CRES DEVELOPMENT COMPANY, INC.

                                COMMERCIAL LEASE

         In  consideration  of the  components  herein  contained,  82 Cambridge
Street Associates, LLC (an entity controlled by CRES Development Company, Inc.),
hereinafter  called LESSOR,  does hereby lease to Palomar Medical  Technologies,
Inc.,  hereinafter called LESSEE, the following described premises,  hereinafter
called the leased premises: A portion of the first floor of 82 Cambridge Street,
Burlington,  Massachusetts,  consisting of approximately  44,000 rentable square
feet and a portion of the lower level,  consisting of  approximately  859 square
feet,  all as shown on Exhibit  "A"  attached  hereto.  LESSEE  shall  have,  as
appurtenant  to the  leased  premises,  the right to use in common  with  others
entitled  thereto the common  facilities  and areas included in the building (as
defined below) and the land on which the building is located  including  without
limitation common walkways,  driveways, parking areas, freight or loading areas,
lobbies,  hallways,  stairways and  elevators,  ramps  necessary or desirable in
conjunction with the use and occupancy of the leased premises.

         TO HAVE AND TO HOLD the  leased  premises  for a term of ten (10) years
commencing on the Commencement Date (defined below), provided,  however, that if
the Commencement  Date is other than the first day of a calendar month, the term
of this Lease shall  expire on the last day of the  calendar  month in which the
tenth  anniversary  of the  Commencement  Date  occurs.  As used herein the term
?Commencement  Date?  shall be the date LESSOR  delivers the leased  premises to
LESSEE  in  accordance  with  the  terms  and  conditions  of  this  Lease.  The
anticipated  Commencement  Date is August 20, 1999. If the leased  premises have
not been  delivered on or before  October 1, 1999,  AND if LESSOR (or Owner,  as
LESSOR's contractor) shall not have been diligently and continuously prosecuting
the work to be performed  under Section 35 hereof,  then LESSEE may elect,  upon
written  notice to LESSOR,  given before  October 15, 1999, to either (i) assume
the  performance  of such  work  and to  complete  the same in  accordance  with
approved  plans and  specifications  described  in  Exhibit  C  hereto,  or (ii)
terminate this Lease, whereupon this Lease and all of the rights and obligations
of the parties  shall  terminate  with the same force and effect as if such date
were the date  originally  set forth herein as the  expiration  date hereof.  If
LESSEE elects to perform such work, then after such election, neither LESSOR nor
Owner shall have any further  responsibility or obligation to complete the same,
and LESSEE shall diligently and continuously complete the same, and LESSOR shall
reimburse  LESSEE  for  the  out-of-pocket   costs  and  expenses  actually  and
reasonably  incurred by LESSEE in so doing (and any sum not so reimbursed within
thirty days after receipt of an invoice therefor, together with lien waivers and
evidence of amounts paid to subcontractors and suppliers, shall bear interest at
eighteen  percent (18%) per annum).  If LESSEE does not elect to terminate  this
Lease, and the leased premises have not, despite diligent and continuous efforts
on the part of LESSOR,  been  delivered on or before  December 31, 1999,  LESSEE
shall have the right to  terminate  this Lease  upon  written  notice to LESSOR,
given before  January 15, 2000,  whereupon  this Lease and all of the rights and
obligations of the parties shall  terminate with the same force and effect as if
such  date were the date  originally  set forth  herein as the  expiration  date
hereof,  and such rights of self-help and termination shall be LESSEE's sole and
exclusive remedy for LESSOR's failure to so deliver the leased premises.  LESSOR
and LESSEE now convenant and agree that the following terms and conditions shall
govern  this lease  during the term hereof and for such  further  time as LESSEE
shall hold the leased premises.

1. RENT.  LESSEE  shall pay to LESSOR  base rent as per  Exhibit  "B" payable in
advance in monthly  installments  on the first day in each calendar  month,  the
first monthly payment (or the fraction of a monthly payment for any portion of a
month  occurring  at the  commencement  of the  lease  term) to be made upon the
Commencement  Date.  All payments  shall be made to LESSOR c/o CRES  Development
Company, Inc., 50


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<PAGE>

Salem Street,  Lynnfield,  MA 01940, or at such other place as LESSOR shall from
time to time in writing designate.

2. SECURITY DEPOSIT. LESSEE shall pay to LESSOR a security deposit in the amount
of $111,073.75  dollars, 50% thereof to be paid upon the execution of this lease
by LESSEE, and the remainder to be paid on the Commencement Date, which shall be
held as security for  LESSEE's  performance  as herein  provided and refunded to
LESSEE  without  interest  pursuant  to the terms  hereof,  subject to  LESSEE's
satisfactory  compliance with the conditions  hereof.  If LESSEE terminates this
Lease due to LESSOR's  failure to deliver the leased  premises,  as  hereinabove
provided,  LESSOR  shall  promptly  refund  the 50%  portion  paid by  LESSEE on
execution  hereof.  LESSEE may not apply the security  deposit to payment of the
last months rent. In the event of any default or breach of this Lease by LESSEE,
LESSOR shall immediately  apply the security deposit to any outstanding  invoice
or other payment due to LESSOR, with the balance applied to outstanding rent. If
after any portion of the security deposit is applied to cure a default or breach
during the term of the lease,  LESSEE shall be  responsible  for restoring  said
deposit  forthwith,  and  failure to do so, or failure to pay the full  security
deposit or any portion  thereof  when due,  shall be  considered  a  substantial
default under the lease.

3. USE OF PREMISES.  LESSEE shall use the leased  premises only for the purposes
of General  Office  Use,  Light  Manufacturing,  Research  and  Development  and
Distribution.  LESSEE  shall  have  twenty  four (24) hour  access to the leased
premises  and the  building  in which  they are  located  seven (7) days a week,
subject to reasonable security considerations and to emergency conditions.

4.  REAL  ESTATE  TAXES.  LESSEE  shall pay  LESSOR  during  the term  hereof as
additional rent a proportionate  share ("LESSEE's  Proportionate  Share") of any
increase in (x) the real estate  taxes  levied  against the land and building of
which the leased premises are a part (hereinafter  called the "building"),  over
(y) "Base Taxes" (as hereinafter defined), whether such increase is caused by an
increase  in the tax rate or the  assessment  of the  property,  or a change  in
method of determining  real estate taxes.  For purposes of this Lease,  LESSEE's
Proportionate Share shall be based on a fraction,  the numerator of which is the
rentable  square footage leased by LESSEE,  and the  denominator of which is the
total rentable square footage of the building of which the leased premises are a
part.  LESSEE shall make payment  within thirty (30) days of written notice from
LESSOR (which shall include a copy of the  applicable tax bill and a calculation
of LESSEE's  Proportionate Share) that such increased taxes are payable, and any
additional rent shall be prorated  should the lease terminate  before the end of
any tax year.  LESSEE shall make such  payments on account of Real Estate Taxes,
at the option of LESSOR,  on a monthly basis on the days on which the rent under
Paragraph 1 of this lease is payable, in amounts reasonably  estimated by LESSOR
(or as otherwise  billed by LESSOR,  but not more frequently  than monthly),  so
that LESSOR shall have received from LESSEE, by February 1, May 1, August 1, and
November 1st of each year (or other applicable dates, if the present real estate
tax payment dates are modified)  LESSEE's full share of the real estate tax. For
purposes of this Lease,  "Base  Taxes" shall be the rate and the  assessment  in
effect as of the date of this  lease.  In the event  that the  building  was not
assessed as a completed structure as of the aforementioned date, then Base Taxes
shall be as of the first date when the building and  supporting  facilities  are
assessed as a completed office  building.  LESSOR shall have the exclusive right
to pursue an  abatement  in the real  estate  taxes,  and if such  abatement  is
obtained a  proportionate  adjustment or refund shall be made in LESSEE's favor,
less the cost of obtaining such abatement.

5.  OPERATING   COSTS.   LESSEE  shall  pay  to  LESSOR  as  additional  rent  a
proportionate  share (based on square footage leased by LESSEE compared with the
square   footage  of  all   premises  to  which  such  costs  and  expenses  are
attributable)  of any  increase in (x) the  aggregate  of all costs and expenses
incurred by LESSOR in connection with the operation, maintenance,  insurance and
management of the building of which the leased premises are a part  (hereinafter
the "Operating  Costs"),  over (y) the "Base  Operating  Costs" (as  hereinafter
defined).  Operating Costs shall include a reasonable  annual  charge-off of the
cost of any capital


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<PAGE>

repairs or  improvements  made by LESSOR for the building or the leased premises
during  the  term of this  lease  and  which  are for the  purpose  of  reducing
Operating Costs, the schedule for which shall be based on the useful life (under
generally accepted accounting principles, consistently applied) of the repair or
improvement, provided that no such capital repairs or improvements made prior to
the fifth  anniversary of the  Commencement  Date shall be included in Operating
Costs.  In the event that during any calendar year (or part  thereof)  occurring
during the Term,  the  building  has an annual  occupancy  rate of less than one
hundred percent (100%),  for purposes hereof, any Operating Costs that vary with
the level of occupancy of the building  with respect to such  calendar  year (or
part thereof) shall be extrapolated as though the annual occupancy rate were one
hundred  percent (100%) for such calendar year (or part  thereof).  LESSEE shall
make  payment  within  thirty (30) days of written  notice from LESSOR that such
increased Operating Costs are payable, and any additional rent shall be prorated
should the lease  terminate  before the end of any calendar  year.  LESSEE shall
make such payments on account of Operating Costs, at the option of LESSOR,  on a
monthly  basis on the days on which the rent under  Paragraph 1 of this lease is
payable, in amounts reasonably estimated by LESSOR.  Notwithstanding anything to
the contrary  contained in this Section 5, Operating Costs shall not include any
capital  expenditures  arising  out of or  resulting  from (i)  defective  work,
construction or materials by or on behalf of LESSOR,  (ii) the failure of LESSOR
to perform any scheduled  maintenance or service,  or (iii) the gross negligence
or  willful  misconduct  of LESSOR or its  agents,  employees,  or  contractors.
Management  fees incurred in favor of related  entities  shall not exceed market
rates (and in no event  exceed four  percent  (4%) of the actual gross rent from
the building,  whether or not such fee is actually  paid),  nor shall  Operating
Costs include the following:

         a)       Costs billed to another tenant;

         b)       Costs of  repairs  or  replacements  resulting  from  casualty
                  losses that would be covered  under a standard  "all-risk"  or
                  "special   form"  policy  of  casualty   insurance   (but  any
                  deductible will be included, up to $10,000), or eminent domain
                  takings, to the extent of the settlement or award proceeds;

         c)       Depreciation or amortization of the building,  lot or any part
                  thereof or improvements thereto;

         d)       Principal or interest  payments on loans  secured by mortgages
                  on the Property;

         e)       Replacement or contingency reserves;

         f)       Ground  lease  rents  or  payments  of any  fees  relating  to
                  leasing, financing or other services;

         g)       Brokerage  commissions and legal fees payable by LESSOR for or
                  with respect to new leases for the Building;

         h)       Legal  or  professional   fees  relating  to  new  leasing  or
                  financing;

         i)       Promotional, advertising or public relations expenses;

         j)       Services  provided for a particular tenant (other than LESSEE)
                  and not tenants in general;

         k)       Any costs or expenses  relating to (1) any breach by LESSOR of
                  its  obligations  hereunder,  or (2) the  compliance  with any
                  applicable  laws,  rules,  orders,  regulations,   ordinances,
                  permits or approvals in effect as of the date of this Lease;

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<PAGE>

         l)       Any costs or expenses  relating to  environmental  remediation
                  unless the need for such remediation  arose as a result of the
                  negligent  act or  omission  of  LESSEE  or  LESSEE's  agents,
                  employees or contractors (in which case LESSEE shall be solely
                  liable for such costs or expenses);

         m)       Any costs or expenses reimbursed to LESSOR by tenants or third
                  parties,  including without  limitation,  costs of convenience
                  electricity  (lights and plugs)  supplied to other  tenants of
                  the Building;

         n)       Any costs or expenses relating to any in-Building food service
                  facilities; and

         o)       Compensation,  fringe benefits, insurance premiums and payroll
                  taxes of any person not engaged in such operation,  management
                  or maintenance  work at the Building on a full-time basis (but
                  such expenses  shall be ratably  allocated to Operating  Costs
                  based  on  the  time   devoted  to  the   Building)  or  other
                  administrative  overhead  or profit  increment  fees and costs
                  paid  by   LESSOR  to  itself   (or  to  its   affiliates   or
                  subsidiaries) except the management fee referred to herein.

For  purposes of this Lease,  "Base  Operating  Costs" shall mean (i) during the
period  commencing  on the  Commencement  Date and ending on the last day of the
calendar month in which the first  anniversary of the Commencement  Date occurs,
$4.85 per square foot of rentable area in the building, and (ii) thereafter, the
actual  Operating Costs incurred during the first twelve full calendar months of
this Lease. LESSOR's notice of LESSOR's share of operating costs shall include a
reasonably  detailed  statement  setting  forth  the  Operating  Costs  and  the
calculation of LESSOR's proportionate share thereof (the "Statement"). If LESSEE
disputes any items set forth in the Statement, LESSEE shall have the right, upon
notice to LESSOR  not later  than  sixty  (60) days  following  receipt  of such
Statement  (which  notice shall set forth in  reasonable  detail the  particular
respects in which LESSEE disputes the Statement),  to audit LESSOR's records and
statements of Operating  Costs for the calendar year which is the subject of the
Statement.  Such audit shall be conducted  by an  independent  certified  public
accountant  selected by LESSEE and  reasonably  acceptable to LESSOR.  The audit
shall  take  place at the  offices  of LESSOR  where its books and  records  are
located at a mutually convenient time during LESSOR's regular business hours. In
the event that such audit  discloses  that  LESSEE  paid in excess of its actual
proportionate share of Operating Costs, then LESSOR shall apply such overpayment
to the next due payment  obligation  on account of Operating  Costs and, if such
refund  exceeds such next due payment  obligation,  refund such excess to LESSEE
within  thirty  (30) days  after  LESSOR's  receipt  of such  audit  report.  In
addition,  in the event that such audit  discloses  that LESSEE paid ten percent
(10%) or more in excess of its actual proportionate share of Operating Costs for
any  particular  cost item or items,  then  LESSEE  shall have the right,  to be
exercised by written notice to LESSOR within fifteen (15) days after delivery of
the  results  of  LESSEE's  audit,  to review  the same cost  item(s)  for prior
calendar years (and any overpayments  discovered with respect to such item(s) in
prior years shall likewise be applied to the next due payment, as stated above).
Notwithstanding  the  foregoing,  LESSEE shall be entitled to continue to review
additional  prior years only so long as its audit of such  particular cost items
continue to reflect  overpayments of 10% or more. The accountant  conducting the
audit shall be compensated on an hourly basis and shall not be compensated based
upon a percentage of overcharges it discovers.  LESSEE shall pay the cost of any
such audit unless such audit  discloses an overpayment  (whether for the year in
question  or any prior  year) in excess of five  percent  (5%) in which case the
cost of such  audit  shall be paid for by  LESSOR.  Any  dispute  regarding  the
results of any such audit,  which is not  resolved by  agreement  of the parties
within sixty (60) days after delivery of such audit report, shall be resolved by
arbitration under the Commercial  Arbitration Rules of the American  Arbitration
Association,  except that there shall be only one arbitrator, who shall not have
had a  professional  relationship  with  either  during the  preceding  one year
period,  and who shall be a certified  property manager having at least ten (10)
years'  experience in the  management  of


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<PAGE>

commercial  properties in the northern  suburban  Boston  market.  If LESSOR and
LESSEE are unable to agree on a mutually acceptable arbitrator within twenty-one
(21) days after the expiration of such 60-day period,  then either party may ask
the  then-president  of the Greater Boston Real Estate Board to name a qualified
arbitrator.

6. UTILITIES AND SERVICES.  As part of the  improvements  to the leased premises
being  provided  by  LESSOR,  LESSOR  shall  provide  water and  sewer  service,
equipment  to heat and cool the leased  premises  as  provided in EXHIBIT C, and
LESSOR shall provide janitorial services as set forth on EXHIBIT D. LESSEE shall
pay for such  services as  Operating  Costs).  LESSEE  shall pay directly to the
utility  provider  for all  convenience  electricity  (lights  and plugs) in the
leased premises,  as determined by a separate meter serving the leased premises.
LESSEE shall pay for all charges that exceed $1.75 per square foot  annually for
electricity  and gas for  the  heat  and air  conditioning  serving  the  leased
premises.  LESSEE  shall also pay LESSOR as an  Operating  Cost a  proportionate
share of any other fees and charges relating to utility use for the common areas
of the building and the property.  No plumbing,  construction or electrical work
of any type (other than repair or  replacement of minor fixtures or equipment by
qualified  personnel)  shall be done without  LESSOR's  prior  written  approval
(which shall not be unreasonably  withheld or delayed) and LESSEE  obtaining the
appropriate  municipal  permit.  LESSOR  represents  and warrants that as of the
Commencement  Date of this Lease,  the leased  premises  shall be  connected  to
electricity, gas, water, sewer and telephone service.

7. COMPLIANCE WITH LAWS. LESSEE acknowledges that no trade, occupation, activity
or work shall be conducted in the leased  premises or use made thereof which may
be unlawful,  improper, noisy, offensive, or contrary to any applicable statute,
regulation,  ordinance or bylaw.  LESSEE shall keep all employees working in the
leased premises covered by Worker's Compensation  Insurance and shall obtain any
licenses and permits necessary for LESSEE's specific occupancy.  LESSEE shall be
responsible  for causing the leased premises and any alterations by LESSEE which
are allowed  hereunder to be in full  compliance  with any  applicable  statute,
regulation,  ordinance,  or bylaw as a result of LESSEE's  particular use of the
leased  premises,  provided that LESSOR shall be required to make alterations to
the leased premises on account of any such statute,  regulation,  ordinance,  or
bylaw that is  generally  applicable  to general  office,  light  manufacturing,
research and development and distribution facilities (subject always to LESSOR's
right, in its sole  discretion,  to contest the  applicability  of such statute,
regulation,  ordinance,  or bylaw).  LESSOR hereby  represents that, to the best
actual knowledge of LESSOR, as of the Commencement Date, the leased premises and
the  improvements  described  on  EXHIBIT  C to be  performed  (or  caused to be
performed)  by LESSOR  shall  comply (to the extent  that  non-compliance  would
adversely  affect  the  use and  occupancy  of the  leased  premises)  with  all
applicable laws, codes, rules, regulations,  ordinances,  permits, approvals and
insurance requirements.

8. FIRE,  CASUALTY,  EMINENT DOMAIN.  Should greater than fifty percent (50%) of
the square  footage of either the leased  premises or the building of which they
are a part be  substantially  damaged by fire or other  casualty  or be taken by
eminent  domain,  LESSOR  may elect to  terminate  this  lease.  When such fire,
casualty or taking  renders the leased  premises  substantially  unsuitable  for
their  intended  use,  a just  and  proportionate  abatement  of base  rent  and
additional  rent shall be made (until such time as the leased premises have been
restored or this Lease has been terminated).  When such fire, casualty or taking
renders the leased premises (or access thereto or facilities  relating  thereto)
substantially  unsuitable for their intended use,  LESSEE may elect to terminate
this lease if: (a) LESSOR fails to give written  notice  within thirty (30) days
of intention to restore the leased premises;  or (b) LESSOR fails to restore the
leased  premises to a condition  substantially  suitable for their  intended use
within one  hundred  and twenty  (120)  days of said fire,  casualty  or taking.
LESSOR  reserves all rights for damages or injury to the leased premises for any
taking by eminent domain, except for damage to LESSEE's property or equipment.

9. FIRE INSURANCE.  LESSEE shall not permit any use of the leased premised which
will  adversely  affect or make  voidable any insurance on the property of which
the leased  premises are a part, or on the contents


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<PAGE>

of said property,  or which shall be contrary to any law or regulation from time
to time established by the Insurance Services Office (or successor),  local Fire
Department,  LESSOR's  insurer,  or any  similar  body.  LESSEE  shall on demand
reimburse LESSOR, and all other tenants,  all extra insurance premiums caused by
LESSEE's use of the leased  premises.  LESSOR  acknowledges  and agrees that the
uses set forth in Section 4 above do not  currently  require  extra or increased
insurance premiums. If LESSEE shall vacate the leased premises or permit same to
be unoccupied other than during LESSEE's  customary  non-business days or hours,
and other  than as a result of a fire,  casualty  or  taking,  and such  vacancy
causes an increase in LESSOR's risk rating,  insurance  rates or premiums,  then
LESSEE  shall be  solely  responsible  for the same  and  shall  pay the same as
additional  rent within ten days after  demand  therefor,  and if LESSEE had not
given LESSOR notice of such vacancy,  and such vacancy  shall  adversely  affect
LESSOR's  insurance  coverage,  LESSOR  shall  advise  LESSEE  as soon as LESSOR
becomes  aware of such effect,  and LESSEE shall be solely  responsible  for any
loss or costs that would  otherwise have been covered prior to the date on which
LESSEE gave such notice.

10.  MAINTENANCE  OF PREMISES.  LESSOR will be  responsible  for all  structural
maintenance  of  all  the  leased  premised,   but  specifically  excluding  all
maintenance of any non "building standard" leasehold  improvements  installed by
or for LESSEE after the  Commencement  Date.  "Structure"  or  "structural"  for
purposes of this lease shall mean and include  only the  following:  foundation;
roof framing (specially excluding, without limitation, the ceiling (of which the
underdeck of the roof is not to be considered a part); bearing columns;  bearing
walls (specially  excluding without  limitation the interior surfaces  thereof),
floor slab and subflooring; space heating and cooling equipment; sprinklers; and
utility  supply  lines that serve the leased  premises in common  with  premises
other than the leased premises.  The costs of such maintenance shall be included
in the Operating  Costs,  as defined  under  Section 5 hereof.  LESSEE agrees to
maintain  at its expense  all other  aspects of the leased  premises in the same
condition as they are at the  commencement  of the term or as they may be put in
during the term of this lease,  excepting  only (i) normal  wear and tear,  (ii)
damage by fire or other casualty,  and (iii) damage caused by the negligent acts
or omissions of LESSOR or its agents or contractors,  and whenever necessary, to
replace light bulbs and interior glass therein. At LESSEE's request, LESSOR will
replace  interior  glass and light bulbs and LESSEE shall pay LESSOR's  invoices
therefor. LESSEE will properly control or vent all solvents,  degreasers, smoke,
odors,  etc., and shall not cause the area surrounding the leased premises to be
in  anything  other  than a neat and clean  condition,  depositing  all waste in
appropriate  receptacles.  LESSEE shall be solely  responsible for any damage to
plumbing  equipment,  sanitary lines, or any other portion of the building which
results from the discharge or use of any acid or corrosive  substance by LESSEE.
LESSEE shall not permit the leased premises to be overloaded,  damaged, stripped
or defaced,  nor suffer any waste,  and will not keep animals  within the leased
premises.  LESSEE  shall,  however,  have the  right to keep a small  number  of
laboratory  animals from time to time in accordance  with all  applicable  laws,
codes and  ordinances or  governmental  permits or licenses,  which LESSEE shall
first obtain. Any increase in air conditioning equipment or electrical capacity,
or any  installation  and/or  maintenance of equipment  which is necessitated by
some  specific  aspect of  LESSEE's  change in use of the leased  premises  from
permitted uses shall be at the LESSEE's  expense.  All  maintenance  provided by
LESSOR shall be during  LESSOR's  normal  business  hours;  provided that LESSOR
shall use  commercially  reasonable  efforts not to  materially  interfere  with
LESSEE's  use or  occupancy of the leased  premises,  and provided  further that
janitorial  services shall be supplied  after normal office hours.  LESSOR shall
also  maintain  and repair the common  areas and  facilities  serving the leased
premises and Building, including without limitation common walkways,  driveways,
parking  areas and  lighting,  freight  or  loading  areas,  lobbies,  hallways,
stairways,  elevators and ramps in good order and repair,  consistent with other
first-class  office buildings in the north suburban Boston market. To the extent
that LESSOR shall receive  written  notice from any  governmental  agency having
jurisdiction that the Building or the Property is in violation of any applicable
law,  regulation  or  ordinance,  and such  violation  does not  arise  from the
LESSEE's  breach  of this  Lease or from  LESSEE's  specific  use of the  leased
premises,  LESSOR shall be responsible  for taking such steps as LESSOR may deem
commercially  reasonable to contest such notice or cure


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<PAGE>

such  violation  (provided  that no  contest  shall  cause  LESSEE  to incur any
criminal or civil  liability or  substantially  impede access to or occupancy of
the leased premises).

11.  ALTERATIONS.  LESSEE shall not make structural  alterations or additions of
any kind to the leased premises, but may make nonstructural alterations provided
LESSOR  consents  thereto in writing,  which consent  shall not be  unreasonably
withheld or delayed as to  non-structural  alterations  or additions that do not
adversely  affect  (in other  than a DE MINIMUS  way) the  building's  plumbing,
electrical  or mechanical  systems.  All such  alterations  shall be at LESSEE's
expense and shall conform with LESSOR's reasonable construction  specifications.
If LESSOR or LESSOR's agent  provides any services or maintenance  for LESSEE in
connection with such alterations or otherwise under this lease, any just invoice
will be promptly paid.  LESSEE shall not permit any mechanics'  liens or similar
liens  to  remain  upon the  leased  premises  in  connection  with  work of any
character  performed or claimed to have been  performed at the  direction of the
LESSEE and shall cause any such lien to be released or removed forthwith without
cost to  LESSOR.  Any  alterations  or  additions  shall  (except  to the extent
specified  by LESSEE as  provided  in  Section  27)  become  part of the  leased
premises and the property of LESSOR.  LESSOR shall have the right at any time to
change the arrangement of parking areas, stairs,  walkways or other common areas
of the  building,  provided that such change does not  materially  and adversely
affect LESSEE's use or occupancy of or access to the leased premises.

12.  ASSIGNMENT OR  SUBLEASING.  LESSEE shall not assign this lease or sublet or
allow any other  firm or  individual  to occupy  the whole or part of the leased
premises  without  LESSOR's  prior written  consent,  which consent shall not be
unreasonably withheld or delayed. Notwithstanding such assignment or subleasing.
LESSEE  shall  remain  liable to LESSOR for the  payment of all rent and for the
full performance of the covenants and conditions of this lease. LESSEE shall pay
LESSOR promptly for reasonable  legal expenses  incurred by LESSOR in connection
with any consent requested thereunder by LESSEE.

13.  SUBORDINATION AND ESTOPPEL.  This lease shall be subject and subordinate to
any and all mortgages and other instruments in the nature of a mortgage,  now or
any time  hereafter  affecting  the  leased  premises,  and LESSEE  shall,  when
requested,  promptly  execute and deliver such written  instruments  as shall be
reasonably  customary and necessary to show the  subordination  of this lease to
said mortgage or other such instruments in the nature of a mortgage.  Each party
agrees  from time to time,  within  ten (10) days after  written  request by the
other, to execute,  acknowledge and deliver to the requesting party (and/or, the
case of LESSOR,  to any  mortgagee  or  prospective  purchaser)  a statement  in
writing  certifying  that this lease is unmodified  and in full force and effect
and that the certifying party has no defenses, offsets, or counterclaims against
its  obligations,  including  as to LESSEE  the  obligation  to pay rent and any
additional  rent or other charges and to perform its other  covenants under this
lease,  and the dates to which the rent and any additional rent or other charges
have been paid.  Notwithstanding  the  foregoing,  such  subordination  shall be
conditioned on LESSOR's  obtaining the holder's written agreement that,  subject
to such reasonable  qualifications as such holder may reasonably  impose, in the
event  that the  holder  shall  succeed  to the  interests  of LESSOR  hereunder
pursuant to such mortgage, ground lease or other encumbrance, then so long as no
Default of LESSEE exists  hereunder,  LESSEE's right to possession of the leased
premises shall not be disturbed and LESSEE's other rights hereunder shall not be
adversely  affected (and this Lease shall not be terminated) by any  foreclosure
of such mortgage or encumbrance or by termination of such ground lease.

14. LESSOR'S ACCESS.  LESSOR or agents of LESSOR may at any reasonable time, and
upon reasonable  advance notice (which need not be in writing and which need not
be  given  at all in the  event  of any  emergency)  enter  to view  the  leased
premises,  to make repairs and  alterations as LESSOR should elect to do for the
leased premises, the common areas or any other portions of the building, to make
repairs  which  LESSEE is required  but has failed to do, and to show the leased
premises to others.


                                       7
<PAGE>

15. SNOW REMOVAL.  LESSOR shall be  responsible  for the prompt  plowing of snow
from all roadways and unobstructed  parking areas and from the walkways,  steps,
and loading areas serving the leased premises.

16. ACCESS & PARKING.  LESSEE shall have the right without any additional charge
to use the parking  facilities  provided for the leased  premises in common with
others  entitled to the use  thereof.  The  building  has three spaces per 1,000
square feet of rentable area, all such spaces to be on an unreserved unallocated
basis.  LESSOR shall maintain the foregoing  parking ratio,  and shall not grant
rights to other tenants or third parties which would be inconsistent  with there
remaining  three  spaces per 1,000  square feet of  rentable  area in the leased
premises.  Subject to final  measurement  of the  leased  premises  pursuant  to
Section 34, LESSEE will be entitled to use 132 parking  spaces.  LESSEE will not
obstruct in any manner any portion of the building or the walkways or approaches
to the building and will conform to all reasonable  rules and regulations now or
hereafter made by LESSOR for parking and for the care, use, or alteration of the
building,   its  facilities  and  approaches.   LESSOR  shall  use  commercially
reasonable  efforts to enforce such rules and  regulations in a uniform  manner.
LESSEE  further  warrants that LESSEE will not permit any employee or visitor to
violate  this or any other  covenant or  obligation  of LESSEE.  All loading and
unloading  shall  be by a side  loading  dock or  entrance,  if such  access  is
available.  No unattended  parking will be permitted  between  7:00PM and 7:00AM
without  LESSOR's  prior  written  approval,  which  shall  not be  unreasonably
withheld or delayed.  Unregistered or disabled vehicles,  or storage trailers of
any type,  may not be parked at any time.  LESSOR may tow, at LESSEE's sole risk
and expense,  any  misparked  vehicle  belonging  to LESSEE or LESSEE's  agents,
employees, invitees or callers, at any time. LESSOR shall not be responsible for
providing any security services for the leased premises.

17. LIABILITY. To the extent permitted by law, and except with respect to damage
to the Building or leased  premises by fire or other  casualty,  LESSEE shall be
solely  responsible  as between  LESSOR and LESSEE for (i) deaths or personal or
bodily  injuries  to  all  persons  whomsoever  occurring  in or on  the  leased
premises,  from whatever  cause  arising,  and (ii) deaths or personal or bodily
injuries to all persons  whomsoever  occurring  outside of the leased  premises,
where the same result from the  negligent or willful acts or omissions of LESSEE
or its  agents,  contractors  or  employees,  and (iii)  damage to  property  to
whomsoever belonging arising out of the use, control, condition or occupation of
the leased premises by LESSEE;  and LESSEE agrees to indemnify,  defend and save
harmless  LESSOR  from any and  liability,  including  but not limited to costs,
expenses,  damages,  causes of action,  claims,  judgments and  attorney's  fees
caused by or in any way growing out of any matters aforesaid.

18.  INSURANCE.  LESSEE  shall  maintain at its own expense  with respect to the
leased  premises  and  LESSEE's  property  which  is not a part  of the  demised
premises a comprehensive public liability insurance policy,  insuring LESSEE and
LESSOR against any claims based on bodily injury  (including  death) or property
damage arising out of the condition of the leased premises (including any common
areas that are considered part of the leased premises hereunder) or their use by
LESSEE, with coverage in the amount of Two Million Dollars ($2,000,000).  LESSEE
shall further  obtain and keep in force during the term of this Lease "all risk"
extended coverage property insurance on LESSEE's personal  property,  all tenant
improvements installed at the leased premises by LESSEE, LESSEE's trade fixtures
and  other  property.  LESSOR  shall  be  included  in each  such  policy  as an
additional  insured using ISO Form CG 20 26 11 85 (or comparable  ACORD form) or
some other  form  approved  by LESSOR.  LESSEE  will file with  LESSOR  prior to
occupancy  certificates and any applicable  riders or endorsements  showing that
such insurance is in force, and thereafter will file renewal  certificates prior
to the expiration of any such policies.  All such insurance  certificates  shall
provide that such policies shall not be canceled without at least ten (10) days'
prior  written  notice to  LESSOR.  In the event  LESSEE  shall  fail to furnish
evidence  of renewal of any policy  prior to the planned  renewal  date shown on
such  certificate,  then  LESSOR may elect to  contract  for such  insurance  at
LESSEE's  expense,  and  LESSOR  shall give  notice  thereof


                                       8
<PAGE>

simultaneously or promptly thereafter. LESSOR shall maintain throughout the term
of this Lease a policy or policies of insurance  covering  loss or damage to the
building  (including  LESSOR installed  improvements to the leased premises) and
all related  improvements in an amount approximately equal to the full insurable
replacement cost thereof, and such insurance shall provide coverage against fire
and other perils customarily  covered by an "all-risk" or "special form" policy.
LESSOR shall also carry a policy or policies of general  liability  insurance in
such amounts and coverages as commercially  reasonable against liability arising
out of the  ownership,  operation  and  management of the building and all areas
relating thereto.

19. SIGNS.  LESSOR shall,  at LESSEE's  expense (and provided  LESSEE shall have
obtained any necessary  governmental approvals or permits) erect signage for the
leased  premises  that will be located on the  building  pediment and visible to
Cambridge  Street,  as well as a  monument  sign in the  front of the  building.
LESSOR shall cooperate with and assist LESSEE's efforts to obtain such approvals
or permits.  LESSEE  shall  obtain the prior  written  consent of LESSOR  before
erecting  any other  sign on the leased  premises,  which  consent  shall not be
unreasonably withheld, but may include approval as to size, wording,  design and
location.  LESSOR may remove and  dispose of any sign not  approved,  erected or
displayed in accordance with this lease.

20. BROKERAGE.  LESSEE and LESSOR each warrants and represents to the other that
each has dealt with no broker or third party with respect to this lease,  except
for  SPAULDING  &  SLYE/COLLIERS  (whose fee shall be paid by  LESSOR)  and each
agrees to indemnify the other  against any brokerage  claims by any other broker
or third person arising by virtue of this lease.

21. DEFAULT AND  ACCELERATION OF RENT. In the event that: (a) any assignment for
the benefit of  creditors,  trust  mortgage,  receivership  or other  insolvency
proceeding  shall be made or  instituted  with  respect  to LESSEE  or  LESSEE's
property and not cured,  discharged or released  within 90 days  (provided  that
such grace period shall not apply to any  proceeding  commenced by LESSEE);  (b)
LESSEE  shall  default  in the  observance  or  performance  of any of  LESSEE's
covenants,  agreements, or obligations hereunder,  other than monetary payments,
and such default  shall not be corrected  within  thirty (30) days after written
notice  thereof  (or, if such  default  cannot  reasonably  be cured within such
30-day period,  despite  diligent and continuous  efforts to cure the same begun
promptly after notice thereof,  then such 30-day period shall be extended for an
additional  reasonable time, so long as LESSEE  continues such efforts);  or (c)
LESSEE shall fail to pay the security  deposit,  rent,  taxes,  any  substantial
invoice  from LESSOR or LESSOR's  agent for goods  and/or  services or other sum
herein  specified,  and such  default  shall  continue  for ten (10) days  after
written notice specifying such failure;  then in any such case LESSOR shall have
the right  thereafter,  without demand or further  notice,  to re-enter and take
possession of the leased premises,  to declare the term of this lease ended, and
to remove LESSEE's effects, all in accordance with applicable law, without being
guilty of any manner of trespass,  and without  prejudice to any remedies  which
might be  otherwise  used for arrears of rent or other  default of breach of the
lease. In the event of any termination, LESSEE shall pay the rent and other sums
payable  hereunder up to the time of such  termination,  and thereafter  LESSEE,
until the end of what would  have been the term of this Lease in the  absence of
such termination,  and whether or not the leased premises shall have been relet,
shall be liable to LESSOR  for,  and shall pay to LESSOR as  liquidated  current
damages  the  rent and  other  sums  that  would be  payable  hereunder  if such
termination had not occurred, less the net proceeds, if any, of any reletting of
the leased  premises,  after  deducting  all  expenses in  connection  with such
reletting,  including,  without limitation,  all repossession  costs,  brokerage
commissions,   legal  expenses,   attorneys'  fees,  advertising,   expenses  of
employees,  alteration costs and expenses of preparation for such reletting.  At
any time after such termination,  whether or not LESSOR shall have collected any
such  current  damages,  as  liquidated  final  damages  and in lieu of all such
current  damages  beyond the date of such demand,  at LESSOR's  election  LESSEE
shall pay to LESSOR an amount equal to the excess, if any, of the rent and other
sums as  hereinabove  provided that would be payable  hereunder from the date of
such demand,  over the then fair net rental value of the leased premises for the
same period,  discounted  to then net present  value at a rate equal to the WALL
STREET JOURNAL prime rate.


                                       9
<PAGE>

LESSOR,  without being under any obligation to do so and without thereby waiving
any  default,  may remedy same for the account and at the expense of LESSEE.  If
LESSOR  pays or incurs any  obligation  for the  payment of money in  connection
therewith, such sums paid or obligations incurred plus interest and costs, shall
be  paid  to  LESSOR  by  LESSEE  as  additional  rent.   Provided  LESSOR  uses
commercially  reasonable efforts to do so, LESSOR shall in no event be liable in
any way  whatsoever  for  failure to relet the  Leased  premises.  For  purposes
hereof,  marketing of the Leased  premises in a manner  similar to the manner in
which  LESSOR  markets  other leased  premises  within  LESSOR's  control in the
Building  shall  be  deemed  to  have  satisfied  LESSOR's   obligation  to  use
"reasonable  efforts."  In no event  shall  LESSOR be  required to (i) relet the
leased premises before leasing similar vacant space in the Building,  (ii) lease
the leased  premises for a rental less than the current fair market  rental then
prevailing  for office space in the  Building,  or (iii) enter into a lease with
any  proposed  tenant  that  does not  have,  in  LESSOR's  reasonable  opinion,
sufficient  financial  resources or operating  experience  to operate the leased
premises in a first-class  manner. Any sums received by LESSOR from or on behalf
of LESSEE at any time shall be  applied  first to any  unamortized  improvements
completed for LESSEE's occupancy then to offset any outstanding invoice or other
payment due to LESSOR,  with the balance  applied to  outstanding  rent.  LESSEE
agrees to pay reasonable attorney's fees and/or administrative costs incurred by
LESSOR in  enforcing  any or all  obligations  of LESSEE under this lease at any
time.  LESSEE shall pay LESSOR interest at the rate of eighteen (18) percent per
annum on any payment from LESSEE to LESSOR which is past due.

22. NOTICE.  Any notice from LESSOR to LESSEE relating to the leased premises or
to the  occupancy  thereof shall be deemed duly served when served by constable,
or sent to the leased  premises by certified  mail,  return  receipt  requested,
postage prepaid, or sent by nationally  recognized overnight delivery or courier
service, and in any case addressed to LESSEE: if prior to the Commencement Date,
addressed to 45 Hartwell Avenue, Lexington, Massachusetts 02421, Attention: Paul
S. Weiner;  and if after the  Commencement  Date,  then to the leased  premises,
Attention:  Paul S. Weiner;  or at such other address as LESSEE may from time to
time  request.  The LESSOR  will send a copy of any notice to LESSEE  alleging a
failure or default  on the part of LESSEE to Sherin and Lodgen  LLP,  100 Summer
Street,  Boston,  Massachusetts 02110,  Attention:  Robert M. Carney. Any notice
from  LESSEE to LESSOR  relating  to the  leased  premises  or to the  occupancy
thereof  shall be deemed duly served when served by  constable  or  delivered to
LESSOR by certified mail, return receipt  requested postage prepaid,  or sent by
nationally  recognized  overnight  delivery or courier service,  and in any case
addressed to LESSOR at 50 Salem Street,  Lynnfield, MA 01940 or at LESSOR's last
designated  address.  No oral notice or  representation  shall have any force or
effect. Time is of the essence in service of any notice.

23.  OCCUPANCY.  Unless LESSOR and LESSEE shall then be actively engaged in good
faith negotiations regarding extension of the term (and in that case for no more
than thirty (30) days after the scheduled termination), in the event that LESSEE
continues to occupy or control all or any part of the leased  premises after the
agreed  termination  of this lease without  written  permission of LESSOR,  then
LESSEE  shall be liable to LESSOR  for any and all  loss,  damaged  or  expenses
incurred  by LESSOR and all other  terms of this lease  shall  continue to apply
except  that rent  shall be due in full  monthly  installments  at a rate of one
hundred  fifty  (150)  percent of that which would  otherwise  be due under this
lease, it being understood  between the parties that such extended  occupancy is
as a tenant at  sufferance  and is solely for the  benefit  and  convenience  of
LESSEE and as such has a greater rental value.  LESSEE's control or occupancy of
all or any part of the leased premised beyond the last day of any monthly rental
period shall constitute  LESSEE's  occupancy for an entire additional month, and
increased rent as provided in this section shall be due and payable  immediately
in advance. LESSOR's acceptance of any payments from LESSEE during such extended
occupancy shall not alter LESSEE's status as a tenant at sufferance.

24. FIRE PREVENTION.  LESSOR and LESSEE each agree to use reasonable precautions
against  fire and  LESSOR  agrees to  provide  and  maintain  (except  as may be
required  solely as a result of  LESSEE's


                                       10
<PAGE>

particular  type of  business in the leased  premises)  approved,  labeled  fire
extinguishers,  emergency  lighting  equipment,  and exit signs and complete any
other modifications within the leased premises as required or recommended by the
Insurance  Services  Office (or successor  organization),  OSHA,  the local Fire
Department,  or any similar body. To the extent  required  solely as a result of
LESSEE's  particular  type of  business  in the leased  premises,  LESSEE  shall
maintain approved, labeled fire extinguishers, emergency lighting equipment, and
exit signs and complete any other  modifications  within the leased  premises as
required  or  recommended  by  the  Insurance   Services  Office  (or  successor
organization), OSHA, the local Fire Department, or any similar body.

25.  OUTSIDE AREA.  No goods,  equipment,  or things of any type or  description
shall be held or stored  outside the leased  premises at any time without  prior
written  consent from LESSOR.  If LESSEE  obtains all  necessary  approvals  and
permits from governmental authorities,  LESSEE shall be allowed to place and use
a gas  barbeque  and  lawn/deck  furniture  on the  deck to be  constructed  and
attached to the leased premises. Any goods, equipment or things left outside the
leased premises without LESSOR's prior written consent shall be deemed abandoned
and may be removed at LESSEE's  expense  without notice by LESSOR.  LESSOR shall
provide a shared  dumpster or compactor for use by LESSEE in common with others,
and LESSEE  shall pay its  proportionate  share  (based on  LESSOR's  reasonable
estimate of LESSEE's use) of any costs associated therewith.

26.  ENVIRONMENT.  LESSEE will so conduct and operate the leased premises as not
to interfere in any way with the use and enjoyment of other portions of the same
or neighboring  buildings by others by reason of odors,  smoke,  smells,  noise,
pets,  accumulation of garbage or trash, vermin or other pests, or otherwise and
will at its expense  employ a  professional  pest control  service if necessary.
LESSEE agrees to maintain  efficient and effective devices for preventing damage
to heating equipment from solvents, degreasers, cutting oils, propellants, etc.,
which may be present at the leased  premises.  No hazardous  materials or wastes
shall be stored,  disposed of or allowed to remain at the leased premises at any
time (except in strict  accordance  with applicable  laws),  and LESSEE shall be
solely responsible for any and all corrosion or other damage associated with the
use, storage and/or disposal of same by LESSEE.  LESSOR  represents and warrants
that  LESSOR has no actual  knowledge  of, and LESSOR has not  received  written
notice  from any  governmental  agency  having  jurisdiction  of, any release or
threat of release of any such hazardous  materials or waste or oil on, at, in or
under the  building or lot on which it is located.  LESSOR shall  indemnify  and
hold LESSEE harmless from and against any and all claims,  loss,  cost,  expense
and  damage  resulting  from and  breach  of the  foregoing  representation  and
warranty.

27. SURRENDER. Subject to the terms and conditions of this Section, LESSEE shall
at the  termination  of this lease remove all of LESSEE's goods and effects from
the  leased  premises,  including  any and  all  fixtures  and  LESSEE-installed
improvements  (to the extent specified by LESSOR at the time of initial approval
thereof), and furniture and equipment, and LESSEE shall repair any damage to the
leased  premises  caused by such  removal.  LESSEE  shall  deliver to LESSOR the
leased  premises and all keys and locks  thereto,  all  fixtures  and  equipment
connected  therewith (to the extent not to be removed by LESSEE).  Not more than
nine (9)  months,  and not less than three (3)  months,  prior to the end of the
term of this  lease,  LESSOR may request  that LESSEE  specify in writing (to be
delivered  within 15 days  after such  request)  those  alterations,  additions,
fixtures and improvements  made to or upon the leased premises by or for LESSEE,
including  but  not  limited  to  any  offices,   partitions,   window   blinds,
manufacturing  and research & development  fixtures,  floor covering  (including
computer  floors),  water coolers,  telephone  wiring,  telephone  equipment and
counters,  that LESSEE  proposes to remove at the expiration of the term. To the
extent that any such  alterations,  additions and improvements are not listed in
LESSEE's  response,  then LESSEE shall have no right to remove the same.  LESSEE
shall in any event remove all furniture,  trade fixtures and business  equipment
that,  in  LESSOR's  reasonable  judgment,  is not readily  re-usable  for other
business office,  warehousing,  light manufacturing and research and development
uses,  provided  that LESSOR gives LESSEE notice of LESSOR's  determination  not
less than thirty (30) days


                                       11
<PAGE>

prior to the  expiration  of the Term.  LESSEE  shall  not  remove  plumbing  or
electrical  equipment  or HVAC  equipment,  except  that  LESSEE  may remove its
particularly  specialized plumbing,  electrical equipment and HVAC equipment and
trade  fixtures,  provided that LESSEE shall  restore the remaining  systems and
equipment to that which was originally  present in the leased  premises.  LESSEE
shall  deliver  the  leased  premises  sanitized  from  any  chemicals  or other
contaminants,  and  broom  clean and in the same  condition  as they were at the
commencement of this lease or any prior lease between the parties for the leased
premises,  or as they were  modified  during  said term  with  LESSOR's  written
consent, reasonable wear and tear and damage by fire or other casualty excepted.
In the event of  LESSEE's  failure to remove any of LESSEE's  property  from the
leased  premises upon  termination  of the lease,  LESSOR is hereby  authorized,
without  liability to LESSEE for loss or damage  thereto and at the sole risk of
LESSEE, to remove and store any such property at LESSEE's expense,  or to retain
same  under  LESSOR's  control,  or to sell at public or private  sale  (without
notice),  any or all  property  not so removed and to apply the net  proceeds of
such sale to the payment of any sum due hereunder,  or to destroy such abandoned
property.  In no case shall the leased premises be deemed  surrendered to LESSOR
until  the  termination  date  provided  herein  or  such  other  date as may be
specified  in a written  agreement  between  the  parties,  notwithstanding  the
delivery of any keys to LESSOR.

28. RESPONSIBILITY.  To the maximum extent permitted by law, LESSOR shall not be
held liable to anyone for loss or damage  caused in any way by the  LESSEE's use
of the leased premises,  leakage,  seepage or escape of water from any source or
for the cessation of any service rendered  customarily to the leased premises or
building,  or agreed to by the terms of this  lease,  due to any  accident,  the
making of repairs,  alterations or  improvements,  labor  difficulties,  weather
conditions, mechanical breakdowns, trouble or scarcity in obtaining electricity,
service or supplies  from the sources  from which they are usually  obtained for
said building,  or any cause beyond LESSOR's immediate control.  Notwithstanding
the  foregoing,  in the event that (i) LESSEE shall be deprived of any essential
service and utility that is to be provided by LESSOR hereunder, and the cause of
such  deprivation  is  within  LESSOR's  reasonable   control,   and  (ii)  such
deprivation  shall continue for five (5) business days after LESSOR has received
written notice thereof from LESSEE,  and (iii) within such 5-business day period
LESSOR shall not have commenced to repair or restore such service or utility and
thereafter  diligently  pursue such repair or restoration  to  completion,  then
commencing  on the  sixth  business  day after  such  notice,  all Rent  payable
hereunder  shall be abated  until such time as such  services  and/or  utilities
shall be restored. For purposes hereof, the term "business day" shall mean a day
on which  LESSEE  would  otherwise  normally be open for  business in the leased
premises.  Notwithstanding  the foregoing,  with respect to any such deprivation
that makes it  impracticable  for LESSEE to continue  its business in the leased
premises,  and if LESSEE  actually causes LESSEE to stop conducting its business
in the  leased  premises,  then such rent  abatement  shall  take  effect on the
business day next following such notice from LESSEE.

29.  SUBROGATION.  LESSOR and LESSEE hereby  release each other and each other's
officers,  directors,  employees  and  agents,  to the  extent of the  insurance
coverage which each is required to carry  hereunder,  from any and all liability
for any loss or damage caused by fire or any of the extended coverage casualties
or any other casualty insured against, even if such fire or other casualty shall
be brought  about by the fault or  negligence  of a party or  parties  for whose
conduct a party is legally responsible. This waiver shall be in force and effect
only with respect to loss or damage  occurring during such time as the insurance
policy or policies  covering  such loss or damage shall  contain a clause to the
effect  that this  waiver  shall not affect  said  policies  or the right of the
insured party to recover thereunder. Each party hereby agrees that its policy or
policies  will  include  such a  clause  if  such is  available.  If such is not
available  without  extra cost,  if the other  party pays such extra cost.  Each
party shall promptly notify the other party of any such extra cost.

30.  GENERAL.  (a) The invalidity or  unenforceability  of any provision of this
lease shall not affect or render invalid or  unenforceable  any other  provision
hereof;  (b) The  obligations  of this lease  shall run with the land,  and this
lease shall be binding  upon and inure to the benefit of the parties  hereto and
their respective


                                       12
<PAGE>

successors and assigns,  except that LESSOR shall be liable only for obligations
occurring  while  LESSOR of the leased  premises;  (c) Any action or  proceeding
arising out of the subject  matter of this lease shall be brought by LESSEE only
in a court of the Commonwealth of  Massachusetts;  (d) If LESSOR is acting under
or as agent for any trust or  corporation,  the  obligations  of LESSOR shall be
binding  upon the  trust or  corporation,  but not  upon any  trustee,  officer,
director,  shareholder, or beneficiary of the trust or corporation individually;
(e) This lease is made and delivered in the Commonwealth of  Massachusetts,  and
shall be  interpreted,  construed,  and  enforced  in  accordance  with the laws
thereof;  (f) This lease was the result of negotiations between parties of equal
bargaining  strength,  and when  executed by both parties shall  constitute  the
entire   agreement   between  said  parties,   and  no  other  oral  or  written
representation  shall  have any effect  hereon,  and this  agreement  may hot be
altered,  extended or amended except by written agreement  attached hereto or as
otherwise  provided  herein,  (g) Except as set forth  herein,  LESSOR  makes no
warranty, express or implied,  concerning the suitability of the leased premises
for LESSEE's  intended  use;  (h) LESSEE  agrees that if LESSOR does not deliver
possession  of the leased  premises as herein  provided  for any reason,  LESSOR
shall not  (except as  expressly  provided  herein) be liable for any damages to
LESSEE for such failure,  but LESSOR agrees to use reasonable efforts to deliver
possession  to  LESSEE  at  the  earliest  possible  date,  and a  proportionate
abatement of rent for such time as LESSEE may be deprived of  possession of said
leased  premised  shall be LESSEE's sole remedy;  (i) Neither the  submission of
this lease form nor the  prospective  acceptance of the security  deposit and/or
rent shall constitute a reservation of or option for the leased premises,  or an
offer to lease, it being  expressly  understood and agreed that this lease shall
not bind either  party in any manner  whatsoever  until it has been  executed by
both parties,  (j) LESSEE shall not be entitled to exercise any option contained
herein if LESSEE is in  default  of any terms or  conditions  hereof  beyond the
expiration of any applicable  notice or grace periods;  (k) The headings on this
lease are for  convenience  only and shall not be  considered  part of the terms
hereof;  (l) No endorsement by LESSEE on any check shall bind LESSOR in any way;
and (m) LESSEE agrees that it will not record this Lease,  but at the request of
either party,  the parties will execute a suitable notice of lease setting forth
the names of the parties, the description of the leased premises and a statement
of the term of this Lease.

31. INTENTIONALLY OMITTED.

32. WAIVERS, ETC. No consent or waiver,  express or implied, by LESSOR, to or of
any breach of any covenant,  condition or duty of LESSEE shall be construed as a
consent or waiver to or of any other  breach of the same or any other  covenant,
condition  or duty.  If LESSEE is several  persons,  several  corporations  or a
partnership,  LESSEE's  obligations  are joint or partnership  and also several.
Unless  repugnant  to the  context  "LESSOR"  and  "LESSEE"  mean the  person or
persons, natural or corporate, named above as LESSOR and as LESSEE respectively,
and their respective heirs, executors, administrators, successors and assigns.

33.  ADDITIONAL  PROVISIONS.  Exhibit "A (Plans),"  "B  (Rent/Expenses/Extension
Terms),"  "C (Plans and  Specifications),"  "D  (Janitorial  Standards)"  and "E
(Rules and Regulations)" attached hereto are hereby incorporated.

34.  FINAL   MEASUREMENT   OF   LEASED   PREMISES;   ARCHITECT'S   CERTIFICATE.
Notwithstanding   anything  to  the  contrary  contained  in  this  Lease,  upon
Substantial  Completion  (as defined in  Paragraph  35) of the leased  premises,
LESSOR shall deliver to LESSEE a certificate  from  LESSOR's  architect  setting
forth the actual square  footage of the leased  premises and the  Building.  The
leased  premises  shall be  calculated  in  accordance  with BOMA  standards  of
measuring rentable square feet. If the square footage  calculation of the leased
premises  changes  after this Lease is executed by LESSOR and LESSEE,  the rent,
security deposit,  LESSEE's Proportionate Share of Taxes and Operating Costs and
the  number  of  parking  spaces to which  LESSEE  shall be  entitled,  shall be
adjusted accordingly.

                                       13
<PAGE>

35. TENDER OF POSSESSION;  SUBSTANTIAL COMPLETION.  The parties acknowledge that
LESSOR has an agreement  with the current owner of the building (the "Owner") to
purchase the property on which the  building is located.  LESSEE has  heretofore
negotiated directly with the Owner a purchase contract,  which has been assigned
to LESSOR.  The Owner is currently in the process of constructing  the building,
as well as tenant improvements  required by LESSEE. LESSEE acknowledges that the
base  building  work  has  been  substantially  completed,  and at the  time  of
execution of this Lease,  LESSEE has approved plans and  specifications  for the
remainder of work to be done. The Owner, as LESSOR's  contractor  shall continue
to perform such work.  LESSOR shall deliver  possession  of the leased  premises
vacant and  Substantially  Completed.  As used herein,  the term  "Substantially
Completed"  shall mean that (i) the leased  premises have been  constructed  and
completed by (or on behalf of) LESSOR as aforesaid in accordance  with the plans
and specification  approved by LESSOR and LESSEE (described on Exhibit C hereto,
as such  plans and  specifications  may be  changed  or  altered  only in mutual
agreement between the parties hereto) in a good and workmanlike  manner,  except
for so called punch list items or defects  which can be completed or remedied by
LESSOR or Owner  after  LESSEE  occupies  the leased  premises  without  causing
substantial  interference with LESSEE's use of the leased premises, and (ii) all
necessary and applicable  governmental  permits and approvals (including a final
Certificate  of Occupancy on the leased  premises and building) have been issued
to allow the LESSEE to use and occupy the leased premises in accordance with the
terms and conditions hereof.  LESSEE and LESSOR acknowledge that, under LESSOR's
agreement with Owner, LESSOR is entitled under certain  circumstances to recover
liquidated  damages from Owner for late  completion  of such work.  In the event
that Owner becomes  entitled to, and actually  recovers such liquidated  damages
from Owner,  then LESSOR  shall pay over to LESSEE  thirty-three  and  one-third
percent (33.3%) of any amounts actually recovered,  but in no event shall LESSOR
be  obligated  to pay over to LESSEE  more than  $1,000.00  per day of such late
completion.  LESSOR shall cause to be completed  and/or repaired such punch list
items as soon as  practicable  but in any event within sixty (60) days after the
Commencement Date, and LESSEE shall allow access to the leased premises for such
purposes.  This  Lease,  and all of the  obligation  and rights  hereunder,  are
expressly   contingent  on  LESSOR's  purchase  of  the  building  as  currently
contemplated.  In the event that LESSOR has not so purchased  the building on or
before July 15, 1999,  then either LESSEE or LESSOR may terminate  this Lease by
notice to the other,  whereupon  this Lease  shall cease and be void and without
further force or effect.

36.  EARLY  POSSESSION.  Subject to approval  by  governmental  authorities  and
LESSOR's or Owner's contractors, LESSEE may enter the leased premises not sooner
than four (4) weeks prior to the anticipated  Commencement  Date,  provided that
LESSEE does not interfere  with or delay the  completion by LESSOR or its agents
or contractors of the construction of any tenant  improvements,  for the purpose
of installing furniture,  trade fixtures,  equipment,  wiring and similar items.
Provided  that  LESSEE  has not begun  operating  its  business  from the leased
premises,  and  subject to all of the terms and  conditions  of the  Lease,  the
foregoing activity shall not constitute the delivery of possession of the leased
premises  to LESSEE and the Lease term  shall not  commence  as a result of said
activities.  Prior to entering  the leased  premises,  LESSEE  shall  obtain all
insurance it is required to obtain by the Lease and shall  provide  certificates
of said insurance to LESSOR.  LESSEE shall  coordinate  such entry with LESSOR's
construction  manager, and such entry shall be made in compliance with all terms
and conditions of this Lease and the Rules and  Regulations  attached  hereto as
EXHIBIT E.

37.  RIGHT OF FIRST  OFFER.  Subject to rights  heretofore  granted to Mediacom,
another tenant in the Building,  if during the term of this Lease LESSOR desires
to lease all or a portion of the building  not  included in the leased  premises
(the "First  Refusal  Space"),  LESSOR shall so notify LESSEE  setting forth the
terms and  conditions  on which LESSOR is willing to so lease the First  Refusal
Space,  and  including  a form of  amendment  to this  Lease,  which  terms  and
conditions   shall  reflect  (among  other  terms)   LESSOR's  then  good  faith
determination  ("LESSOR's  Designation") of the then market rental value for the
First Refusal Space (the "Expansion Rent").  LESSEE may, by giving LESSOR notice
within fifteen (15) days after receipt of LESSOR's notice,  irrevocably elect to
lease the First Refusal Space on the terms and  conditions set forth in LESSOR's
notice.  If LESSEE shall so elect,  LESSEE  shall,  with its notice of exercise,
advise LESSOR of whether LESSEE accepts or disputes  LESSOR's  Designation,  but
LESSEE's exercise shall be irrevocable nonetheless.  Failure by LESSEE to advise
LESSOR that LESSEE disputes LESSOR's  Designation  shall be conclusive  evidence
that LESSEE accepts the same. In either case,  LESSEE shall within ten (10) days
after  such  election  enter  into such  amendment  incorporating  the terms and
conditions  set forth in LESSOR's


                                       14
<PAGE>

notice.  If LESSEE shall fail to exercise  its right within such 15-day  period,
then at LESSOR's option, LESSEE shall have no further rights with respect to the
First Refusal Space,  and LESSOR shall thereafter be free to lease any or all of
the  First  Refusal  Space  to such  party or  parties,  and on such  terms  and
conditions, as LESSOR may deem appropriate. If LESSEE has exercised its right to
lease the First  Refusal  Space as herein  provided,  and  notified  LESSOR that
LESSEE  disputes  LESSOR's  Designation,  and if the Expansion Rent has not been
determined  by the day on which the First  Refusal  Space  becomes a part of the
leased  premises,  then LESSOR's  Designation  shall  (notwithstanding  LESSEE's
disagreement therewith) be deemed the Expansion Rent until the Expansion Rent is
otherwise determined pursuant to the provisions of EXHIBIT B relating to Current
Market Rent. For purposes hereof, the "Adjustment Date" referred to in EXHIBIT B
shall be the day on which the First  Refusal  Space becomes a part of the leased
premises.

38. RIGHT OF FIRST  OPPORTUNITY.  LESSOR  agrees that it will not enter into any
agreement to sell or otherwise  transfer LESSOR's interest in all or any portion
of the building (or land or facilities relating thereto) unless and until LESSOR
shall have first complied with all of the provisions of this Section.  If during
the term of this  Lease,  LESSOR  proposes or desires to sell all or any part of
the building (or land or facilities relating thereto),  LESSOR shall give LESSEE
written notice of such intention, which notice (LESSOR's Offer") shall set forth
all material  terms and  conditions of such proposed  sale  (including,  without
limitation,  the gross cash price and any payment  terms which LESSOR is willing
to accept) and shall  constitute  an offer to sell the building to LESSEE at the
gross cash price and upon the terms  stated  therein.  LESSOR's  Offer  shall be
accompanied  by a list of all tenants and  occupants  in the  building  (whether
under leases or  otherwise)  as of the date of LESSOR's  Offer.  LESSOR's  Offer
shall also be  accompanied  by a schedule  including  the size of each  tenant's
premises, the base rent and escalation reimbursements, the permitted use, length
of term and length and number of extension  and/or expansion  options.  LESSEE's
acceptance of LESSOR's Offer shall be by written notice given within thirty (30)
days following receipt of LESSOR's Offer.  LESSEE's  acceptance shall set a date
of closing not less than  fourteen  (14),  nor more than sixty (60),  days after
receipt by LESSOR of LESSEE's acceptance. It is the contemplation of the parties
that LESSOR's  Offer to LESSEE  pursuant  hereto shall be made by LESSOR in good
faith and that the offering  price will be based upon  LESSOR's  then good faith
estimate of the then fair market value of the property, and that the other terms
and  conditions  of the offer shall be in  accordance  with normal and customary
practice in the  metropolitan  Boston area.  If LESSEE fails to accept  LESSOR's
Offer within thirty (30) days of receipt, or if prior to thirty (30) days LESSEE
rejects LESSOR's Offer,  LESSOR shall be free to sell the Building to such third
party as LESSOR  may  desire  upon  terms and  conditions  not  materially  more
favorable  (I.E.,  at a  purchase  price not less than 90% of that  proposed  to
LESSEE) than those set forth in LESSOR's  Offer,  and LESSEE  shall  execute and
deliver to LESSOR,  in  recordable  form,  a  certificate  reciting  that LESSEE
received  LESSOR's Offer and rejected or failed to accept said offer.  If LESSEE
accepts  LESSOR's  Offer,  (i) LESSOR  shall  deliver  to LESSEE  copies of such
reports,  inspections,  surveys, title insurance policies and like due diligence
material as LESSOR may then have in its  possession  as to the  Property  (which
shall be kept in confidence by LESSEE,  and shall be without any  representation
or warranty whatsoever by LESSOR),  and (ii) LESSOR shall, on the date specified
in LESSEE's  notice of  acceptance,  deliver the deed  conveying the building to
LESSEE or its nominee or  assignee,  and (iii) LESSEE shall pay LESSOR the price
specified in LESSOR's  Offer,  making  payment in cash  (subject to ordinary and
customary adjustments  consistent with local conveyancing  practices).  The deed
shall  be at  least  the  equivalent  of a  so-called  "Massachusetts  statutory
quitclaim  deed," and shall convey a good and clear record and marketable  title
to the building,  free from all encumbrances  and  restrictions  except (a) this
lease; (b) the existing tenancies; (c) provisions of local zoning laws and other
laws,  codes and ordinances  then in effect;  (d)


                                       15
<PAGE>

such real  estate  taxes for the current tax year as are not yet due and payable
on the date of the  delivery of the deed;  (e) liens for  municipal  betterments
assessed after the mailing of lessee's acceptance of LESSOR's Offer; and (f) any
other  encumbrance  or restriction  which LESSEE  accepts by written  instrument
delivered to LESSOR at the time of the delivery of the deed.

39.  TITLE/AUTHORITY.  (i) LESSOR  represents and warrants to LESSEE that, as of
the Commencement Date, the only liens and encumbrances  affecting LESSOR's title
to the  property  of which the  leased  premises  are a part shall be (x) as set
forth on Schedule B of the owner's  title  policy to be issued by Chicago  Title
Insurance Policy in accordance with Commitment No. 22 0066 106 00000463, and (y)
such other liens and  encumbrances  as LESSOR may advise LESSEE between the date
hereof and the Commencement  Date (none of which shall adversely affect LESSEE's
rights and occupancy hereunder);  and (ii) LESSEE and LESSOR each represents and
warrants  to the other that each  person  executing  this Lease on such  party's
behalf has full right and authority to do so, and that all requisite actions and
approvals have been taken or obtained, as the case may be.

IN WITNESS  WHERE OF, LESSOR and LESSEE have hereunto set their hands and common
seals and intend to be legally bound hereby this 17th day of June, 1999.

LESSOR:                                       LESSEE

                                              Palomar Medical Technologies, Inc.


By:                                           By:  /s/ Louis P. Valente
   --------------------------                    -------------------------------
                                                 Its President
                                                 Print Name:  Louis P. Valente

<PAGE>


                                    EXHIBIT A

                                    PREMISES


<PAGE>


                                    EXHIBIT B

                                  RENT/EXPENSES

         DATES                               RENT PER MONTH
         -----                               --------------

         Years 1-5                           $74,049.16
         Years 6-10                          $81,454.09

         OPTION

         Years 11-15                         * (See Extension Term)

The foregoing  calculations  are based on the following  bases: (i) the rent for
years 1-5 is  computed at $20.00 per  rentable  square foot of first floor space
and $10.00 per rentable square foot for below grade space; and (ii) the rent for
years 1-5 is  computed at $22.00 per  rentable  square foot of first floor space
and $10.00 per rentable square foot for below grade space.

* EXTENSION  TERM:  Provided  that LESSEE is not in default of any of the Terms,
Covenants  and  Conditions  of this Lease  (beyond the  expiration of applicable
notice and grace periods) at the time LESSEE exercises such right or at the time
of the expiration of the Term,  LESSEE shall have the right to one (1) extension
term of five (5) years in addition to the period of the Term  described  in this
Lease.  Said right to extension  term shall be exercised by LESSEE if at all, by
written  notice  received by LESSOR not later than nine (9) months  prior to the
expiration of the original term,  time being of the essence with respect to such
notice. Not more than 45 days prior to the last day on which LESSEE may exercise
its extension option as herein  provided,  LESSEE may request that LESSOR advise
LESSEE of LESSOR's then good faith  determination  ("LESSOR's  Designation")  of
then Current Market Rent for the leased premises.  LESSOR shall,  within 30 days
after  receipt of LESSEE's  request,  give LESSOR's  Designation  of the Current
Market Rent for the extension  term. In the event LESSEE does exercise its right
to the  extension  term,  then such notice shall be  irrevocable  and (i) LESSEE
shall,  with its notice of exercise,  advise LESSOR of whether LESSEE accepts or
disputes  LESSOR's  Designation,  and (ii) all Terms and  Conditions  herein set
forth shall  continue to apply during the extension  term,  except that (a) Base
Rent shall increase as indicated below and (b) LESSEE shall have no right to any
additional extension term.

Provided that LESSEE  notifies LESSOR of its exercise of the extension term, the
Base Rent  shall be  determined  on the basis of  ninety-five  (95%)  percent of
Current  Market Rent.  If LESSEE shall not have advised  LESSOR that it contests
LESSOR's Designation,  the Current Market Rent shall be as set forth in LESSOR's
Designation.  If LESSEE has duly contested LESSOR's  Designation and the Current
Rent shall not have been  determined  prior to the extension term  commencement,
then  LESSOR's   Designation  shall   (notwithstanding   LESSEE's   disagreement
therewith) be deemed  Current Market Rent until Current Market Rent is otherwise
determined  pursuant  to  applicable  provisions  of this  paragraph.  On  final
determination of Current Market Rent, if such  determination  would be the basis
on which Base Rent is to be paid,  retroactive adjustment shall be made in order
to give it effect to the  determination  of Current  Market Rent. The Adjustment
Date shall be the first day of the extension term.

CURRENT MARKET RENT: The phrase  "Current Market Rent" shall mean the rental and
all other  monetary  payments  and  escalations  that LESSOR could obtain from a
third party desiring to lease space in the Greater Boston Suburban Office Market
as of the Adjustment Date,  taking into account the type of building,  the size,
location and floor levels and then condition of the leased premises, the quality
of  construction  of the  building  and

<PAGE>

of the leased  premises,  the  services  provided  under the terms of the Lease,
including without limitation any special rights hereunder, the rental then being
attained  for new  Leases of space  comparable  to the  leased  premises  in the
Greater  Boston  Suburban  Office  Market  and all other  factors  that would be
relevant  to a third  party  desiring  to lease the  leased  premises;  provided
however that no reduction, deduction or allowance for the construction of lessee
improvements shall be taken into account in determining  Current Market Rent. In
the event that within sixty (60) days prior to the  Adjustment  Date the parties
hereto shall not have agreed in writing (or to be deemed to have agreed pursuant
to the preceding  paragraphs) as to the Current  Market Rent,  each party shall,
within  thirty (30) days  thereafter  appoint an  appraiser.  Each  appraiser so
appointed  shall be instructed  to determine  independently  the Current  Market
Rent. If the  difference  between the amounts so  determined by such  appraisers
shall not  exceed ten  percent  (10%) of the  lesser of such  amounts,  then the
Current Market Rent shall be an amount equal to fifty percent (50%) of the total
of the  amounts  so  determined.  If  the  difference  between  the  amounts  so
determined  shall exceed ten percent (10%) of the lesser of such  amounts,  then
such two (2) appraisers  shall have ten (10) days  thereafter to appoint a third
appraiser, but if such appraisers fail to do so within such ten (10) day period,
then either LESSOR or LESSEE may request the American Arbitration Association or
any successor  organization thereto to appoint an appraiser within ten (10) days
of such request, and both LESSOR and LESSEE shall be bound by any appointment so
made  within  such ten (10) day  period.  If no such  appraiser  shall have been
appointed  within  such ten (10) days  either  LESSOR or LESSEE may apply to any
court  having  jurisdiction  to have such  appointment  made by such court.  Any
appraiser  appointed by the  original  appraisers,  by the American  Arbitration
Association or by such court shall be instructed to determine the Current Market
Rent in accordance with the definition of such term contained  herein and within
twenty (20) days after its appointment.  If the third appraisal shall exceed the
higher of the first two appraisals,  the Current Market Rent shall be the higher
of the first two  appraisals;  if the third  appraisal is less than the lower of
the first two  appraisals,  the  Current  Market  Rent shall be the lower of the
first two appraisals. In all other cases, the Current market Rent shall be equal
to the third appraisal. All such determinations of the Current Market Rent shall
be final and binding  upon LESSOR and LESSEE as the Current  Market Rent for the
Adjustment Date.  Notwithstanding  the foregoing,  if either party shall fail to
appoint its appraiser within the 30 day period specified above (such party being
referred to herein as the "failing party"),  the other party may serve notice on
the failing party  requiring  the failing party to appoint its appraiser  within
then (10) days of the giving of such  notice.  If the  failing  party  shall not
respond by  appointment  of its appraiser  within said ten day period,  then the
appraiser  appointed  by the  other  party  shall  be the sole  appraiser  whose
determination  of the Current Market Rent shall be binding and  conclusive  upon
LESSEE and LESSOR.

This provision for determination by appraisal shall be specifically  enforceable
to  the  extent  such  remedy  is  available  under   applicable  law,  and  any
determination  hereunder  shall be final and binding upon the parties  except as
otherwise  provided  by  applicable  law.  Each party shall pay for the fees and
expenses  of the  appraiser  appointed  by it, but the fees and  expenses of the
third appraiser shall be shared equally by the parties. All appraisers appointed
hereunder shall be MAI appraisers, so-called.


<PAGE>


                                    EXHIBIT C

                             PLANS & SPECIFICATIONS

Work Letter - Enclosed pages 21-34

Construction  Drawings created by Visnick & Caulfield dated 5/27/99 incorporated
by reference

        Drawing Number A-1 Partition Plan

        Drawing  Number A-2 Power and  Tel/Data  Plan (as amended for moving one
        electrical and data outlet and adding 15 data outlets)

        Drawing Number A-3 Reflected Ceiling Plan

        Drawing  Number A-4 Finish Plan (as amended for using higher grade 32 oz
        carpet in board room,  corner  meeting room and CEO office;  stone floor
        within entire  reception area;  additional  changes from carpet to vinyl
        flooring as indicated)

        Drawing Number A-5  Elevations,  Door/Frame/Hardware,  Door Schedule (as
        amended  for adding  cabinet  and fake drawer  below  cooktop  stove and
        raising electrical outlet)

        Drawing Number A-6 Details

        Drawing Number A-7 Details

In the case of any conflicts between the work letter and the drawings,  the work
letter shall supercede the drawings.


                       PALOMAR MEDICAL TECHNOLOGIES, INC.

             WORK LETTER FOR 80-82 CAMBRIDGE STREET, BURLINGTON, MA

                                  JUNE 17, 1999

AREA:           Approximately  44,000  RSF  located  on  the  East  side  of the
                building and 859 RSF on the Lower Level of the building.

ENTRANCES:      Entrances will be as follows:

                o       One (1) entrance  (existing)  on  Cambridge  Street with
                        white  columns.  This  entrance  needs to be  fully  ADA
                        compliant  and  also  requires  the  installation  of  a
                        doorbell  which  will  ring in both the  left and  right
                        corridors  off the  Reception  area beyond the  interior
                        glass doors in each corridor (meaning in the office area
                        of each corridor).

                o       One  (1)  side  employee  entrance  glass  door  with  a
                        doorbell,  which will ring in both the Loading Docks and
                        Receiving areas.

EXTERIOR:       Installation of a concrete dumpster pad capable of accommodating
                a thirty (30) cubic yard roll off  container  and placed next to
                the loading dock in a location suitable to Palomar.

WINDOWS:        One (1) large  French door sized  paired  window,  1"  insulated
                green glass in green frames to match existing to be installed in
                the Controller's  Office as indicated on the floor plan. Two (2)
                continuous 1" insulated green ribbon glass in green frames to be
                removed for two (2) loading docks.

                One (1) pyramid style  skylight to be installed in the reception
                area as indicated on the floor plan (at Palomar expense).

                Perimeter  vertical  blinds with 3" vinyl blades to be installed
                on all exterior  windows.  Also, the same vertical  blinds to be
                installed on the Board Room 1/2 height glass wall.

                Interior glass panels as shown on the floor plan to be installed
                as  follows:  three  (3) 1/2  height  X 6'  glass  panels  to be
                installed in walls of the R&D and Optics  Assembly  Clean Rooms;
                1/2  height  glass in the Board Room wall  facing the  Reception
                Area glass.

PARTITIONS:     Partitions to be installed as follows:

                o Type 1 - Partitions  at exterior  wall:  3-5/8" 25 gauge steel
                studs at 16" O.C.  (existing),  1 layer 5/8"  gypsum  wallboard.
                Wallboard to be taped and spackled.  The inside of walls to have
                appropriate fiberglass insulation and a vapor barrier (existing)
                Height  of  partition  to  underside  of  existing   slab  above
                (existing).
<PAGE>

                o  Type  2 -  Partitions  at  core  toilets,  mechanical  rooms,
                sprinkler rooms,  electrical  rooms,  Loading Docks, R&D Machine
                Shop and tenant  demising:  3-5/8" 25 gauge  steel  studs at 16"
                O.C., 1 layer 5/8" gypsum  wallboard.  Wallboard to be taped and
                spackled.  The  inside of walls,  excluding  the walls  abutting
                hallways,  to receive 3" of  fiberglass  insulation  (at Palomar
                expense).  Height of partition  to  underside  of existing  slab
                above.

                o Type 3 - Partitions  for standard  interior  walls:  3-5/8" 25
                gauge  steel studs at 16" O.C.,  1 layer 5/8" gypsum  wallboard.
                Wallboard  to be  taped  and  spackled.  The  inside  of  walls,
                excluding  the  walls  abutting  hallways,   to  receive  3"  of
                fiberglass insulation (at Palomar expense).  Height of partition
                to exceed ceiling height by 6".

                o Type 4 - Partitions  for interior  walls in the Test Bay Area:
                3-5/8" 25 gauge  steel  studs at 16" O.C.,  1 layer 5/8"  gypsum
                wallboard.  Wallboard  to be taped and  spackled.  The inside of
                walls,  excluding the walls abutting hallways,  to receive 3" of
                fiberglass insulation (at Palomar expense).  Height of partition
                to underside of  acoustical  tile ceiling (10') to under ceiling
                grid.  GWB  detail at  ceiling to be double row foam tape at top
                runner with  continuous  metal casing bead (USG#  200-B)  having
                spackled finish.

                Partitions  to  include:  window  sills;  "boxing" of columns in
                office areas;  "special"  round enclosure of column in reception
                area as shown on floor  plan;  "special"  ceiling  treatment  in
                reception  area  to  accommodate  pyramid  skylight  and  accent
                lighting (at Palomar expense);  and full height chain link fence
                with  sliding  gates (to be  installed  from  floor  slab to the
                underside of ceiling above) as shown on floor plan.

BATHROOMS:      Men's and women's  bathrooms  with showers will be  constructed.
                The bathrooms will be  constructed  with separate air supply and
                exhaust  directly to the outside and will  include all  bathroom
                fixtures and all accessories such as mirrors, toilet partitions,
                toilet  tissue  dispensers,  paper  towel  dispensers,  sanitary
                napkin  dispensers,  soap  dispensers.  The bathrooms  will also
                include  GFI  outlets  at the sinks and coat hooks on the shower
                walls and on the toilet  partition doors. The bathrooms shall be
                fully ADA compliant.
<PAGE>

PLUMBING:       Fixtures  will  be  installed  in  the  bathrooms,  showers  and
                janitor's  closet  as  shown  on  floor  plan  and  shall be ADA
                compliant.  Break Room water  cooler  shall be  installed  where
                shown on floor plan.

                Provision for and  installation of appropriate  plumbing for all
                appliances in the Break Room requiring plumbing.  The appliances
                include a kitchen  stainless  steel  "double"  sink with hot and
                cold water faucets and spray; piping for a coffee machine; a 1/2
                HP  garbage  disposal;  a  dishwasher  (to  be  supplied  by the
                contractor); and one (1) water filter to be placed in a location
                as designated by Palomar.

                In the  production  and  laboratory  areas,  eight (8) sinks (of
                which  the  rough  plumbing  and  final  connections  will be at
                contractor  expense and the  provision  of the sinks in laminate
                cabinet  units  will be at  Palomar  expense)  with hot and cold
                water  faucets  and placed in three (3)  proximate  areas of the
                building (to  facilitate  stacking of common piping) as shown on
                floor plan.

                Sufficient  domestic  hot water  heating and  plumbing  shall be
                installed  to supply  an  adequate  hot water  supply to all the
                above  fixtures  with the  final  engineering  calculations  and
                design to be reviewed by Palomar before installation.

GAS:            Gas service via Boston Gas is installed and will be piped to all
                units  requiring  gas.  At  least  two  (2) gas  meters  will be
                installed to enable gas to be metered separately for Palomar and
                as needed for the other tenant in the building .

ELECTRICAL:     Three phase 480 volt,  2,000 amp electrical  service provided by
                Boston Edison to one (1)  electrical  panel.  At least three (3)
                electric  meters will be installed to enable  electricity  to be
                metered  separately  for Palomar's  HVAC,  Palomar's  lights and
                plugs and as needed for the other tenant in the building.  Also,
                a device to  measure  Palomar's  lights  and plugs  usage in the
                manufacturing  area for audit  purposes as designated by Palomar
                to be installed (at Palomar expense).
<PAGE>

                The distribution of electrical outlets will be as follows:

                          GENERAL BUILDING REQUIREMENTS

                o Enclosed offices,  small meeting rooms (10' X 12'), file room,
                etc.  - Three (3)  duplex  20 amp  outlets  per room.

                o  Paneled  workstations  and  individual  work  desks - Two (2)
                duplex 20 amp  outlets per  workstation.  The outlets at paneled
                workstations to be included as Palomar furniture.  Contractor to
                make all final connections.

                o Large meeting rooms - Four (4) duplex 20 amp outlets per room.

                o Corridors - One (1) duplex 20 amp outlet per 30 linear feet of
                corridor space.

                o  Copier/Printer  areas - Either one (1) quad or two (2) duplex
                20 amp outlets per area.

                o All storage rooms,  Supply, and Sprinkler & Electrical rooms -
                Two (2) duplex 20 amp outlets per room.

                           SPECIFIC ROOM REQUIREMENTS

                o Type 1 - 110/115 volt 20 amp with duplex outlet

                o Type 2 - 110/115 volt 20 amp with quad outlet

                o Type 3 - 110/115 volt 20 amp duplex outlet dedicated circuit

                o Type 4 - 220 volt 30 amp  single  phase  outlet  with  lockout
                switch

                o Type 5 - 220 volt 30 amp 50 Hz outlet with lockout switch

                o Type 6 - 220 volt 50 amp 3 phase outlet with lockout switch

<TABLE>
<CAPTION>

                                               TYPE 1     TYPE 2     TYPE 3     TYPE 4     TYPE 5     TYPE 6
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
                LOCATION:
<S>                                        <C>         <C>        <C>        <C>        <C>        <C>
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R&D OPTICAL SHOP                                           4          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R&D ELECTRICAL SHOP                            4           2          2          2          1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R&D MACHINE SHOP                                           7          2          2                     2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R&D LAB 1                                                  6          1          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R&D LAB 2                                                  6          2          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R&D LAB 3                                                  6          1          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R&D LAB 4                                                  6          1          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R&D LAB 5                                                  6          1          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R&D MGH LAB                                                6          1          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
ENG. LAB 1                                                 6          1          2          1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
ENG. LAB 2                                                 6          1          2          1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
ENG. LAB 3                                                 6          1          2          1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TBD LAB                                                    6          1          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TRAINING ROOM                                              6          1          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
MFG. MECH. & ELEC. LAB                         4           2                     1          1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
DEPOT REPAIR                                   4           2          1          2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------

<PAGE>
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
DOCUMENTATION                                  8           2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 1                                     1           2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 2                                     1           2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 3                                                 2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 4                                                 2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 5                                                 2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 6                                                 2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 7                                                 2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 8                                                 2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 9                                     1           2                     1          1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 10                                    1           2                     1          1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 11                                    1           2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEST BAY 12                                    1           2                     1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
OPTICS ASSEMBLY ROOM                           16                                1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
R & D CLEAN ROOM                               5
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
CHASSIS & SUB ASSEMBLY                                     8                     3
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
MAIN STORES                                                5
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
QA INSPECTION                                              4
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
MRB                                                        1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
RECEIVING                                                  3
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
FINISHED GOODS                                             3
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
LOADING DOCK                                   4
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
BREAK ROOM                                     10
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TEL ROOM                                                   2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
IS MGR.                                        6           3
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
BOARD ROOM                                     3           2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
SALES/MARKETING DEMO ROOM                      4           2                     2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
RECEPTION                                      4           1
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
COPY/FAX/MAIL                                  4           2
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
EXERCISE ROOM                                              4
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
BATHROOM                                       4
------------------------------------------ ----------- ---------- ---------- ---------- ---------- ----------
TOTAL                                          86         149        19         47          7          2
</TABLE>


                Additional outlet requirements will be as follows:

                o Break  Room  will  require  four  (4)  GFI (of the 10  outlets
                specified  above)  duplex  outlets  along  counter  top  and  an
                electric stove outlet as required by the stove manufacturer.

                o Bathroom  will  require GFI outlets (2 per each side).  o Deck
                will require two (2) outside/protected GFI duplex outlets.
<PAGE>

                The distribution of electrical circuits will be as follows:

                          GENERAL BUILDING REQUIREMENTS

                o Lighting  circuits will be distributed as per good engineering
                practice and reviewed with Palomar before installation.

                o Enclosed  offices,  meeting rooms, file room, etc. - Three (3)
                rooms per circuit.  o Paneled  workstations  and individual work
                desks - Four (4) workstations per circuit.

                o Corridors - Ten (10) outlets per circuit.

                o Copier areas - One (1) area per circuit.

                o All storage rooms,  Supply, and Sprinkler & Electrical rooms -
                Ten (10) outlets per circuit.

                           SPECIFIC ROOM REQUIREMENTS

                o Type 1 & 2 (20 amp circuits) unless otherwise stated below not
                to exceed 20 plugs (5 quads or 10 duplex) per circuit.

                o Type 3 each duplex outlet to be on a dedicated circuit.

                o Type 4 & 6 not to exceed two (2) plugs per circuit.

                o Type 5 to  require  two (2) 50 Hz  generators  and to be split
                into  two  (2)  circuits.  One  circuit  will  have  the R&D and
                Engineering  Lab  outlets  (totaling  4  outlets)  and the other
                circuit will have the Mfg. Mech. & Elect.  Lab and Test Bays 9 &
                10 (totaling 3 outlets).

                o The  Exercise  Room  will have two (2)  circuits  (2 quads per
                circuit).

                o Break  Room to require  one (1)  circuit  for each  individual
                appliance (each refrigerator, dishwasher, double oven, and stove
                top),  one (1)  circuit  for the  vending  machines  and two (2)
                circuits for the remaining outlets.

                o IS Mgr will  have  three (3)  circuits  (2 duplex & 1 quad per
                circuit).

                o Tel Room will have one (1) circuit for both quad outlets.

                Switches to be located as per Palomar direction  maintaining ADA
                compliance. All light switches to be flat rocker style switches.
                All dimmer switches to be lever style switches.

                The Chassis and Sub Assembly areas will require two (2) overhead
                bus bars running the length of the entire area.

                Electrical to also include the purchase and installation on a 8'
                X 10' flush ceiling  mounted  electrically  operated  projection
                screen  for the Board Room (to be  purchased  and  installed  at
                Palomar expense);  and the coordination of voice & data cabling,
                paging and cable for cable television (the installation costs of
                these items at Palomar expense).
<PAGE>

LIGHTING:       The lighting will be as follows:

                o Type 1 - One (1) 2' X 4' fluorescent  fixture with 1/2" X 1/2"
                paracube lenses per 60 square feet of enclosed offices, Exercise
                Room,   Bathrooms,   all  meeting  rooms,   Coat  Room  and  the
                Copy/fax/mail  area  (except the Board Room,  CEO Office and the
                Corner Meeting Room).  In place of the above paracube  fixtures,
                equivalent  indirect  lighting  fixtures are to be installed (at
                Palomar  expense for the premium cost of the  indirect  lighting
                fixtures over paracube fixtures).

                o Type 2 - One (1) 2' X 4" fluorescent fixture with solid lenses
                per 60 square  feet of  enclosed  space  for all  labs,  all R&D
                shops,  Optics Assembly Room, the R&D Clean Room, all Test Bays,
                Depot Repair,  Training Room, all Storage Rooms,  Supply and all
                Electrical & Sprinkler rooms. R& D Clean Room to be "clean room"
                fixtures  (at  Palomar  expense  for the  premium  of clean room
                fixtures over standard solid lense fixtures).

                o Type 3 - One (1) 2' X 4' fluorescent fixture with solid lenses
                per  80  square  feet  of  all  remaining  open  production  and
                caged/chain  link  fenced  space  and  loading  dock  (including
                corridors in those areas).

                o Type 4 - One (1) 2' X 4' fluorescent  fixture with 1/2" X 1/2"
                paracube lenses per 80 square feet of remaining office space and
                Break Room  (including  paneled  workstations  and  corridors in
                those  areas).   In  place  of  the  above  paracube   fixtures,
                equivalent  indirect  lighting  fixtures are to be installed (at
                Palomar  expense for the premium cost of the  indirect  lighting
                fixtures over paracube fixtures).

                o Type 5 - One (1) 2' X 2' fluorescent  fixture with 1/2" X 1/2"
                paracube  lenses per 60 square feet of space for the Board Room,
                CEO office and the Corner Meeting Room, (at Palomar  expense for
                the premium cost in excess of the Type 1 lighting  fixture).  In
                place  of  the  above  paracube  fixtures,  equivalent  indirect
                lighting  fixtures are to be installed  (at Palomar  expense for
                the premium cost of the indirect lighting fixtures over paracube
                fixtures).


                o Type 6 - Special Lighting requirements:

                1.  Incandescent  red  lights  (60  watt) in  globes  as a laser
                warning light above every lab, Test Bay, Training,  Depot Repair
                and  Sales/Marketing  Demo Room entrance  doorway to be switched
                with an  indicator  light on each  switch at each door for these
                rooms.  Switches to be linked such that turning on one switch in
                a  room  will  activate  all  room  laser  warning   lights  and
                indicators.
<PAGE>

                2. Two (2) outdoor  spot lights to be located  outside the Break
                Room to  illuminate  the Deck with the switch in the Break Room.

                3.  Interior  spot  lights to be located in the  Reception  area
                ceiling for accent and general lighting.

                4. Interior "high hat" ceiling lights (at Palomar expense) to be
                located in the Board Room  ceiling as  detailed  under  "SPECIAL
                AREAS"  and three (3)  interior  high hat  ceiling  lights to be
                installed on a single dimmer switch in each of the large meeting
                rooms (4 rooms in total).

                All fluorescent fixtures to be 277 volts and approved by Palomar
                before installation.

HVAC:           The building will be heated and cooled by rooftop mounted units,
                gas fired,  packaged air handling units with integral air-cooled
                condensing units so as to provide sufficient heating and cooling
                distribution and controls shall be installed in all areas as per
                good engineering  practice so as to maintain 68 degrees F in the
                summer  and 72  degrees  F in the  winter  in all  areas  of the
                building  in full  use and  occupancy.  Temperature/thermostatic
                controls  in  all  areas  shall  be   distributed  to  meet  the
                requirements stated above.

                It  should  be  noted,  that in any room in which a laser can be
                fired  (every  lab,  all Test  Bays,  Training  Room  and  Depot
                Repair),  the laser  generates  20,000 BTU's per hour.  As such,
                special  care must be taken in  designing  the HVAC  system  for
                these rooms to both exhaust the heat and provide  sufficient air
                flow & cooling.

                A total of four (4) adjacent labs (2 in R&D and 2 in Engineering
                to be  specified by Palomar) and four (4) Test Bays (Test Bays 7
                - 10) will be designated as "burn in capable". "Burn in capable"
                shall  mean that these labs must be able to handle the full heat
                load  (20,000  BTU's per hour) for up to twenty four (24) hours.
                These areas will require  individual  room controlled air supply
                dampers that will allow each room to be supplied  with up to 800
                CFM of air. In addition,  each room will require  forced  ducted
                exhaust to the outside of the building.

                The  standard  for all other  labs,  all other Test Bays,  Depot
                Repair and  Training  Room  shall be at a minimum  1/2 the above
                requirement (10,000 BTU's per hour).  However,  these areas will
                require  individual room controlled air supply dampers that will
                allow  each room to be  supplied  with up to 800 CFM of air.  In
                addition,  each of these  rooms will  require  an  exhaust  (not
                forced to the outside as in the "burn in capable" rooms).
<PAGE>

                Supply  air to all  labs,  Training  Room,  all  assembly  areas
                (including  the  Optics  Assembly,   Chassis  Assembly  and  Sub
                Assembly), Depot Repair, Training Room and all Test Bays must be
                distributed such that supply air filters can be changed as often
                as required and upgraded as needed.

                The R&D Clean Room (at Palomar  expense for the premium  cost in
                excess  of a lab  build  out)  must be able to  achieve  a Class
                10,000 level of clean room  performance (as per Federal Standard
                209E and  applicable  ISO  standards).  As such,  this room will
                require HEPA filter(s) on the supply air and all other necessary
                construction requirements to meet certification testing.

                The  distribution  of  supply  air and  temperature/thermostatic
                controls in all other areas (ie. offices, meeting rooms, paneled
                workstations,  etc.) shall be as per good  engineering  practice
                and sufficient to meet the temperature  standards  listed above.
                Please  note  that  the  IS  Manager's   room  will  contain  12
                PC's/Servers and be able to run 24 hours each day.

                Treated  (heated  and/or  cooled) fresh air will be supplied per
                the Massachusetts  Building Code and ASHRAE  guidelines,  and an
                economizer  cycle will be provided.  The system shall be capable
                of  providing  100%  fresh air  intake.  External  venting to be
                provided for two (2) exhaust  hoods to be placed in locations by
                Palomar.

FIRE PROTECTION: A fire  protection   system  including  all  devices  shall  be
                installed as per all state and local  requirements.  This system
                shall include a main fire alarm panel,  all  signaling  devices,
                exit  signs,   emergency  egress  lighting,   fire  extinguisher
                cabinets  with fire  extinguishers  and fire hose  cabinets with
                fire hose (if required by code). A capped  sprinkler system with
                heads  turned  up  (existing)  and  all  downward  turned  heads
                distributed  throughout  the  entire  area will be  provided  in
                accordance with applicable code requirements.

SECURITY:       A card access  security  system shall be  installed.  The system
                shall  include  a main  control  panel,  card key  swipes at all
                entrance  doors and either room motion  detection  or  perimeter
                glass sensors to fully secure the perimeter of the building. The
                system shall include  security devices on the loading dock doors
                and the lower level doors.  Palomar  shall be supplied  with 150
                card  keys  and  the  ability  to be able to  program  card  key
                changes.
<PAGE>

CEILINGS:       Suspended  acoustical  ceilings shall be installed in all areas.
                The  ceiling  height  in all  areas  except  the  Reception  and
                caged/chain  link  fenced  area will be 10' and  shall  enable a
                finished  soffit  above  front  windows  of at least  6". In the
                caged/chain link fence area, the ceiling height shall be as high
                as possible.  See "SPECIAL AREAS" listed below for the Reception
                Area ceiling.

                Ceiling tile in all labs,  R&D Clean Room,  the Optics  Assembly
                Room,  all  Test  Bays,  Training  and  Depot  Repair,  will  be
                installed in a 2' X 4' grid with 2' X 4' flat  acoustical  vinyl
                coated tiles.

                Ceiling  tile in all other  assembly,  R&D shops,  electrical  &
                sprinkler rooms, all Storage Rooms,  Supply and caged/chain link
                fence areas,  Loading Docks and including all related  corridors
                will be installed in a 2' X 4' grid with 2' X 4' flat acoustical
                tiles.

                Ceiling tile in all offices (including File Room, Interview Room
                TBD rooms),  all paneled  workstation  areas,  all meeting rooms
                (including the Sales/Marketing  Demo Room), related common areas
                (including  Bathrooms,  Exercise  Room,  Reception,  Break Room,
                Coats  and   Copy/Fax/Mail),   and  related  corridors  will  be
                installed in a 2' X 4' grid with 2' X 4' acoustical, second look
                (Fissuard) tiles.

DOORS & HARDWARE: All doors are to have metal frames  and are to be 3' wide X 7'
                high X 1 3/4"  solid  core birch  veneer  finished  with two (2)
                coats of stain and two (2) coats of clear polyurethane. Hardware
                will be ADA compliant  Schlage or comparable,  dull chrome.  All
                locks  will be on a master  key system and will be placed on all
                external doors,  all  caged/chain  link fence gates and 30 other
                internal  doors to be  determined  by Palomar.  Palomar  will be
                provided  with two keys per each lock and five (5)  master  keys
                with appropriate submasters at Palomar's direction(submasters at
                Palomar expense).

                Additional door related hardware to be as follows:

                1. Floor door stops on all appropriate doors.

                2. Coat hooks on interior of office doors.

                3. Door  closers for the two (2) R&D Clean Room  entrance  doors
                (at Palomar expense).

                4. Ten (10) door  glass  vision  panels to be placed in the four
                (4) large  meeting  room  entrance  doors,  Break Room  entrance
                doors,  and the door  between  the R&D office  and Sub  Assembly
                areas (at Palomar expense for the glass vision panel only).
<PAGE>

FLOORING:       Flooring  for  all  office  areas,  paneled  workstation  areas,
                Exercise Room, all meeting rooms,  Sales/Marketing Demo room and
                related  corridors (except as noted below under "SPECIAL AREAS")
                shall be 32 oz.  carpet of usual  commercial  cut loop type with
                manufacturer and style to be approved by Palomar.

                Flooring in the Break Room,  all enclosed R&D areas  (except the
                R&D machine shop), all enclosed Engineering areas, the R&D Clean
                Room,  Optics Assembly Room, TBD Lab,  Training,  all Test Bays,
                Depot Repair, Mfg. Mech./Elect. Lab, Documentation, IS Mgr., Tel
                room and related corridors shall be vinyl tile with the style to
                be approved by Palomar.

                Flooring in all remaining  areas including the R&D Machine Shop,
                all caged/chain  link fenced areas,  loading docks,  chassis and
                sub assembly areas,  mechanical/electrical/sprinkler rooms to be
                painted with a polyurethane  paint including  walkway paths with
                the product and colors to be approved by Palomar.

                Ceramic tile will be on all floors and the wet areas of the core
                toilets, showers and the janitor's closet.

                The  Reception  Area shall  require the  installation  of higher
                grade  flooring (to be approved by Palomar).  (Should any higher
                grade  flooring be installed,  the premium cost of that flooring
                over higher grade carpet to be at Palomar expense.)

                Vinyl cove base shall be installed in all areas.

PAINT:          All walls to be  finished  with one (1) coat of latex quick seal
                primer  and two (2)  coats  of  Benjamin  Moore  Spec.  No.  2-3
                (eggshell  finish  latex  base).  All door frames to be finished
                with one (1) coat latex  quick seal  primer and two (2) coats of
                Benjamin  Moore  or  comparable   Spec.   No.  4-6   (semi-gloss
                finish/alkyd base).

LOADING DOCKS:  Installation  of two (2) loading  docks as per floor  plan.  The
                installation to include all related fixtures including two (2)
                electrically  operated  dock  doors,  two (2) dock  levelers,  a
                single ceiling mounted  heating/forced air unit and all exterior
                treatments  such as dock  bumpers,  leveling of pavement in dock
                area and pavement striping.
<PAGE>

LOWER           LEVEL: Lower Level to be built out as follows:

                o Clean exposed ceiling.

                o Florescent strip lighting.

                o All walls painted (as per above specification).

                o  All   flooring   to  be  painted   concrete   (as  per  above
                specification).  o  Electrical  outlets to be  installed  as per
                corridor specification above.

                o Entrance to storage area to be an overhead  rolling door and a
                single door.

                o HVAC  system  distribution  and  controls  able to maintain 60
                degrees F in winter.

MILLWORK:       Millwork to be provided and installed as follows:

                o Break Room - Kitchen  cabinets  above and below a counter  top
                (containing the sink) placed as shown on floor plan.

                o  Copy/Fax/Mail  - Counter  top placed  along walls as shown on
                floor plan with shelves above and locked cabinets below.

                o Coats - A coat rack with  shelf  above as  indicated  on floor
                plan.

SPECIAL AREAS:  The following areas will be finished accordingly:

                o Board Room:

                1.      2' X 2'  suspended  ceiling  grid  with  2' X 2'  raised
                        ceiling tiles.

                2.      Four  (4)  incandescent   "high  hat"  ceiling  fixtures
                        controlled  by  one  (1)  dimmer  circuits  (at  Palomar
                        expense).

                3.      Flush mounted electrically  operated 8' X 10' projection
                        screen (at Palomar expense).

                4.      Higher grade carpet.

                5.      Vertical  blinds on all glass as shown on floor plan.

                6.      6" of fiberglass  insulation  to be installed  above the
                        ceiling tiles (at Palomar expense).

                7.      Installation  of wall mounted  "white board" unit (to be
                        supplied by Palomar).
<PAGE>

                o Corner  Meeting  Room (12' X 20'  meeting  room in front  left
                corner of the building):

                1.      2' X 2'  suspended  ceiling  grid  with  2' X 2'  raised
                        ceiling tiles.

                2.      Higher grade carpet.

                o CEO Office:

                1.      2' X 2'  suspended  ceiling  grid  with  2' X 2'  raised
                        ceiling tiles.

                2.      Higher grade carpet.

                o Break Room -  Millwork  (as  detailed  under  "MILLWORK")  and
                double sink unit as shown on floor plan; the installation of all
                appliances as shown on the floor plan;  one (1) double  exterior
                glass  door;  and  deck at the same  floor  height  as  interior
                flooring with railing as shown on floor plan.

                o  Reception -  incandescent  accent and  general  lighting,  as
                specified previously under "LIGHTING"; special ceiling treatment
                to  accommodate  pyramid  skylight  (at  Palomar  expense),   as
                specified  previously  under  "WINDOWS";  special  flooring,  as
                specified previously under "FLOORING".

WATER/SEWER:    Water and sewer provided by the Town of Burlington. All required
                plumbing connections to be installed as per applicable codes and
                Town of Burlington requirements.

ROOF:           Schuller  rubber  membrane  roof  (existing).  All required roof
                penetrations to be done in accordance with Schuller requirements
                so as to not effect in any way the roof warranty.

GENERAL:        All colors to be selected by Palomar.

Y2K:            All  products,   equipment,  and  systems  (including  hardware,
                software  and  embedded  chips)  incorporated  into  or  used in
                connection with this site shall be year 2000 compliant, that is,
                the  products or systems,  independently  and when  incorporated
                into  this  site,  will be  capable  of  accurately  processing,
                providing and/or receiving date data prior to, during,  or after
                the calendar year 2000 a.d. Such year 2000  compliant  products,
                equipment, and systems:

                1.      Will operate  during such time period  without  error of
                        any  nature   relating  to  date  data  that   includes,
                        represents,  or references the year 2000 or later years,
                        or resulting from the passage of time from the year 1999
                        to the year 2000;

                2.      Will  not  terminate  ordinary  operations  nor  produce
                        invalid  or  incorrect  results as a result of date data
                        that  includes,  represents or references the year 1999,
                        the year 2000 or later  years,  or the  passage  of time
                        from the year 1999 to the year 2000;
<PAGE>

                3.      Will specify the year in any date data either explicitly
                        or by unambiguous implication in all interfaces and data
                        storage; and

                4.      Will recognize and correctly process year 2000 date data
                        as a leap year.


<PAGE>


                                    EXHIBIT D

                              JANITORIAL STANDARDS

A.         GENERAL

           1. All stone,  ceramic,  tile,  marble,  terrazzo  and other  unwaxed
           flooring  to be  swept  nightly  on  Business  Days,  using  approved
           dust-down preparation; wash flooring once a month.

           2. All  linoleum,  rubber,  asphalt tile and other  similar  types of
           flooring  (that may be waxed) to be swept  nightly on Business  Days,
           using approved dust-down  preparation.  Waxing, if any, shall be done
           at LESSEE's expense.

           3. All  carpeting  and rugs to be  carpet  swept  or  vacuum  cleaned
           nightly on Business Days, as may be required.

           4. Hand dust and wipe clean all furniture, files, fixtures and window
sills nightly on Business Days;

           5. Dust interior of all waste paper disposal cans and baskets nightly
           on Business Days; damp dust as necessary.

           6. Wash clean all water coolers nightly on Business Days;

           7. Dust all door and  other  ventilating  louvers  within  reach,  as
necessary.

           8. Dust all telephones as necessary.

           9. Sweep all private stairway structures nightly on Business Days.

           10. Wipe clean all bright work weekly.

           11.  Interior  and  exterior of metal  elevator  car and hatch doors,
           including saddles, to be properly cleaned and treated as necessary.

           12.  Vacuum  clean  and  change  filters  in air  conditioning  units
semi-annually.

B.         LAVATORIES (BUILDING)

           1. Sweep and wash all lavatory  floors nightly on Business Days, wash
           and polish all  mirrors,  powder  shelves,  bright work and  enameled
           surfaces in lavatories, weekly.

           2. Scour, wash and disinfect all basins, bowls and urinals throughout
           all lavatories nightly on Business Days.

           3. Wash all toilet seats nightly on Business Days.

           4.  Hand  dust and clean all  partitions,  tile wall  dispensers  and
           receptacles in all lavatories nightly on Business Days.

           5. Empty paper towel  receptacles  and transport  wastepaper from the
           demised leased premises nightly on Business Days.

           6. Fill toilet tissue holders  nightly on Business Days (tissue to be
furnished by Owner).

           7. Empty sanitary disposal receptacles nightly on Business Days.

           8. Wash interior of waste cans and receptacles at least once a week.

           9.  Thoroughly  wash all wall  tile and  stall  surfaces  as often as
           necessary but in no event less than once every two weeks.

           10. Fill soap dispensers and paper towel dispensers (dispensers, soap
           and paper towels to be furnished by LESSOR at LESSOR's expense).

C.         HIGH DUSTING

           Do all high dusting quarterly, which includes the following:

           1. Dust clean all vertical surfaces, such as walls, partitions, doors
           and bucks and other surfaces not reached in nightly cleaning.

           2. Dust clean all pipes,  ventilating and air  conditioning  louvers,
           ducts,  high  moldings  and other high  areas not  reached in nightly
           cleaning.

           3. Dust all lighting fixtures,  including glass or plastic enclosures
(exterior only).

D.         WINDOW CLEANING

           1. All windows to be cleaned inside and outside, two times a year.

           2.  LESSEE's  entrance  doors and lobby glass to be cleaned  daily on
Business Days.

           3. All other interior  glass and a normal amount of partition  glass,
           glass doors and fan lights are to be cleaned twice a year.

           4. Mail chute glass to be kept in a clean condition at all times.

E.         DAY PORTERS

           1.  Service,  during  Business  Days all public and  operating  space
throughout the Building.

           2. Keep elevator cars clean and neat during the day on Business Days.

           3. Insert  toilet  tissue in  lavatories  (tissue to be  furnished by
           LESSOR) as necessary on Business Days.

           4. Keep staircases policed as necessary on Business Days.

           5. Fill soap  dispensers and paper towel  dispensers on Business Days
           (dispensers,  soap and  paper  towels  to be  furnished  by LESSOR at
           LESSOR's expense).


<PAGE>


                                    EXHIBIT E

                               RULES & REGULATIONS

I.         The following regulations are generally applicable:

           1. The public  sidewalks,  entrances,  passages,  courts,  elevators,
vestibules,  stairways, corridors or halls shall not be obstructed or encumbered
by LESSEE  (except as necessary  for  deliveries)  or used for any purpose other
than ingress and egress to and from the leased premises.

           2. No awnings,  curtains, blinds shades, screens or other projections
shall be attached to or hung in, or used in connection  with,  any window of the
leased  premises or any outside  wall of the  Building  unless the same are of a
quality, type, design and color, and attached in the manner, reasonably approved
by LESSOR.

           3. No show  cases  or  other  articles  shall  be put in  front of or
affixed to any part of the  exterior of the  Building,  nor places in the halls,
corridors or vestibules.

           4. The water and wash closets and other  plumbing  fixtures shall not
be used for any  purposes  other  than those for which  they were  designed  and
constructed, and no sweepings,  rubbish, rags, acids or like substances shall be
deposited therein.

           5. LESSEE  shall not use the leased  premises or any part  thereof or
permit the leased premises or any part thereof to be used as a public employment
bureau or for the sale of property of any kind at auction,  except in connection
with LESSEE's business as permitted in the Lease.

           6. LESSEE must, upon the  termination of its tenancy,  restore to the
LESSOR all locks,  cylinders  and keys to offices and toilet rooms of the leased
premises.

           7. The LESSOR  reserves  the right (but  assumes  no  obligation)  to
exclude  from the  Building  between the hours of 6 p.m.  and 8 a.m.  and at all
hours on Sunday and  holidays  all persons  connected  with or calling  upon the
LESSEE who do not present a pass to the Building signed by the LESSEE.

           8.  The  requirements  of  LESSEE  will  be  attended  to  only  upon
application  at the  Building  manager's  office.  Employees of LESSOR shall not
perform any work or do  anything  outside of the regular  duties,  unless  under
special instructions from the office of the LESSOR.

           9. There  shall not be used in any space,  or in the public  halls of
the  Building,  either by LESSEE or by  jobbers or others,  in the  delivery  or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and side guards.

           10. No  bicycles,  vehicles  or  animals of any kind shall be brought
into or kept in or about the leased premises.

           11. No LESSEE  shall  make,  or permit to be made,  any  unseemly  or
disturbing  noises or disturb or interfere  with  occupants of the Building.  No
LESSEE shall throw  anything out of the doors,  windows or skylights or down the
passageways.

           12. The leased  premises shall not be used for lodging or sleeping or
for any immoral or illegal purpose.

           13.  LESSEE  shall  co-operate  with  LESSOR  in  obtaining   maximum
effectiveness  of the cooling  system by closing  draperies when sun's rays fall
directly on windows of leased premises.

           14.  LESSOR  shall have the  right,  exercisable  without  notice and
without  liability to any LESSEE,  to change the name and street  address of the
Building.

II. The following  regulations  are applicable to any additions,  alterations or
improvements being undertaken by or for LESSEE in the leased premises:

A.         GENERAL

           1. All alterations,  installations or improvements ("Alterations") to
be made  by  LESSEE  in,  to or  about  the  leased  premises  shall  be made in
accordance with the requirements of this Exhibit and by contractors or mechanics
approved by LESSOR.

           2. LESSEE shall,  prior to the  commencement of any work,  submit for
LESSOR's written approval,  complete plans for the Alterations.  Drawings are to
be complete with full details and specifications for all of the Alterations.

           3.  Alterations  must comply with the Building Code applicable to the
Property and the requirements,  rules and regulations and any other governmental
agencies having jurisdiction.

           4. To the  extent  that the same is  required  by  applicable  law or
regulation,  no work shall be  permitted  to commence  without the LESSOR  being
furnished  with a valid  building or demolition  permit and all other  necessary
approvals from agencies having jurisdiction.

           5. All  demolition,  removals  or other  categories  of work that may
inconvenience  other LESSEEs or disturb Building  operations,  must be scheduled
and performed  before or after normal working hours and LESSEE shall provide the
Building  manager with at least 24 hours' notice prior to  proceeding  with such
work.

           6. All inquiries, submissions,  approvals and all other matters shall
be processed through the Building manager.

B.         PRIOR TO COMMENCEMENT OF WORK

           1. LESSEE shall  submit to the Building  manager a request to perform
the  work.  To the  extent  that the  same are  required  by  applicable  law or
regulation,  or are  customarily  produced for similar  work,  the request shall
include the following enclosures:

           (i) A list of LESSEE's contractors and/or subcontractors for LESSOR's
reasonable approval.

           (ii) Four complete sets of plans and specifications  properly stamped
           by a registered architect or professional engineer.

           (iii) A properly executed building permit application form.

           (iv) Four executed  copies of the insurance  policies or certificates
           from  LESSEE's  contractor  and,  if  requested  by LESSOR,  from the
           contractor's subcontractors.

           2.  LESSOR  will  return to LESSEE  two sets of plans  approved  or a
disapproval with specific  comments as to the reasons therefor (such approval or
comments shall not constitute a waiver of approval of governmental agencies).

           3. LESSEE shall obtain a building permit from the Building Department
and  necessary  permits  from  other  governmental  agencies.  LESSEE  shall  be
responsible for keeping  current all permits.  LESSEE shall submit copies of all
approved  plans and permits to LESSOR and shall post the original  permit on the
leased premises prior to the commencement of any work. All work, if performed by
a contractor or  subcontractor,  shall be subject to reasonable  supervision and
inspection by LESSOR's representative.  Such supervision and inspection shall be
at LESSEE's  sole expense and LESSEE shall pay LESSOR's  reasonable  charges for
such supervision and inspection.

C.         REQUIREMENTS AND PROCEDURES

           1. All structural and floor loading  requirements shall be subject to
the prior approval of LESSOR's structural engineer.

           2. All  mechanical  (HVAC,  plumbing and  sprinkler)  and  electrical
requirements  shall be  subject  to the  approval  of  LESSOR's  mechanical  and
electrical  engineers and all mechanical and electrical  work shall be performed
by  contractors  who are  reasonably  approved by LESSOR or engaged by LESSOR in
maintaining the Building.  When necessary,  LESSOR will require  engineering and
shop drawings, which drawings must be approved by LESSOR before work is started.
Drawings  are to be  prepared by LESSEE and all  approvals  shall be obtained by
LESSEE.

           3. Elevator service for construction  work shall be charged to LESSEE
at standard  Building rates.  Prior  arrangements for elevator use shall be made
with Building manager by LESSEE. No material or equipment shall be carried under
or on top of  elevators.  If an  operating  engineer  is  required  by any union
regulations, such engineer shall be paid for by LESSEE.

           4. If shutdown of risers and mains for  electrical,  HVAC,  sprinkler
and  plumbing  work is  required,  such work  shall be  supervised  by  LESSOR's
representative. No work will be performed in Building mechanical equipment rooms
without LESSOR's approval and under LESSOR's supervision.

           5. LESSEE's contractor shall:

           (i) have a  superintendent  or foreman on the leased  premises at all
times;

           (ii)  police the job at all  times,  continually  keeping  the leased
premises orderly;

           (iii) maintain  cleanliness  and  protection of all areas,  including
elevators and lobbies.

           (iv)  protect  the front  and top of all  peripheral  HVAC  units and
           thoroughly clean them at the completion of work;

           (v) block off supply and return  grills,  diffusers and ducts to keep
           dust from entering into the Building air conditioning system; and

           (vi) avoid the disturbance of other LESSEEs.

           6.   If   LESSEE's   contractor   is   negligent   in   any   of  its
responsibilities, LESSEE shall be charged for corrective work.

           7. All  equipment  and  installations  must be equal to the standards
generally in effect with respect to the remainder of the Building. Any deviation
from such  standards  will be  permitted  only if  indicated or specified on the
plans and specifications and approved by LESSOR.

           8. A properly  executed air balancing report signed by a professional
engineer shall be submitted to LESSOR upon the completion of all HVAC work.

           9. Upon completion of the Alterations,  LESSEE shall submit to LESSOR
a  permanent   certificate   of  occupancy  and  final  approval  by  the  other
governmental agencies having jurisdiction.

           10. LESSEE shall submit to LESSOR a final  "as-built" set of drawings
showing all items of the Alterations in full detail.

           11. Additional and differing provisions in the Lease, if any, will be
applicable and will take precedence.

           12. LESSOR's approval of the plans, drawings, specifications or other
submissions  in respect of any work,  addition,  alteration or improvement to be
undertaken by or on behalf of LESSEE shall create no liability or responsibility
on the part of LESSOR for their  completeness,  design sufficiency or compliance
with   requirements  of  any  applicable  laws,  rules  or  regulations  of  any
governmental or quasi-governmental agency, board or authority.