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                                                                    Exhibit 10.4


To the holders of the Class C Convertible
Preferred Stock (the "Class C Stock"), par
value $0.001 per share, of Diomed
Holdings, Inc. (the "Company"):

                       Exchange of Class C Preferred Stock

         In order for the Company to comply with the terms of the  Settlement of
Stipulation reached in Augenbaum v. Diomed Holdings, Inc., filed in the Delaware
Chancery Court on July 28, 2003,  each of you severally  agrees with the Company
as follows:

1.       The  Company  will  authorize  the  issuance  of 20  shares  of Class E
         Preferred Stock, par value $0.001 per share (the "Class E Stock").  The
         Class E Stock will each be preferred in liquidation to the extent that,
         before any  distribution  is made to the holders of the Company  Common
         Stock,  par value  $0.001  per share  ("Common  Stock"),  there will be
         distributed pro rata to the holders of the issued and outstanding Class
         E Stock  and Class F Stock the  amount of  $108,469.00  per share as to
         each issued and  outstanding  share of Class E Stock and $10,072.00 per
         share as to each  issued and  outstanding  share of Class F Stock.  The
         holders of the Common  Stock  will  share in the  remainder  of the net
         liquidation proceeds. The term "liquidation" will mean any liquidation,
         dissolution or winding up of the Company,  as well as any sale,  lease,
         exchange  or  other  disposition  of  all or  substantially  all of the
         Company's assets.

2.       On execution of this  agreement,  you will tender all shares of Class C
         Stock to the Company, and the Company will issue to you in exchange, an
         equal number of shares of Class E Stock (the "Class E Shares").

3.       Following tender of all shares of Class C Stock, the Class C Stock will
         be eliminated by the filing of a Certificate  of  Elimination  with the
         Delaware Secretary of State.

4.       Upon  any  sale,  lease,  exchange  or  other  disposition  of  all  or
         substantially all of the Company's assets while your Class E Shares are
         outstanding, you shall have the right to sell to the Company all of the
         Class E Shares you own in exchange for 1,355,862 shares of Common Stock
         per share of Class E Stock.

5.       Upon the earlier of the approval by the Company's  stockholders  of the
         issuance  of  the  shares  of  Common  stock  to be  issued  under  the
         investment   into  the  Company   (the  "Tranch  II   investment")   or
         consummation  of the Tranch II investment,  you shall have the right to
         sell to the Company,  and the Company  shall have the right to purchase
         from you, all of your Class E Shares in exchange for  1,355,862  shares
         of Common Stock per share of Class E Stock.

6.       To exercise any right under Paragraph 4 or 5 above any party shall give
         written  notice  to  the  other  as  provided  in  the  First  Exchange
         Agreement.  The closing of any purchase or sale under  Paragraph 4 or 5
         above will occur at the  Company's  offices on the fifth  business  day
         after notice is given or deemed given.

7.       This letter agreement may be signed in separate  counterparts,  each of
         which shall be one and the same agreement.  This letter agreement shall
         not be effective  unless and until signed by each holder of the Class C
         Stock. A facsimile  transmission of this signed letter  agreement shall
         be legal and binding on all parties hereto.


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8.       This letter agreement  represents the final agreement among the parties
         hereto   and  may  not  be   contradicted   by   evidence   of   prior,
         contemporaneous,  or  subsequent  oral  agreements of the parties or by
         prior or contemporaneous written agreements.  This letter agreement may
         not be amended except by a writing signed by all of the parties hereto.
         If  any  provision  of  this  letter  agreement  shall  be  invalid  or
         unenforceable in any jurisdiction,  such invalidity or unenforceability
         shall not affect the  validity or  enforceability  of the  remainder of
         this letter agreement or the validity or  enforceability of this letter
         agreement in any other jurisdiction.

9.       This letter  agreement  shall be governed by the  internal  laws of the
         State of New York without regard to conflicts of laws principles.

         Please  indicate  your  agreement  with the  foregoing  by signing this
letter in the space provided below, at which time this letter shall be a binding
agreement among us.



                                       Yours truly,

                                       DIOMED HOLDINGS, INC.

                                       /s/  JAMES A. WYLIE, JR.

                                       By_________________________
                                       James A. Wylie, Jr.
                                       President and Chief Executive Officer

Accepted and agreed to:

GIBRALT U.S., Inc.



By /s/ JOHNNY CIAMPI
   --------------------------
   John Ciampi
   Authorized Person


/s/  MORRIS BELZBERG
-------------------------------
Morris Belzberg


/s/  STEVEN SCHRAIBERG
 -------------------------------
Steven Shraiberg

/s/  CHARLES DIAMOND
-------------------------------
Charles Diamond