Document:

EXHIBIT
        10.1

      

      RADCOM
        LTD. 

       

      
        
          

        

      

      NOTICE
        OF 2005 ANNUAL GENERAL MEETING OF SHAREHOLDERS 

      
        

         

      Notice
        is
        hereby given that the 2005 Annual General Meeting of Shareholders (the
“Meeting”) of Radcom Ltd. (the “Company”) will be held on Wednesday, September
        14, 2005 at 16:00 (Israel time), at the offices of the Company, 24 Raoul
        Wallenberg Street, Tel Aviv, Israel, for the following purposes:

      

      
        	 	
                (1)

              	
                To
                  fix the number of directors on the Board of Directors at four (4)
                  and to
                  re-elect two (2) directors to serve as members of the Company’s Board of
                  Directors; 

              

      

      
        	 	
                (2)

              	
                To
                  amend the Articles of Association of the Company in order to permit
                  indemnification of directors and office holders of the Company
                  to the
                  fullest extent permitted by law;

              

      

      
        	 	
                (3)

              	
                To
                  amend the Company’s indemnification letters with each of its directors and
                  office holders in order to conform them to recent changes in the
                  law;

              

      

      
        	 	
                (4)

              	
                To
                  reappoint the Company’s independent auditors, and to authorize the
                  Company’s Audit Committee to fix their remuneration;
                  

              

      

      
        	 	
                (5)

              	
                To
                  reallocate the unutilized pool of shares reserved for issuance
                  under the
                  Company’s option plans;

              

      

      
        	 	
                (6)

              	
                To
                  approve the grant of options to purchase 30,000 Ordinary Shares
                  to each of
                  Rony Ross, Dan Barnea, and Zohar Gilon, directors of the
                  Company;

              

      

      
        	 	
                (7)

              	
                To
                  approve the grant of options to purchase 60,000 Ordinary Shares
                  to Zohar
                  Zisapel, the Chairman of the Board of Directors of the
                  Company;

              

      

      
        	 	
                (8)

              	
                To
                  discuss the auditors’ report and the consolidated financial statements of
                  the Company for the year ended December 31, 2004;
                  and

              

      

      
        	 	
                (9)

              	
                To
                  transact such other business as may properly come before the Meeting
                  or
                  any adjournment thereof.

              

      

       

      The
        Board
        of Directors recommends a vote FOR approval of all matters to be voted upon
        at
        the Meeting.

      

      Shareholders
        of record at the close of business on August 9, 2005 are entitled to notice
        of,
        and to vote at, the Meeting. All shareholders are cordially invited to attend
        the Meeting in person.

      

      Whether
        or not you plan to attend the Meeting, you are urged to promptly complete,
        date
        and sign the enclosed proxy and to mail it in the enclosed envelope, which
        requires no postage if mailed in the United States. Return of your proxy
        does
        not deprive you of your right to attend the Meeting, to revoke the proxy
        and to
        vote your shares in person.

      

      Joint
        holders of shares should take note that, pursuant to Article 32(d) of the
        Articles of Association of the Company, the vote of the senior holder of
        the
        joint shares who tenders a vote, in person or by proxy, will be accepted
        to the
        exclusion of the vote(s) of the other joint holder(s). For this purpose
        seniority will be determined by the order in which the names stand in the
        Company’s Register of Members.

      

      
        	 	
                By
                  Order of the Board of Directors,

                

                Arnon
                  Toussia-Cohen

                

                Chief
                  Executive Officer

              

      

      

      

      Dated:
        August 9, 2005

      

      The
        audited financial statements of the Company for the fiscal year ended December
        31, 2004, are not a part of the proxy solicitation material, but were filed
        together with the Company’s Annual Report on Form 20-F, which was filed on March
        31, 2005 with the SEC and is available at the SEC’s website, www.sec.gov and at
        the Company’s website, www.radcom.com.
        

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      RADCOM
        LTD.

      24
        RAOUL
        WALLENBERG STREET

      TEL
        AVIV
        69719, ISRAEL

       

      
        

         

      PROXY
        STATEMENT

       

      
        

         

      2005
        ANNUAL GENERAL MEETING OF SHAREHOLDERS 

      

      This
        Proxy Statement is furnished to the holders of ordinary shares, NIS 0.05
        nominal
        value (the “Ordinary Shares”), of Radcom Ltd. (the “Company”) in connection with
        the solicitation by the Board of Directors of proxies for use at the 2005
        Annual
        General Meeting of Shareholders (the “Meeting”), or at any adjournment thereof,
        pursuant to the accompanying Notice of 2005 Annual General Meeting of
        Shareholders. The Meeting will be held on Wednesday, September 14, 2005 at
        16:00
        (Israel time), at the offices of the Company, 24 Raoul Wallenberg Street,
        Tel
        Aviv, Israel.

      

      It
        is
        proposed that at the Meeting, resolutions be adopted as follows: 

      

      
        	 	
                1.

              	
                To
                  fix the number of directors on the Board of Directors at four (4)
                  and to
                  re-elect two (2) directors to serve as members of the Company’s Board of
                  Directors;

              

      

      
        	 	
                2.

              	
                To
                  amend the Articles of Association of the Company in order to permit
                  indemnification of directors and office holders of the Company
                  to the
                  fullest extent permitted by law;

              

      

      
        	 	
                3.

              	
                To
                  amend the Company’s indemnification letters with each of its directors and
                  office holders in order to conform them to recent changes in the
                  law;

              

      

      
        	 	
                4.

              	
                To
                  reappoint the Company’s independent auditors, and to authorize the
                  Company’s Audit Committee to fix their remuneration;
                  

              

      

      
        	 	
                5.

              	
                To
                  reallocate the unutilized pool of shares reserved for issuance
                  under the
                  Company’s option plans;

              

      

      
        	 	
                6.

              	
                To
                  approve the grant of options to purchase 30,000 Ordinary Shares
                  to each of
                  Rony Ross, Dan Barnea, and Zohar Gilon, directors of the Company;
                  and

              

      

      
        	 	
                7.

              	
                To
                  approve the grant of options to purchase 60,000 Ordinary Shares
                  to Zohar
                  Zisapel, the Chairman of the Board of Directors of the
                  Company.

              

      

      

      Additionally,
        the auditors’ report and the consolidated financial statements of the Company
        for the year ended December 31, 2004 will be discussed. 

      

      The
        Company currently is not aware of any other matters that will come before
        the
        Meeting. If any other matters properly come before the Meeting, the persons
        designated as proxies intend to vote in accordance with their judgment on
        such
        matters.

      

      A
        form of
        proxy for use at the Meeting and a return envelope for the proxy are enclosed.
        Shareholders may revoke the authority granted by their execution of proxies
        at
        any time before the exercise thereof by filing with the Company a written
        notice
        of revocation or duly executed proxy bearing a later date, or by voting in
        person at the Meeting. Unless otherwise indicated on the form of proxy, shares
        represented by any proxy in the enclosed form, if the proxy is properly executed
        and received by the Company not less than 72 hours prior to the time fixed
        for
        the Meeting, will be voted in favor of all the matters to be presented to
        the
        Meeting, as described above. On all matters considered at the Meeting,
        abstentions and broker non-votes will be treated as neither a vote “for” nor
“against” the matter, although they will be counted in determining whether a
        quorum is present.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

         

      

      Proxies
        for use at the Meeting are being solicited by the Board of Directors of the
        Company. Only shareholders of record at the close of business on August 9,
        2005
        will be entitled to vote at the Meeting. Proxies are being mailed to
        shareholders on or about August 12, 2005 and will be solicited chiefly by
        mail.
        However, certain officers, directors, employees and agents of the Company,
        none
        of whom will receive additional compensation therefore, may solicit proxies
        by
        telephone, telegram or other personal contact. The Company will bear the
        cost
        for the solicitation of the proxies, including postage, printing and handling,
        and will reimburse the reasonable expenses of brokerage firms and others
        for
        forwarding material to beneficial owners of shares.

      

      RECORD
        DATE; OUTSTANDING VOTING SECURITIES; VOTING RIGHTS

      

      Only
        shareholders of record at the close of business on August 9, 2005 will be
        entitled to vote at the Meeting and any adjournments or postponements thereof.
        The Company had outstanding on July 31, 2005, 14,813,797 Ordinary Shares,
        each
        of which is entitled to one vote upon each of the matters to be presented
        at the
        Meeting. Two or more shareholders of the Company holding shares conferring
        in
        the aggregate at least one-third (1/3) of the voting power of the Company,
        present in person or by proxy and entitled to vote, will constitute a quorum
        at
        the Meeting.

      

      BENEFICIAL
        OWNERSHIP OF SECURITIES BY CERTAIN

      BENEFICIAL
        OWNERS AND MANAGEMENT

       

      The
        following table sets forth certain information regarding the beneficial
        ownership of the Company’s Ordinary Shares as of July 31, 2005 by (i)
        each
        person or entity known to own beneficially more than five percent (5%) of
        the
        Company’s outstanding Ordinary Shares based on information provided to the
        Company by the holders or disclosed in public filings with the Securities
        and
        Exchange Commission,
        and
        (ii) all directors and officers as a group, based
        on
        information provided to the Company by the holders or disclosed in public
        filings with the Securities and Exchange Commission.

      

      
        	
                Name

              	 	
                Number
                  of Ordinary

                Shares
                  Beneficially Owned(1)

              	 	
                Percentage
                  of 

                Outstanding
                  Ordinary

                Shares(2)

              	 
	
                Zohar
                  Zisapel (3) (4)

              	 	 	
                3,
                  348,042

              	 	 	
                22.2

              	
                %

              
	
                Yehuda
                  Zisapel (3) (5)

              	 	 	
                2,027,161

              	 	 	
                13.6

              	
                %

              
	
                RAD
                  Data Communications Ltd (6)

              	 	 	
                177,841

              	 	 	
                1.2

              	
                %

              
	
                Star
                  Growth Enterprise, a German Civil Law 

                Partnership
                  (with limitation of liability) (7)

              	 	 	
                1,225,490

              	 	 	
                8.3

              	
                %

              
	
                J.
                  Carrlo Cannell, D/B/A

                Cannell
                  Capital Management (8)

              	 	 	
                1,705,193

              	 	 	
                11.5

              	
                %

              
	
                All
                  directors and executive officers as a group 

                (12
                  persons) (1) (2)

              	 	 	
                4,585,842

              	 	 	
                28.2

              	
                %

              

      

      

      
        
           

        

        
           

          
            

          

        

        
           

        

         

      

      
        	
                (1)

              	
                Except
                  as otherwise noted and pursuant to applicable community property
                  laws,
                  each person named in the table has sole voting and investment power
                  with
                  respect to all Ordinary Shares listed as owned by such person.
                  Shares
                  beneficially owned include shares that may be acquired pursuant
                  to options
                  or warrants that are exercisable on or within 60 days of July 31,
                  2005.
                  

              
	 	 
	
                (2)

              	
                The
                  percentage of outstanding Ordinary Shares is based on 14,813,797
                  Ordinary
                  Shares outstanding as of July 31, 2005. For determining
                  the
                  percentage owned by each person, Ordinary Shares for each person
                  includes
                  Ordinary Shares that may be acquired by such person pursuant to
                  options
                  and warrants to purchase Ordinary Shares that are exercisable within
                  60
                  days of July 31, 2005.

                The
                  number of outstanding Ordinary Shares does not include shares that
                  were
                  repurchased by the Company.

              
	 	 
	
                (3)

              	
                Includes
                  beneficial ownership of Messrs. Zohar Zisapel and Yehuda
                  Zisapel of
                  Ordinary Shares held by RAD Data Communications Ltd., an Israeli
                  company.
                  

              
	 	 
	
                (4)

              	
                Includes
                  167,862 Ordinary Shares and warrants to purchase 9,979 Ordinary
                  Shares
                  owned of record by RAD Data Communications Ltd., 54,500 Ordinary
                  Shares
                  owned of record by Klil and Michael Ltd., an Israeli company, 110,000
                  Ordinary Shares issuable upon exercise of options exercisable within
                  60
                  days of July 31 2005, and warrants to purchase 129,377 Ordinary
                  Shares.
                  Zohar Zisapel is a principal shareholder and director of each of
                  RAD Data
                  Communications Ltd. and Klil and Michael Ltd. and, as such,
                  Mr. Zisapel may be deemed to have voting and dispositive
                  power over
                  the Ordinary Shares held by RAD Data Communications Ltd. and Klil
                  and
                  Michael Ltd. Mr. Zisapel disclaims beneficial ownership
                  of these
                  Ordinary Shares except to the extent of his pecuniary interest
                  therein.

              
	 	 
	
                (5)

              	
                Includes
                  167,862 Ordinary Shares and 9,979 warrants to purchase Ordinary
                  Shares
                  owned of record by RAD Data Communications Ltd. and 910,360 Ordinary
                  Shares owned of record by Retem Local Networks Ltd., an Israeli
                  company,
                  and 116,246 warrants to purchase Ordinary Shares. Yehuda Zisapel
                  is a
                  principal shareholder and director of each of RAD Data Communications
                  Ltd.
                  and Retem Local Networks and, as such, Mr. Zisapel may be
                  deemed to
                  have voting and dispositive power over the Ordinary Shares held
                  by RAD
                  Data Communications Ltd. and Retem Local Networks. Mr. Zisapel
                  disclaims beneficial ownership of these Ordinary
                  Shares.

              
	 	 
	
                (6)

              	
                Includes
                  9,979 warrants to purchase Ordinary Shares. Messrs. Zohar Zisapel
                  and
                  Yehudah Zisapel have shared voting and dispositive
                  power with respect to the shares held by RAD Data Communications
                  Ltd. The
                  shares held by RAD Data Communications Ltd. are reflected under
                  Zohar
                  Zisapel’s and Yehuda Zisapel’s names in the table.

              
	 	 
	
                (7)

              	
                Includes
                  1,137,955 Ordinary Shares owned of record by Star Growth Enterprise
                  (“Growth”), a German Civil Law Partnership (without limitation of
                  liability), and 85,535 Ordinary Shares owned of record by SVM Star
                  Ventures Managementgesellschaft mbH Nr. 3 (“SVM 3”). Growth is managed by
                  SVM 3. Dr. Meir Barel is the sole director and primary owner of
                  SVM 3. Dr.
                  Barel has the sole power to vote or direct the vote, and the sole
                  power to
                  dispose of or direct the disposition of, the shares beneficially
                  owned by
                  SVM 3 and by Growth. SVM 3 has the sole power to vote or direct
                  the vote,
                  and the sole power to dispose of or direct the disposition of,
                  the shares
                  beneficially owned by Growth. Dr. Barel disclaims beneficial ownership
                  of
                  the shares held by Growth (including the shares issuable upon exercise
                  of
                  the warrants) except to the extent of any pecuniary interest
                  therein. This
                  information is based on Dr. Meir Barel’s Schedule 13-G filed on May 11,
                  2004.

              
	 	 
	
                (8)

              	
                This
                  information is based on Mr. Cannell’s Schedule 13-F HR filed on May 13,
                  2005. 

              

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      ITEM
        1 - RE-ELECTION OF DIRECTORS

      

      Under
        the
        Company’s Articles of Association, the Board of Directors is to consist of not
        less than three (3) and not more than nine (9) directors, the exact number
        to be
        fixed from time to time by resolution of the shareholders. The number of
        directors of the Company is currently fixed at five (5) although the Board
        of
        Directors currently consists of four (4) directors. At the Meeting, the
        shareholders will be asked to fix the number of Directors at four (4). Directors
        of the Company, other than external directors, are elected at each annual
        general meeting of shareholders. The external directors are required to be
        elected by the shareholders, for a maximum of two terms. Each term of an
        external director is three years. At the 2004 annual general meeting of
        shareholders, Mr. Dan Barnea and Ms. Rony Ross were re-elected as external
        directors for a second term. At the Meeting, shareholders will be asked to
        re-elect Zohar Zisapel and Zohar Gilon to serve as members of the Company’s
        Board of Directors. 

      

      Proxies
        may not be voted for a greater number of persons than the number of nominees
        named. Under the Articles of Association of the Company, the Board of Directors
        will be entitled to fill, until the next election of directors, any vacancies
        existing on the Board of Directors following the annual general meeting at
        its
        sole discretion.

      

      It
        is
        intended that proxies (other than those directing the proxy holders to vote
        against the listed nominees or for certain of them or to abstain) will be
        voted
        for the election of the two nominees named below as directors of the Company,
        each to hold office until the next annual general meeting and until his
        successor shall have duly taken office, unless his office is vacated earlier
        under any relevant provision of the Articles of Association of the Company.
        

      

      The
        affirmative vote of a majority of the Ordinary Shares represented at the
        Meeting
        in person or by proxy is required to elect the two nominees named below as
        directors of the Company. In the event any one or more of such nominees should
        be unable to serve, the proxies will be voted for the election of such other
        person or persons as shall be determined by the persons named in the proxy
        in
        accordance with their best judgment. The Company is not aware of any reason
        why
        any of the nominees, if elected, should be unable to serve as a director.
        The
        Company does not have any understanding or agreement with respect to the
        future
        election of any nominees named herein. The following information is supplied
        with respect to each person nominated
        and recommended to be elected by the Board of Directors of the Company, and
        is
        based upon the records of the Company and information furnished to it by
        the
        nominees. Reference is made to the above chart entitled “Beneficial Ownership of
        Securities by Certain Beneficial Owners and Management” for information
        pertaining to stock ownership by certain nominees.

      

      A
        brief
        biography of each nominee is set forth below:

      

      Mr. Zohar
        Zisapel (56),
        one of
        the co-founders of the Company, has served as the Chairman of the Board of
        Director of the Company since its inception. Mr. Zisapel is also a
        founder
        and a director of RAD Data Communications Ltd., a worldwide data communications
        company headquartered in Israel, for which he currently serves as Chairman
        of
        the Board and served as President from 1982 to 1997. Mr. Zisapel is a director
        of other public companies including: Verisity Ltd., RADVision Ltd and Ceragon
        Ltd. Mr. Zisapel previously served as Head of the Electronics Research
        Department in the Israeli Ministry of Defense. Mr. Zisapel has a B.Sc.
        and
        a M.Sc. degree in electrical engineering from the Technion and an M.B.A.
        degree
        from Tel Aviv University.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

         

      

      Mr. Zohar
        Gilon (57), has
        served as a director since June 1995. Mr. Gilon serves as a General
        Partner
        and Managing Director of Tamar Technologies Ventures, a venture capital fund
        investing in Israel and the United States. From 1993 until
        August 1995, Mr. Gilon served as President of W.S.P. Capital Holdings
        Ltd.,
        which provides investment banking and underwriting services in Israel and
        invests in real estate and high-technology investments in Israel and abroad.
        Mr. Gilon serves as a director of other public companies, namely Ceragon
        Ltd. and RIT Technologies Ltd., and of several private companies. Mr Gilon
        is
        also a private investor in numerous high-technology companies, including
        affiliates of the Company in Israel. He holds a B.Sc. degree in electrical
        engineering from the Technion and an M.B.A. degree from Tel Aviv
        University.

      

      The
        affirmative vote of the holders of a majority of the voting power represented
        at
        the Meeting, in person or by proxy, and voting on this matter, is required
        for
        the approval of this matter.

      

      It
        is
        proposed that at the Meeting the following resolutions be adopted: 

      

      “RESOLVED,
        that the
        number of directors on the Board of Directors of the Company be set at four
        (4).”

       

      “RESOLVED,
        that
        Zohar Zisapel be re-elected to serve as a member of the Board of Directors
        of
        the Company, effective immediately.”

       

      “RESOLVED,
        that
        Zohar Gilon be re-elected to serve as a member of the Board of Directors
        of the
        Company, effective immediately.”

      

      The
        Board of Directors recommends a vote FOR approval of the proposed
        resolutions.

       

      ITEM
        2- AMENDMENT OF ARTICLES OF ASSOCIATION

       

      The
        Company’s Articles of Association allow it to indemnify any office holder or
        director to the fullest extent permitted under the Israeli Companies Law,
        5759-1999 (the “Companies Law”), provided that the nature and extent of the
        indemnification conforms to the provisions of the Companies Law and that
        the
        indemnification is approved as required by the Companies Law.

       

      The
        Company has provided indemnification letters to each of the Company’s directors
        and officers to insure and indemnify them against certain types of claims,
        subject to certain limitations (the “Indemnification Letters”). These
        Indemnification Letters were approved by the Company’s Audit Committee, Board of
        Directors and shareholders as required by the Companies Law.

       

      In
        March
        2005, the Companies Law was amended. Among the provisions affected were those
        relating to indemnification of directors and office holders. In light of
        these
        amendments, the Board of Directors believes that it would be desirable to
        amend
        the provisions of the Articles of Association in order that the Company be
        permitted to continue to indemnify its directors and office holders to the
        fullest extent permitted by law.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      The
        affirmative vote of the holders of a majority of the voting power represented
        at
        the Meeting, in person or by proxy, and voting on this matter, is required
        for
        the approval of this matter. In addition, pursuant to Section 262(b) of the
        Companies Law, since the members of the Company’s Board of Directors and the
        officers of the Company who are beneficiaries of the Indemnification Letters
        may
        be deemed collectively a “controlling shareholder” of the Company (as such term
        is defined in the Companies Law), the affirmative vote of the Ordinary Shares
        must include at least one-third of the Ordinary Shares voted by shareholders
        who
        do not have a “personal interest” in the matter (unless the total shares of
        non-interested shareholders voted against the matter does not represent more
        than one percent of the outstanding Ordinary Shares). For this purpose, all
        shareholders are asked to indicate on the enclosed proxy card whether or
        not
        they have a personal interest by marking their vote in the appropriate line.
        Under the Companies Law, a “personal interest” of a shareholder (i) includes a
        personal interest of any members of the shareholder’s immediate family (or
        spouses thereof) or a personal interest of a company with respect to which
        the
        shareholder (or such family member) serves as a director or the CEO, owns
        at
        least 5% of the shares or has the right to appoint a director or the CEO
        and
        (ii) excludes an interest arising solely from the ownership of the Company’s
        Ordinary Shares. 

       

      It
        is
        proposed that at the Meeting the following resolution be adopted: 

       

      “RESOLVED,
        that
        Article 70(c) of the Articles of Association of the Company be amended and
        restated to provide as follows:

       

      
        	 	
                “(c)

              	
                Subject
                  to the provisions of the Companies Law, the Company may indemnify
                  an
                  Office Holder in respect of an obligation or expense specified
                  below
                  imposed on the Office Holder in respect of an act performed in
                  his
                  capacity as an Office Holder, as
                  follows:

              

      

      

      
        	 	 	
                “(i)

              	
                a
                  financial obligation imposed on him in favor of another person
                  by a court
                  judgment, including a compromise judgment or an arbitrator’s award
                  approved by court;

              

      

      

      
        	 	 	
                “(ii)

              	
                reasonable
                  litigation expenses, including attorney’s fees, expended by the Office
                  Holder as a result of an investigation or proceeding instituted
                  against
                  him by a competent authority, provided that such investigation
                  or
                  proceeding concluded without the filing of an indictment against
                  him and
                  either (A) concluded without the imposition of any financial liability
                  in
                  lieu of criminal proceedings or (B) concluded with the imposition
                  of a
                  financial liability in lieu of criminal proceedings but relates
                  to a
                  criminal offense that does not require proof of criminal intent;
                  and

              

      

      

      
        	 	 	
                “(iii)

              	
                reasonable
                  litigation expenses, including attorneys’ fees, expended by an Office
                  Holder or charged to the Office Holder by a court, in a proceeding
                  instituted against the Office Holder by the Company or on its behalf
                  or by
                  another person, or in a criminal charge from which the Office Holder
                  was
                  acquitted, or in a criminal proceeding in which the Office Holder
                  was
                  convicted of an offense that does not require proof of criminal
                  intent.

              

      

      

      
        	 	 	
                “The
                  Company may undertake to indemnify an Office Holder as aforesaid,
                  (aa)
                  prospectively, provided that, in respect of Article 70(c)(i), the
                  undertaking is limited to events which in the opinion of the Board
                  of
                  Directors are foreseeable in light of the Company’s actual operations when
                  the undertaking to indemnify is given, and to an amount or criteria
                  set by
                  the Board of Directors as reasonable under the circumstances, and
                  further
                  provided that such events and amount or criteria are set forth
                  in the
                  undertaking to indemnify,
                  and (bb) retroactively.”

              

      

       

      The
        Board of Directors recommends a vote FOR approval of the proposed
        resolution.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      ITEM
        3- AMENDMENT OF INDEMNIFICATION LETTERS

       

      At
        the
        annual general meeting of shareholders held on December 11, 2000, the
        shareholders ratified and approved the Company’s undertaking to enter into the
        Indemnification Letters. In light of the amendments to the Companies Law
        described in Item 2 and the desirability of continued indemnification of
        the
        Company’s directors and office holders, the Company’s Audit Committee and Board
        of Directors have approved certain amendments in the Indemnification Letters
        as
        set forth below, subject to the approval by the shareholders of the amendments
        to the Articles of Association proposed in Item 2. 

       

      The
        affirmative vote of the holders of a majority of the voting power represented
        at
        the Meeting, in person or by proxy, and voting on this matter, is required
        for
        the approval of this matter. In addition, since the members of the Company’s
        Board of Directors and the officers of the Company who are beneficiaries
        of the
        Indemnification Letters may be deemed collectively a “controlling shareholder”
        of the Company (as such term is defined in the Companies Law), the affirmative
        vote of the Ordinary Shares must include at least one-third of the Ordinary
        Shares voted by shareholders who do not have a “personal interest” in the matter
        (unless the total shares of non-interested shareholders voted against the
        matter
        does not represent more than one percent of the outstanding Ordinary Shares).
        For this purpose, all shareholders are asked to indicate on the enclosed
        proxy
        card whether or not they have a personal interest by marking their vote in
        the
        appropriate line. Under the Companies Law, a “personal interest” of a
        shareholder (i) includes a personal interest of any members of the shareholder’s
        immediate family (or spouses thereof) or a personal interest of a company
        with
        respect to which the shareholder (or such family member) serves as a director
        or
        the CEO, owns at least 5% of the shares or has the right to appoint a director
        or the CEO and (ii) excludes an interest arising solely from the ownership
        of
        the Company’s Ordinary Shares.

      

      It
        is
        proposed that at the Meeting the following resolution be adopted: 

       

      
        	 	
                “RESOLVED,
                  that Section 1 of the form of Indemnification Letter be amended
                  and
                  restated to provide as follows:

              

      

       

      
        	 	 	
                “1.

              	
                Subject
                  to the conditions set forth in Section 10, and pursuant to the
                  other terms
                  and conditions in this Letter of Indemnification, the Company hereby
                  undertakes to indemnify you to the maximum extent permitted by
                  law
                  for:

              

      

      

      
        	 	 	
                “1.1

              	
                any
                  financial obligation imposed on you in favor of another person
                  by a court
                  judgment, including a settlement or an arbitrator’s award approved by
                  court, in respect of any act or omission (“Action”)
                  taken or made by you in your capacity as a director, officer and/or
                  employee of the Company; 

              

      

      

      
        	 	 	
                “1.2

              	
                reasonable
                  litigation expenses, including attorney’s fees, expended by you as a
                  result of an investigation or proceeding instituted against you
                  by a
                  competent authority, provided that such investigation or proceeding
                  concluded without the filing of an indictment against you and either
                  (A)
                  concluded without the imposition of any financial liability in
                  lieu of
                  criminal proceedings or (B) concluded with the imposition of a
                  financial
                  liability in lieu of criminal proceedings but relates to a criminal
                  offense that does not require proof of criminal intent;
                  and

              

      

      

      
        	 	 	
                “1.3

              	
                all
                  reasonable litigation expenses, including attorneys’ fees, expended by you
                  or charged to you by a court, in a proceeding instituted against
                  you by
                  the Company or on its behalf or by another person, or in any criminal
                  proceedings in which you are acquitted, or in any criminal proceedings
                  of
                  a crime which does not require proof of criminal intent in which
                  you are
                  convicted, all in respect of actions taken by you in your capacity
                  as a
                  director, officer and/or employee of the
                  Company.

              

      

      

      
        	 	 	
                “The
                  above indemnification will also apply to any Action taken by you
                  in your
                  capacity as a director, officer and/or employee of any other company
                  controlled, directly or indirectly, by the Company (a ‘Subsidiary’)
                  or in your capacity as a director, or observer at board of directors’
                  meetings, of a company not controlled by the Company but where
                  your
                  appointment as a director or observer results directly from the
                  Company’s
                  holdings in such company (an ‘Affiliate’).”

              

      

       

      The
        Board of Directors recommends a vote FOR
        approval of the proposed resolution.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      ITEM
        4- REAPPOINTMENT OF INDEPENDENT AUDITORS

      

      At
        the
        Meeting, the shareholders will be asked to approve the reappointment of Somekh
        Chaikin, Certified Public Accountants (Israel), a member firm of KPMG
        International, as the Company’s independent auditors until the end of next
        year’s annual general meeting of shareholders. The shareholders will also be
        asked to authorize the Audit Committee, by an authority delegated to it by
        the
        Board of Directors, to fix the compensation of the auditors in accordance
        with
        the amount and nature of their services. 

      

      The
        affirmative vote of the holders of a majority of the voting power represented
        at
        the Meeting, in person or by proxy, and voting on this matter, is required
        for
        the approval of this matter.

      

      It
        is
        proposed that at the Meeting the following resolutions be adopted:

      

      “RESOLVED,
        that
        Somekh Chaikin, Certified Public Accountants (Israel), a member firm of KPMG
        International, be, and hereby are, re-appointed as the independent auditors
        of
        the Company until the end of the 2006 annual general meeting of shareholders,
        and that the Audit Committee of the Company, by an authority duly delegated
        by
        the Board of Directors of the Company, be, and it hereby is, authorized to
        fix
        the compensation of the independent auditors in accordance with the amount
        and
        nature of their services.”

       

      The
        Board of Directors recommends a vote FOR approval of the proposed
        resolution.

      

      ITEM
        5- REALLOCATING THE UNUTILIZED POOL OF SHARES RESERVED FOR ISSUANCE UNDER
        THE
        COMPANY’S OPTION PLANS

      

      On
        June
        30, 2003, the Securities and Exchange Commission approved amendments to Nasdaq’s
        listing rules. The amended rules require the Company to obtain shareholder
        approval for the adoption of, and material amendments to, most stock option
        plans. 

      

      The
        Radcom Ltd. 2003 Share Option Plan (the “2003 Plan”) was adopted by the Board of
        Directors of the Company as a result of the July 2002 tax reform in Israel,
        which afforded various new tax advantages with respect to the taxation of
        options granted to Israeli employees and directors under amended Section
        102 of
        the Israeli Tax Ordinance. The 2003 Plan was designed so that grants of awards
        under it would be subject to the tax advantages under the new tax rules.
        Currently, there are 1,605,748 shares reserved for issuance under the 2003
        Plan,
        of which 1,024,412 have been allocated or exercised, leaving 581,336 shares
        free
        for allocation. The Board of Directors has recommended that the unutilized
        reserves of 135,000 shares under the Directors Share Incentive Plan (1997)
        be
“moved” to the 2003 Plan so that they can be used. Accordingly, the number of
        shares available for issuance under the 2003 Plan shall be increased by 135,000
        shares. The 135,000 unissued shares will be transferred from the pool of
        shares
        reserved for issuance under the Radcom Ltd. Directors Share Incentive Plan
        (1997), which will be reduced by 135,000 shares to 256,000 shares, which
        will
        remain available for issuance upon exercise of options that have been granted
        under that plan.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

         

      

      The
        affirmative vote of the holders of a majority of the voting power represented
        at
        the Meeting, in person or by proxy, and voting on this matter is required
        for
        the approval thereof.

      

      It
        is
        proposed that at the Meeting the following resolution be adopted:

      

      “RESOLVED,
        to
        authorize the transfer of 135,000 unissued shares from the pool of shares
        reserved for issuance under the Radcom Ltd. Directors Share Incentive Plan
        (1997) to the pool of shares reserved for issuance under the 2003
        Plan.

      

      The
        Board of Directors recommends a vote FOR approval of the proposed
        resolution.

      

      ITEM
        6 - APPROVAL OF GRANT OF OPTIONS TO PURCHASE ORDINARY SHARES TO CERTAIN
        DIRECTORS

      

      Under
        the
        Companies Law, the terms of compensation of the Company’s directors must be
        approved by the Company’s Audit Committee, Board of Directors and shareholders,
        in that order.

      

      By
        actions of the Company’s Audit Committee and Board of Directors on July 24,
        2005, Rony Ross, Dan Barnea, and Zohar Gilon, directors of the Company, were
        each granted options to purchase 30,000 Ordinary Shares, which shall
        vest in
        three
        (3) equal annual installments, as long as each such director continues to
        serve
        as a member of the Company’s Board of Directors, exercisable at an exercise
        price equal to the closing price for the Company’s Ordinary Shares as traded on
        the NASDAQ National Market at the close of trading on September 14, 2005.
        The
        grant of such options will be effective on September 14, 2005. The options
        will
        expire upon the earlier of the following: (i) the tenth anniversary of the
        date
        of grant; or (ii) 180 days from the date the individual ceases to be a director
        of the Company. The aforesaid options were granted by the Company under the
        2003
        Plan, subject to shareholder approval, and under Section 102(b)(2) of the
        Income
        Tax Ordinance (New Version) - 1961, and the Company elected the capital gains
        route for the grant of these options. 

      

      The
        affirmative vote of the holders of a majority of the voting power represented
        at
        the Meeting, in person or by proxy, and voting on this matter, is required
        for
        the approval of this matter.

      

      It
        is
        proposed that at the Meeting the following resolution be adopted:

      

      “RESOLVED,
        the
        grant of options to each of Rony Ross, Dan Barnea, and Zohar Gilon, directors
        of
        the Company, to purchase 30,000 Ordinary Shares, which shall vest in three
        (3)
        equal annual installments, as long as each such director continues to serve
        as a
        member of the Company’s Board of Directors, exercisable at an exercise price
        equal to the closing price for the Company’s Ordinary Shares as traded on the
        NASDAQ National Market at the close of trading on September 14, 2005, as
        approved by the Audit Committee and the Board of Directors, be, and hereby
        is,
        approved.”

      

      The
        Board of Directors recommends a vote FOR the approval of the proposed
        resolution.

      

      
        
           

        

        
           

          
            

          

        

        
           

        

         

      

      ITEM
        7 - APPROVAL OF GRANT OF OPTIONS TO PURCHASE 60,000 ORDINARY SHARES TO THE
        CHAIRMAN OF THE BOARD OF DIRECTORS

      

      Under
        the
        Companies Law, the terms of compensation of the Company’s directors must be
        approved by the Company’s Audit Committee, Board of Directors and shareholders,
        in that order.

      

      By
        actions of the Company’s Audit Committee and Board of Directors on July 24,
        2005, Zohar Zisapel, the Chairman of the Board of Directors of the Company,
        was
        granted options to purchase 60,000 Ordinary Shares, which shall vest in three
        (3) equal annual installments, provided that he continues to serve as a member
        of the Company’s Board of Directors, exercisable at an exercise price equal to
        the closing price for the Company’s Ordinary Shares as traded on the NASDAQ
        National Market at the close of trading on September 14, 2005. The grant
        of such
        options will be effective on September 14, 2005. The options will expire
        upon
        the earlier of the following: (i) the tenth anniversary of the date of grant;
        or
        (ii) 180 days from the date the individual ceases to be a director of the
        Company. These options were granted by the Company under the 2003 Share Plan,
        subject to shareholder approval, and under Section 3(9) of the Income Tax
        Ordinance (New Version) - 1961. 

      

      The
        affirmative vote of the holders of a majority of the voting power represented
        at
        the Meeting, in person or by proxy, and voting on this matter, is required
        for
        the approval of this matter. In addition, since Mr. Zisapel may be deemed
        a
“controlling shareholder” of the Company (as such term is defined in the
        Companies Law), the affirmative vote of the Ordinary Shares must include
        at
        least one-third of the Ordinary Shares voted by shareholders who do not have
        a
“personal interest” in the matter (unless the total shares of non-interested
        shareholders voted against the matter does not represent more than one percent
        of the outstanding Ordinary Shares). For this purpose, all shareholders are
        asked to indicate on the enclosed proxy card whether or not they have a personal
        interest by marking their vote in the appropriate line. Under the Companies
        Law,
        a “personal interest” of a shareholder (i) includes a personal interest of any
        members of the shareholder’s immediate family (or spouses thereof) or a personal
        interest of a company with respect to which the shareholder (or such family
        member) serves as a director or the CEO, owns at least 5% of the shares or
        has
        the right to appoint a director or the CEO and (ii) excludes an interest
        arising
        solely from the ownership of the Company’s Ordinary Shares.

      

      It
        is
        proposed that at the Meeting the following resolution be adopted:

      

      “RESOLVED,
        the
        grant of options to Zohar Zisapel, the Chairman of the Board of Directors
        of the
        Company, to purchase 60,000 Ordinary Shares, which shall vest in three (3)
        equal
        annual installments, provided that he continues to serve as a member of the
        Company’s Board of Directors, exercisable at an exercise price equal to the
        closing price for the Company’s Ordinary Shares as traded on the NASDAQ National
        Market at the close of trading on September 14, 2005, as approved by the
        Audit
        Committee and the Board of Directors, be, and hereby is, approved.”

      

      The
        Board of Directors recommends a vote FOR approval of this proposed
        matter.

      

      ITEM
        8 - REVIEW OF THE AUDITORS’ REPORT AND THE CONSOLIDATED FINANCIAL
        STATEMENTS

       

      The
        audited financial statements of the Company for the fiscal year ended December
        31, 2004 were filed together with the Company’s Annual Report on Form 20-F,
        which was filed with the SEC and is available at the SEC’s website, www.sec.gov
        and at the Company’s website, www.radcom.com. The Company will hold a discussion
        with respect to the financial statements at the Meeting. This item will not
        involve a vote of the shareholders.

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      ITEM
        9 - OTHER BUSINESS

       

      Management
        knows of no other business to be transacted at the Meeting, other than as
        set
        forth in the Notice of Annual General Meeting. However, if any other matters
        are
        properly presented to the Meeting, the persons named in the enclosed form
        of
        proxy will vote upon such matters in accordance with their best
        judgment.

      

      
        
          	 	
                  
                    By
                      Order of the Board of Directors,

                    

                    Arnon
                      Toussia-Cohen

                     

                    Chief
                      Executive
                      Officer

                  

                

        

      Dated:
        August 9, 2005EXHIBIT 10.1 -- DISTRIBUTION AGREEMENT

<PAGE>

                                  DIOMED, INC.
                                 One Dundee Park
                                Andover, MA 01810

                                 August 5, 2005

Luminetx Corporation
1256 Union Avenue
Memphis, TN  38104

Ladies and Gentlemen:

      This letter sets forth our understanding and agreement regarding the terms
upon which Diomed, Inc. (referred to as "we" or "us" or variations thereof) will
distribute certain medical products developed by Luminetx Corporation (referred
to as "you" or variations thereof).

      1. Background. You have developed a biomedical imaging system known as the
VeinViewer Imaging System (the "System"). We are interested in obtaining
exclusive rights to distribute the System directly and through leasing companies
to physicians for the purpose of performing sclerotherapy, phlebectomies or the
treatment of varicose veins (the "Market"), and you desire to appoint us as your
exclusive distributor of the System to the Market. The territory within which we
may exercise our distribution rights (the "Territory") shall initially consist
of the United States, including all commonwealths, territories, possessions and
military bases, and the United Kingdom, and may be expanded upon mutual
agreement to include other international markets as the product becomes more
widely available. We agree that we will not attempt to sell the system in the
U.K. during 2006 without your prior approval, to allow time to obtain the
necessary regulatory clearances for that portion of the Territory, however, if
we decide to bear such costs and responsibilities to allow us to sell the System
in the U.K. sooner, we may do so.

      2. Grant of Distribution Rights. Subject to the provisions of this
Agreement, you appoint us as your exclusive distributor of the System to the
Market within the Territory, and grant us the exclusive right to distribute and
sell the System to the Market throughout the Territory. You will refer to us all
inquiries you receive for or relating to the System within the Market and the
Territory. We will refer to you all inquiries we receive for or relating to the
System outside the Market or the Territory. All new models or versions of the
System introduced during the term of this Agreement, and all updates,
modifications, improvements and customizations made to the System during the
term of this Agreement, will be considered to be part of the System for purposes
of this Agreement, and our rights under this paragraph 2 will apply to such new
models or versions of the System and to the System as so updated, modified,
improved or customized. We recognize that some modifications or improvements to
the system may lead to an increase in the base price of the system. Pricing
changes will be implemented in accordance with paragraph 8(a). We agree to use
commercially reasonable efforts (a) to exploit the rights granted to us by you;
(b) to achieve and maintain sales volume and distribution of the System; and (c)
otherwise to develop and satisfy the market for the System in the Territory and
Market. We shall consult with you and give due regard to your advice concerning
material aspects of distribution strategy and policy, and you shall supply us
with such Technical Information or other Confidential Information (as defined
below), as in your reasonable discretion, is reasonably necessary to enable us
to perform our obligations under this Agreement.

<PAGE>

      3. Limitation on Activities. During the term of this Agreement, you will
not yourself distribute or sell (except to us under this Agreement), or grant to
any third party any right to distribute or sell, the System within the Market
anywhere in the Territory. During the term of this Agreement and for a period of
two (2) years following any expiration or termination of this Agreement, we
specifically agree to refrain from directly or indirectly developing,
manufacturing, assembling, distributing, marketing or selling products or
services, under our own brand name or otherwise, within the Territory, which are
competitive with the System; provided, however, that we may continue to sell and
support the sale of ultrasound equipment which we currently market or may market
in the future and which may be considered to compete with the System.

      4. Requirements for Systems. All Systems you sell to us for distribution
under this Agreement will display the Diomed name or logo on the border of all
projected images. We will have the right to review and approve all such uses of
our trademarks and logos. In addition, you will notify us promptly of material
defects in any System reported by any user.

      5. Consideration. In consideration of the exclusive distribution rights
granted to us hereunder, we have agreed to invest a total of $1,000,000 in
Luminetx, upon the terms and conditions set forth in Exhibit B, and to grant you
a warrant to purchase 600,000 shares of Diomed common stock, upon the terms and
conditions set forth in Exhibit C. You understand and acknowledge that we are
under no obligation to provide any financial support to you other than as
expressly set forth herein.

      6. Your Assistance with Marketing and Distribution. You will reasonably
cooperate with us in our marketing and distribution of the System. You will also
work with us to develop a program to exchange sales leads, and to identify
opportunities for joint public relations activities and trade show
participation. You will provide, at no charge to us, specimen copies of
collateral advertising and promotional materals developed by you including, but
not limited to, photographs, video files, animations and graphic images; and you
will assist us in developing other collateral materials to support our sales and
marketing programs. We shall prepare and distribute such advertising material,
sales literature, catalogues, and other printed promotional material, prepare
and disseminate such electronic and other non-printed promotional material, and
conduct such promotional activities as we believe necessary to perform our
obligations under this Agreement. Prior to their distribution, dissemination or
use, we will supply you with copies of all advertising material, sales
literature, catalogues, and other printed promotional material, and transcripts
and graphical representations of all other non-printed promotional material
prepared by or for us relating to the System. You shall have a period of ten
(10) business days to review such advertising and promotional materials by us,
and, upon your reasonable request we will make changes in such advertising and
promotional materials prior to distribution, dissemination or use thereof. All
copyright or other intellectual property interests in any promotional,
advertising or marketing literature or other materials produced by or for us
pertaining to the System, which bear any of your trademarks or to which your
logo has been affixed, shall vest in you. We agree to assign, and hereby do
assign, any and all such rights to you and agree to execute any further
documents reasonably requested by you to confirm such assignment, and further
hereby appoint you our attorney-in-fact to execute all such documents in the
event that we fail to do so. We will retain all copyright and other intellectual
property interests in all other promotional, advertising or marketing literature
or other materials produced by or for us, and you will retain all copyright and
other intellectual property interests in all promotional, advertising or
marketing literature or other materials produced by or for you.

                                       2
<PAGE>

      7. Orders. We will place monthly orders for Systems with you on our
standard purchase order form setting forth the quantity of the products ordered
and the desired delivery date (which shall not be less than fifteen (15)
business days following the date of the order unless you otherwise agree). No
order will be binding unless acknowledged and accepted by you, but you may not
unreasonably refuse to accept any order. You will confirm your acceptance or
rejection of an order within five (5) days after your receipt of such order.
Once an order is accepted, neither you nor we may cancel or modify it without
the other party's approval. We will also provide by the end of each month a
rolling non-binding 12 month forecast of our expected purchases to assist you
with production scheduling, which forecast shall be subject to monthly review
and adjustment. We will make reasonable attempts to purchase according to this
forecast.

      8. Pricing, Shipping and Payment. You will use your best efforts to make
first delivery of the Systems to us on or before January 31, 2006. The date of
your initial delivery of the Systems to us may be referred to in this Agreement
as the "Initial Delivery Date."

          (a) Until the six (6) month anniversary of the Initial Delivery Date
(the "Initial Period"), the price at which you will sell us Systems under this
Agreement (the "System Price") will be as set forth on Exhibit A. After the
Initial Period, the System Price shall be determined for each Measuring Period
as set forth below. As used herein, the "Measuring Periods" shall mean
successive quarterly periods following the Initial Period until the second (2nd)
anniversary of the Initial Delivery Date and successive annual periods
thereafter. For each Measuring Period, the System Price shall be equal to
****CONFIDENTIAL TREATMENT REQUESTED**** of the average selling price of Systems
to end users across all your distribution channels and markets (including end
user sales by us but excluding sales of demonstration units, loaners, used
Systems, and sales to governmental authorities and research institutions) during
the preceding Measuring Period (or during the Initial Period, in the case of the
first Measuring Period); provided, however, that any increases in the System
Price shall not exceed, on a percentage basis, the percentage increase in your
actual direct per-unit production costs for the Systems, as evidenced by your
costed bill of materials, since the Initial Delivery Date. We shall have the
right, at our expense, during normal business hours and upon reasonable notice,
to review your books and records regarding System sales as required to allow us
to verify the calculation of System pricing; provided, however, that we may not
exercise this right more than once in any twelve (12) month period. You and we
agree that we will determine the prices at which we sell Systems to end users.

                                        3

<PAGE>

          (b) In the event that we realize an average gross margin of more than
****CONFIDENTIAL TREATMENT REQUESTED**** % on sales of Systems in any calendar
quarter, we will pay you an additional amount equal to (i) ****CONFIDENTIAL
TREATMENT REQUESTED**** % of the portion of our System gross margin in such
quarter that resulted in a gross margin of more than but not more than
****CONFIDENTIAL TREATMENT REQUESTED**** %, plus (ii) ****CONFIDENTIAL TREATMENT
REQUESTED**** % of the portion of our System gross margin in such quarter that
resulted in a gross margin of more than ****CONFIDENTIAL TREATMENT REQUESTED****
%. Sales of demonstration units and loaners, and sales to governmental
authorities and research units, shall be excluded from the calculation of our
average gross margin for purposes of this paragraph.

      By way of example, if System revenues in a particular quarter were $
****CONFIDENTIAL TREATMENT REQUESTED**** and our cost of sales for the System in
such quarter was $ ****CONFIDENTIAL TREATMENT REQUESTED****, resulting in a
gross margin of ****CONFIDENTIAL TREATMENT REQUESTED**** %, we would pay you an
amount equal to ****CONFIDENTIAL TREATMENT REQUESTED**** % of $ ****CONFIDENTIAL
TREATMENT REQUESTED**** (being the difference between $ ****CONFIDENTIAL
TREATMENT REQUESTED****, the level of System revenues that would have resulted
in a ****CONFIDENTIAL TREATMENT REQUESTED**** % gross margin, and $
****CONFIDENTIAL TREATMENT REQUESTED****, the level of System revenues that
would have resulted in a ****CONFIDENTIAL TREATMENT REQUESTED**** % gross
margin) plus ****CONFIDENTIAL TREATMENT REQUESTED**** % of $ ****CONFIDENTIAL
TREATMENT REQUESTED**** (being the difference between the $ ****CONFIDENTIAL
TREATMENT REQUESTED**** in actual System revenues and $ ****CONFIDENTIAL
TREATMENT REQUESTED****, the level of System revenues that would have resulted
in a ****CONFIDENTIAL TREATMENT REQUESTED**** % gross margin), or a total of $
****CONFIDENTIAL TREATMENT REQUESTED****. We will pay such additional amount to
you within forty-five (45) days following the end of the applicable quarter. We
will make all accounting determinations required under this paragraph in
accordance with our published financial statements and generally accepted
accounting principles, consistently applied. You shall have the right, at your
expense, during normal business hours and upon reasonable notice, to review our
books and records regarding System sales as required to allow you to verify the
amount of fees owed to you; provided, however, that you may not exercise this
right more than once in any twelve (12) month period.

          (c) You will ship Systems purchased by us via ground carrier, FOB from
your manufacturing facility or distribution site, to any location we specify in
the continental United States. We will provide you with contact and address
information for end users of Systems who purchase from us, including associated
System identification numbers (such as serial numbers or lot numbers).

          (d) We will make payment to you within 45 days from the date of our
receipt of the goods, and you may charge us interest (at a rate of 1.0% per
month) on any late payments we make.

                                       4

<PAGE>

      9. Fulfillment of Orders. You agree to sell and deliver to us (subject to
our orders) a number of Systems at least equal to the target number of Systems
described in paragraph 10 below. Beyond such target number of Systems, you agree
to use your best efforts to sell and deliver to us (subject to our orders) a
sufficient quantity of Systems to meet our requirements.

      10. Purchase Quantities.

          (a) The target number of Systems we are to purchase under this
Agreement shall be: (i) ****CONFIDENTIAL TREATMENT REQUESTED**** Systems prior
to the first (1st) anniversary of the Initial Delivery Date, purchased according
to the rolling twelve (12) month forecast described in paragraph 7, (ii) an
additional ****CONFIDENTIAL TREATMENT REQUESTED**** Systems prior to the second
(2nd) anniversary of the Initial Delivery Date, and (iii) an additional
****CONFIDENTIAL TREATMENT REQUESTED**** Systems prior to the third (3rd)
anniversary of the Initial Delivery Date. In the event that this Agreement
continues in effect after the third (3rd) anniversary of the Initial Delivery
Date, the target number of Systems we are to purchase in each subsequent year
shall be determined by good faith agreement between you and us at least ninety
(90) days before the beginning of such year, and will be in the range of
****CONFIDENTIAL TREATMENT REQUESTED**** % to ****CONFIDENTIAL TREATMENT
REQUESTED**** % greater than the target number for the preceding year, unless
you and we agree otherwise. Purchases in all years beyond 2006 shall be made in
a quarterly spread as mutually agreed upon at least ninety (90) days in advance
of the contract year based on an assessment of the then current sales year
purchasing pattern.

          (b) If we fail to purchase the annual target number of Systems in
clauses (i) and (ii) of paragraph (a) above, prior to the third (3rd)
anniversary of the Initial Delivery Date for any reason (except as described
below), then, upon your delivery to us of written notice of such failure, our
rights under paragraph 2 of this Agreement shall become non-exclusive in nature
and thereafter you will have the right to yourself distribute and sell, and
grant to third parties the right to distribute and sell, the System within the
Market in the Territory. In addition, if we fail to purchase at least
****CONFIDENTIAL TREATMENT REQUESTED**** % of the annual target number of
Systems in any year for any reason (except as described below), then you may
terminate this Agreement by written notice to us of such failure.

          (c) If we place an order for Systems that would not result in our
purchases of Systems exceeding ****CONFIDENTIAL TREATMENT REQUESTED**** % of the
quantities reflected in our then-current purchase forecast furnished to you
pursuant to paragraph 7 and you reject such order, the target purchase quantity
for the period in which such order was placed will be reduced by the number of
Systems covered by such rejected order. If you accept an order and fail to
deliver any Systems within ten (10) days after the date for delivery specified
by us in the order for such Systems as described in paragraph 7, the target
purchase quantity for the period in which such Systems were scheduled for
delivery will be reduced by the number of Systems which were not so delivered.
If during any period we purchase more than the target number of Systems that we
are to purchase for such period, such excess number of Systems will be applied
to reduce the target purchase quantity for the subsequent period or periods.

                                       5

<PAGE>

11. Warranties.

          (a) You warrant each System sold in accordance with this Agreement to
be free from defects in materials and workmanship for a period of twelve (12)
months from the date of its first use by the end user. You make such warranty to
us and to each System end user. You agree to provide warranty service directly
to all System end users, at your sole expense. We acknowledge that the only
warranty given by you is a warranty to repair or replace any System determined
to be defective, or determined by the parties to have failed to meet existing,
applicable manufacturers' warranties, specifications and/or standards for the
System; provided, however, that if you are unable to repair or replace any
defective System, you will refund the purchase price paid for the System. THE
REMEDY PROVIDED BY YOU AS TO REPAIR OR REPLACEMENT OF SYSTEMS OR REFUNDS
THEREFOR SHALL BE OUR SOLE AND EXCLUSIVE REMEDY UNDER THIS SECTION, AND IT IS
EXPRESSLY MADE IN SUBSTITUTION OF ANY AND ALL REMEDIES OTHERWISE AVAILABLE TO
US, INCLUDING ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, UNLESS SUCH
LIMITATION IS OTHERWISE PROHIBITED UNDER APPLICABLE LAW. EXCEPT AS SET FORTH IN
PARAGRAPHS (b) AND (c) OF THIS SECTION, YOU HEREBY DISCLAIM ANY AND ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, HOWSOEVER ARISING RELATED TO THE SYSTEM,
INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR
PURPOSE, MERCHANTABILITY, OR OTHERWISE, SAVE TO THE EXTENT SUCH WARRANTIES ARE
UNABLE TO BE EXCLUDED BY APPLICABLE LAW. YOU NEITHER ASSUME OR AUTHORIZE ANY
PERSON TO ASSUME FOR YOU ANY OTHER ADDITIONAL LIABILITY OR RESPONSIBILITY WITH
RESPECT TO THE SYSTEM.

          (b) You represent and warrant that all Systems you sell to us (i)
shall be manufactured in accordance with Food and Drug Administration ("FDA")
Good Manufacturing Practices requirements in the U.S. and other similar
governmental standards applicable in the Territory, (ii) shall have all FDA and
other governmental approvals required in the Territory in order to allow us to
sell them for use in the Market, and (iii) shall bear labeling that conforms to
FDA and other applicable governmental rules and regulations in the Territory. We
shall be responsible for obtaining any approval or license necessary to import
the Systems into the Territory outside of the U.S. You agree to cooperate and
use your best efforts to assist us in obtaining and maintaining any and all
necessary regulatory or other government approvals regarding the use or sale of
the System within the Territory outside of the U.S. and all such approvals
relating to the System shall, if local regulatory policy permits, be obtained in
your name and benefit as the manufacturer and shall allow you to continue sales
of the System in such country in the event of the termination of this Agreement.
Upon termination of this Agreement, we will make all reasonable efforts at your
expense to transfer local registrations to you or your designated third party.
All costs associated with obtaining and maintain any and all necessary
regulatory or other government approvals regarding the use or sale of the System
within the Territory, and any fines and/or penalties resulting from the failure
to obtain or maintain such approvals, shall be borne by you during the term of
this Agreement.

                                       6

<PAGE>

          (c) You represent and warrant that the System does not and shall not
during the term of this Agreement violate or infringe in the Territory any
copyright, patent, trademark, trade secret or other proprietary rights of any
third party, and that no claims of any such infringement have been made through
the date of this Agreement.

          (d) You and we represent and warrant to each other that we and you
have all power and authority necessary to enter into and perform our respective
obligations under this Agreement, and you and we have obtained all consents and
approvals required to permit each of us to execute, deliver and perform this
Agreement.

      12. Confidentiality and Non-Disclosure. All information exchanged between
you and us will be subject to the terms and conditions of the Mutual
Confidentiality and Non-Disclosure Agreement between you and us dated July 29,
2005, the terms of which are incorporated herein by this reference and the
breach of which shall be a breach of this Agreement. As used herein,
"Confidential Information" and "Technical Information" shall both mean
information that constitutes "Confidential Information" pursuant to the terms of
such agreement.

      13. Non-Solicitation. We and you each agree, during the term hereof and
for a period of two (2) years after any expiration or termination hereof, not to
directly or indirectly, without the other party's prior written consent, offer
to employ or employ in any manner any employees of the other party while they
are in the other party's employ, and not to offer to employ or employ in any
manner any of the other party's former employees for a period of six (6) months
after they have left the other party's employ. Our and your obligations
contained in this section are independent, and the existence of any claim or
cause of action of a party, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the other party of such
party's obligations of under this section. Our and your obligations under this
section shall survive any termination or expiration of this Agreement.

      14. Injunction and Damages. We and you each acknowledge that any breach or
imminent breach by a party of paragraphs 12, 13 or 15 of this Agreement may
cause irreparable injury and harm to the other party, and that remedies at law
for the breach or imminent breach may be inadequate. Accordingly,
notwithstanding the terms of any other section of this Agreement to the
contrary, and in addition to any such other relief, in the event of a breach of
such paragraphs by a party, the other party shall be entitled to seek specific
performance, temporary and permanent injunctive relief and such other relief to
which the other party may be entitled at law or in equity without the necessity
of posting bond or proving actual damage. A party shall be entitled to recover
all reasonable costs and attorneys' fees incurred by it in the event it is
successful in obtaining any such relief. In the event that a party is
unsuccessful in obtaining any relief under this section, then it shall reimburse
the other party for such party's reasonable costs and attorneys' fees incurred
in defense of such action.

      15. Intellectual Property Rights.

          (a) Ownership. We acknowledge your exclusive ownership of your
trademarks affixed to or used in connection with the System (collectively
referred to as the "Marks"), the patents, compositions or technology embodied in
the System or any improvements or additions thereto, and any copyrights or other
intellectual property interests in or relating to the System, or advertising and
promotional literature associated therewith (whether produced by you or us), and
will not make any modification or obliteration of the trademark or patent
markings on the Products as sold. You acknowledge our exclusive ownership of our
trademarks and logos that the System displays pursuant to paragraph 4 and any
advertising, sales and promotional materials in which we are to retain rights as
described in paragraph 6.

                                       7

<PAGE>

          (b) Use of Marks. This Agreement shall not give us any right to use
the Marks, and shall not give you any right to use our trademarks and logos,
except as specifically authorized by you herein. We agree to identify ourselves
as an independent distributor of the System and to display the Marks prominently
on or in connection with any and all advertising material, sales literature,
catalogues, internet websites and other printed and electronic promotional
material prepared by or for us relating to the System or our business involving
the System. We shall not use any Mark with any prefix, suffix or other modifying
words, terms, designs or symbols, or in any modified form, nor use any Mark in
connection with the sale of any other products or services not purchased from
you. Promptly following termination of this Agreement for any reason, we agree
to discontinue use of the Marks, and to remove, or dispose of, as you shall
direct, any signs or other indicia relating our sale of the System and any use
of the Marks; provided, however, that we may continue to use the Marks in
connection with the sale of Systems we have on hand as of the effective date of
termination. Following termination of this Agreement, we shall not be permitted
to use the Marks in connection with any product or service, except as provided
in the preceding sentence. We shall not have any right to register in the
Territory or elsewhere, any trademarks identical with, substantially similar to
or a translation of the Marks. All use of the Marks by us, including any new
variations thereof first used in the Territory, in connection with the selling,
installation and service of the System, under this Agreement shall be owned by
you, subject to your control in all respects and shall inure to your benefit.

          (c) Defense of Rights. We shall, at your request and expense, assist
you in taking any action which may be necessary in order to safeguard and defend
your right of ownership in the Marks or your patents. In particular, we shall
observe the market for designations which may infringe your rights in and to
your patents or Marks and inform you of our observations. We shall (a) inform
you promptly of any such infringement; and (b) collaborate with you in
proceeding against such infringers, to the extent reasonably requested by you.

          (d) Limited License; Inventions. This Agreement grants a limited
license to us to use, only as may be reasonably necessary to effectuate the
purposes of this Agreement, and subject to your control and approval, the Marks,
patents, copyrights, Technical Information, Confidential Information or
technology used by you in connection with or embodied in the System. We agree to
execute any and all documents as you may reasonably determine are necessary or
desirable to evidence the limited license granted hereunder for recording
purposes. Any and all improvements, modifications, inventions or discoveries by
us or our employees, relating to the System shall be your sole and exclusive
property. In furtherance of the foregoing, we hereby assign, and agree to
assign, all such improvements, modifications, inventions and discoveries to you,
and further authorize you as our attorney-in-fact to execute all such documents
as you may determine are necessary or desirable to confirm the foregoing
assignment and/or your ownership rights to such improvements, modifications,
inventions or discoveries. It is expressly understood and agreed between the
parties that you retain full ownership of all Marks, patents, copyrights,
Technical Information, Confidential Information and other technology described
above in this Section. In the event of termination of this Agreement, for any
reason, we agree that all rights of access to or to use the Marks, patents,
copyrights, Technical Information, Confidential Information and other technology
granted hereunder shall revert to you, and we shall have no interest therein
whatsoever.

                                       8

<PAGE>

      16. Term. This Agreement will be effective as of the date of your
execution of this Agreement, and unless sooner terminated pursuant to the terms
of this paragraph, will terminate on the third (3rd) anniversary of the Initial
Delivery Date; provided, however, that if we purchase an aggregate of at least
****CONFIDENTIAL TREATMENT REQUESTED**** Systems prior to the third (3rd)
anniversary of the Initial Delivery Date, the termination date of this Agreement
will be the fourth (4th) anniversary of the Initial Delivery Date. You and we
may agree to extend the term hereof for additional one year periods mutual
written agreement.

      Termination by You. Upon giving us thirty (30) days prior written notice,
you shall have the right to terminate this Agreement in the event of any of the
following, unless we cure such situation in all material respects within such
thirty (30) day period:

      (a) We intentionally, knowingly and on a continuing basis sell Systems
      outside the Territory or Market;

      (b) In the event of any material breach by us of our obligations
      hereunder;

      (c) We make an assignment for the benefit of creditors or if a petition
      for bankruptcy is filed by or against us and such petition is not
      dismissed within ninety (90) days after the filing of such petition; or

      (d) Any of your invoices to us remains unpaid more than ninety (90) days
      past its due date.

      Termination by Us. Upon giving you thirty (30) days prior written notice,
we shall have the right to terminate this Agreement in the event of any of the
following, unless you cure such situation in all material respects within such
thirty (30) day period:

      (a) You are adjudicated to be insolvent or if bankruptcy or similar
      proceedings are instituted against you;

      (b) You intentionally, knowingly and on a continuing basis sell Systems to
      other persons inside the Territory or Market;

      (c) You make an assignement for the benefit of creditors or if a petition
      for bankruptcy is filed by or against you and such petition is not
      dismissed within ninety (90) days after filing of such petition;

                                       9

<PAGE>

      (d) You intentionally, knowingly and on a continuing basis sell Systems to
      other persons inside the Territory or Market;

      (e) You fail to make the first delivery of Systems to us prior to May 31,
      2006; or

      (f) In the event of any material breach by you of your obligations
      hereunder.

In the event of any termination by us pursuant to the foregoing provisions, (i)
the unexercised portion of the warrant we have agreed to grant you as described
in paragraph 5 shall terminate immediately and (ii) any obligation that we may
then have to make additional investments in Luminetx shall terminate.

      17. Rights Upon Termination. Upon the termination of this Agreement for
any reason, all rights and obligations of the parties under this Agreement will
cease, except for (i) our obligation to make payments with respect to orders of
Systems delivered by you prior to the effective date of termination, (ii) our
right to continue to distribute and sell all Systems we have on hand as of the
effective date of termination, and (iii) the rights and obligations of the
parties under this paragraph and under paragraphs 12, 13, 14, 15, 17, and 24.

      18. Indemnification. You shall indemnify and defend us against and hold us
harmless from any and all claims (including without limitation, product
liability claims), suits, damages, judgments, or losses, including reasonable
attorneys' fees and other expenses incurred in investigation and defense, which
arise out of (i) any breach of your warranties set forth in paragraph 11, or
(ii) any alleged lack of quality or safety of any Systems sold by you to us
under this Agreement. You will retain counsel reasonably acceptable to us to
defend any such claims, and will not settle any such claims without our prior
written consent unless the settlement includes a full and complete release of
our liability. During the term of this Agreement, you will maintain product
liability insurance policies reasonably acceptable to us, which policies shall
name us as an additional insured. You agree to provide us evidence of such
policies at our request. We shall indemnify and defend you against and hold you
harmless from any and all claims (including without limitation, product
liability claims), suits, damages, judgments, or losses, including reasonable
attorneys' fees and other expenses incurred in investigation and defense, which
arise out of (i) any breach of our warranties set forth in paragraph 11, or (ii)
any material misrepresentation we make regarding the System that is inconsistent
with information regarding the System you provide to us or authorize us to use.

                                       10

<PAGE>

      19. Escrow.

          (a) Within ten (10) days following the execution of this Agreement,
you will deposit the plans, designs, specifications and manufacturing
documentation necessary for manufacture of the System (the "Escrow Materials")
with an escrow agent reasonably acceptable to us. You will promptly update
Escrow Materials in the event of any material change in the System, and in any
event not less than quarterly until the first (1st) anniversary of the Initial
Delivery Date and annually thereafter. The Escrow Material shall be maintained
under an agreement which provides that the escrow agent shall furnish us with a
copy of the Escrow Materials in the event of any of the following (the "Release
Events"); (i) you fail to make the first delivery of Systems to us prior to May
31, 2006, (ii) you make an assignment for the benefit of creditors, file a
petition for bankruptcy or a petition is filed against you and such petition is
not dismissed within ninety (90) days after filing of such petition, (iii) you
cease to provide warranty or maintenance service for the System; or (iv) for a
period of at least three (3) consecutive months, we order and you fail to
deliver or have delivered at least fifty percent (50%) of the monthly forecast
number of Systems established pursuant to paragraph 7 as and when described in
this Agreement, provided that the failure to sell and deliver such Systems to us
is not the result of a Force Majeure Event (as defined below) or the action of
any regulatory authority, or any breach of this Agreement by us. Following the
Release Event, we will continue to purchase those Systems which are actually
produced by you or your manufacturer and delivered to us in accord with and as
per the terms of this Agreement; provided, however, that we may utilize the
Escrow Materials, and shall have a limited license, subject to the provisions of
this Agreement, to manufacture Systems directly or have Systems manufactured by
third parties in order to supplement the number of Systems available for our
purchase from you or your manufacturer and allow us to meet the demand for
Systems in our Market. We will continue to have access to the Escrow Materials
until the Release Event is terminated by: (a) expiration or termination of this
Agreement, in the case of a Release Event described in clause (i) above; (b)
your petition for bankruptcy being dismissed, in the case of a Release Event
described in clause (ii) above; (c) you resume the provision of warranty and
maintenance service for the System for a period of three (3) consecutive months
in the case of a Release Event described in clause (iii) above; or (d) you
demonstrate for a period of three (3) consecutive months the ability to deliver
seventy-five percent (75%) of the monthly forecast number of Systems established
pursuant to paragraph 7, in the case of a Release Event described in clause (iv)
above. Upon request, you will show us the agreement with the escrow agent that
sets forth the above specified terms. You hereby grant us a license, effective
during the Term of this Agreement, to use the Escrow Materials while any Release
Event is ongoing to manufacture or have manufactured the System for sale by us
in the Market and the Territory and to provide warranty and maintenance services
to our customers, which license shall be exercisable only if we are entitled to
receive the Escrow Materials in accordance with the foregoing terms. In the
event that a Release Event occurs and as a result we have the right to terminate
this Agreement and do so, our rights pursuant to this Section 19 shall be
terminated.

          (b) It is understood and agreed that all rights and licenses to Escrow
Materials granted under this paragraph 19 are, and shall be deemed to be, for
purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to
"intellectual property" as defined under Section 101 (56) of the Bankruptcy
Code. Further, it is understood and agreed that we, as licensee of the Escrow
Materials, shall retain and may fully exercise all of our rights and elections
under the Bankruptcy Code in the event of your bankruptcy.

                                       11

<PAGE>

      20. Disputes. Should any dispute, controversy, difference or claim arise
among the parties concerning the interpretation, performance or enforcement of
this Agreement, the parties shall use their best efforts to settle such disputes
amicably between themselves. However, if such efforts fail to resolve the
dispute within thirty (30) days from the date written notice of the dispute was
given by one party to the other party, the parties agree that such dispute shall
be settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association (the "Rules") before a panel of three (3)
arbitrators appointed in accordance with the Rules (the "Arbitral Panel"). The
arbitration will be held as promptly as possible at such time as the Arbitral
Panel may determine; provided, however, that such arbitration shall take place
in New York City, New York. The Arbitral Panel shall determine the matters in
dispute in accordance with the laws of the State of Tennessee, without regard to
principles of conflicts of laws.

          (a) Procedure. The decision of the Arbitral Panel shall be in writing
and shall set forth in detail the facts of the dispute and the reasons for the
decision. The decision of a majority of the arbitrators on the Arbitral Panel
will be final and binding upon the parties hereto, who hereby waive any appeal
of such award. The expenses of the arbitration will be shared equally between
the parties. The parties agree that the award of the Arbitral Panel shall be the
sole and exclusive remedy between them regarding any claims, counter-claims,
issues, disputes, controversies, differences or accountings presented or pled to
the Arbitral Panel. The award of the Arbitral Panel shall be made and shall
promptly be payable in U.S. Dollars, free of any tax, deductions or offsets, and
that any costs, fees or taxes incident to enforcing the award shall, to the
maximum extent permitted by law, be charged against the party resisting such
enforcement. Judgment upon the award of the Arbitral Panel may be entered in any
court of competent jurisdiction, or application may be made in such court for a
judicial acceptance of the award and an order of enforcement, as the case may
be.

      21. Severability. In case any one or more of the provisions contained in
this Agreement shall be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall be limited to such provisions and the
remainder of this Agreement shall be valid and binding upon you and us;
provided, however, that in the event the Arbitral Panel or a court of competent
jurisdiction determines that a particular provision of this Agreement is
unreasonable, the parties agree to use their best efforts to reform the
provision in a manner so as to preserve as closely as possible the intent of the
parties.

      22. Exhibits. The Exhibits referred to herein are expressly incorporated
into this Agreement by this reference.

      23.. Assignment. Neither party shall have the right to assign or transfer
its rights or obligations under this Agreement, in whole or in part, without the
other party's prior written consent, which shall not be unreasonably withheld or
delayed.

      24. Relationship Between the Parties. This Agreement shall not create the
relationship of principal and agent between us. We shall have no authority to
make any commitment on behalf of you and you shall have no authority to make any
commitment on behalf of us. We warrant that we shall not act as or represent
ourselves to be an agent for you, or create or attempt to create any obligation
or liability on behalf of you. You warrant that you shall not act as or
represent yourself to be an agent for us, nor create or attempt to create any
obligation on our behalf. This Agreement shall not be construed as binding the
us as partners or as creating any other form of legal association which would
impose liability upon one party for the act or failure to act of the other.

                                       12

<PAGE>

      25. Compliance with Foreign Laws. Each party will comply with all laws and
regulations applicable to it during the course of performance of this Agreement
and related activities. Should registration of the System or this Agreement with
governmental authorities be required under the laws of the Territory outside of
the U.S., we shall comply with such registration requirements and provide proof
of such compliance to you; provided, however, that you shall not be bound by nor
obligated to make any revisions or modifications to this Agreement requested by
such governmental authorities unless you shall expressly consent in writing to
any such revision or modification.

      26. Force Majeure.

          (a) Definition. A "Force Majeure Event" shall mean any event or
circumstance or combination of events or circumstances which is beyond a party's
control and which materially and adversely affects the performance by that party
of its obligations under or pursuant to this Agreement. To the extent they
satisfy the above requirements, Force Majeure Events shall include, by way of
example only, such events as governmental acts, orders, judgments, directives
(official or unofficial), decrees or laws having a substantial adverse effect on
the production of the Systems; strikes (legal or illegal); lockouts; blockades
or embargoes; war (declared or undeclared); insurrection, riot, sabotage or
civil disturbance; acts of terrorism, general restraint or arrests of government
and people; explosions; epidemic; fires; flooding or water damage; hurricanes or
storms; atmospheric disturbances; landslides; lightning; typhoon; tornado; soil
subsidence; washouts; and earthquakes.

          (b) Notification. The party asserting the occurrence of a Force
Majeure Event shall promptly notify the other party of the occurrence of the
Force Majeure Event, and will estimate the period of suspension and the nature
of the disruption caused by the Force Majeure Event. Upon prompt notice of the
Force Majeure Event, the affected party may suspend performance of its
obligations hereunder; provided, however, that the party so affected shall use
its best efforts to avoid or remove the causes of nonperformance brought about
by the Force Majeure Event, and shall continue performance hereunder with the
utmost dispatch whenever those causes are removed. If at any time any party
shall suspend performance of its obligations hereunder, then the performance of
the other party hereunder shall be likewise suspended for the same length of
time.

          (c) Right to Terminate. If a Force Majeure Event (or a combination of
Force Majeure Events) suspends the performance of any obligation by a party
under this Agreement for more than six (6) months, either party may terminate
this Agreement by providing written notice of termination to the other party.
Any such termination shall not adversely affect any terms of this Agreement that
provide for obligations surviving termination of this Agreement.

                                       13

<PAGE>

      27. Notice. Any notice required or permitted herein must be in writing,
and may be sent by personal delivery, fax, expedited courier, messenger service,
registered mail or electronic mail, properly addressed to the party to be
notified at the address set forth below:

      If to You:                       With Copy to:

      Jim Phillips.                    G. Robert Morris
      Luminetx Corporation             Butler, Snow, O'Mara, Stevens &
      1256 Union Avenue, Third Floor    Cannada
      Memphis, TN 38104                Suite 500
      Fax: (901)  252-3701             6075 Poplar Avenue
                                       Memphis, TN 38119
                                       Fax:  (901) 680-7201

      If to Us:                        With Copy to:

      James A. Wylie                   Stephen R. Conlin
      Diomed, Inc.                     Van Wert, Zimmer & Conlin, P.C.
      One Dundee Park                  245 Winter Street, Suite 400
      Andover, MA  01810               Waltham, MA  02451
      Fax: (978) 475-8488              Fax:  (781) 314-0101

Such notice shall be deemed delivered when received. Receipt of any notice shall
be confirmed in writing by the recipient. Either party may, by written notice to
the other party, change the address to which notices shall be sent.

      28. General. This Agreement: (a) may be executed in any number of
counterparts, all of which together shall constitute one and the same
instrument; (b) shall be governed by the laws of The State of Tennessee; (c)
constitutes the entire agreement between you and us with respect to its subject
matter, superseding all prior oral and written communications, negotiations,
understandings, agreements and the like between you and us in such respect,
other than the existing non-disclosure agreement between you and us; (d) may be
amended, and any right under this Agreement may be waived, only in writing
(which, in the case of any amendment, is signed by you and us, or, in the case
of the waiver of any right, by the party waiving such right); (e) shall bind and
inure to the benefit of both you and us and our respective successors and
assigns; (f) contains rights which are cumulative, and no right or remedy
conferred upon either party is intended to be exclusive of any other right or
remedy, and every right and remedy shall be in addition to any other right or
remedy given; and (g) shall not be construed such that any waiver by either
party of any of its rights or of any breaches of the other party in a particular
instance is deemed a waiver of the same or different rights or breaches in
subsequent instances

      If you agree with and accept the above terms, please indicate your
agreement and acceptance by signing below.

                                    Yours truly,

                                    DIOMED, INC.

                                    /s/  James A. Wylie
                                    James A. Wylie
                                    President and Chief Executive Officer

                                       14

<PAGE>

Agreed and accepted
As of August 5, 2005:

                              LUMINETX CORPORATION

/s/    Jim Phillips
Name:  Jim Phillips
Title: CEO

                                       15

<PAGE>

                       EXHIBIT A - Initial System Pricing

                                 (Confidential)

VVC:  Price to Diomed of $ ****CONFIDENTIAL TREATMENT REQUESTED****, based on
      target list price of $22,500 and
      target Diomed ASP of $ ****CONFIDENTIAL TREATMENT REQUESTED****

VVS:  Price to Diomed of $ ****CONFIDENTIAL TREATMENT REQUESTED****,
      based on target list price of $17,500
      and target Diomed ASP of $ ****CONFIDENTIAL TREATMENT
      REQUESTED****

                                       16

<PAGE>

             EXHIBIT B - Terms for Diomed Investment in Luminetx

                                       17

<PAGE>

THIS CONVERTIBLE PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE OR OTHER SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE AFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE LENDER, REASONABLY SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM
THE SECURITIES AND EXCHANGE COMMISSION.

                              LUMINETX CORPORATION

                           CONVERTIBLE PROMISSORY NOTE

$1,000,000                                              Dated:  August 5, 2005

      FOR VALUE RECEIVED, the undersigned, LUMINETX CORPORATION, a Tennessee
corporation (the "Corporation"), hereby promises to pay to the order of Diomed,
Inc., a Delaware corporation, or its assigns (collectively, the "Lender"), the
principal amount of One Million Dollars ($1,000,000.00) and interest ("Note").

      1. Principal Amount. The principal amount represented by this Note is One
Million Dollars ($1,000,000.00) (the "Principal Amount"). Lender shall disburse
(i) Five Hundred Thousand Dollars ($500,000) to Corporation upon execution of
this Note, and (ii) disburse Five Hundred Thousand Dollars ($500,000) to
Corporation on the date when Corporation shall have both (a) produced at least
one hundred (100) units of the System (as such term is defined in the
Distribution Letter from Lender to Corporation (the "Distribution Letter") and
(b) Lender shall have accepted delivery of at least twenty five (25) units of
the System.

      2. Payment of Principal and Interest. Subject to conversion or earlier
payment as provided for elsewhere in this Note, the Corporation shall pay to the
Lender the entire unpaid Principal Amount and all unpaid accrued interest under
this Note in full on August 5, 2006 (the "Maturity Date"). Interest at a rate of
five percent (5.0%) per annum shall commence on the date of each disbursement of
funds hereunder and, except as provided in Section 6(a) below, shall continue on
the unpaid Principal Amount until paid in full. Principal and interest due
hereunder shall be paid in lawful money of the United States of America in
immediately available federal funds or the equivalent at the address of the
Lender set forth in Section 8 below or at such other address as the Lender may
designate. All payments made hereunder (including, without limitation, payments
made under Section 3) shall first be applied to interest then due and payable
and any excess payment shall then be applied to reduce the Principal Amount.

      3. Optional Prepayment. The Corporation may prepay all or any portion of
the unpaid Principal Amount together with interest due on this Note without
premium or penalty.

      4. Mandatory Prepayment. The Corporation shall prepay the full unpaid
Principal Amount, together with all accrued and unpaid interest thereon, upon
the occurrence of an Event of Default (as defined in Section 5 below).

      5. Default and Remedies.

      (a)   An "Event of Default" under this Note shall mean the occurrence of
            any of the following events:

            (i)   If the Corporation shall fail to make when due the payment of
                  the Principal Amount or interest as required by the Note,
                  whether at the due date thereof or by acceleration thereof or
                  otherwise;

            (ii)  If the Corporation shall fail to duly observe or perform in
                  any material respect any covenant, condition or agreement
                  required to be observed or performed under the Note and such
                  failure remains uncured (to the extent that such breach is
                  curable) for a period of thirty (30) calendar days after
                  written notice thereof;

            (iii) The commencement by the Corporation of any bankruptcy,
                  insolvency, arrangement, reorganization, receivership or
                  similar proceedings under any federal or applicable state law;
                  or the commencement against the Corporation, of any
                  bankruptcy, insolvency, arrangement, reorganization,
                  receivership or similar proceeding under any federal or
                  applicable state law by creditors of the Corporation,
                  provided, that such proceedings shall not be deemed an Event
                  of Default if such proceeding is controverted within thirty
                  (30) days and dismissed and vacated within sixty (60) days of
                  commencement, except in the event that any of the actions
                  sought in any such proceeding shall occur or the Corporation
                  shall take action to authorize or effect any of the actions in
                  any such proceeding;

            (iv)  If any proceeding or case shall be commenced in any court of
                  competent jurisdiction seeking dissolution or winding-up of
                  the Corporation;

            (v)   If the Corporation is dissolved, either voluntarily or
                  involuntarily; or (vi) Upon termination of the Distribution
                  Letter by Lender pursuant to Paragraph 16 thereof.

            (b)   Upon an Event of Default, the Lender may declare the
                  outstanding Principal Amount, and all accrued and unpaid
                  interest on the Principal Amount, immediately due and payable,
                  and such amount shall be collectible immediately or at any
                  time after such Event of Default. The rights and remedies
                  provided by this Note shall be cumulative, and shall be in
                  addition to, and not exclusive of, any other rights and
                  remedies available at law or in equity.

      6.    Conversion into Stock

      (a) Conversion Upon a Qualified Financing. Upon the occurrence of a
Qualified Financing (as hereinafter defined) prior to the Maturity Date, the
unpaid Principal Amount on this Note shall be automatically converted
("Qualified Financing Conversion") into shares of the Corporation's capital
stock of the same class or series issued in the Qualified Financing ("Stock").
Upon a Qualified Financing Conversion, any accrued but unpaid interest shall be
cancelled and Corporation shall have no further obligation or liability
therefor. The number of shares of Stock into which this Note is convertible
shall be determined by dividing the sum of the unpaid Principal Amount by the
issue price per share of the Stock paid by other investors in the Qualified
Financing, and such shares shall be issued upon the same terms and conditions as
the Stock issued in the Qualified Financing. Lender shall be entitled to
equivalent rights as those in any stock purchase, investor rights, stockholder
or other investment-related agreements entered into between the Corporation and
other investors in the Qualified Financing. For purposes of this Note, a
"Qualified Financing" shall be the issuance of Stock in one or more closings, as
a result of arm's length negotiations, in which a minimum amount of Three
Million Dollars ($3,000,000), as authorized and approved by the Corporation's
Board of Directors, is received by the Corporation from one or more investors.
The Corporation shall take any and all actions required by the Corporation's
Charter, Bylaws or applicable laws to authorize and issue the necessary total
number of shares of Stock to permit issuance of Stock to the Lender in
connection with a Qualified Financing Conversion. Upon the occurrence of a
Qualified Financing Conversion, the entire unpaid Principal Amount of this Note
shall be applied against the issue price of the shares of Stock being issued to
the Lender hereunder. In lieu of any fractional shares of Stock that may result
in the calculation of the number of such shares, the Corporation will promptly
pay to the Lender an amount equal to the value of such fractional shares. In
connection with an Qualified Financing Conversion, the Lender shall surrender
this Note to the Secretary of the Corporation in exchange for (i) a certificate
representing the shares of Stock issued to the Lender as a result of such
Qualified Financing Conversion and, if applicable, (ii) payment in lieu of any
fractional shares as provided for in this Section 6(a). The provisions of this
Section 6(a) shall terminate upon the repayment of the entire outstanding
Principal Amount plus any accrued but unpaid interest

      (b) Optional Conversion. In the event (i) of a Change of Control (as
defined below) or (ii) that a Qualified Financing has not occurred as of the
Maturity Date, the unpaid and outstanding Principal Amount and all accrued and
unpaid interest as of the Change of Control or Maturity Date, as applicable, may
be converted at any time thereafter, at the option of the Lender, ("Optional
Conversion") into shares of the Corporation's common stock ("Common Stock"). The
number of shares of Common Stock into which this Note is convertible shall be
determined by dividing the sum of the unpaid Principal Amount plus the accrued
interest on the date of the Optional Conversion by the purchase price per share
of the Common Stock. The Corporation shall take any and all actions required by
the Corporation's Charter, Bylaws or applicable laws to authorize and issue the
necessary total number of shares of Common Stock to permit issuance of Common
Stock to the Lender in connection with an Optional Conversion. Upon the
occurrence of an Optional Conversion, the entire unpaid Principal Amount and all
accrued unpaid interest shall be applied against the purchase price of the
Common Stock being issued to the Lender hereunder. In lieu of any fractional
shares of Common Stock that may result in the calculation of the number of such
shares, the Corporation will promptly pay to the Lender an amount equal to the
value of such fractional shares. In connection with an Optional Conversion, the
Lender shall surrender this Note to the Secretary of the Corporation in exchange
for (i) a certificate representing the shares of Common Stock issued to the
Lender as a result of such Optional Conversion and, if applicable, (ii) payment
in lieu of any fractional shares as provided for in this Section 6(b). The
purchase price of the Common Stock shall be $1.00 per share, which price shall
be appropriately adjusted to reflect the occurrence of any stock split, stock
dividend, recapitalization or other similar transaction affecting the Common
Stock.

      For purposes of the above, "Change of Control" shall mean: (a) the merger,
consolidation or other combination of the Corporation with any other
corporation, partnership, limited liability company or other business entity
that will result in the holders of the capital stock of the Corporation
immediately after the date of this Note owning in combination less than 50% of
the voting power and equity interests of the surviving corporation, partnership,
limited liability company or other business entity immediately after the
consummation of such transaction on a fully-diluted basis; (b) the sale,
exchange, lease or transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Corporation; or
(c) other than a Qualified Financing, any issuance of securities or other
transaction that will result in any person or entity (other than the holders of
the capital stock of the Corporation immediately after the date of this Note)
owning in combination more than 50% of the voting power or equity interests of
the Corporation on a fully-diluted basis.

      7. Term. The term of this Note shall be adjusted as necessary to avoid the
treatment of the Note as a "high-yield debt obligation" under the Internal
Revenue Code of 1986, as amended.

      8. Notices. All notices, demands and other communications under this Note
shall be in writing and shall be deemed to have been duly given on the date of
service if served personally on or faxed (if receipt confirmed) to the party to
whom notice is to be given, or on the third day after mailing if mailed to the
party to whom notice is to be given by certified mail, return receipt requested,
and properly addressed as follows (and with a copy sent as specified in the case
of notices, demands or communications to the Corporation):

If to the Corporation, to:        Luminetx Corporation
                                  Attention: James M. Phillips
                                  1256 Union Ave., 3rd Floor
                                  Memphis, TN 38104
                                  Facsimile:  (901) 253-3701

With a copy to  (which  copy      G. Robert Morris
shall not constitute notice       Butler,  Snow, O'Mara,  Stevens & Cannada,
hereunder):                         PLLC
                                  Crescent Center, Suite 500
                                  6075 Poplar Avenue
                                  Memphis, TN  38119
                                  Facsimile:  (901) 680-7201

If to the Lender, to:             Diomed, Inc.
                                  Attn:  James A. Wylie
                                  One Dundee Park
                                  Andover, MA  01810
                                  Facsimile:  (978) 475-8488

With a copy to  (which  copy      Stephen R. Conlin
shall not constitute notice       Van Wert, Zimmer & Conlin, P.C.
hereunder):                       245 Winter Street, Suite 400
                                  Waltham, MA  02451
                                  Facsimile:  (781) 314-0101

      The address, facsimile number, or the contact person for purposes of this
Section 8 may be changed by giving the parties specified above written notice of
the new address or name in the manner set forth above.

      9. Assignability. This Note may not be assigned by the Corporation,
without the consent of the Lender. No such assignment shall constitute a
novation or release of the Corporation of the obligations hereof or from any
liability to the Lender.

      10. Usury Laws. It is the intention of the Corporation and the Lender to
conform strictly to all applicable usury laws now or hereafter in force, and any
interest payable under this Note shall be subject to reduction to an amount
which is the maximum legal amount allowed under the applicable usury laws as now
or hereafter construed by the courts having jurisdiction over such matters. The
aggregate of all interest (whether designated as interest, service charges,
points or otherwise) contracted for, chargeable, or receivable under this Note
shall under no circumstances exceed the maximum legal rate upon the Principal
Amount remaining unpaid from time to time. If such interest does exceed the
maximum legal rate, it shall be deemed a mistake and such excess shall be
canceled automatically and, if theretofore paid, rebated to the Corporation or
credited on the Principal Amount, or if this Note has been repaid, then such
excess shall be rebated to the Corporation.

      11. Security Interest. As collateral security for the prompt performance
and payment in full of the indebtedness evidenced by this Note, including
accrued and unpaid interest and costs of collection and any other charges due in
connection herewith (collectively, the "Obligations"), the Corporation hereby
grants to the Lender a continuing security interest in all assets now or
hereafter owned or acquired by the Corporation, and any accessions or
substitutions thereto, including without limitation the following (collectively,
the "Collateral"):

            All inventory of the Corporation; all goods and equipment of the
            Corporation; all accounts receivable of the Corporation; all real
            property of the Corporation; all contract rights of the Corporation;
            all other rights of the Corporation to the payment of money, amounts
            due under factoring agreements, tax refunds and insurance proceeds;
            all interests of the Corporation in goods as to which an account
            receivable shall have arisen; all files, records and writings of the
            Corporation or in which it has an interest in any way relating to
            the foregoing property; all deposit accounts, investment property,
            instruments, documents of title, policies and certificates of
            insurance, securities, promissory notes, chattel paper, deposits,
            cash or other property owned by the Corporation or in which it has
            an interest; all general intangibles of the Corporation including
            without limitation good will, trade secrets, trade names,
            trademarks, URLs, patents, patent applications and any rights of the
            Corporation to retrieval from third parties of electronically
            processed and recorded information pertaining to any of the
            foregoing types of Collateral; and proceeds and products of all of
            the foregoing.

The Corporation shall cooperate with the Lender in preparing and filing one or
more UCC-1 financing statements or other financing notices complying with the
requirements of applicable law and otherwise in form approved by the Lender; and
shall do, make, execute and deliver all such additional and further acts,
things, deeds, assurances and instruments as the Lender may reasonably require
more completely to vest in and assure to the Lender its rights hereunder or in
any of the Collateral. Upon the happening of any Event of Default, the Lender
shall have all of the rights and remedies of a secured party under the Uniform
Commercial Code.

      12.   Miscellaneous.

      (a)   Any amendment hereto or waiver of any provision hereof must be in
            writing and signed by both the Corporation and the Lender.

      (b)   Wherever in this Note reference is made to the Corporation or the
            Lender, such reference shall be deemed to include, as applicable, a
            reference to their respective permitted successors and assigns, and
            the provisions of this Note shall be binding upon and shall inure to
            the benefit of such permitted successors and assigns.

      (c)   This Note shall in all respects be governed by and construed in
            accordance with the laws of the State of Tennessee without regard to
            conflicts of law principles of any jurisdiction to the contrary.

      (c)   The captions of the Sections of this Note are inserted solely for
            ease of reference and shall not be considered in the interpretation
            or construction of this Note.

      (d)   The Lender, by acceptance of this Note, hereby represents and
            warrants that this Note has been acquired by the Lender for
            investment only and not for resale or distribution hereof. The
            Lender, by acceptance of this Note, further understands, covenants
            and agrees that the Corporation is under no obligation and has made
            no commitment to provide for registration of this Note under the
            Securities Act of 1933, as amended, or state securities laws, or to
            take such steps as are necessary to permit the sale of this Note
            without registration under those laws.

(e)         The Corporation waives presentment, notice and demand, notice of
            protest, notice of demand and dishonor, and notice of nonpayment of
            this Note.

(f)         Wherever possible, each provision of this Note which has been
            prohibited by or held invalid under applicable law shall be
            ineffective to the extent of such prohibition or invalidity, but
            such prohibition or invalidity shall not invalidate the remainder of
            such provision or the remaining provisions of this Note.

(g)         No delay in the exercise of any right or remedy of any party hereto
            shall operate as a waiver thereof, and no single or partial exercise
            of any such right or remedy shall preclude other or future exercise
            thereof or the exercise of any other right or remedy.

(h)         It is expressly understood and agreed by the parties hereto that if
            it is necessary to enforce payment of this Note through the
            engagement or efforts of an attorney or by suit, the Corporation
            shall pay reasonable attorneys' fees, expenses of counsel, and other
            costs of collection actually incurred by the Lender.

(i)         This Note may be executed in counterparts, each of which shall be
            deemed an original, but both of which shall constitute one and the
            same Note.

                            [SIGNATURE PAGE FOLLOWS]

<PAGE>

      IN WITNESS WHEREOF, the Corporation has executed, acknowledged and
delivered this Note as of the day and year first above written.

                                          LUMINETX CORPORATION

                                          By:
                                             ----------------------------------

                                          Printed:
                                                  -----------------------------

                                          Title:
                                                -------------------------------

ACCEPTED AND AGREED, this 5th day of August, 2005:

Diomed, Inc.

By:
   -----------------------

 Printed:
         -----------------

Title:
      --------------------

<PAGE>

                           EXHIBIT C - Diomed Warrant

                                       18

<PAGE>

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

                          COMMON STOCK PURCHASE WARRANT

             To Purchase up to 600,000 Shares of Common Stock of

                              Diomed Holdings, Inc.

      THIS COMMON STOCK PURCHASE WARRANT (the "Warrant"), granted as of August
5, 2005, certifies that, for value received, LUMINETX CORPORATION ("Luminetx"
and, together with its permitted successors and permitted assigns, the
"Holder"), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after the
Initial Exercise Date (as defined below) and on or prior to the close of
business on the Termination Date (as defined below), but not thereafter, to
subscribe for and purchase from Diomed Holdings, Inc., a Delaware corporation
(the "Company"), up to Six Hundred Thousand (600,000) shares (the "Warrant
Shares") of Common Stock, par value $0.001 per share, of the Company (the
"Common Stock"). The purchase price of one share of Common Stock (the "Exercise
Price") under this Warrant shall be $2.90, subject to adjustment hereunder.

      Section 1.  Definitions.   Capitalized   terms  not  otherwise   defined
herein  shall  have  their  respective   meanings  set  forth  in  the  letter
agreement,  dated as of August 5, 2005, between the Diomed,  Inc. and Luminetx
(the  "Distribution  Agreement").  The following  terms when used herein shall
have their respective meanings as set forth below:

      "Initial Exercise Date" means the date when the Warrant Shares have been
approved for listing on the American Stock Exchange.

      "Market Price" means the closing price of the Company's Common Stock on
the American Stock Exchange (or a successor trading market where the Common
Stock is listed for trading).

<PAGE>

      "Termination Date" means the date which is the earliest to occur of (i)
the fifth anniversary of the date when the Holder's right to purchase the
Warrant Shares granted herein shall be fully vested pursuant to Section 2(c),
(ii) the sixth (6th) anniversary from the date hereof, and (iii) the effective
date of any termination of the Distribution Agreement by the Company pursuant to
Section 16 thereof.

      "Trading Day" means a day when the American Stock Exchange (or a successor
trading market where the Company's Common Stock is listed for trading) is open
for business and conducts trading in the market where the Common Stock is listed
for trading.

      Section 2.  Exercise.

            a) Exercise of Warrant. Exercise of the purchase rights represented
      by this Warrant may, to the extent vested, as provided herein, be made at
      any time or times on or after the Initial Exercise Date and on or before
      the Termination Date by delivery to the Company of a duly executed
      facsimile copy of the Notice of Exercise Form annexed hereto (or such
      other office or agency of the Company as it may designate by notice in
      writing to the registered Holder at the address of such Holder appearing
      on the books of the Company); provided, however, within five (5) Trading
      Days of the date said Notice of Exercise is delivered to the Company, the
      Holder shall have surrendered this Warrant to the Company and the Company
      shall have received payment of the aggregate Exercise Price of the shares
      thereby purchased by wire transfer or cashier's check drawn on a United
      States bank.

            b) Exercise Price. The Exercise Price of each share of Common Stock
      under this Warrant shall be $2.90, subject to adjustment hereunder.

            c) Vesting. The Holder's purchase rights represented by this Warrant
      shall vest as follows: (i) fifty percent (50%) shall vest on the date
      hereof and (ii) the remaining fifty percent (50%) shall vest on the date
      when Luminetx shall have both (A) produced at least one hundred (100)
      units of the System and (B) Diomed, Inc. shall have accepted delivery of
      at least twenty five (25) units of the System.

            d) Mechanics of Exercise.

                  i. Authorization of Warrant Shares. The Company covenants that
            all Warrant Shares which may be issued upon the exercise of the
            purchase rights represented by this Warrant will, upon exercise of
            the purchase rights represented by this Warrant, be duly authorized,
            validly issued, fully paid and nonassessable and free from all
            taxes, liens and charges in respect of the issue thereof (other than
            taxes in respect of any transfer occurring contemporaneously with
            such issue). The Company covenants that during the period the
            Warrant is outstanding, it will reserve from its authorized and
            unissued Common Stock a sufficient number of shares to provide for
            the issuance of the Warrant Shares upon the exercise of any purchase
            rights under this Warrant. The Company further covenants that its
            issuance of this Warrant shall constitute full authority to its
            officers who are charged with the duty of executing stock
            certificates to execute and issue the necessary certificates for the
            Warrant Shares upon the exercise of the purchase rights under this
            Warrant. The Company will take all such reasonable action as may be
            necessary to assure that such Warrant Shares may be issued as
            provided herein without violation of any applicable law or
            regulation, or of any requirements of the American Stock Exchange
            (or a successor trading market) upon which the Common Stock may be
            listed.

                                       2
<PAGE>

                  ii. Delivery of Certificates upon Exercise. Certificates for
            shares purchased hereunder shall be delivered to the Holder within
            five (5) Trading Days from the delivery to the Company of the Notice
            of Exercise Form, surrender of this Warrant and payment of the
            aggregate Exercise Price as set forth above ("Warrant Share Delivery
            Date"). This Warrant shall be deemed to have been exercised on the
            date the Exercise Price is received by the Company. The Warrant
            Shares shall be deemed to have been issued, and Holder or any other
            person so designated to be named therein shall be deemed to have
            become a holder of record of such shares for all purposes, as of the
            date the Warrant has been exercised by delivery to the Company of
            the Notice of Exercise form and by payment to the Company of the
            Exercise Price and all taxes required to be paid by the Holder, if
            any, prior to the issuance of such shares, have been paid.

                  iii. Delivery of New Warrants upon Exercise. If this Warrant
            shall have been exercised in part, the Company shall, at the time of
            delivery of the certificate or certificates representing Warrant
            Shares, deliver to Holder a new Warrant evidencing the rights of
            Holder to purchase the unpurchased Warrant Shares called for by this
            Warrant, which new Warrant shall in all other respects be identical
            with this Warrant.

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

                  v. Charges, Taxes and Expenses. Issuance of certificates for
            Warrant Shares shall be made without charge to the Holder for any
            issue or transfer tax or other incidental expense in respect of the
            issuance of such certificate, all of which taxes and expenses shall
            be paid by the Company, and such certificates shall be issued in the
            name of the Holder or in such name or names as may be directed by
            the Holder.

                                       3
<PAGE>

      Section 3.  Certain Adjustments.

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

            b) Notice to Holders. Whenever the Exercise Price is adjusted
      pursuant to this Section 3, the Company shall promptly mail to each Holder
      a notice setting forth the Exercise Price after such adjustment and
      setting forth a brief statement of the facts requiring such adjustment.

            c) Fundamental Transaction. If, at any time while this Warrant is
      outstanding, (A) the Company effects any merger or consolidation of the
      Company with or into another Person, (B) the Company effects any sale of
      all or substantially all of its assets in one or a series of related
      transactions, (C) any tender offer or exchange offer (whether by the
      Company or another Person) is completed pursuant to which holders of
      Common Stock are permitted to tender or exchange their shares for other
      securities, cash or property, or (D) the Company effects any
      reclassification of the Common Stock or any compulsory share exchange
      pursuant to which the Common Stock is effectively converted into or
      exchanged for other securities, cash or property (in any such case, a
      "Fundamental Transaction"), then, (i) if the Market Price of the Common
      Stock on the Trading Day immediately prior to the consummation of the
      Fundamental Transaction is equal to or greater than the Exercise Price of
      the Common Stock, then the Holder shall be deemed to have exercised this
      Warrant in full immediately prior to the consummation of the Fundamental
      Transaction, and the Holder shall receive, after surrender of this Warrant
      to the Company, together with payment of the Exercise Price, the cash,
      securities or other property received by the holders of Common Stock in
      consideration for each share of Common Stock held by them prior to the
      consummation of the Fundamental Transaction (the "Alternate
      Consideration") and (ii) if the Market Price of the Common Stock on the
      Trading Day immediately prior to the consummation of the Fundamental
      Transaction is less than the Exercise Price of the Common Stock, then the
      Holder shall be entitled to exercise this Warrant subsequent to the
      consummation of the Fundamental Transaction and prior to the Termination
      Date, provided that upon any such subsequent exercise of this Warrant, the
      Holder shall have the right to receive, for each Warrant Share that would
      have been issuable upon such exercise absent such Fundamental Transaction,
      the Alternate Consideration. For purposes of any such exercise, the
      Exercise Price shall be appropriately adjusted to apply to such Alternate
      Consideration based on the amount of Alternate Consideration issuable in
      respect of one share of Common Stock in such Fundamental Transaction, and
      the Company shall apportion the Exercise Price among the Alternate
      Consideration in a reasonable manner reflecting the relative value of any
      different components of the Alternate Consideration. If holders of Common
      Stock are given any choice as to the securities, cash or property to be
      received in a Fundamental Transaction, then the Holder shall be given the
      same choice as to the Alternate Consideration it receives upon any
      exercise of this Warrant following such Fundamental Transaction. To the
      extent necessary to effectuate the foregoing provisions, any successor to
      the Company or surviving entity in such Fundamental Transaction shall
      issue to the Holder a new warrant consistent with the foregoing provisions
      and evidencing the Holder's right to exercise such warrant into Alternate
      Consideration. The terms of any agreement pursuant to which a Fundamental
      Transaction is effected shall include terms requiring any such successor
      or surviving entity to comply with the provisions of this paragraph (c)
      and insuring that this Warrant (or any such replacement security) will be
      similarly adjusted upon any subsequent transaction analogous to a
      Fundamental Transaction.

                                       4

<PAGE>

      Section 4.  Transfers of Warrants.

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

            b) Limitations on Transfer. The Holder shall not have the right to
      sell, transfer, convey or assign (each, a "transfer") all or any part of
      its purchase rights granted under this Warrant except that (A) the Holder
      may transfer its right to purchase limited numbers of Warrant Shares such
      that (i) on the date hereof, the Holder may transfer its right to purchase
      up to two hundred thousand (200,000) Warrant Shares, but only if the
      Market Price of the Common Stock is not less than five dollars ($5.00) per
      share (as the same may be adjusted on account of stock dividends and
      splits under Section 3(a)) on the date of such transfer and (ii) during
      any three (3) month period following the first date after the date hereof
      when the Market Price of the Common Stock reaches or exceeds five dollars
      ($5.00) per share (as the same may be adjusted on account of stock
      dividends and splits under Section 3(a)) the Holder may transfer its right
      to purchase up to fifty thousand (50,000) Warrant Shares, but in either
      case only where (B) such transfer is (i) in full compliance with Section
      4(c), (ii) to the extent that the proposed transfer would or may, in the
      reasonable view of the Company, violate any provision of, or result in
      liability to the Company under, any applicable law, including without
      limitation Executive Order 13224, the Untied States Bank Secrecy Act, the
      United States Money Laundering Control Act of 1986, the United States
      International Money Laundering Abatement and Anti-Terrorist Financing Act
      of 2001, the Foreign Corrupt Practices Act of 1977, the Securities Act of
      1933, as amended (the "Securities Act") or the Securities Exchange Act of
      1934, as amended ---------------- and (iii) where the proposed transferee
      provides to the Company such acknowledgments, certifications and
      documentation as may be reasonably required by the Company to demonstrate
      the absence of any violation of law or liability.

                                       5

<PAGE>

            c) Transfer Restrictions. If, at the time of the surrender of this
      Warrant in connection with any transfer of this Warrant, the transfer of
      this Warrant shall not be registered pursuant to an effective registration
      statement under the Securities Act and under applicable state securities
      or blue sky laws, the Company may require, as a condition of allowing such
      transfer (i) that the Holder or transferee of this Warrant, as the case
      may be, furnish to the Company a written opinion of counsel (which opinion
      shall be in form, substance and scope customary for opinions of counsel in
      comparable transactions) to the effect that such transfer may be made
      without registration under the Securities Act and under applicable state
      securities or blue sky laws, (ii) that the transferee be an "accredited
      investor" as defined in Rule 501 promulgated under the Securities Act or a
      "qualified institutional buyer" as defined in Rule 144A(a) under the
      Securities Act and (iii) that the Holder or transferee execute and deliver
      to the Company an investment letter, investor suitability questionnaire
      and/or other acknowledgments, certifications and documentation as may be
      reasonably required by the Company to demonstrate the proposed
      transferee's status as an accredited investor or qualified institutional
      buyer, as the case may be.

      Section 5.  Miscellaneous.

            a) Title to Warrant. Prior to the Termination Date and subject to
      compliance with all applicable law and Section 4 of this Warrant, this
      Warrant and all rights hereunder are transferable, in whole or in part, at
      the office or agency of the Company by the Holder in person or by duly
      authorized attorney, upon surrender of this Warrant together with
      documentation, acknowledgements and/or certifications required by the
      Company in connection with the proposed transfer.

            b) No Rights as Shareholder Until Exercise. This Warrant does not
      entitle the Holder to any voting rights or other rights as a shareholder
      of the Company prior to the exercise hereof. Upon the surrender of this
      Warrant and the payment of the aggregate Exercise Price (or by means of a
      cashless exercise), the Warrant Shares so purchased shall be and be deemed
      to be issued to such Holder as the record owner of such shares as of the
      close of business on the later of the date of such surrender or payment.

            c) Loss, Theft, Destruction or Mutilation of Warrant. The Company
      covenants that upon receipt by the Company of evidence reasonably
      satisfactory to it of the loss, theft, destruction or mutilation of this
      Warrant or any stock certificate relating to the Warrant Shares, and in
      case of loss, theft or destruction, of indemnity or security reasonably
      satisfactory to it, and upon surrender and cancellation of such Warrant or
      stock certificate, if mutilated, the Company will make and deliver a new
      Warrant or stock certificate of like tenor and dated as of such
      cancellation, in lieu of such Warrant or stock certificate.

                                       6

<PAGE>

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

            e) Applicable Law; Dispute Resolution; Jurisdiction. All questions
      concerning the construction, validity, enforcement and interpretation of
      this Warrant shall be determined in accordance with the provisions of the
      Distribution Agreement.

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

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

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

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

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

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

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

                                       7
<PAGE>

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

                                       8
<PAGE>

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

Dated:  August __, 2005

                                         DIOMED HOLDINGS, INC.

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

                                       9

<PAGE>

                               NOTICE OF EXERCISE

TO:   Diomed Holdings, Inc.

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

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

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

The Warrant Shares shall be delivered to the following:

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

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

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

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

                                                    [PURCHASER]

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

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

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