Document:

CONFIDENTIAL

December 21, 2001

Peter Klein
Chief Executive Officer
Diomed Inc.
One Dundee Park
Andover, MA  01810

Dear Peter:

Pursuant to our discussions,  we are pleased to confirm the  arrangements  under
which Verus Support Services Inc.  ("Verus") is engaged by Diomed Inc. ("Diomed"
or the "Company") and its successors to act as the Company's  financial  advisor
("Financial Advisor") post the planned RPO Transaction.

1.    Verus will act as a Financial Advisor as specified below:

       o      Evaluate and recommend financial and strategic alternatives to the
              Company;
       o      Identify potential acquisition/merger targets and, if requested by
              the Company, contact such parties and/or their representatives and
              assist the Company with analysis and negotiations;
       o      Advise the Company as to the timing, structure and pricing; and
       o      Assist the Company in any documentation.

       For  acting  as  Financial  Advisor,  Diomed  shall  pay  Verus a monthly
       advisory fee in the amount of $15,000 per month,  commencing on the first
       day of the Month  following  the Closing of the  planned RTO  Transaction
       ("Effective Date") and terminating 18 months thereafter.  The Company has
       the right to request Verus to provide other advisory services which shall
       be subject to customary fees and terms.

       In  addition  to the  monthly  advisory  fee Verus shall be entitled to a
       success  fee of 3.5% of the  Transaction  Value  upon  the  closing  of a
       successful  Transaction  with  a  minimum  fee of  $175,000.  Transaction
       includes  a merger,  sale,  or  acquisition  of Diomed  and/or any of its
       affiliates  with a third  party.  Transaction  Value  is  defined  as the
       consideration that Diomed and/or its affiliates receives or provides in a
       Transaction. It is understood that the financial advisory engagement will
       be  non-exclusive;  however,  the success fee  provided  herein  shall be
       payable to the extend Verus  identifies and  introduces  the  Transaction
       notwithstanding the participation or execution by other advisors. .

2.     The term of the  engagement to act as the Company's  exclusive  Financial
       Advisor  shall be for the period  from the  Effective  Date and ending 18
       months thereafter.  If mutually agreed,  such engagement can be extended.
       Verus may terminate the engagement hereunder at any time, with or without
       cause,  by giving the Company at least 30 days prior  written  notice and
       the  terms  and  conditions  herein,   except  the   indemnification  and
       confidentiality provisions which shall survive.

3.     In connection with Verus' activities on the Company's behalf, Diomed will
       furnish Verus with all  information  which it may reasonably  request and
       will provide Verus access to the  officers,  directors,  accountants  and
       counsel of Diomed.  Diomed  acknowledges  that in rendering  its services
       hereunder,

<PAGE>

       Verus shall be solely  using and relying on the  information  provided by
       the  Company.  Verus does not assume  responsibility  for the accuracy or
       completeness of any information. Any advice rendered by Verus pursuant to
       this  agreement may not be disclosed  publicly  without its prior written
       consent.

4.     In  addition  to any fees that may be  payable  to Verus  hereunder  (and
       regardless of whether a Transaction occurs), the Company hereby agrees to
       reimburse Verus for travel and other  out-of-pocket  expenses incurred in
       performing  its  services  hereunder.  If such  expenses  are expected to
       exceed  $15,000  in  aggregate,  during  the term  hereunder,  the excess
       expenses  must be approved by Diomed in advance.  All legal or other fees
       in association  with any  transaction  Diomed agrees to undertake are the
       sole responsibility of Diomed.

5.     The Company  agrees that Verus has the right to place  advertisements  in
       financial and other  newspapers  and journals  describing its services to
       the Company hereunder upon review and approval by the Company.

6.     Verus will act under this letter  agreement as an independent  contractor
       with duties to the Company. Because Verus will be acting on the Company's
       behalf   in  this   capacity,   it  is   Verus'   practice   to   receive
       indemnification.  A copy  of  Verus'  standard  indemnification  form  is
       attached to this letter.

7.     Verus  and  Diomed  mutually  agree  that  they  will  not  disclose  any
       confidential  information  received from the other party to others except
       with the written  permission of the other party or as such disclosure may
       be required by law.

8.     This agreement  shall be governed by and construed in accordance with the
       laws of the State of New York applicable to contracts  executed in and to
       be performed in that state.

If the terms of our engagement as set forth in this letter are  satisfactory  to
you,  kindly sign and date the enclosed copy of this letter and  indemnification
form and return it.

                                    Very truly yours,

                                    VERUS SUPPORT SERVICES INC.

                                    By: ___________________________
                                        Ajmal Khan
                                        Chief Executive Officer

ACCEPTED AND AGREED TO as of the date hereof 24, 2001.

DIOMED INC.

By:    ___________________________
       Peter Klein
       Chief Executive Officer

<PAGE>

December 24, 2001

Verus Support Services Inc.
520 Madison Ave. #3830
New York, NY 10022

Gentlemen:

This letter will confirm that we have engaged  Verus  Support  Services  Inc. to
advise and assist us in connection with the matters referred to in our Financial
Advisor  agreement  dated  December  21,  2001  (the  "Engagement  Letter").  In
consideration  of your  agreement to act on our behalf in  connection  with such
matters, we agree to indemnify and hold harmless you and your affiliates and you
and their respective  officers,  directors,  employees and agents and each other
person,  if any,  controlling  you or any of your  affiliates (you and each such
other person being an "Indemnified Person") from and against any losses, claims,
damages or  liabilities  related to,  arising out of or in  connection  with the
engagement (the  "Engagement")  under the Engagement  Letter, and will reimburse
each  Indemnified  Person  for all  expenses  (including  fees and  expenses  of
counsel)  as they are  incurred in  connection  with  investigating,  preparing,
pursuing or defending  any action,  claim,  suit,  investigation  or  proceeding
related to, arising out of or in connection with the Engagement,  whether or not
pending or threatened and whether or not any  Indemnified  Person is a party. We
will not, however, be responsible for any losses, claims, damages or liabilities
(or expenses  relating thereto) that are finally  judicially  determined to have
resulted from the bad faith or gross  negligence of any Indemnified  Person.  We
also agree that no Indemnified  Person shall have any liability  (whether direct
or indirect,  in contract or tort or otherwise) to us for or in connection  with
the  Engagement  except for any such  liability for losses,  claims,  damages or
liabilities  incurred  by us that  are  finally  judicially  determined  to have
resulted from the bad faith or gross negligence of such Indemnified Person.

We will not, without your prior written consent, settle, compromise,  consent to
the entry of any judgment in or otherwise  seek to terminate any action,  claim,
suit or proceeding in respect of which  indemnification  may be sought hereunder
(whether  or  not  any  Indemnified  Person  is a  party  thereto)  unless  such
settlement,  compromise,  consent  or  termination  includes  a release  of each
Indemnified Person from any liabilities arising out of such action,  claim, suit
or proceeding.  No Indemnified Person seeking indemnification,  reimbursement or
contribution  under this  agreement  will,  without our prior  written  consent,
settle, compromise, consent to the entry of any judgment in or otherwise seek to
terminate any action,  claim, suit,  investigation or proceeding  referred to in
the preceding paragraph.

If the indemnification  provided for in the first paragraph of this agreement is
judicially determined to be unavailable (other than in accordance with the third
sentence of the first paragraph  hereof) to an Indemnified  Person in respect of
any losses,  claims, damages or liabilities referred to herein, then, in lieu of
indemnifying  such  Indemnified  Person  hereunder,  we shall  contribute to the
amount paid or payable by such  Indemnified  Person as a result of such  losses,
claims,  damages or  liabilities  (and  expense  relating  thereto)  (i) in such
proportion as is appropriate to reflect the relative benefits to you, on the one
hand,  and us, on the other hand, of the  Engagement  or (ii) if the  allocation
provided  by  clause  (i)  above  is not  available,  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 each of you and us,  as well as any  other
relevant equitable  considerations;  provided,  however,  in no event shall your
aggregate contribution to the amount paid or payable exceed the aggregate amount
of fees actually received by you under the Engagement  Letter.  For the purposes
of this agreement,  the relative  benefits to us and you of the Engagement shall
be  deemed  to be in the  same  proportion  as  (a)  the  total  value  paid  or
contemplated  to be paid or received or contemplated to be received by us or our
shareholders,  as the case may be, in the transaction or  transactions  that are
the  subject  of  the  Engagement,  whether  or  not  any  such  transaction  is
consummated,  bears  to (b)  the  fees  paid  or to be  paid  to you  under  the
Engagement Letter.

<PAGE>

The  provisions  of  this  agreement  shall  apply  to the  Engagement  and  any
modification thereof and shall remain in full force and effect regardless of any
termination or the completion of your services under the Engagement Letter.

This agreement and the  Engagement  Letter shall be governed by and construed in
accordance  with the  laws of the  State of New  York  applicable  to  contracts
executed and to be performed in that state.

                                    Very truly yours,

                                    DIOMED INC.

                                    By: ___________________________
                                              Peter Klein
                                        Chief Executive Officer

ACCEPTED AND AGREED TO as of the date of December 24, 2001.

VERUS SUPPORT SERVICES INC.

By: ___________________________
       Ajmal Khan
       Chief Executive OfficerEXHIBIT 10.4

                       TERMS AND CONDITIONS OF ENGAGEMENT
                                OF JAMES ARKOOSH

Your appointment  will be that of  Non-executive  Chairman of  Diomed Inc. ("the
company ").

Your appointment will commence on July 1, 2001 and will be reviewed by the Board
of Directors after an initial period of one year and annually thereafter

As Non-executive  Chairman,  your role will include the leadership and direction
of the Board,  supervision  and  mentoring  of the CEO and other duties that the
Board may periodically assign to you.

Your compensation will be at an annual rate of $50,000, paid quarterly,  subject
to  your  performance  of the  standards  herein  and  any  additional  specific
performance  standards  mutually  agreed in writing with the Board of Directors.
You will be entitled to additional  "Chairman" options to acquire 50,00 ordinary
shares of Diomed Inc., subject to the terms of the Diomed Inc. 2001 Share Option
Plan as modified  in the grant  provided  at the June 2001  Director's  meeting.
These options will vest  quarterly  over two years and shall be exercisable at a
price of $1.25 per share.

It is understood that so long as you remain an officer of Verus International or
its affiliates that your quarterly compensation and expense reimbursements shall
be directly  payable to Verus Support  Services  Inc.  Options at all time shall
remain your  personal  asset and in no situation  shall accrue to the benefit of
your employer.  On your written notification of a termination of your employment
or consent of Verus  International,  the  Company  will remit  compensation  and
reimbursements under this agreement directly to you.

The Company will  reimburse all  reasonable  expenses  incurred on behalf of the
company subject to any limits established by the Board.

The  company  maintains  and will  maintain  during  the term of this  Agreement
Directors' and Officers' Liability insurance with a current indemnity limit of a
minimum of $5 million.

As  Non-executive  Chairman,  you have the right to resign as  Chairman  or as a
Director at any time and for any reason.  Such resignation should be provided in
writing to the  Company  and all current  Directors.  Resignation  or removal as
Chairman does not terminate  your position as a Director of the Company.  If you
resign  or are  removed  as,  Chairman,  you  shall  be paid  all  compensation,
reimbursed all expenses and your Chairman  options shall vest through the end of
the  calendar  quarter  in which  you give or  receive  written  notice  of your
resignation or removal.

The terms of your appointment will be in accordance with and governed by the
laws of the State of Delaware.

For and on behalf of the Board of      I, James  Arkoosh,  agree to the above
Diomed Inc.                            Terms and Conditions

Signed_____________________            Signed_____________________

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