Exhibit 10.3
One Dundee Park
Andover, MA 01810
978-475-7771
August 21, 2003
Mr. Samuel Belzberg c/o Mr. Johnny Ciampi Gibralt US, Inc.
1177 West Hastings, Suite 2000
Vancouver, BC V6E 2K3
Canada
Re: Permanent Financing - Understanding and Acknowledgment of Certain Matters
Dear Sam:
This letter is being addressed to Gibralt US, Inc. ("Gibralt") in its capacity
as the Designated Note Purchaser under the terms of the $2,000,000 bridge
financing made to Diomed Holdings, Inc. (the "Company") in December 2002 (the
"December 2002 Financing") and the Designated Lender under the terms of the
$1,200,000 bridge financing made to the Company in May 2003 (the "May 2003
Financing"), and as a holder of greater than two-thirds of the outstanding
securities issued by the Company in both the December 2002 Financing and the May
2003 Financing. The purpose of this letter is to set forth our understanding
with respect to certain matters relating to these transactions as they pertain
to the Company's present financing initiative (the "Permanent Financing").
Certain investors in the Permanent Financing have asked the Company to obtain
the acknowledgment of the investors in the December 2002 Financing and the May
2003 Financing to our understanding of these matters.
As you know, the Permanent Financing is contemplated to occur in two tranches,
with Tranche I consisting of investment in the form of Secured Bridge Notes,
part of the proceeds of which will immediately be applied to the repayment in
full of the notes representing the indebtedness incurred in the December 2002
Financing, and with the investors in the December 2002 Financing participating
in Tranche I in the total amount of $2,000,000. Tranche II will occur when the
Company has satisfied certain conditions, including obtaining stockholder
approval or the issuance of common stock to the investors in the Permanent
Financing, the December 2002 Financing and the May 2003 Financing and obtaining
AMEX listing of this common stock.
Under the terms of the Class E Preferred Stock and Class F Preferred Stock, held
by the investors in the December 2002 Financing and the May 2003 Financing,
respectively, these shares of preferred stock are to be exchanged by the holders
and the Company for shares of common stock, under the exchange agreements dated
as of August 16, 2003 between the Company and these investors, once stockholder
approval of the issuance of the underlying common stock and AMEX listing of
these shares has been obtained. We understand that the holders of the Class E
Preferred Stock and Class F Preferred Stock will not tender their shares for
exchange into common stock until the Tranche II Closing occurs, notwithstanding
the possibility that stockholder approval and AMEX listing may be obtained prior
to the Tranche II Closing. Further, we understand that the shares of common
stock issued upon exchange of the Class E Preferred Stock and Class F Preferred
Stock will not be eligible for participation in the Company's contemplated
rights offering, even if this common stock is outstanding, or is for any reason
deemed to be outstanding, on the business day prior to the Tranche II Closing
Date. We also understand that any and all shares of common stock held by the
investors in the December 2002 Financing and the May 2003 Financing on the
business day prior to the Tranche II Closing Date other than those shares issued
in exchange for the Class E Preferred Stock and the Class F Preferred Stock will
be eligible to participate in the Company's contemplated rights offering.
Additionally, the investors in the December 2002 Financing and the May 2003
Financing are parties to a Registration Rights Agreement with the Company. The
investors in the Permanent Financing will also be parties to an Investors'
Rights Agreement with the Company, which provides for, among other things,
mandatory registration of the common stock issued in the Permanent Financing. It
is our intention that the investors in the December 2002 Financing will become
parties to the Investors' Rights Agreement by virtue of their participation in
the Tranche I investment, that the investors in the May 2003 Financing will also
be deemed to be parties to the Investors' Rights Agreement and that the existing
Registration Rights Agreement will be terminated, effective as of the Tranche I
Closing. Accordingly, the common stock issued to the investors in the December
2002 Financing in connection with their investment in Tranche I and in
connection with the exchange of their Class E Preferred Stock, the common stock
issued to the investors in the May 2003 Financing in connection with the
exchange of their Class F Preferred Stock and the common stock issued to the
investors in the Permanent Financing will all be governed by the Investors'
Rights Agreement.
In terms of security for the Class D Notes, which will remain outstanding after
the Tranche I Closing until the Tranche II Closing, the collateral enjoyed by
the holders of the Class D Notes will become "shared" with the holders of the
Secured Bridge Notes, issued in Tranche I. Gibralt will cease to act as the
"Designated Note Purchaser" on behalf of the Class E Notes because they will be
redeemed immediately after the Tranche I Closing, but Gibralt will continue to
be the "Designated Lender" on behalf of the holders of the Class D Notes until
they are redeemed in Tranche II. In addition, we understand that Gibralt will
act as the "Designated Pledgeholder" under the Amended and Restated Pledge
Agreement, and will retain the stock certificate and stock power relating to all
outstanding shares of Diomed PDT, Inc. and perform the other duties of the
Designated Pledgeholder under the Amended and Restated Pledge Agreement.
Further, signed acknowledgment below will constitute Gibralt's consent to the
Company's entering into the Amended and Restated Pledge Agreement and the
Security Agreement with the Secured Bridge Note investors.
Also in connection with the security for the Class D Notes, we wish to clarify
that Gibralt's capacity under the Second Amended and Restated Security Agreement
is as agent for the holders of the Class D Notes, not in Gibralt's individual
capacity. Your acknowledgment below will serve to confirm your concurrence with
this understanding.
Finally, we note that currently, if the Company does not complete the Permanent
Financing by November 15, 2003, the investors in the May 2003 Financing have the
right to declare immediately due and payable the $1,200,000 principal amount and
accrued interest on the Class D Notes issued by the Company in the May 2003
Financing. We appreciate the investors' previous willingness to grant extensions
of this deadline in light of the delays we have encountered in completing the
Permanent Financing. While we continue to expect to complete the Permanent
Financing by November 15, 2003, we would like to obtain the agreement of the
investors in the May 2003 Financing to further extend this deadline to the
business day following any date after November 15, 2003 which the Company and
the investors in the Permanent Financing agree to as the Tranche II Closing
Date. Your acknowledgement below will constitute your agreement to so extend the
acceleration deadline.
If you are in agreement with the foregoing, please so indicate by having the
acknowledgment below signed on behalf of Gibralt. If you have any questions,
please call me to discuss them.
Very truly yours,
/s/ JAMES A. WYLIE, JR.
James A. Wylie, Jr.
Chief Executive Officer
Acknowledged and Agreed:
Gibralt US, Inc.,
As an investor in the December 2002 Financing, As an investor in the
May 2003 Financing, As a holder of Class D Notes and Class E Notes,
As a holder of Class E Preferred Stock and Class F Preferred Stock
As the Designated Note Purchaser and
As the Designated Lender
By: /s/ JOHNNY CIAMPI
Johnny Ciampi, Authorized Officer