Document:

Exhibit 10.3

                                ESCROW AGREEMENT

              ESCROW AGREEMENT made as of August 8, 2003 by and among the Issuer
and the Placement  Agent whose names and addresses  appear on signature  page of
this Escrow Agreement and Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., 666
Third Ave., New York, NY 10017, facsimile no. 212-983-3115 (the "Escrow Agent").

                                   WITNESSETH:

              WHEREAS,  the Issuer  proposes  to sell  $6,995,000  in  aggregate
principal  amount of Secured  Bridge Notes  ("Tranche I Closing")  and a certain
number of shares of the Issuer's  Common Stock  constituting  Investors'  Shares
("Tranche II Closing") (the Secured Bridge Notes and Investors'  Shares shall be
collectively  referred  to as the  "Securities"),  pursuant  to the  terms  of a
Securities Purchase Agreement (the "Securities Purchase Agreement") by and among
the Issuer and the investors  identified  therein (the "Investors") in a private
offering to accredited  investors (the "Offering") at any time prior to November
15, 2003 (the "Offering Period");

              WHEREAS,  the  aggregate  proceeds  anticipated  to be  raised  in
connection with the Tranche I Closing and the Tranche II Closing is a minimum of
$15,200,000 and a maximum of $18,200,000  (subject to an  overallotment of up to
$5,000,000),  which amounts do not include the Placement Agent's fees in respect
of the  Offering  which  are  being  reinvested  in the  Issuer  pusuant  to the
Placement Agent Agreement;

              WHEREAS,   in  connection  with  the  Tranche  II  Closing  it  is
anticipated that the Secured Bridge Notes and the Issuer's  outstanding  Class D
Notes in the aggregate principal amount of $1,200,000 (collectively, the "Issued
Securities")  will be reinvested in the Tranche II Closing and that the evidence
of such notes  shall be  deposited  with the Escrow  Agent or  delivered  to the
Issuer in connection with the Tranche II Closing;

              WHEREAS,  the Issuer and the Placement  Agent propose to establish
an escrow account (the "Escrow Account"), to which subscription monies which are
received by the Escrow Agent from the Placement Agent or directly from Investors
in connection  with this private  offering of the Securities are to be credited,
and the Escrow Agent is willing to establish the Escrow Account on the terms and
subject to the conditions hereinafter set forth; and

              WHEREAS,  the  Escrow  Agent has an  agreement  with Fleet Bank to
establish a special, segregated bank account into which the subscription monies,
which are received by the Escrow Agent from the Placement Agent or directly from
Investors and credited to the Escrow Account, are to be deposited and disbursed;

              NOW,  THEREFORE,  in  consideration  of the  premises  and  mutual
covenants herein contained,  the parties hereto hereby agree as follows:  Terms.
Each capitalized term not otherwise  defined in this Escrow Agreement shall have
the  meaning  set  forth  for such term in the  Securities  Purchase  Agreement.
Establishment  of the Bank Account.  The Escrow Agent shall establish a special,
segregated interest-bearing bank account at the branch of Fleet Bank selected by
the Escrow Agent (heretofore defined as the "Bank Account").  The purpose of the
Bank Account is for (a) the deposit of all subscription monies (checks,  cash or
wire transfers) which are received by the Placement Agent from Investors and are
delivered by the Placement Agent to the Escrow Agent, (b) the holding of amounts
of subscription  monies which are collected  through the banking system directly
from Investors,  and (c) the  disbursement of collected  funds, all as described
herein.  On or  before  the date of the  initial  deposit  in the  Bank  Account
pursuant to this Escrow  Agreement,  the Placement Agent shall notify the Escrow
Agent in writing of the date of the commencement of the Offering (the "Effective
Date"),  and the Escrow  Agent  shall not be  required to accept any amounts for
credit to the Escrow  Account or for  deposit in the Bank  Account  prior to its
receipt of such notification.

<PAGE>

The  Offering  Period  shall be deemed to  commence on the date hereof and shall
continue  until the  earlier  of the (a)  September  15,  2003 if the  Tranche I
Closing has not yet occurred,  and (b) 90 days following the date of the Tranche
I Closing if the Tranche II Closing has not yet occurred (or if such date is not
a regular  business day, then the following  business  day). The last day of the
Offering Period,  is referred to herein as the  "Termination  Date." Deposits to
the Bank Account.

The Placement Agent shall promptly  deliver to the Escrow Agent all monies which
it receives from Investors,  which monies shall be in the form of checks,  cash,
or wire transfers. Upon the Escrow Agent's receipt of such monies, they shall be
credited to the Escrow Account.  All checks  delivered to the Escrow Agent shall
be made payable to "Mintz, Levin et al., Escrow Agent for Diomed Holdings, Inc."
Any check  payable  other than to the Escrow  Agent as required  hereby shall be
returned to the Investor, or if the Escrow Agent has insufficient information to
do so, then to the Placement Agent (together with any Subscription  Information,
as defined  below or other  documents  delivered  therewith) by noon of the next
business day following receipt of such check by the Escrow Agent, and such check
shall be deemed not to have been  delivered to the Escrow Agent  pursuant to the
terms of this Escrow  Agreement.  All wire  transfers of funds  delivered to the
Escrow Account shall be sent as follows:

              Bank Name:        Fleet Bank
              ABA No.:          011000390
              Bank Address:     Boston, MA  02110
                                Account Name: Mintz, Levin, Cohn, Ferris,
                                              Glovsky and Popeo, P.C. Client
                                         Group Account
              Account No.:      55214199
              Reference:        Sunrise/Diomed 22379001

Promptly  (and in any  event  prior  to noon on the  next  business  day)  after
receiving  subscription  monies as  described  in Section  3.1, the Escrow Agent
shall deposit the same into the Bank Account. Amounts of monies so deposited are
hereinafter referred to as "Escrow Amounts".  The Escrow Agent shall cause Fleet
Bank to process all Escrow  Amounts for collection  through the banking  system.
Simultaneously with each deposit to the Escrow Account,  the Placement Agent (or
the Issuer, if such deposit is made by the Issuer) shall inform the Escrow Agent
in writing of the name and address of the Investor,  the  respective  amounts of
Secured Bridge Notes and Investors'  Shares  subscribed for by such Investor and
the  aggregate   dollar   amount  of  such   subscription   (collectively,   the
"Subscription  Information").  The Escrow  Agent shall not be required to accept
for credit to the Escrow  Account or for deposit  into the Bank  Account  checks
which are not  accompanied by the  appropriate  Subscription  Information.  Wire
transfers  and cash  representing  payments  by  Investors  shall  not be deemed
deposited in the Escrow  Account  until the Escrow Agent has received in writing
the Subscription  Information  identified on Schedules 1 and 2 of the Securities
Purchase Agreement required with respect to such payments.

The Escrow  Agent  shall not be  required  to accept in the Escrow  Account  any
amounts  representing  payments by  Investors,  whether by check,  cash or wire,
except during the Escrow Agent's regular  business  hours.  Those Escrow Amounts
which have been deposited in the Bank Account and which have cleared the banking
system and have been  collected by the Escrow Agent,  are herein  referred to as
the "Fund." If the  Offering is  terminated  before the  Termination  Date,  the
Escrow Agent shall refund any portion of the Fund prior to  disbursement  of the
Fund in accordance with Article 4 hereof upon  instructions in writing signed by
both the Issuer and the Placement Agent.

Disbursement from the Bank Account.

If by the close of  regular  banking  hours on the  Termination  Date the Escrow
Agent has not received  written  instructions  signed by both the Issuer and the
Placement Agent then the Escrow Agent shall promptly (i) refund to each Investor
the amount of payment received from such Investor which is then held in the Fund
or which thereafter clears the banking system, with interest thereon, by drawing
checks on the Bank  Account for the amounts of such  payments  and  transmitting
them to the  Investors  and (ii) return any Issued  Securities  to the Investors
that had delivered  these Issued  Securities to the Escrow Agent. In such event,
the Escrow Agent shall promptly notify the Issuer and the Placement Agent of its
distribution of the Fund.

                                        2
<PAGE>

If at any time up to the close of regular banking hours on the Termination  Date
the Escrow Agent shall have the received written instructions signed by both the
Issuer and the  Placement  Agent with respect to either the Tranche I Closing or
the Tranche II Closing,  then the Escrow Agent shall promptly  disburse all or a
portion  of the  Fund in  accordance  with  such  instructions,  subject  to the
following provisions of this Section 4.2.

With  respect to the Tranche I Closing,  the written  instructions  delivered in
accordance  with the above shall  include,  but not be limited to,  instructions
with  respect to the  following:  (i) the Escrow  Agent  shall wire  transfer in
immediately  available funds $6,500,000 (net of any amounts properly  identified
in the instructions) to the Issuer's account designated in writing to the Escrow
Agent;  (ii) the  Issuer  shall  issue  Secured  Bridge  Notes in the  aggregate
principal amount of $6,995,000;  (iii) the Escrow Agent shall receive its entire
fee pursuant to Section 8 hereof;  (iv) the  Placement  Agent shall  receive its
entire placement agent fee in accordance with its Placement Agent Agreement,  as
may be amended from time to time,  including the  reimbursement  of its expenses
and delivery of Secured  Bridge Notes in partial  satisfaction  of such fees, if
any, and (v) legal counsel to the Investors  shall receive its or their fees and
expenses.

With respect to the Tranche II Closing,  the written  instructions  delivered in
accordance  with the above shall  include,  but not be limited to,  instructions
with  respect to the  following:  (i) the Escrow  Agent  shall wire  transfer in
immediately  available funds any remaining  amount contained in the Fund, net of
any amounts  properly  identified  in the  instructions;  (ii) the Issuer  shall
cancel  the  Secured  Bridge  Notes  previously   issued   (including,   without
limitation, notes issued to the Placement Agent (or its designees) as fees under
the Placement  Agent  Agreement) and issue that number of shares of Common Stock
of the Issuer as shall be identified in the  instructions;  (iii) interest which
has accrued on the  Investors'  respective  Escrow  Amounts shall be refunded to
each  Investor  by drawing  checks on the Bank  Account  for the amounts of such
interest  and  transmitting  them to the  Investors  or,  if  instructed  by the
Placement  Agent,  delivered  to the  Issuer  as  consideration  for  additional
Investors' Shares, and (iv) such other fees and expenses shall be distributed as
may be due and owing to the parties.

Upon  disbursement  of the Fund  pursuant  to the terms of this  Article  4, the
Escrow  Agent shall be relieved of further  obligations  and  released  from all
liability  under this Escrow  Agreement.  It is expressly  agreed and understood
that in no event shall the aggregate amount of payments made by the Escrow Agent
exceed the amount of the Fund.

Rights, Duties and Responsibilities of Escrow Agent. It is understood and agreed
that the duties of the Escrow Agent are purely ministerial in nature, and that:

The Escrow Agent shall  notify the  Placement  Agent and the Issuer,  on a daily
basis,  of the Escrow  Amounts which have been deposited in the Bank Account and
of the amounts, constituting the Fund, which have cleared the banking system and
have been  collected by the Escrow Agent.  In addition,  the Escrow Agent shall,
from time to time, upon written request therefor from any Investor,  notify such
requesting  Investor within one business day following  receipt of such request,
of the Escrow  Amounts  which have been  deposited  in the Bank  Account by such
requesting  Investor and of the aggregate  amounts  constituting the Fund, which
have cleared the banking system and have been collected by the Escrow Agent.
The Escrow Agent shall not be  responsible  for or be required to enforce any of
the  terms or  conditions  of the  Securities  Purchase  Agreement  or any other
agreement  between the Placement Agent and the Issuer nor shall the Escrow Agent
be responsible for the performance by the Placement Agent or the Issuer of their
respective obligations under this Escrow Agreement.

The Escrow  Agent shall not be required to accept from the  Placement  Agent (or
the Issuer) any  Subscription  Information  pertaining to Investors  unless such
Subscription  Information  is  accompanied  by  checks,  cash or wire  transfers
meeting the  requirements of Section 3.1, nor shall the Escrow Agent be required
to keep records of any  information  with  respect to payments  deposited by the
Placement  Agent or any Investor (or the Issuer) except as to the amount of such
payments;  however,  the Escrow Agent shall notify the Placement  Agent within a
reasonable  time of any  discrepancy  between the amount set forth in Schedule I
and the amount delivered to the Escrow Agent therewith.  Such amount need not be
accepted  for  deposit in the Escrow  Account  until such  discrepancy  has been
resolved.

                                        3
<PAGE>

The Escrow Agent shall be under no duty or responsibility to enforce  collection
of any check  delivered to it hereunder.  The Escrow Agent,  within a reasonable
time,  shall return to the Placement Agent or Investor,  as the case may be, any
check received which is dishonored,  together with the Subscription Information,
if any, which accompanied such check.

The Escrow  Agent shall be entitled to rely upon the  accuracy,  act in reliance
upon the  contents,  and  assume the  genuineness  of any  notice,  instruction,
certificate,  signature,  instrument  or  other  document  which is given to the
Escrow  Agent  pursuant to this Escrow  Agreement  without the  necessity of the
Escrow Agent verifying the truth or accuracy thereof. The Escrow Agent shall not
be obligated  to make any inquiry as to the  authority,  capacity,  existence or
identity of any person  purporting to give any such notice or instructions or to
execute any such certificate, instrument or other document.

If the Escrow  Agent is  uncertain  as its duties or rights  hereunder  or shall
receive instructions with respect to the Bank Account, the Escrow Amounts or the
Fund  which,  in its sole  determination,  are in  conflict  either  with  other
instructions  received by it or with any provision of this Escrow Agreement,  it
shall be entitled to hold the Escrow Amounts, the Fund, or a portion thereof, in
the Bank  Account  pending  the  resolution  of such  uncertainty  to the Escrow
Agent's sole  satisfaction,  by final judgment of a court or courts of competent
jurisdiction or otherwise;  or the Escrow Agent, at its sole option, may deposit
the Fund (and any other Escrow Amounts that thereafter  become part of the Fund)
with the Clerk of a court of competent jurisdiction in a proceeding to which all
parties in interest are joined. Upon the deposit by the Escrow Agent of the Fund
with the Clerk of any court,  the Escrow  Agent shall be relieved of all further
obligations  and released from all liability  hereunder.  The Escrow Agent shall
not be liable for any action taken or omitted  hereunder,  or for the misconduct
of any  employee,  agent or  attorney  appointed  by it,  except  in the case of
willful  misconduct or gross  negligence.  The Escrow Agent shall be entitled to
consult  with counsel of its own choosing and shall not be liable for any action
taken, suffered or omitted by it in accordance with the advice of such counsel.

The Escrow Agent shall have no  responsibility  at any time to ascertain whether
or not any security interest exists in the Escrow Amounts,  the Fund or any part
thereof or to file any financing  statement  under the Uniform  Commercial  Code
with respect to the Fund or any part thereof.

Amendment;  Resignation.  This Escrow  Agreement  may be altered or amended only
with the  written  consent of the  Issuer,  the  Placement  Agent and the Escrow
Agent.  The Escrow Agent may resign for any reason upon ten (10) business  days'
written notice to the Issuer and the Placement Agent. After giving notice of its
resignation  as aforesaid,  the Escrow Agent shall hold the Escrow Amounts until
they  clear the  banking  system and the Fund for a period of not more than five
(5) business days  following the effective  date of such  resignation,  at which
time (a) if a  successor  escrow  agent  shall have been  appointed  and written
notice thereof  (including the name and address of such successor  escrow agent)
shall have been given to the resigning Escrow Agent by the Issuer, the Placement
Agent and such successor escrow agent, then the resigning Escrow Agent shall pay
over to the successor escrow agent the Fund, less any portion thereof previously
paid out in  accordance  with this  Escrow  Agreement;  or (b) if the  resigning
Escrow Agent shall not have received  written  notice signed by the Issuer,  the
Placement Agent and a successor  escrow agent,  then the resigning  Escrow Agent
shall promptly refund the amount in the Fund to each Investor,  without interest
thereon or deduction  therefrom,  and the resigning  Escrow Agent shall promptly
notify the  Issuer and the  Placement  Agent in writing of its  liquidation  and
distribution of the Fund;  whereupon,  in either case, the Escrow Agent shall be
relieved of all further  obligations  and released from all Liability under this
Escrow  Agreement.  Without  limiting the  provisions  of Section 8 hereof,  the
resigning  Escrow Agent shall be entitled to be reimbursed by the Issuer and the
Placement Agent for any expenses  incurred in connection  with its  resignation,
transfer of the Fund to a successor  escrow  agent or  distribution  of the Fund
pursuant to this Section 6.

                                       4
<PAGE>

Representations  and  Warranties.  The Issuer  and the  Placement  Agent  hereby
severally represent and warrant to the Escrow Agent that:

No party other than the parties  hereto and the  Investors  have, or shall have,
any lien,  claim or security  interest in the Escrow  Amounts or the Fund or any
part thereof other then with respect to the evidence of notes which may be held.

No  financing  statement  under the  Uniform  Commercial  Code is on file in any
jurisdiction claiming a security interest in or describing (whether specifically
or  generally)  the  Escrow  Amounts  or the  Fund  or  any  part  thereof.  The
Subscription  Information  contained  in  Schedules  1 and 2 of  the  Securities
Purchase  Agreement  shall,  at the  time of  submission  and at the time of the
disbursement  of the Fund,  be deemed a  representation  and warranty  that such
deposit  represents a bona fide payment by the purchaser  described  therein for
the amount of Securities set forth in such Schedule 1.

Fees and Expenses.  The Escrow Agent shall be entitled to a fee equal to $7,500,
payable  upon  request  in  writing  from the  Escrow  Agent to the  Issuer.  In
addition,  if any  controversy  arises under this Escrow  Agreement,  the Issuer
agrees to reimburse  the Escrow Agent for any  reasonable  expenses  incurred in
connection with this Escrow Agreement, including, but not limited to, reasonable
counsel fees.
Indemnification and Contribution.

The Issuer  (the  "Indemnitor")  agrees to  indemnify  the Escrow  Agent and its
officers,  directors,  employees, agents and shareholders (collectively referred
to as the  "Indemnitees")  against,  and hold them harmless of and from, any and
all loss,  liability,  cost, damage and expense,  including without  limitation,
reasonable  counsel fees, which the Indemnitees may suffer or incur by reason of
any action,  claim or proceeding brought against the Indemnitees  arising out of
or relating in any way to this Escrow Agreement or any transaction to which this
Escrow Agreement relates,  unless such action, claim or proceeding is the result
of the willful misconduct or gross negligence of the Indemnitees.

If the  indemnification  provided for in Section 9.1 is applicable,  but for any
reason is held to be unavailable,  the Indemnitor  shall contribute such amounts
as are just and  equitable  to pay, or to  reimburse  the  Indemnitees  for, the
aggregate  of any and all losses,  liabilities,  costs,  damages  and  expenses,
including  counsel fees,  actually incurred by the Indemnitees as a result of or
in connection  with, and any amount paid in settlement of, any action,  claim or
proceeding  arising out of or relating in any way to any actions or omissions of
the Indemnitor.
The  provisions of this Article 9 shall survive any  termination  of this Escrow
Agreement,  whether by disbursement of the Fund, resignation of the Escrow Agent
or otherwise.

Governing  Law and  Assignment.  This Escrow  Agreement  shall be  construed  in
accordance  with and  governed by the laws of the State of New York and shall be
binding,  upon the parties hereto and their  respective  successors and assigns;
provided,  however,  that any  assignment or transfer by any party of its rights
under this Escrow  Agreement or with  respect to the Escrow  Amounts or the Fund
shall be void as against  the Escrow  Agent  unless (a) written  notice  thereof
shall be  given  to the  Escrow  Agent;  and (b) the  Escrow  Agent  shall  have
consented in writing to such assignment or transfer.

Notices.  All  notices  required  to be given in  connection  with  this  Escrow
Agreement  shall be in writing  and sent by  reputable  overnight  courier  with
receipt confirmed or by hand delivery with receipt acknowledged,  addressed,  if
to the Issuer or the Placement Agent, at their respective addresses set forth on
the signature  page, and if to the Escrow Agent, at its address set forth above,
to the  attention  of Kenneth  Koch and Todd Mason.  Notices  given by facsimile
transmission  shall be effective upon confirmed receipt of such transmission but
only if a hard copy of the notice so  transmitted  is also sent to the recipient
by First Class U.S. Mail, postage prepaid.

                                       5
<PAGE>

Severability.  If any  provision  of this Escrow  Agreement  or the  application
thereof  to any  person or  circumstance  shall be  determined  to be invalid or
unenforceable,  the  remaining  provisions  of  this  Escrow  Agreement  or  the
application  of such provision to persons or  circumstances  other than those to
which it is held  invalid or  unenforceable  shall not be  affected  thereby and
shall be valid and enforceable to the fullest extent permitted by law.

Execution  in Several  Counterparts.  This Escrow  Agreement  may be executed in
several  counterparts or by separate  instruments,  and all of such counterparts
and instruments  shall  constitute one agreement,  binding on all of the parties
hereto.

Entire  Agreement;  Amendments.  This Escrow  Agreement  constitutes  the entire
agreement  between the parties  hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings  (written or oral) of the
parties in connection therewith. This Escrow Agreement may not be amended except
by a written instrument executed by all of the parties.

                            [Signature page Follows]

                                       6
<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Escrow Agreement
as of the day and year first above written.

MINTZ, LEVIN, COHN, FERRIS, GLOVSKY & POPEO, P.C.

By: __________________________
    Name:
    Title:

DIOMED HOLDINGS, INC.

By: __________________________
    Name:
    Title:

SUNRISE SECURITIES CORP.

By: __________________________
    Name:
    Title:

                                       7Exhibit 10.4

                           INVESTORS' RIGHTS AGREEMENT

         THIS  INVESTORS'  RIGHTS  AGREEMENT  (this  "Agreement")  is made as of
_________  ___,  2003, by and among DIOMED  HOLDINGS,  INC. (the  "Company"),  a
Delaware  corporation,  and each of the  Investors  signatory to the  Securities
Purchase Agreement (the "Securities Purchase Agreement"),  dated as of August 8,
2003,  between  the  Company  and  the  parties  listed  on  Schedule  A of this
Agreement.  Capitalized  terms used but not defined in this Agreement shall have
the respective meanings given them in the Securities Purchase Agreement.

         WHEREAS,  Pursuant to the Securities  Purchase  Agreement,  the Holders
have acquired certain shares of the Company's Common Stock; and

         WHEREAS, Pursuant to the Securities Purchase Agreement, the Company and
the Holders have entered into this Agreement.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the Company and the Holders hereby
agree as follows:

         1. RESTRICTIONS ON TRANSFERABILITY.  None of the Restricted  Securities
may be sold, assigned, transferred, pledged or otherwise disposed of, whether or
not for value,  except in compliance  with  applicable  law. At such time as the
Restricted  Securities cease to be Restricted Securities under the terms of this
Agreement,  the provisions of this Agreement shall no longer apply to the shares
of the Common Stock that theretofore were Restricted Securities.

         2. RESTRICTIVE LEGEND.

         2.1  SHARES  OF  STOCK.   Each  certificate   representing   Restricted
Securities  that are  shares of  Common  Stock  shall be  stamped  or  otherwise
imprinted with a legend  substantially in the following form (in addition to any
legend required under applicable state securities laws or otherwise):

                  THE SHARES  REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
                  FOR  INVESTMENT  AND  HAVE  NOT  BEEN  REGISTERED   UNDER  THE
                  SECURITIES ACT OF 1933 (THE  "SECURITIES  ACT").  THESE SHARES
                  MAY NOT BE SOLD, ASSIGNED,  TRANSFERRED,  PLEDGED OR OTHERWISE
                  DISPOSED  OF  IN  THE  ABSENCE  OF  SUCH  REGISTRATION  OR  AN
                  EXEMPTION THEREFROM UNDER THE SECURITIES ACT.

         2.2 STOP TRANSFER  INSTRUCTIONS.  Each Holder consents to the Company's
making a notation on its records and giving  instructions  to any transfer agent
of the  Restricted  Securities in order to prevent a transfer that is prohibited
by this Agreement.

         3. INTENTIONALLY OMITTED

         4. MANDATORY REGISTRATION

<PAGE>

         4.1 FILING AND  EFFECTIVENESS  OF REGISTRATION  STATEMENT.  The Company
shall  prepare and file with the SEC,  no later than thirty (30) days  following
the  Tranche  II  Closing  Date  (the  "Required   Filing  Date"),   the  Resale
Registration  Statement or other  Offering  Document  that  registers all of the
Restricted Securities.  The Company will use commercially  reasonable efforts to
cause the Resale Registration Statement to be declared effective by the SEC on a
date no later  than  ninety  (90) days after the  Tranche  II Closing  Date (the
"Required  Effective Date").  Notwithstanding  the foregoing,  if the Tranche II
Closing does not occur on or prior to November 15, 2003 then the Required Filing
Date  shall be the date that is 95 days  after the  Tranche I  Closing,  and the
Required  Effective  Date  shall be the date that is 70 days after the filing of
the Resale Registration Statement.

         4.2 PAYMENTS FOR NON-FILING AND NON-EFFECTIVENESS. Unless the Company's
performance  is waived in writing by the Investor  Majority,  the Company  shall
make payment to the Holders in such amounts and at such times as follows:

                  (i) If the  Company  does  not file  the  Resale  Registration
         Statement  on or before  the  Required  Filing  Date,  within  five (5)
         business days after the Required Filing Date the Company shall issue to
         the Holders  without  demand  therefore,  upon payment of the par value
         thereof by the  Holder to the  Company,  fully paid and  non-assessable
         shares  of  Common  Stock   representing  three  percent  (3%)  of  the
         Investors'  Shares  acquired by each such Holder  under the  Securities
         Purchase Agreement (a "3% Payment"),  plus an additional 3% Payment for
         every thirty (30) days after the Required  Filing Date during which the
         Company does not file the Resale Registration Statement  (collectively,
         the "Late Filing Payment").

                  (ii) If the  Resale  Registration  Statement  is not  declared
         effective by the SEC on or before the Required  Effective Date,  within
         five (5) business  days after the Required  Effective  Date the Company
         shall issue to the Holders without demand therefor, upon payment of the
         par value thereof by the Holder to the Company,  a 3% Payment,  plus an
         additional  3% Payment for every  thirty  (30) days after the  Required
         Effective  Date  during  which  the  SEC has not  declared  the  Resale
         Registration  Statement  to  be  effective  (collectively,   the  "Late
         Effective Payment").

                  (iii) For the  avoidance of doubt,  the payment of Late Filing
         Payments  and/or Late Effective  Payments shall not relieve the Company
         from its obligation to file the Resale Registration Statement or to use
         commercially  reasonable  efforts  to  cause  the  Resale  Registration
         Statement to be declared  effective by the SEC as  contemplated by this
         Agreement.

                  (iv) Notwithstanding the foregoing, the amounts payable by the
         Company  pursuant to this provision  shall not be payable to the extent
         any delay in the  effectiveness  of the Resale  Registration  Statement
         occurs  because  of an act of, or a failure  to act or to act timely by
         any of the Holders or their counsel as required by Section 12.

                  (v) Notwithstanding the foregoing, the aggregate amount of any
         Late  Filing  Payments  and Late  Effective  Payments  shall not exceed
         twelve percent (12%)

                                       2
<PAGE>

         of the amount of the Investors'  Shares issued by the Company  pursuant
         to the Stock Purchase  Agreement and such Late Filing Payments and Late
         Effective Payments shall constitute  liquidated damages for the periods
         for which they were paid.  Holders shall be entitled to pursue remedies
         at law or in equity for  periods of default  subsequent  to the periods
         for which such Late Filing  Payments and Late  Effective  Payments were
         made.

                  (vi)  Within  thirty  (30) days after the Resale  Registration
         Statement  is declared  effective  by the SEC,  the Company  shall,  as
         necessary,  file a  post-effective  amendment in combination with a new
         Resale  Registration  Statement  which  may be  necessary  to cover any
         Restricted  Securities issued to the Holders in the form of Late Filing
         Payments  and/or Late Effective  Payments that were not included in the
         Resale Registration Statement,  the effectiveness of which shall render
         non-applicable and shall therefore  terminate the Holders' rights under
         Sections 5 and 6.

                  (vii) If the Company is  required to pay Late Filing  Payments
         and/or Late Effective Payments, the Company shall promptly issue to the
         Holders  receiving such payments one or more invoices for the par value
         of the Common Stock issued in payment thereof.

         5. DEMAND REGISTRATION.

         5.1 NOTICE FROM HOLDERS.  If, at any time after the date that is ninety
(90) days after the date of this Agreement  until the second  anniversary of the
Tranche II Closing Date,  for so long as any of the  Restricted  Securities  are
outstanding and are not the subject of an effective registration statement,  the
Company  receives a written request from the Investor  Majority that the Company
file a registration  statement  under the Act covering the  registration of all,
but not less all, of the Restricted Securities,  then the Company will promptly,
and in no event later than thirty (30) days of the receipt  thereof,  subject to
the  limitations  of  Sections  5.2 and 5.3,  use its best  efforts to take such
actions to register  with, or otherwise  seek such  approvals of, the SEC as are
necessary  or  appropriate  in order to permit the public  offer and sale of the
Restricted Securities within 180 days after the receipt of such notice.

         5.2 REGISTERED PUBLIC OFFERING INVOLVING AN UNDERWRITER. If the Holders
intend to distribute the Restricted Securities covered by their request by means
of an underwriting, the Holders will notify the Company of such desire and prior
to such  distribution the Company and the Holders will mutually agree in writing
to the rules and procedures that shall govern such distribution.

         6. PIGGY-BACK REGISTRATION. From and after the date that is ninety (90)
days after the date of this  Agreement and until the second  anniversary  of the
Tranche II Closing Date,  for so long as any of the  Restricted  Securities  are
outstanding and are not the subject of an effective registration  statement,  if
the Company  contemplates  making an offering of Common  Stock (or other  equity
securities  convertible  into or exchangeable  for Common Stock)  registered for
sale under the 1933 Act or proposes to file a  registration  statement  covering
any of its securities  other than (i) a registration  on Form S-8 or S-4, or any
successor or similar forms; and (ii) a shelf  registration  under Rule 415 under
the 1933  Act for the  sole  purpose  of  registering  shares  to be

                                       3
<PAGE>

issued in connection  with the  acquisition of assets,  the Company will at each
such time give prompt  written  notice to the Holders of its  intention to do so
and of such  Holder's  rights under this Section 6. Upon the written  request of
any such  Holder  made  within  thirty  (30) days after the  receipt of any such
notice (which  request shall specify the  Restricted  Securities  intended to be
disposed of by such Holder and the intended method of disposition thereof),  the
Company will use its best efforts to effect the  registration  of all Restricted
Securities  which the Company has been so  requested to register by the Holders,
to the  extent  requisite  to permit the  disposition  (in  accordance  with the
intended  methods of  disposition)  of the Restricted  Securities by the Holders
requesting  registration,  by inclusion  of such  Restricted  Securities  in the
registration statement which covers the securities which the Company proposes to
register;  PROVIDED,  that if, at any time after  giving  written  notice of its
intention to register any Restricted  Securities and prior to the effective date
of the registration  statement filed in connection with such  registration,  the
Company  shall  determine  for any  reason  either not to  register  or to delay
registration  of such Restricted  Securities,  the Company may, at its election,
give written notice of such determination to the Holders requesting registration
and, thereupon,  (i) in the case of a determination not to register, the Company
shall be relieved of its  obligation  to register any  Restricted  Securities in
connection  with  such  registration  (but not from  its  obligation  to pay the
expenses of  registration  in connection  therewith),  and (ii) in the case of a
determination  to  delay  registering  such  Restricted  Securities,   shall  be
permitted to delay registering any Restricted Securities, for the same period as
the delay in registering such other securities.

         7. OBLIGATIONS OF THE COMPANY.

         The Company shall do the following:

         7.1 Whenever  required under this Agreement to effect the  registration
of any Restricted Security, the Company will, as expeditiously as possible:

         (a)      prepare  and  file  with  the  SEC (or  any  other  equivalent
                  governmental authority in a jurisdiction outside of the United
                  States  responsible  for the  regulation and oversight of such
                  jurisdiction's  securities laws (a "Governmental  Authority"))
                  Offering Documents with respect to such Restricted  Securities
                  and use its best efforts to cause such  Offering  Documents to
                  become  effective as  expeditiously  as possible,  and, in the
                  case  of  the  registration  of  Restricted  Securities  under
                  Section 4, keep such Offering Documents effective for a period
                  of up to three (3)  years or, in the case of the  registration
                  of  Restricted  Securities  under  Sections  5 or 6,  upon the
                  request  of the  Holders  of a  majority  of  the  outstanding
                  Investors'  Shares  which are then  beneficially  owned by the
                  Holders,  keep such Offering Documents  effective for a period
                  of up to one hundred twenty (120) days or, in either event, if
                  earlier,  until the distribution  contemplated in the Offering
                  Document has been completed or until all Restricted Securities
                  covered by such  Offering  Document  can be sold in any ninety
                  (90) day period without  registration  in compliance with Rule
                  144(k) of the  Securities  Act;  PROVIDED,  that,  such  three
                  (3)-year or one hundred twenty (120)-day  period,  as the case
                  may be,  shall be  extended  for a period of time equal to the
                  period  any  Holder   refrains  from  selling  any  Restricted
                  Securities  included in such registration at the request of an
                  underwriter  of the Common Stock (or other  securities) of the
                  Company,  at the  request of the  Company  pursuant to Section
                  12.2  hereof  or as a result of a Stop  Order (as  hereinafter
                  defined);

                                       4
<PAGE>

         (b)      notify each Holder whose  securities  are to be  registered of
                  the   effectiveness   of  the  Offering   Documents   and  the
                  effectiveness   or  final   approval  of  any   post-effective
                  amendment to any Offering Document;  and prepare and file with
                  the  SEC  or a  Governmental  Authority  such  amendments  and
                  supplements to such Offering  Documents as may be necessary to
                  comply with the provisions of the Securities Act and any other
                  applicable  laws  with  respect  to  the  disposition  of  all
                  Restricted Security covered by such Offering Documents;

         (c)      furnish to each Holder such numbers of copies of a prospectus,
                  including a preliminary  prospectus,  in  conformity  with the
                  requirements of the Securities Act and other  applicable laws,
                  and such other documents as it may reasonably request in order
                  to facilitate the disposition of Restricted  Security owned by
                  it;

         (d)      use  its  best   efforts  to  (i)  register  and  qualify  the
                  securities covered by such Offering Documents under such other
                  securities or "blue sky" laws of such states or  jurisdictions
                  as may be  reasonably  requested  by the  Holders,  but in any
                  event in no more than five (5) states and  jurisdictions,  and
                  do  all  other  acts  and  things  that  may be  necessary  or
                  desirable  to enable the Holders to  consummate  their  public
                  sale or other  disposition of the Restricted  Security in such
                  states or jurisdictions;  PROVIDED,  that the Company will not
                  be required in connection  therewith or as a condition thereto
                  to qualify to do business, where not otherwise required, or to
                  file a general  consent  to  service  of  process  in any such
                  states or jurisdictions, unless the Company is already subject
                  to service in such  jurisdiction and except as may be required
                  by the Securities Act and (ii) cause such Restricted  Security
                  to be registered  with or approved by such other  governmental
                  agencies or  authorities  as may be necessary by virtue of the
                  business  and   operations   of  the  Company  to  enable  the
                  disposition of such Restricted Security;

         (e)      in the event of any underwritten  public offering,  enter into
                  and perform its obligations  under an underwriting  agreement,
                  in usual and customary form, with the managing  underwriter of
                  such offering;

         (f)      notify  each  Holder of  Restricted  Security  covered by such
                  Offering  Document,  at any time  when a  prospectus  relating
                  thereto is required to be  delivered,  of (i) the  issuance of
                  any  stop  order  or  equivalent  order  by  the  SEC  or  any
                  Governmental  Authority  suspending the  effectiveness of such
                  Offering  Document or the initiation of any proceedings by any
                  person to such effect (a "Stop Order"),  and use  commercially
                  reasonable efforts to obtain the release of such suspension as
                  soon as reasonably practicable and (ii) any communication from
                  the SEC or any Governmental Authority threatening the issuance
                  of a Stop Order;

                                       5
<PAGE>

         (g)      cause  all  such  Restricted  Securities  registered  pursuant
                  hereunder  to be listed on each  securities  exchange on which
                  similar securities issued by the Company are then listed;

         (h)      provide a  transfer  agent and  registrar  for all  Restricted
                  Securities  registered  pursuant  hereunder and a CUSIP number
                  for all such  Restricted  Securities,  in each  case not later
                  than the effective date of such  registration and use its best
                  efforts  to cause the  transfer  agent to  remove  restrictive
                  legends on the securities covered by such registration;

         (i)      use its best efforts to furnish, at the request of any Holder,
                  on the date that such  Restricted  Securities are delivered to
                  the  underwriters  for sale in connection  with a registration
                  pursuant to this Agreement,  if such securities are being sold
                  through  underwriters,  or, if such  securities  are not being
                  sold  through  underwriters,  on the date  that  the  Offering
                  Document with respect to such  securities  becomes  effective,
                  (i)  an  opinion,  dated  as of  such  date,  of  the  counsel
                  representing   the   Company   for   the   purposes   of  such
                  registration, in form and substance as is customarily given to
                  underwriters in an underwritten public offering and reasonably
                  satisfactory   to  a  majority  in  interest  of  the  Holders
                  requesting registration,  addressed to the underwriters and to
                  the Holders requesting registration of Restricted Security and
                  (ii) a  "comfort"  letter  dated  as of such  date,  from  the
                  independent  certified public  accountants of the Company,  in
                  form and  substance  as is  customarily  given by  independent
                  certified   public   accountants   to   underwriters   in   an
                  underwritten public offering and reasonably  satisfactory to a
                  majority in interest of the Holders  requesting  registration,
                  addressed to the  underwriters  and to the Holders  requesting
                  registration of Restricted Security;

         (j)      as soon as  practicable  after becoming aware of the happening
                  of any event as a result of which the Offering  Documents,  as
                  then in effect, include an untrue statement of a material fact
                  or omit to state a material fact required to be stated therein
                  or necessary to make the  statements  therein not  misleading,
                  (i) notify each  Holder of  Restricted  Securities  covered by
                  such  Offering  Document,   (ii)  use  its  best  commercially
                  reasonable efforts to prepare a supplement or amendment to the
                  Offering Documents (and make all required filings with the SEC
                  and Governmental Authorities) to correct such untrue statement
                  or omission if not otherwise satisfied through the filing of a
                  report  to  the  SEC  or  otherwise   pursuant  to  applicable
                  securities  laws, and (ii)  simultaneously  (and thereafter as
                  requested) deliver such number of copies of such supplement or
                  amendment to each Holder of Restricted  Securities  covered by
                  such  supplemented or amended Offering  Documents as each such
                  Holder may request in writing; and

         (k)      use  commercially  reasonable  best  efforts  to  prevent  the
                  issuance   of  any  stop   order  or   other   suspension   of
                  effectiveness of an Offering  Document,  and, if such an order
                  is  issued,  to obtain  the  withdrawal  of such  order at the
                  earliest practicable time.

                                       6
<PAGE>

         8. NONPUBLIC  INFORMATION.  Notwithstanding any other provision of this
Agreement,  the Company's obligation to file a registration statement under this
Agreement,  or to  cause  such  registration  statement  to  become  and  remain
effective,  shall be suspended  for a period not to exceed twenty (20) days (and
for periods not  exceeding,  in the  aggregate,  sixty (60) days in any 12-month
period) if there exists at the time material non-public  information relating to
the Company which, in the reasonable  opinion of the Company  determined in good
faith, should not be disclosed.

         9.  EXPENSES  OF  REGISTRATION.  The  Company  will  bear all  expenses
incurred in connection with registrations pursuant to this Agreement, including,
without  limitation,  all registration,  filing and qualification fees, printing
expenses,  fees and  disbursements  of counsel for the  Company and  independent
accountants  for the Company and expenses of any special audits of the Company's
financial statements incidental to or required by such registration, fees of the
National  Association  of Securities  Dealers,  Inc.,  transfer  taxes,  fees of
transfer agents and registrars' fees, but the Company will not pay underwriters'
fees, discounts or commissions relating to the Restricted Securities or any fees
or expenses of legal counsel for any of the Holders.

         10. INDEMNIFICATION.

         10.1 INDEMNITY BY THE COMPANY.  If the Company registers any Restricted
Securities  pursuant to this  Agreement,  the Company  will  indemnify  and hold
harmless  each  Holder,  its  officers,  directors  and  partners and each other
person,  if any, who controls  (within the meaning of the  Securities  Act) each
Holder, against any losses, claims, damages or liabilities, joint or several, to
which each Holder,  or such  controlling  persons may become  subject  under the
Securities  Act or  otherwise,  insofar  as  such  losses,  claims,  damages  or
liabilities  (or actions in respect  thereof) arise out of or are based upon any
untrue statement (or alleged untrue statement) of any material fact contained in
any  registration   statement  under  which  such  Restricted   Securities  were
registered  under  the  Securities  Act,  any  preliminary  prospectus  or final
prospectus  contained therein,  or any amendment or supplement thereof, or arise
out of or are based upon the omission (or alleged  omission) to state  therein a
material fact required to be stated  therein or necessary to make the statements
therein  not  misleading,  or any  violation  by the  Company  of  any  rule  or
regulation  promulgated  under the  Securities  Act or any state  securities law
applicable  to the  Company and  relating to action or inaction  required of the
Company  in  connection  with any such  registration,  and will  reimburse  each
Holder, its officers,  directors and partners,  and each person controlling each
Holder,  for any reasonable legal and any other expenses  incurred in connection
with  investigating,  defending  or  settling  any  such  claim,  loss,  damage,
liability  or action,  provided  that the Company will not be liable in any such
case to the extent that any such claim,  loss, damage or liability arises out of
or is based on any untrue  statement or omission based upon written  information
furnished  to  the  Company  by an  instrument  duly  executed  by  each  Holder
specifically for use therein.

         10.2  INDEMNITY  BY  THE  HOLDER.   Each  Holder  will,  if  Restricted
Securities  held by or issuable to such Holder are included in the securities as
to which such  registration is being  effected,  indemnify and hold harmless the
Company,  each  of its  directors,  each  officer  who  signs  the  registration
statement, each underwriter, if any, of the Company's securities covered by such
a  registration  statement,  each  person  who  controls  the  Company  and such
underwriter  (within the  meaning of the  Securities  Act),  against all claims,
losses,  expenses,  damages  and  liabilities  (or  actions in respect  thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a  material  fact  contained  in any such  registration  statement,  prospectus,

                                       7
<PAGE>

offering  circular or other document made in writing by such Holder for purposes
of  inclusion  in such  registration  statement,  or any  omission  (or  alleged
omission) by such Holder to state  therein a material fact required to be stated
therein or necessary to make the  statements  therein not  misleading,  and will
reimburse  the  Company,  such  directors,   officers,   partners,   persons  or
underwriters for any reasonable legal or any other expenses  incurred by them in
connection  with  investigating,  defending  or settling  any such claim,  loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement,  prospectus, offering circular
or other  document in reliance upon and in conformity  with written  information
furnished  to  the  Company  by an  instrument  duly  executed  by  such  Holder
specifically  for use  therein;  provided,  that the total amount for which such
Holder,  shall be liable  under this  Section 10.2 shall not in any event exceed
the proceeds (net of underwriting  discounts and  commissions)  received by such
Holder  from the  sale of  Restricted  Securities  sold by such  Holder  in such
registration.

         10.3  NOTICE  BY  THE  INDEMNIFIED   PARTY.   Each  party  entitled  to
indemnification  under this  Section  10 (the  "Indemnified  Party")  shall give
notice to the party  required  to  provide  indemnification  (the  "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claims
as to which indemnity may be sought,  and shall permit the Indemnifying Party to
assume  the  defense of any such claim or any  litigation  resulting  therefrom;
PROVIDED, that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation,  shall be approved by the Indemnified  Party (whose
approval shall not be  unreasonably  withheld),  and the  Indemnified  Party may
participate in such defense at such party's  expense,  and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations hereunder, unless such failure
resulted in actual detriment to the Indemnifying  Party. No Indemnifying  Party,
in the defense of any such claim or litigation,  shall,  except with the consent
of each  Indemnified  Party,  consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the  claimant  or  plaintiff  to such  Indemnified  Party of a release  from all
liability in respect of such claim or litigation.

         10.4  UNDERWRITING  AGREEMENT.  Notwithstanding  the foregoing,  to the
extent that the  provisions  on  indemnification  contained in the  underwriting
agreements  entered into among the Holders,  the Company and the underwriters in
connection  with the  underwritten  public  offering  are in  conflict  with the
foregoing  provisions,  the provisions in the  underwriting  agreement  shall be
controlling as to the  Restricted  Securities  included in the public  offering;
PROVIDED,  that if, as a result of this Section 10.4, the Holder, and any person
controlling  the  Holder,  are held  liable  for an  amount  which  exceeds  the
aggregate proceeds received by the Holder from the sale of Restricted Securities
included  in a  registration,  as  provided  in Section  10.2,  pursuant to such
underwriting agreement (the "Excess Liability"), the Company shall reimburse any
such Holder for such Excess Liability.

         10.5 CONTRIBUTION.  If the indemnification provided for in this Section
10 is  held  by a  court  of  competent  jurisdiction  to be  unavailable  to an
Indemnified Party with respect to any loss, liability,  claim, damage or expense
referred to therein,  then the Indemnifying  Party, in lieu of indemnifying such
Indemnified Party thereunder,  shall contribute to the amount paid or payable by
such Indemnified  Party as a result of such loss,  liability,  claim,  damage or
expense in such  proportion as is  appropriate  to reflect the relative fault of
the Indemnifying Party on the one hand

                                       8
<PAGE>

and of the Indemnified Party on the other hand in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or expense as
well as any other relevant equitable  considerations.  The relevant fault of the
Indemnifying  Party and the  Indemnified  Party shall be determined by reference
to,  among other  things,  whether the untrue or alleged  untrue  statement of a
material  fact or the omission to state a material  fact relates to  information
supplied by the Indemnifying  Party or by the Indemnified Party and the parties'
relative intent, knowledge,  access to information and opportunity to correct or
prevent such statement or omission.  Notwithstanding  the foregoing,  the amount
that any Holder shall be obligated to  contribute  pursuant to this Section 10.5
shall be  limited  to an  amount  equal to the  proceeds  to any  Holder  of the
Restricted  Securities sold pursuant to the  registration  statement which gives
rise to such obligation to contribute  (less the aggregate amount of any damages
which any Holder has  otherwise  been  required  to pay in respect of such loss,
claim,  damage,  liability or action or any  substantially  similar loss, claim,
damage,   liability  or  action  arising  from  the  sale  of  such   Restricted
Securities).

         10.6  SURVIVAL  OF  INDEMNITY.  The  indemnification  and  contribution
provided by this Section 10 shall be a continuing right to  indemnification  and
shall survive the registration and sale of any securities by any person entitled
to indemnification under this Agreement.

         11. LOCKUP AGREEMENT. In the event that the Holders desire to engage in
an  underwritten  offering,  the Holder will agree to  reasonable  and customary
lockup provisions prior to the commencement of such offering.

         12. HOLDER'S COOPERATION.

         12.1 INFORMATION  REGARDING HOLDER. It is a condition  precedent to the
obligations of the Company to take any action to effect the  registration of any
Restricted  Securities pursuant to this Agreement with respect to the Restricted
Securities  of  any  Holder  that  such  Holder  furnish  to  the  Company  such
information  regarding  itself,  the Restricted  Securities  held by it, and the
intended method of disposition of such securities as is reasonably  requested by
the  Company  in  order  to  comply  with  applicable  law  or by  the  managing
underwriter in order to satisfy the requirements applicable to such registration
of such Holder's Restricted Securities.

         12.2  OBLIGATIONS  OF THE HOLDER.  Each Holder will not (until  further
notice by the  Company)  effect sales  thereof (or deliver a  prospectus  to any
purchaser)  after receipt of  telegraphic  or written notice from the Company to
suspend  sales to  permit  the  Company  to  correct  or  update a  registration
statement or  prospectus.  At the end of the period  during which the Company is
obligated to keep any registration  statement filed under this Agreement current
and effective as required by applicable law, each Holder shall discontinue sales
of shares  pursuant to such  registration  statement upon receipt of notice from
the  Company  of its  intention  to  remove  from  registration  the  shares  of
Restricted Securities covered by such registration statement that remain unsold,
and each Holder shall notify the Company of the number of such shares registered
that remain unsold immediately upon receipt of such notice from the Company.

         13.  RULE  144.  With a view to  making  available  to the  Holder  the
benefits of certain rules and  regulations  of the SEC which may permit the sale
of the  Restricted  Securities to the public without  registration,  the Company
agrees to:

                                       9
<PAGE>

         (a)      make and keep public information available, as those terms are
                  understood and defined in Rule 144; and

         (b)      use its best  efforts to file with the SEC in a timely  manner
                  all reports and other documents  required of the Company under
                  the Securities Act and the Exchange Securities Act.

         14. DEFINITIONS.  As used in this Agreement,  the following terms shall
have the following meanings:

         (a)      "HOLDER"   shall  mean  the  person  that  has  executed  this
                  Agreement  (other than the  Company)  and any other person who
                  holds   Restricted   Securities   and  who  has   assumed  the
                  obligations  of the Holder  under this  Agreement  pursuant to
                  Section 3(c).

         (b)      "INVESTOR  NOMINEES"  has  the  meaning  given  to it  in  the
                  Stockholders'  Agreement,  dated  the date  hereof,  among the
                  Company,  the Investors and certain other  stockholders of the
                  Company.

         (c)      "LATE EFFECTIVE PAYMENT" shall have the meaning given to it in
                  Section 4.2.

         (d)      "LATE FILING  PAYMENT"  shall have the meaning  given to it in
                  Section 4.2.

         (e)      "OFFERING  DOCUMENTS"  shall  mean any  application,  offering
                  memoranda,  prospectuses,  registration  statements  or  other
                  documents  necessary  or  appropriate  in order to effect  any
                  offer or sale of  Restricted  Security in the manner set forth
                  herein.

         (f)      "REGISTER," "registered" and "registration" shall refer to (i)
                  a registration effected by preparing and filing a registration
                  statement  in  compliance  with the  Securities  Act,  and the
                  declaration   or  ordering  of  the   effectiveness   of  such
                  registration  statement,  and compliance with applicable state
                  securities  laws of such  states in which  any of the  Holders
                  notifies  the  Company of his  intention  to offer  Restricted
                  Securities,  or (ii) in the case of an offer and sale  outside
                  of the  United  States,  the  preparation  and  filing  of the
                  relevant Offering  Documents with any applicable  Governmental
                  Authority and the declaration or ordering of  effectiveness of
                  such Offering Documents.

         (g)      "RESALE  REGISTRATION  STATEMENT"  shall mean the registration
                  statement  filed by the Company to register  the resale by the
                  Investors of the Restricted Securities.

         (h)      "RESTRICTED  SECURITIES" shall mean (i) the Investors' Shares,
                  (ii) any shares of Common  Stock  issued to the  Investors  as
                  Late Filing  Payments  pursuant  to Section  4.2(ii) and (iii)
                  only as to the Resale Registration  Statement that is declared
                  effective by the SEC, any shares of Common Stock issued to the
                  Investors as Late  Effectiveness  Payments pursuant to Section
                  4.2  (iii),  in each case only to the extent the same have not
                  been  sold  to the  public.  As to

                                       10
<PAGE>

                  any particular  Restricted  Securities,  such securities shall
                  cease to be  Restricted  Securities  when  (i) a  registration
                  statement  with respect to the sale of such  securities  shall
                  have  become  effective  under  the  Securities  Act and  such
                  securities shall have been disposed of under such registration
                  statement, (ii) such securities shall have become eligible for
                  resale pursuant to Rule 144(k) and any  restrictive  legend on
                  certificates  representing  such  securities  shall  have been
                  removed,  (iii)  such  securities  shall  have been  otherwise
                  transferred or disposed of, and (x) new certificates  therefor
                  not bearing a legend  restricting  further transfer shall have
                  been delivered by the Company,  and (y) subsequent transfer or
                  disposition  of them shall not require their  registration  or
                  qualification  under the  Securities  Act or any similar state
                  law then in force or  compliance  with Rule 144,  or (iv) such
                  securities    shall   have    ceased   to   be    outstanding.
                  Notwithstanding the foregoing, Restricted Securities shall not
                  include otherwise  Restricted  Securities (i) sold by a person
                  in a transaction  in which his rights under this Agreement are
                  not properly assigned, or (ii) (A) sold to or through a broker
                  or dealer or underwriter in a public  distribution or a public
                  securities  transaction,  or (B) sold in a transaction  exempt
                  from the registration and prospectus delivery  requirements of
                  the  Securities  Act under  Section  4(1)  thereof so that all
                  transfer  restrictions,  and restrictive  legends with respect
                  thereto,  if any,  are removed upon the  consummation  of such
                  sale or (C)  the  registration  rights  associated  with  such
                  securities have been terminated pursuant to this Agreement.

         (i)      "REQUIRED  EFFECTIVE  DATE" shall have the meaning given to it
                  in Section 4.1.

         (j)      "REQUIRED  FILING DATE" shall have the meaning  given to it in
                  Section 4.1.

         (k)      "RULE 144" shall mean Rule 144 under the Securities Act or any
                  successor  or  similar  rule as may be enacted by the SEC from
                  time to time.

         (l)      "RULE 145" shall mean Rule 145 under the Securities Act or any
                  successor  or  similar  rule as may be enacted by the SEC from
                  time to time.

         (m)      "3%  PAYMENT"  shall have the  meaning  given to it in Section
                  4.2.

         15. GOVERNING LAW; MISCELLANEOUS.

         15.1 With respect to  governing  law,  jurisdiction  and waiver of jury
trial, the parties agree as follows:

         (a)      THIS   AGREEMENT   SHALL  BE  GOVERNED  BY  AND  CONSTRUED  IN
                  ACCORDANCE  WITH THE  INTERNAL  LAWS OF THE STATE OF NEW YORK,
                  WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES

         (b)      ANY LEGAL ACTION OR PROCEEDING  WITH RESPECT TO THIS AGREEMENT
                  MAY BE BROUGHT IN THE COURTS OF THE STATE

                                       11
<PAGE>

                  OF NEW YORK SITTING IN NEW YORK COUNTY OR OF THE UNITED STATES
                  FOR THE SOUTHERN  DISTRICT OF SUCH STATE.  EACH OF THE COMPANY
                  AND THE INVESTORS IRREVOCABLY WAIVES ANY OBJECTION,  INCLUDING
                  ANY  OBJECTION  TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
                  OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
                  THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH  JURISDICTION
                  IN  RESPECT  OF  THIS  AGREEMENT  OR  OTHER  DOCUMENT  RELATED
                  THERETO. EACH OF THE COMPANY AND THE INVESTORS WAIVES PERSONAL
                  SERVICE OF ANY SUMMONS,  COMPLAINT OR OTHER PROCESS, WHICH MAY
                  BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.

         (c)      EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT
                  TO  TRIAL BY JURY OF ANY  CLAIM,  DEMAND,  ACTION  OR CAUSE OF
                  ACTION  ARISING  UNDER ANY  INVESTMENT  DOCUMENT OR IN ANY WAY
                  CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
                  PARTIES  HERETO OR ANY OF THEM WITH RESPECT TO ANY  INVESTMENT
                  DOCUMENT OR THE  TRANSACTIONS  RELATED  THERETO,  IN EACH CASE
                  WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED
                  IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES
                  AND CONSENTS THAT ANY SUCH CLAIM,  DEMAND,  ACTION OR CAUSE OF
                  ACTION  SHALL BE DECIDED BY COURT  TRIAL  WITHOUT A JURY,  AND
                  THAT  ANY  PARTY  TO  THIS  AGREEMENT  MAY  FILE  AN  ORIGINAL
                  COUNTERPART  OR A COPY OF  THIS  SECTION  WITH  ANY  COURT  AS
                  WRITTEN  EVIDENCE OF THE CONSENT OF THE SIGNATORIES  HERETO TO
                  THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

         15.2 Notices to be delivered hereunder shall be delivered in the manner
as set forth in the Securities  Purchase Agreement and shall be deemed effective
when given in such manner as provided by the Securities Purchase Agreement.

         15.3  Failure of any party to exercise  any right or remedy  under this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

         15.4 This  Agreement  shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.

         15.5 All pronouns and any  variations  thereof refer to the  masculine,
feminine or neuter, singular or plural, as the context may require.

                                       12
<PAGE>

         15.6 A facsimile  transmission of this signed  Agreement shall be legal
and binding on all parties hereto.

         15.7 This Agreement may be signed in one or more counterparts,  each of
which shall be deemed an original.

         15.8 The headings of this  Agreement are for  convenience  of reference
and shall not form part of, or affect the interpretation of, this Agreement.

         15.9  If  any  provision  of  this   Agreement   shall  be  invalid  or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or  enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.

         15.10 This Agreement may be amended only by the written  consent of the
Holders  of at least 75% of the  outstanding  Investors'  Shares  which are then
beneficially  owned by the Holders and an  instrument  in writing  signed by the
Company.

         15.11 This Agreement  represents the final  agreement among the parties
and may not be contradicted by evidence of prior, contemporaneous, or subsequent
oral  agreements  of  the  parties  or  by  prior  or  contemporaneous   written
agreements.

                            [Signature page follows.]

                                       13
<PAGE>

         IN WITNESS  WHEREOF,  the parties  have  executed  and  delivered  this
Investors' Rights Agreement as of the date first above written above.

                                    COMPANY:

                                    DIOMED HOLDINGS, INC.

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

                                     HOLDER:

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

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

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