Document:

Exhibit 10

EXHIBIT 10.1

CONSENT AND SEVENTH AMENDMENT

TO 

LOAN AND SECURITY AGREEMENT

THIS CONSENT AND SEVENTH AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into this 28th day of September, 2007, by and among Silicon Valley Bank (“Bank”), Relm Wireless Corporation, a Nevada corporation (“Relm Wireless”), and Relm Communications, Inc., a Florida corporation (“Relm Communications ” and, together with Relm Wireless, the “Borrower”) whose address is 7100 Technology Drive, West Melbourne, Florida  32904.

RECITALS

A.

Bank and Borrower have entered into that certain Loan and Security Agreement dated as of August 29, 2003, as previously amended (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).  

B.

Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.  

C.

Borrower has requested that Bank (i) amend the Loan Agreement to (i) adjust the amount of the Tangible Net Worth covenant contained therein, and (ii) consent to the payment by Relm Wireless of a one-time special dividend of $0.50 per share of the common stock of Relm Wireless.

D.

Bank has agreed to so amend certain provisions of the Loan Agreement and to consent to the payment of such special dividend, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.

Definitions.  Capitalized terms used but not defined in this Consent shall have the meanings given to them in the Loan Agreement.

2.

Amendments to Loan Agreement.

2.1

Section 5 (Financial Covenants).  Section 5 of the Amended and Restated Schedule to Loan and Security agreement is amended in its entirety and replaced with the following:

FINANCIAL COVENANTS

(Section 5.1):

Borrower shall comply with each of the following covenants.  Compliance shall be determined as of the end of each month, except as otherwise specifically provided below: 

Tangible Net Worth:

Borrower shall maintain at all times, to be tested as of the last day of each quarter, on a consolidated basis with respect to Borrower and its Subsidiaries, a Tangible Net Worth of at least $25,000,000, increasing by (a) 50% of quarterly profits, commencing with the quarter beginning July 1, 2007, and (b) 75% of the amount received in respect of issuances of equity and the principal amount of the issuance of Subordinated Debt, in each case received after July 1, 2007.

Adjusted Quick Ratio:

Borrower shall maintain as of the end of each quarter an Adjusted Quick Ratio of at least 2:00 to 1.00.

Definitions.

For purposes of the foregoing financial covenants, the following term shall have the following meaning:

“Adjusted Quick Ratio” means, as of any date, the ratio of (x) Quick Assets to (y) Current Liabilities less Deferred Revenues; where

“Quick Assets” are, on such date, the Borrower’s consolidated, unrestricted cash, cash equivalents, and net billed accounts receivable, all determined according to GAAP;

“Current Liabilities” are the aggregate amount of Borrower’s Total Liabilities which mature within one (1) year; and

“Total Liabilities” are, on any day, obligations that should, under GAAP, be classified liabilities on Borrower’s consolidated balance sheet, including all debt and current portion of subordinated debt allowed to be paid, but excluding all other subordinate debt.

“Deferred Revenue” is all amounts received in advance of performance under maintenance, licensing and service contracts and not yet recognized as revenue.

“Tangible Net Worth” is, on any date, the consolidated total assets of Borrower and its Subsidiaries minus (a) any amounts attributable to (i) goodwill, (ii) intangible items including unamortized debt discount and expense, patents, trade and service marks and names, copyrights and research and 

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development expenses except prepaid expenses, (iii) notes, accounts receivable and other obligations owing to Borrower from its officers or other Affiliates, and (iv) reserves not already deducted from assets, minus (b) Total Liabilities , plus (c) Subordinated Debt; where:

“Subordinated Debt” is indebtedness incurred by Borrower and subordinated to all of Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank; and.

“Total Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet, including all Indebtedness, and current portion of Subordinated Debt permitted by Bank to be paid by Borrower.

3.

Consent.  The Bank hereby consents to the payment of a one time special dividend of $0.50 per share of common stock of Relm Wireless by not later than November 30, 2007, provided that no such dividend may be paid at any time an Event of Default or Default either exists under the Loan Agreement or would result from the payment of any such dividend.

4.

Limitation of Amendments.

4.1

The amendments set forth in Section 2 above and the consent set forth in Section 3 above are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

4.2

This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

5.

Representations and Warranties.  To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

5.1

Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date), and (b) no Event of Default has occurred and is continuing;

5.2

Borrower has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended by this Amendment;

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5.3

The organizational documents of Borrower most recently delivered to Bank remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

5.4

The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized; 

5.5

The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower; 

5.6

The execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on either Borrower, except as already has been obtained or made; and

5.7

This Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

6.

Counterparts.  This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

7.

Effectiveness.  This Amendment shall be deemed effective upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrower’s payment of an amendment fee in an amount equal to $1,500, and (c) Borrower’s payment of Bank’s legal fees and expenses in connection with the negotiation and preparation of this Consent.  

[Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

						
	BANK

	     

	BORROWER

	  

	 
	 

	Silicon Valley Bank

	 
	Relm Wireless Corporation

	  

	 
	 

	  

	 
	 

	By:

	 /s/ SCOTT MCCARTY

	 
	By:

	  /s/ WILLIAM P. KELLY

	Name:

	M. SCOTT MCCARTY

	 
	Name:

	William P. Kelly

	Title:

	Relationship  Manager

	 
	Title:

	Executive Vice President

	  

	 
	 
	 

	  

	 
	Relm Communications, Inc.

	  

	 
	 

	  

	 
	 

	 
	 
	 
	By:

	/s/ WILLIAM P. KELLY

	 
	 
	 
	Name: 

	William P. Kelly

	 
	 
	 
	Title:

	Executive Vice President

5EX 10.1

    Execution
      Version

     

    LOAN
      AND SECURITY AGREEMENT 

     

    THIS
      LOAN
      AND SECURITY AGREEMENT is made and dated as of September 28, 2007 and is entered
      into by and between DIOMED HOLDINGS, INC., a Delaware corporation (“Holdings”),
      and DIOMED, INC., a Delaware corporation (“Lead Borrower”), and each of their
      respective Subsidiaries organized in a jurisdiction of the United States of
      America (each a “US Subsidiary”) that hereinafter becomes a “Borrower” pursuant
      to the terms hereof (each an “Additional Borrower”, and Lead Borrower, Holdings
      and each Additional Borrower hereinafter collectively referred to as the
“Borrowers” and, each individually, a “Borrower”), and HERCULES TECHNOLOGY
      GROWTH CAPITAL, INC., a Maryland corporation (the “Lender”).

     

    RECITALS

     

    A.
      Borrower has requested Lender to make available to Borrowers a loan in an
      aggregate principal amount of up to Ten Million Dollars ($10,000,000) (the
“Term
      Loan”); and

     

    B.
      Lender
      is willing to make the Term Loan on the terms and conditions set forth in this
      Agreement.

     

    AGREEMENT

     

    NOW,
      THEREFORE, Borrower and Lender agree as follows:

     

    SECTION 1.
      DEFINITIONS AND RULES OF CONSTRUCTION

     

    1.1. Unless
      otherwise defined herein, the following capitalized terms shall have the
      following meanings:

     

    "777
      Patent Litigation" means litigation relating to the Borrowers' patent
      infringement case against AngioDynamics, Inc, and Vascular Solutions, Inc.
      relating to '777 patent, Civil Action No. 04-10019NMG and Civil Action No.
      04-10444NMG, filed in the United States District Court for the District of
      Massachusetts.

     

    “Account
      Control Agreement(s)” means any agreement entered into by and among the Lender,
      any Borrower and a third party Bank or other institution (including a Securities
      Intermediary) in which such Borrower maintains a Deposit Account or an account
      holding Investment Property and which is intended to perfect Lender’s security
      interest in the subject account or accounts.

     

    “ACH
      Authorization” means the ACH Debit Authorization Agreement in substantially the
      form of Exhibit
      H.

     

    “Additional
      Borrower” has the meaning given to such term in the preamble to this
      Agreement.

     

    “Advances”
      means any Term Loan Advance.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Advance
      Date” means the funding date of any Advance.

     

    “Advance
      Request” means a request for an Advance submitted by any Borrower to Lender in
      substantially the form of Exhibit A.

     

    “Aggregate
      Gross Consideration” means the aggregate amount of cash, notes and the fair
      market value of any securities or other property paid or payable directly or
      indirectly to Holdings or to the equityholders of Holdings in connection with
      a
      consummated Change in Control, including, without limitation, (i) any dividends
      paid or any stock redemptions made in connection with the Change in Control,
      (ii) all indebtedness for borrowed money and other liabilities directly or
      indirectly assumed, refinanced, retired or extinguished in connection with
      the
      Change in Control, or which otherwise remains outstanding with Holdings or
      any
      subsidiary thereof as of the consummation of the Change in Control, (iii) all
      amounts paid or other value ascribed in the Change in Control (including the
      form of “rollover” options or warrants) in respect of issued warrants, options
      or other convertible securities, whether or not vested, in connection with
      the
      Change in Control, the value of which shall be based on the difference between
      the acquisition price and exercise or conversion price of such securities;
      (iv)
      the full amount of any consideration placed in escrow or otherwise held back
      to
      support the Company’s (or its stockholders’) indemnification or similar
      obligation under the definitive documents with respect to the Change in Control;
      (v) the present value (as agreed to in good faith by the parties) of any
      contingent consideration to be paid in the future; and (vi) the value of any
      retained interest in Holdings, based on the per-share value paid in the Change
      in Control, if less than 100% of the equity of Holdings is transferred in the
      Change in Control.

     

    “Agreement”
      means this Loan and Security Agreement, as amended from time to
      time.

     

    “Assignee”
      has the meaning given to it in Section 12.13.

     

    “Availability
      Period” has the meaning given to it in Section 2.1(a).

     

    “Borrower”
      or “Borrowers” has the meaning given to such terms in the preamble to this
      Agreement.

     

    “Borrower
      Products” means all products, software, service offerings, technical data or
      technology currently being designed, manufactured or sold by any Borrower or
      which any Borrower intends to sell, license, or distribute in the future
      including any products or service offerings under development, collectively,
      together with all products, software, service offerings, technical data or
      technology that have been sold, licensed or distributed by any Borrower since
      its incorporation.

     

    “Business
      Day” means a day in which the banking institutions in the State of California
      are open for business. 

     

    “Cash”
      means all cash and liquid funds.

     

    
      
        
        

      

      
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    “Change
      in Control” means (i) any reorganization, recapitalization, consolidation or
      merger (or similar transaction or series of related transactions) of any
      Borrower, (ii) any sale or issuance by any Borrower of new shares of Preferred
      Stock of such Borrower to investors, none of whom are current investors in
      such
      Borrower, and such new shares of Preferred Stock are senior to all existing
      Preferred Stock and Common Stock with respect to liquidation preferences, and
      the aggregate liquidation preference of the new shares of Preferred Stock is
      more than fifty percent (50%) of the aggregate liquidation preference of all
      shares of Preferred Stock and Common Stock of the Company, (iii) any sale,
      lease, license or transfer of any substantial part of the assets of any Borrower
      or any Subsidiary, (iv) any "person" or "group" (as such terms are used in
      Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, becomes the
      "beneficial owner" (as defined in Rules 13d-3 and 13-d5 under the Securities
      Exchange Act of 1934, except that a person or group shall be deemed to have
      “beneficial ownership" of all securities that such person or group has the right
      to acquire, whether such right is exercisable immediately or only after the
      passage of time (such right, an "option right")), directly or indirectly, of
      25%
      or more of the equity securities of Holdings entitled to vote for members of
      the
      board of directors or equivalent governing body of Holdings on a fully-diluted
      basis (and taking into account all such securities that such "person" or "group"
      has the right to acquire pursuant to any option right), (v) during any period
      of
      12 consecutive months, a majority of the members of the board of directors
      or
      other equivalent governing body of Holdings cease to be composed of individuals
      (a) who were members of that board or equivalent governing body on the first
      day
      of such period, or (b) whose election or nomination to that board or equivalent
      governing body was approved by individuals referred to in clause (a) above
      constituting at the time of the election or nomination at least a majority
      of
      that board or equivalent governing body, or (vi) if at any time Holdings owns
      less than 100% of all outstanding shares of any of the Lead Borrower, of Diomed
      Limited, or of Diolaser Mexico S.A. de C.V. 

     

    “Change
      in Control Payment” has the meaning given to it in Section 7.17(c).

     

    “Claims”
      has the meaning given to it in Section 12.10.

     

    “Closing
      Date” means the date of this Agreement.

     

    "Closing
      Success Fee" means a success fee in the amount of $200,000 to be paid by
      Borrowers to Lender on the Closing Date.

     

    “Collateral”
      means the property described in Section 3.1.

     

    “Common
      Stock” means shares of the common stock of Holdings.

     

    “Confidential
      Information” has the meaning given to it in Section 12.12.

     

    “Contingent
      Obligation” means, as applied to any Person, any direct or indirect liability,
      contingent or otherwise, of that Person with respect to (i) any indebtedness,
      lease, dividend, letter of credit or other obligation of another, including
      any
      such obligation directly or indirectly guaranteed, endorsed, co-made or
      discounted or sold with recourse by that Person, or in respect of which that
      Person is otherwise directly or indirectly liable; (ii) any obligations with
      respect to undrawn letters of credit, corporate credit cards or merchant
      services issued for the account of that Person; and (iii) all obligations
      arising under any interest rate, currency or commodity swap agreement, interest
      rate cap agreement, interest rate collar agreement, or other agreement or
      arrangement designated to protect a Person against fluctuation in interest
      rates, currency exchange rates or commodity prices; provided, however, that
      the
      term “Contingent Obligation” shall not include endorsements for collection or
      deposit in the ordinary course of business. The amount of any Contingent
      Obligation shall be deemed to be an amount equal to the stated or determined
      amount of the primary obligation in respect of which such Contingent Obligation
      is made or, if not stated or determinable, the maximum reasonably anticipated
      liability in respect thereof as determined by such Person in good faith;
      provided, however, that such amount shall not in any event exceed the maximum
      amount of the obligations under the guarantee or other support
      arrangement.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

       

    

    “Convertible
      Debentures” means the convertible debentures due October 25, 2008, principal
      amount $3,712,000.

     

    “Convertible
      Noteholders” means holders of promissory notes pursuant to the Convertible
      Debentures.

     

    “Copyright
      License” means any written agreement granting any right to use any Copyright or
      Copyright registration, now owned or hereafter acquired by any Borrower or
      in
      which such Borrower now holds or hereafter acquires any interest.

     

    “Copyright
      Security Agreement” means a copyright security agreement executed and delivered
      by each Borrower and the Lender, as such may be amended, restated or otherwise
      modified from time to time. 

     

    “Copyrights”
      means all copyrights, whether registered or unregistered, held pursuant to
      the laws of the United States, any State thereof, or of any other
      country.

     

    “Deposit
      Accounts” means any “deposit accounts,” as such term is defined in the UCC, and
      includes any checking account, savings account, or certificate of
      deposit.

     

    “ERISA”
      is the Employee Retirement Income Security Act of 1974, and its
      regulations.

     

    “Event
      of
      Default” has the meaning given to it in Section 10.

     

    “Facility
      Charge” means two percent (2.0%) of the Maximum Term Loan Amount.

     

    “Financial
      Statements” has the meaning given to it in Section 7.1.

     

    “GAAP”
      means generally accepted accounting principles in the United States of America,
      as in effect from time to time.

     

    “Governmental
      Authority” shall mean the government of the United States, any foreign country
      or any multinational authority, or any state, commonwealth, protectorate or
      political subdivision thereof, and any entity, body or authority exercising
      executive, legislative, judicial, regulatory or administrative functions of
      or
      pertaining to government, including the PBGC and other quasi-governmental
      entities established to perform such functions. 

     

    “Indebtedness”
      means indebtedness of any kind, including (a) all indebtedness for borrowed
      money or the deferred purchase price of property or services, including
      reimbursement and other obligations with respect to surety bonds and letters
      of
      credit, (b) all obligations evidenced by notes, bonds, debentures or similar
      instruments, (c) all capital lease obligations, and (d) all Contingent
      Obligations.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    “Insolvency
      Proceeding” is any proceeding by or against any Person under the United States
      Bankruptcy Code, or any other bankruptcy or insolvency law, including
      assignments for the benefit of creditors, compositions, extensions generally
      with its creditors, or proceedings seeking reorganization, arrangement, or
      other
      relief.

     

    “Intellectual
      Property” means all of Borrowers’ Copyrights; Trademarks; Patents; Licenses;
      trade secrets and inventions; mask works; Borrowers’ applications therefor and
      reissues, extensions, or renewals thereof; and Borrowers’ goodwill associated
      with any of the foregoing, together with Borrowers’ rights to sue for past,
      present and future infringement of Intellectual Property and the goodwill
      associated therewith.

     

    “Intercreditor
      Agreement” means that certain Intercreditor Agreement dated the date hereof
      between all holders of Convertible Debentures and the Lender pursuant to which
      each such holder subordinates its right to payment and performance of, and
      all
      liens and security interests securing, the Subordinated Debt (as defined
      therein) in favor of the Lender.

     

    “Investment”
      means any beneficial ownership (including stock, partnership or limited
      liability company interests) of or in any Person, or any loan, advance or
      capital contribution to any Person or the acquisition of all, or substantially
      all, of the assets of another Person.

     

    “Judgment”
      means any judgment of the United States District Court for the District of
      Massachusetts or any successor court in respect of the 777 Patent
      Litigation.

     

    “Joinder
      Agreements” means for each Additional Borrower, a completed and executed Joinder
      Agreement in substantially the form attached hereto as Exhibit
      G.

     

    “Lender”
      has the meaning given to it in the preamble to this Agreement.

     

    “Lender
      Expenses” are all audit fees and expenses, costs, and expenses (including
      reasonable attorneys’ fees and expenses) for preparing, negotiating,
      administering, defending and enforcing the Loan Documents (including, without
      limitation, those incurred in connection with appeals or Insolvency Proceedings)
      or otherwise incurred with respect to any Borrower.

     

    “License”
      means any Copyright License, Patent License, Trademark License or other license
      of rights or interests.

     

    “Lien”
      means any mortgage, deed of trust, pledge, hypothecation, assignment for
      security, security interest, encumbrance, levy, lien or charge of any kind,
      whether voluntarily incurred or arising by operation of law or otherwise,
      against any property, any conditional sale or other title retention agreement,
      and any lease in the nature of a security interest, and the filing of any
      financing statement (other than a precautionary financing statement with respect
      to a lease that is not in the nature of a security interest) under the UCC
      or
      comparable law of any jurisdiction.

     

    “Loan”
      means the Advances made under this Agreement.

     

    
      
        
        

      

      
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    “Loan
      Documents” means this Agreement, the Notes, the Intercreditor Agreement, the ACH
      Authorization, the Pledge Agreements, the Account Control Agreements, the
      Joinder Agreements, the Copyright Security Agreement, the Trademark Security
      Agreement, the Patent Security Agreement, all UCC Financing Statements, the
      Warrant, the Supplemental Warrant and any other documents executed in connection
      with the Secured Obligations or the transactions contemplated hereby, as the
      same may from time to time be amended, modified, supplemented or
      restated.

     

    “Material
      Adverse Effect” means a material adverse effect upon: (i) the business,
      operations, properties, assets or condition (financial or otherwise) of the
      Borrowers taken as a whole; or (ii) the ability of the Borrowers to perform
      the Secured Obligations in accordance with the terms of the Loan Documents,
      or
      the ability of Lender to enforce any of its rights or remedies with respect
      to
      the Secured Obligations; or (iii) the Collateral or Lender’s Liens on the
      Collateral or the priority of such Liens.

     

    “Maximum
      Term Loan Amount” means Ten Million and No/100 Dollars
      ($10,000,000).

     

    “Maximum
      Rate” shall have the meaning assigned to such term in Section 2.2.

     

    “Next
      Event” means the closing of Holdings’ next round of private equity financing
      which first becomes effective after the Closing Date and results in aggregate
      proceeds to any Borrower of at least $10,000,000.

     

    “Notes”
      means any Term Note as it may be amended, restated or modified from time to
      time.

     

    “Patent
      License” means any written agreement granting any right with respect to any
      invention on which a Patent is in existence or a Patent application is pending,
      in which agreement any Borrower now holds or hereafter acquires any
      interest.

     

    “Patents”
      means all letters patent of, or rights corresponding thereto, in the United
      States or in any other country, all registrations and recordings thereof, and
      all applications for letters patent of, or rights corresponding thereto, in
      the
      United States or any other country.

     

    “Patent
      Security Agreement” means a patent security agreement executed and delivered by
      each Borrower and the Lender, as such may be amended, restated or otherwise
      modified from time to time. 

     

    “Permitted
      Indebtedness” means: (i) Indebtedness of any Borrower in favor of Lender arising
      under this Agreement or any other Loan Document; (ii) Indebtedness existing
      on
      the Closing Date which is disclosed in Schedule
      1A;
      (iii)
      Indebtedness of up to $100,000 outstanding at any time secured by a lien
      described in clause (vii) of the defined term “Permitted Liens,” provided such
      Indebtedness does not exceed the lesser of the cost or fair market value of
      the
      Equipment financed with such Indebtedness; (iv) Indebtedness to trade creditors
      incurred in the ordinary course of business not outstanding for more than one
      hundred and twenty (120) days, including Indebtedness incurred in the ordinary
      course of business with corporate credit cards; (v) Indebtedness that also
      constitutes a Permitted Investment; (vi) reimbursement obligations in connection
      with letters of credit that are secured by cash or cash equivalents and issued
      on behalf of any Borrower or any Subsidiary thereof in an amount not to exceed
      $200,000 at any time outstanding; (vii) Indebtedness owing from any Borrower
      to
      another Borrower; (viii) other Indebtedness in an amount not to exceed $200,000
      at any time outstanding; and (ix) extensions, refinancings and renewals of
      any
      items of Permitted Indebtedness, provided that the principal amount is not
      increased or the terms modified to impose materially more burdensome terms
      upon
      the relevant Borrower or its Subsidiary, as the case may be. 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Permitted
      Investment” means: (i) Investments existing on the Closing Date which are
      disclosed in Schedule
      1B;
      (ii)
      (a) marketable direct obligations issued or unconditionally guaranteed by the
      United States of America or any agency or any State thereof maturing within
      one
      year from the date of acquisition thereof, (b) commercial paper maturing no
      more
      than one year from the date of creation thereof and currently having rating
      of
      at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s
      Investors Service, (c) certificates of deposit issued by any bank with assets
      of
      at least $500,000,000 maturing no more than one year from the date of investment
      therein, and (d) money market accounts; (iii) repurchases of stock from former
      employees, directors, or consultants of any Borrower under the terms of
      applicable repurchase agreements at the original issuance price of such
      securities in an aggregate amount not to exceed $250,000 in any fiscal year,
      provided that no Event of Default has occurred, is continuing or would exist
      after giving effect to the repurchases; (iv) Investments accepted in connection
      with Permitted Transfers; (v) Investments (including debt obligations) received
      in connection with the bankruptcy or reorganization of customers or suppliers
      and in settlement of delinquent obligations of, and other disputes with,
      customers or suppliers arising in the ordinary course of a Borrower’s business;
      (vi) Investments consisting of notes receivable of, or prepaid royalties and
      other credit extensions, to customers and suppliers who are not affiliates,
      in
      the ordinary course of business, provided that this subparagraph (vi) shall
      not
      apply to Investments of any Borrower in any Subsidiary; (vii) Investments
      consisting of loans not involving the net transfer on a substantially
      contemporaneous basis of cash proceeds to employees, officers or directors
      relating to the purchase of capital stock of a Borrower pursuant to employee
      stock purchase plans or other similar agreements approved by such Borrower’s
      Board of Directors; (viii) Investments consisting of travel advances in the
      ordinary course of business; (ix) Investments in newly-formed Subsidiaries
      organized in the United States, provided that such Subsidiaries enter into
      a
      Joinder Agreement promptly after their formation by Borrower and execute such
      other documents as shall be reasonably requested by Lender; (x) joint ventures
      or strategic alliances in the ordinary course of a Borrower’s business
      consisting of the nonexclusive licensing of technology, the development of
      technology or the providing of technical support, provided that any cash
      Investments by any Borrower do not exceed $100,000 in the aggregate in any
      fiscal year; (xi) so long as no Event of Default has occurred or is continuing,
      Investments in Diomed Limited to be used solely for the purchase of inventory
      for resale to customers and for use by sales personnel in the ordinary course
      of
      business and for the payment of operating expenses incurred in the ordinary
      course of business and consistent with past practices of Diomed Limited and
      on
      behalf of Diomed Limited, provided
      that
      the
      funding of any such Investment shall not be made until a date which is more
      than
      thirty (30) days prior to the date any amounts in this clause (xi) are due
      and
      payable; (xii) so long as no Event of Default has occurred or is continuing,
      Investments made in Diolaser Mexico S.A. de C.V., not to exceed $250,000 in
      the
      aggregate per fiscal year; and (xiii) additional Investments that do not exceed
      $250,000 in the aggregate. For the avoidance of doubt, Investments to Restricted
      Subsidiaries are not permitted without the prior written consent of the
      Lender.

     

    
      
        
        

      

      
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    “Permitted
      Liens” means any and all of the following: (i) Liens in favor of Lender; (ii)
      Liens existing on the Closing Date which are disclosed in Schedule
      1C;
      (iii) Liens for taxes, fees, assessments or other governmental charges or
      levies, either not delinquent or being contested in good faith by appropriate
      proceedings; provided,
      that
      each Borrower maintains adequate reserves therefor in accordance with GAAP;
      (iv) Liens securing claims or demands of materialmen, artisans, mechanics,
      carriers, warehousemen, landlords and other like Persons arising in the ordinary
      course of a Borrower’s business and imposed without action of such parties;
provided,
      that
      the payment thereof is not yet required; (v) Liens arising from judgments,
      decrees or attachments in circumstances which do not constitute an Event of
      Default hereunder; (vi) the following deposits, to the extent made in the
      ordinary course of business: deposits under worker’s compensation, unemployment
      insurance, social security and other similar laws, or to secure the performance
      of bids, tenders or contracts (other than for the repayment of borrowed money)
      or to secure indemnity, performance or other similar bonds for the performance
      of bids, tenders or contracts (other than for the repayment of borrowed money)
      or to secure statutory obligations (other than liens arising under ERISA or
      environmental liens) or surety or appeal bonds, or to secure indemnity,
      performance or other similar bonds; (vii) Liens on Equipment or software or
      other intellectual property constituting purchase money liens and Liens in
      connection with capital leases securing Indebtedness permitted in clause (iii)
      of “Permitted Indebtedness”; (viii) leasehold interests in leases or subleases
      and licenses granted in the ordinary course of business and not interfering
      in
      any material respect with the business of the licensor; (ix) Liens in favor
      of
      customs and revenue authorities arising as a matter of law to secure payment
      of
      custom duties that are promptly paid on or before the date they become due;
      (x)
      Liens on insurance proceeds securing the payment of financed insurance premiums
      that are promptly paid on or before the date they become due (provided that
      such
      Liens extend only to such insurance proceeds and not to any other property
      or
      assets); (xi) statutory and common law rights of set-off and other similar
      rights as to deposits of cash and securities in favor of banks, other depository
      institutions and brokerage firms; (xii) easements, zoning restrictions,
      rights-of-way and similar encumbrances on real property imposed by law or
      arising in the ordinary course of business so long as they do not materially
      impair the value or marketability of the related property; and (xiii) Liens
      on
      cash or cash equivalents securing obligations permitted under clause (vi) of
      the
      definition of Permitted Indebtedness; and (xiv) Liens incurred in connection
      with the extension, renewal or refinancing of the indebtedness secured by Liens
      of the type described in clauses (i) through (x) above; provided,
      that
      any extension, renewal or replacement Lien shall be limited to the property
      encumbered by the existing Lien and the principal amount of the indebtedness
      being extended, renewed or refinanced (as may have been reduced by any payment
      thereon) does not increase.

     

    “Permitted
      Transfers” means (i) sales of Inventory in the normal course of business
      including, without limitation, sales or pre-sales of Inventory in the normal
      course of business and on arms length terms to either Diolaser Mexico S.A.
      de
      C.V. or Diomed Limited; (ii) non-exclusive licenses and similar arrangements
      for
      the use of Intellectual Property in the ordinary course of business and licenses
      that could not result in a legal transfer of title of the licensed property
      but
      that may be exclusive in respects other than territory and that may be exclusive
      as to territory only as to discreet geographical areas outside of the United
      States in the ordinary course of business; (iii) dispositions of worn-out,
      obsolete or surplus Equipment at fair market value in the ordinary course of
      business; and (iv) other Transfers of assets having a fair market value of
      not
      more than $250,000 in the aggregate in any fiscal year. For the avoidance of
      doubt, no transfers to Restricted Subsidiaries are permitted without the prior
      written consent of the Lender.

     

    
      
        
        

      

      
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    “Person”
      means any individual, sole proprietorship, partnership, joint venture, trust,
      unincorporated organization, association, corporation, limited liability
      company, institution, other entity or government.

     

    “Pledge
      Agreements” means (a) that certain Pledge Agreement, dated as of the Closing
      Date, executed and delivered by Holdings pledging its interest in the Lead
      Borrower and the Lead Borrower pledging its interest in Diomed PDT, Inc. and
      Diomed Acquisition Corp., and (b) that certain Share Charge dated as of the
      Closing Date, executed and delivered by the Lead Borrower pledging its interest
      in Diomed Limited, and (c) any other pledge agreement executed and delivered
      pursuant to the terms hereof, as each such agreement may be amended, restated
      or
      otherwise modified from time to time. 

     

    “Preferred
      Stock” means at any given time any equity security issued by any Borrower that
      has any rights, preferences or privileges senior to such Borrower’s common
      stock.

     

    “Prepayment
      Charge” has the meaning given to it in Section 2.4.

     

    “Restricted
      Subsidiaries” means Diomed PDT, Inc. and Diomed Acquisition Corp.

     

    “Secured
      Obligations” means each Borrower’s obligation to repay to Lender the Loan and
      all Advances (whether or not evidenced by any Note), together with all
      principal, interest, fees, costs, professional fees and expenses, or other
      liabilities or obligations for monetary amounts owed by any Borrower to Lender
      however arising, including the indemnity and insurance obligations in
Section 6
      and
      including such amounts as may accrue or be incurred before or after default
      or
      workout or the commencement of any liquidation, dissolution, bankruptcy,
      receivership or reorganization by or against any Borrower, whether due or to
      become due, matured or unmatured, liquidated or unliquidated, contingent or
      non-contingent, and all covenants and duties of any kind or nature, present
      or
      future, in each case, arising under this Agreement, the Notes, or any of the
      other Loan Documents, as the same may from time to time be amended, modified,
      supplemented or restated, whether or not such obligations are partially or
      fully
      secured by the value of Collateral.

     

    “Subsidiary”
      means an entity, whether corporate, partnership, limited liability company,
      joint venture or otherwise, in which any Borrower owns or controls 50% or more
      of the outstanding voting securities, including each entity listed on
Schedule
      1
      hereto.

     

    “Term
      Loan Advance” means any Term Loan funds advanced under this
      Agreement.

     

    “Term
      Loan Interest Rate” means for any day, the prime rate as reported in The Wall
      Street Journal plus 3.20%.

     

    “Term
      Loan Maturity Date” means July 1, 2010.

     

    “Term
      Note” means a promissory note in substantially the form of Exhibit
      B.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    “Trademark
      License” means any written agreement granting any right to use any Trademark or
      Trademark registration, now owned or hereafter acquired by any Borrower or
      in
      which any Borrower now holds or hereafter acquires any interest.

     

    “Trademarks”
      means all trademarks (registered, common law or otherwise) and any applications
      in connection therewith, including registrations, recordings and applications
      in
      the United States Patent and Trademark Office or in any similar office or agency
      of the United States, any State thereof or any other country or any political
      subdivision thereof.

     

    “Trademark
      Security Agreement” means a trademark security agreement executed and delivered
      by each Borrower and the Lender, as such may be amended, restated or otherwise
      modified from time to time. 

     

    “UCC”
      means the Uniform Commercial Code as the same is, from time to time, in effect
      in the State of California; provided,
      that in
      the event that, by reason of mandatory provisions of law, any or all of the
      attachment, perfection or priority of, or remedies with respect to, Lender’s
      Lien on any Collateral is governed by the Uniform Commercial Code as the same
      is, from time to time, in effect in a jurisdiction other than the State of
      California, then the term “UCC” shall mean the Uniform Commercial Code as in
      effect, from time to time, in such other jurisdiction solely for purposes of
      the
      provisions thereof relating to such attachment, perfection, priority or remedies
      and for purposes of definitions related to such provisions. 

     

    “US
      Subsidiary” has the meaning given to such term in the preamble to this
      Agreement. 

     

    “Warrant”
      means the warrant entered into in connection with the Loan.

     

    1.2. Unless
      otherwise specified, all references in this Agreement or any Annex or Schedule
      hereto to a “Section,” “subsection,” “Exhibit,” “Annex,” or “Schedule” shall
      refer to the corresponding Section, subsection, Exhibit, Annex, or Schedule
      in
      or to this Agreement. Unless otherwise specifically provided herein, any
      accounting term used in this Agreement or the other Loan Documents shall have
      the meaning customarily given such term in accordance with GAAP, and all
      financial computations hereunder shall be computed in accordance with GAAP,
      consistently applied. Unless otherwise defined herein or in the other Loan
      Documents, terms that are used herein or in the other Loan Documents and defined
      in the UCC shall have the meanings given to them in the UCC.

     

    SECTION 2.
      THE LOAN

     

    2.1. Term
      Loan.

     

    (a) Advances.
      Subject
      to the terms and conditions of this Agreement, Lender will make and Borrowers
      agree to draw, a Term Loan Advance of $6,000,000 on the Closing Date. Any
      Borrower may request additional Term Loan Advances in an aggregate amount up
      to
      $4,000,000, to be advanced in minimum increments of $2,000,000, beginning on
      January 31, 2008 and continuing until March 30, 2008 (the “Availability
      Period”). The aggregate outstanding Term Loan Advances may be up to and shall
      not exceed the Maximum Term Loan Amount.

     

    
      
        
        

      

      
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    (b) Advance
      Request.
      To
      obtain a Term Loan Advance, the relevant Borrower shall complete, sign and
      deliver an Advance Request to Lender and each Borrower shall complete, sign
      and
      deliver a Term Note to Lender. Lender shall fund the Term Loan Advance in the
      manner requested by the Advance Request provided that each of the conditions
      precedent to such Term Loan Advance is satisfied as of the requested Advance
      Date.

     

    (c) Interest.
      The
      principal balance of each Term Loan Advance shall bear interest thereon from
      such Advance Date at the Term Loan Interest Rate based on a year consisting
      of
      360 days, with interest computed daily based on the actual number of days
      elapsed. The Term Loan Interest Rate for each Term Loan Advance will be fixed
      on
      the date of that Term Loan Advance, and will apply to that Term Loan Advance
      for
      so long as it is outstanding, including during the period of
      amortization.

     

    (d) Payment.
      Borrower will pay interest on each Term Loan Advance on the first day of each
      month, beginning the month after the Advance Date. Borrower shall repay the
      aggregate Term Loan principal balance that is outstanding on June 30, 2008
      in 24
equal
      monthly installments of principal and interest beginning July 1, 2008 and
      continuing on the first business day of each month thereafter. The
      Term
      Loan entire principal balance and all accrued but unpaid interest hereunder,
      shall be due and payable on the Term Loan Maturity Date. Borrower shall make
      all
      payments under this Agreement without setoff, recoupment or deduction and
      regardless of any counterclaim or defense.
      Lender
      will initiate debit entries to the relevant Borrower’s account as authorized on
      the ACH Authorization on each payment date of all periodic obligations payable
      to Lender under each Term Note or Term Advance.

     

    2.2. Maximum
      Interest.
      Notwithstanding any provision in this Agreement, the Notes, or any other Loan
      Document, it is the Parties’ intent not to contract for, charge or receive
      interest at a rate that is greater than the maximum rate permissible by law
      that
      a court of competent jurisdiction shall deem applicable hereto (which under
      the
      laws of the State of California shall be deemed to be the laws relating to
      permissible rates of interest on commercial loans) (the “Maximum Rate”). If a
      court of competent jurisdiction shall finally determine that Borrowers have
      actually paid to Lender an amount of interest in excess of the amount that
      would
      have been payable if all of the Secured Obligations had at all times borne
      interest at the Maximum Rate, then such excess interest actually paid by the
      Borrowers shall be applied as follows: first,
      to the
      payment of principal outstanding on the Notes; second,
      after
      all principal is repaid, to the payment of Lender’s accrued interest, costs,
      expenses, professional fees and any other Secured Obligations; and third,
      after
      all Secured Obligations are repaid, the excess (if any) shall be refunded to
      the
      Borrowers.

     

    2.3. Default
      Interest.
      In the
      event any payment is not paid on the scheduled payment date, an amount equal
      to
      five percent (5%) of the past due amount shall be payable on demand. In
      addition, upon the occurrence and during the continuation of an Event of Default
      hereunder, all Secured Obligations, including principal, interest, compounded
      interest, and professional fees, shall bear interest at a rate per annum equal
      to the rate set forth in Section 2.1(c)
      plus
      five percent (5%) per annum. In the event any interest is not paid when due
      hereunder, delinquent interest shall be added to principal and shall bear
      interest on interest, compounded at the rate set forth in
      Section 2.1(c)
      or
      Section 2.3,
      as
      applicable.

     

    
      
        
        

      

      
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    2.4. Prepayment.
      At its
      option upon at least 7 business days prior notice to Lender, Borrowers may
      prepay all, but not less than all, of the outstanding Advances by paying the
      entire principal balance, all accrued and unpaid interest, together with a
      prepayment charge equal to the following percentage of the Advance amount being
      prepaid; if such Advance amounts are prepaid in any of the first twelve (12)
      months following the Closing Date, 3%; after twelve (12) months but prior to
      twenty four (24) months, 2%; and thereafter, 1% (each, a “Prepayment Charge”).
      Each Borrower agrees that the Prepayment Charge is a reasonable calculation
      of
      Lender’s lost profits in view of the difficulties and impracticality of
      determining actual damages resulting from an early repayment of the Advances.
      Borrowers shall prepay the outstanding amount of all principal and accrued
      interest and unpaid interest upon a Change of Control.
      Borrowers shall not be required to pay a Prepayment Charge and such Prepayment
      Charge shall be deemed waived in the event of the Borrowers' early repayment
      of
      the Advances is made substantially contemporaneously with the acquisition of
      all
      or substantially all of the assets of Holdings by a third party or all or
      substantially all of the stock of Holdings by a third party or the merger or
      consolidation of holdings with a third party.

     

    2.5. End
      of
      Term Charge.
      On the
      earliest to occur of (i) the Term Loan Maturity Date, (ii) the date that
      Borrower prepays the outstanding Obligations, or (iii) the Obligations become
      due and payable, Borrower shall pay Lender a charge of 9.50% of the aggregate
      Advances made to the Borrowers.

     

    2.6. Joint
      and Several Liability of the Borrowers.
      Each
      Borrower is accepting joint and several liability hereunder and under the other
      Loan Documents in consideration of the financial accommodations to be provided
      by Lender under this Agreement, for the mutual benefit, directly and indirectly,
      of each Borrower and in consideration of the undertakings of the other Borrowers
      to accept joint and several liability for the Secured Obligations. Each
      Borrower, jointly and severally, hereby irrevocably, absolutely and
      unconditionally accepts, not merely as a surety but also as a co-debtor, joint
      and several liability with the other Borrowers, with respect to the payment
      and
      performance of all of the Secured Obligations (including, without limitation,
      any Secured Obligations arising under this Section 2.6),
      it
      being the intention of Borrowers that all the Secured Obligations shall be
      the
      joint and several obligations of Borrowers without preferences or distinction
      among them. If and to the extent that any of Borrowers shall fail to make any
      payment with respect to any of the Secured Obligations as and when due or to
      perform any of the Secured Obligations in accordance with the terms thereof,
      then in each such event, the other Persons composing Borrowers will make such
      payment with respect to, or perform, such Secured Obligation. Each Borrower
      hereby agrees that it will not enforce any of its rights of contribution or
      subrogation against Borrowers with respect to any liability incurred by it
      hereunder or under any of the other Loan Documents, any payments made by it
      to
      Lender with respect to any of the Secured Obligations or any collateral security
      therefor until such time as all of the Secured Obligations have been paid in
      full in cash. Any claim which any Borrower may have against any other Borrower
      with respect to any payments to Lender hereunder or under any other Loan
      Documents are hereby expressly made subordinate and junior in right of payment,
      without limitation as to any increases in the Secured Obligations arising
      hereunder or thereunder, to the prior payment in full in cash of the Secured
      Obligations and, in the event of any insolvency, bankruptcy, receivership,
      liquidation, reorganization or other similar proceeding under the laws of any
      jurisdiction relating to any Borrower, its debts or its assets, whether
      voluntary or involuntary, all such Secured Obligations shall be paid in full
      in
      cash before any payment or distribution of any character, whether in cash,
      securities or other property, shall be made to any other Borrower
      therefor.

     

    
      
        
        

      

      
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    2.7. Lead
      Borrower.
      Each
      Borrower hereby irrevocably appoints Diomed, Inc. as the borrowing agent and
      attorney-in-fact for all Borrowers, which appointment shall remain in full
      force
      and effect unless and until Lender shall have received prior written notice
      signed by each Borrower that such appointment has been revoked and that another
      Borrower has been appointed Lead Borrower.

     

    SECTION 3.
      SECURITY INTEREST

     

    3.1. As
      security for the prompt, complete and indefeasible payment when due (whether
      on
      the payment dates or otherwise) of all the Secured Obligations, each Borrower
      grants to Lender a security interest in all of such Borrower’s personal property
      now owned or hereafter acquired, including the following: (collectively, the
      “Collateral”): (a) Accounts; (b) Equipment; (c) Fixtures; (d) General
      Intangibles; (e) Inventory; (f) Investment Property (but excluding (a)
      thirty-five percent (35%) of the capital stock of any foreign Subsidiary that
      constitutes a Permitted Investment, and (b) the capital stock of Luminetix
      Corp.
      (but, for the avoidance of doubt, Collateral shall include any proceeds or
      distributions in respect thereof); (g) Deposit Accounts; (h) Cash; (i) Goods
      and
      other tangible and intangible personal property of any Borrower whether now
      or
      hereafter owned or existing, leased, consigned by or to, or acquired by, such
      Borrower and wherever located; (j) Patents, Patent Licenses; (k) Trademarks
      and
      Trademark Licenses; (l) Copyrights and Copyright Licenses; (m) all right, title,
      interest and claim of any Borrower to or in respect of all sums due and to
      become due to any Borrower arising out of or pursuant to the Judgment; and
      (n)
      to the extent not otherwise included, all Proceeds of each of the foregoing
      and
      all accessions to, substitutions and replacements for, and rents, profits and
      products of each of the foregoing.

     

    3.2. Authorization
      to File Financing Statements.
      Each
      Borrower hereby irrevocably authorizes the Lender at any time and from time
      to
      time to file in any filing office in any UCC jurisdiction any initial financing
      statements and amendments thereto that (a) indicate the Collateral (i) as all
      assets of such Borrower or words of similar effect, regardless of whether any
      particular asset comprised in the Collateral falls within the scope of Article
      9
      of the UCC, or (ii) as being of an equal or lesser scope or with greater detail,
      and (b) provide any other information required by part 5 of Article 9 of the
      UCC
      for the sufficiency or filing office acceptance of any financing statement
      or
      amendment. Each Borrower agrees to furnish any such information to the Lender
      promptly upon request. Each Borrower also ratifies its authorization for the
      Lender to have filed in any UCC jurisdiction any like initial financing
      statements or amendments thereto if filed prior to the date hereof.

     

    3.3. Other
      Actions.
      Further
      to insure the attachment, perfection and first priority (subject to Permitted
      Liens) of, and the ability of the Lender to enforce the Lender’s Liens, each
      Borrower agrees, in each case at the Borrowers’ expense, to take the following
      actions with respect to the following Collateral and without limitation on
      the
      Borrowers’ other obligations contained in this Agreement:

     

    
      
        
        

      

      
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    (a) Promissory
      Notes and Tangible Chattel Paper.
      If any
      Borrower shall, now or at any time hereafter, hold or acquire any promissory
      notes or tangible chattel paper (other than leases of lasers in the ordinary
      course of business), such Borrower shall, at Lender’s request, forthwith
      endorse, assign and deliver the same to the Lender, accompanied by such
      instruments of transfer or assignment duly executed in blank as the Lender
      may
      from time to time specify.

     

    (b) Deposit
      Accounts.
      For
      each deposit account that any Borrower, now or at any time hereafter, opens
      or
      maintains, such Borrower shall, prior to or concurrently with the opening of
      such deposit account, pursuant to an agreement in form and substance reasonably
      satisfactory to the Lender, cause the depositary bank to agree to comply,
      without further consent of such Borrower, at any time during the continuance
      of
      an Event of Default with instructions from the Lender to such depositary bank
      directing the disposition of funds from time to time credited to such deposit
      account. The provisions of this paragraph shall not apply to a deposit account
      for which the Lender is the depositary bank and is in automatic control, (y)
      any
      deposit accounts specially and exclusively used for petty cash and which shall
      not at any time contain more than $10,000, and (z) any deposit accounts
      specially and exclusively used for payroll, payroll taxes and other employee
      wage and benefit payments to or for the benefit of such Borrower’s salaried
      employees.

     

    (c) Investment
      Property.
      If any
      Borrower shall, now or at any time hereafter, hold or acquire any certificated
      securities, such Borrower shall forthwith endorse, assign and deliver the same
      to the Lender, accompanied by such instruments of transfer or assignment duly
      executed in blank as the Lender may from time to time specify. If any securities
      now or hereafter acquired by any Borrower are uncertificated and are issued
      to
      such Borrower or its nominee directly by the issuer thereof, such Borrower
      shall
      promptly, but no later than three (3) Business Days after receipt thereof notify
      the Lender thereof and, at the Lender’s request and option, either (i) cause the
      issuer to enter into an Account Control Agreement or an agreement under Section
      8-106 of the UCC whereby the issuer agrees with instructions originated by
      Lender without further consent by any Borrower, or (ii) pursuant to an agreement
      in form and substance satisfactory to the Lender, arrange for the Lender to
      become the registered owner of the securities. If any securities, whether
      certificated or uncertificated, or other investment property now or hereafter
      acquired by any Borrower are held by such Borrower or its nominee through a
      securities intermediary or commodity intermediary, such Borrower shall promptly,
      but no later than three (3) Business Days after receipt thereof notify the
      Lender thereof and, at the Lender’s request and option, either (x) cause such
      securities intermediary or (as the case may be) commodity intermediary to enter
      into an Account Control Agreement, or (y) pursuant to an agreement in form
      and
      substance satisfactory to the Lender, in the case of financial assets or other
      investment property held through a securities intermediary, arrange for the
      Lender to become the entitlement holder with respect to such investment
      property, with such Borrower being permitted, only with the consent of the
      Lender, to exercise rights to withdraw or otherwise deal with such investment
      property. The provisions of this paragraph shall not apply to any financial
      assets credited to a securities account for which the Lender is the securities
      intermediary.

     

    
      
        
        

      

      
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    (d) Collateral
      in the Possession of a Bailee.
      If any
      Collateral is, now or at any time hereafter, in the possession of a bailee,
      Borrowers shall promptly notify the Lender thereof and, at the Lender’s request
      and option, shall promptly obtain a bailee acknowledgment and access agreement
      in form and substance reasonably satisfactory to the Lender.

     

    (e) Letter-of-credit
      Rights.
      If any
      Borrower is, now or at any time hereafter, a beneficiary under a letter of
      credit, such Borrower shall promptly notify the Lender thereof and, at the
      request and option of the Lender, such Borrower shall, pursuant to an agreement
      in form and substance reasonably satisfactory to the Lender, either (a) arrange
      for the issuer and any confirmer of such letter of credit to consent to an
      assignment to the Lender of the proceeds of the letter of credit or (b) arrange
      for the Lender to become the transferee beneficiary of the letter of
      credit.

     

    (f) Commercial
      Tort Claims.
      If any
      Borrower shall, now or at any time hereafter, hold or acquire a commercial
      tort
      claim in an amount greater than $100,000, such Borrower shall promptly notify
      the Lender in a writing signed by such Borrower of the particulars thereof
      and
      grant to the Lender in such writing a security interest therein and in the
      proceeds thereof, all upon the terms of this Agreement, with such writing to
      be
      in form and substance reasonably satisfactory to the Lender.

     

    (g) Judgment.
      The
      Borrowers shall file pleadings with the appropriate court indicating that the
      Judgment has been assigned to the Lender as collateral security and shall serve
      such pleadings on the defendants in the 777 Patent Litigation.

     

    (h) Other
      Actions as to any and all Collateral.
      Each
      Borrower further agrees, upon the request of the Lender and at the Lender’s
      option, to take any and all other actions as the Lender may reasonably determine
      to be necessary or useful for the attachment, perfection and first priority
      (subject to Permitted Liens) of, and the ability of the Lender to enforce,
      the
      Lender’s Lien in any and all of the Collateral, including (i) executing,
      delivering and, where appropriate, filing financing statements and amendments
      relating thereto under the UCC, to the extent, if any, that the applicable
      Borrower’s signature thereon is required therefor, (ii) causing the Lender’s
      name to be noted as secured party on any certificate of title for a titled
      good
      if such notation is a condition to attachment, perfection or priority of, or
      ability of the Lender to enforce, the Lender’s security interest in such
      Collateral, (iii) complying with any provision of any statute, regulation or
      treaty of the United States as to any Collateral if compliance with such
      provision is a condition to attachment, perfection or priority of, or ability
      of
      the Lender to enforce, the Lender’s security interest in such Collateral, (iv)
      obtaining governmental and other third party waivers, consents and approvals,
      in
      form and substance reasonably satisfactory to the Lender, including any consent
      of any licensor, lessor or other person obligated on Collateral, (v) obtaining
      waivers from mortgagees and landlords in form and substance reasonably
      satisfactory to the Lender, (vi) creating and perfecting Liens in favor of
      the
      Lender in any real property acquired after the Closing Date, and (vii) taking
      all actions under any earlier versions of the UCC or under any other law, as
      reasonably determined by the Lender to be applicable in any relevant UCC or
      other jurisdiction, including any foreign jurisdiction. In addition to the
      foregoing, each Borrower shall on such periodic basis as the Lender shall
      require, (w) provide the Lender with a report of all new patentable,
      copyrightable or trademarkable materials acquired or generated by such Borrower
      during the prior period (whether or not the Borrower ultimately causes such
      patent, copyright or trademark to be registered as set forth in clause (x)
      below), (x) cause all patents, copyrights, and trademarks acquired or generated
      by such Borrower material to its business that are not already the subject
      of a
      registration with the appropriate filing office (or an application therefor
      diligently prosecuted) and the registration of which would not significantly
      compromise the Borrower’s competitive position, to be registered with such
      appropriate filing office in a manner sufficient to impart constructive notice
      of such Borrower’s ownership thereof, (y) cause to be prepared, executed, and
      delivered to the Lender supplemental schedules to the applicable Loan Documents
      to identify such patents, copyrights and trademarks as being subject to the
      security interests created thereunder, and (z) execute and deliver to the Lender
      at the Lender’s request Patent, Trademark or Copyright Security Agreements with
      respect to such patents, trademarks or copyrights for filing with the
      appropriate filing office.

     

    
      
        
        

      

      
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    3.4. Collateral
      Assignment.
      Each
      Borrower agrees and acknowledges that the grant of a security interest in the
      Judgment as set forth in Section 3.1
      is a
      collateral assignment thereof and the Borrowers hereby collaterally assign
      such
      Judgment to the Lender.

     

    3.5. Relation
      to Other Security Documents.
      Concurrently herewith each Borrower is executing and delivering to the Lender
      the Pledge Agreements, a Copyright Security Agreement, a Patent Security
      Agreement and a Trademark Security Agreement pursuant to which such Borrower
      is
      assigning to the Lender certain Collateral as set forth in such agreements.
      The
      provisions of such agreements are supplemental to the provisions of this
      Agreement, and nothing contained in such agreements shall derogate from any
      of
      the rights or remedies of the Lender. Neither the delivery of, nor anything
      contained in, such agreements shall be deemed to prevent or postpone the time
      of
      attachment or perfection of any security interest in such Collateral created
      hereby.

     

    3.6. Power
      of Attorney.
      Each
      Borrower hereby irrevocably makes, constitutes, and appoints the Lender (and
      any
      of the Lender’s officers, employees, or agents designated by the Lender) as such
      Borrower’s true and lawful attorney, with power to (a) if such Borrower refuses
      to, or fails timely to execute and deliver any of the documents described in
      Section 3.2,
      sign
      the name of Borrower on any of the documents described in Section 3.2,
      (b) at
      any time that an Event of Default has occurred and is continuing, sign
      Borrower’s name on any invoice or bill of lading relating to the Collateral,
      drafts against account debtors, or notices to account debtors, (c) at any time
      that an Event of Default has occurred and is continuing, send requests for
      verification of Receivables, (d) at any time that an Event of Default has
      occurred and is continuing, endorse Borrower’s name on any collection item that
      may come into the Lender’s possession, (e) at any time that an Event of Default
      has occurred and is continuing, make, settle, and adjust all claims under the
      Borrower’s policies of insurance and make all determinations and decisions with
      respect to such policies of insurance, and (f) at any time that an Event of
      Default has occurred and is continuing, settle and adjust disputes and claims
      respecting the Receivables, Chattel Paper, or General Intangibles directly
      with
      account debtors, for amounts and upon terms that the Lender determines to be
      reasonable, and the Lender may cause to be executed and delivered any documents
      and releases that the Lender determines to be necessary. The appointment of
      the
      Lender as each Borrower’s attorney, and each and every one of its rights and
      powers, being coupled with an interest, is irrevocable until all of the
      Obligations have been fully and finally repaid in cash and performed and the
      Lender’s obligations to extend credit hereunder are terminated.

     

    
      
        
        

      

      
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    SECTION 4.
      CONDITIONS PRECEDENT TO LOAN

     

    The
      obligations of Lender to make the Loan hereunder are subject to the satisfaction
      by Borrowers of the following conditions:

     

    4.1. Initial
      Advance.
      On or
      prior to the Closing Date, Borrowers shall have delivered to Lender the
      following:

     

    (a) executed
      originals of the Loan Documents required to be delivered on the Closing Date,
      a
      legal opinion of Borrowers’ counsel, and all other documents and instruments
      reasonably required by Lender to effectuate the transactions contemplated hereby
      or to create and perfect the Liens of Lender with respect to all Collateral,
      in
      all cases in form and substance reasonably acceptable to Lender;

     

    (b) certified
      copy of resolutions of each Borrower’s board of directors evidencing approval of
      (i) the Loan and other transactions evidenced by the Loan Documents; and
      (ii) the Warrant and transactions evidenced thereby;

     

    (c) certified
      copies of the Certificate of Incorporation and the Bylaws, as amended through
      the Closing Date, of each Borrower;

     

    (d) a
      certificate of good standing for each Borrower from its state of incorporation
      and similar certificates from all other jurisdictions in which it does business
      and where the failure to be qualified would have a Material Adverse
      Effect;

     

    (e) (i)
      to
      the extent not paid prior to the Closing Date, payment of the Facility Charge
      and reimbursement of Lender’s current expenses reimbursable pursuant to this
      Agreement, and (ii) payment of the Closing Success Fee as set forth in Section
      7.17(a),
      in each
      case which amounts may be deducted from the initial Advance; 

     

    (f) evidence
      of insurance, together with endorsements identifying Lender as additional
      insured on all liability policies and loss payee on all property
      policies;

     

    (g) results
      of UCC searches with respect to the Collateral indicating no Liens other than
      Permitted Liens and otherwise in form and substance satisfactory to the Lender;
      

     

    (h) written
      consent of the holders of Holdings' Preferred Stock;

     

    (i) written
      consent of the Convertible Noteholders; and

    
       

      
        
          
          

        

        
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    (j) such
      other documents as Lender may reasonably request.

     

    4.2. All
      Advances.
      On each
      Advance Date:

     

    (a) Lender
      shall have received (i) an Advance Request and a Note for the relevant
      Advance as required by Section 2.1(b),
      each
      duly executed by the relevant Borrower’s Chief Executive Officer or Chief
      Financial Officer, and (ii) any other documents Lender may reasonably
      request.

     

    (b) The
      representations and warranties set forth in this Agreement and in Section 5
      and in
      the Warrant shall be true and correct in all material respects on and as of
      the
      Advance Date with the same effect as though made on and as of such date, except
      to the extent such representations and warranties expressly relate to an earlier
      date.

     

    (c) Each
      Borrower shall be in compliance with all the terms and provisions set forth
      herein and in each other Loan Document on its part to be observed or performed,
      and at the time of and immediately after such Advance no Event of Default shall
      have occurred and be continuing.

     

    (d) Each
      Advance Request shall be deemed to constitute a representation and warranty
      by
      each Borrower on the relevant Advance Date as to the matters specified in
      paragraphs (b) and (c) of this Section 4.2
      and as
      to the matters set forth in the Advance Request.

     

    4.3. No
      Default.
      As of
      the Closing Date and each Advance Date, (i) no fact or condition exists that
      would (or would, with the passage of time, the giving of notice, or both)
      constitute an Event of Default and (ii) no event that has had or could
      reasonably be expected to have a Material Adverse Effect has occurred and is
      continuing.

     

    SECTION 5.
      REPRESENTATIONS AND WARRANTIES OF BORROWER

     

    Each
      Borrower represents and warrants that:

     

    5.1. Corporate
      Status.
      Each
      Borrower is a corporation duly organized, legally existing and in good standing
      under the laws of the State of Delaware, and is duly qualified as a foreign
      corporation in all jurisdictions in which the nature of its business or location
      of its properties require such qualifications and where the failure to be
      qualified could reasonably be expected to have a Material Adverse Effect. Each
      Borrower’s present name, former names (if any), locations, place of formation,
      tax identification number, organizational identification number and other
      information are correctly set forth in Exhibit
      C,
      as may
      be updated by Borrower in a written notice (including any Compliance
      Certificate) provided to Lender after the Closing Date.

     

    5.2. Collateral.
      Each
      Borrower owns the Collateral free of all Liens, except for Permitted Liens.
      Each
      Borrower has the power and authority to grant to Lender a Lien in the Collateral
      as security for the Secured Obligations.

     

    
      
        
        

      

      
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    5.3. Consents.
      Each
      Borrower’s execution, delivery and performance of the Notes, this Agreement and
      all other Loan Documents, and Lead Borrower’s execution of the Warrant,
      (i) have been duly authorized by all necessary corporate action of such
      Borrower, (ii) will not result in the creation or imposition of any Lien
      upon the Collateral, other than Permitted Liens and the Liens created by this
      Agreement and the other Loan Documents, (iii) do not violate any provisions
      of
      such Borrower’s Certificate or Articles of Incorporation (as applicable),
      bylaws, or any, law, regulation, order, injunction, judgment, decree or writ
      to
      which such Borrower is subject and (iv) except as described on Schedule
      5.3,
      do not
      violate any contract or agreement or require the consent or approval of any
      other Person. The individual or individuals executing the Loan Documents and
      the
      Warrant are duly authorized to do so.

     

    5.4. Material
      Adverse Effect.
      Other
      than as set forth in the Schedules to this Agreement as in effect on the Closing
      Date, expressly excluding any changes to or escalation in status of the items
      listed on such Schedules occurring after the Closing Date and, no event that
      has
      had or could reasonably be expected to have a Material Adverse Effect has
      occurred and is continuing, and Borrowers are not aware of any event likely
      to
      occur that is reasonably expected to result in a Material Adverse
      Effect.

     

    5.5. Actions
      Before Governmental Authorities.
      Except
      as described on Schedule
      5.5,
      there
      are no actions, suits or proceedings at law or in equity or by or before any
      Governmental Authority now pending or, to the knowledge of any Borrower,
      threatened against or affecting any Borrower or its property (i) which would
      adversely affect the validity or enforceability of any Loan Document or the
      Lender’s rights under any Loan Document, or (ii) as to which there is a
      reasonable possibility of an adverse determination and which, if adversely
      determined, would reasonably be expected to, individually or in the aggregate,
      result in a Material Adverse Effect.

     

    5.6. Laws.
      No
      Borrower is in violation of any law, rule or regulation, or in default with
      respect to any judgment, writ, injunction or decree of any Governmental
      Authority, where such violation or default is reasonably expected to result
      in a
      Material Adverse Effect. No Borrower is in default in any manner under any
      provision of any agreement or instrument evidencing indebtedness, or any other
      material agreement to which it is a party or by which it is bound.

     

    5.7. Information
      Correct.
      No
      information, report, Advance Request, financial statement, exhibit or schedule
      furnished, by or on behalf of Borrowers to Lender in connection with any Loan
      Document or included therein or delivered pursuant thereto contained, contains
      or will contain any material misstatement of fact or omitted, omits or will
      omit
      to state any material fact necessary to make the statements therein, in the
      light of the circumstances under which they were, are or will be made, not
      misleading at the time such statement was made or deemed made.

     

    5.8. Tax
      Matters.
      Except
      as described on Schedule
      5.8,
      (a)
      each Borrower has filed all federal, state and local tax returns that it is
      required to file, (b) each Borrower has duly paid or fully reserved for all
      taxes or installments thereof (including any interest or penalties) as and
      when
      due, which have or may become due pursuant to such returns, and (c) each
      Borrower has paid or fully reserved for any tax assessment received by such
      Borrower for the three (3) years preceding the Closing Date, if any (including
      any taxes being contested in good faith and by appropriate
      proceedings).

     

    
      
        
        

      

      
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    5.9. Intellectual
      Property Claims.
      Each
      Borrower is the sole owner of, or otherwise has the right to use, the
      Intellectual Property owned or held by such Borrower. Except as described on
      Schedule
      5.9,
      (i)
      each of the material Copyrights, Trademarks and Patents is valid and
      enforceable, (ii) no material part of the Intellectual Property has been judged
      invalid or unenforceable, in whole or in part, and (iii) no claim has been
      made
      to such Borrower that any material part of the Intellectual Property violates
      the rights of any third party. Exhibit D
      is a
      true, correct and complete list of each of Borrower’s Patents, registered
      Trademarks, registered Copyrights, and material agreements under which each
      Borrower licenses Intellectual Property from third parties (other than
      shrink-wrap software licenses), together with application or registration
      numbers, as applicable, owned by any Borrower, in each case as of the Closing
      Date. No Borrower is in material breach of, nor has any Borrower failed to
      perform any material obligations under, any of the foregoing contracts, licenses
      or agreements and, to each Borrower’s knowledge, no third party to any such
      contract, license or agreement is in material breach thereof or has failed
      to
      perform any material obligations thereunder.

     

    5.10. Intellectual
      Property.
      Except
      as described on Schedule
      5.10,
      each
      Borrower has, or in the case of any proposed business, will have, all material
      rights with respect to Intellectual Property necessary in the operation or
      conduct of Borrower’s business as currently conducted and proposed to be
      conducted by such Borrower. Without limiting the generality of the foregoing,
      and in the case of Licenses, except for restrictions that are unenforceable
      under Division 9 of the UCC, each Borrower has the right, to the extent required
      to operate Borrower’s business, to freely transfer, license or assign
      Intellectual Property without condition, restriction or payment of any kind
      (other than license payments in the ordinary course of business) to any third
      party, and each Borrower owns or has the right to use, pursuant to valid
      licenses, all software development tools, library functions, compilers and
      all
      other third-party software and other items that are used in the design,
      development, promotion, sale, license, manufacture, import, export, use or
      distribution of Borrower Products.

     

    5.11. Borrower
      Products.
      Except
      as described on Schedule
      5.11;
      (a) no
      Intellectual Property owned by any Borrower or Borrower Product has been or
      is
      subject to any actual or, to the knowledge of any Borrower, threatened
      litigation, proceeding (including any proceeding in the United States Patent
      and
      Trademark Office or any corresponding foreign office or agency) or outstanding
      decree, order, judgment, settlement agreement or stipulation that restricts
      in
      any manner any Borrower’s use, transfer or licensing thereof or that may affect
      the validity, use or enforceability thereof; (b) there is no decree, order,
      judgment, agreement, stipulation, arbitral award or other provision entered
      into
      in connection with any litigation or proceeding that obligates any Borrower
      to
      grant licenses or ownership interest in any future Intellectual Property related
      to the operation or conduct of the business of any Borrower or Borrower
      Products; (c) no Borrower has received any written notice or claim, or, to
      the
      knowledge of Borrower, oral notice or claim, challenging or questioning any
      Borrower’s ownership in any Intellectual Property (or written notice of any
      claim challenging or questioning the ownership in any licensed Intellectual
      Property of the owner thereof) or suggesting that any third party has any claim
      of legal or beneficial ownership with respect thereto nor, to any Borrower’s
      knowledge, is there a reasonable basis for any such claim; and (d) no Borrower’s
      use of its Intellectual Property nor the production and sale of Borrower
      Products infringes the Intellectual Property or other rights of
      others.

     

    
      
        
        

      

      
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    5.12. Financial
      Accounts.
      Exhibit
      E,
      as may
      be updated by any Borrower in a written notice provided to Lender after the
      Closing Date, is a true, correct and complete list of (a) all banks and
      other financial institutions at which each Borrower or any US Subsidiary
      maintains Deposit Accounts and (b) all institutions at which each Borrower
      or
      any US Subsidiary maintains an account holding Investment Property, and such
      exhibit correctly identifies the name, address and telephone number of each
      bank
      or other institution, the name in which the account is held, a description
      of
      the purpose of the account, and the complete account number
      therefor.

     

    5.13. Employee
      Loans.
      No
      Borrower has any outstanding loans to any employee, officer or director of
      such
      Borrower nor has any Borrower guaranteed the payment of any loan made to an
      employee, officer or director of any Borrower by a third party.

     

    5.14. Capitalization
      and Subsidiaries.
      Each
      Borrower’s capitalization as of the Closing Date is set forth on Schedule
      5.14
      annexed
      hereto. No Borrower owns any stock, partnership interest or other equity
      securities of any Person, except for Permitted Investments. Attached as
Schedule
      5.14,
      is a
      true, correct and complete list of each Subsidiary. Such Schedule
      5.14
      may be
      updated by any Borrower in a written notice provided after the Closing Date,
      provided
      that
      no such
      update shall be deemed a waiver of any Event of Default resulting from matters
      disclosed therein.

     

    SECTION 6. INSURANCE;
      INDEMNIFICATION

     

    6.1. Coverage.
      Each
      Borrower shall cause to be carried and maintained commercial general liability
      insurance, on an occurrence form, against risks customarily insured against
      in
      such Borrower’s line of business. Such risks shall include the risks of bodily
      injury, including death, property damage, personal injury, advertising injury,
      and contractual liability per the terms of the indemnification agreement found
      in Section 6.3.
      Borrowers must maintain a minimum of One Million Dollars ($1,000,000.00) of
      commercial general liability insurance for each occurrence. Borrowers have
      and
      agree to maintain a minimum of Ten Million Dollars ($10,000,000) of directors
      and officers’ insurance for each occurrence, and Ten Million Dollars
      ($10,000,000) in the aggregate. So long as there are any Secured Obligations
      outstanding, each Borrower shall also cause to be carried and maintained
      insurance upon the Collateral, insuring against all risks of physical loss
      or
      damage howsoever caused, in an amount not less than the full replacement cost
      of
      the Collateral, provided that such insurance may be subject to standard
      exceptions and deductibles.

     

    6.2. Certificates.
      Each
      Borrower shall deliver to Lender certificates of insurance that evidence such
      Borrower’s compliance with its insurance obligations in
      Section 6.1
      and the
      obligations contained in this Section 6.2.
      Each
      Borrower’s insurance certificate shall state Lender is an additional insured for
      commercial general liability, an additional insured and a loss payee for all
      risk property damage insurance, subject to the insurer’s approval, a loss payee
      for fidelity insurance, and a loss payee for property insurance and additional
      insured for liability insurance for any future insurance that Borrowers may
      acquire from such insurer. Attached to the certificates of insurance will be
      additional insured endorsements for liability and lender’s loss payable
      endorsements for all risk property damage insurance and fidelity. All
      certificates of insurance will provide for a minimum of thirty (30) days advance
      written notice to Lender of cancellation or any other change adverse to Lender’s
      interests. Any failure of Lender to scrutinize such insurance certificates
      for
      compliance is not a waiver of any of Lender’s rights, all of which are
      reserved.

     

    
      
        
        

      

      
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    6.3. Indemnity.
      Each
      Borrower agrees to indemnify and hold Lender and its officers, directors,
      employees, agents, in-house attorneys, representatives and shareholders harmless
      from and against any and all claims, costs, expenses, damages and liabilities
      (including such claims, costs, expenses, damages and liabilities based on
      liability in tort, including strict liability in tort), including reasonable
      attorneys’ fees and disbursements and other costs of investigation or defense
      (including those incurred upon any appeal), that may be instituted or asserted
      against or incurred by Lender or any such Person as the result of credit having
      been extended, suspended or terminated under this Agreement and the other Loan
      Documents or the administration of such credit, or in connection with or arising
      out of the transactions contemplated hereunder and thereunder, or the handling
      of Collateral of Borrowers, or any actions or failures to act in connection
      therewith, or arising out of the disposition or utilization of the Collateral,
      or Lender’s relying on any instruction of Lead Borrower, or any other actions
      taken or not taken by Lender hereunder or under any other Loan Document
      excluding in all cases claims resulting solely from Lender’s gross negligence or
      willful misconduct. Each Borrower agrees to pay, and to save Lender harmless
      from, any and all liabilities with respect to, or resulting from any delay
      in
      paying, any and all excise, sales or other similar taxes (excluding taxes
      imposed on or measured by the net income of Lender) that may be payable or
      determined to be payable with respect to any of the Collateral or this
      Agreement.

     

    SECTION 7.
      COVENANTS OF BORROWER

     

    Each
      Borrower agrees as follows:

     

    7.1. Financial
      Reports.
      Each
      Borrower shall furnish to Lender the Compliance Certificate in the form of
      Exhibit
      F
      monthly
      within 30 days after the end of each month and the financial statements listed
      hereinafter (the “Financial Statements”):

     

    (a) as
      soon
      as practicable (and in any event within 30 days) after the end of each month,
      unaudited interim financial statements as of the end of such month (prepared
      on
      a consolidated and consolidating basis, if applicable), including balance sheet
      and related statements of income and cash flows accompanied by a report
      detailing any material contingencies (including the commencement of any material
      litigation by or against any Borrower) or any other occurrence that would
      reasonably be expected to have a Material Adverse Effect, all certified by
      Holdings’ Chief Executive Officer or Chief Financial Officer to the effect that
      they have been prepared in accordance with GAAP, except (i) for the absence
      of
      footnotes, (ii) that they are subject to normal year end adjustments, and (iii)
      they do not contain certain non-cash items that are customarily included in
      quarterly and annual financial statements;

     

    (b) as
      soon
      as practicable (and in any event within 45 days) after the end of each calendar
      quarter, unaudited interim financial statements as of the end of such calendar
      quarter (prepared on a consolidated and consolidating basis, if applicable),
      including balance sheet and related statements of income and cash flows
      accompanied by a report detailing any material contingencies (including the
      commencement of any material litigation by or against any Borrower) or any
      other
      occurrence that would reasonably be expected to have a Material Adverse Effect,
      all certified by Holdings’ Chief Executive Officer or Chief Financial Officer to
      the effect that they have been prepared in accordance with GAAP, except (i)
      for
      the absence of footnotes, and (ii) that they are subject to normal year end
      adjustments;

     

    
      
        
        

      

      
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    (c) as
      soon
      as practicable (and in any event within 90 days) after the end of each fiscal
      year, (i) unqualified audited financial statements as of the end of such year
      (prepared on a consolidated and consolidating basis, if applicable), including
      balance sheet and related statements of income and cash flows, and setting
      forth
      in comparative form the corresponding figures for the preceding fiscal year,
      certified by a firm of independent certified public accountants selected by
      Borrowers and reasonably acceptable to Lender, accompanied by any management
      report from such accountants;

     

    (d) promptly
      after the sending or filing thereof, as the case may be, copies of any proxy
      statements, financial statements or reports that any Borrower has made available
      to holders of its Preferred Stock and copies of any regular, periodic and
      special reports or registration statements that any Borrower files with the
      Securities and Exchange Commission or any governmental authority that may be
      substituted therefor, or any national securities exchange; and

     

    (e) budgets,
      operating plans and other financial information reasonably requested by
      Lender.

     

    The
      executed Compliance Certificate may be sent via facsimile to Lender at (617)
      261-6551 or via e-mail to bjadot@herculestech.com. All Financial Statements
      required to be delivered pursuant to clauses (a), (b) and (c) shall be
      sent via e-mail to financialstatements@herculestech.com with a copy to
      bjadot@herculestech.com provided,
      that if
      e-mail is not available or sending such Financial Statements via e-mail is
      not
      possible, they shall be sent via facsimile to Lender at: (617) 261-6551,
      attention Chief Credit Officer, reference Diomed Holdings, Inc.

     

    7.2. Management
      Rights.
      Each
      Borrower shall permit any representative that Lender authorizes, including
      its
      attorneys and accountants, to inspect the Collateral, and examine and make
      copies and abstracts of the books of account and records of such Borrower at
      reasonable times and upon reasonable notice during normal business hours. In
      addition, any such representative shall upon reasonable notice have the right
      to
      meet with management and officers of each Borrower to discuss such books of
      account and records. In addition, Lender shall be entitled at reasonable times
      and intervals to consult with and advise the management and officers of each
      Borrower concerning significant business issues affecting such Borrower. Such
      consultations shall not unreasonably interfere with such Borrower’s business
      operations. The parties intend that the rights granted Lender shall constitute
      “management rights” within the meaning of 29 C.F.R Section 2510.3-101(d)(3)(ii),
      but that any advice, recommendations or participation by Lender with respect
      to
      any business issues shall not be deemed to give Lender, nor be deemed an
      exercise by Lender of, control over any Borrower’s management or
      policies.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    7.3. Further
      Assurances.
      Each
      Borrower shall from time to time execute, deliver and file, alone or with
      Lender, any financing statements, security agreements, collateral assignments,
      notices, control agreements, or other documents to perfect or give the highest
      priority to Lender’s Lien on the Collateral. Each Borrower shall from time to
      time procure any instruments or documents as may be requested by Lender, and
      take all further action that may be necessary or desirable, or that Lender
      may
      reasonably request, to perfect and protect the Liens granted hereby and thereby.
      In addition, and for such purposes only, each Borrower hereby authorizes Lender
      to execute and deliver on behalf of such Borrower and to file such financing
      statements, collateral assignments, notices, control agreements, security
      agreements and other documents without the signature of such Borrower either
      in
      Lender’s name or in the name of Lender as agent and attorney-in-fact for such
      Borrower. Each Borrower shall protect and defend such Borrower’s title to the
      Collateral and Lender’s Lien thereon against all Persons claiming any interest
      adverse to any Borrower or Lender other than Permitted Liens.

     

    7.4. Compromise
      of Agreements.
      With
      respect to Accounts with a combined value in excess of twenty percent (20%)
      of
      all of any individual Borrower’s Accounts then outstanding (other than Accounts
      constituting proceeds of the 777 Patent Litigation), no Borrower shall (a)
      grant
      any material extension of the time of payment thereof, (b) to any material
      extent, compromise, compound or settle the same for less than the full amount
      thereof, (c) release, wholly or partly, any Person liable for the payment
      thereof, or (d) allow any credit or discount whatsoever thereon other than
      trade
      discounts granted by such Borrower in the ordinary course of business of such
      Borrower. Nothing in this Section 7.4 shall be deemed to prevent Borrowers
      from
      compromising or settling any actions with respect to the 777 Patent Litigation,
      provided
      that
      no Event
      of Default has occurred and is continuing and provided
      further that
      such
      actions could not reasonably be expected to result in a Material Adverse
      Effect.

     

    7.5. Indebtedness.
      No
      Borrower shall create, incur, assume, guarantee or be or remain liable with
      respect to any Indebtedness, or permit any US Subsidiary so to do, other than
      Permitted Indebtedness, or prepay any Indebtedness or take any actions which
      impose on any Borrower an obligation to prepay any Indebtedness, or make any
      cash payment with respect to the Convertible Debentures, except for (i) the
      conversion of Indebtedness into equity securities and the payment of cash in
      lieu of and solely for fractional shares in connection with such
      conversion,
      (ii) so
      long as no Event of Default pursuant to Sections 10.1
      or
10.6
      shall
      have occurred and be continuing or prior to the acceleration of the Secured
      Obligations pursuant to Section 11.1,
      the
      Borrowers may make any payment of interest due and owing to the Convertible
      Noteholders in respect of the Convertible Debentures.
      No
      Borrower shall be permitted to prepay or repay the obligations owing under
      the
      Convertible Debentures without the written consent of the Lender.

     

    7.6. Collateral.
      Each
      Borrower shall at all times keep the Collateral and all other property and
      assets used in such Borrower’s business or in which such Borrower now or
      hereafter holds any interest free and clear from any legal process or Liens
      whatsoever (except for (a) Permitted Liens, and (b) those described on
Schedule
      7.6),
      and
      shall give Lender prompt written notice of any legal process affecting the
      Collateral, such other property and assets, or any Liens thereon. Each Borrower
      shall cause its US Subsidiaries to protect and defend such US Subsidiary’s title
      to its assets from and against all Persons claiming any interest adverse to
      such
      US Subsidiary, and each Borrower shall cause its Subsidiaries at all times
      to
      keep such Subsidiary’s property and assets free and clear from any legal process
      or Liens whatsoever (except for (a) Permitted Liens, and (b) those described
      on
Schedule
      7.6),
      and
      shall give Lender prompt written notice of any legal process affecting such
      Subsidiary’s assets. 

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    7.7. Investments.
      No
      Borrower shall directly or indirectly acquire or own, or make any Investment
      in
      or to any Person, or permit any of its US Subsidiaries so to do, other than
      Permitted Investments.

     

    7.8. Distributions.
      No
      Borrower shall nor shall any Borrower allow any Subsidiary to, (a) repurchase
      or
      redeem any class of stock or other equity interest other than pursuant to
      employee, director or consultant repurchase plans or other similar agreements,
      provided,
      however, in each case the repurchase or redemption price does not exceed the
      original consideration paid for such stock or equity interest, provided,
      further, that for purposes of the foregoing, neither the exercise of common
      stock purchase warrants or options to purchase common stock on a "cashless
      exercise" basis nor the conversion or exchange for common stock of the
      Convertible Debentures, or shares of Preferred Stock in accordance with their
      terms shall not constitute a repurchase or redemption, or (b) declare or pay
      any
      cash dividend or make a cash distribution on any class of stock or other equity
      interest, except that a Subsidiary may pay dividends or make distributions
      to
      Borrower, or (c) lend money to any employees, officers or directors or guarantee
      the payment of any such loans granted by a third party in excess of $100,000
      in
      the aggregate or (d) waive, release or forgive any indebtedness owed by any
      employees, officers or directors in excess of $100,000 in the
      aggregate. 

     

    7.9. Transfers.
      Except
      for Permitted Transfers, no Borrower nor any US Subsidiary shall voluntarily
      or
      involuntarily transfer, sell, lease, license, lend or in any other manner convey
      any equitable, beneficial or legal interest in any material portion of their
      assets.

     

    7.10. Taxes.
      Each
      Borrower and its respective US Subsidiaries shall pay when due all taxes, fees
      or other charges of any nature whatsoever (together with any related interest
      or
      penalties) now or hereafter imposed or assessed against such Borrower, Lender
      or
      the Collateral or upon such Borrower’s ownership, possession, use, operation or
      disposition thereof or upon Borrower’s rents, receipts or earnings arising
      therefrom. Each Borrower shall file on or before the due date therefor all
      personal property tax returns in respect of the Collateral. Notwithstanding
      the
      foregoing, each Borrower may contest, in good faith and by appropriate
      proceedings, taxes for which such Borrower maintains adequate reserves therefor
      in accordance with GAAP.

     

    7.11. Corporate
      Changes.
      Neither
      any Borrower nor any Subsidiary shall change its corporate name, legal form
      or
      jurisdiction of formation without twenty (20) days’ prior written notice to
      Lender. Neither any Borrower nor any Subsidiary shall relocate its chief
      executive office or its principal place of business unless: (i) it has provided
      prior written notice to Lender; and (ii) such relocation shall be within the
      continental United States. Neither any Borrower nor any Subsidiary shall
      relocate any item of Collateral (other than (w) sales of Inventory in the
      ordinary course of business, (x) relocations of Equipment having an aggregate
      value of up to $150,000 in any fiscal year, (y) transportation or relocation
      of
      Inventory to the extent that such Inventory is in the custody of Borrowers'
      sales representatives and is necessary for the purposes of demonstrating
      Borrowers' products, and (z) relocations of Collateral from a location described
      on Exhibit
      C
      to
      another location described on Exhibit
      C)
      unless
      (1) it has provided prompt written notice to Lender, (2) such relocation is
      within the continental United States, and (3) if such relocation is to a third
      party bailee, it has delivered a bailee agreement in form and substance
      reasonably acceptable to the Lender.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    7.12. New
      Subsidiaries.
      Each
      Borrower shall notify Lender of each Subsidiary formed subsequent to the Closing
      Date and, if requested in writing by Lender, within 15 days of such request,
      shall cause any US Subsidiary become an Additional Borrower by execution and
      delivery to Lender of a Joinder Agreement together with a legal opinion in
      form
      and substance satisfactory to Lender and such other documents requested by
      Lender.

     

    7.13. Modification
      of Certain Agreements.
      Each
      Borrower will not, and will not permit any of its Subsidiaries to, consent
      to
      any amendment, supplement, waiver or other modification of, such Borrower’s or
      such Subsidiary’s certificate of incorporation or formation, by-laws, limited
      liability company agreement, partnership agreement or such other applicable
      governing documents.

     

    7.14. Compliance
      with Laws.
      Each
      Borrower shall and shall cause each of its Subsidiaries to, comply with (a)
      the
      applicable laws and regulations wherever its business is conducted to the extent
      to which the non-compliance of such laws and regulations could not reasonably
      be
      expected to result in a Material Adverse Effect, (b) the provisions of its
      organizational documents, (c) all agreements and instruments by which it and
      any
      of its properties may be bound to the extent to which the non-compliance of
      such
      laws and regulations could not reasonably be expected to result in a Material
      Adverse Effect and (d) all applicable decrees, orders and
      judgments.

     

    7.15. Payments.
      The
      Lender will initiate debit entries to the Borrower’s account as authorized on
      the ACH Debit Authorization Agreement in the form of Exhibit
      H
      on each
      Payment Date of all periodic obligations payable to Lender under each Note
      or
      Advance.

     

    7.16. Deposit
      Accounts.
      Neither
      any Borrower nor any US Subsidiary of any Borrower shall maintain any Deposit
      Accounts, or accounts holding Investment Property, except with respect to which
      Lender has an Account Control Agreement unless otherwise permitted pursuant
      to
      Section 3.3(b).

     

    7.17. Additional
      Fees.
      Borrowers shall pay to Lender the following additional fees:

     

    (a) a
      Closing
      Success Fee (which amount may be deducted from the initial
      Advance);

     

    (b) on
      the
      earlier of (i) June 30, 2008, or (ii) any prepayment in full of the Secured
      Obligations, whether by voluntary prepayment, accelerated termination or
      otherwise, a fee in the amount of $900,000; and

     

    (c) in
      the
      event of a Change in Control, 1% of the Aggregate Gross Consideration payable
      in
      connection with such Change in Control.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    7.18. Issuance
      of Equity.
      Neither
      any Borrower nor any US Subsidiary of any Borrower shall issue any class of
      stock or other equity interest for consideration that is less than $1.15 per
      share,
      provided
      that
      the
      conversion price of the Convertible Debentures and the Warrant may be equal
      to
      $0.70 per share of Common Stock and Holdings may issue additional shares to
      the
      holders of Holdings Preferred Stock such that upon conversion of the Holdings
      Preferred Stock, such holders would receive, in
      toto,
      the
      number of shares of Common Stock that would have been issued to the holder
      had
      the exchange rate of the Holdings Preferred Stock been $0.70 per
      share.

     

    7.19. Business
      of Subsidiaries.
      Notwithstanding anything herein to the contrary, none of the U.S. Subsidiaries
      other than Holdings and the Lead Borrower shall engage in any trade or business,
      or own any assets (other than the stock of their Subsidiaries, leases for retail
      locations or intellectual property with a de minimis value) or incur any
      Indebtedness (other than the Secured Obligations).

     

    7.20. Treasury
      Functions.
      All
      cash management and treasury functions for any Subsidiary not organized in
      a
      jurisdiction of the United States shall be maintained by the Borrowers,
provided
      that
      Diomed
      Limited may maintain its existing line of credit with Barclays
      Bank.

     

    SECTION 8.
      RIGHT TO PURCHASE STOCK

     

    8.1. Lender
      or
      its assignee or nominee shall have the right, in its discretion, to purchase
      shares of Holdings’ securities having an aggregate purchase price of up to
      $1,000,000 in the Next Event on the same terms and conditions afforded to other
      investors in the Next Event.

     

    SECTION 9.
      CONDITIONS SUBSEQUENT

     

    9.1. 777
      Patent Litigation.
      The
      Borrowers will, within fourteen (14) days of the Closing Date, have taken all
      actions necessary to perfect the Lender’s security interest in the proceeds of
      the Judgment and shall take such further actions in connection with the Judgment
      as may be requested by Lender.

     

    SECTION 10.
      EVENTS OF DEFAULT

     

    The
      occurrence of any one or more of the following events shall be an Event of
      Default:

     

    10.1. Payments.
      Any
      Borrower fails to pay any amount due under this Agreement, the Notes or any
      of
      the other Loan Documents on the due date including, without limitation, the
      Warrant Price Fee or any fee set forth in Section 7.17;
      or

     

    10.2. Covenants.
      Any
      Borrower breaches or defaults in the performance of any covenant or Secured
      Obligation under this Agreement, the Notes, or any of the other Loan Documents,
      and (a) with respect to a default under any covenant under this Agreement
      (other than under Section 6.1,
      6.2,
      7.5
      -
7.9,
      7.15
      -
7.18
      or
9.1)
      such
      default continues for more than ten (10) days after the earlier of the date
      on
      which (i) Lender has given notice of such default to Lead Borrower and (ii)
      any
      Borrower has actual knowledge of such default or (b) with respect to a default
      under any of Section 6.1,
      6.2,
      7.5
      -
7.9,
      7.15
      -
7.18
      or
9.1,
      the
      occurrence of such default; or

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    10.3. Material
      Adverse Effect.
      A
      circumstance has occurred that would reasonably be expected to have a Material
      Adverse Effect; or

     

    10.4. Other
      Loan Documents.
      The
      occurrence of any default under the Warrant, any Loan Document, or any other
      agreement between any Borrower and Lender and such default continues for more
      than ten (10) days after the earlier of (a) Lender has given notice of such
      default to Lead Borrower, or (b) any Borrower has actual knowledge of such
      default; or

     

    10.5. Representations.
      Any
      representation or warranty made by any Borrower in any Loan Document or in
      the
      Warrant shall have been false or misleading in any material respect;
      or

     

    10.6. Insolvency.
      Any
      Borrower (A) (i) shall make an assignment for the benefit of creditors; or
      (ii) shall be unable to pay its debts as they become due, or be unable to
      pay or perform under the Loan Documents; or (iii) shall file a voluntary
      petition in bankruptcy; or (iv) shall file any petition, answer, or
      document seeking for itself any reorganization, arrangement, composition,
      readjustment, liquidation, dissolution or similar relief under any present
      or
      future statute, law or regulation pertinent to such circumstances; or
      (v) shall seek or consent to or acquiesce in the appointment of any
      trustee, receiver, or liquidator of such Borrower or of all or any substantial
      part (i.e., 33-1/3% or more) of the assets or property of such Borrower; or
      (vi) shall cease operations of its business as its business has normally
      been conducted, or terminate substantially all of its employees, or becomes
      insolvent; or (vii) such Borrower or its directors or majority shareholders
      shall take any action initiating any of the foregoing actions described in
      clauses (i) through (vi); or (B) either (i) thirty (30) days shall
      have expired after the commencement of an involuntary action against any
      Borrower seeking reorganization, arrangement, composition, readjustment,
      liquidation, dissolution or similar relief under any present or future statute,
      law or regulation, without such action being dismissed or all orders or
      proceedings thereunder affecting the operations or the business of any Borrower
      being stayed; or (ii) a stay of any such order or proceedings shall
      thereafter be set aside and the action setting it aside shall not be timely
      appealed; or (iii) any Borrower shall file any answer admitting or not
      contesting the material allegations of a petition filed against such Borrower
      in
      any such proceedings; or (iv) the court in which such proceedings are
      pending shall enter a decree or order granting the relief sought in any such
      proceedings; or (v) thirty (30) days shall have expired after the appointment,
      without the consent or acquiescence of any Borrower, of any trustee, receiver
      or
      liquidator of such Borrower or of all or any substantial part of the properties
      of such Borrower without such appointment being vacated; or

     

    10.7. Attachments;
      Judgments.
      Any
      portion of any Borrower’s assets is attached or seized, or a levy is filed
      against any such assets, or a judgment or judgments is/are entered for the
      payment of money, individually or in the aggregate, of at least $150,000, or
      any
      Borrower is enjoined or in any way prevented by court order from conducting
      any
      part of its business; or

     

    10.8. Subordination
      of Convertible Debenture Security.
      (a) The
      occurrence of any default under the Convertible Debentures, subject to any
      grace
      or cure period in relation thereto, or (b) any holder of a Convertible Debenture
      shall have repudiated or contested the validity or enforceability of the
      Intercreditor Agreement between the Lender and each holder of the Convertible
      Debentures, dated as of the date hereof, or shall have otherwise sought the
      termination of such Intercreditor Agreement.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    10.9. Other
      Obligations.
      Either the occurrence of any default under any written agreement or
      obligation of any Borrower (other than accounts payable subject to ordinary
      course invoices) involving any Indebtedness in excess of $100,000, or the
      occurrence of any default under any agreement or obligation of any Borrower
      that
      could reasonably be expected to have a Material Adverse Effect; or

     

    10.10. Change
      in Control.
      Any
      Borrower or any Subsidiary shall suffer a Change in Control.

     

    SECTION 11.
      REMEDIES

     

    11.1. General.
      Upon
      and during the continuance of any one or more Events of Default, (i) Lender
      may,
      at its option, accelerate and demand payment of all or any part of the Secured
      Obligations and declare them to be immediately due and payable (provided,
      that
      upon the occurrence of an Event of Default of the type described in
      Section 10.6,
      the
      Notes and all of the Secured Obligations shall automatically be accelerated
      and
      made due and payable, in each case without any further notice or act), and
      (ii)
      Lender may notify any of Borrowers’ account debtors to make payment directly to
      Lender, compromise in a commercially reasonable manner the amount of any such
      account on any Borrower’s behalf and endorse Lender’s name without recourse on
      any such payment for deposit directly to Lender’s account. Lender may exercise
      all rights and remedies with respect to the Collateral under the Loan Documents
      or otherwise available to it under the UCC and other applicable law, including
      the right to release, hold, sell, lease, liquidate, collect, realize upon,
      or
      otherwise dispose of all or any part of the Collateral and the right to occupy,
      utilize, process and commingle the Collateral. All Lender’s rights and remedies
      shall be cumulative and not exclusive.

     

    11.2. Collection;
      Foreclosure.
      Upon
      the occurrence and during the continuance of any Event of Default, Lender may,
      at any time or from time to time, apply, collect, liquidate, sell in one or
      more
      sales, lease or otherwise dispose of, any or all of the Collateral, in its
      then
      condition or following any commercially reasonable preparation or processing,
      in
      such order as Lender may elect. Any such sale may be made either at public
      or
      private sale at its place of business or elsewhere. Each Borrower agrees that
      any such public or private sale may occur upon ten (10) calendar days’ prior
      written notice to Lead Borrower. Lender may require any Borrower to assemble
      the
      Collateral and make it available to Lender at a place designated by Lender
      that
      is reasonably convenient to Lender and such Borrower. The proceeds of any sale,
      disposition or other realization upon all or any part of the Collateral shall
      be
      applied by Lender in the following order of priorities:

     

    First,
      to
      Lender in an amount sufficient to pay in full Lender’s costs and professionals’
and advisors’ fees and expenses as described in Section 12.11;

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    Second,
      to
      Lender in an amount equal to the then unpaid amount of the Secured Obligations
      (including principal, interest, and the Default Rate interest), in such order
      and priority as Lender may choose in its sole discretion; and

     

    Finally,
      after
      the full, final, and indefeasible payment in Cash of all of the Secured
      Obligations, to any creditor holding a junior Lien on the Collateral, or to
      Lead
      Borrower or its representatives or as a court of competent jurisdiction may
      direct.

     

    Lender
      shall be deemed to have acted reasonably in the custody, preservation and
      disposition of any of the Collateral if it complies with the obligations of
      a
      secured party under the UCC.

     

    11.3. No
      Waiver.
      Lender
      shall be under no obligation to marshal any of the Collateral for the benefit
      of
      any Borrower or any other Person, and each Borrower expressly waives all rights,
      if any, to require Lender to marshal any Collateral.

     

    11.4. Cumulative
      Remedies.
      The
      rights, powers and remedies of Lender hereunder shall be in addition to all
      rights, powers and remedies given by statute or rule of law and are cumulative.
      The exercise of any one or more of the rights, powers and remedies provided
      herein shall not be construed as a waiver of or election of remedies with
      respect to any other rights, powers and remedies of Lender.

     

    SECTION 12.
      MISCELLANEOUS

     

    12.1. Severability.
      Whenever possible, each provision of this Agreement shall be interpreted in
      such
      manner as to be effective and valid under applicable law, but if any provision
      of this Agreement shall be prohibited by or invalid under such law, such
      provision shall be ineffective only to the extent and duration of such
      prohibition or invalidity, without invalidating the remainder of such provision
      or the remaining provisions of this Agreement.

     

    12.2. Notice.
      Except
      as otherwise provided herein, any notice, demand, request, consent, approval,
      declaration, service of process or other communication (including the delivery
      of Financial Statements) that is required, contemplated, or permitted under
      the
      Loan Documents or with respect to the subject matter hereof shall be in writing,
      and shall be deemed to have been validly served, given, delivered, and received
      upon the earlier of: (i) the day of transmission by facsimile or hand
      delivery or delivery by an overnight express service or overnight mail delivery
      service; or (ii) the third calendar day after deposit in the United States
      mails, with proper first class postage prepaid, in each case addressed to the
      party to be notified as follows:

     

    
      	
            	(a)	
              If
                to Lender:

            

    

     

    
      	
              HERCULES
                TECHNOLOGY GROWTH CAPITAL, INC.

              Legal
                Department

              Attention:
                Chief Legal Officer and R. Bryan Jadot

              400
                Hamilton Avenue, Suite 310

              Palo
                Alto, CA 94301

              Facsimile:
                650- 473-9194

              Telephone:
                650-289-3068

            

    

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    
      	
            	(b)	
              If
                to any Borrower:

            

    

     

    
      	
              DIOMED
                HOLDINGS, INC.

              1
                Dundee Park

              Andover,
                MA 01810

              Attention:
                David B. Swank

              Facsimile:
                (978) 475-8488

              Telephone:
                (978) 824-1823

               

              Copy
                to:

               

              McGuire
                Woods LLP

              1345
                Avenue of the Americas

              7th
                Floor

              New
                York, NY 10105

              Attention:
                William A. Newman, Esq.

              Facsimile:
                (212) 548-2170

              Telephone:
                (212) 548-2660

            

    

     

    or
      to
      such other address as each party may designate for itself by like
      notice.

     

    12.3. Entire
      Agreement; Amendments.
      This
      Agreement, the Notes, and the other Loan Documents constitute the entire
      agreement and understanding of the parties hereto in respect of the subject
      matter hereof and thereof, and supersede and replace in their entirety any
      prior
      proposals, term sheets, letters, negotiations or other documents or agreements,
      whether written or oral, with respect to the subject matter hereof or thereof.
      None of the terms of this Agreement, the Notes or any of the other Loan
      Documents may be amended except by an instrument executed by each of the parties
      hereto.

     

    12.4. No
      Strict Construction.
      The
      parties hereto have participated jointly in the negotiation and drafting of
      this
      Agreement. In the event an ambiguity or question of intent or interpretation
      arises, this Agreement shall be construed as if drafted jointly by the parties
      hereto and no presumption or burden of proof shall arise favoring or disfavoring
      any party by virtue of the authorship of any provisions of this
      Agreement.

     

    12.5. No
      Waiver.
      The
      powers conferred upon Lender by this Agreement are solely to protect its rights
      hereunder and under the other Loan Documents and its interest in the Collateral
      and shall not impose any duty upon Lender to exercise any such powers. No
      omission or delay by Lender at any time to enforce any right or remedy reserved
      to it, or to require performance of any of the terms, covenants or provisions
      hereof by any Borrower at any time designated, shall be a waiver of any such
      right or remedy to which Lender is entitled, nor shall it in any way affect
      the
      right of Lender to enforce such provisions thereafter.

     

    12.6. Survival.
      All
      agreements, representations and warranties contained in this Agreement, the
      Notes and the other Loan Documents or in any document delivered pursuant hereto
      or thereto shall be for the benefit of Lender and shall survive the execution
      and delivery of this Agreement and the expiration or other termination of this
      Agreement.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    12.7. Successors
      and Assigns.
      The
      provisions of this Agreement and the other Loan Documents shall inure to the
      benefit of and be binding on each Borrower and its permitted assigns (if any).
      No Borrower shall assign its obligations under this Agreement, the Notes or
      any
      of the other Loan Documents without Lender’s express prior written consent, and
      any such attempted assignment shall be void and of no effect. Lender may assign,
      transfer, or endorse its rights hereunder and under the other Loan Documents
      without prior notice to any Borrower, and all of such rights shall inure to
      the
      benefit of Lender’s successors and assigns.

     

    12.8. Governing
      Law.
      This
      Agreement, the Notes and the other Loan Documents have been negotiated and
      delivered to Lender in the State of California, and shall have been accepted
      by
      Lender in the State of California. Payment to Lender by Borrower of the Secured
      Obligations is due in the State of California. This Agreement, the Notes and
      the
      other Loan Documents shall be governed by, and construed and enforced in
      accordance with, the laws of the State of California, excluding conflict of
      laws
      principles that would cause the application of laws of any other
      jurisdiction.

     

    12.9. Consent
      to Jurisdiction and Venue.
      All
      judicial proceedings (to the extent that the reference requirement of Section
      12.10
      is not
      applicable) arising in or under or related to this Agreement, the Notes or
      any
      of the other Loan Documents may be brought in any state or federal court located
      in the State of California. By execution and delivery of this Agreement, each
      party hereto generally and unconditionally: (a) consents to nonexclusive
      personal jurisdiction in Santa Clara County, State of California;
      (b) waives any objection as to jurisdiction or venue in Santa Clara County,
      State of California; (c) agrees not to assert any defense based on lack of
      jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees
      to be bound by any judgment rendered thereby in connection with this Agreement,
      the Notes or the other Loan Documents. Service of process on any party hereto
      in
      any action arising out of or relating to this Agreement shall be effective
      if
      given in any manner permitted by California law and shall be deemed effective
      and received as set forth in Section 12.3.
      Nothing
      herein shall affect the right to serve process in any other manner permitted
      by
      law or shall limit the right of either party to bring proceedings in the courts
      of any other jurisdiction.

     

    12.10. Mutual
      Waiver of Jury Trial / Judicial Reference.

     

    (a) Because
      disputes arising in connection with complex financial transactions are most
      quickly and economically resolved by an experienced and expert person and the
      parties wish applicable state and federal laws to apply (rather than arbitration
      rules), the parties desire that their disputes be resolved by a judge applying
      such applicable laws. EACH BORROWER AND LENDER SPECIFICALLY WAIVES ANY RIGHT
      IT
      MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM,
      COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”)
      ASSERTED BY SUCH BORROWER AGAINST LENDER OR ITS ASSIGNEE OR BY LENDER OR ITS
      ASSIGNEE AGAINST SUCH BORROWER. This waiver extends to all such Claims,
      including Claims that involve Persons other than any Borrower and Lender; Claims
      that arise out of or are in any way connected to the relationship between any
      Borrower and Lender; and any Claims for damages, breach of contract, tort,
      specific performance, or any equitable or legal relief of any kind, arising
      out
      of this Agreement, any other Loan Document.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

    (b) If
      the
      waiver of jury trial set forth in Section 12.10(a)
      is
      ineffective or unenforceable, the parties agree that all Claims shall be
      resolved by reference to a private judge sitting without a jury, pursuant to
      Code of Civil Procedure Section 638, before a mutually acceptable referee or,
      if
      the parties cannot agree, a referee selected by the Presiding Judge of the
      Santa
      Clara County, California. Such proceeding shall be conducted in Santa Clara
      County, California, with California rules of evidence and discovery applicable
      to such proceeding.

     

    (c) In
      the
      event Claims are to be resolved by judicial reference, either party may seek
      from a court identified in Section 12.10,
      any
      prejudgment order, writ or other relief and have such prejudgment order, writ
      or
      other relief enforced to the fullest extent permitted by law notwithstanding
      that all Claims are otherwise subject to resolution by judicial
      reference.

     

    12.11. Professional
      Fees.
      Each
      Borrower promises to pay Lender’s fees and expenses necessary to finalize the
      loan documentation, including but not limited to reasonable attorneys fees,
      UCC
      searches, filing costs, and other miscellaneous expenses. In addition, each
      Borrower promises to pay any and all reasonable attorneys’ and other
      professionals’ fees and expenses incurred by Lender after the Closing Date in
      connection with or related to: (a) the Loan; (b) the administration,
      collection, or enforcement of the Loan; (c) the amendment or modification
      of the Loan Documents; (d) any waiver, consent, release, or termination
      under the Loan Documents; (e) the protection, preservation, sale, lease,
      liquidation, or disposition of Collateral or the exercise of remedies with
      respect to the Collateral; (f) any legal, litigation, administrative,
      arbitration, or out of court proceeding in connection with or related to any
      Borrower or the Collateral, and any appeal or review thereof; and (g) any
      bankruptcy, restructuring, reorganization, assignment for the benefit of
      creditors, workout, foreclosure, or other action related to any Borrower, the
      Collateral, the Loan Documents, including representing Lender in any adversary
      proceeding or contested matter commenced or continued by or on behalf of any
      Borrower’s estate, and any appeal or review thereof.

     

    12.12. Confidentiality.
      Lender
      acknowledges that certain items of Collateral and information provided to Lender
      by any Borrower are confidential and proprietary information of such Borrower,
      if and to the extent such information is marked as confidential by such Borrower
      at the time of disclosure (the “Confidential Information”). Accordingly, Lender
      agrees that any Confidential Information it may obtain in the course of
      acquiring, administering, or perfecting Lender’s security interest in the
      Collateral shall not be disclosed to any other person or entity in any manner
      whatsoever, in whole or in part, without the prior written consent of the
      applicable Borrower, except that Lender may disclose any such information:
      (a) to its own directors, officers, employees, accountants, counsel and
      other professional advisors and to its affiliates if Lender in its sole
      discretion determines that any such party should have access to such information
      in connection with such party’s responsibilities in connection with the Loan or
      this Agreement and, provided that such recipient of such Confidential
      Information either (i) agrees to be bound by the confidentiality provisions
      of
      this paragraph or (ii) is otherwise subject to confidentiality restrictions
      that
      reasonably protect against the disclosure of Confidential Information;
      (b) if such information is generally available to the public; (c) if
      required or appropriate in any report, statement or testimony submitted to
      any
      governmental authority having or claiming to have jurisdiction over Lender;
      (d) if required or appropriate in response to any summons or subpoena or in
      connection with any litigation, to the extent permitted or deemed advisable
      by
      Lender’s counsel; (e) to comply with any legal requirement or law
      applicable to Lender; (f) to the extent reasonably necessary in connection
      with the exercise of any right or remedy under any Loan Document, including
      Lender’s sale, lease, or other disposition of Collateral after default;
      (g) to any participant or assignee of Lender or any prospective participant
      or assignee; provided,
      that
      such participant or assignee or prospective participant or assignee agrees
      in
      writing to be bound by this Section prior to disclosure; or (h) otherwise
      with the prior consent of the applicable Borrower; provided,
      that
      any disclosure made in violation of this Agreement shall not affect the
      obligations of any Borrower or any of its affiliates or any guarantor under
      this
      Agreement or the other Loan Documents.
      Lender
      also acknowledges that Lead Borrower will be required pursuant to regulations
      promulgated by the Securities and Exchange Commission (the “SEC”) to file copies
      of the Loan documents with the SEC.

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    12.13. Assignment
      of Rights.
      Each
      Borrower acknowledges and understands that Lender may sell and assign all or
      part of its interest hereunder and under the Note(s) and Loan Documents to
      any
      person or entity (an “Assignee”). After such assignment the term “Lender” as
      used in the Loan Documents shall mean and include such Assignee, and such
      Assignee shall be vested with all rights, powers and remedies of Lender
      hereunder with respect to the interest so assigned; but with respect to any
      such
      interest not so transferred, Lender shall retain all rights, powers and remedies
      hereby given. No such assignment by Lender shall relieve any Borrower of any
      of
      its obligations hereunder. Lender agrees that in the event of any transfer
      by it
      of the Note(s), it will endorse thereon a notation as to the portion of the
      principal of the Note(s), which shall have been paid at the time of such
      transfer and as to the date to which interest shall have been last paid
      thereon.

     

    12.14. Revival
      of Secured Obligations.
      This
      Agreement and the Loan Documents shall remain in full force and effect and
      continue to be effective if any petition is filed by or against any Borrower
      for
      liquidation or reorganization, if any Borrower becomes insolvent or makes an
      assignment for the benefit of creditors, if a receiver or trustee is appointed
      for all or any significant part of any Borrower’s assets, or if any payment or
      transfer of Collateral is recovered from Lender. The Loan Documents and the
      Secured Obligations and Collateral security shall continue to be effective,
      or
      shall be revived or reinstated, as the case may be, if at any time payment
      and
      performance of the Secured Obligations or any transfer of Collateral to Lender,
      or any part thereof is rescinded, avoided or avoidable, reduced in amount,
      or
      must otherwise be restored or returned by, or is recovered from, Lender or
      by
      any obligee of the Secured Obligations, whether as a “voidable preference,”
“fraudulent conveyance,” or otherwise, all as though such payment, performance,
      or transfer of Collateral had not been made. In the event that any payment,
      or
      any part thereof, is rescinded, reduced, avoided, avoidable, restored, returned,
      or recovered, the Loan Documents and the Secured Obligations shall be deemed,
      without any further action or documentation, to have been revived and reinstated
      except to the extent of the full, final, and indefeasible payment to Lender
      in
      Cash.

     

    12.15. Counterparts.
      This
      Agreement and any amendments, waivers, consents or supplements hereto may be
      executed in any number of counterparts, and by different parties hereto in
      separate counterparts, each of which when so delivered shall be deemed an
      original, but all of which counterparts shall constitute but one and the same
      instrument.

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    12.16. No
      Third Party Beneficiaries.
      No
      provisions of the Loan Documents are intended, nor will be interpreted, to
      provide or create any third-party beneficiary rights or any other rights of
      any
      kind in any person other than Lender and Borrowers unless specifically provided
      otherwise herein, and, except as otherwise so provided, all provisions of the
      Loan Documents will be personal and solely between the Lender and the
      Borrowers.

     

    12.17. Publicity.
      Lender
      may use any Borrower’s name and logo, and include a brief description of the
      relationship between such Borrower and Lender, in Lender’s marketing materials
provided
      that
      Lender
      shall provide a copy of such materials to Borrower and Borrower has the right
      to
      object to such use in writing within three (3) Business Days (such approval
      not
      to be unreasonably withheld).

     

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, Borrower and Lender have duly executed and delivered this
      Loan
      and Security Agreement as of the day and year first above written.

    

      
        	
                BORROWER:

              	 	
                DIOMED
                  HOLDINGS, INC.

              	 
	 	 	 	 
	 	 	
                Signature:

              	 	 
	 	 	
                Print
                  Name:

              	 	 
	 	 	
                Title:

              	 	 
	 	 	 	 	 
	
                BORROWER:

              	 	
                DIOMED,
                  INC.

              	 
	 	 	 	 
	 	 	
                Signature:

              	 	 
	 	 	
                Print
                  Name:

              	 	 
	 	 	
                Title:

              	 	 

      

    

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    Accepted
      in Palo Alto, California:

     

    
      	
              LENDER:

            	 	
              HERCULES
                TECHNOLOGY GROWTH 

              CAPITAL,
                INC., a Maryland corporation

            	 
	 	 	 	 	 
	 	 	
              By:

            	 	 
	 	 	
              Name:

            	
              K.
                Nicholas Martitsch

            	 
	 	 	
              Its:
                

            	
              Associate
                General Counsel

            	 

    

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF EXHIBITS AND SCHEDULES

     

    
      	
              Exhibit
                A:

            	
              Advance
                Request

            
	 	
              Attachment
                to Advance Request

            
	 	 
	
              Exhibit
                B:

            	
              Term
                Note

            
	 	 
	
              Exhibit
                C:

            	
              Name,
                Locations, and Other Information for Borrower

            
	 	 
	
              Exhibit
                D: 

            	
              Borrower’s
                Patents, Trademarks, Copyrights and Licenses

            
	 	 
	
              Exhibit
                E:

            	
              Borrower’s
                Deposit Accounts and Investment Accounts

            
	 	 
	
              Exhibit
                F:

            	
              Compliance
                Certificate

            
	 	 
	
              Exhibit
                G:

            	
              Joinder
                Agreement

            
	 	 
	
              Exhibit
                H:

            	
              ACH
                Debit Authorization Agreement

            
	 	 
	
              Schedule
                1

            	
              Subsidiaries

            
	
              Schedule
                1A

            	
              Existing
                Permitted Indebtedness

            
	
              Schedule
                1B

            	
              Existing
                Permitted Investments

            
	
              Schedule
                1C

            	
              Existing
                Permitted Liens

            
	
              Schedule
                5.3

            	
              Consents,
                Etc.

            
	
              Schedule
                5.5

            	
              Actions
                Before Governmental Authorities

            
	
              Schedule
                5.8

            	
              Tax
                Matters

            
	
              Schedule
                5.9

            	
              Intellectual
                Property Claims

            
	
              Schedule
                5.10

            	
              Intellectual
                Property

            
	
              Schedule
                5.11

            	
              Borrower
                Products

            
	
              Schedule
                5.12

            	
              Financial
                Accounts

            
	
              Schedule
                5.14

            	
              Capitalization

            
	
              Schedule
                7.6

            	
              Legal
                Process/Litigation

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    ADVANCE
      REQUEST

     

    
      	
              To:
                

            	
              Lender:

            	
              
                Date:
                  _______, 20___

              

            
	 	
              Hercules
                Technology Growth Capital, Inc.

            	 
	 	
              400
                Hamilton Avenue, Suite 310

            	 
	 	
              Palo
                Alto, CA 94301

            	 
	 	
              Facsimile:
                650-473-9194

            	 
	 	
              Attn:

            	 

    

     

    [BORROWER]
      (“Borrower”) hereby requests from Hercules Technology Growth Capital, Inc.
      (“Lender”) an Advance in the amount of _____________________ Dollars
      ($________________) on ______________, _____ (the “Advance Date”) pursuant to
      the Loan and Security Agreement between, inter
      alios,
      Borrower and Lender (the “Agreement”). Capitalized
      words and other terms used but not otherwise defined herein are used with the
      same meanings as defined in the Agreement.

     

    Please:

     

    
      	
              (a)

            	
              Issue
                a check payable to Borrower

            	  

	 	
              or

            	   

	
              (b)

            	
              Wire
                Funds to Borrower’s account

            	     

    

    

    
      	
              Bank:

            	  

	
              Address:

            	  

	 	  

	
              ABA Number:

            	  

	
              Account Number:

            	 	  

	
              Account Name:

            	 	  

    

     

    Borrower
      represents that the conditions precedent to the Advance set forth in the
      Agreement are satisfied and shall be satisfied upon the making of such Advance,
      including but not limited to: (i) that no event that has had or could
      reasonably be expected to have a Material Adverse Effect has occurred and is
      continuing; (ii) that the representations and warranties set forth in the
      Agreement and in the Warrant are and shall be true and correct in all material
      respects on and as of the Advance Date with the same effect as though made
      on
      and as of such date, except to the extent such representations and warranties
      expressly relate to an earlier date; (iii) that Borrower is in compliance
      with all the terms and provisions set forth in each Loan Document on its part
      to
      be observed or performed; and (iv) that as of the Advance Date, no fact or
      condition exists that would (or would, with the passage of time, the giving
      of
      notice, or both) constitute an Event of Default under the Loan Documents.
      Borrower understands and acknowledges that Lender has the right to review the
      financial information supporting this representation and, based upon such review
      in its sole discretion, Lender may decline to fund the requested
      Advance.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Borrower
      hereby represents that Borrower’s corporate status and locations have not
      changed since the date of the Agreement or, if the Attachment to this Advance
      Request is completed, are as set forth in the Attachment to this Advance
      Request.

     

    Borrower
      agrees to notify Lender promptly before the funding of the Loan if any of the
      matters which have been represented above shall not be true and correct on
      the
      Borrowing Date and if Lender has received no such notice before the Advance
      Date
      then the statements set forth above shall be deemed to have been made and shall
      be deemed to be true and correct as of the Advance Date.

     

    Executed
      as of _____________, 20___.

     

    
      	 	
              BORROWER:
                [BORROWER]

            	 
	 	 	 
	 	
              SIGNATURE:

            	 	 
	 	
              TITLE:

            	
              Chief Executive Officer or Chief Financial Officer

            	 
	 	
              PRINT NAME:

            	 	 

    

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    ATTACHMENT
      TO ADVANCE REQUEST

     

    Dated:
      _______________________

     

    Borrower
      hereby represents and warrants to Lender that Borrower’s current name and
      organizational status is as follows:

     

    
      	
              Name:

            	
              [Borrower]

            
	 	 
	
              Type
                of organization:

            	
              Corporation

            
	 	 
	
              State
                of organization:

            	
              Delaware

            
	 	 
	
              Organization
                file number:

            	
              _________________________

            

    

    

     

    Borrower
      hereby represents and warrants to Lender that the street addresses, cities,
      states and postal codes of its current locations are as follows:

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

     

    SECURED
      TERM PROMISSORY NOTE

    

    
      	
              $[__],000,000

            	
              Advance
                Date: _______ __, 20__

            
	 	
              Maturity
                Date: July 1, 2010

            

    

    

    FOR
      VALUE
      RECEIVED, DIOMED HOLDINGS, INC., a Delaware corporation, and DIOMED, INC.,
      a
      Delaware corporation, each for itself and each Additional Borrower
      (collectively, the “Borrowers”) hereby promises to pay jointly and severally to
      the order of Hercules Technology Growth Capital, Inc., a Maryland corporation,
      or the holder of this Note (the “Lender”) at 400 Hamilton Avenue, Suite 310,
      Palo Alto, CA 94301 or such other place of payment as the holder of this Secured
      Term Promissory Note (this “Promissory Note”) may specify from time to time in
      writing, in lawful money of the United States of America, the principal amount
      of [__] Million Dollars ($[__],000,000) or such other principal amount as Lender
      has advanced to Borrower, together with interest at a fixed rate equal to the
      prime rate as reported in the Wall Street Journal on the date of the Advance,
      and if not reported, then the prime rate next reported in the Wall Street
      Journal, plus 3.20% per annum based upon a year consisting of 360 days, with
      interest computed daily based on the actual number of days in each
      month.

     

    This
      Promissory Note is the Note referred to in, and is executed and delivered in
      connection with, that certain Loan and Security Agreement dated September 28,
      2007, by and among Borrowers and Lender (as the same may from time to time
      be
      amended, modified or supplemented in accordance with its terms, the “Loan
      Agreement”), and is entitled to the benefit and security of the Loan Agreement
      and the other Loan Documents (as defined in the Loan Agreement), to which
      reference is made for a statement of all of the terms and conditions thereof.
      All payments shall be made in accordance with the Loan Agreement. All terms
      defined in the Loan Agreement shall have the same definitions when used herein,
      unless otherwise defined herein. An Event of Default under the Loan Agreement
      shall constitute a default under this Promissory Note. Reference to the Loan
      Agreement shall not affect or impair the absolute and unconditional obligation
      of the Borrowers to pay all principal and interest and premium, if any, under
      this Promissory Note upon demand or as otherwise provided herein.

     

    Each
      Borrower waives presentment and demand for payment, notice of dishonor, protest
      and notice of protest under the UCC or any applicable law. Each Borrower agrees
      to make all payments under this Promissory Note without setoff, recoupment
      or
      deduction and regardless of any counterclaim or defense. This Promissory Note
      has been negotiated and delivered to Lender and is payable in the State of
      California. This Promissory Note shall be governed by and 

     

    construed
      and enforced in accordance with, the laws of the State of California, excluding
      any conflicts of law rules or principles that would cause the application of
      the
      laws of any other jurisdiction.

     

    [Remainder
      of page intentionally left blank - signature page to follow]

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	
              BORROWERS
                EACH FOR ITSELF AND

            	 	
              DIOMED
                HOLDINGS, INC.

            
	
              ON
                BEHALF OF ITS SUBSIDIARIES:

            	 	 	 	 
	 	 	
              Signature:

            	 	 
	 	 	
              Print
                Name:

            	 	 
	 	 	
              Title:

            	 	 
	 	 	 	 	 
	 	 	
              DIOMED,
                INC.

            
	 	 	
              Signature:

            	 	 
	 	 	
              Print
                Name:

            	 	 
	 	 	
              Title:

            	 	 

    

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

     

    NAME,
      LOCATIONS, AND OTHER INFORMATION FOR BORROWER

     

    1. Borrower
      represents and warrants to Lender that Borrower’s current name and
      organizational status as of the Closing Date is as follows:

     

    
      	
              Name:

            	
              Diomed,
                Inc.

            
	 	 
	
              Type
                of organization:

            	
              Corporation

            
	 	 
	
              State
                of organization:

            	
              Delaware

            
	 	 
	
              Organization
                file number:

            	
              2823212

            

    

     

    2. Borrower
      represents and warrants to Lender that for five (5) years prior to the Closing
      Date, Borrower did not do business under any other name or organization or
      form
      except the following: NONE

     

    Name:

    Used
      during dates of:

    Type
      of
      Organization:

    State
      of
      organization:

    Organization
      file Number:

     

    Borrower’s
      fiscal year ends on December 31

    Borrower’s
      federal employer tax identification number is: 04-3410679

     

    3. Borrower
      represents and warrants to Lender that its chief executive office is located
      at:
      One Dundee Park, Andover, MA 01810.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    NAME,
      LOCATIONS, AND OTHER INFORMATION FOR HOLDINGS

     

    1. Borrower
      represents and warrants to Lender that Borrower’s current name and
      organizational status as of the Closing Date is as follows:

     

    
      	
              Name:

            	
              Diomed
                Holdings, Inc.

            
	 	 
	
              Type
                of organization:

            	
              Corporation

            
	 	 
	
              State
                of organization:

            	
              Delaware

            
	 	 
	
              Organization
                file number:

            	
              3509203

            

    

     

    2. Borrower
      represents and warrants to Lender that for five (5) years prior to the Closing
      Date, Borrower did not do business under any other name or organization or
      form
      except the following: NONE

     

    Name:

    Used
      during dates of:

    Type
      of
      Organization:

    State
      of
      organization:

    Organization
      file Number:

     

    Borrower’s
      fiscal year ends on December 31

    Borrower’s
      federal employer tax identification number is: 84-1480636

     

    3. Borrower
      represents and warrants to Lender that its chief executive office is located
      at:
      One Dundee Park, Andover, MA 01810.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    EXHIBIT
      D

     

    BORROWER’S
      PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    EXHIBIT
      E

     

    BORROWER’S
      DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS

     

    
      	
              Name
                of 

              Institution

            	 	
              Account
                

              Holder

            	 	
              Address and Telephone No.

            	 	
              Account No.

            	 	
              Type
                

              (Deposit or
                

              Investment)

            	 	
              Purpose of
                

              Account

            	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

    

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    EXHIBIT
      F

     

    COMPLIANCE
      CERTIFICATE

    

    Hercules
      Technology Growth Capital, Inc.

    400
      Hamilton Avenue, Suite 310

    Palo
      Alto, CA 94301

     

    Reference
      is made to that certain Loan and Security Agreement dated as of September 28,
      2007 and all ancillary documents entered into in connection with such Loan
      and
      Security Agreement all as may be amended from time to time, (hereinafter
      referred to collectively as the “Loan Agreement”) between Hercules Technology
      Growth Capital, Inc. (“Hercules”) as Lender and Diomed Holdings, Inc.
      (“Holdings”) and Diomed, Inc. (“Lead Borrower”), each for itself and on behalf
      of each Additional Borrower (collectively with Holdings and Lead Borrower,
      the
“Borrowers”). All capitalized terms not defined herein shall have the same
      meaning as defined in the Loan Agreement.

     

    The
      undersigned is an Officer of the Holdings, knowledgeable of all Borrowers’
financial matters, and is authorized to provide certification of information
      regarding the Borrowers; hereby certifies that in accordance with the terms
      and
      conditions of the Loan Agreement, the Borrowers are in compliance for the period
      ending ___________ of all covenants, conditions and terms and hereby reaffirms
      that all representations and warranties contained therein are true and correct
      on and as of the date of this Compliance Certificate with the same effect as
      though made on and as of such date, except to the extent such representations
      and warranties expressly relate to an earlier date, after giving effect in
      all
      cases to any standard(s) of materiality contained in the Loan Agreement as
      to
      such representations and warranties. Attached are the required documents
      supporting the above certification. The undersigned further certifies that
      these
      are prepared in accordance with GAAP (except for the absence of footnotes with
      respect to unaudited financial statement and subject to normal year end
      adjustments) and are consistent from one period to the next except as explained
      below.

     

    
      	
              REPORTING
                REQUIREMENT

            	 	
              REQUIRED

            	 	
              CHECK
                IF 

              ATTACHED

            
	
              Interim
                Financial Statements

            	 	
              Monthly
                within 30 days

            	 	 
	
              Interim
                Financial Statements

            	 	
              Quarterly
                within 45 days

            	 	 
	
              Audited
                Financial Statements

            	 	
              FYE
                within 90 days

            	 	 

    

    

    
      	 	
              Very
                truly yours,

            
	 	
              DIOMED
                HOLDINGS, INC.

            
	 	
              By:

            	  
	
               

            
	 	
              Name:

            	  
	
               

            
	 	
              Its:

            	  
	
               

            

    

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    EXHIBIT
      G

     

    FORM
      OF JOINDER AGREEMENT

     

    This
      Joinder Agreement (the “Joinder Agreement”) is made and dated as of _________,
      20___, and is entered into by and between__________________, a _____________
      corporation (“Subsidiary”), and Hercules Technology Growth Capital, Inc., a
      Maryland corporation, as a Lender.

     

    RECITALS

     

    A.
      Subsidiary’s Affiliate, [Borrower] (“Company”) has entered into that certain
      Loan and Security Agreement dated as of September 28, 2007, with Lender, as
      such
      agreement may be amended (the “Loan Agreement”), together with the other
      agreements executed and delivered in connection therewith;

     

    B.
      Subsidiary acknowledges and agrees that it will benefit both directly and
      indirectly from Company’s execution of the Loan Agreement and the other
      agreements executed and delivered in connection therewith;

     

    AGREEMENT

     

    NOW
      THEREFORE, Subsidiary and Lender agree as follows:

     

    1. The
      recitals set forth above are incorporated into and made part of this Joinder
      Agreement. Capitalized terms not defined herein shall have the meaning provided
      in the Loan Agreement.

     

    2. By
      signing this Joinder Agreement, Subsidiary shall be bound by the terms and
      conditions of the Loan Agreement the same as if it were the Borrower (as defined
      in the Loan Agreement) under the Loan Agreement, mutatis
      mutandis,
      provided however, that Lender shall have no duties, responsibilities or
      obligations to Subsidiary arising under or related to the Loan Agreement or
      the
      other agreements executed and delivered in connection therewith. Rather, to
      the
      extent that Lender has any duties, responsibilities or obligations arising
      under
      or related to the Loan Agreement or the other agreements executed and delivered
      in connection therewith, those duties, responsibilities or obligations shall
      flow only to Company and not to Subsidiary or any other person or entity. By
      way
      of example (and not an exclusive list): (a) Lender’s providing notice to Company
      in accordance with the Loan Agreement or as otherwise agreed between Company
      and
      Lender shall be deemed provided to Subsidiary; (b) a Lender’s providing an
      Advance to Company shall be deemed an Advance to Subsidiary; and (c) Subsidiary
      shall have no right to request an Advance or make any other demand on
      Lender.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    [SIGNATURE
      PAGE TO JOINDER AGREEMENT]

     

    
      	
              SUBSIDIARY:
                

               

              
                

              

            	
            

    

    
      	
              By:

            	 	 
	
              Name:

            	 	 
	
              Title:

            	 	 

    

    

    
      	
              Address:

            	 	 
	 	 
	 	 
	
              Telephone:
                

            	 	 
	
              Facsimile:
                

            	 	 

    

    

     

    
      	
              LENDER:       
                

            	
              HERCULES TECHNOLOGY GROWTH CAPITAL, INC.,

            
	 	
              a
                Maryland corporation

            	 
	 	 	 	 
	 	
              By:

            	 	 
	 	
              Name:
                

            	
              Scott
                Harvey

            	 
	 	
              Its:

            	
              Chief
                Legal Officer

            	 

    

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    EXHIBIT
      H

     

    ACH
      DEBIT AUTHORIZATION AGREEMENT

     

    Hercules
      Technology Growth Capital, Inc.

    400
      Hamilton Avenue, Suite 310

    Palo
      Alto, CA 94301

     

    
      	 	
              Re:

            	
              Loan
                and Security Agreement dated as of September 28, 2007 among DIOMED
                HOLDINGS, INC., a Delaware corporation, and DIOMED, INC., a Delaware
                corporation, each for itself and each Additional Borrower (collectively,
                the “Borrowers”) and Hercules Technology Growth Capital, Inc. (“Company”)
                (the “Agreement”)

            

    

     

    In
      connection with the above referenced Agreement, the undersigned Borrower hereby
      authorizes the Company to initiate debit entries for the periodic payments
      due
      under the Agreement to the Borrower’s account indicated below. The undersigned
      Borrower authorizes the depository institution named below to debit to such
      account.

    

      
        	
                DEPOSITORY
                  NAME

              	
                BRANCH

              
	 	 
	
                CITY

              	
                STATE
                  AND ZIP CODE

              
	 	 
	
                TRANSIT/ABA
                  NUMBER

              	
                ACCOUNT
                  NUMBER

              

      

    

     

    This
      authority will remain in full force and effect so long as any amounts are due
      under the Agreement.

     

    
      	
               

            	 
	
              (Borrower)(Please
                Print)

            	 
	
              By:
                

            	   	 
	
              Date:

            	   	 

    

    

    
      
        
        

      

      
        13

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