EXHIBIT 10.2


                             KEY EMPLOYEE AGREEMENT

To:   Louis P. Valente

        The  undersigned,   Palomar  Medical  Technologies,   Inc.,  a  Delaware
corporation  (the  "Company" or "PMTI"),  with its  principal  place of business
located at 66 Cherry Hill Drive,  Beverly,  MA 01915,  hereby agrees with you as
follows:

l.      Position and Responsibilities.

        1.1 You shall  serve as Chief  Executive  Officer and  President  of the
Company, or in such other executive capacity as shall be designated by the Board
of Directors or Executive Committee of the Company.

        1.2 You will devote your full time and best  efforts to the  performance
of your duties hereunder and the business and affairs of the Company.  You agree
to perform such executive duties as may be assigned to you by or on authority of
the Company's  Chief  Executive  Officer  ("CEO"),  President or Chairman of the
Board  from  time to time.  After  receipt  of  notice  of  termination  of your
employment  hereunder,  you shall  continue to be  available to the Company on a
part-time  basis at  reasonable  and  customary  hourly  rates to  assist in any
necessary transition, lawsuits, or other carry-over issues.

        1.3 You will duly,  punctually,  and faithfully  perform and observe any
and all  rules  and  regulations  that the  Company  may now or shall  hereafter
reasonably  establish  governing  your conduct as an employee and the conduct of
its business.

2.      Term of Employment

        2.1 The initial term of this Agreement  shall be for the period of years
set  forth on  Exhibit  A  annexed  hereto  commencing  with  the  date  hereof.
Thereafter, this Agreement shall be automatically renewed for successive periods
of one (1) year,  unless you or the Company  shall give the other party not less
than two (2) months prior written notice of non-renewal. During the initial term
of this  Agreement,  your  employment  with the  Company  may be  terminated  as
provided in Sections 2.2 or 2.3.



                                       1
<PAGE>

        2.2 The Company shall have the right to terminate your employment at any
time under this Agreement prior to the stated term in any of the following ways:

        (a) on ten (10) days prior  written  notice to you upon your  disability
        (disability  shall be  defined  as your  inability  to  perform  with or
        without reasonable accommodation all of your essential duties under this
        Agreement)  (if any question shall arise as to whether during any period
        you are  disabled,  so as to be unable to perform all of your  essential
        duties  hereunder,  you may,  and at the request of the  Company  shall,
        submit to a medical  examination by a physician  selected by the Company
        to whom you or your duly appointed guardian,  if any, have no reasonable
        objections  to  determine   whether  you  are  so  disabled,   and  such
        determination  shall for the purposes of this Agreement be conclusive of
        the issue;  if such question shall arise and you shall fail to submit to
        such medical examination, the Company's determination of the issue shall
        be binding on you);

        (b)  immediately  without  prior notice to you upon your death;  if your
        employment is terminated  because of your death,  pursuant to subsection
        2.2 (a), all  obligations of the Company  hereunder  cease,  except with
        respect to amounts and obligations  accrued to you, through 30 days from
        the date during which your death has occurred;

        (c) immediately without prior notice to you by the Company for Cause, as
        hereinafter defined;

        (d)  immediately  without prior notice to you or Cause,  in the event of
        the  liquidation  or  reorganization  of the  Company  under the federal
        Bankruptcy Act or any state insolvency or bankruptcy law;

        (e) at any time  without  prior  notice to you or Cause,  provided  that
        during the initial term of this Agreement the Company shall be obligated
        to pay to you upon notice of  termination,  as severance  pay, your Base
        Salary as then in effect in a lump sum payment in addition to all earned
        incentive  compensation  in  accordance  with  Exhibit A attached,  less
        applicable taxes and other required withholdings and any amounts you may
        owe to the  Company  and  continuation  of all  benefits  and  insurance
        payments to the extent  permitted by the Company's plans or policies for
        one year.  If your  employment  is  terminated  without Cause at anytime
        after the initial term, the Company shall be obligated to pay a lump sum
        amount equal to one-half  your Base Salary as then in effect in addition
        to all  earned  incentive  compensation  in  accordance  with  Exhibit A
        attached,  less applicable taxes and other required withholdings and any
        amount you may owe to the Company and  continuation  of all benefits and
        insurance  payments  by the  Company  to  the  extent  permitted  by the
        Company's  plans or policies for six months.  If,  however,  a change in
        control  of  the  Company  should  occur  causing  termination  of  your
        employment  without Cause at any time during the term of this Agreement,
        then you shall be entitled to receive as  severance  pay four times your
        Base  Salary as then in effect in a lump sum  payment in addition to all
        earned incentive compensation in accordance with Exhibit A attached. For
        purposes of this Agreement "change in control" shall be deemed to be the
        sale of all or  substantially  all of the  assets of the  Company or the
        merger of the  Company  with  another  entity  where  the  other  entity
        survives the merger.

                                       2
<PAGE>

        2.3 During the initial term of this Agreement,  you shall have the right
to terminate your employment hereunder for any reason, upon not less than ninety
(90) days' prior written notice to the Company.

        2.4 "Cause" for the purpose of Section 2 of this  Agreement  shall mean:
(i)  the  falseness  or  material  inaccuracy  of  any  of  your  warranties  or
representations herein; (ii) your failure,  refusal or inability  satisfactorily
to perform the  services  required of you hereby,  or to comply with  reasonable
explicit directives of the President,  Board of Directors or Executive Committee
with  respect  to  the  services  to  be  rendered  hereunder;  (iii)  fraud  or
embezzlement  involving  assets of the  Company,  its  customers,  suppliers  or
affiliates or other misappropriation of the Company's assets or funds; (iv) your
conviction of a criminal  felony  offense;  (v) any material breach of the terms
hereof;  provided  however,  that the Company  provides you with 20 days written
notice  specifying the breach relied on for such  termination,  and only if such
breach has not been cured within such 20-day period; (vi) habitual use of drugs;
or (vii) conduct by you that is materially  harmful to the business  interest or
reputation of the Company or any of its affiliates.

        Any dispute,  controversy,  or claim arising out of, in connection with,
or in relation to this  definition of "Cause" shall be settled by arbitration as
provided in Section 9 hereof. The cost of arbitration,  exclusive of the cost of
each  party's  legal  representation  (which,  except as  hereinafter  otherwise
provided,  shall be borne by the party incurring the expense), shall be borne by
the  instigating  party;  provided,  however,  that the  arbitrators'  award may
require  either party to reimburse  the other for the  reasonable  cost of legal
representation in the arbitration proceedings.

3.      Compensation

        You shall receive the  compensation  and benefits set forth on Exhibit A
attached  hereto  ("Compensation")  for  all  services  to be  rendered  by  you
hereunder  and for your  transfer of property  rights  pursuant to an  agreement
relating  to  proprietary  information  and  inventions  of even  date  herewith
attached  hereto as  Exhibit C between  you and the  Company  (the  "Proprietary
Information and Inventions Agreement").

4.      Other Activities During Employment

        4.1 Except for any outside  employment and directorships  currently held
by you as listed on Exhibit B attached hereto, and except with the prior written
consent of a disinterested  majority of the Company's Board of Directors,  which
consent will not be unreasonably withheld, you will not, during the term of this
Agreement,  undertake or engage in any other employment,  occupation or business
enterprise other than one in which you are an inactive investor.

        4.2 You hereby  agree that,  except as  disclosed  on Exhibit B attached
hereto, during your employment hereunder,  you will not, directly or indirectly,
engage (i)  individually,  (ii) as an officer,  (iii) as a director,  (iv) as an
employee, (v) as a consultant,  (vi) as an advisor, (vii) as an agent (whether a
salesperson or otherwise), (viii) as a broker, or (ix) as a partner, covenanter,
stockholder or other  proprietor  owning  directly or indirectly  more than five
percent (5) interest in any firm, corporation,  partnership, trust, association,
or other organization which is engaged 

                                       3
<PAGE>

in the planning,  research,  development,  production,  manufacture,  marketing,
sales,  or  distribution of products,  equipment,  or services  similar to those
produced  by  the  Company,  (such  firm,   corporation,   partnership,   trust,
association,   or  other  organization  being  hereinafter   referred  to  as  a
"Prohibited  Enterprise").  Except as may be shown on Exhibit B attached hereto,
you hereby represent that you are not engaged in any of the foregoing capacities
(i) through (ix) in any Prohibited Enterprise.

        5 Former Employers

        5.1 You represent  and warrant that your  employment by the Company will
not  conflict  with  and  will  not be  constrained  by  any  prior  or  current
employment, consulting,  confidentiality,  non-competition or other agreement or
relationship, whether oral or written. You represent and warrant that you do not
possess confidential information arising out of any such employment,  consulting
agreement or  relationship  which,  in your best judgment,  would be utilized in
connection with your employment by the Company in the absence of Section 5.2.

        5.2 If, in spite of the second  sentence of Section 5.1, you should find
that confidential  information  belonging to any other person or entity might be
usable in connection  with the Company's  business,  you will not  intentionally
disclose  to the  Company  or use on  behalf  of the  Company  any  confidential
information  belonging  to  any  of  your  former  employers;  but  during  your
employment  by the  Company you will use in the  performance  of your duties all
information  which is  generally  known and used by persons  with  training  and
experience  comparable to your own all information  which is common knowledge in
the industry or otherwise legally in the public domain.

6.      Proprietary Information and Inventions

        You agree to  execute,  deliver  and be bound by the  provisions  of the
Proprietary Information and Inventions Agreement attached hereto as Exhibit C.

7.      Post-Employment Activities

        7.1 For a period of one (1) year after the  termination or expiration of
your employment,  for cause or if you terminated the employment with the Company
hereunder (the "Non-Competition  Period"),  absent the Board of Directors' prior
written  approval,  you will not  directly or  indirectly  engage in  activities
similar to those  described  in Section  4.2,  nor  render  services  similar or
reasonably  related to those  which you shall have  rendered  hereunder  to, any
person or entity  whether now existing or hereafter  established  which directly
competes  with (or  proposes  or plans to  directly  compete  with) the  Company
("Direct Competitor") in the same or similar business. Nor shall you (i) entice,
induce  or  encourage  any of the  Company's  other  employees  to engage in any
activity  which,  were it  done  by you,  would  violate  any  provision  of the
Proprietary  Information  and  Inventions  Agreement  or this Section 7, or (ii)
directly or indirectly  solicit or accept  business or orders from  customers of
the Company  (including  end users whom the  Company's  products or services are
sold through  distributors,  licensees  and the like) for any business  which is
similar  to or  competitive  with the  business  of the  Company  as then  being
conducted. As used in this Agreement,  the term "any line of business engaged in
or under  

                                       4
<PAGE>

demonstrable  development  by the  Company"  shall be  applied as at the date of
termination of your  employment,  or, if later, as at the date of termination of
any post-employment consultation.

        7.2 During the  Non-Competition  Period,  the  provisions of Section 4.2
shall be applicable to you and you shall comply therewith.

        7.3 Until the conclusion of the  Non-Competition  Period, you shall give
notice to Company of each new business activity you plan to undertake,  at least
fourteen (14) days prior to beginning any such activity. Such notice shall state
the name and address of the person for whom such activity is undertaken  and the
nature of your business  relationship(s) and position(s) with such persons.  You
shall provide the Company with such other pertinent information  concerning such
business  activity as the Company may  reasonably  request in order to determine
your continued compliance with your obligations hereunder.

        7.4 No  provision of this  Agreement  shall be construed to preclude you
from  performing  the same  services  which the  Company  hereby  retains you to
perform for any person or entity which is not a Direct Competitor of the Company
upon the expiration or termination  of your  employment (or any  post-employment
consultation)  so long as you do not thereby  violate any term of this Agreement
or the Proprietary Information and Inventions Agreement.

        7.5 You and the Company  are of the belief that the period of time,  the
area specified and the nature and scope of the  restrictions  in Section 7.1 are
reasonable in view of the nature of the business in which the Company is engaged
and proposes to engage, the state of its business development and your knowledge
of this business.  However, if such period, such area or the nature and scope of
the  restrictions  should be adjudged  unreasonable in any judicial  proceeding,
then the period of time shall be  reduced  by such  number of months,  such area
shall be reduced by elimination of such portion of such area, or such nature and
scope of the restrictions shall be modified, as are deemed unreasonable, so that
this  covenant may be enforced in such area and during such period of time as is
adjudged to be reasonable.

        7.6 You agree and  covenant  that you will not,  unless  acting with the
Company's   express  written  consent,   directly  or  indirectly,   during  the
Non-Competition  Period,  solicit,  entice away or interfere  with the Company's
contractual relationships with any customer,  client, officer or employee of the
Company.

        7.7 You recognize and agree that the injury that the Company will suffer
in the event of your  breach of any  covenant  or  agreement  contained  in this
Section 7 cannot be  compensated by monetary  damages  alone,  and you therefore
agree that the Company,  in addition to and without  limiting any other remedies
or rights that it may have, either under this Agreement or otherwise, shall have
the right to obtain an injunction  against you,  enjoining any such breach,  and
that you shall  reimburse the Company for its costs and attorneys'  fees of such
action.


                                       5
<PAGE>

8.      Survival of Terms and Remedies

        Your  obligations  under  the  Proprietary  Information  and  Inventions
Agreement and the  provisions of Sections 7, 8, 9, and 11 of this  Agreement (as
modified  by  Section  4,  if  applicable)   shall  survive  the  expiration  or
termination of your employment  (whether  through your resignation or otherwise)
with the  Company.  You  acknowledge  that a  remedy  at law for any  breach  or
threatened  breach by you of the provisions of the  Proprietary  Information and
Inventions  Agreement  or  Sections 4 or 7 hereof  would be  inadequate  and you
therefore agree that the Company shall be entitled to such injunctive  relief in
case  of any  such  breach  or  threatened  breach.  Should  you  engage  in any
activities  prohibited by this  Agreement,  you agree to pay over to the Company
all  compensation,  remuneration  or monies or property of any sort  received in
connection with such activities;  such payment shall not impair any other rights
or remedies of the Company or your obligations or liabilities  which you and the
Company may have under this Agreement or applicable law.

9.      Arbitration

        Any dispute concerning this Agreement including, but not limited to, its
existence,  validity,  interpretation,  performance or non-performance,  arising
before or after termination or expiration of this Agreement, shall be settled by
a single arbitrator in Boston,  Massachusetts,  in accordance with the expedited
procedures of the  commercial  rules then in effect of the American  Arbitration
Association;  provided,  however,  that  claims or  disputes  involving  the (i)
unauthorized  use or  disclosure  of  Confidential  Information  (as  defined in
Exhibit C), or (ii) the breach or alleged breach by you of any  obligations  set
forth in Section 7, shall be settled by either a Federal or state court  sitting
in  Massachusetts  and shall not be  decided  by  arbitration  pursuant  to this
Section,  unless you and the  company  expressly  agree  otherwise  in  writing.
Judgment upon any arbitration  award may be entered in the highest court,  state
or federal,  having  jurisdiction.  Except as otherwise provided in Section 2.4,
the cost of such arbitration  shall be borne equally between the parties thereto
unless otherwise determined by such arbitrator;  each party shall separately pay
its or his own counsel fees and other costs in connection with the arbitration.

10.     Assignment

        This  Agreement  and the rights and  obligations  of the parties  hereto
shall  bind and inure to the  benefit  of any  successor  or  successors  of the
Company by  reorganization,  merger or consolidation  and any assignee of all or
substantially  all of its business and  properties,  but,  except as to any such
successor or assignee of the Company,  neither this  Agreement nor any rights or
benefits hereunder may be assigned by the Company or by you, except by operation
of law or by a further written agreement by the parties hereto.

11.     Interpretation

        IT IS THE  INTENT  OF THE  PARTIES  THAT in case  any one or more of the
provisions  contained in this  Agreement  shall,  for any reason,  be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability  shall not affect the other  provisions 

                                       6
<PAGE>

of this  Agreement,  and this  Agreement  shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. MOREOVER, IT
IS THE INTENT OF THE PARTIES THAT if any one or more of the provisions contained
in this Agreement is or becomes or is deemed invalid,  illegal or  unenforceable
or in case  any  shall  for any  reason  be held to be  excessively  broad as to
duration,  geographical  scope,  activity or subject,  such  provision  shall be
construed by amending, limiting and/or reducing it to conform to applicable laws
so as to be valid  and  enforceable  or,  if it  cannot  be so  amended  without
materially  altering the intention of the parties,  it shall be stricken and the
remainder of this Agreement shall remain in full force and effect.

12.     Notices

        Any notice  which the  Company is  required to or may desire to give you
shall be given by  registered  or  certified  mail,  return  receipt  requested,
addressed to you at your  address of record with the  Company,  or at such other
place as you may from time to time  designate  in writing.  Any notice which you
are  required or may desire to give to the Company  hereunder  shall be given by
registered  or  certified  mail,  return  receipt  requested,  addressed  to the
Chairman of the Board of the Company at its principal  office,  or at such other
office as the Company may from time to time designate in writing, with a copy to
the General  Counsel of Palomar  Medical  Technologies,  Inc.  at its  principal
office.

13.     Waivers

        Failure by the Company to insist upon strict  compliance with any of the
terms,  covenants,  or  conditions  hereof  shall not be deemed a waiver of such
terms,  covenants  or  conditions.  No waiver of any right under this  Agreement
shall be deemed  effective  unless  contained  in a writing  signed by the party
charged with such waiver,  and no waiver of any right arising from any breach or
failure to perform shall be deemed to be a waiver of any future such right or of
any other right arising under this Agreement.

14.     Complete Agreement; Amendments

        The foregoing,  including  Exhibits A, B and C attached  hereto,  is the
entire  agreement  of the parties  with  respect to the subject  matter  hereof,
superseding  any  previous  oral  or  written  communications,  representations,
understandings,  or agreements with the Company or any officer or representative
thereof.  This Agreement may be amended or modified or certain provisions waived
only by a written  instrument  signed and agreed to by the parties hereto,  upon
authorization of the Company's Board of Directors.

15.     Headings

        The headings of the Sections  contained in this  Agreement  are inserted
for  convenience  and  reference  only and in no way  define,  limit,  extend or
describe the scope of this Agreement,  the intent of any provisions  hereof, and
shall not be deemed to  constitute  a part  hereof nor to affect the  meaning of
this Agreement in any way.

                                       7
<PAGE>

16.     Counterparts

        This Agreement may be signed in two counterparts, each of which shall be
deemed an original and both of which shall together constitute one agreement.

17.     Governing Law

        This Agreement shall be governed by and construed in accordance with the
laws of the  Commonwealth of  Massachusetts  without regard to its principles of
conflict of laws.

18.     Effective Date

        The effective Date of this Agreement is May 15, 1997.

        If you are in agreement with the foregoing,  please sign your name below
and also at the bottom of the Proprietary  Information and Inventions Agreement,
whereupon both  Agreements  shall become binding in accordance with their terms.
Please then  return  this  Agreement  to the  Company.  (You may retain for your
records the accompanying counterpart of this Agreement enclosed herewith.)


                                            Very truly yours,

                                            PALOMAR MEDICAL TECHNOLOGIES, INC.




                                            By: 
                                               ---------------------------------
                                                 Name:
                                                 Title:

Accepted and Agreed:




----------------------
Louis P. Valente

<PAGE>



                                                                      EXHIBIT A


                   EMPLOYMENT TERM, COMPENSATION AND BENEFITS

                                       OF

                                Louis P. Valente
                      Chief Executive Officer and President



1.      Term

        The term of the  Agreement  to  which  this  Exhibit  A is  annexed  and
incorporated  shall  be for  two  (2)  years  from  the  effective  date of this
Agreement,  unless  renewed in  accordance  with Section 2.1 of the Agreement or
terminated prior thereto in accordance with Section 2.2 or 2.3 of the Agreement.

2.      Compensation

        (a) Base  Salary.  Your  Base  Salary  shall  TWO  HUNDRED  SEVENTY-FIVE
        THOUSAND DOLLARS ($275,000) per annum, to be paid in accordance with the
        Company's  payroll  policies,   and  if  the  Agreement  is  renewed  in
        accordance  with Section 2.1, to be subject to increases  thereafter  as
        determined  by  the  Company's   Board  of  Directors  or   Compensation
        Committee.

        (b)  Performance  Compensation.  You will be eligible for a bonus at the
        end of each  fiscal year that is up to 100% of your Base  Salary,  to be
        determined by the Company's Compensation Committee.

        (c) Options.  You shall receive an option to purchase  400,000 shares of
        the common stock, $.01 par value per share, of the Company, on the terms
        and conditions set forth in the Stock Option  Agreement  between you and
        the Company of even date herewith.

3.      Vacation

        You shall be paid for and entitled to all legal holidays,  and three (3)
weeks paid  vacation per annum.  You shall  arrange for  vacations in advance at
such time or times as shall be mutually  agreeable to you and the  Company.  Any
vacation time not used in any  particular  year may be carried  forward into the
subsequent year. You may not receive pay in lieu of vacation.

4.      Insurance and Benefits

        You shall be  eligible  for  participation  in any health or other group
insurance  plan which may be  established by the Company or which the Company is
required to maintain by law.  You 

                                       1
<PAGE>

shall also be entitled to  participate  in any
employee  benefit  program which the Company may establish for its key employees
or for its employees generally, including, but in no way limited to, bonuses and
stock purchase or option plans. The Company may alter,  modify, add to or delete
its employee  benefit plans at any time as it, in its sole judgment,  determines
to  be  appropriate,   without  recourse  by  you.  The  Company  shall  provide
comprehensive  health  insurance  for  you  and  your  dependents.  Should  your
employment be terminated  for any reason,  the Company will use its best efforts
to allow you to assume these policies.

5.      Expenses

        The Company shall reimburse you promptly for all reasonable and ordinary
business  and  out-of-pocket  expenses  incurred by you in  connection  with the
Company's business and in the scope of your employment hereunder, as approved by
the Company,  including,  without  limitation,  reasonable and necessary  travel
expenses  incurred  by you  during  the  term of this  Agreement,  provided  the
expenses  are  incurred in  furtherance  of the  Company's  business  and at the
request of the Company.  You agree to keep and maintain records of the aforesaid
expenses  as may be  requested  by the Company and to account to the Company for
the expenses prior to reimbursement.

        The Company  shall lease a vehicle for you for the initial  term of this
Agreement.


<PAGE>



                                                                       EXHIBIT B









                      OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS



                                       OF


                                LOUIS P. VALENTE





<PAGE>


                                                                       EXHIBIT C



                PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT




                               As of May 15, 1997

To:  Louis P. Valente


         The  undersigned,  in  consideration  of  and  as  a  condition  of  my
employment  or  continued  employment  by you and/or by your  parent  company or
companies which you own, control,  or are affiliated with or their successors in
business (collectively, the "Company"), hereby agrees as follows:

1.    All Business to be the Property of the Company

      I agree that any and all  presently  existing  business of the Company and
all  business  developed  by me or any other  employee of the Company  including
without  limitation all contracts,  fees,  commissions,  compensation,  records,
customer or client  lists,  agreements  and any other  incident of any  business
developed,  earned  or  carried  on by me for the  Company  is and  shall be the
exclusive  property  of the  Company,  and (where  applicable)  shall be payable
directly to the Company.

2.    Confidentiality

      I recognize that my relationship with the Company is one of high trust and
confidence  by reason of my access to and  contact  with the trade  secrets  and
confidential  and  proprietary  information  of the  Company.  I  agree  to keep
confidential,  except to the extent authorized by the Company in writing for its
benefit,  not to  disclose  or make  any use of at any  time  either  during  or
subsequent to my  employment,  any Inventions (as  hereinafter  defined),  trade
secrets and confidential  information,  knowledge,  data or other information of
the  Company  which is either not  generally  known  outside  the  Company or is
proprietary and confidential  information of the Company or any of its customers
or suppliers relating to products,  processes,  know-how,  techniques,  methods,
designs,  formulas,  test data, customer,  employee and supplier lists, business
plans,  budgets,  costs,  markets,  marketing  plans  and  strategies,   pricing
strategies,  operations  or other subject  matter  pertaining to any existing or
contemplated  business  of the  Company  or any of its  affiliates,  which I may
produce,  obtain,  or  otherwise  acquire  during the  course of my  employment,
whether I have such  information  in my memory or  embodied  in writing or other
tangible  form,  except as herein  provided.  I  further  agree not to  deliver,
reproduce  or  in  any  way  allow  any  such  trade  secrets  and  confidential
information, knowledge, data or other information, or any documentation relating
thereto,  to be  delivered  to or used by any  third  parties  without  specific
direction or consent of a duly authorized representative of the Company.

                                       1
<PAGE>

3.    Return of Confidential Material

         In the event my employment  with the Company  terminates for any reason
whatsoever,  I agree to promptly surrender and deliver to the Company all of the
tangible  forms of  Confidential  Information  listed in Section 2, all records,
information,  materials, equipment, drawings, computer disks, documents and data
of which I may obtain or produce during the course of my employment,  and I will
not take with me any  description  containing or pertaining to any  confidential
information,  knowledge  or data of the  Company  which I may  produce or obtain
during the course of my employment.

4.    Assignment of Inventions

         4.1 I hereby acknowledge and agree that the Company is the owner of all
Inventions.  In order to protect the  Company's  rights to such  Inventions,  by
executing  this  Agreement  I hereby  irrevocably  assign to the  Company all my
right,  title  and  interest  in and to all  Inventions  (without  any  separate
remuneration or  compensation  other than that received from time to time in the
course of my employment).

         4.2 For  purposes  of  this  Agreement,  "Inventions"  shall  mean  all
research information,  inventions, technical innovations, writings, tabulations,
procedures, developments, know-how, plans, programs, trade secrets, discoveries,
processes, designs, methods, techniques, technology, devices, or improvements in
any of the foregoing or other ideas,  whether or not patentable or copyrightable
and whether or not reduced to practice,  made or conceived by me (whether solely
or jointly  with  others)  during the period of my  employment  with the Company
which relate in any manner to the actual or demonstrably  anticipated  business,
work,  or  research  and  development  of the  Company,  or  result  from or are
suggested  by any  task  assigned  to me or any work  performed  by me for or on
behalf of the Company.

         4.3 Any discovery,  process,  design,  method,  technique,  technology,
device,  or improvement  in any of the foregoing or other ideas,  whether or not
patentable  or  copyrightable  and whether or not reduced to  practice,  made or
conceived by me whether  solely or jointly with others which I develop  entirely
on my own time not using any of the Company' equipment, supplies, facilities, or
trade secret information  ("Personal Invention") is excluded from this Agreement
provided  such  Personal  Invention  (i)  does  not  relate  to  the  actual  or
demonstrably anticipated business,  research and development of the Company, and
(ii) does not result, directly or indirectly,  from any work performed by me for
or on behalf of the Company.

5.    Disclosure of Inventions

         I agree that in connection with any Invention, I will promptly disclose
such Invention to the President,  Board of Directors and the Executive Committee
of the Company in order to permit the Company to enforce its property  rights to
such  Invention  in  accordance  with this  Agreement.  My  disclosure  shall be
received in confidence by the Company.


                                       2
<PAGE>

6.    Patents and Copyrights: Execution of Documents

         6.1 Upon request,  I agree to assist the Company or its nominee (at its
expense) during and at any time subsequent to my employment in every  reasonable
way to obtain for its own benefit  patents and  copyrights for Inventions in any
and all countries.  Such patent and copyrights  shall be and remain the sole and
exclusive property of the Company or its nominee. I agree to perform such lawful
acts as the Company  deems to be  necessary  to allow it to exercise  all right,
title and interest in and to such patents and copyrights.

         6.2 In connection with this Agreement, I agree to execute,  acknowledge
and deliver to the Company or its  nominee  upon  request and at its expense all
documents,  including  assignments of title,  patent or copyright  applications,
assignments  of such  applications,  assignments  of patents or copyrights  upon
issuance,  as the Company may  determine  necessary  or desirable to protect the
Company's or its nominee's  interest in  Inventions,  and/or to use in obtaining
patents or  copyrights in any and all countries and to vest title thereto in the
Company or its nominee to any of the foregoing.

7.    Maintenance of Records

         It is understood that all Personal  Inventions if any, whether patented
or unpatented,  which I made prior to my employment by the Company, are excluded
from this Agreement.  To preclude any possible uncertainty,  I have set forth on
Schedule  A  attached  hereto  a  complete  list  of  all of my  prior  Personal
Inventions, including numbers of all patents and patent applications and a brief
description of all unpatented  Personal Inventions which are not the property of
a previous  employer.  I represent  and  covenant  that the list is complete and
that, if no items are on the list, I have no such prior Personal  Inventions.  I
agree to notify the Company in writing  before I make any  disclosure or perform
any work on behalf of the Company  which  appears to  threaten or conflict  with
proprietary rights I claim in any Personal Invention. In the event of my failure
to give such notice,  I agree that I will make no claim against the Company with
respect to any such Personal Invention.

8.    Other Obligations

         I  acknowledge  that the Company from time to time may have  agreements
with  other  persons,  companies,  entities,  the U.S.  Government  or  agencies
thereof,  which impose  obligations  or  restrictions  on the Company  regarding
Inventions   made  during  the  course  of  work  thereunder  or  regarding  the
confidential  nature of such work.  I agree to be bound by all such  obligations
and  restrictions  and to take all action  necessary to discharge  the Company's
obligations.

9.    Injunctive Relief

      You  recognize  and agree that the injury that the Company  will suffer in
the  event  of your  breach  of any  covenant  or  agreement  contained  in this
Proprietary  Information and Confidentiality  Agreement cannot be compensated by
monetary damages alone, and you therefore agree that the Company, in addition to
and without limiting any other remedies or rights that it may have, either under
this Proprietary Information and Confidentiality  Agreement 

                                       3
<PAGE>

or  otherwise,  shall  have the  right to  obtain  an  injunction  against  you,
enjoining  any such  breach,  and that you shall  reimburse  the Company for its
costs and attorneys' fees of such action.

10.   Binding Effect

      This  Agreement  shall be  binding  upon and inure to the  benefit  of the
parties hereto and their  respective  legal  representatives  and successors.  I
expressly  consent  to be  bound by the  provisions  of this  Agreement  for the
benefit of the Company or any parent,  subsidiary or affiliate  thereof to whose
employ I may be  transferred  without  the  necessity  that  this  Agreement  be
resigned at the time of such transfer.

11.   Interpretation

      IT IS THE  INTENT  OF THE  PARTIES  THAT  in  case  any one or more of the
provisions  contained in this  Agreement  shall,  for any reason,  be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability  shall not affect the other  provisions of this Agreement,  and
this Agreement shall be construed as if such invalid,  illegal or  unenforceable
provision had never been  contained  herein.  MOREOVER,  IT IS THE INTENT OF THE
PARTIES  THAT if any  provision  of this  Agreement  is or  becomes or is deemed
invalid,  illegal or  unenforceable or in case any one or more of the provisions
contained in this Agreement shall for any reason be held to be excessively broad
as to duration, geographical scope, activity or subject, such provision shall be
construed by amending, limiting and/or reducing it to conform to applicable laws
so as to be valid  and  enforceable  or,  if it  cannot  be so  amended  without
materially  altering the intention of the parties,  it shall be stricken and the
remainder of this Agreement shall remain in full force and effect.

12.   Waivers

      Failure by the Company to insist upon  strict  compliance  with any of the
terms,  covenants  or  conditions  hereof  shall  not be deemed a waiver of such
terms,  covenants  or  conditions.  No waiver of any right under this  Agreement
shall be deemed  effective  unless  contained  in a writing  signed by the party
charged with such waiver,  and no waiver of any right arising from any breach or
failure to perform shall be deemed to be a waiver of any future such right or of
any other right arising under this Agreement.

13.   Entire Agreement; Modification

      This Agreement  constitutes the entire  agreement  between the parties and
supersedes   any  prior   oral  or  written   communications,   representations,
understandings  or  agreements  concerning  the subject  matter  hereof with the
Company or any  officer  or  representative  thereof.  This  Agreement  does not
constitute an employment agreement, and no changes in any compensation, title or
duties or any other terms or conditions  of my  employment,  including,  without
limitation,  the  termination of my  employment,  shall affect the provisions of
this  Agreement,  except  as  stated  herein.  This  Agreement  may be  amended,
modified,  or certain  provisions waived only by a written  instrument signed by
the parties hereto, upon authorization of the Company's Board of Directors.

                                       4
<PAGE>

14.   Headings

      The headings of the Sections  contained in this Agreement are inserted for
convenience and reference only and in no way define,  limit,  extend or describe
the scope of this Agreement,  the intent of any provisions hereof, and shall not
be  deemed  to  constitute  a part  hereof  nor to affect  the  meaning  of this
Agreement in any way.

15.   Counterparts

      This Agreement may be signed in two  counterparts,  each of which shall be
deemed an original and both of which shall together constitute one agreement.

16.   Governing Law

      This  Agreement  shall be  deemed to be a sealed  instrument  and shall be
governed  and  construed  in  accordance  with the laws of the  Commonwealth  of
Massachusetts, without regard to its principles of conflict of laws.

17.   Notices

      Any  notice  which the  Company is  required  to or may desire to give you
shall be given by  registered  or  certified  mail,  return  receipt  requested,
addressed to you at your  address of record with the  Company,  or at such other
place as you may from time to time  designate  in writing.  Any notice which you
are  required or may desire to give to the Company  hereunder  shall be given by
registered  or  certified  mail,  return  receipt  requested,  addressed  to the
Chairman of the Board of the Company at its principal  office,  or at such other
office as the Company may from time to time designate in writing, with a copy to
the General  Counsel of Palomar  Medical  Technologies,  Inc.  at its  principal
office.

                                              EMPLOYEE

                                                  /s/
                                              ----------------------------------
                                              Louis P. Valente

                                              Accepted and Agreed:

                                              PALOMAR MEDICAL TECHNOLOGIES, INC.



                                              By:
                                                  ------------------------------
                                                     Name:
                                                     Title:

<PAGE>

                                                                      SCHEDULE A









                            LIST OF PRIOR INVENTIONS



                                       OF


                                LOUIS P. VALENTE