DIOMED HOLDINGS INC
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>7
<FILENAME>ex10_5.txt
<TEXT>
                                                                    Exhibit 10.5

                            PATENT SECURITY AGREEMENT


                  THIS PATENT  SECURITY  AGREEMENT,  dated as of August 29, 2003
(this  "AGREEMENT"),   between  DIOMED,   INC.,  a  Delaware   corporation  (the
"GRANTOR"),  and GIBRALT US,  INC.,  a Colorado  corporation,  as agent (in such
capacity,  the  "DESIGNATED  NOTE  INVESTOR")  for  the  Secured  Parties  (such
capitalized term and all other capitalized terms not otherwise defined herein to
have the meanings provided for in the Security Agreement referred to below).

                              W I T N E S S E T H:

                  WHEREAS, pursuant to a Security Agreement dated as of the date
hereof (as such agreement may be amended, amended and restated,  supplemented or
otherwise  modified from time to time,  the "SECURITY  AGREEMENT"),  between the
Grantor and the  Designated  Note  Investor  and in order to obtain the benefits
referred to therein,  the Grantor has granted to the Designated  Note Investor a
security  interest in substantially  all of the Grantor's  property,  including,
without limitation, the Collateral referred to in SECTION 1 below; and

                  WHEREAS,  pursuant to the Security Agreement,  the Grantor has
agreed to execute this Agreement in respect of its Collateral for recording with
the U.S.  Patent and  Trademark  Office and any other office in which a security
interest  in  the  Collateral  may be  recorded  under  the  laws  of any  other
applicable jurisdiction;

                  NOW,  THEREFORE,  in  consideration  of the  premises  and the
mutual  covenants  and  agreements  hereinafter  set forth,  the Grantor and the
Designated Note Investor agree as follows:

         1.1 GRANT OF SECURITY. The Grantor hereby grants to the Designated Note
Investor  for the benefit of the Secured  Parties a security  interest in and to
all of such  Grantor's  right,  title and interest in and to the following  (the
"COLLATERAL"):

                  (a) the United  States,  international,  and foreign  patents,
patent  applications and patent licenses set forth in SCHEDULE A hereto opposite
the name of such Grantor, as SCHEDULE A may be supplemented from time to time by
supplements to the Security  Agreement and this Agreement  which may be executed
and  delivered  by such Grantor to the  Administrative  Agent from time to time,
together with all  reissues,  divisions,  continuations,  continuations-in-part,
extensions  and  reexaminations  thereof,  and all rights  therein  provided  by
international treaties or conventions (the "PATENTS");

                  (b) any and all  claims  for  damages  for past,  present  and
future  infringement,  misappropriation  or breach with  respect to the Patents,
with the right,  but not the  obligation,  to sue for and collect,  or otherwise
recover, such damages; and

                  (c) any and all Proceeds of the foregoing.



                                       1
<PAGE>

         1.2 SECURITY FOR OBLIGATIONS.  The pledge and collateral assignment of,
and the grant of a security  interest in, the  Collateral  by the Grantor  under
this Agreement secures the payment of all Secured Obligations of the Grantor now
or hereafter existing,  whether direct or indirect,  absolute or contingent, and
whether for principal, reimbursement obligations, interest, premiums, penalties,
fees, indemnifications, contract causes of action, costs, expenses or otherwise.

         1.3  RECORDATION.   The  Grantor   authorizes  and  requests  that  the
Commissioner  of Patents  and  Trademarks  and any other  applicable  government
officer record this Agreement.

         1.4 EXECUTION IN  COUNTERPARTS.  This  Agreement may be executed in any
number of counterparts,  each of which when so executed shall be deemed to be an
original  and all of which  taken  together  shall  constitute  one and the same
agreement.

         1.5 GRANTS,  RIGHTS AND REMEDIES.  This Agreement has been entered into
in conjunction with the provisions of the Security  Agreement.  The Grantor does
hereby acknowledge and confirm that the grant of the security interest hereunder
to, and the rights and remedies of, the Designated Note Investor with respect to
the Collateral are more fully set forth in the Security Agreement, the terms and
provisions of which are  incorporated  herein by reference as if fully set forth
herein.

         1.6 GOVERNING LAW. This  Agreement  shall be governed by, and construed
in accordance with, the laws of the State of New York.


                              [Signatures follow.]



                                       2
<PAGE>

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement by
their duly authorized officers as of the day and year first above written.

                                DIOMED, INC.
                                ("GRANTOR")


                                By: /s/ JAMES A. WYLIE, JR.
                                    --------------------------------------
                                    Name: James A. Wylie, Jr.
                                    Title: Chief Executive Officer




                                GIBRALT US, INC.,
                                as Designated Note Investor
                                ("DESIGNATED NOTE INVESTOR")


                                By: /s/ JOHNNY CIAMPI
                                    ---------------------------------------
                                    Name: Johnny Ciampi
                                    Title: Authorized Officer




<PAGE>

                                                                      SCHEDULE A



         Endovascular Laser Device and Treatment of Varicose Veins (EVLT)

         "A method for treating blood vessels using  endovascular  techniques to
deliver laser energy."

Assigned to Diomed,  Inc. by Robert J. Min, M.D.,  one of five named  inventors,
pursuant to Purchase Agreement dated July 23, 2003.


------------------------------- ----------------------------------------
           Country                              Number
------------------------------- ----------------------------------------
USA                             6,398,777
------------------------------- ----------------------------------------
WO                              200044296
------------------------------- ----------------------------------------
AU                              200029753
------------------------------- ----------------------------------------
EP                              1156751
------------------------------- ----------------------------------------
PCT                             US0002187 (applied 8/13/99)
------------------------------- ----------------------------------------
EP                              00908406 (applied 11/8/00)
------------------------------- ----------------------------------------
CA                              2361634 (applied 8/27/01)
------------------------------- ----------------------------------------

</TEXT>
</DOCUMENT>
