AMENDED AND RESTATED EMPLOYMENT AGREEMENT

         THIS  AMENDED AND  RESTATED  EMPLOYMENT  AGREEMENT  (this  "AGREEMENT")
entered into as of this 30 day of June, 1999, amends and restates the Employment
Agreement  made as of January 1, 1997,  between  Palomar  Medical  Technologies,
Inc., a Delaware  corporation (the "COMPANY"),  and Joseph Caruso, an individual
(the "EXECUTIVE"),

                                WITNESSETH THAT:

         WHEREAS, the Company desires to employ Executive as its Chief Financial
Officer for the period and upon and subject to the terms herein provided; and

         WHEREAS,  the Company  desires to be assured  that  Executive  will not
compete  with the  Company  for the period and  within  the  geographical  areas
hereinafter specified; and

         WHEREAS,  Executive  is willing to agree to be  employed by the Company
for the period and upon and subject to the terms herein provided; and

         WHEREAS,  Executive  does  not  desire  to work  for the  Company  in a
position lower than that of Chief Financial  Officer and is willing to agree not
to compete with the Company;

         NOW,  THEREFORE,  in consideration of the premises,  the parties hereto
covenant and agree as follows:

         SECTION 1. TERM OF  EMPLOYMENT;  COMPENSATION.  The  Company  agrees to
employ  Executive  from January 1, 1997 until  December 31, 1999 (the "Term") as
its Chief Financial Officer, with the responsibilities  normally associated with
such position (the "EXECUTIVE POSITION"). The Company will pay Executive for his
services  during the term of his  employment  hereunder at an annual rate of Two
Hundred Thousand Dollars ($200,000), subject to a 15% increase per year, payable
in arrears, in equal installments, in accordance with standard Company practice,
but in any event not less often than  monthly,  subject only to such payroll and
withholding deductions as are required by law.

         SECTION 2. OFFICE AND DUTIES.  Executive  shall have the usual  duties,
responsibilities  and  authority  (the  "EXECUTIVE'S   AUTHORITY")  of  a  Chief
Financial  Officer,  and shall  report to the Board of Directors of the Company,
and shall perform such  specific  other tasks,  consistent  with his position as
Chief  Financial  Officer,  as may from time to time be  assigned  to him by the
Board of Directors.  Executive  shall devote  substantially  all of his business
time, labor,  skill,  undivided attention and best ability to the performance of
his  duties  hereunder.  Executive  may not,  without  Executive's  consent,  be
required to perform  Executive's  duties at any location that is more than fifty
(50) miles from the Company's principal office in Beverly, Massachusetts, except
that  Executive  agrees  that he will travel to  whatever  extent is  reasonably
necessary in the conduct of the Company's business.

         SECTION 3. EXPENSES.  Executive shall be entitled to reimbursement  for
expenses  incurred  by him in  connection  with the  performance  of his  duties
hereunder upon receipt of vouchers  therefor in accordance  with such procedures
as the Company has heretofore or may hereafter establish.

<PAGE>

         SECTION 4. VACATION DURING  EMPLOYMENT.  Executive shall be entitled to
such  reasonable  vacations as may be allowed by the Company in accordance  with
general  practices  to be  established,  but in any event not less than four (4)
weeks during each twelve (12) month period.

         SECTION 5.  ADDITIONAL  BENEFITS.  The Company shall make  available to
Executive at least those  perquisites  presently  granted to Executive.  Nothing
herein  contained  shall  preclude  Executive,  to the  extent  he is  otherwise
eligible,  from  participation  in all group insurance  programs or other fringe
benefit  plans  which  the  Company  may  hereafter  in its  sole  and  absolute
discretion make available generally to its employees,  but the Company shall not
be required to establish or maintain any such program or plan.

         SECTION 6. TERMINATION BY THE COMPANY. The Company shall have the right
to terminate  Executive's  employment  at any time for "Cause".  For purposes of
this  Agreement,  "Cause" shall mean (a)  termination by action of a majority of
the members of the Company's  Board of Directors,  acting on the written opinion
of counsel, because of Executive's willful and continued refusal, without proper
cause, to perform substantially  Executive's duties under this Agreement; or (b)
the  conviction  of  Executive  of a felony  or an act of fraud or  embezzlement
against the Company or any of its divisions,  subsidiaries of affiliates  (which
through lapse of time or otherwise is not subject to appeal).  Such  termination
shall be effected by written notice  thereof,  personally  hand delivered by the
Company to Executive, and, except as hereinafter provided, shall be effective as
of the thirtieth (30th) calendar day after such notice; PROVIDED,  however, that
if within such thirty (30) calendar day period Executive shall cease Executive's
reftisal and shall use Executive's best efforts to perform such obligations, the
termination shall not be effective.

         SECTION 7. TERMINATION BY DEATH. In the event Executive dies during the
Term,   Executive's  employment  shall  terminate  (effective  on  the  date  of
Executive's death) and the provisions of Section 10 shall be applicable.

         SECTION 8.  TERMINATION  BY  Disability.  In the event  that  Executive
suffers a disability  which  prevents  Executive from  substantially  performing
Executive's  duties  under this  Agreement  for a period of at least one hundred
eighty  (180)  consecutive  or  nonconsecutive  calendar  days  within any three
hundred  sixty-five (365) calendar day period, the Company shall have the right,
after  such one  hundred  eighty  (180)  calendar  day period  has  elapsed,  to
terminate  Executive's  employment  hereunder  upon  thirty (30)  calendar  days
written  notice  to  Executive  and  the  provisions  of  Section  10  shall  be
applicable.

                                       -2-
<PAGE>

         Section  9.  TERMINATION  BY  EXECUTIVE.   Notwithstanding   any  other
provisions of this  Agreement,  Executive may terminate  Executive's  employment
either  (i) in the event of a "Change  in  Control"  or (ii) by  written  notice
served upon the Company  within thirty (30)  calendar  days after  Executive has
knowledge of an event constituting "GOOD REASON."

         For purposes of this Agreement, the term "CHANGE IN CONTROL" shall mean
either (i) that,  after  January 1, 1997,  any person (an  "ACQUIRING  Person"),
together with its  affiliates and associates (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, or any successor rule thereto) shall become the
beneficial  owner (as defined in Rule 13d-3 under the  Securities  and  Exchange
Act), including by merger or otherwise,  of more than fifty percent (50%) of the
total  voting  power of all classes of voting  stock of the Company or (ii) that
one or more  Acquiring  Persons has succeeded as the result of or in response to
actual or threatened election contests,  whether by settlement or otherwise,  in
having elected to the Board of Directors of the Company,  whether at one time or
on a cumulative  basis,  a sufficient  number of its nominees to constitute  (x)
more  than  thirty  percent  (30%)  of the  members  of the  Company's  Board of
Directors,  rounded down to the nearest whole number, if the number of directors
on the Company's Board is eight or less, or (y) more than forty percent (40%) of
the members of the Company's Board, rounded down to the nearest whole number, if
the number of directors on the Company's Board is nine or more.

         For purposes of this Agreement, the term "Good Reason" shall mean:

                  (i) any action by the Company which results in a diminution in
         the Executive Position or in the Executive's Authority;

                  (ii) any  failure by the  Company to timely pay the amounts or
         provide  the  benefits  described  in  this  Agreement,  other  than an
         isolated  failure  not  occurring  in bad faith  and which is  remedied
         promptly after receipt of written notice thereof given by Executive; or

                  (iii)  a  material  breach  by  the  Company  of  any  of  the
         provisions  of this  Agreement  which  failure  or  breach  shall  have
         continued for thirty (30) days after written  notice from  Executive to
         the Company specifying the nature of such failure or breach; or

                  (iv)  any  action  by  the  Company  that  would  result  in a
         violation of SECTION 2.

                                       -3-
<PAGE>

         SECTION 10. EFFECT OF TERMINATION.  (a) FOR CAUSE;  WITHOUT GOOD REASON
AND NO  CHANGE IN  CONTROL;  AND  DEATH.  In the  event of  termination  of this
Agreement  (i) by the  Company for Cause,  (ii) by the  Executive  without  Good
Reason or Change in  Control  or (iii) by reason of the death of the  Executive,
the Company shall pay Executive (or Executive's  beneficiary in the event of the
Executive's death) any base salary or other compensation  earned (and a pro rata
portion  of the bonus  payable  with  respect  to the year in which  termination
occurred)  but  not  paid  to  Executive  prior  to the  effective  date of such
termination  and,  in the case of  termination  by reason of death,  the Company
shall pay Executive's  beneficiary (i) the base salary that Executive would have
earned for a period of six (6) months following his death,  plus (ii) a pro rata
portion of any bonuses or other incentive compensation that Executive would have
earned if he had been employed for the full fiscal year in which he died payable
at the time of  payment  of  similar  bonuses  made to other  Executives  of the
Company,  plus (iii) any death  benefits that Executive is entitled to under the
Company's policies in effect on Executive's date of death.

         (b) WITHOUT CAUSE; FOR GOOD REASON.  In the event of (i) termination of
this  Agreement by the Company other than for Cause,  (ii)  termination  of this
Agreement by Executive for Good Reason without a Change in Control,  the Company
shall pay  Executive,  in a lump stun within thirty (30) days after  termination
under this Section 10(B),  the sum of (A) the amount  described in Section 10(a)
of this Agreement  (other than the payments to be paid in case of termination by
death),  and (B) the amount equal to one time (lx) the  Executive's  annual base
salary in effect at the time of termination  under this SECTION  10(B),  and the
Company shall continue  during the Term all of the benefits and  perquisites set
forth in SECTION 5,  notwithstanding the fact that Executive may no longer be an
employee  eligible to participate  in one or more of the employee  benefit plans
maintained by the Company.

         (c) CHANGE IN CONTROL  (OTHER THAN AN APPROVED  CHANGE IN CONTROL).  In
the event of  termination  of this  Agreement by  Executive  within one (1) year
after a Change in  Control  (other  than an  Approved  Change in  Control),  the
Company shall pay Executive, in a lump sum payment within thirty (30) days after
termination  under this SECTION  10(C),  the sum of (A) the amount  described in
Section 10(a) of this  Agreement  (other than the payments to be made in case of
termination by death),  and (B) the amount equal to four (4x) times  Executive's
Annual  Compensation,  and the Company shall continue during the Term all of the
benefits and perquisites set forth in Section 5,  notwithstanding  the fact that
Executive may no longer be an employee eligible to participate in one or more of
the employee benefit plans maintained by the Company.

         For purposes of this Agreement,  the term "APPROVED  CHANGE IN CONTROL"
shall mean a Change of Control  that has occurred  with the prior  approval of a
majority of the Continuing  Directors and the term  "CONTINUING  DIRECTOR" shall
mean any member of the Board of Directors of the Company who is not an Acquiring
Person or a nominee or representative of an Acquiring Person or of any affiliate
or associate of an Acquiring  Person and any successor to a Continuing  Director
who was recommended for election or elected to succeed a Continuing  Director by
a majority of the  Continuing  Directors  then on the Board of  Directors of the
Company.

         For  purposes  of  this  SECTION  10(C)  of  this  Agreement  the  term
"EXECUTIVE'S ANNUAL  COMPENSATION" shall mean (i) the sum of (A) the Executive's
base salary set forth in Section I and

                                      -4-
<PAGE>

(B) any bonus  compensation  to which  Executive  would  have been  entitled  if
Executive  continued  to be employed  under this  Agreement  to the end of 1996,
PROVIDED  that  if the  Executive's  base  salary  or  bonuses  compensation  is
increased  after 1996 the term shall  mean the  higher of the  Executive  annual
salary  immediately  prior to such  change or the sum of (a) the base  salary in
effect  at the  time of  termination  and (b) any  bonus  compensation  to which
Executive  would have been  entitled if Executive  had  continued to be employed
under  this  Agreement  to the end of the  Company's  fiscal  year in which  his
employment terminated.

         (d) WITH GOOD REASON  FOLLOWING AN APPROVED  CHANGE IN CONTROL.  In the
event of  termination of this Agreement by Executive with Good Reason within one
(1) year after an Approved  Change in Control,  the Company shall pay Executive,
in a lump sum  payment  within  thirty  (30) days after  termination  under this
SECTION  10(C),  the sum of (A) the amount  described  in Section  10(A) of this
Agreement  (other than the payments to be made in case of termination by death),
(B) the amount equal to four (4x) times the sum of (i)  Executive's  annual base
salary in effect at the time of termination,  and (ii) any bonus compensation to
which  Executive  would have been  entitled  if  Executive  had  remained  as an
employee under this  Agreement to the end of the Company's  fiscal year in which
his employment terminated, and the Company shall continue during the Term all of
the benefits and  perquisites set forth in Section 5,  notwithstanding  the fact
that  Executive may no longer be an employee  eligible to  participate in one or
more of the employee benefit plans maintained by the Company.

         (e) DISABILITY. In the event of termination of this Agreement by reason
of disability,  the Company shall continue to pay Executive's base salary at the
time of such  termination for the remainder of the Term,  reduced by the maximum
amount of salary which may be insured under the Company's  Long Term  Disability
Plan at the time of disability.

         SECTION  11.  EXCISE  TAXES.  In the event  that  Executive  shall have
imposed  upon him the tax  which is  imposed  by  Section  4999 of the  Internal
Revenue Code of 1986, as amended (the "CODE"), or by any successor provision, by
reason of any  payment  or  benefit  which  Executive  has  received  under this
Agreement,  the Company  shall pay as  additional  compensation  to Executive an
amount equal to the amount of the tax imposed by Code Section 4999 (the "SPECIAL
TAX PAYMENT") as a result of the receipt of such payment,  or benefit;  provided
that the  Special Tax Payment  shall NOT be  increased  to account for excise or
other tax imposed as a result of the making of the Special Tax Payment.

           SECTION 12.  ACCELERATION  AND EXPIRATION OF OPTIONS.  Any options or
  warrants  to  purchase  capital  stock  of  the  Company  (collectively,   the
  "OPTIONS")  granted  by the  Company  to  Executive  that have not yet  become
  exercisable  shall  become  exercisable  upon the earliest to occur of (a) the
  termination  of  Executive's  employment as a result of  Executive's  death or
  disability;  (b) the  termination  by Executive  with Good Reason;  or (c) the
  termination  by  Executive  after a Change in Control  (other than an Approved
  Change in  Control).  Notwithstanding  the  foregoing,  all  Options,  whether
  currently  exercisable  or not,  shall expire and cease to be  exercisable  as
  follows:

                  (a) if  the  Company  terminates  Executive's  employment  for
         Cause, immediately upon the effective date of such termination;

                                      -5-
<PAGE>

                  (b) if Executive  terminates  Executive's  employment with the
         Company  other than for Good  Reason,  a Change in Control,  death,  or
         disability, immediately upon the effective date of such termination;

                  (c) if Executive  terminates  Executive's  employment with the
         Company  with Good  Reason or after a Change in Control  (other than an
         Approved Change in Control),  ninety (90) days after the effective date
         of such termination (but in no event later than the date the Term would
         expire without giving effect to any automatic renewal).

                  (d) if Executive dies while  employed by the Company,  six (6)
         calendar months after Executive's death (but in no event later than the
         date the Term  would  expire  without  giving  effect to any  automatic
         renewal); and

                  (e) if  Executive's  employment  is  terminated as a result of
         disability,  six (6) calendar  months after the effective  date of such
         termination  (but in no event later than the date the Term would expire
         without giving effect to any automatic renewal).

         SECTION  13. NO  MITIGATION;  NO  OFFSET.  Executive  shall be under no
obligation to mitigate  damages or the amount of any payment  provided for under
this Agreement by seeking other  employment or otherwise,  and there shall be no
offset  against  amounts due  Executive  under this  Agreement on account of any
remuneration  attributable  to any  subsequent  employment  that  Executive  may
obtain.

         SECTION 14. DISCLOSURE AND ASSIGNMENT OF INTELLECTUAL PROPERTY.

                  (a) Executive agrees that the Company,  and its successors and
         assigns shall own all right, title and interest throughout the world in
         and to all  research,  information,  inventions,  designs,  procedures,
         developments,   discoveries,  improvements,  patents  and  applications
         therefor,   trademarks  and  applications   therefor,   copyrights  and
         applications  therefor,  trade  secrets,   drawings,   plans,  systems,
         methods,  specifications,  and all  other  manufacturing,  engineering,
         technical, research and development data and know-how (herein sometimes
         "INTELLECTUAL PROPERTY") made, conceived,  developed and/or acquired by
         him solely or jointly with others  during the period of his  employment
         with the  Company or within one year  thereafter,  which  relate to the
         manufacture, production or processing of any products developed or sold
         by the Company  during the term of this  Agreement  or which are within
         the scope of or usable in connection with the Company's  business as it
         may,  from time to time,  hereafter  be  conducted  or  proposed  to be
         conducted,  whether  or not made  during my regular  working  hours and
         whether or not made on the Company's premises.

                  (b) Executive agrees that any such Intellectual Property shall
         constitute a work made for hire under the copyright  laws of the United
         States  and,  to the extent  any such  Intellectual  Property  shall be
         determined not to be a work made for hire,  Executive  hereby  assigns,
         and,  to the extent any such  assignment  cannot be made at the present
         time,  Executive  hereby  agrees to assign,  to the  Company  all of my
         right,  title and interest  throughout  the world,

                                      -6-
<PAGE>

         including,  without  limitation,  copyright,  patent  and trade  secret
         rights, in and to the Intellectual Property,  together with Executive's
         right to file for and/or own wholly without  restriction  United States
         and foreign  patents,  trademarks and copyrights with respect  thereto.
         Executive  specifically  agrees  and  acknowledges  that the  foregoing
         assignment covers all results, outputs and products of his work for the
         Company  prior to  January  1, 1997,  whether  as an  employee  or as a
         consultant,  and all related copyrights,  patents and other proprietary
         rights,  and that all  such  results,  outputs  and  products  shall be
         Intellectual  Property  hereunder  and the sole property of the Company
         hereafter.

                  (c)  Executive  agrees  to  execute  all  appropriate   patent
         applications  securing  all United  States and  foreign  patents on all
         Intellectual  Property, and to do, execute and deliver any and all acts
         and   instruments   that  may  be  necessary  or  proper  to  vest  all
         Intellectual  Property in the Company or its nominee or designee and to
         enable the  Company,  or its  nominee or  designee,  to obtain all such
         patents;  and Executive agrees to render to the Company, or its nominee
         or designee,  all such  assistance as it may require in the prosecution
         of all such patent  applications  and  applications for the re-issue of
         such patents,  and in the  prosecution or defense of all  interferences
         which may be  declared  involving  any of said patent  applications  or
         patents,   but  the  expense  of  all  such   assignments   and  patent
         applications,  or all other proceedings referred to herein above, shall
         be borne  by the  Company.  Executive  shall  be  entitled  to fair and
         reasonable  compensation  for  any  such  assistance  requested  by the
         Company  or its  nominee or  designee  and  furnished  by him after the
         termination  of his  employment.  Executive  shall  make  and  maintain
         adequate and current written records of all Intellectual  Property, and
         Executive shall disclose all Intellectual Property promptly,  fully and
         in writing to the Company  immediately upon development of the same and
         at any time upon request.

         SECTION 15.  CONFIDENTIALITY.  Executive  shall not,  either during the
period of his employment  with the Company or thereafter,  reveal or disclose to
any person outside the Company or use for his own benefit, without the Company's
specific written  authorization,  whether by private  communication or by public
address  or  publication  or  otherwise,   any  Confidential   Information,   as
hereinafter defined. The term "CONFIDENTIAL INFORMATION" as used throughout this
Agreement shall mean all trade secrets,  proprietary  information and other data
or information (and any tangible  evidence,  record or representation  thereof),
whether  prepared,  conceived  or  developed  by an  employee  of the Company or
received by the Company from an outside  source,  which is in the  possession of
the Company  (whether  or not the  property  of the  Company),  which in any way
relates to the present or future business of the Company, which is maintained in
confidence by the Company, or which might permit the Company or its customers to
obtain a competitive  advantage over  competitors who do not have access to such
trade  secrets,  proprietary  information,  or other  data or  information.  All
originals  and copies of any of the  foregoing,  relating to the business of the
Company,  however  and  whenever  produced,  shall be the sole  property  of the
Company,  not to be removed from the premises or custody of the Company  without
in each  instance  first  obtaining  written  consent  or  authorization  of the
Company. Upon the termination of Executive's employment in any manner or for any
reason,  Executive shall promptly  surrender to the Company all copies of any of
the foregoing,  together with any other documents,  materials, data, information
and  equipment  belonging  to or relating to the  Company's  business and in his
possession,  custody or control,  and Executive  shall not thereafter  retain or

                                      -7-
<PAGE>

deliver to any other person,  any of the foregoing or any sunnnary or memorandum
thereof.

         SECTION 16 .RESTRICTION. The Company has invested and may in the future
be required to invest  substantial  sums of money,  directly or  indirectly,  to
continue and expand the business  heretofore  conducted by it and in  connection
therewith,  and as Executive  recognizes that the Company would be substantially
injured by Executive  disclosing  to others,  or by Executive  using for his own
benefit,  any  Intellectual  Property or any of the other  types of  information
referred to in Section 15 as  Confidential  Information,  Executive  agrees that
during  the  period  of  his  employment  hereunder  and  for  a  period  ending
twenty-four (24) months after the term of this Agreement:

                  (a)   Neither  he  nor  any  member  of  his  family  will  be
interested,  directly or  indirectly,  as an  investor in any other  business or
enterprise  similar to that of the  Company or in  competition  with the Company
(except as an investor in securities listed on a national securities exchange or
actively traded over the counter; and

                  (b) He will not,  directly or indirectly,  for his own account
or as employee,  officer, director, partner, joint venturer or otherwise, engage
within  the  United  States  or  Canada,   in  any  phase  of  the  business  of
manufacturing,  distributing or selling of lasers for use in medical or cosmetic
procedures.

                  (c) Executive shall not solicit,  induce,  attempt to hire, or
hire any employee of the Company (or any other person who may have been employed
by the Company during the term of his employment with the Company), or assist in
such  hiring  by any other  person or  business  entity  or  encourage  any such
employee to terminate his or her employment with the Company.

         Executive  and the  Company  are of the belief that the period of time,
the geographic  area and the range of activities  limited by this SECTION 16 are
reasonable,  in view of the  nature  of the  business  in which the  Company  is
engaged  and  proposes  to  engage,  the state of its  product  development  and
Executive's  knowledge of this business.  However,  if such period,  or range of
activities area should be adjudged unreasonable in any judicial proceeding, then
the period of time shall be reduced by such number of months, such area shall be
reduced  by  elimination  of such  portion of such  area,  and/or  such range of
activities  shall be reduced by  elimination of such  activities,  as are deemed
unreasonable, so that this covenant may be enforced in such area and during such
period of time as is adjudged to be reasonable.

         SECTION 17.  NOTICES.  All notices and other  communications  hereunder
shall be in writing  and shall be deemed to have been given  when  delivered  or
three (3) days after mailing if mailed by first- class,  registered or certified
mail, postage prepaid,  addressed (a) if to Executive,  at the address set forth
below his name on the  signature  page  hereof,  or to such other  person(s)  or
addresses) as Executive shall have furnished to the Company in writing;  and (b)
if to the Company, at 45 Hartwell Avenue,  Lexington,  MA 02421, Attn: Mr. Louis
P. Valente, with a copy to Foley, Hoag & Eliot, One Post Office Square,  Boston,
Massachusetts 02109, Attn: David A. Broadwin, Esq. or to such other person(s) or
addresses) as the Company shall have furnished to Executive in writing.

                                      -8-
<PAGE>

         SECTION  18.  ASSIGNABILITY.  In the event  that the  Company  shall be
merged with, or consolidated into, any other  corporation,  or in the event that
it  shall  sell  and  transfer  substantially  all  of  its  assets  to  another
corporation,  the terms of this Agreement  shall inure to the benefit of, and be
assumed by, the corporation  resulting from such merger or consolidation,  or to
which the Company's assets shall be sold and  transferred.  This Agreement shall
not be assignable by Executive, but it shall be binding upon, and shall inure to
the benefit of, his heirs, executors, administrators and legal representatives.

         SECTION  19.  ENTIRE  AGREEMENT.  This  Agreement  contains  the entire
agreement  between the Company and Executive  with respect to the subject matter
hereof and there have been no oral or other agreements of any kind whatsoever as
a  condition  precedent  or  inducement  to the  signing  of this  Agreement  or
otherwise concerning this Agreement or the subject matter hereof. This Agreement
supersedes  the  Employment  Agreement  dated January 1, 1997 by and between the
Executive and the Company.

         SECTION 20 .EXPENSES. Each party shall pay its own expenses incident to
the  performance  or  enforcement  of this  Agreement,  including  all  fees and
expenses of its counsel for all activities of such counsel  undertaken  pursuant
to this Agreement, except as otherwise herein specifically provided.

         SECTION 21. EQUITABLE RELIEF.  Executive recognizes and agrees that the
Company's  remedy at law for any breach of the  provisions of SECTIONS 14, 15 or
16 hereof would be inadequate, and he agrees that for breach of such provisions,
the Company shall,  in addition to such other remedies as may be available to it
at law or in equity or as provided in this Agreement,  be entitled to injunctive
relief and to enforce its rights by an action for  specific  performance  to the
extent permitted by law. Should Executive engage in any activities prohibited by
this  Agreement,  he  agrees  to pay  over  to  the  Company  all  compensation,
remunerations or moneys or property of any sort received in connection with such
activities;  such payment shall not impair any rights or remedies of the Company
or obligations  or  liabilities  of Executive  which such parties may have under
this Agreement or applicable law.

         SECTION 22. WAIVERS AND FURTHER AGREEMENTS.  Any waiver of any terms or
conditions of this  Agreement  shall not operate as a waiver of any other breach
of such  terms or  conditions  or any  other  term or  condition,  nor shall any
failure to enforce any provision hereof operate as a waiver of such provision or
of any other provision hereof;  PROVIDED,  HOWEVER, THAT no such written waiver,
unless it, by its own  terms,  explicitly  provides  to the  contrary,  shall be
construed to effect a  continuing  waiver of the  provision  being waived and no
such waiver in any instance  shall  constitute a waiver in any other instance or
for any other  purpose or impair the right of the party against whom such waiver
is claimed in all other  instances  or for all other  purposes  to require  full
compliance with such provision. Each of the parties hereto agrees to execute all
such further  instruments  and documents and to take all such further  action as
the other  party may  reasonably  require in order to  effectuate  the terms and
purposes of this Agreement.

                                      -9-
<PAGE>

         SECTION 23.  AMENDMENTS.  This Agreement may not be amended,  nor shall
any waiver, change, modification,  consent or discharge be effected except by an
instrument  in  writing  executed  by or on  behalf of the  party  against  whom
enforcement of any waiver, change, modification, consent or discharge is sought.

         SECTION- 24. SEVERABILITY.  If any provision of this Agreement shall be
held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable
as applied to any particular case in any  jurisdiction or  jurisdictions,  or in
all  jurisdictions or in all cases,  because of the conflicting of any provision
with any  constitution  or  statute  or rule of  public  policy or for any other
reason,  such circumstance  shall not have the effect of rendering the provision
or provisions in question,  invalid,  inoperative or  unenforceable in any other
jurisdiction  or in any other case or  circumstance  or of  rendering  any other
provision or provisions herein contained  invalid,  inoperative or unenforceable
to the extent that such other provisions are not themselves actually in conflict
with such  constitution,  statute or rule of public  policy,  but this Agreement
shall be reformed  and  construed  in any such  jurisdiction  or case as if such
invalid,  inoperative or unenforceable provision had never been contained herein
and such provision reformed so that it would be valid, operative and enforceable
to the maximum extent permitted in such jurisdiction or in such case.

         SECTION 25. COUNTERPARTS. This Agreement 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,  and in  pleading  or
proving any  provision of this  Agreement,  it shall not be necessary to produce
more than one of such counterparts.

         SECTION 26. SECTION HEADINGS.  The headings contained in this Agreement
are for  reference  purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

         SECTION 27.  GENERAL PROVISIONS.

         (a) Executive further agrees that his obligations under SECTIONS 14, 15
and 16 of this Agreement shall be binding upon him  irrespective of the duration
of his  employment  by  the  Company,  the  reasons  for  any  cessation  of his
employment by the Company,  or the amount of his  compensation and shall survive
the termination of this Agreement  (whether such  termination is by the Company,
by Executive, upon expiration of this Agreement or otherwise).

         (b) Executive represents and warrants to the Company that he is not now
under any  obligations  to any  person,  firm or  corporation,  and has no other
interest  which is  inconsistent  or in conflict with this  Agreement,  or which
would prevent, limit or impair, in any way, the performance by him of any of the
covenants or his duties in his said employment.

         SECTION 28.  GENDER.  Whenever used herein,  the singular  number shall
include the plural,  the plural shall include the  singular,  and the use of any
gender shall include all genders.

                                      -10-
<PAGE>

         SECTION 92.  GOVERNING  LAW.  This  Agreement  shall be governed by and
construed and enforced in accordance  with the law (other than the law governing
conflict of law questions) of the Commonwealth of Massachusetts.

         IN WITNESS WHEREOF,  the parties have executed or caused to be executed
this Agreement as of the date first above written.

                                           PALOMAR MEDICAL TECHNOLOGIES, INC.

                                           By:      /s/ Louis P. Valente
                                                    --------------------
                                           Name:    Louis P. Valente
                                           Title:   Chief Executive Officer

         BY PLACING MY SIGNATURE  HEREUNDER,  I ACKNOWLEDGE THAT I HAVE READ ALL
THE PROVISIONS OF THIS AGREEMENT AND THAT I AGREE TO ALL OF ITS TERMS.

                                           EXECUTIVE:


                                           /s/ Joseph P. Caruso
                                           --------------------

                                           Notice Address:

                                           30 Zachary Lane
                                           ------------------
                                           Reading, MA  01867
                                           ------------------