EXHIBIT 10(aaa)


                               WARRANT AGREEMENT



                                     between



                       PALOMAR MEDICAL TECHNOLOGIES, INC.

                                       and

                    AMERICAN STOCK TRANSFER & TRUST COMPANY,

                                as Warrant Agent

                            Dated as of June 24, 1996










                                WARRANT AGREEMENT


                  AGREEMENT dated as of June 24, 1996 (the "Agreement")  between
PALOMAR MEDICAL TECHNOLOGIES,  INC., a Delaware corporation (the "Company"), and
AMERICAN  STOCK  TRANSFER & TRUST COMPANY,  a New York  corporation,  as Warrant
Agent (the "Warrant Agent").

                  The  Company   proposes  to  issue  and  deliver  its  warrant
certificates (the "Warrant  Certificates") evi dencing warrants (the "Warrants")
to purchase, under cer tain circumstances, up to an aggregate of 600,000 shares,
subject to adjustment,  of its Common Stock,  par value $0.01 per share ("Common
Stock"),  such shares of Common  Stock  issuable  upon  exercise of the Warrants
being here inafter called the "Warrant  Shares",  in connection with an offering
by the  Company of a minimum  of 10,000  units  (the  "Units")  and a maximum of
25,000 Units, each unit consisting of SF 1,000 principal amount of the Company's
4.5%  Convertible  Subordinated  Debentures  due  2003  (the  "Debentures")  and
twenty-four  Warrants,  each such Warrant entitling the registered owner thereof
to purchase  one  Warrant  Share at the Swiss  Franc  equivalent  on the date of
exercise of $16.50 per share, subject to adjustment.

                  In  consideration  of the  foregoing  and for the  purpose  of
defining the terms and provisions of the Warrants and the respective  rights and
obligations  there under of the Company and the record  holders of the War rants
(the "Holders"), the Company and the Warrant Agent each hereby agree as follows:

1.         CERTAIN DEFINITIONS

                  A.  An  "Affiliate"  of the  Company  shall  mean  any  Person
directly or indirectly controlling or con trolled by or under direct or indirect
common  control  with the  Company,  as the case may be.  For  purposes  of this
definition,  "control"  when used with  respect to any Person means the power to
direct the  management  and  policies of such  Person,  directly or  indirectly,
whether  through the ownership of voting  securities,  by contract or otherwise,
and the terms  "controlling" and "con trolled" have meanings  correlative to the
foregoing.






                  B.  "Agreement"  shall  have  the  meaning  set  forth  in the
preamble hereof.

                  C.  "Closing  Price" for any day means the last  reported sale
price of the  Common  Stock on Nasdaq  on such day or, in case no such  reported
sale takes place on such day, the average of the reported  closing bid and asked
prices on such day,  in either  case on Nasdaq  or, if the  Common  Stock is not
listed or admitted to trading on Nasdaq,  on the principal  national  securities
exchange  on which the Common  Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national securities  exchange,  the average
of the closing bid and asked prices in the over-the-counter  market as furnished
by any New York Stock Exchange  member or other firm se lected from time to time
by the Company for that  purpose.  If the Common  Stock is not quoted on Nasdaq,
listed or admitted to trading on any national securities exchange,  or listed in
any list of bid and asked prices in the over-the-counter market, "Closing Price"
shall mean the fair market value of the Common Stock as determined in accordance
with Section 4A(3) hereof.

                  D.  "Commission"   shall  mean  the  Securities  and  Exchange
Commission.

                  E.  "Common  Stock"  shall have the  meaning  set forth in the
preamble hereof.

                  F. "Company"  shall have the meaning set forth in the preamble
hereof.


                  G. "Current  Market Value" shall have the meaning set forth in
Section 4A(4).

                  H. "Debentures"  shall mean the 4.5% Convertible  Subordinated
Debentures issued by the Company.

                  I.  "Dollar"  "US$,"  "United  States  dollar" or the sign "$"
means a Dollar or other  equivalent  unit in such coin or currency of the United
States as at the time  shall be legal  tender  for the  payment  of  public  and
private debts.



                                       2


                  J. "Exchange Act" means the United States Securities  Exchange
Act of 1934,  as  amended  from  time to time,  and the  rules  and  regulations
promulgated thereun der, and any successor statute thereto.

                  K.  "Expiration  Date" shall mean the date  following the last
day on which any Debenture may be converted in to shares of Common Stock (at the
option of the  Company  or the  Holder),  or any  Warrant  may be exer cised for
Warrant Shares, in accordance with the respec tive terms thereof.

                  L. "Final Closing" means the final closing of the Offering.

                  M. "GAAP" means generally accepted  accounting  principles set
forth  in the  opinions  of the  Accounting  Principles  Board  of the  American
Institute of Certified Public  Accountants and the statements and pronouncements
of the Financial Accounting Standards Board or such other statements by any such
other  entity as may be  approved  by a  significant  segment of the  accounting
profession in the United States,  and which are applicable to the  circumstances
as of the date of this Warrant Agreement.

                  N. "Holders"  shall have the meaning set forth in the preamble
hereof.

                  O.  The   "Indenture"   shall  mean  the   Indenture  for  the
Debentures.

                  P. An "Independent  Financial  Expert" shall mean a nationally
recognized  investment  banking  firm  which  does  not  (and  whose  directors,
officers,  employees and affiliates do not) have a direct or indirect finan cial
interest in the Company or any of its  Affiliates,  which has not been,  and, at
the time it is called upon to give  independent  financial advice to the Company
or any of its  Affiliates,  is not  (and  none  of  whose  directors,  officers,
employees or affiliates  is) a promoter,  direc tor or officer of the Company or
any of its Affiliates or an underwriter with respect to any of the securities of
the  Company or any of its  Affiliates  and which does not provide any advice or
opinions  to the  Company  or any of its  Affiliates  except  as an  Independent
Financial  Expert.


                                       3


     An Independent  Financial  Expert may be compensated by the Company or such
Affiliates  for  opinions or services  it provides as an  Independent  Financial
Expert.


                  Q. "Initial Closing" means the first closing of the Offering.

                  R. "Nasdaq" means The Nasdaq National Market System.

                  S. "Noon  Buying  Rate" means the  exchange  rate for one U.S.
dollar  expressed in Swiss  Francs,  based upon the noon buying rate in New York
City for cable transfers in Swiss Francs,  as certified for customs  purposes by
the Federal Reserve Bank of New York.

                  T. "Offering" means the offering of Units.


                  U.  A  "Person"  shall  mean  any   individual,   corporation,
partnership,   joint  venture,   association,   joint  stock   company,   trust,
unincorporated organization or government or any agency or political subdivision
thereof.

                  V.  "Prospectus"  shall mean the  prospectus  included  in any
Registration  Statement, as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any of the Warrant  Shares  covered
by such  Registration  Statement and by all other  amendments and supplements to
the   prospectus,   including   post-effective   amendments   and  all  material
incorporated by reference in such prospectus.

                  W. "Registrable Securities" shall mean the Warrant Shares.

                  X. "Registration  Rights" shall mean the rights of Holders set
forth in Section 2C to have the Warrant Shares  registered for issuance under an
effective registration statement.

                  Y. "Registration Agreement" shall mean the Registration Rights
Agreement  among the Company  and Holders of Warrant Shares set forth in Section
2C  to  have  the


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Warrant Shares registered for sale under an effective registration statement.

                  Z.   "Registration   Statement"   shall  mean  a  registration
statement on an appropriate form under the Securities Act which covers the offer
and sale by the Company of all the Registrable  Securities  pursuant to Rule 415
of the General Rules and  Regulations  under the Securities  Act, or any similar
rule that may be adopted by the  Commission,  and all amendments and supplements
to such registration statement,  including  post-effective  amendments,  in each
case including the  Prospectus  con tained therein and all exhibits  thereto and
all material incorporated or deemed to be incorporated by reference therein.

                  AA. "Securities Act" means the United States Securities Act of
1933, as amended, and any successor statute.

                  BB.  "Security" shall have the same meaning as in Section 2(1)
of the United States Securities Act of 1933, as amended.

                  CC. "Subagent" shall have the meaning set forth in Section 9A.

                  DD.  "Subsidiary" shall mean any corporation of which at least
a majority of the outstanding  stock having by the terms thereof ordinary voting
power to elect a majority of the directors of such corporation,  irrespective of
whether  or not at the  time  stock  of any  other  class  or  classes  of  such
corporation  shall have or might have voting power by reason of the happening of
any contingency,  is at the time directly or indirectly owned by the Company, or
by one or more  Subsidiaries  of the Company,  or by the Company and one or more
Subsidiaries.

                  EE. "Swiss Franc" or the abbreviation "SF" means a Swiss Franc
or other  equivalent unit in such coin or currency of Switzerland as at the time
shall be legal tender for the payment of public and private debts.

                  FF.  "Taxes"  means  any  present  or  future  taxes,  levies,
imposts, duties, fees, assessments, deductions,


                                       5


withholdings or other charges of whatever nature, including,  without limitation
income, gross receipts,  excise, property,  sales, transfer,  license,  payroll,
withholding,  social security,  and franchise taxes, now or hereafter imposed or
levied by the United States of America or any state, local or foreign government
or by any department,  agency or other political subdivision or taxing authority
thereof or  therein  and all  interest,  penalties,  additions  to tax and other
similar liabilities with respect thereto."

                  GG. "Units" shall mean the Units, each con sisting of SF 1,000
principal amount of the Company's 4.5% Convertible  Subordinated  Debentures and
twenty-four Warrants.

                  HH.  "Warrant  Agent"  shall have the meaning set forth in the
preamble hereof or shall mean the suc cessor or successors of such Warrant Agent
appointed in accordance with the terms hereof.

                  II. "Warrant Certificates" shall have the meaning set forth in
the preamble hereof.

                  JJ. "Warrant  Exercise Price" shall have the meaning set forth
in Section 3A.

                  KK. "Warrant Expiration Date" shall have the meaning set forth
in Section 3B(3).

                  LL.  "Warrant  Register"  shall  mean  the  register  for  the
Warrants of the Company maintained by the Warrant Agent.

                  MM.  "Warrant  Shares" shall have the meaning set forth in the
preamble hereof.

                  NN.  "Warrants"  shall  have  the  meaning  set  forth  in the
preamble hereof.

2. ORIGINAL ISSUE OF WARRANTS

                  A. Form of  Warrant  Certificates.  The  Warrant  Certificates
shall be issued in registered form only and  substantially  in the form attached
hereto as Exhibit A,


                                       6


shall be dated the date on which countersigned by the Warrant Agent and may have
such legends and endorsements typed, stamped, printed,  lithographed or engraved
thereon as the Company may deem appropriate and as are not inconsistent with the
provisions  of this  Agreement,  or as may be required to comply with any law or
with any rule or regulation  pursuant  thereto or with any rule or regulation of
any  securities  exchange on which the Warrants may be listed,  or to conform to
usage.

                  B.  Execution  and Delivery of Warrant  Certificates.  Warrant
Certificates  evidencing  Warrants to purchase  initially  an aggregate of up to
600,000 Warrant Shares may be executed,  on or after the date of this Agreement,
by the Company and delivered to the Warrant Agent for countersignature,  and the
Warrant Agent shall thereupon  countersign and deliver such Warrant Certificates
upon the order and at the  direction  of the  Company to the  purchasers  of the
Units  on the date of  issuance.  The  Warrant  Agent is  hereby  authorized  to
countersign and deliver Warrant Certificates as required by this Section 2 or by
Section 3B, Section 5 or Section 7. The Warrant  Certificates  shall be executed
on behalf  of the  Company  by the  Chairman  of the  Board,  President  or Vice
President of such companies,  either manually or by facsimile  signature printed
thereon.  The Warrant Certif icates shall be countersigned either manually or by
fac simile signature printed thereon by the Warrant Agent and shall not be valid
for any  purpose  unless so counter  signed.  In case any officer of the Company
whose signa ture shall have been  placed  upon any of the  Warrant  Certificates
shall cease to be such  officer of the Compa ny before  countersignature  by the
Warrant Agent and issue and delivery  thereof,  such warrant  Certificates  may,
nevertheless,  be  countersigned  by the Warrant  Agent and issued and delivered
with the same force and effect as though  such  person had not ceased to be such
officer of the Company.


                  C.  Exchange,  Registration,  and  Transfer  of  Warrants  and
Warrant Shares.  The Warrants are not separately  transferable.  The Debentures,
Warrants,  and Units have not been  registered  under the  Securities  Act,  nor
qualified for sale under any other securities laws, and therefore are subject to
certain  restrictions  on trans fer. The Company will enter into a  registration
rights


                                       7


agreement  with the  purchasers  of the  Units  (the  "Registration  Agreement")
pursuant to which the Company will, at the Company's expense, for the benefit of
the holders of the  Warrants,  and with respect to the Warrant  Shares  issuable
upon exercise of the Warrants (the "Registrable Securities"),  (i) file with the
Commission  within 60 days after the Initial Closing,  a Registration  Statement
covering the issuance of the Registrable  Securities,  (ii) use its best efforts
to  cause  the  Registration  Statement  to  be  declared  effective  under  the
Securities Act as soon as possible thereafter, and (iii) use its best efforts to
keep effective the Registration Statement until the Expiration Date. The Company
will provide to each holder of Registrable  Securities  copies of the Prospectus
which is a part of the  Registration  Statement  and notify each Holder when the
Registration  Statement has become effec tive.  The purpose of the  Registration
Statement  shall be to enable each Holder which (i) receives  Warrant  Shares as
the result of the  exercise  of  Warrants  and (ii) is not an  Affiliate  of the
Company and is not engaging in a distribution of securities  (within the meaning
of the  Securities  Act) to trade such Warrant Shares from and after the date of
issuance  thereof without any limita tions or restrictions  under the Securities
Act.  The  Company  will  agree in the  Registration  Agreement  to use its best
efforts to cause the Warrant Shares issuable upon exercise of the Warrants to be
listed on Nasdaq upon effectiveness of the Registration Statement.

                  The  Warrants  are  transferable,  only as a Unit  along  with
transfer of the Debentures,  by the Holder thereof,  in whole or in part, on the
Warrant  Register  maintained  by the  Warrant  Agent  for  such  purpose,  upon
surrender of the Warrants and  accompanied  by transfer of the Debentures in the
Unit, by the Holder or his or her attorney duly authorized in writing.  Upon any
partial transfer the Company will issue and deliver to such Holder a new Warrant
Certificate or Certificates with respect to any portion not so transferred.

3.   WARRANT  EXERCISE  PRICE;  EXERCISE OF WARRANTS;  EFFECT OF  REDEMPTION  OF
     DEBENTURES

                  A. Warrant  Exercise Price.  Each Warrant  Certificate  shall,
when countersigned by the Warrant


                                       8


Agent, entitle the Holder thereof,  subject to the provisions of this Agreement,
to purchase one share of Common Stock for each Warrant  represented  thereby, in
each case at a purchase price (the "Warrant  Exercise Price") of the Swiss Franc
equivalent on the date of exercise of $16.50 per share, based on the Noon Buying
Rate in  effect  on the  date of  exercise,  subject  to  adjustment  as  herein
provided.


                  B.  Exercise of  Warrants.  (1)  Generally.  The  Warrants are
exercisable  at any time during the period  commencing  120 days  following  the
Initial Closing and ending on the Warrant Expiration Date.  Warrants may only be
exercised  in lots of 24  Warrants or integral  multiples  thereof;  and each 24
Warrants to be exercised  must be accompanied  by SF 1,000  principal  amount of
Debentures,  presented  for  conversion  or  redemption  or  repurchase  in  its
entirety,  as the case may be,  pursuant  to the  terms of the  Debentures.  The
Warrants are not separately transferable.

                  (1) Method of Exercise;  Payment of Warrant Exercise Price. In
order  to  exercise  all  or  any  of  the  Warrants  represented  by a  Warrant
Certificate,  the Holder thereof must surrender for exercise,  if then permitted
pursuant to the terms hereof, the Warrant Certificate to the Warrant Agent, with
the exercise form on the reverse of or attached to the Warrant  Certificate duly
executed,  together  with any required  payment in full of the Warrant  Exercise
Price then in effect for each  Warrant  Share or other  securities  or  property
(including  any money) to which the Holder is  entitled as to which a Warrant is
submitted for exercise,  any such payment of the Warrant Exercise Price to be in
cash,  by check or by wire trans fer,  payable to the order of the Company.  All
funds re ceived upon the tender of Warrants  shall be  delivered or deposited by
the  Warrant  Agent as  instructed  in  writing by the  Company,  in the case of
Warrants exercised for securities issued by the Company, upon exercise thereof.

                  If  fewer  than  all the  Warrants  represented  by a  Warrant
Certificate are surrendered, such Warrant Certificate shall be surrendered and a
new Warrant  Certificate  of the same tenor and for the number of Warrants which
were not surrendered shall be executed by the Company.


                                       9


The Warrant Agent shall countersign the new Warrant Certificate, register it, in
such name or names as may be  directed  in writing by the Holder and deliver the
new Warrant Certificate to the Person or Persons entitled to receive the same.

                  Upon surrender of a Warrant Certificate in conformity with the
foregoing  provisions,  the Warrant Agent shall  thereupon  promptly  notify the
Company,  and  the  Company  shall  transfer  to  the  Holder  of  such  Warrant
Certificate  appropriate  evidence of ownership  of any Warrant  Shares or other
securities  or property  (including  any money) to which the Holder is entitled,
registered  or  otherwise  placed in, or  payable to the order of,  such name or
names as may be  directed  in  writing by the Hold er,  and shall  deliver  such
evidence of ownership and any other securities or property (including any money)
to the Person or Persons  entitled to receive the same,  together with an amount
in cash in lieu of any fraction of a share as provided in Section 4E.

                  The Company agrees that the Warrant Shares so purchased  shall
be deemed to be issued to the  registered  Holder  thereof  on the date on which
Warrants shall have been surrendered and payment made for such Warrant Shares as
aforesaid;  provided however that no such surrender and payment on any date when
the stock  transfer  books of the Company  shall be closed shall be effective to
constitute  the person  entitled to receive  such  Warrant  Shares as the record
holder  thereof on such date,  but such surrender and payment shall be effective
to constitute  the person  entitled to receive such Warrant Shares as the record
holder thereof for all purposes immediately after the opening of business on the
next succeeding day on which such stock transfer books are open.

                  (2)  Expiration  of Warrants.  All  outstanding  Warrants will
terminate and become void (the "Warrant  Expiration Date") on the earlier of (i)
5:00 p.m., New York City time, seven years from the Initial Closing or (ii) upon
conversion,  redemption,  or  repayment  of the  Debentures,  in which  case the
Warrants   attached  to  such  Debentures  will  expire  upon  such  conversion,
redemption,  or  repayment  unless then  exercised.  In the event the  aforesaid
expiration  dates of the  Warrants  fall on a 


                                       10


Saturday,  Sunday, or on a legal holiday on which the New York Stock Exchange is
closed,  then the Warrants shall expire at 5:00 p.m., New York City time, on the
next succeeding business date.

                  A holder of Debentures desiring to convert Debentures will not
be required to exercise  the  attached  Warrants.  However,  if the Warrants are
unexercised,  they will expire upon such conversion by the holder of Deben tures
or upon  conversion  or  redemption  at the  option of the  Company.  Holders of
Debentures whose  Debentures are redeemed through  operation of the sinking fund
pertaining  thereto will not be required to exercise  the  Warrants  attached to
such Debentures. However, any unexercised Warrants will expire upon such payment
of the  Debentures.  Any tender of Debentures  for  repurchase,  pursuant to the
terms of the Debentures,  will be accompanied by the at tached  Warrants,  which
may either be exercised or, upon failure of such exercise, will expire upon such
repur chase. In addition,  during the period beginning 90 days after the Initial
Closing and ending 119 days  following the Initial  Closing,  any  conversion of
Debentures will  necessarily  result in the expiration of the Warrants  attached
thereto.

                  C. Money and Other Property  Deposited with the Warrant Agent.
Any moneys, securities or other property which at any time shall be deposited by
the Company,  or on its behalf with the Warrant Agent pursuant to this Agreement
shall be, and are  hereby,  assigned,  transferred  and set over to the  Warrant
Agent in trust  for the  purpose  for which  such  moneys,  securities  or other
property  shall  have  been  deposited;  but such mon eys,  securities  or other
property need not be segregated  from other funds,  securities or other property
held by the  Warrant  Agent  except to the  extent  required  by law.  Any money
deposited  with the Warrant  Agent for payment and  distribution  to the Holders
that remains unclaimed for two years after the Warrant  Expiration Date shall be
paid to or upon the order of the  Company,  as the case may be, upon its request
therefor.

                  D. Payment of Taxes.  All Warrant  Shares or other  securities
issuable by the Company upon the exer cise of Warrants shall be validly  issued,
fully paid and  


                                       11


non-assessable,  and the  Company  shall pay all  taxes  and other  governmental
charges  that may be imposed  under the laws of the United  States of America or
any political  subdivision or taxing authority  thereof or therein in respect of
the  issuance  or  delivery  thereof  or of other  securities  deliverable  upon
exercise of Warrants. The Company shall not be required, however, to pay any tax
or other charge imposed in connection with any transfer involved in the issue of
any certificates  for Warrant Shares or other securities  issuable upon exercise
of the  Warrants  or payment  of cash to any  Person  other than the Holder of a
Warrant Certificate  surrendered upon the exercise or purchase of a Warrant, and
in case of such transfer or payment, the Warrant Agent and the Company shall not
be  required  to issue any stock  certificate  or pay any cash until such tax or
charge has been paid or it has been  established to the Warrant  Agent's and the
Company's satisfaction that no such tax or other charge is due.


                  E. Reorganizations,  Reclassifications,  Etc.  Notwithstanding
anything herein to the contrary,  in the case of any capital  reorganization  or
any reclassifica  tion of the Common Stock, or in the case of the consoli dation
or merger of the Company  with or into any other  corporation  or in case of any
sale or transfer of all or substantially all of the assets of the Company as may
be  permitted  by the  provisions  hereof,  the  Holder  of  each  Warrant  then
outstanding  shall have the right  thereafter  to exercise such Warrant into the
kind and amount of shares of stock and other securities and property receiv able
upon such  reorganization,  reclassification,  consoli dation,  merger,  sale or
transfer by a holder of the number of shares of Common Stock of the Company into
which  such  Warrant  might  have  been  exercised  immediately  prior  to  such
reorganization, reclassification, consoli dation, merger, sale or transfer; and,
in any such case,  appropriate  adjustment  (as  determined in good faith by the
Board of  Directors  of the  Company)  shall be made in the  application  of the
provisions  of  this  Agreement  (in  cluding  provisions  with  regard  to  the
adjustment of the Warrant Exercise Price) in order that the rights and interests
of the Holders thereafter shall be as nearly equivalent as may be practicable to
the rights and inter ests provided for in this Section 3.


                                       12


                  F.  Surrender  of   Certificates.   Any  Warrant   Certificate
surrendered  for exercise or purchase  shall,  if  surrendered to the Company be
delivered to the Warrant Agent, and all Warrant  Certificates  surrendered or so
delivered  to any Warrant  Agent shall be  promptly  cancel led by such  Warrant
Agent and shall not be reissued by the Company.  The Warrant Agent shall destroy
such can celled Warrant  Certificates and deliver its certificate of destruction
to the Company unless the Company shall otherwise direct.



4.  ADJUSTMENTS  ADJUSTMENTS

                  A. Adjustments Adjustments. The Warrant Exercise Price and the
number of shares of Common Stock issuable upon exercise of each Warrant shall be
subject to adjustment from time to time as follows:



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                  (1) Stock Dividends and Distributions;  Stock Splits;  Reverse
Stock Splits; Reclassifications. In case the Company shall (i) pay a dividend on
its capital stock in shares of any class or series of Common Stock,  (ii) make a
distribution  in  shares  of any  class of Common  Stock,  (iii)  subdivide  its
outstanding  shares of any class or series of Common  Stock,  (iv)  combine  its
outstanding  shares of any class or series of Common Stock into a smaller number
of shares of any class or series of Common Stock, or (v) issue any shares of its
capital  stock in a  reclassification  of the Common Stock  (including  any such
reclassification  in connection with a merger,  consolidation  or other business
combination  in which the Company is the continuing  corporation)  the number of
shares of Common Stock  purchasable  upon  exercise of each Warrant  immediately
prior to the  record  date  for  such  dividend  or the  effective  date of such
subdivision or combination  shall be adjusted so that the Holder of each Warrant
shall  thereafter be entitled to receive the kind and number of shares of Common
Stock or other  securities of the Company,  as the case may be, that such Holder
would have owned or have been  entitled to receive after the happening of any of
the events described above, had such Warrant been exercised immediately prior to
the  happening  of such  event or any  record  date  with  respect  thereto.  An
adjustment   made  pursuant  to  this  Section  4A(l)  shall  become   effective
immediately  after the effective  date of such event  retroactive  to the record
date, if any, for such event.


                  (2)  Distribution  of Debt,  Assets,  Subscription  Rights  or
Convertible  Securities.  In case the  Company  shall fix a record  date for the
making of a  distribution,  to all  holders  of shares of any class or series of
Common Stock, of evidences of indebtedness of the Company,  assets (other than a
regularly scheduled cash dividend) or rights,  options,  warrants or convertible
or  exchangeable  securities  containing  the right to subscribe for or purchase
shares of any class or series of Common  Stock,  then in each case the number of
shares of Common Stock  purchasable  after such record date upon the exercise of
each Warrant shall be determined by  multiplying  the number of shares of Common
Stock  purchasable upon the exercise of such Warrant  immediately  prior to such
record 


                                       14



date by a fraction,  the  numerator  of which shall be the then  Current  Market
Value per share of Common Stock on the record date for such distribution and the
denominator  of which shall be the then Current Market Value per share of Common
Stock on the  record  date for such  distribution  less the then fair  value (as
determined  by the Board of Directors  of the Company,  acting in good faith) of
the portion of such assets or evidences of  indebtedness  so  distributed  or of
such  subscription  rights,  options  or  warrants,  or of such  convertible  or
exchangeable  securities  applicable  to one  share of such  class or  series of
Common Stock.  Such adjustment  shall be made whenever any such  distribution is
made, and shall become effective on the date of distribution  retroactive to the
record date for the  determination  of  stockholders  entitled  to receive  such
distribution.

                  (3) Current Market Value.  For the purposes of any computation
under this  Section 4, the Current  Market Value per share of Common Stock or of
any other security (herein collectively referred to as a "security") at the date
herein  specified  shall be (1) if the  Company  does not have a class of equity
securities  registered  under the  Exchange  Act,  the value of the security (a)
determined in good faith in the most recently completed arm's-length transaction
between the Company and an unaffiliated  third party in which such determination
is necessary and the closing of which occurs on such date or shall have occurred
within the six months preceding such date, (b) if no such transaction shall have
occurred  on  such  date or  within  such  six-month  period,  as most  recently
determined  as of a date  within  the  six  months  preceding  such  date  by an
Independent  Financial  Expert in accordance with the criteria set out below (in
the event of more than one such  determination,  the determination for the later
date shall be used) or (c) if no such determination  shall have been made within
such six-month  period,  determined as of such date by an Independent  Financial
Expert in accordance with the criteria for such valuation set out below,  (2) if
the Company does have a class of equity securities registered under the Exchange
Act, deemed to be the average of the daily market prices of such security for 20
consecutive  business days during the period  commencing 30 business days before
such date or, if the  Company  has had a class of equity  securities 


                                       15


registered  under the Exchange Act for less than 30  consecutive  business  days
before  such date,  then the  average of the daily  market  price for all of the
business days before such date for which daily market prices are available.

                  The market  price for each such  business day shall be: (A) in
the case of a security listed or admitted to trading on any securities exchange,
the last reported sale price on such day, or if no sale takes place on such day,
the average of the closing bid and asked  prices on such day, (B) in the case of
a security  not then listed or admitted to trading on any  securities  exchange,
the last reported sale price on such day, or if no sale takes place on such day,
the average of the  closing  bid and asked  prices on such day, as reported by a
reputable  quotation  source  designated  by the  Company,  (C) in the case of a
security not then listed or admitted to trading on any  securities  exchange and
as to which no such reported  sale price or bid and asked prices are  available,
the  average  of the  reported  high bid and low asked  prices  on such day,  as
reported by a reputable quotation service, or a newspaper of general circulation
in the Borough of Manhattan,  City and State of New York,  customarily published
on each business day, designated by the Company, or if there shall be no bid and
asked prices on such day, the average of the high bid and low asked  prices,  as
so reported,  on the most recent day (not more than 30 days prior to the date in
question)  for which prices have been so  reported,  and (D) if there are no bid
and asked prices reported during the 30 days prior to the date in question,  the
Current  Market Value of the security  shall be determined as if the Company did
not have a class of equity securities registered under the Exchange Act.

                  Where so required herein,  the value of the Common Stock shall
be determined by an "Independent  Financial Expert," to be selected by the Board
of  Directors of the Company and  retained on  customary  terms and  conditions,
using one or more valuation  methods that the Independent  Financial  Expert, in
its best  professional  judgment,  determines to be most appropriate but without
giving  effect to the  discount for any lack of liquidity of the Common Stock or
to the  fact  that the  Company  may 


                                       16


not have any class of equity  securities  registered under the Exchange Act. The
Company shall cause the Independent  Financial Expert to deliver to the Company,
with a copy to the Warrant  Agent, a value report (the "Value  Report")  stating
the methods of valuation  considered  or used and the value of said Common Stock
as of the date of the Value Report,  and containing a statement as to the nature
and scope of the examination or  investigation  upon which the  determination of
value was made. The Independent  Financial  Expert shall consult with management
of the  Company  in  order  to  allow  such  management  to  comment  upon  such
Independent Financial Expert's valuation.  The Indepen dent Financial Expert may
revise its Value  Report  based on such  consultation,  provided  that the final
Value Report shall reflect both the initial  valuation and the  determination to
revise it. Any such  Value  Report or  revision  thereof  shall be deemed  final
unless revised  within five days after  delivery to the Company,  with a copy to
the Warrant Agent.  The Independent  Financial Expert shall not be liable to the
Company or the Holders for the contents of the Value  Report if the  Independent
Financial  Expert  shall have  prepared  such Value  Report in good  faith.  The
Warrant  Agent shall have no other duty with respect to the Value Report  except
to keep it on file and available for inspection by the Holders.

                  (4) Adjustment of Warrant Exercise Price.  Whenever the number
of shares of Common  Stock  purchasable  upon the  exercise  of each  Warrant is
adjusted,  as herein  provided,  the  Warrant  Exercise  Price for each share of
Common  Stock  payable  upon  exercise  of such  Warrant  shall be  adjusted  by
multiplying such Warrant Exercise Price  immediately prior to such adjustment by
a fraction,  the  numerator  of which shall be the number of shares  purchasable
upon the exercise of each Warrant immediately prior to such adjustment,  and the
denominator  of which shall be the number of shares so  purchasable  immediately
thereafter.

                  (5) Expiration of Rights,  Options and Conversion  Privileges.
Upon the expiration of any rights,  options,  warrants or conversion or exchange
privileges,  if any thereof shall not have been exercised,  the Warrant Exercise
Price and the number of shares of Common Stock  purchasable upon the exercise of
each Warrant shall,  upon 


                                       17


such expiration,  be readjusted and shall thereafter,  upon any future exercise,
be such as they would have been had they been  originally  adjusted  (or had the
original  adjustment not been  required,  as the case may be) as if (A) the only
shares of any class or series of Common  Stock so issued were the shares of such
class or  series  of  Common  Stock,  if any,  actually  issued or sold upon the
exercise of such rights, options,  warrants or conversion or exchange rights and
(B) such shares of such class or series of Common Stock,  if any, were issued or
sold for the consideration  actually received by the Company, upon such exercise
plus the  consideration,  if any, actually received by the Company for issuance,
sale or grant of all such rights,  options,  warrants or  conversion or exchange
rights whether or not exercised;  provided,  further,  that no such readjustment
shall have the effect of increasing the Warrant Exercise Price by an amount,  or
decreasing the number of shares  purchasable upon exercisable of each Warrant by
a number, in excess of the amount or number of the adjustment  initially made in
respect to the  issuance,  sale or grant of such  rights,  options,  warrants or
conversion or exchange rights.

                  (6) De Minimis  Adjustments.  No  adjustment  in the number of
shares of Common  Stock  purchasable  hereunder  shall be  required  unless such
adjustment would require an increase or decrease of at least one percent (1%) in
the  number of  shares of Common  Stock  purchasable  upon an  exercise  of each
Warrant;  provided however, that any adjustments which by reason of this Section
4A(6) are not  required  to be made  shall be  carried  forward  and taken  into
account in any  subsequent  adjustment.  All  calculations  shall be made to the
nearest one-thousandth of a share.

                  B.  Notice of  Adjustment.  Whenever  the  number of shares of
Common  Stock or other stock or property  purchasable  upon the exercise of each
Warrant or the Warrant  Exercise  Price is  adjusted,  as herein  provided,  the
Company  shall  cause the  Warrant  Agent  promptly to mail by first class mail,
postage  prepaid,  to each Holder notice of such  adjustment or adjustments  and
shall deliver to the Warrant Agent a certificate of a firm of independent public
accountants selected by the Board of Directors of the Company, in the case of an
adjustment 



                                       18



affecting the Common  Stock,  setting forth the number of shares of Common Stock
or other stock or property purchasable upon the exercise of each Warrant and the
Warrant Exercise Price after such adjustment, setting forth a brief statement of
the facts  requiring such  adjustment and setting forth the computation by which
such  adjustment  was made.  The Warrant Agent shall be entitled to rely on such
certificate  and shall be under no duty or  responsibility  with  respect to any
such  certificate,  except to exhibit the same from time to time,  to any Holder
desiring an inspection  thereof during  reasonable  business hours.  The Warrant
Agent shall not at any time be under any duty or  responsibility  to any Holders
to  determine  whether any facts exist that may  require any  adjustment  of the
Warrant Exercise Price or the number of shares of Common Stock or other stock or
property purchasable on exercise of the Warrants,  or with respect to the nature
or extent of any such  adjustment  when  made,  or with  respect  to the  method
employed  in making  such  adjustment  or the  validity or value (or the kind or
amount) of any shares of Common  Stock or other stock or  property  which may be
purchasable  on  exercise  of the  Warrants.  The  Warrant  Agent  shall  not be
responsible for any failure of the Company to make any cash payment or to issue,
transfer or deliver any shares of Common  Stock or stock  certificates  or other
common stock or properties upon the exercise of any warrant.

                  C.  Statement  on Warrant  Certificates.  Irrespective  of any
adjustment  in the  Warrant  Exercise  Price  or the  number  or kind of  shares
purchasable upon the exercise of the Warrants,  Warrant Certificates theretofore
or thereafter  issued may continue to express the same price and number and kind
of shares as are stated in the Warrant Certificates  initially issuable pursuant
to this Agreement.

                  D. Notice to Holders of  Dissolution,  Liquidation  or Winding
Up. In case at any time after the date  hereof  there  shall be a  voluntary  or
involuntary  dissolution,  liquidation  or  winding up of the  Company,  then th
Company shall cause to be mailed (by first-class mail,  postage prepaid) to each
Holder  of an  outstanding  warrant  at such  Holder's  address  as shown on the
Warrant Register,  at the earliest practicable time (and, in any event, 


                                       19


not less than 30 calendar days before any date set for definitive action) notice
of the date on which  such  dissolution,  liquidation  or  winding up shall take
place,  as the case may be. Such notice  shall also specify the date as of which
the holders of the shares of record of Common Stock or other securities issuable
upon  exercise of the  Warrants  shall be entitled to exchange  their shares for
securities,   money  or  other  property   deliverable  upon  such  dissolution,
liquidation  or  winding  up, as the case may be, on which  date each  Holder of
outstanding warrants shall be entitled to receive upon surrender of the Warrants
the cash or other  property,  less the Warrant  Exercise Price for such Warrants
then in effect,  that such  Holder  would have been  entitled to receive had the
Warrants been exercisable and exercised  immediately  prior to such dissolution,
liquidation  or winding up and any and all  rights of a Holder to  exercise  the
Warrants  shall  terminate in their  entirety.  In case of any such voluntary or
involuntary dissolution,  liquidation or winding up of the Company), the Company
shall  deposit  with the  Warrant  Agent any funds or other  property  which the
Holders are  entitled to receive  under this  Agreement.  After  receipt of such
deposit from the Company and after receipt of surrendered Warrants,  the Warrant
Agent shall make payment in  appropriate  amount to such Person or Persons as it
may be directed in writing by the Holder surrendering such Warrants.

                  E. Fractional Interests.  The Company shall not be required to
issue  fractional  shares of Common Stock on the  exercise of warrants.  If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full shares of Common Stock or other securities which
shall be issuable upon such  exercise  thereof shall be computed on the basis of
the aggregate number of shares of Common Stock or other  securities  purchasable
on exercise of the Warrants so  presented.  If any fraction of a share of Common
Stock would,  except for the  provisions  of this Section 4E, be issuable on the
exercise of any Warrant (or specified portion thereof), the Company shall pay an
amount in cash calculated by it to be equal to the then Current Market Value per
share of Common  Stock  multiplied  by such  fraction  computed  to the  nearest
one-hundredth of a Swiss Franc.


                                       20



                  F. Other Notices. In the event:

                  (1) The Company shall declare any dividend on the Common Stock
payable in shares of capital stock of the Company, cash or other property; or

                  (2) The  Company  shall  authorize  the issue of any  options,
warrants or rights pro rata to all  holders of Common  Stock  entitling  them to
subscribe  for or purchase  any shares of stock of the Company or to receive any
other rights; or

                  (3) The Company shall authorize the  distribution  pro rata to
all holders of Common Stock of a cash  dividend  payable  otherwise  than out of
earnings or surplus  legally  available  therefor under the laws of the State of
Delaware,  shares of its capital stock (other than Common Stock), stock or other
securities of other persons,  evidences of indebtedness issued by the Company or
other persons,  assets (excluding regularly scheduled cash dividends) or options
or rights  (excluding  options to purchase  and rights to  subscribe  for Common
Stock or other  securities of the Company  convertible  into or exchangeable for
Common Stock); or

                  (4) There shall occur any reclassification of the Common Stock
or any  consolidation or merger of the Company with or into another  corporation
(other than a  consolidation  or merger in which the  Company is the  continuing
corporation  and which  does not result in any  reclassifi  cation of the Common
Stock) or a sale or transfer to another  corporation of all or substantially all
of the properties of the Company;

then the Company shall cause to be filed with the Warrant Agent pursuant  hereto
and shall cause to be  delivered  promptly to the holders at their  addresses as
they shall appear in the Warrant  Register,  at least 20 days (or 10 in any case
specified in clause (a) or (b) above) prior to the applicable  date  hereinafter
specified,  a notice  stating  (i) the date on which a record is to be taken for
the purpose of such dividend,  distribution or rights, or, if a record is not to
be taken,  the date as of which  the  holders  of  Common  Stock of record to be
entitled to such 


                                       21


dividend, distribution or rights are to be determined, or (ii) the date on which
such reorganization,  reclassification,  consolidation,  merger, sale, transfer,
dissolution,  liquidation or winding up is expected to become effective, and the
date as of which it is expected  that holders of Common Stock of record shall be
entitled  to  exchange  their  shares of Common  Stock for  securities  or other
property deliverable upon such  reclassification,  consolidation,  merger, sale,
transfer, dissolution, liquidation or winding up.



                                       22


5. LOSS OR MUTILATION 

                  Upon receipt by the Company and the Warrant  Agent of evidence
satisfactory to them (in the exercise of reasonable discretion) of the ownership
of and the loss, theft, destruction or mutilation of any Warrant Certificate and
of indemnity  satisfactory to them (in the exer cise of reasonable  discretion),
and (in the case of mutilation) upon surrender and cancellation  thereof,  then,
in the absence of notice to the Company or the Warrant  Agent that the  warrants
represented  thereby have been  acquired by a bona fide  purchaser,  the Warrant
Agent  shall  countersign  and  deliver  to the  registered  Holder of the lost,
stolen,  destroyed or mutilated Warrant Certificate,  in exchange for or in lieu
thereof,  a new Warrant  Certificate  of the same tenor and for a like aggregate
number of Warrants.  Upon the issuance of any new Warrant Certificate under this
Section 5, the Company may require the payment of a sum  sufficient to cover any
tax or other  governmental  charge that may be imposed in  relation  thereto and
other  expenses  (including  the fees and  expenses  of the  Warrant  Agent)  in
connection  herewith.  Every new  Warrant  Certificate  executed  and  delivered
pursuant  to this  Section 5 in lieu of any lost,  stolen or  destroyed  Warrant
Certificate shall constitute a contractual obligation of the Company, whether or
not the allegedly lost, stolen or destroyed Warrant  Certificate shall be at any
time  enforceable  by anyone,  and shall be  entitled  to the  benefits  of this
Agreement   equally  and   proportionately   with  any  and  all  other  Warrant
Certificates  duly  executed and  delivered  hereunder.  The  provisions of this
Section 5 are  exclusive  and shall  preclude  (to the extent  lawful) all other
rights or remedies with respect to the replacement of mutilated,  lost,  stolen,
or destroyed Warrant Certificates.

6. RESERVATION AND AUTHORIZATION OF COMMON STOCK  
   
                           The  Company  shall  at all  times  reserve  and keep
available for issue upon the exercise of Warrants such number of its  authorized
but  unissued  shares  of  Common  Stock  or  other  securities  of the  Company
deliverable upon exercise of Warrants as will be sufficient to permit the
exercise  in  full of all  outstanding  Warrants,  and  will 



                                       23


cause appropriate evidence of ownership of such Common Stock or other securities
of the Company to be  delivered  to the Warrant  Agent upon request for delivery
upon the exercise of Warrants, and all shares of Common Stock will, at all times
that Warrants are exercisable,  be duly approved for listing subject to official
notice of  issuance  on Nasdaq or such other  securities  exchange  on which the
Common Stock is then listed.

7. WARRANT REGISTER

                  The Warrant  Certificates  shall be issued in registered  form
only.  The Company  shall cause to be kept at the office of the Warrant  Agent a
Warrant  Register in which,  subject to such reasonable  regulations as they may
prescribe,   the  Company  shall  provide  for  the  registra  tion  of  Warrant
Certificates  and  transfers  or  exchanges  of Warrant  Certificates  as herein
provided, subject to Section 2C.

                  At the  option  of the  Holder,  Warrant  Certificates  may be
exchanged at such office or the office of any Subagent,  and upon payment of the
charges  hereinafter   provided.   Whenever  any  Warrant  Certificates  are  so
surrendered for exchange, the Company shall execute, and the Warrant Agent shall
countersign  and deliver,  the Warrant  Certificates  that the Holder making the
exchange is entitled to receive.

                  All  Warrant  Certificates  issued  upon any  registration  of
transfer or exchange of Warrant  Certificates  shall be the valid obligations of
the Company, evidencing the same obligations,  and entitled to the same benefits
under  this  Agreement,  as the  Warrant  Certificates  surren  dered  for  such
registration of transfer or exchange.

                  Every Warrant  Certificate  surrendered  for  registration  of
transfer or exchange  shall (if so required by the Company or the Warrant Agent)
be duly endorsed,  or be accompanied by a written instrument of transfer in form
satisfactory  to the Company and the Warrant  Agent duly  executed by the Holder
thereof or his or her attorney duly authorized in writing.



                                       24



                  No charge  shall be made for any  registration  of transfer or
exchange of Warrant Certificates.

                  Any Warrant  Certificate  when duly endorsed in blank shall be
deemed negotiable,  and when a Warrant  Certificate shall have been so endorsed,
the Holder  thereof may be treated by the  Company,  the  Warrant  Agent and all
other persons  dealing  therewith as the absolute  owner thereof for any purpose
and as the person entitled to exercise the rights represented thereby, or to the
transfer  thereof  on  the  Warrant   Register,   any  notice  to  the  contrary
notwithstanding;  but until such transfer on the Warrant Register,  the Company,
and the Warrant Agent may treat the  registered  Holder thereof as the owner for
all purposes.

8. WARRANT HOLDERS

                  A. No Voting or Dividend Rights.  Prior to the exercise of the
Warrants, no Holder of a Warrant Certificate,  as such, shall be entitled to any
rights of a stockholder of the Company, including, without limitation, the right
to vote, to recei dividends or other  distributions,  to exercise any preemptive
right or to receive any notice of meetings of  stockholders or any notice of any
proceedings of the Company except as may be specifically provided for herein.

                  B.  Right of  Action.  All rights of action in respect of this
Agreement  are  vested in the  Holders  of the  Warrants,  and any Holder of any
Warrant,  without the  consent of the  Warrant  Agent or the Holder of any other
Warrant,  may, in such  Holder's  own behalf and for such  Holder's own benefit,
enforce,  and may institute and maintain any suit, action or proceeding  against
the Company suitable to enforce, or otherwise in respect of, such Holder's right
to  exercise,  exchange or tender for  purchase  such  Holder's  Warrants in the
manner provided in this Agree ment.

9. CONCERNING THE WARRANT AGENT 

                  A. Nature of Duties and Responsibilities  Assumed. The Company
hereby appoints the Warrant Agent to act as agent of the Company as set forth in
this Agree


                                       25



ment.  The Warrant Agent hereby  accepts the  appointment as agent of th Company
and agrees to  perform  that  agency  upon the terms and  conditions  herein set
forth,  by all of which  the  Company  and the  Holders  of  Warrants,  by their
acceptance  thereof,  shall be  bound.  It shall not by  countersigning  Warrant
Certificates or by any other act hereunder be deemed to make any representations
as to  validity or  authorization  of the  Warrants or the Warrant  Certificates
(except  as to its  countersignature  thereon)  or of any  securities  or  other
property delivered upon exercise or tender of any warrant, or as to the accuracy
of the computation of the Warrant Exercise Price or the number or kind or amount
of stock or other securities or other property  deliverable upon exercise of any
warrant, the independence of any Independent Financial Expert or the correctness
of any of the  representations of the Company made in such certificates that the
Warrant Agent  receives.  The Warrant Agent shall not have any duty to calculate
or determine any adjustments  with respect either to the Warrant  Exercise Price
or the kind and amount of shares or other securities or any property  receivable
by Holders upon the exercise or tender of Warrants  required  from time to time,
and the Warrant Agent shall have no duty or  responsibility  in determining  the
accuracy or correctness of such calculation.  The Warrant Agent shall not (i) be
liable for any recital or statement of fact  contained  herein or in the warrant
Certificates or for any action taken, suffered or omitted by it in good faith on
the belief that any Warrant Certificate or any other documents or any signatures
are genuine or properly  authorized,  (ii) be responsible for any failure on the
part  of the  Company  to  comply  with  any of its  covenants  and  obligations
contained in this Agreement or in the Warrant  Certificates,  or (iii) be liable
for any act or omission in  connection  with this  Agreement  except for its own
gross negligence or willful  misconduct.  The Warrant Agent is hereby authorized
to accept  instructions  with respect to the performance of its duties hereunder
from the  President,  any Vice  President,  Treasurer  or the  Secretary  of the
Company and to apply to any such officer for  instructions  (which  instructions
will be promptly given in writing when  requested),  and the Warrant Agent shall
not be liable for any action  taken or  suffered to be taken by it in good faith
in accordance with the  instructions of any such officer,  but



                                       26



in its discretion the Warrant Agent may in lieu thereof accept other evidence of
such  or may  require  such  further  or  additional  evidence  as it  may  deem
reasonable.

                  The Warrant  Agent may execute and  exercise any of the rights
and powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys, agents or employees, provided reasonable care has been
exercised in the selection and in the continued employment of any such attorney,
agent or employee.  The Warrant Agent shall not be under any  obligation or duty
to  institute,  appear in or defend  any  action,  suit or legal  proceeding  in
respect hereof, unless first indemnified to its satisfaction, but this provision
shall not  affect  the  power of the  Warrant  Agent to take such  action as the
Warrant Agent may consider proper,  whether with or without such indemnity.  The
Warrant Agent shall promptly  notify the Company in writing of any claim made or
action, suit or proceeding instituted against it arising out of or in connection
with this Agreement.

                  The Company will perform, execute,  acknowledge and deliver or
cause to be  performed,  executed,  acknowledged  and delivered all such further
act,  instruments  and  assurances as may  reasonably be required by the Warrant
Agent in order to  enable it to carry  out or  perform  its  duties  under  this
Agreement.

                  The  Warrant  Agent  shall act solely as agent of the  Company
hereunder.  The  Warrant  Agent  shall not be liable  except for the  failure to
perform  such  duties as are  specifically  set  forth  herein,  and no  implied
covenants or obligations  shall be read into this Agreement  against the Warrant
Agent whose duties and  obligations  shall be  determined  solely by the express
provisions hereof.

                  The Company  shall cause to be  maintained an office or agency
in one or more European  cities,  which shall include  Luxembourg if required by
applicable  law  or  regulation,   where  the  Warrants  may  be  presented  for
registration of transfer or exercise (each, a "Subagent").



                                       27



                  Any  Subagent  has the  power  and  authority  granted  to and
conferred  upon it  herein  and in the  Warrants  and such  further  powers  and
authority,  acceptable to it, as the Company may hereafter respectively grant to
or confer  upon it. The  Company  reserves  the right to vary or  terminate  the
appointment of any Subagent, or to appoint additional or other subagents.

                  The Company shall enter into an appropriate  agency  agreement
with any Subagent not a party to this Warrant  Agreement.  Such agreement  shall
implement the provisions of this Warrant Agreement that relate to such Subagent.
The  Company  shall  notify  the  Warrant  Agent of the name and  address of any
Subagent not a party to this Warrant Agreement.

                  The Company has initially  appointed Banca Commerciale  Lugano
as sole  Subagent  for the purposes  set forth in this  Warrant  Agreement.  Any
Subagent in acting  hereunder  shall be subject at all times and in all respects
to the  directions  of the  Warrant  Agent,  subject to and in  accordance  with
applicable laws, and shall be responsible solely to the Warrant Agent.

                  B. Right to Consult Counsel. The Warrant Agent may at any time
consult with legal counsel  satisfactory to it (who may be legal counsel for the
Company),  and the Warrant Agent shall incur no liability or  responsibility  to
the Company or to any Holder for any action taken,  suffered or omitted by it in
good faith in accordance with the opinion or advice of such counsel.

                  C. Compensation and  Reimbursement.  The Company agrees to pay
the Warrant Agent from time to time  compensation for its services  hereunder as
its Warrant Agent at its rates as in effect from time to time,  and to reimburse
it for  reasonable  expenses and counsel fees  incurred in  connection  with the
execution and administration of this Agreement,  and further agrees to indemnify
the Warrant  Agent and save it  harmless  against  any  losses,  liabilities  or
expenses arising out of or in connection with the acceptance and  administration
of this  Agreement,  including  the  costs  and  expenses  of  investigating  or
defending  any claim of such  liability,  except that the Company  shall have no
liability  hereunder  to the  


                                       28



extent that any such loss, liability or expense results from the Warrant Agent's
own gross negligence or willful misconduct.

                  D.  Warrant  Agent May Hold  Company  Securities.  The Warrant
Agent and any  stockholder,  director,  officer or employee of the Warrant Agent
may buy, sell or deal in any of the Warrants or other  securities of the Company
or its respective Affiliates or become pecuniarily interested in transactions in
which the Company or its respective  Affiliates  may be interested,  or contract
with or lend money to the Company or its respective  Affiliates or otherwise act
as  fully  and  freely  as  though  it were not the  Warrant  Agent  under  this
Agreement.  Nothing  herein shall  preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.

                  E. Resignation and Removal;  Appointment of Successor. (1) The
Warrant  Agent may resign its duties and be discharged  from all further  duties
and liability  hereunder  (except  liability  arising as a result of the Warrant
Agent's own gross  negligence  or willful  misconduct)  after giving one month's
prior  written  notice to the Company.  The Company may remove the Warrant Agent
upon one month's written  notice,  and the Warrant Agent shall thereupon in like
manner be discharged from all further duties and liabilities  hereunder,  except
as aforesaid.  The Warrant Agent shall, at the expense of the Company,  cause to
be mailed (by first class mail,  postage prepaid) to each Holder of a Warrant at
his or her last  address as shown on the Warrant  Register a copy of said notice
of resignation or notice of removal,  as the case may be. Upon such  resignation
or removal,  the Company  shall appoint in writing a new warrant  agent.  If the
Company shall fail to make such appointment  within a period of 30 calendar days
after it has been  notified  in writing  of such  resignation  by the  resigning
Warrant Agent or after such removal, then the Holder of any Warrant may apply to
any court of competent  jurisdiction for the appointment of a new warrant agent.
Any new  warrant  agent,  whether  appointed  by the Company or by such a court,
shall be a corporation in good standing in the  jurisdiction of its organization
and all other  jurisdictions in which it conducts business and having a combined
capital  and  surplus of not less than  $1,000,000. 



                                       29



The combined  capital and surplus of any such new warrant  agent shall be deemed
to be the  combined  capital and surplus as set forth in the most recent  annual
report  of  its  condition   published  by  such  warrant  agent  prior  to  its
appointment, provided that such reports are published at least annually pursuant
to law or to the  requirements  of a Federal or state  supervising  or examining
authority.  After  acceptance in writing of such  appointment by the new warrant
agent,   it  shall  be  vested  with  the  same  powers,   rights,   duties  and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act of deed; but if for any reason it
shall be necessary  or  expedient to execute and deliver any further  assurance,
conveyance,  act or deed,  the same shall be done at the  expense of the Company
and shall be legally and validly  executed  and  delivered  by the  resigning or
removed  Warrant  Agent.   Not  later  than  the  effective  date  of  any  such
appointment, the Company shall file notice thereof with the resigning or removed
Warrant  Agent.  Failure to give any notice  provided for in this Section 9E(l),
however, or any defect therein, shall not affect the legality or validity of the
resignation of the Warrant Agent or the  appointment of a new warrant agent,  as
the case may be.

                  (1) Any  corporation  into which the Warrant  Agent or any new
warrant agent may be merged or any corporation  resulting from any consolidation
to which the Warrant Agent or any new warrant agent shall be a party, shall be a
successor  Warrant Agent under this Agreement  without any further act, provided
that such  corporation  would be eligible  for  appointment  as successor to the
Warrant Agent under the provisions of Section 9E(l). Any such successor  Warrant
Agent shall  promptly  cause  notice of its  succession  as Warrant  Agent to be
mailed (by  first-class  mail,  postage  prepaid) to each Holder of a Warrant at
such Holder's last address as shown on the Warrant Register.

10. REPORTS TO HOLDERS

                  The Company  will file with the Warrant  Agent  within 15 days
after  the date by which  the  Company  is  required  to file the same  with the
Commission (including any extension of time to which the Company is entitled),


                                       30



copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as said  Commission may from
time to time by rules  and  regulations  prescribe)  which  the  Company  may be
required to file with said Commission pursuant to Section 13 or Section 15(d) of
the  Exchange  Act;  or, if the  Company is not  required  to file  information,
documents or reports pursuant to either of such sections,  then to file with the
Warrant  Agent and said  Commission,  in accordance  with rules and  regulations
prescribed from time to time by said Commission,  such of the  supplementary and
periodic  information,  documents and reports which may be required  pursuant to
Section 13 of the Exchange Act in respect of a security listed and registered on
a national  securities  exchange as may be prescribed  from time to time in such
rules and regulations.

11. NOTICES

                  Any notice,  demand or delivery  authorized by this  Agreement
shall be  sufficiently  given or made when mailed if sent by  first-class  mail,
postage  prepaid,  addressed to any Holder of a Warrant at such Holder's address
shown  on the  Warrant  Register  and to the  Company  or the  Warrant  Agent as
follows:

                           If to the Company:

                                    Palomar Medical Technologies, Inc.
                                    66 Cherry Hill Drive
                                    Beverly, Massachusetts 01915
                                    Attention:  Corporate Controller

                           If to the Warrant Agent:

                                    American Stock Transfer & Trust Company
                                    6201 15th Avenue
                                    3rd Floor
                                    Brooklyn, New York 11219

or such other address as shall have been  furnished to the party given or making
such notice, demand or delivery.


                                       31



12. APPLICABLE LAW

                  This  Agreement  and  each  Warrant  shall be  deemed  to be a
contract  made  under the laws of the State of New  York,  and for all  purposes
shall be governed by and construed in accordance  with the internal laws of said
State. Under the Judiciary Law of the State of New York, a judgment or decree in
an action based upon an  obligation  denominated  in a currency  other than U.S.
dollars shall be rendered in the foreign  currency of the underlying  obligation
and converted into U.S. dollars at a rate of exchange  prevailing on the date of
the entry of the judgment or decree.

13. PERSONS BENEFITTING

                  This Agreement  shall be binding upon and inure to the benefit
of the Company and the Warrant Agent, and their respective successors,  assigns,
beneficiaries,  executors and administrators,  and the Holders from time to time
of the Warrants.  Nothing in this Agreement is intended or shall be construed to
confer  upon any  Person,  other than the  Company,  the  Warrant  Agent and the
Holders of the Warrants,  any right,  remedy or claim under or by reason of this
Agreement or any part hereof.

14. COUNTERPARTS

                  This  Agreement may be executed in any number of  counterparts
and  each  of said  counterparts  shall  for all  purposes  be  deemed  to be an
original,  and all such counterparts  shall together  constitute but one and the
same instrument.


                                       32




15. AMENDMENTS

                  The Company  may,  without the consent or  concurrence  of the
Holders of the  Warrants,  by  supplemental  agreement  or  otherwise,  make any
changes or  corrections  in this  Agreement  that it shall have been  advised by
counsel (i) are required to cure any  ambiguity  or to correct any  defective or
inconsistent  provision or clerical omission or mistake or manifest error herein
contained or (ii) add to the  covenants  and  agreements  of the Company in this
Agreement  further  covenants  and  agreements  of the Company  thereafter to be
observed,  or surrender  any rights or power  reserved to or conferred  upon the
Company  in this  Agreement,  provided  that in  either  case  such  changes  or
corrections  do not and will not adversely  affect,  alter or change the rights,
privileges or immunities of the Holders of the Warrants. The Warrant Agent shall
join with the Company in the  execution  and  delivery of any such  supplemental
agreements  unless  it  affects  the  Warrant  Agent's  own  rights,  duties  or
immunities  hereunder,  in which case the  Warrant  Agent may,  but shall not be
required to, join in such execution and delivery.

                  With the consent of the Holders (or persons  entitled to vote,
or to  give  consents  respecting  the  same)  of not  less  than 66 2/3% of the
Warrants at the time outstanding,  the Company,  when authorized by a resolution
of its Board of  Directors,  and the Warrant Agent may, from time to time and at
any  time,  enter  into an  amendment  hereto  for the  purpose  of  adding  any
provisions to or changing in any manner or eliminating  any of the provisions of
this  Agreement  or of any  amendment  hereto or of  modifying in any manner the
rights and  obligations  of the  Holders  of the  Warrants  and of the  Company;
provided  that,  without  the  consent  of  the  Holders  of all  Warrants  then
outstanding,  no such amendment shall affect the Warrants  adversely,  or modify
any of the  provisions  of this  Agreement  in a manner  adverse to the  Holders
thereof,  or reduce the aforesaid  percentage of Warrants,  the Holders of which
are required to consent to any such amendment.




                                       33



                  Upon the request of the  Company,  accompanied  by a copy of a
resolution of its Board of Directors  certified by the Secretary or an Assistant
Secretary of the Company  authorizing the execution of any such  agreement,  and
upon the filing  with the  Warrant  Agent of  evidence of the consent of Warrant
Holders as  aforesaid,  the  Warrant  Agent  shall join with the  Company in the
execution of such agreement  unless such agreement  affects the Warrant  Agent's
own rights,  duties or immunities  under this  Agreement or otherwise,  in which
case the Warrant  Agent may in its  discretion,  but shall not be obligated  to,
enter into such amendment.

                  It shall  not be  necessary  for the  consent  of the  Warrant
Holders  under this  Section  to approve  the  particular  form of any  proposed
amendment,  but it  shall  be  sufficient  if such  consent  shall  approve  the
substance thereof.

                  Promptly  after the  execution  by the Company and the Warrant
Agent of any agreement  pursuant to the provisions of this Section,  the Company
shall  provide  for notice to be  delivered  to the  Holders,  setting  forth in
general terms the  substance of such  agreement,  at the last  addresses of such
Holders  appearing  upon the  Warrant  Register.  Any  failure of the Company to
provide such  notice,  or any defect  therein,  shall not,  however,  in any way
impair or affect the validity of any such amendment.

16. HEADINGS

                  The  descriptive  headings  of the  several  Sections  of this
Agreement  are  inserted  for  convenience  and shall not  control or affect the
meaning or construction of any of the provisions hereof.

                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement to be duly executed, as of the day and year first above written.

                                                            PALOMAR MEDICAL
                                                              TECHNOLOGIES, INC.



                                       34

                                                 By: /s/ Steven Georgiev
                                                     ---------------------------
                                                 Title: Chairman & CEO
                                                     ---------------------------



                                                         AMERICAN STOCK TRANSFER
                                                           & TRUST COMPANY,
                                                           as Warrant Agent


                                                 By: /s/ Herbert J. Lemmer
                                                     ---------------------------
                                                 Title: Vice President
                                                     ---------------------------



                                       35






                                                                       EXHIBIT A


                          [FORM OF WARRANT CERTIFICATE]

         THE WARRANTS  REPRESENTED HEREBY ARE PART OF A NONDETACHABLE UNIT, EACH
UNIT CONSISTING OF ONE SF 1,000 PRINCIPAL AMOUNT 4.5%  CONVERTIBLE  SUBORDINATED
DEBENTURE AND 24 COMMON STOCK PURCHASE WARRANTS. SAID DEBENTURE AND WARRANTS MAY
NOT BE TRANSFERRED OR TRADED SEPARATELY, AND ANY PURPORTED TRANSFER OF EITHER OF
SUCH  SECURITIES  SEPARATELY  FROM THE  OTHER  SHALL BE VOID  AND  SHALL  NOT BE
RECORDED ON THE BOOKS AND RECORDS OF THE COMPANY. WARRANTS MAY ONLY BE EXERCISED
IN LOTS OF 24 WARRANTS OR INTEGRAL MULTIPLES THEREOF; AND EACH 24 WARRANTS TO BE
EXERCISED  MUST BE  ACCOMPANIED  BY SF 1,000  PRINCIPAL  AMOUNT  OF  DEBENTURES,
PRESENTED FOR  CONVERSION  OR  REDEMPTION OR REPURCHASE IN ITS ENTIRETY,  AS THE
CASE MAY BE, PURSUANT TO THE TERMS OF THE DEBENTURES.

         THE  SECURITIES  REPRESENTED  BY  THIS  CERTIFICATE  HAVE  BEEN  ISSUED
PURSUANT  TO  REGULATION  S, AN  EXEMPTION  FROM  REGISTRATION  PURSUANT  TO THE
PROVISIONS  UNDER THE UNITED  STATES  SECURITIES  ACT OF 1933,  AS AMENDED  (THE
"SECURITIES  ACT").  THESE  SECURITIES MAY NOT BE  TRANSFERRED,  OFFERED OR SOLD
PRIOR  TO  THE  END OF THE  FORTY  (40)-DAY  PERIOD  (THE  "RESTRICTED  PERIOD")
COMMENCING  ON THE LATER OF (I) THE DATE THE  SECURITIES  ARE FIRST  OFFERED  TO
PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN REGULATION S) OR (II) THE DATE OF
THE FINAL  CLOSING OF THE  OFFERING  OF THE UNITS BY THE  COMPANY,  UNLESS  SUCH
TRANSFER,  OFFER OR SALE (I) IS MADE IN AN "OFFSHORE  TRANSACTION"  AND NOT TO A
"U.S.  PERSON"  (OTHER  THAN A  "DISTRIBUTOR")  (AS SUCH  TERMS ARE  DEFINED  IN
REGULATION  S) OR  (II)  IS  MADE  PURSUANT  TO  REGISTRATION  OR AN  APPLICABLE
EXEMPTION  UNDER  THE  SECURITIES  ACT.  THE  SECURITIES   REPRESENTED  BY  THIS
CERTIFICATE  CANNOT BE SOLD EXCEPT  PURSUANT TO THE TERMS AND  CONDITIONS OF THE
OFFSHORE SECURITIES  SUBSCRIPTION  AGREEMENT BETWEEN THE COMPANY AND THE INITIAL
HOLDER OF THE SHARES REPRESENTED BY THIS CERTIFICATE, A COPY OF WHICH IS ON FILE
AT THE OFFICES OF THE COMPANY.


                                      A-1






BY REQUESTING  THE TRANSFER OF THE SECURITIES  REPRESENTED  BY THIS  CERTIFICATE
AFTER THE RESTRICTED PERIOD,  THE HOLDER OF THIS CERTIFICATE  REPRESENTS THAT IF
SUCH  TRANSFER IS MADE TO A U.S.  PERSON,  THAT AT THE TIME OF SUCH TRANSFER THE
HOLDER IS NOT AN  "AFFILIATE"  OF THE  COMPANY  (AS SUCH TERM IS  DEFINED IN THE
SECURITIES  ACT) OR AN  "UNDERWRITER"  OR "DEALER" (AS SUCH TERMS ARE DEFINED IN
THE ACT), HAS NOT ENGAGED IN ANY SHORT SALES OR SIMILAR HEDGE  TRANSACTIONS WITH
RESPECT TO THE COMPANY'S SHARES OF COMMON STOCK DURING THE RESTRICTED PERIOD, IS
NOT A  "DISTRIBUTOR"  AND SUCH  TRANSFER  IS NOT BEING MADE AS PART OF A PLAN OR
SCHEME TO EVADE THE REGISTRATION PROVISIONS OF THE SECURITIES ACT.


                       PALOMAR MEDICAL TECHNOLOGIES, INC.

                          COMMON STOCK PURCHASE WARRANT



No. __________                                                __________Warrants


                           This  certifies that  __________________________,  or
registered assigns, is the owner of the number of Warrants set forth above, each
of which represents the right, at any time during the period commencing 120 days
following the Initial Closing, to purchase from Palomar
Medical Technologies, Inc., a Delaware corporation (the "Company"), one share of
Common Stock,  par value $.01 per share, of the Company ("Common  Stock"),  such
shares of Common Stock issuable upon exercise of the Warrants being  hereinafter
called the "Warrant  Shares",  each such Warrant  entitling the registered owner
thereof to purchase one Warrant Share at the Swiss Franc  equivalent on the date
of exercise of $16.50 per share, subject to adjustment, upon surrender hereof at
the office of American Stock  Transfer & Trust  Company,  or to its successor as
the warrant agent under the Warrant Agree ment hereinafter referred to (any such
warrant  agent being  herein  called the  "Warrant  Agent"),  with the  Exercise
Subscription  Form on the reverse  hereof or attached  hereto duly  executed and
simultaneous  payment  in full (in cash or by check  payable to the order of the
Company) of the purchase  price for the Warrant  Shares as to which the Warrants
represented by this Warrant Certificate are exercised, 

                                      A-2





all subject to the terms and conditions hereof and of the Warrant Agreement.

                           This  Warrant  Certificate  is  issued  under  and in
accordance  with a Warrant  Agreement  dated as of June 24,  1996 (the  "Warrant
Agreement"), between the Company and American Stock Transfer & Trust Company, as
Warrant Agent, and is subject to the terms and provisions contained
therein  to all of  which  terms  and  provisions  the  Holder  of this  Warrant
Certificate  consents by  acceptance  hereof.  The Warrant  Agreement  is hereby
incorporated  herein by reference  and made a part  hereof.  Reference is hereby
made to the Warrant Agreement for a full description of the rights,  limitations
of rights, obligations,  duties and immunities thereunder of the Company and the
Holders of the  Warrants.  Capitalized  defined  terms used herein have the same
meanings as in the Warrant  Agreement.  Copies of the Warrant  Agreement  are on
file at the office of the  Warrant  Agent and may be  obtained by writing to the
Warrant Agent at the following address:  6201 15th Avenue, 3rd Floor,  Brooklyn,
New York 11219.

                           All  outstanding  Warrants will  terminate and become
void (the "Warrant  Expiration  Date") on the earlier of (i) 5:00 p.m., New York
City  time,  seven  years  from the  Initial  Closing  or (ii) upon  conversion,
redemption,  or repayment of the Debentures, in which case the Warrants attached
to such Debentures will expire upon such  conversion,  redemption,  or repayment
unless  then  exercised.  In the event  the  aforesaid  expiration  dates of the
Warrants fall on a Saturday, Sunday, or on a legal holiday on which the New York
Stock Exchange is closed,  then the Warrants shall expire at 5:00 p.m., New York
City time, on the next succeeding business date.

                           A holder of Debentures desiring to convert Debentures
will not be required to exercise the attached Warrants. However, if the Warrants
are  unexercised,  they  will  expire  upon  such  conversion  by the  holder of
Debentures  or upon  conversion  or  redemption  at the  option of the  Company.
Holders of Debentures  whose  Debentures are redeemed  through  operation of the
sinking  fund  pertaining  thereto will not be required to exercise the Warrants
attached to such Debentures.  However, any unexercised Warrants will expire upon
such  payment  of the  Debentures.

                                      A-3





Any  tender  of  Deben  tures  for  repurchase,  pursuant  to the  terms  of the
Debentures,  will be accompanied by the attached  Warrants,  which may either be
exercised or, upon failure of such exercise,  will expire upon such  repurchase.
In addition,  during the period  beginning 90 days after the Initial Closing and
ending 119 days following the Initial Closing, any conversion of Debentures will
necessarily result in the expiration of the Warrants attached thereto.

                           All shares of Common  Stock  issuable  by the Company
upon  the  exercise  of  Warrants  shall  be  validly  issued,  fully  paid  and
non-assessable,  and the  Company  shall pay all  taxes  and other  governmental
charges that may be imposed in respect of the issue or delivery thereof or
of other securities deliverable upon exercise of Warrants. The Company shall not
be required,  however, to pay any tax or other charge imposed in connection with
any  transfer  involved  in the issue of any  certificate  for  shares of Common
Stock,  and in such case the  Company  shall not be required to issue or deliver
any stock  certificate  until  such tax or other  charge has been paid or it has
been  established to the Company's  satisfaction  that no tax or other charge is
due.

                  The  Warrants  are  not  separately   transferable   from  the
Debentures.  This Warrant Certificate and all rights hereunder are transferable,
only as a Unit along with transfer of the Debentures,  by the registered  holder
hereof,  in whole or in part, on the Warrant Register  maintained by the Warrant
Agent for such  purpose  at its office in  Luxembourg,  upon  surrender  of this
Warrant  Certificate  duly endorsed,  or  accompanied  by written  instrument of
transfer in form satisfactory to the Company and the Warrant Agent duly executed
and  accompanied  by transfer of the  Debentures in the Unit, by the  registered
holder  hereof or his or her  attorney  duly  authorized  in  writing.  Upon any
partial transfer the Company will issue and deliver to such holder a new Warrant
Certificate or Certificates with respect to any portion not so transferred. Each
taker and holder of this Warrant Certificate, and the accompanying Debentures in
the Unit,  by taking or holding  the same,  consents  and agrees that his or her
Warrant  Certificate when duly endorsed in blank shall be deemed  negotiable and
that when this

                                      A-4




Warrant  Certificate  shall  have been so  endorsed,  the  holder  hereof may be
treated  by the  Company  and  all  other  persons  dealing  with  this  Warrant
Certificate  as the  absolute  owner  hereof for any  purpose  and as the person
entitled to exercise the rights represented hereby, or to the transfer hereof in
the Warrant Register maintained by the Warrant Agent, any notice to the contrary
notwithstanding,  but until such transfer on such register,  the Company and the
Warrant  Agent  may  treat  the  registered  holder  hereof as the owner for all
purposes.

                  The Debentures,  Warrants,  and Units have not been registered
under the  Securities  Act, nor  qualified  for sale under any other  securities
laws, and therefore are subject to certain restrictions on transfer. The Company
will enter into a Registration Rights Agreement with the purchasers of the Units
(the  "Registration  Agreement")  pursuant  to which the  Company  will,  at the
Company's  expense,  for the  benefit of the holders of the  Warrants,  and with
respect to the  Warrant  Shares  issuable  upon  exercise of the  Warrants  (the
"Registrable Securities"), (i) file with the Commission within 60 days after the
Initial  Closing,  a  Registration   Statement  covering  the  issuance  of  the
Registrable  Securities,  (ii) use its best  efforts  to cause the  Registration
Statement to be declared  effective under the Securities Act as soon as possible
thereafter,  and (iii) use its best efforts to keep  effective the  Registration
Statement until the Expiration  Date. The Company will provide to each holder of
Registrable  Securities  copies  of  the  Prospectus  which  is a  part  of  the
Registration  Statement and notify each Holder when the  Registration  Statement
has become  effective.  The purpose of the  Registration  Statement  shall be to
enable  each  Holder  which (i)  receives  Warrant  Shares as the  result of the
exercise  of  Warrants  and (ii) is not an  Affiliate  of the Company and is not
engaging in a distribution  of securities  (within the meaning of the Securities
Act) to trade such  Warrant  Shares from and after the date of issuance  thereof
without any  limitations or  restrictions  under the Securities Act. The Company
will agree in the  Registration  Agreement  to use its best efforts to cause the
Warrant  Shares  issuable  upon  exercise of the Warrants to be listed on Nasdaq
upon effectiveness of the Registration Statement.

                                      A-5







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


Dated:____________________, 19__

                                              PALOMAR MEDICAL TECHNOLOGIES, INC.



                                             By:_______________________________
                                                Title:







                                      A-6



Countersigned:

AMERICAN STOCK TRANSFER & TRUST COMPANY,
   as Warrant Agent



By:
        Authorized Signature








                                      A-7






                           EXERCISE SUBSCRIPTION FORM

(To be executed  only upon  exercise  of Warrant  for shares of Common  Stock of
Palomar Medical Technologies, Inc.)


To:      Palomar Medical Technologies, Inc.

                           The undersigned irrevocably exercises of the Warrants
for the purchase of one share (subject to adjustment) of Common Stock, par value
$.01 per share, of Palomar  Technologies,  Inc., for each Warrant represented by
the Warrant  Certificate  and herewith makes payment of SF_______  (such payment
being in cash or by check payable to the order of Palomar Medical  Technologies,
Inc.),  all at the exercise price and on the terms and  conditions  specified in
the within Warrant  Certificate and the Warrant  Agreement  therein referred to,
surrenders this Warrant Certificate and all right, title and interest therein to
Palomar Medical  Technologies,  Inc., and directs that the shares of such Common
Stock  deliverable upon the exercise of said Warrants be registered or placed in
the name and at the address specified below and delivered thereto.


Date: __________________________, 19__


                                           _______________________________   (1)
                                                (Signature of Holder)


                                           ____________________________________
                                                 (Printed Name of Holder)


                                           ____________________________________
                                                    (Street Address)


                                           ____________________________________
                                               (City)   (State)   (Zip Code)




                                      A-8





                                  TRANSFER FORM

                           This is to certify  that as of the date  hereof  with
respect to ________  Warrants (the  "Surrendered  Warrants") for registration of
transfer,  or for exchange or conversion where the securities issuable upon such
exchange or  conversion  are to be  registered  in a name other than that of the
undersigned  Holder (each such transaction being a "transfer"),  the undersigned
Holder (as defined in the Indenture)  certifies that the transfer of Surrendered
Warrants  complies  with the  restrictive  legend  set  forth on the face of the
Surrendered Warrants for the reason checked below:

                             ___   The  transfer  of  the  Surrendered  Warrants
                             complies  with Rule 144  under the U.S.  Securities
                             Act of 1933, as amended (the "Securities Act"); or

                             ___   The  transfer  of  the  Surrendered  Warrants
                             complies with Rule 144A under the  Securities  Act;
                             or

                             ___   The  transfer  of  the  Surrendered  Warrants
                             complies with Rule 903 or 904 of Regulation S under
                             the Securities Act.

                                                [Name of Holder]





Dated: __________, ___*

* To be dated the date of presentation or surrender



                                      A-9




Securities to be issued to:

Please insert social security or identifying number:


Name:


Street Address:


City, State and Zip Code:




Any unexercised Warrants evidenced by the within Warrant Certificate to
be issued to:

Please insert social security or identifying number:


Name:


Street Address:


City, State and Zip Code:




                                      A-10