209

                          REGISTRATION RIGHTS AGREEMENT

     THIS  REGISTRATION  RIGHTS  AGREEMENT  ("Registration  Rights  Agreement"),
entered into as of March 10, 1997, between  ___________________  with offices at
________________ (the "Purchaser"),  and Palomar Medical  Technologies,  Inc., a
Delaware corporation, with offices at 66 Cherry Hill Drive, Beverly,
Massachusetts 01915 (the "Company").

                              W I T N E S S E T H:

     WHEREAS,  pursuant to a Subscription Agreement,  dated as of March 10, 1997
(the "Agreement"), by and between the Company and the Purchaser, the Company has
agreed to sell and the  Purchaser  has  agreed  to  purchase  up to  ___________
Dollars  (U.S.$_______) of the Company's 5% Convertible Debentures due March 10,
2002 (the  "Debentures")  convertible into shares of the Company's Common Stock,
$.01 par value.  The shares of Common  Stock  issuable  upon  conversion  of the
Debentures are referred to herein as the "Shares".

     WHEREAS,  pursuant to the terms of, and in partial  consideration  for, the
Purchaser's  agreement  to enter into the  Agreement,  the Company has agreed to
provide the  Purchaser  with  certain  registration  rights with  respect to the
Shares;

     NOW, THEREFORE,  in consideration of the mutual promises,  representations,
warranties,  covenants  and  conditions  set forth  herein,  the Company and the
Purchaser agree as follows:

     1. Certain Definitions.  As used in this Registration Rights Agreement, the
following terms shall have the following respective  meanings.  Other terms used
herein which are defined in the Agreement shall have the same meanings herein as
are set forth for such terms in the Agreement or, if not defined therein, in the
Debentures.

     "Commission" or "SEC" shall mean the Securities and Exchange  Commission or
     any other federal agency at the time administering the Securities Act.

     "Minimum  Number of Shares"  shall  mean,  at any time,  the sum of (i) the
     number of shares of Common Stock issued prior to such time upon  conversion
     of all or any part of the  Debentures,  plus (ii) the  number of shares (as
     may be adjusted in  accordance  with the terms of the  


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     Debenture)  of Common Stock  issuable at such time upon  conversion  of the
     Debentures   (without   giving   effect   to  any   applicable   conversion
     restrictions),  minus (iii) the number of shares of Common Stock  described
     in clause (i) above  that have been sold prior to such time by the  Holders
     pursuant to a registration statement or Rule 144.

     "Registrable  Securities" shall mean: (i) Shares issued to the Purchaser or
     its designee upon  conversion of the  Debentures;  (ii) any securities into
     which or for which any such Shares  shall have been  converted or exchanged
     pursuant to any  recapitalization,  reorganization or merger; and (iii) any
     securities  issued with respect to the foregoing  pursuant to a stock split
     or stock dividend.

     The terms  "register",  "registered"  and  "registration"  shall refer to a
     registration  effected by preparing and filing a registration  statement in
     compliance  with the Securities Act and  applicable  rules and  regulations
     thereunder,  and the declaration or ordering of the  effectiveness  of such
     registration statement.

     "Registration  Expenses"  shall mean all  expenses  to be  incurred  by the
     Company in connection  with the  Purchaser's  exercise of its  registration
     rights  under  this  Registration  Rights  Agreement,   including,  without
     limitation,  all registration and filing fees, printing expenses,  fees and
     disbursements of counsel for the Company,  blue sky fees and expenses,  and
     the  expense of any  special  audits  incident  to or  required by any such
     registration  (but excluding the  compensation of regular  employees of the
     Company, which shall be paid in any event by the Company).

     "Selling  Expenses"  shall  mean all  underwriting  discounts  and  selling
     commissions,  if any,  applicable to the sale of such Holder's  Registrable
     Securities and all fees and disbursements of counsel for such Holder.

     "Holder"  shall  include the Purchaser  and any  transferee of  Debentures,
     Shares or Registrable  Securities which have not been sold to the public to
     whom  the  registration   rights  conferred  by  this  Registration  Rights
     Agreement  have been  transferred  in  compliance  with  Section 10 of this
     Registration Rights Agreement.

     "Registration  Statement"  shall have the meaning set forth in Section 2(a)
     herein.


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                                      211


     "Regulation  D" shall mean  Regulation D promulgated  under the  Securities
     Act, as amended from time to time.

     "Securities  Act" shall mean the  Securities  Act of 1933,  as amended from
     time to time.

     2. Registration Requirements. The Company shall file by the sixtieth (60th)
calendar day after the Closing Date, and use its best efforts to cause to become
effective, as promptly as possible and in any event by the one hundred twentieth
(120th)  calendar day after the Closing Date, a  registration  statement on Form
S-3 under the Securities Act or, if Form S-3 is not then  available,  on another
appropriate  form covering the resale of the  Registrable  Securities,  covering
1,100,000  shares and shall take all action necessary to qualify the Registrable
Securities  under state  "blue sky" laws as  hereinafter  provided.  The Company
shall use its diligent best efforts to effect the registrations  contemplated by
the foregoing (including, without limitation, the execution of an undertaking to
file amendments and post-effective  amendments,  appropriate qualification under
and  compliance  with  applicable  blue sky or other state  securities  laws and
appropriate  compliance with applicable  regulations issued under the Securities
Act) and as would  permit or  facilitate  the sale and  distribution  of all the
Registrable  Securities  in all states  reasonably  requested  by the Holder for
purposes of maximizing  the proceeds  realizable by the Holder,  except that the
Company shall not be required in connection  therewith or as a condition thereof
to  qualify  as a foreign  corporation  in any  jurisdiction  in which it is not
otherwise required to be so qualified, except the State of New York (if required
in order to satisfy  New York blue sky laws),  from such sale and  distribution.
Such  best  efforts  by the  Company  shall  include,  without  limitation,  the
following:

          (a) The  Company  shall file (i)  registration  statement(s)  with the
     Commission  pursuant to Rule 415 under the Securities Act on Form S-3 under
     the  Securities  Act and the Company  shall use its best efforts to qualify
     for the use of such Form (or in the event that the Company is ineligible to
     use such form,  such other form as the Company is eligible to use under the
     Securities  Act)  covering  all  of  the  Registrable  Securities  so to be
     registered (each, a "Registration Statement"); (ii) within fifteen business
     days after the Company  receives  notice from any Holder that the number of
     Registrable Securities covered by the Registration Statement is at any time
     less than one hundred ten percent  (110%) of the Minimum  Number of Shares,
     an amendment to the  Registration  Statement to increase by twenty  percent
     (20%) the  number  of  Registrable  Securities  originally  covered  by the
     Registration Statement;  (iii) thereafter,  as promptly as possible, and in
     any event within  thirty  


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     calendar  days after the Company  receives  notice from any Holder that the
     number of  Registrable  Securities  covered by the  Registration  Statement
     shall at any time be  insufficient  to cover one hundred ten percent (110%)
     of the  Minimum  Number  of  Shares,  one or more  additional  registration
     statements  covering two hundred  percent  (200%) of the Minimum  Number of
     Shares;  (iv) such blue sky  filings as shall be  reasonably  requested  to
     permit  such  sales,  provided,  however,  that the  Company  shall  not be
     required to register the Registrable  Securities in any  jurisdiction  that
     would  subject  it to general  service of process in any such  jurisdiction
     where it is not then so subject or  subject  the  Company to any tax in any
     such jurisdiction where it is not then so subject or require the Company to
     qualify  to do  business  in  any  jurisdiction  where  it is not  then  so
     qualified;  and (v)  required  filings  with the  National  Association  of
     Securities Dealers,  Inc. ("NASD") or exchange where the Shares are traded;
     all as soon as practicable after the date hereof. The Company shall use its
     best efforts to have the Registration Statement, or such amendments and any
     such  additional   registration   statements  and  other  filings  declared
     effective as soon as may be  practicable  after filing in  accordance  with
     this paragraph.

          (b) The Company shall enter into such customary agreements  (including
     a customary underwriting agreement with the underwriter or underwriters, if
     any) and take all such other reasonable actions in connection  therewith in
     order  to  expedite  or  facilitate  the  disposition  of such  Registrable
     Securities and in such connection, the Company shall:

               (i) make such  representations  and warranties to the underwriter
          or  underwriters,  if any,  in form  and  substance  and  scope as are
          customarily made by issuers to underwriters in secondary  underwritten
          offerings;

               (ii)  in  the  case  of an  underwritten  offering,  cause  to be
          delivered to the sellers of Registrable Securities and the underwriter
          or underwriters, if any, opinions of counsel to the Company, dated the
          effective date (or in the case of an underwritten offering,  dated the
          date of delivery of any Registrable  Securities sold pursuant thereto)
          of the applicable  registration statement (which counsel, and opinions
          (in form,  scope and substance),  shall be reasonably  satisfactory to
          the managing  underwriter or  underwriters,  if any, and the appointed
          representative or counsel of the Holder),  addressed to the Holder and
          each underwriter,  if any, covering the matters customarily covered in
          opinions  requested in  underwritten  secondary  offerings and, in the
          case  of any  


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          underwritten  offering,  such  other  matters  as  may  be  reasonably
          requested by the Holder;

               (iii)  in the  case  of an  underwritten  offering,  cause  to be
          delivered,  immediately  prior to the  effectiveness of the applicable
          Registration  Statement (and, in the case of an underwritten offering,
          at the time of delivery of any  Registrable  Securities  sold pursuant
          thereto),  letters from the  Company's  independent  certified  public
          accountants  addressed  to the  Holder and each  underwriter,  if any,
          stating  that such  accountants  are  independent  public  accountants
          within the meaning of the Securities Act and the applicable  published
          rules and regulations thereunder,  and otherwise in customary form and
          covering such  financial  and  accounting  matters as are  customarily
          covered by letters of the  independent  certified  public  accountants
          delivered in connection with underwritten secondary public offerings;

               (iv) if an underwriting agreement is entered into, cause the same
          to  set  forth   indemnification   and  contribution   provisions  and
          procedures  which are no less  favorable to the Holder and the Company
          than  those  contemplated  by  sections  9 and 10 with  respect to all
          parties to be indemnified pursuant to such sections;

               (v) deliver such documents and  certificates as may be reasonably
          requested by the Holder of the  Registrable  Securities  being sold or
          the  managing  underwriter  or  underwriters,   if  any,  to  evidence
          compliance  with  clause (i) above and with any  customary  conditions
          contained in the  underwriting  agreement,  if any, or other agreement
          entered into by the Company;

the  foregoing in this  paragraph  2(b) shall be done at each closing  under any
such  underwriting  or  similar  agreement  or as  and to  the  extent  required
thereunder;  provided, however, that the Company shall not be required to effect
an  underwritten  offering of the  Registrable  Securities  on more than one (1)
occasion.

          (c) At least ten (10)  business days prior to the  anticipated  filing
     thereof with the SEC, the Company shall make  available for  inspection and
     review by the Holder, a representative  or  representatives  of the Holder,
     any underwriter participating in any disposition pursuant to a Registration
     Statement,  and any  attorney  or  accountant  retained  by such  Holder or
     underwriter,  any such registration statement or amendment or supplement or
     any blue sky,  NASD or other  filing,  all  


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     financial and other records,  pertinent  corporate documents and properties
     of the Company as they may  reasonably  request for the purpose,  and cause
     the Company's  officers,  directors and employees to supply all information
     reasonably requested by any such representative,  underwriter,  attorney or
     accountant  in  connection  with  such  Registration  Statement;  provided,
     however, that the Holder and its representatives, if any, shall first agree
     in writing with the Company that any information  that is reasonably and in
     good faith designated by the Company in writing as confidential at the time
     of delivery of such  information  shall be kept  confidential by the Holder
     and  its   representatives,   if  any,   and  that  the   Holder   and  its
     representatives,   if  any,  will  use  reasonable  efforts  to  cause  its
     representatives  and  such  other  persons  so  to  keep  such  information
     confidential,  unless (i)  disclosure  of such  information  is required by
     court or  administrative  order or is  necessary to respond to inquiries of
     regulatory authorities,  (ii) disclosure of such information is required by
     law (including any disclosure  requirements  pursuant to Federal securities
     laws in connection with the filing of any Registration Statement or the use
     of any prospectus  referred to in this  Agreement),  (iii) such information
     becomes  generally  available  to the  public  other  than as a result of a
     disclosure  or  failure  to  safeguard  by  any  such  person,   (iv)  such
     information  becomes  available to any such person from a source other than
     the Company and such source, to the knowledge of such persons, is not bound
     by a  confidentiality  agreement with the Company,  or (v) such information
     was known to or is  developed  by such  persons  without  reference to such
     confidential  information of the Company.  In the case of any disclosure in
     clauses (i) and (ii) above, the Holder will use reasonable  efforts to give
     to the Company as much notice as possible prior to such disclosure.

     In connection with any registration of securities of the Holder  hereunder,
the Holder  shall  promptly  complete  and  return to the  Company  all  selling
stockholder questionnaires, and otherwise furnish to the Company all information
regarding the Holder,  reasonably requested by the Company to assist the Company
in preparing any Registration Statement, any amendment or supplement thereto, or
any blue sky, NASD or other filing to be made in connection therewith.

          (d)  The  Company  will  keep,  to the  maximum  extent  permitted  by
     applicable  law,  the  economic  terms of the  Debentures  and the offering
     related thereto confidential.  If the Company is required by applicable law
     to file the form of Debenture, any written summary of the material economic
     terms of the Debentures or any other documents  related to the transactions
     contemplated   hereby  with  the  Commission  or  any  other   governmental
     authority,  the Company  shall,  prior to any such  


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     filing,  (i) notify the Holders,  (ii) seek to have the  Commission  afford
     confidential  treatment  to  the  filing,  (iii)  permit  the  Holders  the
     opportunity to review the proposed filing and any requests for confidential
     treatment,  and (iv)  accommodate all reasonable  comments and requests for
     changes made by the Holders or their counsel.

     Notwithstanding the foregoing,  the Holder hereby consents to the filing by
the Company of the form of Debenture, the Agreement and this Registration Rights
Agreement as exhibits to any registration  statements filed under the Securities
Act and any Exchange Act Reports (as defined in the  Agreement)  filed after the
date of this Registration Rights Agreement.

     3.  Underwritten  Distribution.  If the Holder  intends to  distribute  the
Registrable  Securities  covered  by a  Registration  Statement  by  means of an
underwriting,  the Holder shall so advise the Company and, within 30 days of the
date thereof and without limiting the generality of other provisions hereof, the
Company will prepare and file such  amendment or amendments to the  Registration
Statement  and make such other  filings as may be  necessary or  appropriate  to
effect any such underwritten distribution.

     4. Multiple Holders.  If there is more than one Holder,  such Holders shall
act with  respect to their  rights  under  this  Registration  Rights  Agreement
according to the vote of two-thirds-in-interest.

     5.  Expenses  of  Registration.   All  Registration  Expenses  incurred  in
connection with any registration,  qualification or compliance  pursuant to this
Registration  Rights  Agreement  shall be borne by the Company,  and all Selling
Expenses shall be borne by each Holder.

     6. Registration Delay or Failure. The Company acknowledges that its failure
to register the Registrable Securities in accordance with the Agreement and this
Registration  Rights  Agreement  will  cause the  Holder to suffer  damages  and
undertake  risks in amounts that will be  difficult  to  ascertain  and were not
anticipated  in  negotiating  the  terms  hereof  or of  the  Agreement  or  the
Debentures.  Accordingly,  the parties agree that it is  appropriate  to include
herein a provision for  liquidated  damages and to compensate  the Holder fairly
for the additional  risk  undertaken by the Holder  resulting from the Company's
delay or failure to effect such registrations. The parties acknowledge and agree
that the  provisions  hereinafter  set forth in this  Paragraph 6 represent  the
parties' good faith effort to quantify  such damages and to compensate  for such

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                                      216


additional risk and, as such, agree that the form and amount of damages and risk
compensation are reasonable and will not constitute a penalty.

          (a) If the Registration Statement covering the resale of the Shares is
     not declared  effective by the one hundred  twentieth  (120th) calendar day
     after the Closing Date,  then the Company shall pay, in cash, to the Holder
     on such 120th day and on each  succeeding  30th day  thereafter (or earlier
     date when the  Registration  Statement  becomes  effective) upon which such
     Registration  Statement still has not become effective,  an amount equal to
     two percent (2%) of the original  principal amount of the Debentures of the
     Holder  on the  payment  date  (or the date  upon  which  the  Registration
     Statement  becomes  effective)  until the  earlier of (i) the  Registration
     Statement  being  declared  effective  or (ii) the two  hundred  seventieth
     (270th) day after the Closing  Date.  The amounts  payable  pursuant to the
     foregoing  sentence  shall not exceed ten percent (10%) of the  Outstanding
     Amount of the Debentures if, on or prior to the payment date for any 30-day
     period that would require  payments in excess of such amounts,  the Company
     has  established  to the  reasonable  satisfaction  of the Holder  that the
     Company has adequate liquidity to redeem the Debentures pursuant to Section
     6 thereof.  In addition,  in the event that any principal of the Debentures
     is converted  prior to the 120th day, the Company will pay, in cash, to the
     Holder,  in addition to the Shares issued upon conversion,  two (2) percent
     of the original  principal amount of the Debenture on the applicable Holder
     Conversion Date.

          (b) If such  Registration  Statement still has not become effective by
     the 270th calendar day after the Closing Date, then, at the Holder's option
     exercised  at  any  time  thereafter   until  the   effectiveness   of  the
     Registration  Statement  (which  shall not be subject to any stop orders or
     other prohibitions on sale of shares thereunder),  the Company shall redeem
     the Holder's  Debentures,  at a price equal to one hundred  twenty  percent
     (120%) of the  original  principal  amount of the  Holder's  Debentures  in
     accordance  with the procedures  set forth in Section 6 (without  regard to
     Sections 6(d) or 6(e)) of the Debentures.

          (c) If such Registration Statement is insufficient to cover the number
     of Shares issuable upon  conversion of the Debentures by any Holder,  then,
     at the Holder's option exercised at any time during which such Registration
     Statement  is  insufficient  to cover the  number of Shares  issuable  upon
     conversion of such Holder's Debentures, the Company shall redeem the number
     of Shares not covered by the Registration  Statement  pursuant to Section 6
     (without regard to Sections 6(d) or 6(e)) of the Debentures.


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          (d)  Notwithstanding  any of  the  foregoing,  failure  to  cause  the
     Registration Statement to become effective shall not constitute an Event of
     Default  under  Section  17 of the  Debenture  as long  as (i) the  Company
     continues  to use its best efforts to cause the  Registration  Statement to
     become effective as required by Section 6(a) hereof, (ii) the Company makes
     timely payments of the amounts required by Section 6(a) hereof, (iii) on or
     prior to the 270th  calendar  day after the  Closing  Date and at all times
     thereafter until the  effectiveness  of the  Registration  Statement or the
     redemption of all the Debentures, the Company shall have established to the
     reasonable  satisfaction  of the  Holder  that  the  Company  has  adequate
     liquidity to redeem the Debentures pursuant to Section 6 thereof,  and (iv)
     the Registration  Statement shall have been filed by the 60th day after the
     Closing Date.

     7. Registration  Procedures.  In the case of each registration  effected by
the Company pursuant to this  Registration  Rights  Agreement,  the Company will
keep the Holder advised in writing as to initiation of each  registration and as
to the completion thereof. At its expense, the Company will use its best efforts
to:

          (a) Keep such  registration  effective  for the period  ending (i) 180
     days after the Maturity  Date of the  Debentures,  (ii) when the Holder has
     completed the distribution of the Registrable  Securities  described in the
     registration  statement  relating  thereto,  or (iii) the date on which the
     Registrable  Securities  are saleable  pursuant to Rule 144(k)  promulgated
     under the Securities Act, whichever first occurs.

          (b) Furnish such number of prospectuses  and other documents  incident
     thereto as the Holder from time to time may reasonably request.

     8. Indemnification.

          (a) Company Indemnity.  The Company will indemnify the Holder, each of
     its  officers,  directors  and partners,  and each person  controlling  the
     Holder within the meaning of Section 15 of the Securities Act and the rules
     and regulations thereunder,  and each underwriter,  if any, and each person
     who controls,  within the meaning of Section 15 of the  Securities  Act and
     the rules and regulations thereunder, any underwriter,  against all claims,
     losses, damages and liabilities (or actions in respect thereof) arising out
     of or based on any untrue  statement  (or alleged  untrue  statement)  of a
     material  fact  contained  in any  prospectus,  offering  circular or other
     document (including any related registration statement, notification or the
     like) incident to any registration  effected  


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     pursuant to this Registration  Rights  Agreement,  or based on any omission
     (or  alleged  omission)  to state  therein a material  fact  required to be
     stated therein or necessary to make the statements therein, in light of the
     circumstances in which they were made, not misleading,  or any violation by
     the Company of the Securities Act or any state  securities law or in either
     case,  any rule or  regulation  thereunder  applicable  to the  Company and
     relating to action or inaction  required of the Company in connection  with
     any such registration, and will reimburse the Holder, each of its officers,
     directors and partners,  and each person controlling such Holder, each such
     underwriter  and each person who  controls  any such  underwriter,  for any
     legal  and any  other  expenses  reasonably  incurred  in  connection  with
     investigating  and defending  any such claim,  loss,  damage,  liability or
     action,  provided  that the Company  will not be liable in any such case to
     the extent that any such claim, loss,  damage,  liability or expense arises
     out of or is based on any untrue  statement or omission (or alleged  untrue
     statement or  omission)  based upon  written  information  furnished to the
     Company by the Holder and stated to be  specifically  for use therein.  The
     indemnity  agreement  contained  in this  Section  8(a)  shall not apply to
     amounts paid in settlement of any such loss,  claim,  damage,  liability or
     action if such  settlement  is effected  without the consent of the Company
     (which consent will not be unreasonably withheld).

          (b) Holder Indemnity.  The Holder will, if Registrable Securities held
     by it are included in a registration  statement  effected  pursuant to this
     Registration  Rights  Agreement,   indemnify  the  Company,   each  of  its
     directors,  officers, partners, each person who controls the Company within
     the  meaning  of  Section  15 of the  Securities  Act  and  the  rules  and
     regulations  thereunder,  each  other  Holder  (if any),  and each of their
     officers,  directors and partners,  and each person  controlling such other
     Holder,  against all claims, losses, damages and liabilities (or actions in
     respect  thereof)  arising  out of or based  on any  untrue  statement  (or
     alleged untrue  statement) of a material fact contained in any registration
     statement,  prospectus, offering circular or other document incident to any
     registration of Registrable Securities pursuant to this Registration Rights
     Agreement,  or any  omission  (or  alleged  omission)  to state  therein  a
     material  fact  required  to be stated  therein  or  necessary  to make the
     statements therein not misleading,  and will reimburse the Company and such
     other Holders and their directors, officers and partners or control persons
     for any legal or any other expenses  reasonably incurred in connection with
     investigating  or  defending  any such claim,  loss,  damage,  liability or
     action,  in each  case to the  extent,  but only to the  extent,  that such
     untrue  statement  (or alleged  untrue  statement)  or omission (or alleged
     omission)  is made in such  registration  statement,  prospectus,  offering
     circular or other document in reliance upon and in conformity  


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     with written information  furnished to the Company by the Holder and stated
     to be specifically for use therein; provided, however, that the obligations
     of the Holder  shall not apply to amounts  paid in  settlement  of any such
     claims,  losses,  damages or  liabilities  if such  settlement  is effected
     without the consent of the Holder (which consent shall not be  unreasonably
     withheld).  Notwithstanding anything to the contrary in this Section 8, the
     Holder's liability under this paragraph 8(b) with respect to any particular
     registration  shall be limited to an amount equal to the proceeds  received
     by the Holder from the  Registrable  Securities  sold by the Holder in such
     registration.

          (c)  Procedure.  Each party  entitled  to  indemnification  under this
     Section 8 (the "Indemnified Party") shall give notice to the party required
     to provide  indemnification (the "Indemnifying  Party") promptly after such
     Indemnified  Party has actual  knowledge of any claim as to which indemnity
     may be  sought,  and shall  permit  the  Indemnifying  Party to assume  the
     defense of any such claim in any litigation resulting  therefrom,  provided
     that counsel for the  Indemnifying  Party, who shall conduct the defense of
     such claim or any litigation resulting therefrom,  shall be approved by the
     Indemnified  Parties (whose approval shall not be  unreasonably  withheld),
     and the  Indemnified  Party  may  participate  in such  defense  at its own
     expense, and provided,  further,  that the failure of any Indemnified Party
     to give notice as provided herein shall not relieve the Indemnifying  Party
     of its  obligations  under  this  Section  except  to the  extent  that the
     Indemnifying  Party is  actually  prejudiced  by such  failure  to  provide
     notice.  No  Indemnifying  Party,  in the  defense  of any  such  claim  or
     litigation,  shall,  except  with the consent of the  Indemnified  Parties,
     consent to entry of any  judgment or enter into any  settlement  which does
     not include as an unconditional  term thereof the giving by the claimant or
     plaintiff to all  Indemnified  Parties of a release  from all  liability in
     respect of such claim or litigation.  Each Indemnified  Party shall furnish
     such  information  regarding  itself  or  the  claim  in  question  as  any
     Indemnifying Party may reasonably request in writing.

     9. Contribution. If the indemnification provided for in Section 8 herein is
unavailable to the Indemnified Parties in respect of any losses, claims, damages
or liabilities referred to herein, then each such Indemnifying Party, in lieu of
indemnifying  the Indemnified  Parties,  shall  contribute to the amount paid or
payable by such Indemnified Parties as a result of such losses,  claims, damages
or  liabilities  (i) as between the Company on the one hand and the  Indemnified
Parties  on the other,  in such  proportion  as is  appropriate  to reflect  the
relative  benefits  received by the Company on the one hand and the  Indemnified
Parties on the other hand from the  registration of the Registrable  Securities,
or  (ii)  if  such  


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allocation  is not  permitted  by  applicable  law,  in  such  proportion  as is
appropriate  to reflect not only such  relative  benefits  but also the relative
fault of the  Company  on the one hand and of the  Indemnified  Parties,  on the
other hand in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities,  as well as any other relevant equitable
considerations.

     The  relative  benefits  received  by the  Company  on the one hand and the
Indemnified  Parties,  on the  other  hand  shall  be  deemed  to be in the same
proportion as the proceeds from the offering (net of underwriting  discounts and
commissions  but before  deducting  expenses)  received by the Company  from the
initial sale of the Debentures by the Company  pursuant to the Agreement bear to
the gain  realized  by the  Holder in  connection  with the sale of  Registrable
Securities by the Holder pursuant to the registration. The relative fault of the
Company on the one hand and of the Holder, on the other hand shall be determined
by  reference  to,  among other  things,  whether  the untrue or alleged  untrue
statement  of a material  fact or omission to state a material  fact  relates to
information supplied by the Company by the Holder.

     In no event shall the  obligation of any  Indemnifying  Party to contribute
under this Section 9 exceed the amount that such  Indemnifying  Party would have
been obligated to pay by way of indemnification if the indemnification  provided
for  under   Section  8(a)  or  8(b)  hereof  had  been   available   under  the
circumstances.

     The Company and the Holder agree that it would not be just and equitable if
contribution  pursuant to this Section 9 were  determined by pro rata allocation
(even if the Indemnified Parties were treated as one entity for such purpose) or
by any other method of  allocation  which does not take account of the equitable
considerations  referred to in the immediately preceding paragraphs.  The amount
paid or  payable  by an  Indemnified  Party as a result of the  losses,  claims,
damages and  liabilities  referred to in the  immediately  preceding  paragraphs
shall be deemed to include,  subject to the  limitations  set forth  above,  any
legal  or  other  expenses  reasonably  incurred  by such  Indemnified  Party in
connection with  investigating  or defending any such action or claim. No person
guilty of fraudulent  misrepresentation  (within the meaning of Section 11(f) of
the Securities  Act) shall be entitled to  contribution  from any person who was
not guilty of such fraudulent misrepresentation.

     10.  Survival.  The  indemnity  and  contribution  agreements  contained in
Sections 8 and 9 shall remain operative and in full force and effect  regardless
of (i) any termination of the Agreement,  (ii) any  


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investigation  made by or on behalf of any Indemnified Party or by or on behalf-
of the Company or (iii) the  consummation  of the sale or successive  resales of
the Registrable Securities.

     11. Information By Holder and Any Underwriters. The Holder shall furnish to
the Company,  within 20 business days of the Company's  request  therefor,  such
information  regarding the Holder or  underwriters,  as the case may be, and the
distribution  proposed  by  such  Holder  or  underwriters  as the  Company  may
reasonably request in writing and as shall be reasonably  required in connection
with  any  registration,   qualification  or  compliance  referred  to  in  this
Registration Rights Agreement.

     Each Holder whose  Registrable  Securities  are included in a  Registration
Statement  understands  that  the  Securities  Act  may  require  delivery  of a
prospectus relating thereto in connection with any sale thereof pursuant to such
Registration  Statement  and each  such  Holder  shall use its  reasonable  best
efforts to comply with the applicable  prospectus  delivery  requirements of the
Securities Act in connection with any such sale.

     Each Holder agrees to use its reasonable best efforts to notify the Company
promptly after the date on which all Registrable Securities owned by such Holder
have been sold by such Holder,  if such date is prior to the Maturity  Date,  so
that the Company may comply with its  obligation to terminate  the  Registration
Statement in accordance  with Item 512 of Regulation SK or Regulation SB, as the
case may be.

     12.  Transfer of Assignment of Registration  Rights.  The rights granted to
the Holder by the Company under this Registration Rights Agreement, to cause the
Company to register Registrable Securities,  may be transferred or assigned to a
transferee or assignee of any of not less than  $100,000 in principal  amount of
Debentures,  provided that the Company is given written  notice by the Holder at
the time of or within a  reasonable  time after  said  transfer  or  assignment,
stating the name and address of said  transferee or assignee and identifying the
securities with respect to which such registration  rights are being transferred
or assigned,  and  provided,  further,  that the  transferee or assignee of such
rights is not deemed by the Board of Directors of the Company, in its reasonable
judgment,  to be a competitor  of the Company and  provided,  further,  that the
transferee  or assignee of such rights  agrees to be bound by this  Registration
Rights Agreement.


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                                      222


     13. Miscellaneous.

          (a)  Entire  Agreement;   Counterparts.   This   Registration   Rights
     Agreement, the Subscription Agreement (including the Schedules and Exhibits
     thereto),  the  Debentures  and the other  Related  Agreements  contain the
     entire  understanding  and  agreement  of the parties  with  respect to the
     subject  matter  hereof.  This  Registration  Rights  Agreement  may not be
     modified  or  terminated  except  by a  written  agreement  signed  by both
     parties.  This Registration  Rights Agreement may be executed in any number
     of counterparts.

          (b)  Notices.  Any notice or other  communication  given or  permitted
     under this  Agreement  shall be in writing and shall be deemed to have been
     duly given if personally delivered or sent by registered or certified mail,
     return receipt requested,  postage prepaid with a copy in each case sent on
     the same day to the  party by  facsimile,  Federal  Express  or other  such
     expedited means, (a) if to Purchaser,  at its address hereinabove set forth
     (if Angelo,  Gordon & Co.,  L.P., or an affiliated  entity,  then a copy to
     Akin, Gump,  Strauss,  Hauer & Feld,  L.L.P., 590 Madison Avenue, New York,
     New York - 10022,  Attention:  Stephen M. Vine,  Esq.,  Telecopy No.: (212)
     872-1002,  Telephone No.: (212)  872-1000),  (b) if to the Company,  at its
     address  hereinabove  set  forth,  (c)  if,  to a  Holder  other  than  the
     Purchaser,  at the address thereof furnished by like notice to the Company,
     or (d) to any such addressee at such other address or addresses as shall be
     so furnished  to the other  parties  hereto by like notice.  Communications
     shall be deemed to have been received when personally delivered or, if sent
     by mail or  facsimile,  when  actually  received by the party to whom it is
     addressed.  Copies of all notices to the  Company  shall be sent to Paul S.
     Weiner,  Director of Finance of the  Company,  and to the  attention of the
     General  counsel of the Company.  Copies of all notices to the Holder shall
     be sent to its designee or representative.

          (c) Gender of Terms.  All terms used herein shall be deemed to include
     the  feminine  and the neuter,  and the  singular  and the  plural,  as the
     context requires.

          (d) Governing Law; Consent of Jurisdiction.  This Registration  Rights
     Agreement shall be governed by and construed in accordance with the laws of
     the  Commonwealth  of  Massachusetts,  without  regard to the principles of
     conflicts of laws thereof. Each of the Company and the Purchaser (i) hereby
     irrevocably  submits to the  exclusive  jurisdiction  of the United  States
     District  Court for the  Southern  District of New York for the purposes of
     any  suit,  action  or  proceeding  arising  out  of 
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                                      223


     or relating to this  Registration  Rights Agreement and (ii) hereby waives,
     and agrees not to assert in any such suit, action or proceeding,  any claim
     that it is not personally  subject to the jurisdiction of such court,  that
     the suit, action or proceeding is brought in an inconvenient  forum or that
     the  venue of the suit,  action  or  proceeding  is  improper.  Each of the
     Company  and the  Purchaser  consents to process  being  served in any such
     suit,  action or  proceeding by mailing a copy thereof to such party at the
     address  in  effect  for  notices  to it  under  this  Registration  Rights
     Agreement and agrees that such service shall constitute good and sufficient
     service of process  and notice  thereof.  Nothing in this  paragraph  shall
     affect or limit any right to serve process in any other manner permitted by
     law.

          (e) Title. The titles used in this  Registration  Rights Agreement are
     used for  convenience  only and are not to be  considered  in construing or
     interpreting this Registration Rights Agreement.

<PAGE>
                                      224


     IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be duly executed as of the date first above written.

                                     INVESTOR:

                                     By its:


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

                                     PALOMAR MEDICAL TECHNOLOGIES, INC.


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