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:



                                       7