<PAGE>
 
                                                                     EXHIBIT 4.5

                               SECOND AMENDMENT

                                      TO

                               RIGHTS AGREEMENT
                               ----------------

         SECOND AMENDMENT, dated as of October __, 1998 (the "Second
Amendment"), to Rights Agreement dated as of September 4, 1992 (the "Rights
Agreement") and amended March 25, 1996, between Candela Corporation, a Delaware
corporation (the "Company"), and Bank Boston, N.A., a national banking
association, as Rights Agent (the "Rights Agent").

         WHEREAS, the Board of Directors of the Company has determined that it
would be desirable and in the best interests of the Company and its stockholders
for the Company to supplement and amend the Rights Agreement in the manner set
forth in this Second Amendment;

         NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein and in the Rights Agreement and for other good and
valuable consideration, the receipt of which is hereby acknowledged, and
pursuant to Section 26 of the Rights Agreement, the parties hereby agree as
follows:

         1.    All references in the Rights Agreement to "Continuing Director"
or "Continuing Directors" are deleted and replaced with "Director" or
"Directors" as appropriate.

         2.    Section 1 (o) of the Rights Agreement is amended to read in
its entirety as follows: 

               (o)  "Director" shall mean any member of the Board, and
               "Directors" shall mean the members of the Board.

         3.    Section 25 of the Rights Agreement is amended to read in its
               entirety as follows: Section 25. Notices. Notices or demands
                                                -------
               authorized by this Agreement to be given or made by the Rights
               Agent or by the holder of any Rights Certificate to or on the
               Company shall be sufficiently given or made if sent by first-
               class mail, postage prepaid, addressed (until another address is
               filed in writing with the Rights Agent) as follows:

                              Candela Corporation
                              530 Boston Post Road
                              Wayland, MA 01778-1833
                              Attention:  President

               Subject to the provisions of Section 21, any notice or demand
               authorized by this Agreement to be given or made by the Company
               or by the holder of any Rights
<PAGE>
 
               Certificate to or on the Rights Agent shall be sufficiently given
               or made if sent by first-class mail, postage prepaid, addressed
               (until another address is filed in writing with the Company) as
               follows:

                               Bank Boston, N.A.
                               c/o Boston EquiServe L.P.
                               150 Royall Street
                               Canton, Massachusetts 02021
                               Attention:  Client Administration

               Notices or demands authorized by this Agreement to be given or
               made by the Company or the Rights Agent to the holder of any
               Rights Certificate (or, if prior to the Distribution Date, to the
               holder of certificates representing shares of Common Stock) shall
               be sufficiently given or made if sent by first-class mail,
               postage prepaid, addressed to such holder at the address of such
               holder as shown on the registry books of the Company.

         4.    To delete from Section 28 in each place that it appears the
phrase "(with, where specifically provided for herein, the concurrence of the
Continuing Directors)".

         5.    The forms of Rights Certificate and Summary of Rights to Purchase
Common Stock attached as Exhibits A and B to the Rights Agreement, respectively,
are amended to read in their entireties as set forth in the forms of such
documents attached hereto and labeled Exhibits A and B, respectively.

         6.    The term "Agreement" as used in the Rights Agreement shall be
deemed to refer to the Rights Agreement as amended hereby.

         7.    The foregoing Amendments shall be effective as of the date hereof
and, except as set forth herein, the Rights Agreement shall remain in full force
and effect and shall be otherwise unaffected hereby.

         8.    This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                 [Remainder of Page Intentionally Left Blank]
<PAGE>
 
         IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and their respective corporate seals to be
hereunto affixed, all as of the day and year first above written.


Attest:                                 CANDELA CORPORATION



By:____________________________         By:________________________________
   Gordon H. Hayes, Jr.                    Gerard E. Puorro
   Secretary                               President and Chief Executive
                                           Officer



Attest:                                 BANK BOSTON, N.A.



By:____________________________         By:________________________________
   Elaine Landry                           Tyler Haynes
   Account Manager                         Administration Manager
<PAGE>
 
                                                                       EXHIBIT A
                                                                       ---------
Certificate No. R-
                                                               __________ Rights


               NOT EXERCISABLE AFTER SEPTEMBER 22, 2002 OR EARLIER IF REDEEMED
               BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
               OPTION OF THE COMPANY, AT $0.005 PER RIGHT ON THE TERMS SET FORTH
               IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
               BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE PERSON
               (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
               SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. THE
               RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO LONG AS
               HELD, BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE
               QUALIFICATION TO THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY
               SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE
               BEEN OBTAINED OR BE OBTAINABLE. [THE RIGHTS REPRESENTED BY THIS
               RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO
               WAS OR BECAME AN [ACQUIRING] [ADVERSE] PERSON OR AN AFFILIATE OR
               ASSOCIATE OF AN [ACQUIRING] [ADVERSE] PERSON (AS SUCH TERMS ARE
               DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
               CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND
               VOID IN THE CIRCUMSTANCE SPECIFIED IN SECTION 7(e) OF SUCH
               AGREEMENT.]/1/


________________
/1/  The portion of the legend in brackets shall be inserted only if applicable,
shall be modified to apply to an Acquiring Person or an Adverse Person, as 
applicable, and shall replace the preceding sentence.
<PAGE>
 
                              Rights Certificate

                              CANDELA CORPORATION

         This certifies that _________, or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of September 4, 1992 (the "Rights Agreement"), as amended,
between Candela Corporation, a Delaware corporation (the "Company"), and
BankBoston, N.A. (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 P.M. (Eastern time) on September 22, 2002 at the office or offices
of the Rights Agent designated for such purpose, or its successors as Rights
Agent, one fully paid and nonassessable share of common stock, par value $.01
per share (the "Common Stock"), of the Company, at a purchase price of $48.00
per share (the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
September 22, 1992, based on the Common Stock as constituted at such date.

         As more fully set forth in the Rights Agreement, following the
occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights
Agreement), if the Rights evidenced by this Rights Certificate are beneficially
owned by (i) an Acquiring Person, an Adverse Person or an Affiliate or Associate
of any such Person (as such terms are defined in the Rights Agreement), which
the Company's Directors (as defined in the Rights Agreement), in their sole
discretion, determine is or was involved in or caused or facilitated, directly
or indirectly (including through any change in the Board), such Section
11(a)(ii) Event, (ii) a transferee of any such Acquiring Person, Adverse Person,
Affiliate or Associate who becomes a transferee after such Acquiring Person,
Adverse Person, Affiliate or Associate becomes such, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of any such
Acquiring Person, Adverse Person, 
<PAGE>
 
Affiliate or Associate who becomes a transferee prior to or concurrently with
such Acquiring Person or Adverse Person becoming such, such Rights shall become
null and void and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Section 11(a)(ii) Event.

         The Rights evidenced by this Rights Certificate shall not be
exercisable, and shall be void so long as held, by a holder in any jurisdiction
where the requisite qualification to the issuance to such holder, or the
exercise by such holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.

         As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Common Stock or other securities, which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.

         This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Company.

        This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be 
<PAGE>
 
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.

         Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may (unless the Directors shall have made a determination
that a Person is an Adverse Person) be redeemed by the Company at its option at
a redemption price of $0.005 per Right at any time prior to the earlier of the
close of business on (i) the tenth day following the Stock Acquisition Date (as
defined in the Rights Agreement and as such time period may be extended pursuant
to the Rights Agreement), and (ii) the Expiration Date (as defined in the Rights
Agreement). Under certain circumstances set forth in the Rights Agreement, the
decision to redeem shall require the concurrence of a majority of the Directors.
After the expiration of the redemption period, the Company's right of redemption
may be reinstated if either (i) an Acquiring Person reduces his beneficial
ownership to less than 10% of the outstanding shares of Common Stock in a
transaction or series of transactions not involving the Company or (ii) the
Board approves the merger of the Company with, or acquisition of the Company by,
a Person unrelated to the Acquiring Person, and such reinstatement is approved
by the Company's Board of Directors.

         No fractional shares of Common Stock will be issued upon the exercise
of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will
be made, as provided in the Rights Agreement.

         No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Common
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or 
<PAGE>
 
otherwise, until the Right or Rights evidenced by this Rights Certificate shall
have been exercised as provided in the Rights Agreement.

     This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.

     WITNESS the facsimile signature of the proper officer of the Company under
seal. Dated as of _________ 19__.

                                        CANDELA CORPORATION


                                        By____________________________
                                          Title:


                                        By____________________________
                                          Title:

Countersigned:

BANKBOSTON, N.A.

By_______________________
  Authorized Signature
<PAGE>
 
                              FORM OF ASSIGNMENT
                              ------------------


               (To be executed by the registered holder if such 
              holder desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED

hereby sells, assigns and transfers unto


________________________________________________________________________________
                 (Please print name and address of transferee)

________________________________________________________________________________

this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.

Dated:_________, 19__



                                             ____________________________
                                             Signature
Signature Guaranteed:
<PAGE>
 
                                  Certificate
                                  -----------

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1)  this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, an
Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined in the Rights Agreement);

     (2)  after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person, an Adverse Person
or an Affiliate or Associate of any such Person.


Dated:__________, 19__                  ______________________________________
                                        Signature

Signature Guaranteed:

                                    NOTICE
                                    ------


     The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
<PAGE>
 
                         FORM OF ELECTION TO PURCHASE
                         ----------------------------

                 (To be executed if holder desires to exercise
                Rights represented by the Rights Certificate.)

To:  CANDELA CORPORATION

     The undersigned hereby irrevocably elects to exercise Rights represented by
this Rights Certificate to purchase the shares of Common Stock issuable upon the
exercise of the Rights (or such other securities of the Company or of any other
person which may be issuable upon the exercise of the Rights) and requests that
certificates for such shares be issued in the name of and delivered to:

Please insert social security
or other identifying number


                    ___________________________________________
                        (Please print name an address)

_______________________________________________________________

_______________________________________________________________


     If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:

Please insert social security 
or other identifying number:


_______________________________________________________________
                        (Please print name and address)

_______________________________________________________________

_______________________________________________________________

Dated:___________, 19__            ____________________________
                                   Signature

Signature Guaranteed:
<PAGE>
 
                                  Certificate
                                  -----------

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1)  the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person,
an Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined in the Rights Agreement);

     (2)  after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person, an Adverse Person or an
Affiliate or Associate of any such Person.


Dated:________, 19__                         _______________________________
                                             Signature



Signature Guaranteed:

                                    NOTICE
                                    ------

     The signature to the foregoing, Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
 
                                                                       EXHIBIT B
                                                                       ---------

                  SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK


     On September 4, 1992, the Board of Directors of Candela Corporation (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Common Stock of the Company to stockholders of record at the close of
business on September 22, 1992. Each Right entitles the registered holder to
initially purchase from the Company one share of Common Stock at a purchase
price of $48.00, subject to adjustment (the "Purchase Price"). The description
and terms of the Rights are set forth in a Rights Agreement, as amended from
time to time (the "Rights Agreement") between the Company and BankBoston, N.A.,
as Rights Agent.

     Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following the date
on which the Company's chief executive officer becomes aware that a person or
group of affiliated or associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of more than 25% of the
outstanding shares of Common Stock (the "Stock Acquisition Date"), (ii) 10
business days following the commencement of a tender offer or exchange offer
that may result in a person or group beneficially owning 25% or more of such
outstanding shares of Common Stock or (iii) 10 business days after the Directors
of the Company shall declare any Person to be an Adverse Person, upon a
determination that such person, alone or together with its affiliates and
associates, has become the Beneficial Owner of an amount of Common Stock which
the Directors determine to be substantial (which amount shall in no event be
less than 10% of the shares of Common Stock then outstanding) and a majority of
the Directors (with the concurrence of a majority of the Independent Directors)
determines, after reasonable inquiry and investigation, including consultation
with such persons as such directors shall deem appropriate, that (a) such
beneficial ownership by such person is intended to cause the Company to
repurchase the Common Stock beneficially owned by such person or to cause
pressure on the Company to take action or enter into a transaction or series of
transactions intended to provide such person with short-term financial gain
under circumstances where such directors determine that the best long-term
interests of the Company and its stockholders (taking into account any impact on
the national security of the United States or the impact on any constituency
which applicable law permits directors to consider in discharging their
fiduciary duty) would not be served by taking such action or entering into such
transaction or series of transactions at that time or (b) such beneficial
ownership is causing or reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with customers or
impairment of the Company's ability to maintain its competitive position) on the
business or prospects of the Company.

     Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after September 22, 1992
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.

     The Rights are not exercisable until the Distribution Date and will expire
at the close of business on September 22, 2002 unless earlier redeemed by the
Company as described below.

     As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.

     In the event that the Directors determine that a person is an Adverse
Person or, at any time following the Distribution Date, (i) the Company is the
surviving corporation in a merger with an Acquiring Person and its Common Stock
is not changed or exchanged, (ii) a Person becomes the beneficial owner of more
than 25% of the then outstanding shares of Common Stock (except pursuant to an
offer for all outstanding shares of Common Stock
<PAGE>
 
which the Independent Directors determine to be fair to and otherwise in the
best interests of the Company and its stockholders), (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement, or (iv) during such time as there is an Acquiring Person, an event
occurs which results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., a reverse stock split), each holder of a Right
                           ----
will thereafter have the right to receive, upon exercise, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. However, Rights are
not exercisable following the occurrence of either of the events set forth above
until such time as the Rights are no longer redeemable by the Company as set
forth below. Notwithstanding any of the foregoing, following the occurrence of
any of the events set forth in this paragraph, all Rights that are, or (under
certain circumstances specified in the Rights Agreement) were, beneficially
owned by an Acquiring Person or an Adverse Person will be null and void.

     In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger
described in the preceding paragraph or a merger which follows an offer
described in the preceding paragraph), or (ii) more than 50% of the Company's
assets or earning power is sold or transferred, each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock of the acquiring company
having a value equal to two times the exercise price of the Right.

     The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Stock, (ii) if holders of the Common Stock are granted certain rights or
warrants to subscribe for Common Stock or convertible securities at less than
the current market price of the Common Stock, or (iii) upon the distribution to
holders of the Common Stock of evidences of indebtedness or assets (excluding
regular quarterly or other periodic cash dividends) or of subscription rights or
warrants (other than those referred to above).

     With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Common Stock will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Common Stock
on the last trading date prior to the date of exercise.

     In general, the Company may redeem the Rights in whole, but not in part, at
any time until ten days following the Stock Acquisition Date, at a price of
$0.005 per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). Under certain circumstances set forth in
the Rights Agreement, the decision to redeem shall require the concurrence of a
majority of the Directors. The Company may not redeem the Rights if the
Directors have previously declared a person to be an Adverse Person. After the
redemption period has expired, the Company's right of redemption may be
reinstated if either (i) an Acquiring Person reduces its beneficial ownership to
less than 10% of the outstanding shares of Common Stock in a transaction or a
series of transactions not involving the Company or (ii) the Board of Directors
approves the merger of the Company with, or acquisition of the Company by, a
Person unrelated to the Acquiring Person.

     Immediately upon the action of the Board of Directors ordering redemption
of the Rights, the Rights will terminate and the only right of the holders of
Rights will be to receive the $0.005 per Right redemption price.

     Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above.

     Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the earlier to occur of the
<PAGE>
 
determination that a person is an Adverse Person or the Distribution Date. After
the earlier of such events, the provisions of the Rights Agreement may be
amended by the Board in order to cure any ambiguity, to correct or supplement
any provision which may be defective or inconsistent with other provisions, to
make changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person or any Adverse Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.

     A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
September 4, 1992. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.