Document:

EXHIBIT 10.2

                               SECURITY AGREEMENT

     THIS  SECURITY  AGREEMENT is made as of the 17th day of May,  2002,  by and
between BioSphere Medical,  Inc., a Delaware corporation  ("Debtor");  and Brown
Brothers Harriman & Co., a New York general partnership ("Secured Party").

                                   WITNESSETH:

     WHEREAS,  Debtor has  executed  and  delivered  to  Secured  Party a Credit
Agreement  of even  date  herewith  (as the same  may be  amended,  extended  or
restated from time to time, the "Loan Agreement"); and

     WHEREAS, pursuant to the Loan Agreement,  Debtor has executed and delivered
to  Secured  Party a  Promissory  Note of even  date  herewith  in the  original
principal  amount of up to  $5,000,000  (as the same may be  amended,  extended,
renewed or restated from time to time, the "Note"); and

     WHEREAS,  Debtor has agreed to enter into this Security  Agreement in order
to induce  Secured  Party,  inter alia, to make the loans to be evidenced by the
Note;

     NOW,  THEREFORE,  for good and  valuable  consideration,  the  receipt  and
adequacy of which are hereby  acknowledged,  the parties  hereto hereby agree as
follows:

     Section 1. The Security Interests.
     --------- ----------------------

     (a) In order (i) to secure the due and punctual  payment of the Note;  (ii)
to secure the due and punctual  payment and  performance  of all  obligations of
Debtor  contained  herein;  (iii) to secure  the due and  punctual  payment  and
performance of all indebtedness, obligations and liabilities of Debtor contained
in the Loan  Agreement  and in all other  agreements  executed or  delivered  by
Debtor in connection with or as contemplated by the Loan Agreement;  and (iv) to
secure the due and punctual  payment and performance of all other  indebtedness,
liabilities  and  obligations  of  Debtor  to  Secured  Party of every  kind and
description,  whether  direct,  indirect or contingent,  whether now existing or
hereafter  arising or incurred,  whether due or to become due, whether otherwise
secured or unsecured and howsoever  evidenced,  incurred or arising,  including,
without limitation,  all indebtedness,  liabilities and obligations evidenced or
arising  pursuant to any  promissory  note,  loan  agreement,  equipment  lease,
conditional  sales  agreement,   consignment  agreement,   guaranty,  overdraft,
bankers'  acceptance,  forward contract,  foreign exchange  contract,  letter of
credit reimbursement agreement or any other agreement or instrument which may at
any time be executed or issued for Debtor's account or to which Debtor is now or
hereafter may become a party (all of the foregoing are hereinafter  collectively
called the  "Obligations"),  Debtor  hereby grants to Secured Party a continuing
security  interest in the following  described  fixtures and personal  property,
whether now existing or hereafter arising  (hereinafter  collectively called the
"Collateral"):

     All fixtures and all tangible and intangible personal property of Debtor of
every kind and description and wherever located,  in each case whether now owned
or  hereafter  acquired by Debtor,  or in which Debtor may now have or hereafter
acquire an interest, including, without limitation:

          (1) all equipment  (as such term is defined in the Uniform  Commercial
     Code [the "UCC"]), machinery and fixtures,  including,  without limitation,
     all processing and manufacturing equipment,  machine tools, data processing
     and computer  equipment,  furniture,  tools,  dies, molds,  motor vehicles,
     rolling stock,  trailers,  airplanes,  vessels and other equipment of every
     kind and description,  in each case whether now owned or hereafter acquired
     by  Debtor,  or in  which  Debtor  may now  have or  hereafter  acquire  an
     interest;

          (2) all  inventory  (as such term is  defined  in the UCC),  including
     without limitation, all merchandise, raw materials, work in process, parts,
     components, dies, molds, finished goods, supplies and all goods returned to
     or  repossessed  by Debtor,  in each case  whether  now owned or  hereafter
     acquired by Debtor, or in which Debtor may now have or hereafter acquire an
     interest;

          (3) all  accounts  (as such  term is  defined  in the  UCC),  accounts
     receivable,  other receivables,  evidences of indebtedness,  notes, drafts,
     acceptances,  contract rights, leases, chattel paper and electronic chattel
     paper (as such terms are  defined in the UCC),  commercial  tort claims (as
     such term is defined in the UCC), and general  intangibles (as such term is
     defined in the UCC),  including,  without  limitation,  all  collateral and
     security  therefor and all supporting  obligations (as such term is defined
     in the UCC) of every kind and description  (including,  without limitation,
     all guarantees, letters of credit, letter-of-credit rights (as such term is
     defined in the UCC), liens and security interests in favor of Debtor),  and
     all  goodwill,  going concern  value,  patents,  applications  for patents,
     trademarks,  trade names,  service marks,  registrations  of trademarks and
     servicemarks,  customer lists,  advertising  materials,  operating manuals,
     copyrights,   blueprints,  designs,  engineering  drawings  and  contracts,
     proprietary information,  product lines,  distribution  agreements,  dealer
     contracts,  supplier contracts, tax refund claims,  licenses,  research and
     development,  and all rights to the payment of money,  in each case whether
     now owned or hereafter  acquired by Debtor, or in which Debtor may now have
     or hereafter acquire an interest;

          (4) all instruments (as such term is defined in the UCC), documents of
     title, policies and certificates of insurance,  securities (as such term is
     defined in the UCC),  securities  entitlements  (as such term is defined in
     the  UCC),  investment  property  (as such  term is  defined  in the  UCC),
     partnership interests, membership interests in limited liability companies,
     bank  deposits,  deposit  accounts  (as such term is  defined  in the UCC),
     checking  accounts,  certificates of deposit and cash, in each case whether
     now owned or hereafter  acquired by Debtor, or in which Debtor may now have
     or hereafter acquire an interest, including, without limitation, all right,
     title and  interest  of Debtor in and to its  account  with  Secured  Party
     entitled  BioSphere Medical,  Inc., Account Number 2430064,  and all money,
     investment  property and  financial  assets now or  hereafter  held in such
     account;

          (5) all accessions,  additions and improvements to, all  substitutions
     for and all  proceeds  and  products  of, all of the  foregoing,  including
     proceeds of insurance,  whether now owned or hereafter  acquired by Debtor,
     or in which Debtor may now have or hereafter acquire an interest; and

          (6) all books, records,  documents,  computer tapes and discs relating
     to all of the foregoing, whether now owned or hereafter acquired by Debtor,
     or in which Debtor may now have or hereafter acquire an interest.

     Notwithstanding any provision of this Agreement to the contrary, Collateral
     shall not include: (i) Debtor's ownership interest in its subsidiaries, now
     or hereafter existing, including the subsidiaries listed on Schedule III of
     the Loan  Agreement;  (ii) the property  that is described in the financing
     statement  listed in Exhibit B hereto;  (iii) certain  equipment  hereafter
     acquired  by Debtor if such  equipment  is covered  by a lien that  secures
     purchase  money  indebtedness  incurred by Debtor solely for the purpose of
     acquiring  such  equipment  and so long as the amount of such  indebtedness
     does  not  exceed  the  fair  value  of  such  equipment  at  the  time  of
     acquisition; and (iv) the leased equipment described in Schedule I attached
     hereto and made a part hereof.

          (b) All of Debtor's accounts,  accounts  receivable,  contract rights,
     chattel paper,  general intangibles and rights to the payment of money, and
     all collateral and security  therefor and related  supporting  obligations,
     and all proceeds thereof, are sometimes hereinafter collectively called the
     "Customer Receivables".  All of Debtor's equipment,  fixtures and inventory
     are sometimes hereinafter collectively called the "Tangible Collateral".

          (c) The  security  interests  granted  pursuant to this Section 1 (the
     "Security  Interests")  are granted as security  only and shall not subject
     Secured  Party to, or  transfer to Secured  Party,  or in any way affect or
     modify,  any  obligation or liability of Debtor under any of the Collateral
     or any transaction which gave rise thereto.

          (d) If Debtor shall at any time acquire a  commercial  tort claim,  as
     defined in Article 9 of the UCC, Debtor shall promptly notify Secured Party
     in writing of the brief details thereof and shall grant to Secured Party in
     writing a security interest therein and in the proceeds thereof, all on the
     terms of this  Security  Agreement,  and in writing  in form and  substance
     reasonably satisfactory to Secured Party.

          (e) For avoidance of doubt it is expressly  understood and agreed that
     (i) the  Collateral  is intended  to consist of all assets of Debtor  other
     than  Debtor's  ownership  interest in its  subsidiaries,  now or hereafter
     existing,  including  the  subsidiaries  listed on Schedule III to the Loan
     Agreement, the property that is described in the financing statement listed
     in Exhibit B hereto, certain equipment hereafter acquired by Debtor if such
     equipment is covered by a lien that  secures  purchase  money  indebtedness
     incurred by Debtor solely for the purpose of acquiring  such  equipment and
     so long as the amount of such  indebtedness  does not exceed the fair value
     of such  equipment  at the time of  acquisition,  and the leased  equipment
     described in Schedule I attached hereto and made a part hereof; and (ii) to
     the extent the UCC is revised  subsequent  to the date hereof such that the
     definition of any of the foregoing  terms  included in the  description  of
     Collateral  is  changed,  the  parties  agree  that any  property  which is
     included in such changed  definitions which would not otherwise be included
     in the  foregoing  grant on the  date  hereof  be  included  in such  grant
     immediately  upon  the  effective  date  of such  revision,  it  being  the
     intention of the parties  hereto that the  description  of  Collateral  set
     forth  herein be  construed  to  include  the  broadest  possible  range of
     property and assets and all tangible and intangible  personal  property and
     fixtures of Debtor of every kind and description other than as specifically
     excluded herein.

     Section 2. Delivery of Pledged Securities and Chattel Paper.
     ---------  -------------------------------------------------

     (a) All  securities of Debtor,  whether now owned or hereafter  acquired by
Debtor,  shall be promptly  delivered to Secured Party by Debtor pursuant hereto
(which securities, together with all other securities,  securities entitlements,
and shares of stock which may hereafter be delivered to Secured  Party  pursuant
to the terms hereof, are hereinafter called the "Pledged Securities"),  shall be
in suitable  form for  transfer by  delivery,  or shall be  accompanied  by duly
executed  instruments  of  transfer or  assignments  in blank,  with  signatures
appropriately guaranteed,  and accompanied in each case by any required transfer
tax stamps, all in form and substance  satisfactory to Secured Party.  Exhibit A
attached hereto and made a part hereof sets forth a complete  description of all
Pledged Securities owned by Debtor on the date hereof. Debtor shall from time to
time promptly and in accordance with the foregoing provisions deliver to Secured
Party any and all Pledged Securities which may hereafter be acquired by Debtor.

     (b)  Secured  Party  may at any  time or from  time to  time,  in its  sole
discretion,  require  Debtor to cause any chattel paper included in the Customer
Receivables  to be  delivered  to Secured  Party or any agent or  representative
designated by it, or to cause a legend referring to the Security Interests to be
placed on such chattel  paper and upon any ledgers or other  records  concerning
the Customer Receivables.

     Section 3.  Filing; Further Assurances.
     ---------   --------------------------

         Debtor will, at its expense, execute, deliver, file and record (in such
manner and form as Secured Party may reasonably require), or permit Secured
Party to file and record, any financing statements, any carbon, photographic or
other reproduction of a financing statement or this Security Agreement (which
the parties hereto agree shall be sufficient as a financing statement
hereunder), any specific assignments or other paper that may be reasonably
necessary or desirable, or that Secured Party may reasonably request, in order
to create, confirm, preserve, perfect or validate any Security Interest or to
enable Secured Party to exercise and enforce its rights and remedies hereunder
or under applicable law with respect to any of the Collateral. Debtor hereby
authorizes Secured Party, at any time and from time to time, without the
Debtor's further signature or authorization, to file financing statements,
continuation statements and amendments thereto that describe or indicate the
Collateral including, without limitation, an indication that the Collateral
consists of "all assets" of the Debtor or words of similar effect and which
contain any other information required by Part 5 of Article 9 of the UCC for the
sufficiency or filing office acceptance of any financing statement, continuation
statement or amendment, including whether Debtor is an organization, the type of
organization and any organization identification number issued to Debtor. Debtor
agrees to furnish any such information to Secured Party promptly upon request.

     Section 4.  Debtor's Representations and Warranties.
     ---------   ---------------------------------------

     Debtor hereby represents and warrants to Secured Party as follows:

     (a) Except as described in Exhibit B attached hereto and made a part hereof
and liens  permitted  by the Loan  Agreement,  Debtor is, or to the extent  that
certain of the Collateral is to be acquired after the date hereof,  will be, the
owner of the  Collateral  free  from any  adverse  lien,  security  interest  or
encumbrance.

     (b) Except for such  financing  statements as may be described in Exhibit B
attached  hereto and made a part  hereof,  no financing  statement  covering the
Collateral is on file in any public office,  other than the financing statements
filed pursuant to this Security Agreement.

     (c) All additional information, representations and warranties contained in
Exhibit C attached hereto and made a part hereof,  and any Schedules attached to
said Exhibit C, are true, accurate and complete on the date hereof.

     (d) There are no restrictions upon the voting rights or the transfer of all
or any of the  Pledged  Securities  (other  than may  appear  on the face of the
certificate  thereof) and Debtor has the right to vote, pledge, grant a security
interest  in,  and  otherwise  transfer  the  Pledged  Securities  free  of  any
encumbrances  (other than  applicable  restrictions  imposed by Federal or state
securities  laws or  regulations).  Debtor is not affiliated with the issuers of
any securities constituting Collateral through officers,  directors or otherwise
and  Debtor  does  not  hold,  directly  or  indirectly,  more  than  10% of the
securities of any issuer of securities constituting Collateral.

     (e) Exhibit D attached hereto  constitutes an accurate and complete list of
all patents,  trademarks,  tradenames,  patent  applications,  servicemarks  and
registrations of the foregoing owned by or held by Debtor.

     Section 5. Debtor's Covenants.
     ---------  ------------------

     Debtor hereby covenants and agrees with Secured Party that Debtor will:

     (a) Defend the Collateral  against all claims and demands of all persons at
any time  claiming any interest  therein  (other than the parties  holding liens
permitted  by the Loan  Agreement to secure  indebtedness  permitted by the Loan
Agreement).

     (b) Provide  Secured  Party,  at least  fifteen (15) business days prior to
occurrence,  with written notice of (i) any change in Debtor's  chief  executive
office or the office where Debtor maintains its books and records  pertaining to
the Customer  Receivables,  (ii) the movement or location of Collateral to or at
any  address  other than as set forth in said  Exhibit C, and (iii) any event or
occurrence which would render any material warranty or information  contained in
Exhibit C or D hereto inaccurate or incomplete.

     (c) Promptly  notify Secured Party of any event causing a substantial  loss
or diminution in the value of all or any material part of the Collateral and the
amount or an estimate of the amount of such loss or diminution.

     (d) Except as  otherwise  permitted  by the Loan  Agreement  and Section 27
hereof,  not sell or offer to sell or otherwise  assign,  transfer or dispose of
the Collateral or any interest  therein,  without  Secured Party's prior written
consent;  provided,  however,  that  Debtor may sell  inventory,  if any, in the
ordinary  course of its business,  may enter into  licenses of its  intellectual
property in the ordinary course of its business,  and may sell equipment  having
an aggregate value not to exceed $200,000 in any calendar year.

     (e)  Except  as  otherwise  permitted  by  the  Loan  Agreement,  keep  the
Collateral free from any adverse lien,  security  interest or encumbrance and in
good  order and  repair,  reasonable  wear and tear  excepted,  and not waste or
destroy the Collateral or any part thereof.

     (f) Not use the  Collateral in violation of applicable law or of any policy
of insurance applicable thereto.

     (g) Not  change  its  corporate  name,  identity,  structure  or  state  of
organization or formation without at least thirty (30) days prior written notice
to Secured Party.

     (h) At Secured  Party's  request,  execute,  acknowledge  and deliver  such
further  documents  and  instruments  as  Secured  Party  may from  time to time
reasonably  request or require to confirm Secured Party's Security  Interests in
and to  any  patent,  trademark  or  service  mark,  and  any  registrations  or
applications for same.

     (i) Promptly pay any and all taxes,  assessments and  governmental  charges
upon the Collateral prior to the date penalties are attached thereto,  except to
the extent that such taxes,  assessments  and charges shall be contested in good
faith by Debtor,  adequate reserves have been set aside therefor, and payment of
such contested taxes made prior to the institution of any enforcement proceeding
which could adversely affect the Security Interests or the Collateral.

     (j) Have and  maintain  insurance at all times with respect to the Tangible
Collateral  against risks of fire (including  so-called  extended  coverage) and
theft, and such other risks as Secured Party may reasonably  require in writing,
containing  such terms,  in such form,  in such amounts,  for such periods,  and
written by such  companies as may be reasonably  satisfactory  to Secured Party,
such  insurance to name Secured Party as  "additional  insured" and  "mortgagee"
thereunder  and to be payable to  Secured  Party and Debtor as their  respective
interests may appear pursuant to Loss Payable Endorsements in form acceptable to
Secured  Party.  All policies of insurance  shall  provide for thirty (30) days'
prior written notice to Secured Party of cancellation  or material  amendment of
the policies,  and Debtor shall furnish Secured Party with certificates or other
evidence  satisfactory  to  Secured  Party  of  compliance  with  the  foregoing
insurance  provisions.  Debtor shall notify Secured Party of any material change
in the insurance  maintained  with respect to the Tangible  Collateral and shall
furnish Secured Party satisfactory evidence of any such change. Without limiting
any other remedies available to Secured Party, in the event Debtor shall default
in the performance of its obligations  under this paragraph (j),  Secured Party,
at its option,  may effect such insurance coverage with an insurer acceptable to
Secured Party and add the premium(s)  paid therefor to the  Obligations  secured
hereby,  and the amount of such premium(s)  shall be payable by Debtor on demand
with  interest  thereon  at  the  highest  rate  payable  under  the  agreements
evidencing the Obligations.

     (k) Take such steps as the Secured Party may reasonably request for Secured
Party (i) to obtain an  acknowledgement,  in form and substance  satisfactory to
Secured Party, of any bailee having possession of any of the Collateral that the
bailee holds such Collateral for Secured Party,  (ii) to obtain "control" of any
investment  property,  deposit accounts,  letter-of-credit  rights or electronic
chattel  paper (as such  terms  are  defined  in  Article 9 of the UCC) with any
agreements   establishing  control  to  be  in  form  and  substance  reasonably
satisfactory  to Secured  Party,  and (iii)  otherwise  to insure the  continued
perfection and priority of Secured Party's  security  interest in the Collateral
and of the preservation of its rights therein.

     Section 6.  Records Relating to Collateral.
     ---------   ------------------------------

     Debtor will keep its  records  concerning  the  Collateral,  including  the
Customer Receivables and all chattel paper included in the Customer Receivables,
at its offices at 1050 Hingham Street, Rockland, Massachusetts, or at such other
place or places of business as Secured Party may approve in writing. Debtor will
hold and preserve such records and chattel paper and will permit Secured Party's
representatives  at any time during normal business hours to examine and inspect
the Collateral  and to make  abstracts from such records and chattel paper,  and
will  furnish to Secured  Party  such  information  and  reports  regarding  the
Collateral as Secured Party may from time to time reasonably request.

     Section 7.  Collections with Respect to Customer Receivables.
     ---------   ------------------------------------------------

     Debtor will, at its expense:

                  (i) endeavor to collect or cause to be collected from
         customers indebted on Customer Receivables, as and when due, any and
         all amounts, including interest, owing under or on account of each
         Customer Receivable; and

                  (ii) take or cause to be taken such appropriate action to
         repossess goods, the sale or rental of which gave rise to any Customer
         Receivable, and to enforce any rights or liens under Customer
         Receivables, in the name of Debtor or Secured Party, as Secured Party
         may deem proper;

provided,  however,  that (a) Debtor will at all times use its best  judgment to
protect the  interests  of Secured  Party,  and (b) Debtor shall not be required
under  this  Section  7 to take  any  action  which  would  be  contrary  to any
applicable law, court order or standard  practice in Debtor's  industry.  Debtor
shall,  at Secured  Party's  request  following  the  occurrence  of an Event of
Default that continues  beyond the  expiration of any  applicable  grace or cure
period, if any, notify Debtor's account debtors of the Security Interests in the
Customer Receivables and Secured Party may itself at any such time following the
occurrence of an Event of Default that  continues  beyond the  expiration of any
applicable  grace or cure period,  if any, so notify  account  debtors.  Secured
Party  shall  have  full  power  at any  time  after  such  notice  to  collect,
compromise, endorse, sell or otherwise deal with any or all outstanding Customer
Receivables  or the  proceeds  thereof  in the name of either  Secured  Party or
Debtor,  as Secured Party shall reasonably  determine.  In the event that, after
notice to any account debtors to pay Secured Party,  Debtor receives any payment
on a Customer Receivable, all such payments shall be held by Debtor in trust for
Secured Party and promptly turned over to Secured Party.

     Section 8.  Record Ownership of Pledged Securities.
     ---------   --------------------------------------

     Upon the  occurrence  of an Event of  Default  that  continues  beyond  the
expiration of any  applicable  grace or cure period,  if any,  Secured Party may
cause any or all of the  Pledged  Securities  to be  transferred  of record into
Secured  Party's name.  Debtor will promptly give to Secured Party copies of any
notices  or other  communications  received  by Debtor  with  respect to Pledged
Securities registered in the name of Debtor and Secured Party will promptly give
to Debtor  copies of any notices and  communications  received by Secured  Party
with respect to Pledged Securities registered in the name of Secured Party.

     Section 9.  Right to Receive Distributions on Pledged Securities.
     ---------   ----------------------------------------------------

     Unless an Event of Default shall have occurred  that  continues  beyond the
expiration  of any  applicable  grace or cure  period,  if any,  Debtor shall be
entitled,  from  time  to  time,  to  collect  and  receive  for its own use all
dividends,  interest  and other  payments  and  distributions  made upon or with
respect to the Pledged Securities, except

          (i)  stock dividends,

          (ii) dividends  payable in securities or other property,  and non-cash
               dividends,

          (iii)dividends  or  distributions  on  dissolution,  or on  partial or
               total liquidation,  or in connection with a reduction of capital,
               capital surplus or paid-in surplus, and

          (iv) other securities issued with respect to or in lieu of the Pledged
               Securities (whether upon conversion of the convertible securities
               included  therein or through  stock split,  spin-off,  split-off,
               reclassification,   merger,   consolidation,   sale  of   assets,
               combination of shares or otherwise).

Secured Party shall have the right to receive and retain all dividends, interest
and other  payments and  distributions  made upon or with respect to the Pledged
Securities,  except those which Debtor is specifically  authorized to receive as
provided  above,  and Debtor  shall take all such action as may be  necessary or
appropriate  to give  effect to such right.  From time to time upon  receiving a
written request from Debtor accompanied by a certificate signed by its principal
financial  officer or designee stating that no Event of Default has occurred and
is continuing,  Secured Party shall deliver to Debtor  suitable  assignments and
orders for the  payment to Debtor or upon its order of all  dividends,  interest
and other  payments and  distributions  to which Debtor is entitled as set forth
herein,  upon or with respect to any Pledged  Securities which are registered in
Secured Party's name.

     Section 10.  Right to Vote Pledged Securities.
     ----------   --------------------------------

     Unless an Event of Default shall have occurred  that  continues  beyond the
expiration of any applicable grace or cure period, if any, Debtor shall have the
right,  from  time to time,  to vote  and to give  consents,  ratifications  and
waivers with respect to the Pledged Securities and to exercise conversion rights
with respect to the convertible  securities included therein,  and Secured Party
shall, upon receiving a written request from Debtor accompanied by a certificate
signed by its principal  financial  officer stating that no Event of Default has
occurred  and is  continuing,  deliver to Debtor or as specified in such request
such proxies, powers of attorney, consents, ratifications and waivers as Secured
Party shall approve in respect of any Pledged Securities which are registered in
Secured Party's name, and make such  arrangements with respect to the conversion
of  convertible  securities as shall be specified in Debtor's  request and be in
form and substance reasonably satisfactory to Secured Party.

     If an Event of  Default  shall  have  occurred  that  continues  beyond the
expiration of any applicable grace or cure period,  if any, and provided Secured
Party elects to exercise the rights hereinafter set forth by notice to Debtor of
such  election,  Secured  Party shall have the right to the extent  permitted by
law, and Debtor shall take all such action as may be necessary or appropriate to
give  effect to such  right,  to vote and to give  consents,  ratifications  and
waivers  and take any other  action with  respect to all the Pledged  Securities
with the same force and effect as if Secured  Party were the  absolute  and sole
owner  thereof.  The curing of any such Event of Default  where no grace or cure
period has been granted  herein or the curing of any such Event of Default after
the expiration of any applicable grace or cure period,  if any, shall not divest
Secured  Party of its rights  under  Sections 8, 9, 10 and 11 hereof  unless and
until  Secured  Party in writing  reinstates  the rights of Debtor which existed
prior to the occurrence of the Event of Default.

     Section 11.  General Authority.
     ----------   -----------------

     Debtor hereby  irrevocably  appoints Secured Party Debtor's true and lawful
attorney, with full power of substitution,  in the name of Debtor, Secured Party
or  otherwise,  for the sole use and benefit of Secured  Party,  but at Debtor's
expense,  to the extent permitted by law to exercise,  at any time and from time
to time  after any Event of  Default  has  occurred  that  continues  beyond the
expiration  of any  applicable  grace or cure period,  if any, all or any of the
following powers with respect to all or any of the Collateral (which power shall
be in addition and  supplemental  to any powers,  rights and remedies of Secured
Party described herein or otherwise  available to Secured Party under applicable
law):

          (i)  to demand, sue for, collect, receive and give acquittance for any
               and all moneys due or to become due upon or by virtue thereof,

          (ii) to receive, take, endorse, assign and deliver any and all checks,
               notes, drafts,  documents and other negotiable and non-negotiable
               instruments  and chattel paper taken or received by Secured Party
               in connection therewith,

          (iii)to settle, compromise,  compound,  prosecute or defend any action
               or proceeding with respect thereto,

          (iv) to sell,  transfer,  assign or otherwise deal in or with the same
               or the proceeds or avails  thereof or any related goods  securing
               the Customer Receivables,  as fully and effectually as if Secured
               Party were the absolute owner thereof,

          (v)  to extend the time of payment of any or all  thereof  and to make
               any allowance and other adjustments with reference thereto, and

          (vi) to  discharge  any  taxes,  liens,  security  interests  or other
               encumbrances at any time placed thereon.

     The power  conferred  on Secured  Party under this  Section 11 is solely to
protect,  realize upon and enforce Secured Party's Security Interests and rights
and  remedies  in respect to the  Collateral  and shall not impose any duty upon
Secured Party to exercise such power.

     Section 12.  Events of Default.
     ----------   -----------------

     Debtor  shall  be  in  default  under  this  Security  Agreement  upon  the
occurrence of any "Event of Default" as defined in the Loan Agreement, or in any
agreement  now or  hereafter  securing  the  Note,  or in any  agreement  now or
hereafter evidencing or securing any of the Obligations,  and the continuance of
such Event of Default  beyond the  expiration  of any  applicable  grace or cure
period, if any (each such event is herein referred to as an "Event of Default").

     Section 13.  Remedies Upon Event of Default.
     ----------   ------------------------------

     (a) If any Event of Default  shall have  occurred and shall have  continued
beyond the expiration of any applicable  grace or cure period,  if any,  Secured
Party may exercise all the rights and remedies of a secured  party under the UCC
(whether or not the UCC is in effect in the  jurisdiction  where such rights and
remedies are  exercised)  and, in addition,  Secured  Party may,  without  being
required to give any notice,  except as herein provided or as may be required by
mandatory  provisions  of law,  (i) apply the cash,  if any,  then held by it as
Collateral in the manner specified in Section 15 hereof, and (ii) if there shall
be no such cash or if such cash shall be insufficient to pay all the Obligations
in full, sell the Collateral,  or any part thereof, at public or private sale or
at any broker's board or on any securities  exchange,  for cash,  upon credit or
for future delivery, and at such price as Secured Party may deem satisfactory.

     (b)  Secured  Party may require  Debtor to assemble  all or any part of the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient. Any holder of an Obligation may be
the  purchaser of any or all of the  Collateral so sold at any public sale (and,
if the Collateral is of a type customarily sold in a recognized  market or is of
a type which is the subject of widely distributed standard price quotations,  at
any private sale) and thereafter hold the same  absolutely,  free from any right
or claim of  whatsoever  kind.  Upon any such sale Secured  Party shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral so
sold.  Each  purchaser  at any  such  sale  shall  hold the  Collateral  so sold
absolutely,  free  from any claim or right of  whatsoever  kind,  including  any
equity or right of redemption of Debtor.

     (c) Unless the  Collateral to be sold is perishable or threatens to decline
speedily  in  value or is of a type  customarily  sold on a  recognized  market,
Secured Party shall give Debtor at least twenty (20) days' prior written  notice
of its  intention  to make any such public or private sale or sale at a broker's
board or on a securities exchange.  Such notice, in case of a public sale, shall
state the time and place fixed for such sale,  and in case of sale at a broker's
board or on a  securities  exchange,  shall state the board or exchange at which
such  sale is to be made and the day on which  the  Collateral,  or the  portion
thereof so being sold, will first be offered for sale at such board or exchange.
Such  notice,  in case of a private  sale or  disposition,  shall state the time
after which any private sale or other intended disposition is to be made.

     (d) Any  such  public  sale  shall  be held at such  time or  times  within
ordinary  business  hours and at public or  private  place or places as  Secured
Party may fix in the notice of such sale.  At any  public or private  sale,  the
Collateral  may be sold in one lot as an  entirety or in  separate  parcels,  as
Secured Party may  determine.  Secured Party shall not be obligated to make such
sale  pursuant  to any  such  notice.  Secured  Party  may,  without  notice  or
publication,  adjourn  any  public  or  private  sale or  cause  the  same to be
adjourned from time to time by  announcement at the time and place fixed for the
sale,.  and such  sale may be made at any time or place to which the same may be
adjourned. In case of any sale of all or any part of the Collateral on credit or
for future  delivery,  the  Collateral  so sold may be retained by Secured Party
until the selling  price is paid by the  purchaser  thereof,  but Secured  Party
shall not incur any  liability in case of the failure of such  purchaser to take
up and pay for the  Collateral  so sold and, in case of any such  failure,  such
Collateral may again be sold upon like notice.

     (e) Debtor acknowledges that Secured Party may be unable to effect a public
sale of Pledged  Securities  by reason of  prohibitions  contained in applicable
state and federal  securities laws, and agrees that Secured Party is authorized,
at any such sale, if it deems it advisable so to do, to restrict the prospective
bidders or  purchasers  of any of the  Pledged  Securities  to persons  who will
represent  and  agree  that  they are  purchasing  for  their  own  account  for
investment  and  not  with a view  to the  distribution  or  sale of any of such
Pledged  Securities.  Debtor agrees that any private sale of Pledged  Securities
may be at prices and on terms less favorable  than if sold at public sales,  and
Debtor agrees that such private  sales shall not by reason  thereof be deemed to
have been made in a commercially  unreasonable manner.  Secured Party shall have
no  obligation  to delay any sale of Pledged  Securities  for the period of time
necessary  to permit the issuer of such  Pledged  Securities  to  register  such
securities for public sale under applicable securities laws, even if such issuer
would agree to do so.

     (f) Secured Party, instead of exercising the power of sale herein conferred
upon it,  may  proceed by a suit or suits at law or in equity to  foreclose  the
Security  Interests and sell the  Collateral,  or any portion  thereof,  under a
judgment or decree of a court or courts of competent jurisdiction.

     (g) All  rights  and  remedies  contained  herein  shall  be  separate  and
cumulative  and in  addition to all other  rights and  remedies  available  to a
secured party under applicable law, and the exercise of one shall not in any way
limit or prejudice the exercise of any other such rights or remedies.

     Section 14.  Right of Secured Party to Use and Operate Tangible Collateral,
                  Etc.
     ----------   --------------------------------------------------------------

     Upon the occurrence of an Event of Default that shall  continue  beyond the
expiration  of any  applicable  grace  or cure  period,  if any,  to the  extent
permitted  by law,  Secured  Party  shall  have  the  right  and  power  to take
possession of all or any part of the Tangible Collateral,  and to exclude Debtor
and all persons claiming under Debtor wholly or partly therefrom, and thereafter
to hold, store, and/or use, operate,  manage and control the same. Upon any such
taking of possession, Secured Party may, from time to time, at Debtor's expense,
make all such repairs, replacements,  alterations, additions and improvements to
and of the Tangible  Collateral as Secured Party may reasonably deem proper.  In
such case, Secured Party shall have the right to manage and control the Tangible
Collateral and to carry on the business and to exercise all rights and powers of
Debtor in respect thereto as Secured Party shall deem best,  including the right
to enter into any and all such  agreements  with  respect to the leasing  and/or
operation of the Tangible  Collateral  or any part thereof as Secured  Party may
deem fit; and Secured  Party shall be entitled to collect and receive all rents,
issues,  profits,  fees,  revenues  and other  income of the same and every part
thereof. Such rents, issues,  profits,  fees, revenues and other income shall be
applied to pay the expenses of holding and operating the Tangible Collateral and
of  conducting  the  business   thereof,   and  of  all  maintenance,   repairs,
replacements,  alterations, additions and improvements, and to make all payments
which  Secured  Party may be required or may elect to make,  if any,  for taxes,
assessments,  insurance  and other  charges upon the Tangible  Collateral or any
part  thereof,  and all other  payments  which  Secured Party may be required or
authorized  to make under any provision of this  Security  Agreement  (including
legal costs and attorney's fees). The remainder of such rents, issues,  profits,
fees,  revenues  and  other  income  shall  be  applied  to the  payment  of the
Obligations in such order or priority as Secured Party shall determine  (subject
to the provisions of Section 15 hereof) and, unless otherwise provided by law or
by a court of competent jurisdiction, any surplus shall be paid over to Debtor.

     Section 15.  Application of Collateral and Proceeds.
     ----------   --------------------------------------

     The proceeds of any sale of, or other  realization upon, all or any part of
the Collateral shall be applied in the following order of priorities:

     (a) first, to pay the actual and reasonable  expenses of such sale or other
realization,  including reasonable  commission to Secured Party's agent, and all
expenses,  liabilities  and  advances  incurred  or made  by  Secured  Party  in
connection  therewith,  and any other  unreimbursed  expenses for which  Secured
Party is to be reimbursed pursuant to Section 16 hereof;

     (b) second,  to the payment of the  Obligations in such order and manner as
Secured Party, in its sole discretion, shall determine; and

     (c) finally, unless applicable law otherwise provides, to pay to Debtor, or
its successors or assigns,  or as a court of competent  jurisdiction may direct,
any surplus then remaining from such proceeds.

     Section 16.  Expenses; Secured Party's Lien.
     ----------   ------------------------------

     Debtor will forthwith upon demand pay to Secured Party:

     (a) the amount of any taxes which Secured Party may at any time be required
to pay by reason of the Security  Interests  (including any applicable  transfer
taxes and taxes payable in connection with the filing of financing statements to
perfect the Security  Interests) or to free any of the Collateral  from any lien
thereon, and

     (b) the amount of any and all actual and reasonable out-of-pocket expenses,
including  reasonable  attorneys' fees and the reasonable fees and disbursements
of any agents not  regularly  in its employ,  which  Secured  Party may incur in
connection  with  (i)  the  preparation  and  administration  of  this  Security
Agreement,  (ii)  the  collection,  sale  or  other  disposition  of  any of the
Collateral,  (iii) the exercise by Secured Party of any of the powers, rights or
remedies conferred upon it hereunder, or (iv) any Event of Default hereunder.

     Section 17.  Termination of Security Interests; Release of Collateral.
     ----------   --------------------------------------------------------

     Upon the  repayment and  performance  in full of all the  Obligations,  the
expiration  of all  obligations  of  Secured  Party to extend  credit or provide
financial accommodations to Debtor under the Loan Agreement, and the termination
of the Loan Agreement,  the Security Interests shall terminate and all rights to
the Collateral shall revert to Debtor. Upon any such termination of the Security
Interests or release of Collateral,  Secured Party will, at Debtor's  expense to
the extent  permitted  by law,  execute and deliver to Debtor such  documents as
Debtor  shall  reasonably  request to evidence the  termination  of the Security
Interests or the release of such Collateral, as the case may be.

     Section 18.  Notices.
     ----------   -------

     All notices,  communications  and demands hereunder shall be in writing and
sent by certified or registered mail, return receipt requested,  or by overnight
delivery service,  with all charges prepaid,  to the applicable party or parties
at the  addresses  set forth  below,  or by facsimile  transmission  (including,
without limitation, computer generated facsimile), promptly confirmed in writing
sent by first class mail, to the FAX numbers and addresses set forth below:

<PAGE>

         (i) If to Debtor, to it at:

                  Mr. Robert M. Palladino
                  BioSphere Medical, Inc.
                  1050 Hingham Street
                  Rockland, Massachusetts 02370
                  Fax No. (781) 681-5093

                  with a copy to:

                  Attorney Meryl J. Epstein
                  Mintz, Levin, Cohn, Ferris,
                  Glovsky and Popeo, P.C.
                  One Financial Center
                  Boston, Massachusetts 02111
                  Fax No. (617) 542-2241

         (ii) If to Secured Party, to it at:

                  Brown Brothers Harriman & Co.
                  40 Water Street
                  Boston, Massachusetts 02109-3661
                  Attn: Peter D. Costa
                  Fax No. (617) 772-1138

         with a copy to:

                  Attorney Janet S. Fogarty
                  MacAdams & Wieck Incorporated
                  101 Dyer Street, Suite 400
                  Providence, Rhode Island 02903
                  Fax No. (401) 454-8755

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties complying as to delivery with the terms
of this Section.  All such notices and correspondence shall be deemed given upon
the  earliest  to occur of (i)  actual  receipt,  (ii) if sent by  certified  or
registered mail, three (3) business days after being  postmarked,  (iii) if sent
by overnight  delivery  service,  when received or when delivery is refused,  or
(iv) if sent by facsimile, when receipt of such transmission is acknowledged.

     Section 19.  Waivers; Non-Exclusive Remedies.
     ----------   -------------------------------

     (a) Except as otherwise  specifically provided herein, Debtor hereby waives
demand, notice, protest, notice of acceptance of this Security Agreement, notice
of loans made, credit extended, collateral received or delivered or other action
taken in reliance hereon (and all other demands and notice of any  description).
With respect to both the Obligations  and the Collateral,  Debtor hereby assents
to any extension or postponement of the time of payment or any other indulgence,
to any  substitution,  exchange  or release of  Collateral,  to the  addition or
release  of  any  party  or  person  primarily  or  secondarily  liable,  to the
acceptance  of partial  payment  thereon  and the  settlement,  compromising  or
adjusting  of any  thereof,  all in such  manner  and at such  time or  times as
Secured Party may deem advisable.

     (b) Except as otherwise provided by applicable law, Secured Party shall not
have any duty as to the collection or protection of the Collateral or any income
thereon,  nor as to the preservation of rights against prior parties,  nor as to
the preservation of any rights pertaining thereto beyond the safe custody of any
Collateral in its  possession.  Except as otherwise  provided by applicable law,
Secured  Party may exercise its rights with  respect to the  Collateral  without
resorting  or  regard  to other  collateral  or  sources  of  reimbursement  for
liability.  Except as otherwise  provided by applicable law, Secured Party shall
not be required to marshal any present or future  security for  (including,  but
not  limited to,  this  Security  Agreement  and the  Collateral  subject to the
Security  Interest created hereby),  or guaranties of, the Obligations or any of
them, or to resort to such security or guarantees in any particular  order;  and
all of its rights hereunder and in respect of such security and guarantees shall
be cumulative and in addition to all other rights,  however existing or arising.
To the extent that it lawfully may do so,  Debtor hereby agrees that it will not
invoke any law relating to the marshalling of collateral which might cause delay
in or impede the  enforcement  of Secured  Party's  rights  under this  Security
Agreement or under any other  instrument  evidencing  any of the  Obligations or
under  which  any of the  Obligations  is  outstanding  or by  which  any of the
Obligations is secured or guaranteed,  and to the extent that it lawfully may do
so, Debtor hereby irrevocably waives the benefits of all such laws.

     (c) No failure on the part of Secured  Party to  exercise,  and no delay in
exercising, and no course of dealing with respect to, any right, power or remedy
under this Security  Agreement shall operate as a waiver thereof;  nor shall any
single or partial exercise by Secured Party of any right,  power or remedy under
this Security  Agreement preclude any other right, power or remedy. The remedies
in this  Security  Agreement are  cumulative  and are not exclusive of any other
remedies  provided  by law,  including  any rights of setoff in favor of Secured
Party.

     (d) Debtor,  to the extent it may  lawfully do so,  hereby  consents to the
jurisdiction of the courts of the Commonwealth of Massachusetts  and the Federal
District Courts sitting in the Commonwealth of Massachusetts  for the purpose of
any suit or  proceeding  brought  in  connection  with or with  respect  to this
Security Agreement.

     Section 20.  Waiver of Jury Trial.
     ----------   --------------------

     EACH OF DEBTOR AND SECURED PARTY HEREBY  EXPRESSLY  WAIVES TRIAL BY JURY IN
ANY ACTION BROUGHT ON OR WITH RESPECT TO THIS SECURITY AGREEMENT.

     Section 21.  Changes in Writing.
     ----------   ------------------

     Neither this Security  Agreement  nor any provision  hereof may be changed,
waived,  discharged  or  terminated  orally but only by a  statement  in writing
signed by the party against which enforcement of the change,  waiver,  discharge
or termination is sought.

     Section 22.  Massachusetts Law; Meaning of Terms.
     ----------   -----------------------------------

     This Security  Agreement shall be construed in accordance with and governed
by the laws of the  Commonwealth of  Massachusetts  applicable to contracts made
and performed in said commonwealth,  except to the extent that remedies provided
by the laws of any state other than  Massachusetts  are  governed by the laws of
such state.  Unless otherwise  defined herein,  or unless the context  otherwise
requires, all terms used herein which are defined in the UCC as in effect in the
Commonwealth of Massachusetts have the meanings therein stated.

     Section 23.  Separability.
     ----------   ------------

     If any provision hereof is invalid or  unenforceable  in any  jurisdiction,
the  other  provisions  hereof  shall  remain in full  force and  effect in such
jurisdiction and shall be liberally construed in favor of Secured Party.

     Section 24.  Successors and Assigns.
     ----------   ----------------------

     This Security  Agreement  shall be binding upon and inure to the benefit of
the parties  hereto and their  respective  successors  and  assigns,  including,
without  limitation,   any  subsequent  holders  of  the  Note  or  any  of  the
Obligations,  each of whom shall,  without further act, become a party hereto by
becoming a holder of the Note or such Obligations.

     Section 25.  Headings.
     ----------   --------

     The headings in this  Security  Agreement are for the purposes of reference
only and shall not limit or otherwise affect the meaning hereof.

     Section 26.  Counterparts.
     ----------   ------------

     This Security  Agreement may be executed in any number of counterparts  and
by the different parties hereto in separate counterparts,  each of which when so
executed and  delivered  shall be an original,  but all of which shall  together
constitute one and the same agreement.

<PAGE>

     Section 27.  Permitted Transfer of Cash or Cash Equivalents.
     ----------   ----------------------------------------------

     Notwithstanding any provision of this Agreement to the contrary, Debtor may
at its election  direct the  disposition  of funds from the Pledged  Account (as
defined in the Loan  Agreement)  and may originate  instructions  or entitlement
orders  with  respect  to the  Pledged  Account so long as: (a) Debtor is at all
times in compliance with Sections 5.8 and 5.10 of the Loan Agreement (both prior
to and after giving effect to any such  directions,  instructions or entitlement
orders); and (b) no Event of Default has occurred hereunder and continued beyond
the expiration of any applicable  grace or cure period,  if any, or would result
from the taking of any such action permitted  hereunderno  condition which, with
the giving of notice or the passage of time, or both,  would constitute an Event
of Default  hereunder  exists or would result from the taking of any such action
permitted hereunder.

     IN WITNESS  WHEREOF,  this  Security  Agreement  has been  executed  by the
parties hereto all as of the day and year first above written.

                                BIOSPHERE MEDICAL, INC.

                                By:  /s/  Robert M. Palladino
                                     ----------------------------------------

                                     Title:  Vice President / CFO
                                             --------------------------------

                                BROWN BROTHERS HARRIMAN & Co.

                                By:  /s/  Joseph E. Hall
                                     ----------------------------------------

                                     Title:  Senior Vice President
                                             --------------------------------

<PAGE>

                                    EXHIBIT A

                   Pledged Securities Existing on Date Hereof

Debtor owns no securities, security entitlements or shares of stock as of the
date hereof.

<PAGE>

                                    EXHIBIT B

                   Financing Statements on File on Date Hereof

Filing            Secured          File                       Collateral
Office            Party            No.          Date          Description
--------------------------------------------------------------------------------

Delaware          Waters           20268742     1/3/02        Specified
Secretary         Financial                                   Equipment
of State          Services

<PAGE>

                                    EXHIBIT C

                    Additional Representations and Warranties

1.   Debtor's exact name is: BioSphere Medical, Inc.

2.   Debtor's Federal Tax Identification Number is: #04-3216867.

3.   Debtor's  organization  number assigned to Debtor by the Secretary of State
     of its state of formation is #NONE.

4.   Debtor uses in its business and owns the following trade names: None.

5.   Debtor's  chief  executive  office  is:  1050  Hingham  Street,   Rockland,
     Massachusetts 02370

6.   Debtor's  principal  place of business is: 1050 Hingham  Street,  Rockland,
     Massachusetts 02370

7.   Debtor has other  places of  business  located  at:  1050  Hingham  Street,
     Rockland, Massachusetts 02370

8.   Debtor owns or has an interest in personal  property located  elsewhere at:
     None.

9.   Debtor owns property consisting of fixtures at the following locations:

Address                                              Record Owner of Real Estate

1050 Hingham Street
Rockland, Massachusetts 02370

True and complete legal descriptions of such real estate are attached hereto
as Schedules
---------------.

<PAGE>

                                    EXHIBIT D

                      Patents, Trademarks, Tradenames, Etc.

<PAGE>

                                   SCHEDULE I

                                Leased Equipment

o    (10) IBM Thinkpads and (1) 340 Microdrive Thinkpad leased by Debtor through
     Heller Financial Group pursuant to a five year lease that began in April
     2001.

o    (1) Dell Firewall Server leased by Debtor through Dell Equipment Leasing
     pursuant to a three year lease that began in May 1, 2002.

o    (1) High Performance Liquid Chromatography Machine leased by Debtor through
     Waters Financial pursuant to a three year lease that began in January 2002.EXHIBIT 10.3

                                                                    May 31, 2002

Via Facsimile Transmission

Mr. John M. Carnuccio
22 Winsor Street
Duxbury, MA 02332

Dear John:

During our  discussions,  you have notified me that you are resigning  from your
positions  as Chief  Executive  Officer and member of the Board of  Directors of
BioSphere  Medical,  Inc.  (the  "Company")  effective  September 1, 2002.  Also
effective  September 1, 2002,  you are resigning all positions you hold with any
company that is a subsidiary of, or affiliated  with, the Company.  Although you
are  resigning,  the  Company  is  prepared  to provide  you with the  severance
benefits  described  in  paragraph  2 below if you sign and return  this  letter
agreement to me by May 31, 2002. By signing and returning this letter agreement,
you will be  entering  into a binding  agreement  with the  Company  and will be
agreeing to the terms and conditions set forth in the numbered paragraphs below,
including  the release of claims set forth in  paragraph 3.  Therefore,  you are
advised to consult with your attorney before signing this letter agreement. Once
you sign this letter  agreement,  it will become a binding agreement between you
and the Company.

If you choose  not to sign and return  this  letter  agreement  to me by May 31,
2002,  you shall not receive any  severance  benefits  from the Company and your
employment will terminate on that date. You will,  however,  receive payment for
all  accrued  wages  and  for any  unused  vacation  time  accrued  through  the
Separation Date (as defined below). Also, regardless of signing this letter, you
may elect to continue  receiving group medical insurance pursuant to the federal
"COBRA" law, 29 U.S.C.  ss. 1161 et seq. All premium  costs shall be paid by you
on a monthly basis for as long as, and to the extent that,  you remain  eligible
for COBRA continuation. You should consult the COBRA materials to be provided by
the Company for details regarding these benefits. All other benefits,  including
life insurance and long term  disability,  will cease upon your Separation Date.
Further,  pursuant to the BioSphere  Medical,  Inc.  (f/k/a  BioSepra Inc.) 1997
Stock Incentive Plan and your Incentive Stock Option Agreement, you will have up
to thirty-six (36) months after the Separation Date to exercise any vested stock
options you may have as of the Separation  Date (as provided for by the plan and
related  agreement).  All  unvested  stock  options  will  be  cancelled  on the
Separation Date.

The following numbered paragraphs set forth the terms and conditions which will
apply if you sign and return this letter agreement:

     1.   SEPARATION  DATE AND  TRANSITION  PERIOD - The effective  date of your
          separation from the Company,  resignation from the Board of Directors,
          and  resignation  from  all  positions  you  hold  with  any  and  all
          subsidiaries  and  affiliates of the Company is September 1, 2002 (the
          "Separation  Date").  The period of May 31, 2002 to September 1, 2002,
          shall be your Transition  Period.  During the Transition  Period,  you
          will  perform  any and all  services  on behalf of the  Company  at my
          direction. All business-related  communications with Company employees
          will be at my  direction  or through  Robert  Palladino.  Your  duties
          during the  Transition  Period will be performed from your home except
          as I may otherwise  reasonably request or as we may mutually agree. On
          or before September 15, 2002, the Company shall pay you for four weeks
          of accrued  and unused  vacation in full  satisfaction  of any and all
          accrued and unused vacation you may have as of September 1, 2002.

     2.   SEVERANCE  BENEFITS  - In return  for your  execution  of this  letter
          agreement,  including  the  release of claims in section 3 below,  the
          Company  agrees to pay you Three  Hundred Ten  Thousand  Nine  Hundred
          Sixty-Three Dollars and Four Cents ($310,963.04),  less all applicable
          state and federal  taxes (the  "Severance  Pay").  This  Severance Pay
          equals your current  annual  salary and a bonus amount of  $80,604.00.
          This Severance Pay will be paid in equal  installments for a period of
          twenty-six   (26)  pay  periods   following  the  Separation  Date  in
          accordance with the Company's regular payroll practices.  In addition,
          during the period of time that the Company is paying the Severance Pay
          (the  "Severance Pay Period"),  or until you become eligible for other
          coverage,  whichever  comes  first,  you shall be  considered  to have
          elected to continue  receiving group medical insurance pursuant to the
          federal "COBRA" law, 29 U.S.C.ss.1161 et seq. During the Severance Pay
          Period,  the  Company  shall  continue  to pay the -- --- share of the
          premium of such  coverage  that is paid by the  Company for active and
          similarly-situated  employees  who receive the same type of  coverage.
          The  remaining  balance of any premium  costs,  and all premium  costs
          after  the  Severance  Pay  Period,  shall be paid by you on a monthly
          basis for as long as, and to the extent that, you remain  eligible for
          COBRA  continuation.  You should  consult  the COBRA  materials  to be
          provided by the Company for details regarding these benefits.

     3.   RELEASE - In  consideration  of the payment of the  Severance  Pay and
          benefits   described  above,  which  you  acknowledge  you  would  not
          otherwise  be  entitled  to  receive,   you  hereby  fully,   forever,
          irrevocably  and  unconditionally  release,  remise and  discharge the
          Company, its officers, directors, stockholders,  corporate affiliates,
          subsidiaries,  parent  companies,  agents and employees (each in their
          individual  and  corporate  capacities)  (hereinafter,  the  "Released
          Parties")  from  any and all  claims,  charges,  complaints,  demands,
          actions, causes of action, suits, rights, debts, sums of money, costs,
          accounts,  reckonings,  covenants,  contracts,  agreements,  promises,
          doings, omissions, damages, executions, obligations,  liabilities, and
          expenses  (including  attorneys'  fees and  costs),  of every kind and
          nature  which you ever had or now have  against the  Released  Parties
          arising  out of  your  employment  with  and/or  separation  from  the
          Company,  including, but not limited to, all employment discrimination
          claims  under  Title  VII  of  the  Civil  Rights  Act  of  1964,   42
          U.S.C.ss.2000e  et seq., the Americans With  Disabilities Act of 1990,
          42  U.S.C.,ss.12101  et seq.,  the Family and  Medical  Leave Act,  29
          U.S.C.ss.2601 et seq., the Rehabilitation Act of 1973, 29 U.S.C.ss.701
          et seq., and the Massachusetts Fair Employment  Practices Act., M.G.L.
          c.151B,ss.1  et seq.,  all as amended;  all claims  arising out of the
          Fair Credit  Reporting  Act, 15  U.S.C.ss.1681  et seq.,  the Employee
          Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. ss.1001 et
          seq., the  Massachusetts  Civil Rights Act, M.G.L.  c.12ss.ss.11H  and
          11I, the Massachusetts Equal Rights Act, M.G.L. c.93,ss.102 and M.G.L.
          c.214,ss.1C,  the  Massachusetts  Labor  and  Industries  Act,  M.G.L.
          c.149,ss.1  et seq.,  and the  Massachusetts  Privacy Act,  M.G.L.  c.
          214,ss.1B,  all as amended;  all common law claims including,  but not
          limited  to,  actions  in tort,  defamation  and  breach  of  contract
          (including  any and all claims  pursuant  to your offer  letter  dated
          January 18, 1999); all claims to any non-vested  ownership interest in
          the Company,  contractual  or otherwise,  including but not limited to
          claims to stock or stock options;  and any claim or damage arising out
          of your employment with or separation from the Company  (including any
          claim for  retaliation)  under any common  law theory or any  federal,
          state or local statute or ordinance not  expressly  referenced  above;
          provided,  however,  that nothing in this Agreement  prevents you from
          filing,  cooperating  with, or participating in any proceeding  before
          the EEOC or a state Fair Employment  Practices Agency (except that you
          acknowledge that you may not be able to recover any monetary  benefits
          in connection with any such claim, charge or proceeding); and provided
          further that nothing in this letter  agreement shall affect your right
          to enforce  the  provisions  of this  letter  agreement,  nor shall it
          affect your right to claim contribution,  indemnification or insurance
          coverage  from  the  Company  that you  would  have had if you had not
          entered into this letter agreement.

          In consideration of the  undertakings,  transactions and consideration
          recited in this letter agreement,  the Company hereby  unconditionally
          and  irrevocably  remises,  releases and forever  discharges you, your
          heirs  and  administrators,  or any of  them,  of and from any and all
          suits, claims, demands,  interest,  costs (including attorney fees and
          costs  actually  incurred),  expenses,  actions  and causes of action,
          rights, liabilities, obligations, promises, agreements, controversies,
          losses and debts, or any nature whatsoever, which the Company now has,
          or at any time heretofore  ever had, or could have had,  whether known
          or unknown,  suspected or unsuspected,  arising out of your employment
          with the Company; provided,  however, nothing in this letter agreement
          shall affect the  Company's  right to enforce the  provisions  of this
          letter agreement.

     4.   NON-DISCLOSURE AND NON-COMPETITION- You acknowledge your obligation to
          keep  confidential all non-public  information  concerning the Company
          which you  acquired  during  the  course of your  employment  with the
          Company,  as stated more fully in the  Confidentiality  Agreement  you
          executed which remains in full force and effect. You further agree:

          (a)  You shall not disclose to others,  or use for your own benefit or
               the benefit of others,  any  confidential,  proprietary or secret
               information   owned,   possessed   or   used   by  the   Company,
               (collectively,   the  "Proprietary   Information").   By  way  of
               illustration,   but  not  limitation,   Proprietary   Information
               includes inventions,  improvements,  modifications,  discoveries,
               methods,  trade secrets,  processes,  data,  know-how,  marketing
               plans,  forecasts,  unpublished  financial  statements,  budgets,
               licenses,  prices,  costs and  employee,  customer  and  supplier
               lists.

          (b)  Unless otherwise approved by the Board of Directors,  in writing,
               for a period of twelve (12) months from the Separation  Date, you
               shall not directly or indirectly engage (whether for compensation
               or without  compensation) in any business activity,  either as an
               individual proprietor,  partner, stockholder,  officer, employee,
               director,   consultant  or  in  any  other  capacity   whatsoever
               (otherwise  than as the  holder of not more than 2% of the shares
               of  outstanding  stock of a  publicly  held  corporation),  which
               competes with any business conducted by the Company or any of its
               subsidiaries  at any time during the period of your  relationship
               with the Company,  or any business  planned by the Company or any
               of its  subsidiaries  at the time of the  Separation  Date in the
               field of embolotherapy.  You further agree that you shall not, at
               any time during the twelve (12) months  following the  Separation
               Date,  recruit or  otherwise  solicit or induce any  employee  or
               consultant of the Company or any of its subsidiaries to terminate
               such  person's  employment  with,  or  otherwise  terminate  such
               person's   relationship   with   the   Company   or  any  of  its
               subsidiaries, successors or assigns.

          (c)  The  restrictions  set forth in this Section 4 are  considered by
               the parties to be reasonable  for the purposes of protecting  the
               business of the  Company.  However,  if any such  restriction  is
               found by any court of competent  jurisdiction to be unenforceable
               because  it  extends  for too long a  period  of time or over too
               great a range of activities or in too broad a geographic area, it
               shall be  interpreted  to extend only over the maximum  period of
               time,  range of activities or geographic  area as to which it may
               be enforceable.

     5.   RETURN OF COMPANY PROPERTY - You confirm that you have returned to the
          Company all Proprietary Information (and copies thereof), keys, files,
          records (and copies thereof),  equipment  (including,  but not limited
          to,  computer  hardware,  software  and  printers,  wireless  handheld
          devices,  cellular  phones,  pagers,  etc.),  Company  identification,
          Company  vehicles  and  any  other  Company-owned   property  in  your
          possession  or control  and have left  intact all  electronic  Company
          documents,  including  but not limited to those which you developed or
          help develop during your employment. You further confirm that you will
          cancel all accounts for your benefit,  if any, in the Company's  name,
          including but not limited to, credit  cards,  telephone  charge cards,
          cellular phone and/or pager accounts and computer  accounts by May 31,
          2002.

     6.   BUSINESS EXPENSES AND COMPENSATION - You acknowledge that you have not
          submitted  all your  claims for  reimbursement  of  business  expenses
          incurred in conjunction  with the performance of your employment as of
          the date of this letter  agreement and the Company  acknowledges  that
          you may not  have  been  paid for all your  claims  for  reimbursement
          already  submitted.  You  agree  to  promptly  submit  claims  for all
          appropriate  business  expenses  for which you have not yet  submitted
          claims and the Company  agrees to pay such  appropriate  expenses  and
          previously  submitted  but unpaid  expenses  in  accordance  with past
          practice for reimbursement of expenses.  You further  acknowledge that
          you  have  received  payment  in full  for all  services  rendered  in
          conjunction  with your  employment  by the  Company  and that no other
          compensation is owed to you.

     7.   NON-DISPARAGEMENT  - You  understand and agree that as a condition for
          payment to you of the consideration  herein  described,  you shall not
          make any false,  disparaging  or  derogatory  statements  to any media
          outlet,  industry group,  financial institution or analyst, or current
          or former  employee,  consultant,  client or  customer  of the Company
          regarding the Company or any of its  directors,  officers,  employees,
          agents or  representatives or about the Company's business affairs and
          financial  condition.   The  Company  agrees  that  it  will  instruct
          individuals  with  knowledge of this letter  agreement not to make any
          false,  disparaging  or  derogatory  statements  to any media  outlet,
          industry group, financial institution or analyst, or current or former
          employee, consultant, client or customer about you.

     8.   AMENDMENT - This letter  agreement  shall be binding  upon the parties
          and may not be  modified  in any manner,  except by an  instrument  in
          writing of  concurrent or  subsequent  date signed by duly  authorized
          representatives  of the  parties  hereto.  This  letter  agreement  is
          binding  upon and shall  inure to the benefit of the parties and their
          respective  agents,   assigns,   heirs,   executors,   successors  and
          administrators.

     9.   WAIVER OF RIGHTS - No delay or omission  by the Company in  exercising
          any right under this  letter  agreement  shall  operate as a waiver of
          that or any other right.  A waiver or consent  given by the Company on
          any one occasion  shall be effective  only in that  instance and shall
          not  be  construed  as a bar  or  waiver  of any  right  on any  other
          occasion.

     10.  VALIDITY - Should any  provision of this letter  agreement be declared
          or be determined by any court of competent  jurisdiction to be illegal
          or invalid,  the validity of the remaining parts,  terms or provisions
          shall not be affected  thereby and said illegal or invalid part,  term
          or  provision  shall  be  deemed  not  to be a  part  of  this  letter
          agreement.

     11.  CONFIDENTIALITY  - You  understand  and agree that as a condition  for
          payment to you of the severance  benefits herein described,  the terms
          and  contents  of  this  letter  agreement,  and the  contents  of the
          negotiations and discussions resulting in this letter agreement, shall
          be   maintained   as   confidential   by  you  and  your   agents  and
          representatives  and  shall  not be  disclosed  except  to the  extent
          required by federal or state law or as otherwise  agreed to in writing
          by the  Company.  The Company may file this  document or disclose  the
          contents  hereof with the  Securities  and Exchange  Commission or any
          regulatory or governmental agency or entity, to the extent required by
          law or  regulation  or as otherwise  agreed to by you.  12.  Nature of
          Agreement  -  The  parties  understand  and  agree  that  this  letter
          agreement  is  a  severance  agreement  and  does  not  constitute  an
          admission of liability or wrongdoing on the part of either party.

     13.  ACKNOWLEDGMENTS   -  You  acknowledge  that  you  have  been  given  a
          reasonable amount of time to consider this letter agreement,  and that
          the  Company  advised  you to  consult  with an  attorney  of your own
          choosing prior to signing this letter agreement.

     14.  VOLUNTARY  ASSENT - You affirm that no other promises or agreements of
          any  kind  have  been  made to or with  you by any  person  or  entity
          whatsoever  to cause you to sign this letter  agreement,  and that you
          fully understand the meaning and intent of this letter agreement.  You
          state and represent  that you have had an opportunity to fully discuss
          and review the terms of this letter  agreement  with an attorney.  You
          further state and represent  that you have  carefully read this letter
          agreement,  understand  the contents  herein,  freely and  voluntarily
          assent to all of the terms and conditions  hereof,  and sign your name
          of your own free act.

     15.  APPLICABLE  LAW - This  letter  agreement  shall  be  interpreted  and
          construed by the laws of the  Commonwealth of  Massachusetts,  without
          regard to conflict of laws provisions.  Each party hereby  irrevocably
          submits to and  acknowledges  and recognizes the  jurisdiction  of the
          courts of the  Commonwealth of  Massachusetts,  or if  appropriate,  a
          federal court located in Massachusetts  (which courts, for purposes of
          this letter agreement, are the only courts of competent jurisdiction),
          over any suit, action or other proceeding  arising out of, under or in
          connection with this letter agreement or the subject matter hereof.

     16.  ENTIRE AGREEMENT - This letter agreement  contains and constitutes the
          entire  understanding  and agreement  between the parties  hereto with
          respect  to your  severance  benefits  and the  settlement  of  claims
          against  the  Company  and  cancels  all  previous  oral  and  written
          negotiations,   agreements,   commitments,   writings  in   connection
          therewith. Nothing in this paragraph, however, shall modify, cancel or
          supersede your obligations set forth in paragraph 4 herein.

If you have any questions about the matters covered in this letter, please call
me.

                                                     Very truly yours,

                                                     BIOSPHERE MEDICAL, INC.

                                                     By:  /s/ Paul Looney
                                                          ---------------
                                                              Paul Looney
                                                              Board Member

I hereby agree to the terms and conditions set forth above. I hereby resign my
position with the Company, my seat on the Board of Directors, and all positions
I hold with any subsidiary or affiliate of the Company effective September 1,
2002. I have been given sufficient time to consider this letter agreement, I
have reviewed it with my counsel and I have chosen to execute this on the date
below.

/s/ John M. Carnuccio        Date: May 31, 2002
---------------------
    John M. Carnuccio

To be returned by May 31, 2002

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