REPURCHASE AGREEMENT

         THIS  REPURCHASE  AGREEMENT,  dated as of April 6, 1999, by and between
PALOMAR MEDICAL TECHNOLOGIES, INC., a Delaware corporation (the "Company"), with
offices located at 45 Hartwell Avenue, Lexington,  Massachusetts 02421-3102, and
ADVANTAGE FUND LIMITED, a British Virgin Islands corporation ("Advantage").

                              W I T N E S S E T H:

         WHEREAS,  Advantage  owns (i) 403  shares  (the  "Shares")  of Series G
Convertible  Preferred  Stock,  $.01 par value,  of the Company  (the  "Series G
Preferred  Stock")  and (ii)  the  promissory  note of the  Company  payable  to
Advantage due January 8, 2000 in the aggregate principal amount of $1,619,808.31
(the "Note"); and

         WHEREAS, Upon the terms and subject to the conditions set forth herein,
the Company has agreed to repurchase the Shares and the Note (the "Repurchase");

         NOW  THEREFORE,  in  consideration  of  the  premises  and  the  mutual
covenants  contained  herein,  and other good and  valuable  consideration,  the
receipt and sufficiency of which are hereby  acknowledged,  the parties agree as
follows:

         1.       DEFINITIONS.

         The  following  terms used in this  Agreement  shall have the following
meanings:

         "Certificate of Designations" means the Certificate of Designations for
the Series G Preferred Stock.

         "Exchange Agreement" means the Exchange Agreement, dated as of December
31, 1997, between the Company and Advantage.

         "Note  Repurchase  Price"  means  the net  present  value as of the day
preceding the  Repurchase  Date of the  $1,619,808.31  amount due under the Note
using a 5% discount rate from the January 8, 2000 maturity date.

         "Principal Agreements" means the Note, the Certificate of Designations,
the Exchange Agreement, the Registration Rights Agreement, dated as of September
26,  1996,  between the  Company and  Advantage,  and the other  agreements  and
instruments contemplated thereby.

         "Repurchase   Date"  means  the  date  the  Shares  and  the  Note  are
repurchased by the Company pursuant to this Agreement.

         "Repurchase  Period"  means the period from the date of this  Agreement
until  the  earlier  of (i) May  20,  1999 or (ii)  the  date of the  Star  Sale
Cancellation.

         "Repurchase  Price" means the sum of the Share Repurchase Price and the
Note Repurchase Price.

         "Share  Repurchase  Price" means the number of shares multiplied by the
per  share  Redemption  Price  as  such  term is  defined  in  Section  8 of the
Certificate of Designations.

         "Star Sale"  means the closing of the sale by the Company to  Coherent,
Inc. of all of the Company's  ownership  interest in Star Medical  Technologies,
Inc., a subsidiary of the Company, as described in the Company's proxy statement
dated March 12, 1999 or pursuant to a substantially similar transaction.
<PAGE>

         "Star Sale Cancellation" means the first time the Company's gives to or
receives  written  notice from any party involved in the proposed Star Sale that
the  transactions  contemplated  by the proposed Star Sale have been  cancelled,
terminated or suspended (including the failure to seek or obtain approval of the
Company's Stockholders.)

         2.       THE REPURCHASE.

         (a) Repurchase Obligation. If the Star Sale occurs on or before May 15,
1999, the Company shall, within five days after the occurrence of the Star Sale,
repurchase from Advantage (i) all of the Shares for the Share  Repurchase  Price
and (ii) the Note for the Note Repurchase  Price.  Within one business day after
the occurrence of the Star Sale, the Company shall give Advantage written notice
of such occurrence, the Repurchase Date, the Share Repurchase Price and the Note
Repurchase Price.

         (b) Method of Payment. Payment of the Repurchase Price shall be made by
wire  transfer  of  immediately  available  funds  to an  account  of  Advantage
specified by  Advantage  by written  notice to the Company at least one business
day prior to the Repurchase Date.

         (c) Late  Payment  Fee.  If for any  reason  (other  than the  fault of
Advantage) the Repurchase  Price is not paid when due within five days after the
occurrence of the Star Sale,  the Company shall pay Advantage a late payment fee
equal to one-half of one  percent of the  Repurchase  Price per day for each day
after such fifth day until the Repurchase Date.

         3.       ADVANTAGE REPRESENTATIONS, WARRANTIES, ETC.

         Advantage  represents  and warrants to, and  covenants and agrees with,
the Company as follows:

         (a)  Repurchase  Agreement.  This  Agreement  has been duly and validly
authorized,  executed and  delivered  on behalf of Advantage  and is a valid and
binding agreement of Advantage enforceable in accordance with its terms, subject
as to  enforceability  to  general  principles  of  equity  and  to  bankruptcy,
insolvency,  moratorium  and other  similar laws  affecting the  enforcement  of
creditorsAE rights generally.

         (b) Title to the Shares and the Note. Advantage is the beneficial owner
of the Shares and the Note and, if the Repurchase is consummated, the Shares and
the Note will be transferred to the Company free and clear of all claims, liens,
security interests, pledges, charges, and other encumbrances.

         4.       COMPANY REPRESENTATIONS, WARRANTIES, ETC.

         The Company  represents and warrants to, and covenants and agrees with,
Advantage that:

         (a)  Repurchase  Agreement.  This  Agreement  has been duly and validly
authorized,  executed and  delivered on behalf of the Company and is a valid and
binding  agreement  of the Company  enforceable  in  accordance  with its terms,
subject as to enforceability to general  principles of equity and to bankruptcy,
insolvency,  moratorium  and other  similar laws  affecting the  enforcement  of
creditorsAE rights generally.

         (b)  Non-contravention.  The  execution  and delivery by the Company of
this Agreement do not and the  consummation  by the Company of the  transactions
contemplated hereby, including without limitation the Repurchase, will not, with
or without the giving of notice or the lapse of time, or both, (i) result in any
violation of any terms of the  Certificate  of  Incorporation  or By-laws of the
Company,  (ii)  conflict with or result in a breach by the Company of any of the
material  terms or provisions  of, or constitute a material  default  under,  or
result in or give to others 

<PAGE>

any rights of termination, amendment, modification, acceleration or cancellation
of, or result in the  creation or  imposition  of any lien,  security  interest,
charge or  encumbrance  upon any of the  properties  or  assets  of the  Company
pursuant  to,  any  indenture,  mortgage,  deed of trust or other  agreement  or
instrument  to which  the  Company  is a party or by which  the  Company  or its
properties  or assets is bound or  affected,  (iii)  violate or  contravene  any
applicable  law  (including  without  limitation  Section 160(a) of the Delaware
General Corporation Law), rule or regulation or any applicable decree,  judgment
or  order  of any  court,  United  States  federal  or  state  regulatory  body,
administrative  agency or other  governmental body having  jurisdiction over the
Company or any of its properties or assets.

         (c)  Approvals.  No  authorization,  approval  or consent of, or filing
with,  any  court,   governmental  body,   regulatory  agency,   self-regulatory
organization,  or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company for the  execution or delivery by
the  Company  of  this  Agreement  or  the   consummation  of  the  transactions
contemplated hereby, including, without limitation, the Repurchase.

         (d) Solvency.  Prior to and after giving effect to the  Repurchase  the
Company will be Solvent.  "Solvent"  at any time shall mean that,  at such time,
the aggregate fair saleable  value of the CompanyAEs  assets is in excess of the
total  amount of its probable  liabilities  on its then  existing  debts as they
become absolute and matured,  the Company has not then incurred debts beyond its
foreseeable  ability to pay such debts as they mature,  and the Company then has
capital  adequate to conduct the business it is then engaged in or is then about
to engage in.

         5.       CERTAIN COVENANTS.

         (a)  Restriction  on  Exchange.  During  the  Repurchase  Period if the
Company  is  then  in  compliance  with  its  obligations  under  the  Principal
Agreements in all material respects,  Advantage agrees that it will not exercise
its right to exchange or convert any of the Shares into shares of Common  Stock,
$.01 par value, of the Company.  After the Repurchase Period,  there shall be no
restrictions  on the number of Shares which may be  exchanged or converted  into
Common  Stock and the  limitations  on exchanges in Section 4(b) of the Exchange
Agreement shall terminate and have no further force or effect.

         (b)  Restriction  on  Transfer.  During  the  Repurchase  Period if the
Company  is  then  in  compliance  with  its  obligations  under  the  Principal
Agreements  in all material  respects,  Advantage  agrees that it will not sell,
encumber,  or  otherwise  transfer any interest in the Shares or the Note to any
third party.

         (c) Certain Expenses. Whether or not the Repurchase occurs, the Company
shall promptly pay or reimburse  Advantage for all reasonable fees and expenses,
including attorneys' fees and expenses, incurred by Advantage in connection with
this Agreement and the transactions contemplated hereby.

         (d) Notice of Star Sale Cancellation.  The Company shall give Advantage
notice  of  the  Star  Sale  Cancellation  on  the  date  thereof.  The  parties
acknowledge that, if the Repurchase does not occur during the Repurchase Period,
the  restrictions  on Advantage  set forth in Sections 4(a) and 4(b) above shall
terminate  and  Advantage  shall be entitled  to all of its rights and  remedies
under the Principal Agreements and any other agreements and instruments relating
to the Shares and the Notes.

         6.       INDEMNIFICATION.

         (a) Indemnity  Obligation.  To the extent permitted by law, the Company
will indemnify and hold harmless Advantage and its directors,  officers, agents,
representatives,  and controlling  persons (each, an "Indemnified  Person") from
and against all losses, claims,  damages,  liabilities,  and expenses (including
reasonable legal fees and expenses) (collectively,  "Claims") incurred by any of
them arising out of or in connection  with Claims  pertaining to this Agreement,
<PAGE>

the  Repurchase,  or the  circumstances  giving rise to this Agreement which are
brought or asserted by third parties  which are not  affiliated  with  Advantage
(collectively,  "Third Party Claims").  This Section 6 shall be Advantage's sole
remedy against the Company for Claims which constitute Third Party Claims.

         (b)  Indemnity  Procedure.  Promptly  after  receipt by an  Indemnified
Person of notice of the  commencement of any action  (including any governmental
action),  such Indemnified  Person shall, if a Claim in respect thereof is to be
made against the Company  under this Section 5, deliver to the Company a written
notice of the  commencement  thereof  and the  Company  shall  have the right to
participate in, and, to the extent the Company so desires,  to assume control of
the  defense  thereof  with  counsel  selected  by the  Company  but  reasonably
acceptable to the Indemnified  Person;  provided,  however,  that an Indemnified
Person shall have the right to retain its own counsel with the fees and expenses
to be paid by the Company if, in the reasonable  opinion of counsel  retained by
the Company,  the  representation by such counsel of the Indemnified  Person and
the  Company  would  be  inappropriate  due to  actual  or  potential  differing
interests  between such  Indemnified  Person and any other party  represented by
such counsel in such  proceeding.  In such event, the Company shall pay for only
one separate legal counsel in the aggregate for all Indemnified  Persons and all
indemnified  persons  pursuant  to similar  indemnification  obligations  of the
Company  relating to the  repurchase  of other shares of Preferred  Stock;  such
legal  counsel shall be selected by the holders of a majority in interest of the
Preferred Stock on the date hereof. The failure to deliver written notice to the
Company within a reasonable  time of the  commencement  of any such action shall
not relieve the Company of any  liability to the  Indemnified  Person under this
Section 6, except to the extent that the Company is prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by  periodic   payments  of  the  amount   thereof  during  the  course  of  the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable. No Indemnified Party shall,  without the written consent
of the Company,  settle,  compromise or pay any Claim or consent to the entry of
judgment with respect thereto.

         7.       MISCELLANEOUS.

         (a) Governing Law. This Agreement  shall be governed by and interpreted
in accordance with the laws of the Commonwealth of  Massachusetts  applicable to
agreements made and to be performed entirely within such Commonwealth.

         (b) Counterparts. This Agreement may be executed in counterparts and by
the  parties  hereto  on  separate  counterparts,  all of which  together  shall
constitute  one  and the  same  instrument.  A  facsimile  transmission  of this
Agreement  bearing a signature  on behalf of a party  hereto  shall be legal and
binding on such party.

         (c) Headings.  The headings of this  Agreement are for  convenience  of
reference  and shall not form part of, or affect  the  interpretation  of,  this
Agreement.

         (d)  Severability.  If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction,  such invalidity or unenforceability shall
not affect the validity or  enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.

         (e)  Amendments.  No  amendment,  modification,  waiver,  discharge  or
termination  of any provision of this  Agreement nor consent to any departure by
the Advantage or the Company  therefrom  shall in any event be effective  unless
the same  shall be in  writing  and  signed  by the  party  to be  charged  with
enforcement,  and then shall be effective only in the specific  instance and for
the purpose for which  given.  No course of dealing  between the parties  hereto
shall operate as an amendment of this Agreement.

         (f) Waivers. Failure of any party to exercise any right or remedy under
this  Agreement or otherwise,  or delay by a party in  exercising  such right or
remedy,  or any course of dealings  between the parties,  shall not operate as a
waiver thereof or an amendment hereof,  nor 

<PAGE>

shall  any  single  or  partial  exercise  of any such  right or  power,  or any
abandonment  or  discontinuance  of steps  to  enforce  such a right  or  power,
preclude any other or further exercise thereof or exercise of any other right or
power.

         (g)  Notices.  Any notices  required or permitted to be given under the
terms of this  Agreement  shall be delivered  personally  (which  shall  include
telephone  line  facsimile  transmission  with answer back  confirmation)  or by
courier  and  shall  be  effective  upon  receipt,  in the  case of the  Company
addressed to the Company at its address shown in the  introductory  paragraph of
this  Agreement,  Attention:  Director  of  Finance  (telephone  line  facsimile
transmission number (781) 676-7330 or, in the case of Advantage,  at its address
or telephone line facsimile  transmission  number shown on the signature page of
this  Agreement,  with a copy to Genesee  International,  Inc.,  10500 N.E.  8th
Street, Suite 1920, Bellevue,  Washington  98004-4332  (telephone line facsimile
transmission  number  (425)  462-4645) or such other  address or telephone  line
facsimile  transmission  number as a party shall have  provided by notice to the
other party in accordance with this provision.

         (h) Assignment.  Neither party may sell, assign, transfer, or otherwise
convey any of its rights or  delegate  any of its  duties  under this  Agreement
without the prior written consent of the other party and this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors.

         (i)  Survival  of  Representations   and  Warranties.   The  respective
representations,  warranties,  covenants  and  agreements  of Advantage  and the
Company contained in this Agreement or made by them,  respectively,  pursuant to
this Agreement shall survive the delivery of payment for the Shares and the Note
and shall remain in full force and effect regardless of any  investigation  made
by or on behalf of them or any person controlling or advising any of them.

         (j) Entire  Agreement.  This Agreement sets forth the entire  agreement
between  the  parties  hereto  with  respect to the  subject  matter  hereof and
supersedes all prior  agreements and  understandings,  whether  written or oral,
with respect  thereto.  Notwithstanding  the  foregoing,  the parties  agree and
acknowledge that, except as expressly provided herein, nothing contained in this
Agreement shall constitute an amendment to any of the Principal Agreements, each
of which remains unamended and in full force and effect.

         (k) Further  Assurances.  Each party to this Agreement will perform any
and all acts and execute any and all  documents as may be  necessary  and proper
under the  circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.

         (l) Press  Releases.  The Company and Advantage shall have the right to
review  before  issuance any press  releases  with  respect to the  transactions
contemplated  hereby;  provided,  however,  that the Company  shall be entitled,
without the prior  approval  of  Advantage,  to make any press  release or other
public disclosure with respect to such transactions as is required by applicable
law and  regulations  (although  Advantage  shall be consulted by the Company in
connection  with any  such  press  release  prior to its  release  and  shall be
provided with a copy thereof).

         (m) Construction. The language used in this Agreement will be deemed to
be the language  chosen by the parties to express  their mutual  intent,  and no
rules of strict construction will be applied against any party.

<PAGE>

         IN  WITNESS  WHEREOF,  this  Agreement  has been duly  executed  by the
Advantage and the Company by their respective officers or other  representatives
thereunto duly authorized as of the date first set forth above.

                             ADVANTAGE FUND LIMITED



                             By:   /s/ 
                                -------------------------------------
                                Name:  Inter Caribbean Services, Ltd.
                                Title: Secretary

                                Address:     c/o CITCO
                                             Kaya Flamboyan 9
                                             Curatao, Netherlands Antilles

                                             Facsimile No.:  011-599-9732-2008

                            PALOMAR MEDICAL TECHNOLOGIES, INC.



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