PALOMAR MEDICAL TECHNOLOGIES, INC.

                      SECOND AMENDED 1991 STOCK OPTION PLAN


                                    ARTICLE I

                               Purpose of the Plan

         The  purpose  of  this  plan  is to  encourage  and  enable  employees,
consultants,  directors  and others who are in a  position  to make  significant
contributions  to the success of PALOMAR MEDICAL  TECHNOLOGIES,  INC. and of its
affiliated  corporations  upon  whose  judgment,  initiative,  and  efforts  the
Corporation  depends for the  successful  conduct of its business,  to acquire a
closer  identification  of their  interests  with  those of the  corporation  by
providing them with opportunities to purchase stock in the Corporation  pursuant
to options granted hereunder, thereby stimulating their efforts on behalf of the
Corporation  and  strengthening   their  desire  to  remain  involved  with  the
Corporation.


                                   ARTICLE II

                                   Definitions

         2.1  "Affiliated  Corporation"  means any stock  corporation of which a
majority of the voting common or capital  stock is owned  directly or indirectly
by the Corporation.

         2.2  "Award" means an Option granted under Article V.

         2.3  "Board" means the Board of Directors of the Corporation.

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         2.4  "Code"  means the Internal  Revenue  Code of 1986, as amended from
time to time.

         2.5  "Committee"  means a committee of not less than two members of the
Board  appointed  by the  Board  to  administer  the  Plan,  each  of  whom is a
"disinterested  person"  within the meaning of Rule 16b-3  under the  Securities
Exchange Act of 1934, or any successor provision.

         2.6  "Corporation" means PALOMAR MEDICAL TECHNOLOGIES, INC., a Delaware
corporation, or its successor.

         2.7 "Employee" means any person who is a regular full-time or part-time
employee of the Corporation or an Affiliated  Corporation on or after August 30,
1991.

         2.8  "Option" means an Incentive Stock Option or  Non-Qualified  Option
granted by the Committee  under Article V of this Plan in the form of a right to
purchase  Stock  evidenced by an instrument  containing  such  provisions as the
Committee may establish.

         2.9  "Participant"  means a person selected by the Committee to receive
an award under the Plan.

         2.10  "Plan" means this 1991 Stock Option Plan.

         2.11  "Incentive Stock Option" ("ISO") means an option which qualifies
as an incentive stock option as defined in Section 422 of the Code, as amended.

         2.12 "Non-Qualified Option" means any option not intended to qualify as
an Incentive Stock Option.

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         2.13 "Stock" means the Common Stock, $.01 par value, of the Corporation
or any successor,  including any  adjustments in the event of changes in capital
structure of the type described in Article IX.

         2.14  "Reporting  Person"  means a person  subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.

         2.15  "Restricted  Period"  means the  period of time  selected  by the
Committee during which an Award may be forfeited by the person.

                                   ARTICLE III

                           Administration of the Plan

         3.1 ADMINISTRATION BY THE COMMITTEE. This Plan shall be administered by
the  Committee as defined  herein.  From time to time the Board may increase the
size of the Committee and appoint  additional  members  thereto,  remove members
(with or without cause) and appoint new members in substitution  therefor,  fill
vacancies  however caused, or remove all members of the Committee and thereafter
directly administer the Plan. No member of the Committee shall be liable for any
action or  determination  made in good  faith  with  respect  to the Plan or any
options granted under it.

         3.2  POWERS.  The  Committee  shall  have full and final  authority  to
operate,  manage,  and  administer the Plan on behalf of the  Corporation.  This
authority includes, but is not limited to:

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                  (a)   The   power   to   grant   Awards    conditionally    or
         unconditionally,

                  (b)  The  power  to  prescribe   the  form  or  forms  of  the
         instruments evidencing Awards granted under this Plan,

                  (c) The power to interpret the Plan,

                  (d) The power to provide  regulations for the operation of the
         incentive  features of the Plan, and otherwise to prescribe and rescind
         regulations for  interpretation,  management and  administration of the
         Plan,

                  (e) The power to delegate  responsibility  for Plan operation,
         management and administration of the Plan,

                  (f) The power to delegate to other persons the  responsibility
         of performing  ministerial  acts in furtherance of the Plan's  purpose,
         and

                  (g) The power to engage the services of persons, companies, or
         organizations  in furtherance of the Plan's purpose,  including but not
         limited  to,  banks,   insurance   companies,   brokerage   firms,  and
         consultants.

         3.3 ADDITIONAL  POWERS. In addition,  as to each Option to buy Stock of
the  Corporation,  the  Committee  shall  have full and final  authority  in its
discretion: (a) to determine the number of shares

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of Stock  subject to each Option;  (b) to  determine  the time or times at which
Options  will be granted;  (c) to  determine  the option  price of the shares of
Stock  subject to each  Option,  which  price shall be not less than the minimum
price  specified in Article V of this Plan;  (d) to determine  the time or times
when each Option  shall  become  exercisable  and the  duration of the  exercise
period  (including the  acceleration  of any exercise  period),  which shall not
exceed the maximum period  specified in Article V; and (e) to determine  whether
each  Option  granted  shall be an  Incentive  Stock  Option or a  Non-qualified
Option.

         In no event may the  Corporation  grant an Employee any Incentive Stock
Option that is first exercisable  during any one calendar year to the extent the
aggregate fair market value of the Stock (determined at the time the options are
granted)  exceeds $100,000 (under all stock options plans of the Corporation and
any Affiliated Corporation);  provided,  however, that this paragraph shall have
no force and effect if its  inclusion in the Plan is not necessary for Incentive
Stock  Options  issued  under the Plan to  qualify as such  prusuant  to Section
422(d)(1) of the Code.

                                   ARTICLE IV

                                   Eligibility

         4.1 ELIGIBLE EMPLOYEES. All Employees (including Directors and Officers
who are  Employees  and who have not  irrevocably  elected to be  ineligible  to
participate in the Plan) are eligible to be

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gratned Incentive Stock Optona and Non-Qualified Option Awards under this Plan.

         4.2  CONSULTANTS,  DIRECTORS AND OTHER  NON-EMPLOYEES.  Any Consultant,
Director (whether or not an Employee) and any other  Non-Employee is eligible to
be granted  Non-Qualified  Option  Awards under the Plan provided the person has
not  irrevocably  elected  to be  ineligible  to  participate  in the Plan,  and
provided  further that upon  appointment  to the Committee at the first Board of
Directors  meeting  following  the  Annual  Meeting  of the  Shareholders,  each
non-employee  director  appointed  to  the  Committee  shall  be  deemed  to  be
ineligible to participate  under the Plan during his or her period of service on
the Committee.

         4.3 Relevant Factors. In selecting individual  Employees,  Consultants,
Directors,  and  other  Non-Employees  to whom  Awards  shall  be  granted,  the
Committee  shall weigh such factors as are relevant to accomplish the purpose of
the Plan as stated in Article I. An individual who has been granted an Award may
be granted one or more additional  Awards,  if the Committee so determines.  The
granting of an Award to any individual shall neither entitle that individual to,
nor disqualify him from, participation in any other grant of Awards.



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                                    ARTICLE V

                               Stock Option Awards

         5.1 NUMBER OF SHARES.  Subject to the  provisions  of Article X of this
Plan,  the aggregate  number of shares of stock for which Options may be granted
under this Plan shall not exceed 350,000 shares. The shares to be delivered upon
exercise of Options under this Plan shall be made  available,  at the discretion
of the Committee,  either from authorized but unissued shares or from previously
issued  and  reacquired  shares of Stock  held by the  Corporation  as  treasury
shares, including shares purchased in the open market.

         Stock issuable upon exercise of an option granted under the Plan may be
subject  to  such   restrictions  on  transfer,   repurchase   rights  or  other
restrictions as shall be determined by the Committee.

         5.2 EFFECT OF EXPIRATION,  TERMINATION OR SURRENDER. If an Option under
this Plan  shall  expire  or  terminate  unexercised  as to any  shares  covered
thereby, or shall cease for any reason to be exercisable in whole or in part, or
if the Company shall  reacquire any unvested  shares issued  pursuant to Options
under the Plan,  such shares shall  thereafter  be available for the granting of
other Options under this Plan.

         5.3 TERM OF  OPTIONS.  The full term of each Option  granted  hereunder
shall  be for such  period  as the  Committee  shall  determine.  In the case of
Incentive Stock Options granted

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hereunder,  the term shall not  exceed ten (10) years from the date of  granting
thereof.  Each  Option  shall be subject to earlier  termination  as provided in
Section 6.3 and 6.4. Notwithstanding the foregoing, the term of options intended
to qualify as "Incentive Stock Options" shall not exceed five (5) years from the
date of granting  thereof if such option is granted to any  employee  who at the
time  such  option is  granted  owns  more  than ten  percent  (10% of the total
combined voting power of all classes of stock of the Corporation.

         5.4 OPTION PRICE. The option price shall be determined by the Committee
at the time any Option is granted.  In the case of Incentive Stock Options,  the
exercise  price  shall  not be less than  100% of the fair  market  value of the
shares covered thereby at the time the Incentive Stock Option is granted (but in
no event less than par  value),  provided  that in the case  where an  Incentive
Stock Option is granted  hereunder to any Employee who at the time of grant owns
Stock  possessing  more than 10% of the combined  voting power of all classes of
stock of the  Corporation and its Affiliated  Corporations,  the Incentive Stock
Option  price  shall  equal not less than 110% of the fair  market  value of the
shares covered thereby at the time the Incentive Stock Option is granted. In the
case of Non-Qualified  Stock Options,  the exercise price shall not be less than
par value.

         5.5 FAIR MARKET  VALUE.  If, at the time an Option is granted under the
Plan, the Corporation's Stock is publicly traded, "fair

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market value" shall be determined as of the business day for which the prices or
quotes  discussed  in this  sentence  are  available  on the date such Option is
granted and shall mean (i) the average (on that date) of the high and low prices
of the Stock on the principal national securities exchange on which the Stock is
traded, if the Stock is then traded on a national securities  exchange;  or (ii)
the last reported sale price (on that date) of the Stock on the NASDAQ  National
Market List, if the Stock is not the traded on a national  securities  exchange;
or (iii) the closing  bid price (or average of bid prices)  last quoted (on that
date) by an established  quotation service for over-the-counter  securities,  if
the Stock is not reported on the NASDAQ  National Market List.  However,  if the
Stock is not  publicly  traded at the time an Option is granted  under the Plan,
"fair  market  value"  shall  be  deemed  to be the fair  value of the  Stock as
determined by the Committee under Section 3.3.

         5.6  NON-TRANSFERABILITY  OF OPTIONS. No Option granted under this Plan
shall  be  transferable  by the  grantee  otherwise  than by will or the laws of
descent and distribution,  and such Option may be exercised during the grantee's
lifetime only by the grantee.

         5.7 FOREIGN  NATIONALS.  Awards may be granted to Participants  who are
foreign  nationals  or  employed  outside  the  United  States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary  or  advisable  to achieve  the  purposes  of the Plan or comply  with
applicable laws.


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                                   ARTICLE VI

                               Exercise of Option

         6.1 EXERCISE.  Each Option  granted under the Plan shall be exercisable
on such date or dates and during  such  period and for such  number of shares as
shall be determined pursuant to the provisions of the instrument evidencing such
Option. The Committee shall have the right to accelerate the date of exercise of
any option.

         6.2 NOTICE OF EXERCISE.  A person  electing to exercise an Option shall
give written  notice to the  Corporation  of such  electino and of the number of
shares he or she has  elected  to  purchase  and  shall at the time of  exercise
tender the full purchase price of the shares he or she has elected to purchase.

         6.3  DELIVERY OF STOCK.  No shares  shall be delivered  pursuant to any
exercise  of an Option  until  payment in full of the option  price  therefor is
received  by the  Corporation.  Such  payment may be made in whole or in part in
cash or, to the extent  permitted  by the  Committee at or after the grant of an
Option,  by  delivery  of a note or shares of the Stock  owned by the  optionee,
including  Restricted  Stock,  valued at their fair market  value on the date of
delivery,  or such other lawful  consideration  as the Committee may  determine.
Until such person has been issued a certificate or  certificates  for the shares
so purchased,  he or she shall possess no rights of a record holder with respect
to any of such shares.

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         6.4 OPTION  UNAFFECTED BY CHANGE IN DUTIES.  No Incentive Stock Option,
and,  unless  otherwise  determined by the Committee,  no  Non-Qualified  Option
granted  to a  person  who is,  on the date of the  grant,  an  Employee  of the
Corporation  or an  Affiliated  Corporation,  shall be affected by any change of
duties or position of the optionee  (including transfer to or from an Affiliated
Corporation), so long as he or she continues to be an Employee. Employment shall
be  considered  as continuing  and  uninterrupted  during any bona fide leave of
absence  (such  as  those  attributable  to  illness,  military  obligations  or
governmental  service) provided that the period of such leave does not exceed 90
days  or,  if  longer,   any  period  during  which  such  optionee's  right  to
reemployment  is  guaranteed  by statute.  A bona fide leave of absence with the
written  approval of the Committee  shall not be considered an  interruption  of
employment  under the Plan,  provided that such written  approval  contractually
obligates  the  Corporation  or  any  Affiliated  Corporation  to  continue  the
employment of the optionee after the approved period of absence.

         If the optionee shall cease to be an Employee for any reason other than
death,  such Option shall  thereafter be  exercisable  only to the extent of the
purchase  rights,  if any, which have ac rued as of the date of such  cessation;
provided  that (i) the Committee may provide in the  instrument  evidencing  any
Option  that  the  Committee  may in its  absolute  discretion,  upon  any  such
cessation of employment, determine (but be under no obligation to determine)

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that such accrued purchase rights shall be deemed to include  additional  shares
covered by such Option; and (ii) unless the Committee shall otherwise provide in
the  instrument  evidencing  any Option,  upon any such cessation of employment,
such remaining  rights to purchase shall in any event terminate upon the earlier
of (A) the  expiration  of the  original  term of the Option;  or (B) where such
cessation of employment is on account of disability,  the expiration of one year
from the date of such cessation of employment and, otherwise,  the expiration of
three  months from such date.  For purposes of the Plan,  the term  "disability"
shall mean  "permanent and total  disability" as defined in Section  22(e)(3) of
the Code.

         6.5 DEATH OF OPTIONEE.  Should an optionee die while in  possession  of
the legal right to exercise an Option or Options  under this Plan,  such persons
as shall have acquired, by will or by the laws of descent and distribution,  the
right to  exercise  any  Options  theretofore  granted,  may,  unless  otherwise
provided by the Committee in any instrument evidencing any Option, exercise such
Options at any time prior to one year from the ate of death; provided, that such
Option or Options  shall  expire in all events no later than the last day of the
original term of such Option; provided, further, that any such exercise shall be
limited  to the  purchase  rights  that  have  accrued  as of the date  when the
optionee  ceased to be an Employee,  whether by death or  otherwise,  unless the
Committee provides in the instrument evidencing such Option that,

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in the discretion of the Committee, additional shares covered by such Option may
become subject to purchase immediately upon the death of the optionee.

                                   ARTICLE VII

                          Reporting Person Limitations

         Notwithstanding any other provision of the Plan, to the extent required
to  qualify  for the  exemption  provided  by Rule  16b-3  under the  Securities
Exchange Act of 1934, and any successor provision, (i) any Stock or other equity
security  offered  under the Plan to a  Reporting  Person may not be sold for at
least six (6) months after  acquisition,  except in case of death or  disability
and (ii) any  Option,  or other  similar  right  related to an equity  security,
issued under the Plan to a Reporting Person shall not be transferable other than
by will or the laws of descent and distribution, shall not be exercisable for at
least six (6)  months  except in the case of death or  disability,  and shall be
exercisable  during the  Participant's  lifetime only by the  Participant or the
Participant's guardian or legal representative.

                                  ARTICLE VIII

                         Terms and Conditions of Options

         Options shall be evidenced by instruments (which need not be identical)
in such forms as the Committee may from time to time approve.  Such  instruments
shall conform to the terms and

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conditions  set  forth in  Article 5 and 6 hereof  and may  contain  such  other
provisions as the Committee deems advisable that are not  inconsistent  with the
Plan,  including  restrictions  applicable  to  shares  of Stock  issuable  upon
exercise of Options.  In granting any  Non-Qualified  Option,  the Committee may
specify that such  NonQualified  Option shall be subject to the restrictions set
forth  herein  with  respect  to  Incentive  Stock  Options,  or to  such  other
termination  and  cancellation  provisions as the Committee may  determine.  The
Committee may from time to time confer  authority and  responsibility  on one or
more of its own  members  and/or  one or more  officers  of the  Corporation  to
execute and deliver such instruments. The proper officers of the Corporation are
authorized  and directed to take any and all action  necessary or advisable from
time to time to carry out the terms of such instruments.

                                   ARTICLE IX

                                  Benefit Plans

         Awards under the Plan are  discretionary  and are not a part of regular
salary. Awards may not be used in determining the amount of compensation for any
purpose  under  the  benefit  plans  of  the   Corporation,   or  an  Affiliated
Corporation,  except as the Committee may from time to time  expressly  provide.
Neither the Plan, an Option or any instrument  evidencing an Option confers upon
any  Employee  the right to  continued  employment  with the  Corporation  or an
Affiliated Corporation.

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                                    ARTICLE X

                Amendment, Suspension or Termination of the Plan

         The Board may suspend  the Plan or any part  thereof at any time or may
terminate  the Plan in its  entirety.  Awards  shall not be  granted  after Plan
termination.

         The Board  may also  amend  the Plan  from  time to time,  except  that
amendments which affect the following  subjects must be approved by stockholders
of the Corporation:

                  (a)  Except as  provided  in Article  XI  relative  to capital
         changes,  the  number  of  shares as to which  Options  may be  granted
         pursuant to Article V;

                  (b) The maximum term of Options granted;

                  (c) The minimum price at which Options may be granted;

                  (d) The term of the Plan; and

                  (e) The  requirements as to eligibility for  participation  in
         the Plan. Awards granted prior to suspension or termination of the Plan
         may not be cancelled  solely because of such suspension or termination,
         except with the consent of the grantee of the Award.

                                   ARTICLE XI

                          Changes in Capital Structure

         The instruments  evidencing  Options granted hereunder shall be subject
to  adjustment  in  the  event  of  changes  in  the  outstanding  Stock  of the
Corporation by reason of stock dividends, stock

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splits,    recapitalizations,    reorganizations,    mergers,    consolidations,
combinations,  exchanges or other relevant changes in  capitalization  occurring
after the date of an Award to the same extent as would affect an actual share of
stock  issued  and  outstanding  on the  effective  date  of such  change.  Such
adjustment  to  outstanding  Options  shall be made without  change in the total
price applicable to the unexercised portion of such options, and a corresponding
adjustment in the applicable  option price per share shall be made. In the event
of any such change, the aggregate number and classes of shares for which Options
may  thereafter be granted  under Section 5.1 of this Plan may be  appropriately
adjusted as determined by the Committee so as to reflect such change.

         Notwithstanding  the foregoing,  any adjustments  made pursuant to this
Article XI with respect to Incentive  Stock Options shall be made only after the
Committee, after consulting with counsel for the Corporation, determines whether
such  adjustments  would  constitute a  "modification"  of such Incentive  Stock
Options  (as that term is defined in Section 425 of the Code) or would cause any
adverse tax consequences for the holders of such Incentive Stock Options. If the
Committee  determines that such adjustments made with respect to Incentive Stock
Options would constitute a modification of such Incentive Stock Options,  it may
refrain from making such adjustments.

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         In  the  event  of  the  proposed  dissolution  or  liquidation  of the
Corporation, each Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such other  conditions
as shall be determined by the Committee.

         Except as expressly  provided herein, no issuance by the Corporation of
shares of stock of any class, or securities  convertible into shares of stock of
any class,  shall affect, and no adjustment by reason thereof shall be made with
respect  to, the number or price of shares  subject to Options.  No  adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.

         No  fractional  shares  shall be issued under the Plan and the optionee
shall receive from the Corporation cash in lieu of such fractional shares.

                                   ARTICLE XII

                       Effective Date and Term of the Plan

         The Plan shall  become  effective  on August 30,  1991.  The Plan shall
continue  until  such  time as it may be  terminated  by  action  of the  Board;
provided,  however,  that no Options may be granted  under this Plan on or after
the tenth anniversary of the effective date hereof.



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                                  ARTICLE XIII

                 Conversion of ISO's into Non-Qualified Options;
                              Termination of ISO's

         The  Committee,  at the  written  request of any  optionee,  may in its
discretion  take such actions as may be  necessary  to convert  such  optionee's
Incentive Stock Options, that have not been exercised on the date of conversion,
into Non-Qualified Options at any time prior to the expiration of such Incentive
Stock  Options,  regardless  of  whether  the  optionee  is an  employee  of the
Corporation or an Affiliated  Corporation at the time of such  conversion.  Such
actions may include,  but not be limited to,  extending  the exercise  period or
reducing the exercise price of such Options. At the time of such conversion, the
Committee  (with the consent of the optionee) may impose such  conditions on the
Exercise  of  the  resulting  Non-Qualified  Options  as  the  Committee  in its
discretion  may  determine,   provided  that  such   conditions   shall  be  not
inconsistent  with the  Plan.  Nothing  in the Plan  shall be deemed to give any
optionee the right to have such  optionee's  Incentive  Stock Options  converted
into Non-Qualified  Options, and no such conversion shall occur until and unless
the Committee takes appropriate  action. The Committee,  with the consent of the
optionee,  may also terminate any portion of any Incentive Stock Option that has
not been exercised at the time of such termination.



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                                   ARTICLE XIV

                              Application of Funds

         The  proceeds  received  by the  Corporation  from the  sale of  shares
pursuant to Options  granted under the Plan shall be used for general  corporate
purposes.

                                   ARTICLE XV

                             Governmental Regulation

         The Corporation's  obligation to sell and deliver shares of Stock under
this Plan is subject to the approval of any governmental  authority  required in
connection with the authorization, issuance or sale of such shares.

                                   ARTICLE XVI

                     Withholding of Additional Income Taxes

         Upon  the  exercise  of a  Non-Qualified  Option  or  the  making  of a
Disqualifying  Disposition  (as  defined in  Article  XVI) the  Corporation,  in
accordance  with  Section  3402(a) of the Code,  may require the optionee to pay
additional  withholding  taxes  in  respect  of the  amount  that is  considered
compensation  includible  in such person's  gross  income.  The Committee in its
discretion  may  condition  the  exercise  of an Option on the  payment  of such
additional withholding taxes.



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                                  ARTICLE XVII

                 Notice to Company of Disqualifying Disposition

         Each  employee  who  receives an  Incentive  Stock Option must agree to
notify  the  Corporation  in  writing  immediately  after the  employee  makes a
Disqualifying  Disposition of any Stock acquired  pursuant to the exercise of an
Incentive  Stock  Option.   A  Disqualifying   Disposition  is  any  disposition
(including  any sale) of such Stock  before the later of (a) two years after the
date the employee was granted the  Incentive  Stock Option or (b) one year after
the date the employee  acquired Stock by exercising the Incentive  Stock Option.
If the  employee  has died  before  such  stock is sold,  these  holding  period
requirements do not apply and no Disqualifying Disposition can occur thereafter.

                                  ARTICLE XVIII

                           Governing Law; Construction

         The  validity  and   construction  of  the  Plan  and  the  instruments
evidencing  Options  shall be governed by the laws of the State of Delaware.  In
construing  this Plan,  the singular  shall include the plural and the masculine
gender  shall  include the  feminine  and neuter,  unless the context  otherwise
requires.



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