Document:

10.4

                               SECURITY AGREEMENT

         This SECURITY AGREEMENT is entered into as of June 8, 2004, by and
between SILICON VALLEY BANK, a California-based bank with its principal place of
business at 3003 Tasman Drive, Santa Clara, CA 95054, and with a loan production
office located at One Newton Executive Park, 2221 Washington Street, Suite 200,
Newton, Massachusetts 02462, doing business under the name "Silicon Valley East
(the "Bank") and DIOMED HOLDINGS, INC., a Delaware corporation with offices at
One Dundee Park, Andover, Massachusetts 01810 ("Debtor").

                                    RECITALS

         Debtor has executed and delivered a certain Unconditional Guaranty to
Bank of even date herewith (as may be amended from time to time, the
"Guaranty"), pursuant to which the Debtor unconditionally guarantied the payment
and performance of the obligations and liabilities (hereinafter, the
"Liabilities") of DIOMED, INC., a Delaware corporation ("Borrower") to Bank
under the Loan Agreement (as hereinafter defined). Capitalized terms used but
not otherwise defined herein shall have the same meaning as in the Loan and
Security Agreement by and between the Borrower and Bank dated June 8, 2004, as
amended from time to time (the "Loan Agreement"). The Loan Agreement any other
agreements entered into between the Borrower and the Bank in connection
therewith are hereinafter collectively referred to as, the "Loan Documents".

                                    AGREEMENT

         The parties agree as follows:

         1.       CREATION OF SECURITY INTEREST

                  1.1 Grant of Security Interest. Debtor grants to Bank a
continuing security interest in the property described in Exhibit A attached
hereto (the "Collateral") in order to secure prompt payment of any and all
Liabilities of Debtor to Bank. Such security interest constitutes a valid, first
priority security interest in the presently existing Collateral, and will
constitute a valid, first priority security interest in Collateral acquired
after the date hereof.

                  1.2 Delivery of Additional Documentation Required. Debtor
shall from time to time execute and deliver to Bank, at the request of Bank, all
financing statements and other documents that Bank may reasonably request, in
form satisfactory to Bank, to perfect and continue perfected Bank's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents.

         2.       REPRESENTATIONS AND WARRANTIES

                  Debtor represents and warrants as follows:

                  2.1 Due Organization and Qualification. Debtor is a
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state except where the failure to do so would result in a
material adverse effect on Debtor's business or operations.

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                  2.2 Due Authorization; No Conflict. The execution, delivery,
and performance of this Agreement are within Debtor's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Debtor's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which Debtor
is a party or by which Debtor is bound.

                  2.3      No Prior  Encumbrances.  Debtor has good and
indefeasible title to the Collateral, free and clear of any liens, security
interests, or other encumbrances.

         3.       AFFIRMATIVE COVENANTS

                  Debtor covenants and agrees that, until payment in full of all
outstanding liabilities and obligations of Borrower under the Loan Agreement and
of Debtor under the Guaranty and this Agreement, Debtor shall do all of the
following:

                  3.1 Good Standing. Debtor shall maintain its corporate
existence and its good standing in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
could have a material adverse effect on Debtor's business. Debtor shall maintain
in force all licenses, approvals and agreements, the loss of which could
reasonably have a material adverse effect on Debtor's business.

                  3.2 Government Compliance. Debtor shall comply with all
statutes, laws, ordinances and government rules and regulations to which it is
subject, noncompliance with which could reasonably have a material adverse
effect on Debtor's business.

         4.       NEGATIVE COVENANTS

                  Debtor covenants and agrees that until payment in full of all
outstanding liabilities and obligations of Borrower under the Loan Agreement and
of Debtor under the Guaranty and this Agreement, Debtor will not do any of the
following:

                  4.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than a Transfer (i)
of Inventory in the ordinary course of business; (ii) of licenses, and similar
arrangements for the use of the property of Debtor or its Subsidiaries in the
ordinary course of business; or (iii) of worn-out or obsolete Equipment.

                  4.2 Changes in Business, Ownership, Management or Business
Locations. Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Debtor or reasonably related
thereto, or have a material change in its ownership or management. Debtor shall
not, without at least thirty (30) days prior written notice to Bank: (i)
relocate its chief executive office, or (ii) change its jurisdiction of
organization, or (iii) change its organizational structure or type, or (iv)
change its legal name, or (v) change any organizational number (if any) assigned
by its jurisdiction of organization. The Debtor shall provide written notice to
Bank within five (5) days of adding any new offices or business locations
(unless such new offices or business locations contain less than Twenty-Five
Thousand Dollars ($25,000.0) in Debtor's assets or property).

                  4.3 Mergers or Acquisitions. Merge or consolidate, or permit
any of its Subsidiaries to merge or consolidate, with any other Person, or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all
of the capital stock or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary or into Debtor.

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                  4.4 Indebtedness. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

                  4.5 Encumbrance. Create, incur, or allow any Lien on any of
its property, or assign or convey any right to receive income, including the
sale of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, or permit any Collateral not to be subject to the first
priority security interest granted herein.

                  4.6 Investments; Distributions. (i) Directly or indirectly
acquire or own any Person, or make any Investment in any Person, other than
Permitted Investments, or permit any of its Subsidiaries to do so; or (ii) pay
any dividends or make any distribution or payment or redeem, retire or purchase
any capital stock.

                  4.7 Transactions with Affiliates. Directly or indirectly enter
or permit any material transaction with any Affiliate, except transactions that
are in the ordinary course of Debtor's business, on terms no less favorable to
Debtor than would be obtained in an arm's length transaction with a
non-affiliated Person (except the foregoing shall not restrict Debtor's ability
to transfer or have transferred to it cash or securities or other property
consistent with its role as a securities corporation).

                  4.8 Subordinated Debt. Make or permit any payment on any
Subordinated Debt, except under the terms of the Subordinated Debt, or amend any
provision in any document relating to the Subordinated Debt, without Bank's
prior written consent.

                  4.9 Compliance. Undertake as one of its important activities
extending credit to purchase or carry margin stock, or use the proceeds of any
Advance for that purpose; fail to meet the minimum funding requirements of
ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA,
to occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, if the violation could reasonably be expected to
cause a Material Adverse Change, or permit any of its Subsidiaries to do so.

         5.       EVENTS OF DEFAULT

                  Any one or more of the following events shall constitute an
Event of Default by Debtor under this Agreement:

                  5.1      Loan Documents.  If an Event of Default occurs
under the Guaranty or any of the Loan Documents.

                  5.2 Covenant Default. Debtor does not perform any obligation
in Article 3 or violates any covenant in Article 4 or does not perform or
observe any other material term, condition or covenant in this Agreement, any
Loan Documents, or in any agreement between Debtor and Bank and as to any
default under a term, condition or covenant that can be cured, has not cured the
default within ten (10) days after it occurs, or if the default cannot be cured
within ten (10) days or cannot be cured after Debtor's attempts in the ten (10)
day period, and the default may be cured within a reasonable time, then Debtor
shall have additional time (of not more than thirty (30) days) to attempt to
cure the default.

                  5.3      Material Adverse Change.  A Material Adverse
Change occurs.

                  5.4 Attachment. (i) Any material portion of Debtor's assets is
attached, seized, levied on, or comes into possession of a trustee or receiver
and the attachment, seizure or levy is not removed in ten (10) days; (ii) Debtor
is enjoined, restrained, or prevented by court order from conducting a material
part of its business; (iii) a judgment or other claim becomes a Lien on a
material portion of Debtor's assets; or (iv) a notice of lien, levy, or
assessment is filed against a material portion of Debtor's assets by any
government agency and not paid or contested in good faith in compliance with all
appropriate procedures within ten (10) days after Debtor receives notice. These
are not Events of Default if stayed or if a bond is posted pending contest by
Debtor.

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                  5.5 Insolvency. (i) Debtor becomes insolvent; (ii) Debtor
begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is begun
against Debtor and not dismissed or stayed within forty-five (45) days.

                  5.6 Other Agreements. If there is a default in any agreement
to which Debtor is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness of Debtor in an amount in excess of One Hundred
Thousand Dollars ($100,000) or that could reasonably have a Material Adverse
Change.

                  5.7 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Two Hundred
Thousand Dollars ($200,000) shall be rendered against Debtor and shall remain
unsatisfied and unstayed for a period of thirty (30) days.

                  5.8 Misrepresentations. If Debtor or any Person acting for
Debtor makes any material misrepresentation or material misstatement now or
later in any warranty or representation in this Agreement or in any
communication delivered to Bank or to induce Bank to enter this Agreement or any
Loan Document.

                  5.9 Guaranty. Any guaranty of any Liabilities ceases for any
reason to be in full force or any Guarantor does not perform any obligation
under any guaranty of the Obligations, or any material misrepresentation or
material misstatement exists now or later in any warranty or representation in
any guaranty of the Liabilities or in any certificate delivered to Bank in
connection with the guaranty.

         6.       BANK'S RIGHTS AND REMEDIES

                  6.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Debtor:

                           (a) Exercise all rights available to it under the
Massachusetts Uniform Commercial Code and applicable
law;

                           (b) Set off and apply to the obligations any and all
(i) balances and deposits of Debtor held by Bank, or (ii) indebtedness at any
time owing to or for the credit or the account of Debtor held by Bank; and

                           (c) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Debtor's premises) as Bank
determines is commercially reasonable.

                  6.2 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Debtor's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it.

                  6.3 Demand; Protest. Except as provided herein, Debtor waives
demand, protest, notice of protest, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Bank on which
Debtor may in any way be liable.

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7.       CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

         The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. DEBTOR AND BANK EACH ACCEPT FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN
ANY ACTION, SUIT, OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR
BY REASON OF THIS AGREEMENT.

         DEBTOR AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

         8.       GENERAL PROVISIONS

                  8.1 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Debtor without Bank's prior written consent, which
consent may be granted or withheld in Bank's sole discretion. Bank shall have
the right without the consent of or notice to Debtor to sell, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Bank's obligations, rights and benefits hereunder.

                  8.2 Indemnification. Debtor shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Debtor whether under this Agreement, or otherwise
(including without limitation reasonable attorneys' fees and expenses), except
for losses caused by Bank's gross negligence or willful misconduct.

                  8.3      Time of Essence.  Time is of the essence for the
performance of all obligations set forth in this Agreement.

                  8.4 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement for
the purpose of determining the legal enforceability of any specific provision.

                  8.5 Amendments in Writing, Integration. This Agreement cannot
be changed or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.

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                  8.6 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement.

                  8.7 Survival. All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
liabilities and obligations under the Guaranty and this Agreement remain
outstanding. The obligations of Debtor to indemnify Bank with respect to the
expenses, damages, losses, costs and liabilities described in this Agreement
shall survive until all applicable statute of limitations periods with respect
to actions that may be brought against Bank have run.

                  8.8 Amendment of Loan Documents. Debtor authorizes Bank,
without notice or demand and without affecting its liability hereunder, from
time to time to (a) take and hold security for the payment of the Loan
Documents, and exchange, enforce, waive and release any such security and (b)
apply such security and direct the order or manner of sale thereof as Bank in
its sole discretion may determine.

                  8.9 Debtor Waivers. Debtor waives any right to require Bank to
(a) proceed against Borrower, the Debtor, any other guarantor or any other
person; (b) proceed against or exhaust any security held from Borrower or
Debtor; (c) marshal any assets of Borrower or Debtor; or (d) pursue any other
remedy in Bank's power whatsoever. Bank may, at its election, exercise or
decline or fail to exercise any right or remedy it may have against Borrower or
Debtor or any security held by Bank, including without limitation the right to
foreclose upon any such security by judicial or nonjudicial sale, without
affecting or impairing in any way the liability of Debtor hereunder. Debtor
waives any defense arising by reason of any disability or other defense of
Borrower or Debtor or by reason of the cessation from any cause whatsoever of
the liability of Borrower or Debtor. Debtor waives any setoff, defense or
counterclaim that Borrower or Debtor may have against Bank. Debtor waives any
defense arising out of the absence, impairment or loss of any right of
reimbursement or subrogation or any other rights against Borrower or Debtor.
Debtor shall have no right of subrogation or reimbursement, contribution or
other rights against Borrower and Debtor waives any right to enforce any remedy
that Bank now has or may hereafter have against Borrower. Debtor waives all
rights to participate in any security now or hereafter held by Bank. Except as
provided herein, Debtor waives all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor,
and notices of acceptance of this Agreement and of the existence, creation, or
incurring of new or additional indebtedness. Debtor assumes the responsibility
for being and keeping itself informed of the financial condition of Borrower and
of all other circumstances bearing upon the risk of nonpayment of any
indebtedness or nonperformance of any obligation of Borrower, warrants to Bank
that it will keep so informed, and agrees that absent a request for particular
information by Debtor, Bank shall have no duty to advise Debtor of information
known to Bank regarding such condition or any such circumstances.

                  8.10 Insolvency. If Debtor becomes insolvent or is adjudicated
bankrupt or files a petition for reorganization, arrangement, composition or
similar relief under any present or future provision of the United States
Bankruptcy Code, or if such a petition is filed against Debtor, and in any such
proceeding some or all of any indebtedness or obligations under the Loan
Documents are terminated or rejected or any obligation of Debtor is modified or
abrogated, or if Debtor's obligations are otherwise avoided for insolvency,
bankruptcy or any similar reason, Debtor agrees that Debtor's liability

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hereunder shall not thereby be affected or modified and such liability shall
continue in full force and effect as if no such action or proceeding had
occurred. This Agreement shall continue to be effective or be reinstated, as the
case may be, if any payment must be returned by Bank upon the insolvency,
bankruptcy or reorganization of Debtor, any other person, or otherwise, as
though such payment had not been made.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written as a sealed instrument under the
laws of the Commonwealth of Massachusetts.

                                  ("Debtor")

                                  DIOMED HOLDINGS, INC.

                                  By:________________________________________

                                  Name:______________________________________

                                  Title_______________________________________

                                  ("Bank")

                                  SILICON VALLEY BANK, d/b/a
                                  SILICON VALLEY BANK

                                  By: ______________________________

                                  Name: ____________________________

                                  Title:______________________________

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                                    EXHIBIT A

         The Collateral consists of all right, title and interest of Debtor in
and to the following:

         All goods, equipment, inventory, contract rights or rights to payment
of money, license agreements, franchise agreements, general intangibles
(including payment intangibles), accounts (including health-care receivables),
documents, instruments (including any promissory notes), chattel paper (whether
tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities, and all other investment property supporting
obligations, and financial assets, whether now owned or hereafter acquired,
wherever located; and

         All Debtor's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

         Notwithstanding the foregoing, the Collateral does not include:

          Any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; any trade secret rights, including any
rights to unpatented inventions, now owned or hereafter acquired.
Notwithstanding the foregoing, the Collateral shall include all accounts,
license and royalty fees and other revenues, proceeds, or income arising out of
or relating to any of the foregoing intellectual property.EXHIBIT 10.2

                             SUBSCRIPTION AGREEMENT

SKRP 1, Inc.
1900 Avenue of the Stars, Suite 310
Los Angeles, CA 90067

Attn: Richard Rappaport, President

            RE:  PROSPECTUS, DATED JUNE __, 2004

Dear Mr. Rappaport:

The   undersigned   investor   ("Investor")  in  this   Subscription   Agreement
("Agreement")  hereby  acknowledges  receipt of the  prospectus  ("Prospectus"),
dated  June __,  2004 of SRKP 1,  Inc.,  a Delaware  corporation  ("SRKP"),  and
subscribes for the following  number of shares upon the terms and conditions set
forth in the  Prospectus.  The Investor agrees that this Agreement is subject to
availability and acceptance by SRKP.

The Investor  hereby  subscribes  for _______  shares of SRKP's  common stock at
$0.17 per share, for an aggregate  purchase price of $____________.  Enclosed is
the Investor's  check made payable to "SRKP 1, Inc. Escrow Account  Administered
by City  National  Bank" and has been  forwarded  to the  escrow  account in the
self-addressed  stamped  envelope  that has been provided for  convenience.  The
Investor may also elect to submit his  subscription  funds to the escrow account
via wire transfer as provided in this Agreement.

                                            ACCEPTED AND AGREED:

                                            ____________________________
                                            Signature of Investor

                                            ____________________________
    WIRING INSTRUCTIONS:                    Print Full Name

                                            ____________________________
ABA #[____________________________]         Street Address
City National Bank                          ____________________________
A/C[ _____________________________]         City, State, Zip
f/f/c Trust account # [___________]         ____________________________
Account Name:  SRKP 1, Inc.                 Area Code and Telephone Number
Attn:  [__________________________]

                                            _____________________________
                                            ACCEPTED AND AGREED:

                                            SRKP 1, Inc.

                                            By:  ________________________
                                                 Richard Rappaport

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