AMENDMENT NO. 1 TO KEY EMPLOYEE AGREEMENT

     AMENDMENT  NO.  1, by and  among  Palomar  Medical  Technologies,  Inc.,  a
Delaware corporation (the "Company") and Joseph P. Caruso ("Employee"), dated of
June 8, 2000  (this  "Amendment"),  to Key  Employee  Agreement,  dated as of as
January 1, 2000, between the Company and Employee.

                              W I T N E S S E T H :

     WHEREAS,  the Company and Employee are parties to a Key Employee  Agreement
dated as of January 1, 2000 (the "Agreement");

     WHEREAS,  the Company and  Employee  wish to amend the  Agreement  upon the
terms and subject to the conditions set forth herein; and

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

     1. Amendment.  Section 2 of the Agreement  ("Office and Duties") is amended
by deleting the first  sentence  thereof and replacing it in its entirety by the
following:   "Executive  shall  have  the  usual  duties,  responsibilities  and
authority  (the  "Executive's  Authority")  of a President  and Chief  Operating
Officer,  and shall report to the Board of  Directors of the Company,  and shall
perform such specific other tasks, consistent with his position as President and
Chief Operating Officer,  as may from time to time be reasonably assigned to him
by the Board of Directors.

     2.  Effectiveness.  From and after the date hereof,  all  references in the
Agreement to the Agreement shall be deemed to be references to such Agreement as
amended hereby.

     3.  Agreement.  Except as amended by this  Amendment,  the Agreement  shall
remain in effect in accordance with its terms.

     4. Miscellaneous.  (a) This Amendment shall be construed and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.

     (b) This  Amendment  may be executed in any number of  counterparts  and by
different parties hereto on separate  counterparts,  each of which  counterparts
when so executed  and  delivered,  shall be deemed to be an original  and all of
which  counterparts,  taken  together,  shall  constitute  but one and the  same
instrument.  This  Amendment  may be  executed  and  delivered  by a party  by a
telephone  line  facsimile  transmission  bearing a signature  on behalf of such
party transmitted by such party to the other party.

     (c) Section and paragraph  headings in this  Amendment are included  herein
for  convenience  of  reference  only and  shall not  constitute  a part of this
Amendment for any other purpose.
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     (d) Any provision of this Amendment that is  prohibited,  unenforceable  or
not  authorized  in  any  jurisdiction  shall,  as  to  such  jurisdiction,   be
ineffective   to  the   extent   of  such   prohibition,   unenforceability   or
non-authorization  without  invalidating  the  remaining  provisions  hereof  or
affecting  the  validity,  enforceability  or legality of such  provision in any
other jurisdiction.

     (e) No amendment or waiver of any provision of this Amendment  shall in any
event be  effective  unless the same shall be in writing and signed by the party
to be charged  with  enforcement  thereof and any such waiver shall be effective
only in the specific instance and for the specific instance and for the specific
purpose for which given. No failure on the part of any party to exercise, and no
delay in exercising,  any right under this  Amendment  shall operate as a waiver
thereof by such  party.  No single or partial  exercise  of any right under this
Amendment shall preclude any other or further  exercise  thereof or the exercise
of any other right.

     IN WITNESS WHEREOF, the parties hereto have executed, delivered and
made effective this Amendment as of June 8, 2000.

                       PALOMAR MEDICAL TECHNOLOGIES, INC.

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













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