Document:

EXHIBIT 10.2

                                                                  Execution Form

                            SHARE EXCHANGE AGREEMENT

      THIS SHARE EXCHANGE AGREEMENT (this "Agreement"), dated as of September
30, 2005, is entered into by and among Diomed Holdings, Inc., a Delaware
corporation, with headquarters located at One Dundee Park, Andover, MA 01810
(the "Company") and each Purchaser (as defined in the Securities Purchase
Agreement, dated as of the date hereof, among the Company and the purchasers
identified on the signature pages thereto (the "Securities Purchase
Agreement")). Capitalized terms used but not defined herein shall have their
respective meanings set forth in the Securities Purchase Agreement, unless the
context clearly indicates otherwise.

                              W I T N E S S E T H:

      WHEREAS, the Company and the Purchasers have agreed that the Preferred
Stock issued and sold by the Company to the Purchasers pursuant to the
Securities Purchase Agreement shall be subject to certain exchange, redemption,
antidilution and other provisions, as set forth herein.

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

      1.    TENDER AND REDEMPTION OF PREFERRED STOCK.

            (a) Purchasers' Exchange Right. (i) Subject to the conditions set
forth below in this Agreement and the Securities Purchase Agreement, at any time
and from time to time after the date of the listing of such shares with the
Trading Market, the Purchasers may tender any whole number of shares of
Preferred Stock held by them in exchange for a number of fully paid and non
assessable shares of Common Stock per share of Preferred Stock determined in
accordance with the following formula:

                                Issue Price
                               -------------
                               Exchange Rate

Where:

"Exchange Rate" shall mean $2.50, subject to adjustment as set forth herein.

Notwithstanding the foregoing, the Purchaser shall not have the right to
exchange Preferred Stock for Common Stock hereunder if and to the extent that
the issuance of Common Stock pursuant to the exchange right set forth in this
Section 1(a) would cause the Purchaser to violate the limitations on ownership
provisions set forth in Section 4.17 of the Securities Purchase Agreement
("Limitations on Ownership").

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      (b)   Procedures for Exchange by Purchasers.

            (i)   The Purchasers may exercise their exchange right under Section
1(a) by providing written irrevocable notice to the Company (the "Exchange
Notice"), substantially in the form of Exhibit A hereto (and, if the Preferred
Stock is in certificated form, surrendering to the Company along with the
Exchange Notice the Purchaser's stock certificate(s), with stock power(s)
endorsed in blank, representing the Preferred Stock tendered for exchange), in
accordance with the notice provisions of Section 5.4(a) or (b) of the Securities
Purchase Agreement, which Exchange Notice shall be deemed given and effective on
the date (the "Exchange Date") when provided under Section 5.4(a) or (b) of the
Securities Purchase Agreement. Upon receipt by the Company of an Exchange Notice
from a Purchaser (the "Exchanging Purchaser"), the Company shall promptly send,
via facsimile, a confirmation to such Exchanging Purchaser stating that the
Exchange Notice has been received, the date upon which the Company expects to
deliver the Common Stock issuable upon such exchange and the name and telephone
number of a contact person at the Company regarding the exchange.

            (ii)  Upon delivery of an Exchange Notice, the Company (itself, or
through its transfer agent) shall, no later than the second Trading Day
following the Exchange Date (the "Delivery Period"), issue and deliver (i.e.,
deposit with a nationally recognized overnight courier service postage prepaid)
to the Exchanging Purchaser or its nominee that number of shares of Common Stock
issuable upon exchange of such shares of Preferred Stock being exchanged.
Notwithstanding the foregoing, if the Company's transfer agent is participating
in the Depository Trust Company ("DTC") Fast Automated Securities Transfer
program, and so long as the certificates therefor do not bear a legend and the
holder thereof is not then required to return such certificate for the placement
of a legend thereon, the Company shall cause its transfer agent to promptly
electronically transmit the Common Stock issuable upon the exchange to the
Exchanging Purchaser by crediting the account of the holder or its nominee with
DTC through its Deposit Withdrawal Agent Commission system ("DTC Transfer"). If
the aforementioned conditions to a DTC Transfer are not satisfied, and the
Preferred Stock is in certificated form, the Company shall deliver as provided
above to the Purchaser physical certificates representing the Common Stock
issuable upon exchange. Further, if the Preferred Stock is in certificated form,
an Exchanging Purchaser may instruct the Company to deliver to the Exchanging
Purchaser physical certificates representing the Common Stock issuable upon the
exchange in lieu of delivering such shares by way of DTC Transfer.

            (iii) The Company shall pay any and all taxes that may be imposed
upon it with respect to the issuance and delivery of the shares of Common Stock
upon the exchange of the Preferred Stock.

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            (iv)  If any exchange of Preferred Stock would result in the
issuance of a fractional share of Common Stock (aggregating all shares of
Preferred Stock being exchanged pursuant to a given Exchange Notice), such
fractional share shall be payable in cash based upon the ten day VWAP (as
defined below) of the Common Stock at such time, and the number of shares of
Common Stock issuable upon exchange of the Preferred Stock shall be the next
lower whole number of shares. If the Company elects not to, or is unable to,
make such a cash payment, the Exchanging Purchaser shall be entitled to receive,
in lieu of the final fraction of a share, one whole share of Common Stock. For
purposes of the foregoing, "VWAP" means, for any Trading Day, the price
determined by the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on a Trading Market, the daily volume weighted
average price of the Common Stock for such date on the Trading Market on which
the Common Stock is then listed or quoted as reported by Bloomberg Financial
L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern
Time); (b) if the Common Stock is not then listed or quoted on a Trading Market
and if prices for the Common Stock are then quoted on the OTC Bulletin Board,
the volume weighted average price of the Common Stock for such date on the OTC
Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the "Pink
Sheets" published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting prices), the
most recent bid price per share of the Common Stock so reported; or (c) in all
other cases, the fair market value of a share of Common Stock as determined by
an independent appraiser selected in good faith by the holders of the Preferred
Stock and reasonably acceptable to the Corporation, where "Trading Day" means a
day on which the Common Stock is traded on a Trading Market, and "Trading
Market" means the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the Nasdaq SmallCap
Market, the American Stock Exchange, the New York Stock Exchange or the Nasdaq
National Market.

            (v)   In the case of any dispute with respect to an exchange, the
Company shall promptly issue such number of shares of Common Stock as are not
disputed in accordance with subparagraph (ii) above. If such dispute involves
the calculation of the Exchange Rate, and such dispute is not promptly resolved
by discussion between the Exchanging Purchaser and the Company, the Company
shall submit the disputed calculations to an independent outside accountant via
facsimile within three business days of receipt of the Exchange Notice. The
accountant, at the Company's sole expense, shall promptly audit the calculations
and notify the Company and the Exchanging Purchaser of the results no later than
three business days from the date it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive, absent manifest error. The
Company shall then issue the appropriate number of shares of Common Stock in
accordance with subparagraph (ii) above.

            (vi)  Upon the exchange of any shares of Preferred Stock, all
amounts then accrued or payable on such shares under this Agreement, the
Securities Purchase Agreement, the Certificate of Designations (including,
without limitation, all Dividends), the Registration Rights Agreement or the
Warrants through and including the Exchange Date shall be paid in cash (or, in
the case of Dividends, cash or Common Stock) by the Company.

            (vii) If fewer than all shares of Preferred Stock held by an
Exchanging Purchaser are tendered for exchange, then the Company shall record
the cancellation of those shares which were tendered on its books and records
(and, if the Preferred Stock is in certificated form, shall issue in due course
one or more new stock certificates representing those shares held by the
Exchanging Purchaser which remain issued and outstanding)

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      (c)   Exchange Defaults. If, at any time, (i) an Exchanging Purchaser
submits an Exchange Notice and the Company fails for any reason (other than
because such issuance would exceed such Exchanging Purchaser's Limitations on
Ownership) to deliver, on or prior to the fifth Trading Day following the
expiration of the Delivery Period for such exchange, such number of freely
tradable shares of Common Stock to which such holder is entitled upon such
exchange, or (ii) the Company provides written notice to any holder of Preferred
Stock (or makes a public announcement via press release) at any time of its
intention not to issue freely tradable shares of Common Stock upon exercise by
any Exchanging Purchaser of its exchange rights in accordance with the terms of
this Agreement (other than because such issuance would exceed such Purchaser's
Limitations on Ownership) (each of (i) and (ii) being an "Exchange Default"),
then the Company shall pay to the Exchanging Purchaser Liquidated Damages (as
defined below) until the earlier of the date of the cure of such Exchange
Default by the Company or the date of payment by the Company of the Redemption
Amount (as defined below) or the Optional Redemption Price (as defined below),
as the case may be.

      Unless the Company has notified the Exchanging Purchaser in writing
prior to the delivery by such Purchaser of an Exchange Notice that the Company
is unable to honor requests for exchanges, if (i) (a) the Company fails to
promptly deliver during the Delivery Period shares of Common Stock to an
Exchanging Purchaser upon an exchange of shares of Preferred Stock or (b) there
shall occur a Legend Removal Failure (as defined below) and (ii) thereafter,
such Exchanging Purchaser purchases (in an open market transaction or otherwise)
shares of Common Stock to make delivery in satisfaction of a sale by such
Exchanging Purchaser of the unlegended shares of Common Stock (the "Sold
Shares") which such Exchanging Purchaser anticipated receiving upon such
exchange (a "Buy-In"), the Company shall pay such Exchanging Purchaser, in
addition to any other remedies available to the Exchanging Purchaser, the amount
by which (x) such Exchanging Purchaser's total purchase price (including
brokerage commissions, if any) for the unlegended shares of Common Stock so
purchased exceeds (y) the net proceeds received by such Exchanging Purchaser
from the sale of the Sold Shares. For example, if an Exchanging Purchaser
purchases unlegended shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for
$10,000, the Company will be required to pay the Exchanging Purchaser $1,000. An
Exchanging Purchaser shall provide the Company written notification and
supporting documentation indicating any amounts payable to such Purchaser
pursuant to this provision.

      (d) Purchasers' Optional Redemption Right. In the event (each of the
events described in clauses (i)-(ix) below after expiration of the applicable
cure period (if any) being a "Redemption Event"):

            (i)   an Exchange Default shall have occurred and be continuing for
a period of thirty (30) days, during which cure period the Exchanging Purchaser
shall be entitled to Liquidated Damages;

            (ii)  the Common Stock (including any of the shares of Common Stock
issuable upon exchange of the Preferred Stock) is suspended from trading on any
of, or is not listed (and authorized) for trading on at least one of, the New
York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or
the Nasdaq SmallCap Market for an aggregate of ten or more trading days in any
twelve (12) month period, subject to a cure period of six (6) months, during
which cure period the Purchaser shall be entitled to Liquidated Damages;

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            (iii)  the registration statement required to be filed by the
Company pursuant to the Registration Rights Agreement (A) has not been declared
effective by the one hundred twentieth (120th) day following the Closing Date or
(B) such registration statement, after being declared effective, cannot be
utilized by the holders of Preferred Stock for the resale of all of their
Registrable Securities (as defined in the Registration Rights Agreement) for an
aggregate of more than nine fifteen (15) days (other than as permitted under the
Registration Rights Agreement), subject in the case of subclause (B) above to a
cure period of sixty (60) days, during which cure period the Purchaser shall be
entitled to Liquidated Damages; provided, that such Liquidated Damages shall not
be payable to the extent that such payment would be duplicative of liquidated
damages paid by the Company to the Purchaser under the Registration Rights
Agreement for the same underlying reason and for the same period of time;

            (iv)   the Company fails to remove any restrictive legend on any
certificate or any shares of Common Stock issued to the holders of Preferred
Stock upon exchange of the Preferred Stock as and when required by the
Securities Purchase Agreement or the Registration Rights Agreement and permitted
by applicable law (a "Legend Removal Failure"), and any such failure continues
uncured for five business days after the Company has been notified thereof in
writing by the holder;

            (v)    the Company provides written notice (or otherwise indicates)
to any holder of Preferred Stock, or states by way of public announcement
distributed via a press release, at any time, of its intention not to issue, or
otherwise refuses to issue, shares of Common Stock to any holder of Preferred
Stock upon exchange in accordance with the terms of this Agreement;

            (vi)   the Company or any subsidiary of the Company shall make an
assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed;

            (vii)  bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for the relief of debtors shall be instituted
by or against the Company or any subsidiary of the Company and if instituted
against the Company or any subsidiary of the Company by a third party, shall not
be dismissed within 60 days of their initiation;

            (viii) the Company shall:

                   (1) either (i) fail to pay, when due, or within any
      applicable grace period, any payment with respect to any indebtedness of
      the Company in excess of $250,000 due to any third party, other than
      payments contested by the Company in good faith, or otherwise be in breach
      or violation of any agreement for monies owed or owing in an amount in
      excess of $250,000 which breach or violation permits the other party
      thereto to declare a default or otherwise accelerate amounts due
      thereunder, or (ii) suffer to exist any other default or event of default
      under any agreement binding the Company which default or event of default
      would or is likely to have a material adverse effect on the business,
      operations, properties, prospects or financial condition of the Company;
      or

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                   (2) have thirty-five percent (35%) or more of the voting
      power of its capital stock owned beneficially by one person, entity or
      "group" (as such term is used under Section 13(d) of the Securities
      Exchange Act of 1934, as amended), other than in a transaction
      constituting a Liquidating Event (as defined in the Certificate of
      Designations), and such person, entity or group shall continue to have a
      thirty-five percent (35%) or more voting power for a period of thirty (30)
      days; and

            (ix)  except with respect to matters covered by subparagraphs (i) -
(viii) above, as to which such applicable subparagraphs shall apply, the Company
otherwise shall breach any material term hereunder or a material term under the
Securities Purchase Agreement, the Certificate of Designations, the Registration
Rights Agreement or the Warrants (where, in the case of a breach that is
curable, such breach was not cured within ten business days after the Company
has been notified thereof in writing by the Purchaser and, in the case of a
representation or warranty, constituted a material breach as of the date such
representation or warranty was made);

then, to the extent that any Purchaser has not exercised its exchange rights
under Section 1(a) with respect to such shares, upon the occurrence of any such
Redemption Event, such Purchaser shall thereafter have the option, exercisable
in whole or in part at any time and from time to time by delivery of a written
notice to such effect (a "Purchaser Redemption Notice") to the Company while
such Redemption Event continues, to require the Company to purchase for cash any
or all of the then outstanding shares of Preferred Stock held by such holder for
an amount per share equal to the Redemption Amount (as defined below) in effect
at the time of the redemption hereunder. For the avoidance of doubt, the
occurrence of any event described in clauses (i) through (iv) and (ix) shall be
subject to the respective cure periods set forth therein and any event described
in clauses (v), (vi), (vii) and (viii) above shall immediately constitute a
Redemption Event and there shall be no cure period. Upon the Company's receipt
of any Purchaser Redemption Notice hereunder, the Company shall promptly (and in
any event within one business day following such receipt) deliver a written
notice (a "Purchaser Redemption Announcement") to all Purchasers stating the
date upon which the Company received such Purchaser Redemption Notice and the
amount of Preferred Stock covered thereby. The Company shall not redeem any
shares of Preferred Stock during the three Trading Day period following the
delivery of a required Purchaser Redemption Announcement hereunder. At any time
and from time to time during such three Trading Day period, each Purchaser may
request (either orally or in writing) information from the Company with respect
to the instant redemption (including, but not limited to, the aggregate number
of shares of Preferred Stock covered by Purchaser Redemption Notices received by
the Company), and the Company shall furnish (either orally or in writing) as
soon as practicable such requested information to such requesting Purchaser.

For purposes of the foregoing, "Liquidated Damages" shall mean an amount in cash
equal to 3.0% per month of the aggregate purchase price paid by the applicable
Purchaser pursuant to the Securities Purchase Agreement for any shares of
Preferred Stock (together with any shares of Common Stock issued upon exchange
of Preferred Stock by the Purchaser hereunder to the extent such shares of
Common Stock continue to be held by such Purchaser, as if such shares of
Preferred Stock had not been exchanged into Common Stock) then held by such
Purchaser, payable on demand by the Purchaser, as full liquidated damages and
not as a penalty. The Liquidated Damages pursuant to the terms hereof shall
apply on a daily pro-rata basis for any portion of a month prior to the cure of
a Redemption Event to which Liquidated Damages are applicable.

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      (e)   Definition of Redemption Amount. The "Redemption Amount" with
respect to a share of Preferred Stock means an amount equal to the greater of:

                  (i)         IP   x   M
                             ----
                              ER

            and   (ii)        IP   x   R

where:

     "IP" means the Issue Price thereof plus all accrued Dividends (as defined
     in the Certificate of Designations) thereon through the date of payment of
     the Redemption Amount;

     "ER" means the Exchange Rate in effect on the date on which the Company
     receives the Purchaser Redemption Notice;

     "M" means the greater of (A) the highest closing sales price of the Common
     Stock during the period beginning on the date on which the Company receives
     the Purchaser Redemption Notice and ending on the date immediately
     preceding the date of payment of the Purchaser Redemption Amount and (B)
     the fair market value, as of the date on which the Company receives the
     Purchaser Redemption Notice, of the consideration payable to the holder of
     a share of Common Stock pursuant to the transaction which triggers the
     redemption. For purposes of this definition, "fair market value" shall be
     determined by the mutual agreement of the Company and the holders of at
     least 51% of the Preferred Stock then outstanding (the "Required Holders"),
     or if such agreement cannot be reached within five business days prior to
     the date of redemption, by an investment banking firm selected by the
     Company and reasonably acceptable to the Required Holders, with the costs
     of such appraisal to be borne by the Company; and

     "R" means 120%.

      (f)   Redemption Defaults. If the Company fails to pay any Purchaser the
Redemption Amount with respect to any share of Preferred Stock within five
Trading Days after its receipt of a Purchaser Redemption Notice, then the
Purchaser entitled to redemption shall be entitled to interest on the Redemption
Amount at a per annum rate equal to the lower of eighteen percent (18%) and the
highest interest rate permitted by applicable law from the date on which the
Company receives the Purchaser Redemption Notice until the date of payment of
the Redemption Amount hereunder. In the event the Company is not able to redeem
all of the shares of Preferred Stock subject to Purchaser Redemption Notices
delivered prior to the date upon which such redemption is to be effected, the
Company shall redeem shares of Preferred Stock from each Purchaser pro rata,
based on the total number of shares of Preferred Stock outstanding at the time
of redemption included by such holder in all Purchaser Redemption Notices
delivered prior to the date upon which such redemption is to be effected
relative to the total number of shares of Preferred Stock outstanding at the
time of redemption included in all of the Purchaser Redemption Notices delivered
prior to the date upon which such redemption is to be effected.

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            (g)   Company's Optional Redemption Rights. From and after the fifth
(5th) anniversary of the Closing Date, to the extent that the Purchasers have
not exercised its exchange rights under Section 1(a) with respect to such
shares, and unless then precluded from making an Optional Redemption following
the issuance of a Purchaser Redemption Announcement under Section 1(d), the
Company may redeem for cash any or all shares of Preferred Stock then
outstanding (an "Optional Redemption") at a price (the "Optional Redemption
Price") equal to one hundred twenty percent (120%) of the Issue Price of the
Preferred Stock being redeemed, together with any and all accrued and unpaid
Dividends thereon. If the Company elects to redeem in an Optional Redemption
less than all shares of Preferred Stock outstanding, then the Company shall
redeem shares of Preferred Stock pro rata, based on the amount of shares to be
redeemed and the proportion that the number of shares held by each Purchaser
bears to the total number of shares then held by all Purchasers.

            (h)   Procedures for Optional Redemption by Company. The Company may
exercise its redemption right under Section 1(g) by providing written
irrevocable notice to the Purchasers in any manner set forth in Section 5.4 of
the Securities Purchase Agreement (the "Optional Redemption Notice") in such
form as the Company shall approve, setting forth the number of shares of
Preferred Stock being redeemed (and, if less than all, the percentage of shares
held by each Purchasers on a pro rata basis), the Optional Redemption Price, the
date that the Optional Redemption is proposed to occur (which date shall be not
less than twenty (20) days following the effective date of the Optional
Redemption Notice (the "Optional Redemption Date") and such other information as
the Company shall in its discretion determine. If any shares of Preferred Stock
to be redeemed are held in certificated form, the Optional Redemption Notice
shall also include instructions for Purchasers to surrender their shares, duly
endorsed in blank, to the Company for redemption. On the Optional Redemption
Date, unless earlier tendered for exchange by the Purchasers pursuant to Section
1(a) or 1(d), the Company shall issue payment of the Optional Redemption Price
to the Purchasers and the Company shall record the cancellation of those shares
which were so redeemed on its books and records (and, if the Preferred Stock is
in certificated form, shall issue in due course one or more new stock
certificates representing those shares held by the Purchaser which remain issued
and outstanding).

            (i)   Purchasers' Right to Exchange following Company's Optional
Redemption Notice. Following the Company's issuance of an Optional Redemption
Notice and prior to the Optional Redemption Date, each Purchaser shall have the
right to tender for exchange into Common Stock any or all shares of Preferred
Stock held by it (including those that are the subject of the Optional
Redemption Notice) in the manner set forth under Sections 1(a) and (b), subject
to the Limitations on Ownership applicable to each such Purchaser.

      2. ANTIDILUTION ADJUSTMENTS TO EXCHANGE RATE.

            (a)   If at any time while Preferred Stock is issued and
      outstanding, other than in an Exempt Issuance, the Company shall offer,
      sell, grant any option to purchase or offer, sell or grant any right to
      reprice its securities, or otherwise dispose of or issue (or announce or
      be deemed to have made any offer, sale, grant or any option to purchase or
      other disposition) any Common Stock or Common Stock Equivalents (as
      defined below) entitling any Person to acquire shares of Common Stock at
      an effective price per share less than the then Exchange Rate (such lower
      price, with respect to each class of securities being issued, the "Base
      Share Price" of such securities and each such issuance a "Dilutive
      Issuance"), as adjusted hereunder, then the Exchange Rate shall be reduced
      as follows:

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                  (i)   prior to the time when the Company obtains Stockholder
            Approval, the Exchange Rate shall be reduced to an amount that is
            equal to the greater of the (A) Base Share Price and (B) $2.17,
            subject to adjustment for reverse and forward stock splits, stock
            dividends, stock combinations and other similar transactions of the
            Common Stock that occur after the date of this Agreement (such
            amount set forth in this subclause (B), the "Preferred Stock Floor
            Price"); or

                  (ii)  after the time when the Company obtains Stockholder
            Approval, the Exchange Rate shall be reduced to an amount that is
            equal to the Base Share Price; provided, that if the Base Share
            Price is less than the Preferred Stock Floor Price, then the
            Exchange Rate shall be adjusted by (A) reducing the Exchange Rate to
            the Preferred Stock Floor Price and (B) further reducing the
            Exchange Rate to the amount determined by the following calculation:

      ((Fully Diluted Shares Outstanding Before x Adjusted Exchange Rate)
                             + Total Consideration)
      -------------------------------------------------------------------
                     Fully Diluted Shares Outstanding After

            Where:

            "Fully Diluted Shares Outstanding Before" shall mean the total
            number of shares of Common Stock outstanding immediately prior to
            the consummation of such Dilutive Issuance, assuming the issuance of
            all shares of Common Stock underlying Common Stock Equivalents then
            outstanding;

            "Common Stock Equivalents" shall mean any securities of the Company
            or its Subsidiaries which would entitle the holder thereof to
            acquire at any time Common Stock, including without limitation, any
            Purchase Rights or Convertible Securities, including without
            limitation the Preferred Stock and the Warrants;

            "Adjusted Exchange Rate" shall mean the lesser of the Preferred
            Stock Floor Price and the Exchange Rate in effect immediately prior
            to the Dilutive Issuance;

            "Total Consideration" shall mean the sum of all consideration
            received by the Company in the Dilutive Issuance, calculated
            pursuant to Section 3(d)(ii); and

            "Fully Diluted Shares Outstanding After" shall mean the total number
            of shares of Common Stock outstanding immediately after the
            consummation of such Dilutive Issuance, assuming the issuance of all
            shares of Common Stock underlying Common Stock Equivalents then
            outstanding;

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In each instance of an adjustment pursuant to the foregoing clauses (i) and
(ii), such adjustment shall be made whenever Common Stock or Common Stock
Equivalents are issued in a Dilutive Issuance. The Company shall notify each
Purchaser that holds Preferred Stock in writing, no later than five (5) Trading
Days following the consummation of a Dilutive Issuance, indicating therein the
applicable issuance price and other pricing terms. For the avoidance of doubt,
in no event shall the Exchange Rate after giving effect to the Dilutive Issuance
be greater than the Exchange Rate in effect prior to such Dilutive Issuance,
subject to adjustment for reverse and forward stock splits, stock dividends,
stock combinations and other similar transactions of the Common Stock that occur
in connection with the Dilutive Issuance.

            (b)   Effect on Exchange Rate of Certain Events. For purposes of
determining the adjusted Exchange Rate under Section 2(a), the following will be
applicable:

                  (i)   Issuance of Purchase Rights. If the Company issues or
            sells any Purchase Rights, whether or not immediately exercisable,
            and the price per share for which Common Stock is issuable upon the
            exercise of such Purchase Rights (and the price of any conversion of
            Convertible Securities, if applicable) is less than the Exchange
            Rate in effect on the date of issuance or sale of such Purchase
            Rights, then the maximum total number of shares of Common Stock
            issuable upon the exercise of all such Purchase Rights (assuming
            full conversion, exercise or exchange of Convertible Securities, if
            applicable) shall, as of the date of the issuance or sale of such
            Purchase Rights, be deemed to be outstanding and to have been issued
            and sold by the Company for such price per share. For purposes of
            the preceding sentence, the "price per share for which Common Stock
            is issuable upon the exercise of such Purchase Rights" shall be
            determined by dividing (A) the total amount, if any, received or
            receivable by the Company as consideration for the issuance or sale
            of all such Purchase Rights, plus the minimum aggregate amount of
            additional consideration, if any, payable to the Company upon the
            exercise of all such Purchase Rights, plus, in the case of
            Convertible Securities issuable upon the exercise of such Purchase
            Rights, the minimum aggregate amount of additional consideration
            payable upon the conversion, exercise or exchange thereof
            (determined in accordance with the calculation method set forth in
            clause (2) of this Section 2(b)) at the time such Convertible
            Securities first become convertible, exercisable or exchangeable, by
            (B) the maximum total number of shares of Common Stock issuable upon
            the exercise of all such Purchase Rights (assuming full conversion,
            exercise or exchange of Convertible Securities, if applicable). No
            further adjustment to the Exchange Rate shall be made upon the
            actual issuance of such Common Stock upon the exercise of such
            Purchase Rights or upon the conversion, exercise or exchange of
            Convertible Securities issuable upon exercise of such Purchase
            Rights.

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                  (ii)  Issuance of Convertible Securities. If the Company
            issues or sells any Convertible Securities, whether or not
            immediately convertible, exercisable or exchangeable, and the price
            per share for which Common Stock is issuable upon such conversion,
            exercise or exchange is less than the Exchange Rate in effect on the
            date of issuance or sale of such Convertible Securities, then the
            maximum total number of shares of Common Stock issuable upon the
            conversion, exercise or exchange of all such Convertible Securities
            shall, as of the date of the issuance or sale of such Convertible
            Securities, be deemed to be outstanding and to have been issued and
            sold by the Company for such price per share. If the Convertible
            Securities so issued or sold do not have a fluctuating conversion or
            exercise price or exchange ratio, then for the purposes of the
            preceding sentence, the "price per share for which Common Stock is
            issuable upon such conversion, exercise or exchange" shall be
            determined by dividing (A) the total amount, if any, received or
            receivable by the Company as consideration for the issuance or sale
            of all such Convertible Securities, plus the minimum aggregate
            amount of additional consideration, if any, payable to the Company
            upon the conversion, exercise or exchange thereof (determined in
            accordance with the calculation method set forth in this clause (2)
            of this Section 2(b) at the time such Convertible Securities first
            become convertible, exercisable or exchangeable, by (B) the maximum
            total number of shares of Common Stock issuable upon the exercise,
            conversion or exchange of all such Convertible Securities. If the
            Convertible Securities so issued or sold have a fluctuating
            conversion or exercise price or exchange ratio (a "Variable Rate
            Convertible Security"), then for purposes of the next preceding
            sentence, the "price per share for which Common Stock is issuable
            upon such conversion, exercise or exchange" shall be deemed to be
            the lowest price per share which would be applicable (assuming all
            holding period and other conditions to any discounts contained in
            such Variable Rate Convertible Security have been satisfied) if the
            conversion price of such Variable Rate Convertible Security on the
            date of issuance or sale thereof was seventy-five percent (75%) of
            the actual conversion price on such date (the "Assumed Variable
            Market Price"), and, further, if the conversion price of such
            Variable Rate Convertible Security at any time or times thereafter
            is less than or equal to the Assumed Variable Market Price last used
            for making any adjustment under this Section 2 with respect to any
            Variable Rate Convertible Security, the Exchange Rate in effect at
            such time shall be readjusted to equal the Exchange Rate which would
            have resulted if the Assumed Variable Market Price at the time of
            issuance of the Variable Rate Convertible Security had been
            seventy-five percent (75%) of the actual conversion price of such
            Variable Rate Convertible Security existing at the time of the
            adjustment required by this sentence. No further adjustment to the
            Exchange Rate shall be made upon the actual issuance of such Common
            Stock upon conversion, exercise or exchange of such Convertible
            Securities.

                  (iii) Change in Option Price or Conversion Rate. If there is a
            change at any time in (A) the amount of additional consideration
            payable to the Company upon the exercise of any Purchase Rights; (B)
            the amount of additional consideration, if any, payable to the
            Company upon the conversion, exercise or exchange of any Convertible
            Securities; or (C) the rate at which any Convertible Securities are
            convertible into or exercisable or exchangeable for Common Stock (in
            each such case, other than under or by reason of provisions designed
            to protect against dilution), the Exchange Rate in effect at the
            time of such change shall be readjusted to the Exchange Rate which
            would have been in effect at such time had such Purchase Rights or
            Convertible Securities still outstanding provided for such changed
            additional consideration or changed conversion, exercise or exchange
            rate, as the case may be, at the time initially issued or sold.

                                    Page 11
<PAGE>

                  (iv)  Calculation of Consideration Received. If any Common
            Stock, Purchase Rights or Convertible Securities are issued or sold
            for cash, the consideration received therefor will be the amount
            received by the Company therefor (in the case of an underwritten
            public offering, after deduction of all underwriting discounts or
            allowances) in connection with such issuance, grant or sale. In case
            any Common Stock, Purchase Rights or Convertible Securities are
            issued or sold for a consideration part or all of which shall be
            other than cash, including in the case of a strategic or similar
            arrangement in which the other entity will provide services to the
            Company, purchase services from the Company or otherwise provide
            intangible consideration to the Company, the amount of the
            consideration other than cash received by the Company (including the
            net present value of the consideration expected by the Company for
            the provided or purchased services) shall be the fair market value
            of such consideration, except where such consideration consists of
            securities, in which case the amount of consideration received by
            the Company will be the Market Price thereof as of the date of
            receipt. In case any Common Stock, Purchase Rights or Convertible
            Securities are issued in connection with any merger or consolidation
            in which the Company is the surviving corporation, the amount of
            consideration therefor will be deemed to be the fair market value of
            such portion of the net assets and business of the non-surviving
            corporation as is attributable to such Common Stock, Purchase Rights
            or Convertible Securities, as the case may be. Notwithstanding
            anything else herein to the contrary, if Common Stock, Purchase
            Rights or Convertible Securities are issued or sold in conjunction
            with each other as part of a single transaction or in a series of
            related transactions, the Purchaser may elect to determine the
            amount of consideration deemed to be received by the Company
            therefor by deducting the fair value of any type of securities (the
            "Disregarded Securities") issued or sold in such transaction or
            series of transactions. If the Purchaser makes an election pursuant
            to the immediately preceding sentence, no adjustment to the Exchange
            Rate shall be made pursuant to this Section 2 for the issuance of
            the Disregarded Securities or upon any conversion, exercise or
            exchange thereof. The Company shall calculate, using standard
            commercial valuation methods appropriate for valuing such assets,
            the fair market value of any consideration other than cash or
            securities; provided, however, that if the Purchaser does not agree
            to such fair market value calculation within three business days
            after receipt thereof from the Company, then such fair market value
            shall be determined in good faith by an investment banker or other
            appropriate expert of national reputation selected by the Company
            and reasonably acceptable to the Purchaser, with the costs of such
            appraisal to be borne by the Company.

      3.    SUCCESSORS AND ASSIGNS.

      This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns. The Company may
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of each Purchaser. Any Purchaser may assign any or all of
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Preferred Stock, provided, that (i) the proposed transferee or
assignee is either an "accredited investor" as defined in Rule 501(a)(1),
(a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or a "qualified
institutional buyer" as defined in Rule 144(a) under the Securities Act, (ii)
such Purchaser provides written notice to the Company of such proposed
assignment or transfer as soon as practicable and (iii) prior to the taking
effect of such proposed assignment or transfer the proposed assignee or
transferee agrees in a written instrument in form and substance acceptable to
the Company in its sole discretion which provides that such assignee or
transferee agrees to be bound by all provisions hereof which apply to the
"Purchasers" herein and to the terms and conditions of the Preferred Stock
generally.

                                    Page 12
<PAGE>

      4.    MISCELLANEOUS.

            (a) No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 3.

            (b) Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.

            (c) Construction. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

            (d) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, County of New York, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. The parties
hereby waive all rights to a trial by jury. If either party shall commence an
action or proceeding to enforce any provisions of the Transaction Documents,
then the prevailing party in such action or proceeding shall be reimbursed by
the other party for its attorneys' fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.

                                    Page 13
<PAGE>

            (e) Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

            (f) Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

                         [Signature page follows.]

                                    Page 14
<PAGE>

                  IN WITNESS WHEREOF, this Agreement has been duly executed by
the Company and the Purchasers as of the date first set forth above.

                                       COMPANY:

                                       Diomed Holdings, Inc.

                                       By:
                                          ---------------------------------
                                       Name:  James A. Wylie, Jr.
                                       Title:    Chief Executive Officer

                                       PURCHASER

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

                                       By:
                                          ---------------------------------
                                       Name:
                                       Title:

                                    Page 15
<PAGE>

                                    EXHIBITS

Exhibit A                  Form of Exchange Notice

<PAGE>

                                                                       EXHIBIT A

                                 EXCHANGE NOTICE

TO:      Diomed Holdings, Inc.

            (1)   The undersigned hereby elects to tender ________ shares
of Preferred Stock of the Company (the "Tendered Shares") pursuant to the terms
of that certain Share Exchange Agreement, dated as of September 30, 2005, by and
between Diomed Holdings, Inc. and the undersigned (the "Share Exchange
Agreement"), to be exchanged for such number of shares of Common Stock of the
Company as the Tendered Shares are exchangeable for as of the date this notice
is received by the Company (the "Exchanged Common Shares").

            (2)   The undersigned tenders herewith the certificate(s)
representing the Tendered Shares, with stock power(s) endorsed in blank.

            (3)   Please issue a certificate or certificates representing said
Exchanged Common Shares in the name of the undersigned or in such other
name as is specified below:

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

The Exchanged Common Shares shall be delivered to the following:

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

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

            (4)   Confirmation. Upon receipt of this notice, please deliver a
confirmation stating that this notice has been received, the date upon which the
Company expects to deliver the Exchanged Common Shares and the name and
telephone number of a contact person at the Company regarding the exchange.

            (5)   Limitations on Ownership. The undersigned hereby certifies
that, after giving effect to the exchange of Preferred Stock for Common Stock
requested hereby, the undersigned will not be in violation of the Limitations on
Ownership described in Section 1(a) of the Share Exchange Agreement.

                                          [PURCHASER]

                                          By: __________________________________
                                              Name:
                                              Title:
                                          Dated: _______________________________

COMPANY ACKNOWLEDGMENT:

The undersigned acknowledges receipt of the within Exchange Notice on
______________ ___, 20__. The Company expects to deliver the Exchanged Common
Shares on _____________ ___, 20__. Please contact the following person at the
Company in connection with this matter: ______________________, telephone number
_______________.

                                          DIOMED HOLDINGS, INC.
                                          By:___________________________________
                                             Name:
                                             Title:
                                          Dated:________________________________EXHIBIT 10.3

                                                                  EXECUTION FORM

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT IF SO REQUIRED BY THE COMPANY. THIS SECURITY AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

                          COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                              DIOMED HOLDINGS, INC.

      THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") certifies that, for
value received, _____________ (the "Holder"), is entitled, upon the terms and
subject to the limitations on exercise and the conditions hereinafter set forth,
at any time on or after the date of approval of the listing of the Warrant
Shares (as defined below) by the Trading Market (the "Initial Exercise Date")
and on or prior to the close of business on earlier of (i) the five year
anniversary of the Initial Exercise Date and (ii) such earlier date as the
warrant shall no longer be exercisable pursuant to the terms hereof (in either
case, the "Termination Date"), but not thereafter, to subscribe for and purchase
from Diomed Holdings, Inc., a Delaware corporation (the "Company"), up to ______
shares (the "Warrant Shares") of Common Stock, par value $0.001 per share, of
the Company (the "Common Stock"). The purchase price of one share of Common
Stock (the "Exercise Price") under this Warrant shall be $2.50, subject to
adjustment hereunder.

Section 1. Definitions.

      Capitalized terms used and not otherwise defined herein shall have the
meanings set forth in that certain Securities Purchase Agreement (the "Purchase
Agreement"), dated September 30, 2005, by and among the Company and the
purchasers signatory thereto.

Section 2. Exercise.

            (a) Exercise of Warrant. Subject to the provisions hereof,
      including, without limitation, the restrictions set forth in Section 2(d),
      exercise of the purchase rights represented by this Warrant may be made,
      in whole or in part, at any time or times on or after the Initial Exercise
      Date and on or before the Termination Date by delivery to the Company of a
      duly executed facsimile copy of the Notice of Exercise Form annexed hereto
      (or such other office or agency of the Company as it may designate by
      notice in writing to the registered Holder at the address of such Holder
      appearing on the books of the Company); provided, that within three
      Trading Days of the date said Notice of Exercise is delivered to the
      Company, the Holder shall have surrendered this Warrant to the Company and
      the Company shall have received (i) payment of the aggregate Exercise
      Price of the shares thereby purchased by wire transfer or cashier's check
      drawn on a United States bank or (ii) if the Holder is effectuating a
      cashless exercise pursuant to Section 2(c), a written notice of an
      election to effect a cashless exercise for the Warrant Shares specified in
      the Notice of Exercise Form duly executed by the Holder.
<PAGE>

            (b) Exercise Price. The Exercise Price of each share of Common Stock
      under this Warrant shall be $2.50, subject to adjustment hereunder.

            (c) Cashless Exercise. This Warrant may also be exercised at by
      means of a "cashless exercise" in which the Holder shall be entitled to
      receive a certificate for the number of Warrant Shares equal to the
      quotient obtained by dividing [(A-B) (X)] by (A), where:

            (A) =  the VWAP on the Trading Day immediately preceding the date
                   of such election;

            (B) =  the Exercise Price of this Warrant, as adjusted; and

            (X) =  the number of Warrant Shares issuable upon exercise of this
                   Warrant in accordance with the terms of this Warrant by means
                   of a cash exercise rather than a cashless exercise.

Where:

"VWAP" means, for any security as of any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date on the Trading Market on which the Common Stock is
then listed or quoted as reported by Bloomberg Financial L.P. (based on a
Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) if the
Common Stock is not then listed or quoted on a Trading Market and if prices for
the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted
average price of the Common Stock for such date on the OTC Bulletin Board; (c)
if the Common Stock is not then listed or quoted on the OTC Bulletin Board and
if prices for the Common Stock are then reported in the "Pink Sheets" published
by the National Quotation Bureau Incorporated (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported; or (c) in all other cases, the
fair market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the holders of the Preferred Stock and
reasonably acceptable to the Corporation, where "Trading Day" means a day on
which the Common Stock is traded on a Trading Market, and "Trading Market" means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange or the Nasdaq National Market.

                                       2
<PAGE>

      (d) Restrictions on Holder's Ownership. Unless the Holder delivers to the
Company irrevocable written notice prior to the date of issuance hereof or
sixty-one (61) days prior to the effective date of such notice that this Section
2(d) shall not apply to such Holder, in no event shall the Holder have the right
to exercise any portion of this Warrant, pursuant to Section 2(a) or otherwise,
to the extent that after giving effect to such issuance after exercise, the
Holder (together with the Holder's affiliates), as set forth on the applicable
Notice of Exercise, would beneficially own in excess of [4.99%][9.99%][NOTE:
INSERT APPROPRIATE PERCENTAGE BASED ON WHICH HOLDER IS RECEIVING THE WARRANT.]
of the total number of shares of Common Stock outstanding immediately after
giving effect to such issuance. For purposes of this Section 2(d), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act, it being acknowledged by the Holder that the Company is not representing to
the Holder that such calculation is in compliance with Section 13(d) of the
Exchange Act and the Holder is solely responsible for any schedules required to
be filed in accordance therewith. To the extent that the limitation contained in
this Section 2(d) applies, the determination of whether this Warrant is
exercisable (in relation to other securities of the Company owned by the Holder)
and of which a portion of this Warrant is exercisable shall be in the sole
discretion of such Holder, and the submission of a Notice of Exercise shall be
deemed to be such Holder's determination of whether this Warrant is exercisable
(in relation to other securities of the Company owned by such Holder) and of
which portion of this Warrant is exercisable, in each case subject to such
aggregate percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. For purposes of this
Section 2(d), in determining the number of outstanding shares of Common Stock,
the Holder may rely on the number of outstanding shares of Common Stock as
reflected in (x) the Company's most recent Form 10-QSB or Form 10-KSB, as the
case may be, (y) a more recent public announcement by the Company or (z) any
other notice by the Company or the Company's Transfer Agent setting forth the
number of shares of Common Stock outstanding. Upon the written or oral request
of the Holder, the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company,
including this Warrant, by the Holder or its affiliates since the date as of
which such number of outstanding shares of Common Stock was reported.

                                       3
<PAGE>

      (e) Mechanics of Exercise.

            (i) Authorization of Warrant Shares; Listing. The Company covenants
      that all Warrant Shares which may be issued upon the exercise of the
      purchase rights represented by this Warrant will, upon exercise of the
      purchase rights represented by this Warrant, be duly authorized, validly
      issued, fully paid and nonassessable and free from all taxes, liens and
      charges in respect of the issue thereof (other than taxes in respect of
      any transfer occurring contemporaneously with such issue). The Company
      covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number
      of shares to provide for the issuance of the Warrant Shares upon the
      exercise of any purchase rights under this Warrant (without giving effect
      to the restrictions in Section 2(d)). The Company further covenants that
      its issuance of this Warrant shall constitute full authority to its
      officers who are charged with the duty of executing stock certificates to
      execute and issue the necessary certificates for the Warrant Shares upon
      the exercise of the purchase rights under this Warrant. The Company will
      take all such reasonable action as may be necessary to assure that such
      Warrant Shares may be issued as provided herein without violation of any
      applicable law or regulation, or of any requirements of the Trading Market
      upon which the Common Stock may be listed. The Company shall promptly
      secure the listing or quotation of the shares of Common Stock issuable
      upon exercise of this Warrant upon each national securities exchange or
      automated or electronic quotation system, if any, upon which shares of
      Common Stock are then listed or quoted or become listed or quoted (subject
      to official notice of issuance upon exercise of this Warrant) and shall
      maintain, so long as any other shares of Common Stock shall be so listed
      or quoted, such listing or quotation of all shares of Common Stock from
      time to time issuable upon the exercise of this Warrant; and the Company
      shall so list or apply for quotation on each national securities exchange
      or automated or electronic quotation system, as the case may be, and shall
      maintain such listing or quotation of, any other shares of capital stock
      of the Company issuable upon the exercise of this Warrant if and so long
      as any shares of the same class shall be listed or quoted on such national
      securities exchange or automated or electronic quotation system. The
      Company shall, on or before the date of issuance of any Warrant Shares,
      take such actions as the Company shall reasonably determine are necessary
      to qualify the Warrant Shares for, or obtain exemption for the Warrant
      Shares for, sale to the holder of this Warrant upon the exercise hereof
      under applicable securities or "blue sky" laws of the states of the United
      States, and shall provide evidence of any such action so taken to the
      holder of this Warrant prior to such date; provided, however, that the
      Company shall not be required in connection therewith or as a condition
      thereto to (i) qualify to do business in any jurisdiction where it would
      not otherwise be required to qualify but for this provision, (ii) subject
      itself to general taxation in any such jurisdiction or (iii) file a
      general consent to service of process in any such jurisdiction.

            (ii) Delivery of Certificates Upon Exercise. The Company shall
      instruct its transfer agent to deliver to the Holder certificates for
      shares purchased hereunder within two Trading Days from the delivery to
      the Company of the Notice of Exercise Form, surrender of this Warrant and
      payment of the aggregate Exercise Price (unless a cashless exercise) as
      set forth above ("Warrant Share Delivery Date"). This Warrant shall be
      deemed to have been exercised as of the close of business on the date the
      Notice of Exercise form and the payment of the Exercise Price or notice of
      cashless exercise, as applicable, is received by the Company or, if such
      date is not a business day, on the next succeeding business day, and the
      Warrant Shares shall be deemed to have been issued, and the Holder or any
      other person so designated to be named therein shall be deemed to have
      become a holder of record of such shares for all purposes, as of such
      date.

                                       4
<PAGE>

            (iii) Delivery of New Warrants Upon Exercise. If this Warrant shall
      have been exercised in part, the Company shall, as soon as practicable
      after the transfer agent's delivery of the certificate or certificates
      representing Warrant Shares, deliver to the Holder a new Warrant
      evidencing the rights of the Holder to purchase the unpurchased Warrant
      Shares called for by this Warrant, which new Warrant shall in all other
      respects be identical with this Warrant.

            (iv) Exercise Default. If, at any time, a holder of this Warrant
      submits this Warrant, a Notice of Exercise and payment to the Company of
      the Exercise Price for each of the Warrant Shares specified in the Notice
      of Exercise (including pursuant to a cashless exercise), and the Company
      fails for any reason to deliver, on or prior to the fourth business day
      following the Warrant Share Delivery Date for such exercise, the number of
      shares of Common Stock to which the holder is entitled upon such exercise
      (an "Exercise Default"), then the Company shall pay to the holder payments
      ("Exercise Default Payments") for an Exercise Default in the amount of (i)
      (N/365), multiplied by (ii) the amount by which the Market Price of the
      Common Stock on the date the Notice of Exercise giving rise to the
      Exercise Default is transmitted in accordance with the terms hereof (the
      "Exercise Default Date") exceeds the Exercise Price in respect of such
      Warrant Shares, multiplied by (iii) the number of shares of Common Stock
      the Company failed to so deliver in such Exercise Default, multiplied by
      (iv) R, where N equals the number of days from the Exercise Default Date
      to the date that the Company effects the full exercise of this Warrant
      which gave rise to the Exercise Default and R equals the lower of 0.18
      (eighteen percent) and the highest interest rate per annum permitted by
      applicable law, expressed as a decimal. The accrued Exercise Default
      Payment for each calendar month shall be paid in cash and shall be made to
      the holder by the fifth day of the month following the month in which it
      has accrued. Nothing herein shall limit the holder's right to pursue
      actual damages for the Company's failure to maintain a sufficient number
      of authorized shares of Common Stock as required pursuant to the terms
      hereof or to otherwise issue shares of Common Stock upon exercise of this
      Warrant in accordance with the terms hereof, and the holder shall have the
      right to pursue all remedies available at law or in equity (including a
      decree of specific performance and/or injunctive relief).

                                       5
<PAGE>

            (v) No Fractional Shares or Scrip. No fractional shares or scrip
      representing fractional shares shall be issued upon the exercise of this
      Warrant. As to any fraction of a share which the Holder would otherwise be
      entitled to purchase upon such exercise, the Company shall pay a cash
      adjustment in respect of such final fraction in an amount equal to such
      fraction multiplied by the Exercise Price.

            (vi) Closing of Books. The Company will not close its stockholder
      books or records in any manner which prevents the timely exercise of this
      Warrant, pursuant to the terms hereof.

Section 3. Certain Adjustments.
-------------------------------

      (a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding: (A) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by the
Company pursuant to this Warrant), (B) subdivides outstanding shares of Common
Stock into a larger number of shares, (C) combines (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
(D) issues by reclassification of shares of the Common Stock any shares of
capital stock of the Company or (E) takes any similar action having the effect
of increasing or decreasing the number of shares of Common Stock outstanding
immediately prior to the taking effect of such action, then in each case the
Exercise Price shall be multiplied by a fraction: (i) the numerator of which
shall be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding before such event and (ii) the denominator of which shall be
the number of shares of Common Stock outstanding after such event, and the
number of shares issuable upon exercise of this Warrant shall be proportionately
adjusted. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

      (b) Distributions. If, at any time this Warrant is outstanding, the
Company declares or makes any distribution of its assets (or rights to acquire
its assets) pro rata to the record holders of any class of Common Stock, whether
as a partial liquidating dividend, by way of return of capital or otherwise,
(including any dividend or distribution to the Company's stockholders in cash or
shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "Distribution"), then the Holder shall be entitled, upon any
exercise of this Warrant after the date of record for determining stockholders
entitled to such Distribution (or if no such record is taken, the date on which
such Distribution is declared or made), to receive the amount of such assets
which would have been payable to the Holder with respect to the Warrant Shares
issuable upon such exercise (without giving effect to the restrictions contained
in Section 2(d)) had the Holder been the holder of such Warrant Shares on the
record date for the determination of stockholders entitled to such Distribution
(or if no such record is taken, the date on which such Distribution is declared
or made).

                                       6
<PAGE>

      (c) Convertible Securities and Purchase Rights. If, at any time while this
Warrant is outstanding, the Company issues pro rata to the record holders of any
class of Common Stock any securities or other instruments which are convertible
into or exercisable or exchangeable for Common Stock ("Convertible Securities")
or options, warrants or other rights to purchase or subscribe for Common Stock
or Convertible Securities ("Purchase Rights"), whether or not such Convertible
Securities or Purchase Rights are immediately convertible, exercisable or
exchangeable, then the Holder shall be entitled, upon any exercise of this
Warrant after the date of record for determining stockholders entitled to
receive such Convertible Securities or Purchase Rights (or if no such record is
taken, the date on which such Convertible Securities or Purchase Rights are
issued), to receive the aggregate number of Convertible Securities or Purchase
Rights which the Holder would have received with respect to the Warrant Shares
issuable upon such exercise (without giving effect to the limitations contained
in Section 2(d)) had the Holder been the holder of such Warrant Shares on the
record date for the determination of stockholders entitled to receive such
Convertible Securities or Purchase Rights (or if no such record is taken, the
date on which such Convertible Securities or Purchase Rights were issued). If
the right to exercise or convert any such Convertible Securities or Purchase
Rights would expire in accordance with their terms prior to the exercise of this
Warrant, then the terms of such Convertible Securities or Purchase Rights shall
provide that such exercise or convertibility right shall remain in effect until
30 days after the date the Holder receives such Convertible Securities or
Purchase Rights pursuant to the exercise hereof.

      (d) Subsequent Equity Sales.

            (i) If at any time while this Warrant is issued and outstanding,
      other than in an Exempt Issuance, the Company shall offer, sell, grant any
      option to purchase or offer, sell or grant any right to reprice its
      securities, or otherwise dispose of or issue (or announce or be deemed to
      have made any offer, sale, grant or any option to purchase or other
      disposition) any Common Stock or Common Stock Equivalents (as defined
      below) entitling any Person to acquire shares of Common Stock at an
      effective price per share less than the then Exercise Price (such lower
      price, with respect to each class of securities being issued, the "Base
      Share Price" of such securities and each such issuance a "Dilutive
      Issuance"), as adjusted hereunder, then the Exercise Price shall be
      reduced as follows:

            (A) prior to the time when the Company obtains Stockholder Approval,
      the Exercise Price shall be reduced to equal the greater of (1) the Base
      Share Price and (2) $2.12, subject to adjustment for reverse and forward
      stock splits, stock dividends, stock combinations and other similar
      transactions of the Common Stock that occur after the date of this
      Agreement (such amount set forth in this subclause (2), the "Warrant Floor
      Price"); or

                                       7
<PAGE>

            (B) after the time when the Company obtains Stockholder Approval,
      the Exercise Price shall be reduced to an amount that is equal to the Base
      Share Price; provided, if the Base Share Price is less than the Warrant
      Floor Price, then the Exercise Price shall be adjusted by (x) reducing the
      Exercise Price to the Warrant Floor Price and (y) further reducing the
      Exercise Price to the rate determined by the following calculation:

 ((FULLY DILUTED SHARES OUTSTANDING BEFORE X ADJUSTED EXERCISE PRICE)
                             + TOTAL CONSIDERATION)
 -------------------------------------------------------------------------------
                     FULLY DILUTED SHARES OUTSTANDING AFTER

Where:

"Fully Diluted Shares Outstanding Before" shall mean the total number of shares
of Common Stock outstanding immediately prior to the consummation of such
Dilutive Issuance, assuming the issuance of all shares of Common Stock
underlying Common Stock Equivalents then outstanding;

"Common Stock Equivalents" shall mean any securities of the Company or its
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any Purchase Rights or Convertible
Securities, including without limitation the Preferred Stock and the Warrants;

"Adjusted Exercise Price" shall mean the lesser of the Warrant Floor Price and
the Exercise Price in effect immediately prior to the Dilutive Issuance;

"Total Consideration" shall mean the sum of all consideration received by the
Company in the Dilutive Issuance, calculated pursuant to Section 3(d)(ii); and

"Fully Diluted Shares Outstanding After" shall mean the total number of shares
of Common Stock outstanding immediately after the consummation of such Dilutive
Issuance, assuming the issuance of all shares of Common Stock underlying Common
Stock Equivalents then outstanding.

In each instance of an adjustment pursuant to the foregoing clauses (A) and (B),
such adjustment shall be made whenever Common Stock or Common Stock Equivalents
are issued in a Dilutive Issuance. The Company shall notify the Holder in
writing, no later than five (5) Trading Days following the consummation of a
Dilutive Issuance, indicating therein the applicable issuance price and other
pricing terms. For the avoidance of doubt, in no event shall the Exercise Price
after giving effect to any Dilutive Issuance be greater than the Exercise Price
in effect prior to such Dilutive Issuance, subject to adjustment for reverse and
forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Stock that occur in connection with the Dilutive
Issuance

                                       8
<PAGE>

                  (ii) Effect on Exercise Price of Certain Events. For purposes
            of determining the adjusted Exercise Price under clause (i) of this
            Section 3(d), the following will be applicable:

                  (A) Issuance of Purchase Rights. If the Company issues or
            sells any Purchase Rights, whether or not immediately exercisable,
            and the price per share for which Common Stock is issuable upon the
            exercise of such Purchase Rights (and the price of any conversion of
            Convertible Securities, if applicable) is less than the Exercise
            Price in effect on the date of issuance or sale of such Purchase
            Rights, then the maximum total number of shares of Common Stock
            issuable upon the exercise of all such Purchase Rights (assuming
            full conversion, exercise or exchange of Convertible Securities, if
            applicable) shall, as of the date of the issuance or sale of such
            Purchase Rights, be deemed to be outstanding and to have been issued
            and sold by the Company for such price per share. For purposes of
            the preceding sentence, the "price per share for which Common Stock
            is issuable upon the exercise of such Purchase Rights" shall be
            determined by dividing (x) the total amount, if any, received or
            receivable by the Company as consideration for the issuance or sale
            of all such Purchase Rights, plus the minimum aggregate amount of
            additional consideration, if any, payable to the Company upon the
            exercise of all such Purchase Rights, plus, in the case of
            Convertible Securities issuable upon the exercise of such Purchase
            Rights, the minimum aggregate amount of additional consideration
            payable upon the conversion, exercise or exchange thereof
            (determined in accordance with the calculation method set forth in
            clause (ii)(B) of this Section 3(d)) at the time such Convertible
            Securities first become convertible, exercisable or exchangeable, by
            (y) the maximum total number of shares of Common Stock issuable upon
            the exercise of all such Purchase Rights (assuming full conversion,
            exercise or exchange of Convertible Securities, if applicable). No
            further adjustment to the Exercise Price shall be made upon the
            actual issuance of such Common Stock upon the exercise of such
            Purchase Rights or upon the conversion, exercise or exchange of
            Convertible Securities issuable upon exercise of such Purchase
            Rights.

                                       9
<PAGE>

                  (B) Issuance of Convertible Securities. If the Company issues
            or sells any Convertible Securities, whether or not immediately
            convertible, exercisable or exchangeable, and the price per share
            for which Common Stock is issuable upon such conversion, exercise or
            exchange is less than the Exercise Price in effect on the date of
            issuance or sale of such Convertible Securities, then the maximum
            total number of shares of Common Stock issuable upon the conversion,
            exercise or exchange of all such Convertible Securities shall, as of
            the date of the issuance or sale of such Convertible Securities, be
            deemed to be outstanding and to have been issued and sold by the
            Company for such price per share. If the Convertible Securities so
            issued or sold do not have a fluctuating conversion or exercise
            price or exchange ratio, then for the purposes of the preceding
            sentence, the "price per share for which Common Stock is issuable
            upon such conversion, exercise or exchange" shall be determined by
            dividing (x) the total amount, if any, received or receivable by the
            Company as consideration for the issuance or sale of all such
            Convertible Securities, plus the minimum aggregate amount of
            additional consideration, if any, payable to the Company upon the
            conversion, exercise or exchange thereof (determined in accordance
            with the calculation method set forth in this clause (ii)(B) of this
            Section 3(d)) at the time such Convertible Securities first become
            convertible, exercisable or exchangeable, by (y) the maximum total
            number of shares of Common Stock issuable upon the exercise,
            conversion or exchange of all such Convertible Securities. If the
            Convertible Securities so issued or sold have a fluctuating
            conversion or exercise price or exchange ratio (a "Variable Rate
            Convertible Security"), then for purposes of the next preceding
            sentence, the "price per share for which Common Stock is issuable
            upon such conversion, exercise or exchange" shall be deemed to be
            the lowest price per share which would be applicable (assuming all
            holding period and other conditions to any discounts contained in
            such Variable Rate Convertible Security have been satisfied) if the
            conversion price of such Variable Rate Convertible Security on the
            date of issuance or sale thereof was seventy-five percent (75%) of
            the actual conversion price on such date (the "Assumed Variable
            Market Price"), and, further, if the conversion price of such
            Variable Rate Convertible Security at any time or times thereafter
            is less than or equal to the Assumed Variable Market Price last used
            for making any adjustment under this Section 3(d) with respect to
            any Variable Rate Convertible Security, the Exercise Price in effect
            at such time shall be readjusted to equal the Exercise Price which
            would have resulted if the Assumed Variable Market Price at the time
            of issuance of the Variable Rate Convertible Security had been
            seventy-five percent (75%) of the actual conversion price of such
            Variable Rate Convertible Security existing at the time of the
            adjustment required by this sentence. No further adjustment to the
            Exercise Price shall be made upon the actual issuance of such Common
            Stock upon conversion, exercise or exchange of such Convertible
            Securities.

                  (C) Change in Option Price or Conversion Rate. If there is a
            change at any time in (x) the amount of additional consideration
            payable to the Company upon the exercise of any Purchase Rights; (y)
            the amount of additional consideration, if any, payable to the
            Company upon the conversion, exercise or exchange of any Convertible
            Securities; or (z) the rate at which any Convertible Securities are
            convertible into or exercisable or exchangeable for Common Stock (in
            each such case, other than under or by reason of provisions designed
            to protect against dilution), the Exercise Price in effect at the
            time of such change shall be readjusted to the Exercise Price which
            would have been in effect at such time had such Purchase Rights or
            Convertible Securities still outstanding provided for such changed
            additional consideration or changed conversion, exercise or exchange
            rate, as the case may be, at the time initially issued or sold.

                                       10
<PAGE>

                  (D) Calculation of Consideration Received. If any Common
            Stock, Purchase Rights or Convertible Securities are issued or sold
            for cash, the consideration received therefor will be the amount
            received by the Company therefor (in the case of an underwritten
            public offering, after deduction of all underwriting discounts or
            allowances) in connection with such issuance, grant or sale. In case
            any Common Stock, Purchase Rights or Convertible Securities are
            issued or sold for a consideration part or all of which shall be
            other than cash, including in the case of a strategic or similar
            arrangement in which the other entity will provide services to the
            Company, purchase services from the Company or otherwise provide
            intangible consideration to the Company, the amount of the
            consideration other than cash received by the Company (including the
            net present value of the consideration expected by the Company for
            the provided or purchased services) shall be the fair market value
            of such consideration, except where such consideration consists of
            securities, in which case the amount of consideration received by
            the Company will be the Market Price thereof as of the date of
            receipt. In case any Common Stock, Purchase Rights or Convertible
            Securities are issued in connection with any merger or consolidation
            in which the Company is the surviving corporation, the amount of
            consideration therefor will be deemed to be the fair market value of
            such portion of the net assets and business of the non-surviving
            corporation as is attributable to such Common Stock, Purchase Rights
            or Convertible Securities, as the case may be. Notwithstanding
            anything else herein to the contrary, if Common Stock, Purchase
            Rights or Convertible Securities are issued or sold in conjunction
            with each other as part of a single transaction or in a series of
            related transactions, the Holder may elect to determine the amount
            of consideration deemed to be received by the Company therefor by
            deducting the fair value of any type of securities (the "Disregarded
            Securities") issued or sold in such transaction or series of
            transactions. If the Holder makes an election pursuant to the
            immediately preceding sentence, no adjustment to the Exercise Price
            shall be made pursuant to this Section 3(d) for the issuance of the
            Disregarded Securities or upon any conversion, exercise or exchange
            thereof. The Company shall calculate, using standard commercial
            valuation methods appropriate for valuing such assets, the fair
            market value of any consideration other than cash or securities;
            provided, however, that if the Holder does not agree to such fair
            market value calculation within three business days after receipt
            thereof from the Company, then such fair market value shall be
            determined in good faith by an investment banker or other
            appropriate expert of national reputation selected by the Company
            and reasonably acceptable to the Holder, with the costs of such
            appraisal to be borne by the Company.

                                       11
<PAGE>

      (e) Calculations. All calculations under this Section 3 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 3, the number of shares of Common Stock outstanding as
of a given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) outstanding.

      (f) Adjustment in Number of Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 3, the number of shares of
Common Stock issuable upon exercise of this Warrant at each such Exercise Price
shall be adjusted by multiplying a number equal to the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant at such Exercise Price immediately prior
to such adjustment and dividing the product so obtained by the adjusted Exercise
Price.

      (g) Notice to Holders.

                  (i) Adjustment to Exercise Price. Whenever the Exercise Price
            is adjusted pursuant to this Section 3, the Company shall promptly
            mail to each Holder notice setting forth the Exercise Price after
            such adjustment and setting forth a brief statement of the facts
            requiring such adjustment. If the Company issues a variable rate
            security, despite the prohibition thereon in the Purchase Agreement,
            the Company shall be deemed to have issued Common Stock or Common
            Stock Equivalents at the lowest possible conversion or exercise
            price at which such securities may be converted or exercised in the
            case of a Variable Rate Transaction (as defined in the Purchase
            Agreement), or the lowest possible adjustment price in the case of
            an MFN Transaction (as defined in the Purchase Agreement).

                  (ii) Notice to Allow Exercise by the Holder. If (A) the
            Company shall declare a dividend (or any other distribution) on the
            Common Stock; (B) the Company shall declare a special nonrecurring
            cash dividend on or a redemption of the Common Stock; (C) the
            Company shall authorize the granting to all holders of the Common
            Stock rights or warrants to subscribe for or purchase any shares of
            capital stock of any class or of any rights; (D) the approval of any
            stockholders of the Company shall be required in connection with any
            reclassification of the Common Stock, any consolidation or merger to
            which the Company is a party, any sale or transfer of all or
            substantially all of the assets of the Company, of any compulsory
            share exchange whereby the Common Stock is converted into other
            securities, cash or property; (E) the Company shall authorize the
            voluntary or involuntary dissolution, liquidation or winding up of
            the affairs of the Company; then, in each case, the Company shall
            cause to be mailed to the Holder at its last address as it shall
            appear upon the Warrant Register of the Company, at least ten
            business days prior to the applicable record or effective date
            hereinafter specified, a notice stating (x) the date on which a
            record is to be taken for the purpose of such dividend,
            distribution, redemption, rights or warrants, or if a record is not
            to be taken, the date as of which the holders of the Common Stock of
            record to be entitled to such dividend, distributions, redemption,
            rights or warrants are to be determined or (y) the date on which
            such reclassification, consolidation, merger, sale, transfer or
            share exchange is expected to become effective or close, and the
            date as of which it is expected that holders of the Common Stock of
            record shall be entitled to exchange their shares of the Common
            Stock for securities, cash or other property deliverable upon such
            reclassification, consolidation, merger, sale, transfer or share
            exchange; provided, that the failure to mail such notice or any
            defect therein or in the mailing thereof shall not affect the
            validity of the corporate action required to be specified in such
            notice. The Holder is entitled to exercise this Warrant during the
            ten business day period commencing the date of such notice to the
            effective date of the event triggering such notice.

                                       12
<PAGE>

      (h) Fundamental Transaction. If, at any time while this Warrant is
outstanding, (A) the Company effects a Change of Control (as defined below in
this Section 3(h)), (B) there shall occur any liquidation, dissolution or
winding up of the Company (other than a transaction constituting a Change of
Control), (C) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions (other than a transaction
constituting a Change of Control), (D) the Company shall merge or consolidate
with or into, or engage in any other business combination with, any other person
or entity, in any case, which results in either (x) the holders of the voting
securities of the Company immediately prior to such transaction holding or
having the right to direct the voting of fifty percent (50%) or less of the
total outstanding voting securities of the Company or such other surviving or
acquiring person or entity immediately following such transaction or (y) the
members of the board of directors or other governing body of the Company
comprising fifty percent (50%) or less of the members of the board of directors
or other governing body of the Company or such other surviving or acquiring
person or entity immediately following such transaction, (other than a
transaction constituting a Change of Control), (E) any tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property (other than a transaction constituting a
Change of Control), or (F) the Company effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or
property (any such case, a "Fundamental Transaction"), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to receive, for each
Warrant Share that would have been issuable upon such exercise absent such
Fundamental Transaction, upon exercise of this Warrant, the number of shares of
Common Stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and the such shares of stock, securities and/or
other property as would have been issued or payable in such Fundamental
Transaction with respect to or in exchange for the number of Warrant Shares
which would have been issuable upon exercise had such Fundamental Transaction
not taken place (without giving effect to the limitations on ownership contained

                                       13
<PAGE>

in Section 2(d)) (the "Alternate Consideration"), and, in any such case,
appropriate provisions (in form and substance reasonably satisfactory to the
Holder) shall be made with respect to the rights and interests of the Holder to
the end that the economic value of this Warrant is in no way diminished by such
Fundamental Transaction and that the provisions hereof (including, without
limitation, in the case of any such consolidation, merger or sale in which the
successor entity or purchasing entity is not the Company, an immediate
adjustment of the Exercise Price and Warrant Shares so that the Exercise Price
and Warrant Shares immediately after the Fundamental Transaction reflects the
same relative value as compared to the value of the surviving entity's common
stock that existed between the Exercise Price and the Warrant Shares and the
value of the Company's Common Stock immediately prior to such Fundamental
Transaction) shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or securities thereafter deliverable upon the
exercise thereof. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new warrant consistent with the foregoing provisions
and evidencing the Holder's right to exercise such warrant into Alternate
Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this Section 3(h) and ensuring
that this Warrant (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.
Notwithstanding anything to the contrary set forth in this Section 3(h), in the
event of a transaction constituting a Change of Control, if the Company is
unable, after using its best efforts, to cause the successor to the Company or
surviving entity in such Change of Control to issue to the Holder a new warrant
consistent with the foregoing provisions and evidencing the Holder's right to
exercise such warrant into Alternate Consideration, then the Company shall pay
the Holder in cash (the "Change of Control Consideration") an amount equal to
the intrinsic value of the Warrant, as determined by the mutual agreement of the
Company and the Holder. The Company shall tender the Change of Control
Consideration to the Holder at the same time consideration is delivered to the
Company's stockholders pursuant to the Change of Control. For purposes of this
Warrant, "Change of Control" shall mean the occurrence of either of the
following events:

                  (i) the Company shall sell, convey or dispose of all or
            substantially all of its assets (the presentation of any such
            transaction for stockholder approval being conclusive evidence that
            such transaction involves the sale of all or substantially all of
            the assets of the Company); or

                  (ii) merge or consolidate with or into, or engage in any other
            business combination with, any other person or entity, in any case,
            which results in either (x) the holders of the voting securities of
            the Company immediately prior to such transaction holding or having
            the right to direct the voting of fifty percent (50%) or less of the
            total outstanding voting securities of the Company or such other
            surviving or acquiring person or entity immediately following such
            transaction or (y) the members of the board of directors or other
            governing body of the Company comprising fifty percent (50%) of less
            of the members of the board of directors or other governing body of
            the Company or such other surviving or acquiring person or entity
            immediately following such transaction.

                                       14
<PAGE>

                  (i) Exempt Issuance. Notwithstanding the foregoing, no
            adjustments, Alternate Consideration nor notices shall be made, paid
            or issued under this Section 3 in respect of an Exempt Issuance.

      (j) Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors,
provided, that the Exercise Price as so reduced is not less than the Warrant
Floor Price unless Stockholder Approval has been obtained.

Section 4. Transfer of Warrant.

      (a) Transferability. Subject to compliance with any applicable securities
laws and the conditions set forth in Sections 4(d) and 5(a) hereof and to the
provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights
hereunder are transferable, in whole or in part, upon surrender of this Warrant
at the principal office of the Company, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes
payable upon the making of such transfer. Upon such surrender and, if required,
such payment, the Company shall execute and deliver a new Warrant or Warrants in
the name of the assignee or assignees and in the denomination or denominations
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.

      (b) New Warrants. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations in which
new Warrants are to be issued, signed by the Holder or its agent or attorney.
Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver
a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.

      (c) Warrant Register. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

                                       15
<PAGE>

      (d) Transfer Restrictions. If, at the time of the surrender of this
Warrant in connection with any transfer of this Warrant, the transfer of this
Warrant shall not be registered pursuant to an effective registration statement
under the Securities Act and under applicable state securities or blue sky laws,
the Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer may be made without registration under the Securities
Act and under applicable state securities or blue sky laws, (ii) that the Holder
or transferee execute and deliver to the Company an investment letter in form
and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or
(a)(8) promulgated under the Securities Act or a qualified institutional buyer
as defined in Rule 144A(a) under the Securities Act.

Section 5. Miscellaneous.

      (a) Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws and Section 4 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an investment letter in form and
substance reasonably satisfactory to the Company.

      (b) No Rights or Liabilities as a Stockholder Until Exercise. This Warrant
does not entitle the Holder to any voting rights or other rights as a
stockholder of the Company prior to the exercise hereof. No provision of this
Warrant, in the absence of affirmative action by the holder hereof to purchase
Warrant Shares, and no mere enumeration herein of the rights or privileges of
the holder hereof, shall give rise to any liability of such holder for the
Exercise Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

      (c) Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

      (d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.

                                       16
<PAGE>

      (e) Protection of Holder's Rights. Except and to the extent as waived or
consented to by the Holder, the Company shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of the Holder as set forth in this Warrant against impairment. Without
limiting the generality of the foregoing, the Company will (i) not increase the
par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (ii) take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise
of this Warrant, and (iii) obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of
Warrant Shares for which this Warrant is exercisable or in the Exercise Price,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction thereof.

      (f) Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.

      (g) Restrictions. The Holder acknowledges that the Warrant Shares acquired
upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.

      (h) Nonwaiver and Expenses. No course of dealing or any delay or failure
to exercise any right hereunder on the part of the Holder shall operate as a
waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies, notwithstanding all rights hereunder terminate on the Termination
Date. If the Company willfully and knowingly fails to comply with any provision
of this Warrant, which results in any material damages to the Holder, the
Company shall pay to the Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of appellate proceedings, incurred by the Holder in collecting
any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.

      (i) Notices. Any notice, request or other document required or permitted
to be given or delivered to the Holder by the Company shall be delivered in
accordance with the notice provisions of the Purchase Agreement.

                                       17
<PAGE>

      (j) Limitation of Liability. No provision hereof, in the absence of any
affirmative action by the Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Holder,
shall give rise to any liability of the Holder for the purchase price of any
Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

      (k) Remedies. The Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.

      (l) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of the Holder. The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and shall
be enforceable by any such Holder or holder of Warrant Shares.

      (m) Amendment. This Warrant may be modified or amended or the provisions
hereof waived with the written consent of the Company and the Holder.

      (n) Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Warrant shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.

      (o) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.

                              ********************
                            [SIGNATURE PAGE FOLLOWS]

                                       18
<PAGE>

      IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officer thereunto duly authorized.

Dated:  September 30, 2005

                                         DIOMED HOLDINGS, INC.

                                         By:
                                         ---------------------------------------
                                         Name:  James A. Wylie, Jr.
                                         Title:  Chief Executive Officer

                                       19
<PAGE>

                               NOTICE OF EXERCISE

TO: Diomed Holdings, Inc.

      (1)The undersigned hereby elects to purchase ________ Warrant Shares of
the Company pursuant to the terms of the attached Warrant (only if exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.

      (2)Payment shall take the form of (check applicable box):

            |_|   lawful money of the United States; or

            |_|   the cancellation of such number of Warrant Shares as is
                  necessary, in accordance with the formula set forth in
                  subsection 2(c), to exercise this Warrant with respect to the
                  maximum number of Warrant Shares purchasable pursuant to the
                  cashless exercise procedure set forth in subsection 2(c).

      (3)Please issue a certificate or certificates representing said Warrant
Shares in the name of the undersigned or in such other name as is specified
below:

The Warrant Shares shall be delivered to the following:

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

      (4) Accredited Investor. The undersigned is an "accredited investor" as
defined in Regulation D promulgated under the Securities
Act of 1933, as amended.

      (5) Limitations on Ownership. The undersigned hereby certifies that after
giving effect to the exercise of this Warrant hereby and the issuance of the
Warrant Shares hereunder, the undersigned will not be in violation of the
limitations on ownership described in Section 2(d) of this Warrant.

                                         [PURCHASER]

                                         By:
                                         ---------------------------------------
                                         Name:
                                         Title:

                                         Dated:
                                         ---------------------------------------

<PAGE>

                                 ASSIGNMENT FORM

                    (To assign the foregoing warrant, execute
                   this form and supply required information.
                 Do not use this form to exercise the warrant.)

      FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to

                                                               whose address is
--------------------------------------------------------------

-------------------------------------------------------------------------------.

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

                                         Dated:
                                               -----------------,---------------

                 Holder's Signature:
                                     -------------------------------------------

                 Holder's Address:
                                     -------------------------------------------

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

Signature Guaranteed:
                      ----------------------------------------------------------

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

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