Information to evaluate whether to enter into a business  relationship  with the
Company and who are required to undertake in writing the  obligations  regarding
non-use,  non-disclosure  and  non-trading in accordance  with and in the manner
provided in this Agreement.  If Disclosee or anyone to whom Disclosee  transmits
Confidential  Information  pursuant to this Agreement  becomes legally compelled
(by deposition, interrogatory,  subpoena, civil investigation, demand or similar
process) to disclose any Confidential  Information,  Disclosee shall provide the
Company  with  prompt  written  notice  thereof so that the  Company  may seek a
protective  order or other  appropriate  remedy prior to the  disclosure of such
Confidential Information.

3. Term.  The  obligations  of the  Disclosee  shall  survive  for a period of 2
(years) or until such time as the Confidential  Information  becomes  publically
known and made available through no action or inaction of the Disclosee.

4.  Action for  Breach;  Choice of Law and  Jurisdiction.  The  Company may seek
action upon a breach of  Disclosee's  obligations  hereunder in any court having
proper  jurisdiction.  This  Agreement  shall  be  governed  by  the  law of the
Commonwealth  of  Massachusetts,  without  giving effect to the conflict of laws
provisions  thereof.  Disclosee  irrevocably  submits to the jurisdiction of the
state and federal courts located in Boston, Massachusetts,  and waives any right
to seek to remove  any legal  proceedings  initiated  by the  Company to another
forum, whether on the grounds of inconvenience, hardship or otherwise.

5. Return of  Confidential  Information.  Upon the termination for any reason of
the  discussions  regarding  the proposed  business  relationship,  and upon the
request  of the  Company at any time,  Disclosee  shall  promptly  return to the
Company  all  documents  and  other  tangible   manifestations  of  Confidential
Information.

6. No  Further  Obligation.  Neither  the  Company  nor the  Disclosee  shall be
committed in any way by this Agreement to enter into any particular transaction,
and any future  transaction shall be detailed in a formal agreement with respect
thereto entered into by the Company and Disclosee.


DIOMED HOLDINGS, INC.                                DISCLOSEE

By:____________________________             By:_______________________________
David B. Swank                              Name and Title:  ___________________
Chief Financial Officer