-75-

                         SECURITIES PURCHASE AGREEMENT

     THIS SECURITIES  PURCHASE  AGREEMENT  (this  "Agreement") is by and between
Palomar Electronics Corporation (the "Company"), a Delaware corporation, Palomar
Medical  Technologies,  Inc., a Delaware corporation  ("Palomar"),  each with an
office at 66 Cherry Hill Drive, Beverly, Massachusetts 01915 U.S.A., and
Clearwater Fund IV, LLC (the "Purchaser").

     IN CONSIDERATION  of the mutual  covenants  contained in this Agreement and
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,  and intending to be legally  bound  hereby,  the parties agree as
follows:

     SECTION 1.  Authorization of Shares. The Company has authorized the sale of
200,000  shares (the  "Shares") of common  stock,  par value $.01 per share (the
"Common Stock"), of Nexar Technologies,  Inc., a Delaware corporation ("Nexar"),
owned by the Company.

     SECTION 2.  Agreement to Sell and  Purchase the Shares.  At the Closing (as
defined below),  the Company will sell to the Purchaser,  and the Purchaser will
buy from the Company,  upon the terms and conditions  hereinafter set forth, the
Shares  for an  aggregate  purchase  price  to be  calculated  at $10 per  share
totalling $2,000,000 (the "Purchase Price").

     SECTION 3. Payment of Purchase  Price.  On or prior to the Closing Date, as
defined below,  the Purchaser will deliver to the Company the full amount of the
Purchase Price by check or wire transfer to the account set forth below.

                  Citibank
                  399 Park Avenue
                  New York, NY 10048

                  ABA 021000089
                  Account Number:  40611172
                  Account Name:  Dean Witter Reynolds, Inc.
                  For Further Credit to:
                  Account Number 593109782
                  Account Name:  Palomar Medical Technologies, Inc.

     SECTION 4. The Closing.  The consummation of the transactions  contemplated
by this Agreement (the "Closing") shall occur on December 31, 1996 (the "Closing
Date") at the offices of the Company or at such other time and place as shall be
agreed by the Company  and the  Purchaser.  At the  Closing,  the Company  shall
deliver to the Purchaser one or more  certificates for the Shares  registered in
the name of the Purchaser or its nominee.

     SECTION 5.  Representations,  Warranties and Covenants of the Company.  The
Company and Palomar hereby  jointly and severally  represent and warrant to, and
covenant with, the Purchaser as follows:

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                                      -76-

          SECTION 5.1. Organization.  Nexar is duly organized,  validly existing
and in good  standing  under the laws of the State of  Delaware.  Nexar has full
power and  authority  to own and  operate  its  properties  and to  conduct  its
business as currently  conducted  and is  registered or qualified to do business
and is in good standing in each jurisdiction in which it owns or leases property
or  transacts  business  and where the failure to be so  qualified  would have a
material adverse effect upon the business,  financial  condition,  properties or
operations of Nexar.

          SECTION 5.2. Due  Authorization.  The Company has all requisite  power
and  authority  to  execute,  deliver and  perform  its  obligations  under this
Agreement,  and this Agreement has been duly authorized and validly executed and
delivered by the Company and constitutes the valid and binding  agreement of the
Company  enforceable against the Company in accordance with its terms, except as
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,   moratorium,  usury,  fraudulent  conveyance  or  similar  laws
affecting  creditors' and contracting  parties'  rights  generally and except as
enforceability  may be subject to general  principles of equity  (regardless  of
whether such enforceability is considered in a proceeding in equity or at law).

          SECTION 5.3.  Ownership  of the Shares.  The Company is the record and
beneficial  owner of the  Shares  free and  clear  of any  adverse  claim of any
person.  At the  Closing,  Purchaser  will  acquire  good and valid title to the
Shares free and clear of any adverse claim of any person.

          SECTION 5.4.  Non-Contravention.  The  execution  and delivery of this
Agreement,  the sale of the Shares to be sold by the Company hereunder,  and the
consummation of the transactions  contemplated  hereby will not conflict with or
constitute a violation  of, or default  (with the passage of time or  otherwise)
under,  any material  agreement or instrument to which the Company or Nexar is a
party or by which  either  is bound or the  Certificate  of  Incorporation  (the
"Charter")  or the By-Laws of the Company or Nexar nor result in the creation or
imposition of any lien,  encumbrance,  claim,  security  interest or restriction
whatsoever upon any of the material properties or assets of the Company or Nexar
or an  acceleration of  indebtedness  pursuant to any  obligation,  agreement or
condition contained in any material bond, debenture,  note or any other evidence
of indebtedness or any material indenture,  mortgage, deed of trust or any other
agreement or instrument to which the Company or Nexar is a party or by which the
Company  or Nexar is bound or to which  any of the  property  or  assets  of the
Company or Nexar is subject, nor conflict with, or result in a violation of, any
law, administrative regulation,  ordinance or order of any court or governmental
agency,  arbitration  panel or authority  applicable to the Company or Nexar. No
consent,   approval,   authorization   or  other  order  of,  or   registration,
qualification or filing with, any regulatory  body,  administrative  agency,  or
other  governmental body in the United States,  other than with respect to "blue
sky" laws, is required for the valid  issuance and sale of the Shares to be sold
pursuant to this Agreement (other than such as have been made or obtained).

          SECTION 5.5.  Capitalization.  The authorized and outstanding  capital
stock of Nexar and rights to acquire  capital stock of Nexar are as set forth on
Schedule  5.5  hereto.  Except  as 

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                                      -77-

set forth in  Schedule  5.5,  there are no  outstanding  shares of, or rights to
acquire shares of, capital stock of Nexar. The Shares have been duly authorized,
validly issued and are fully paid and nonassessable.

          SECTION  5.6.  Legal  Proceedings.  There  is  no  material  legal  or
governmental proceeding pending or, to the knowledge of the Company,  threatened
or  contemplated to which Nexar is or may be a party or of which the business or
property of Nexar is or may be subject.

          SECTION 5.7. No  Violations.  Nexar is not in violation of its Charter
or By-Laws,  in violation of any law,  administrative  regulation,  ordinance or
order of any  court  or  governmental  agency,  arbitration  panel or  authority
applicable to Nexar,  which violation,  individually or in the aggregate,  would
have a material adverse effect on the business or financial  condition of Nexar,
or in default in any  material  respect in the  performance  of any  obligation,
agreement  or  condition  contained  in any bond,  debenture,  note or any other
evidence of indebtedness in any indenture,  mortgage, deed of trust or any other
agreement or  instrument to which Nexar is a party or by which Nexar is bound or
by which the  properties  of Nexar are bound or  affected,  and there  exists no
condition which, with the passage of time or the giving of notice or both, would
constitute a material default under any such document or instrument or result in
the imposition of any material penalty or the acceleration of any indebtedness.

          SECTION  5.8.  Governmental  Permits,  Etc.  Nexar  has all  necessary
franchises,  licenses,  certificates and other  authorizations from any foreign,
federal, state or local government or governmental agency,  department,  or body
that are  currently  necessary  for the  operation  of the  business of Nexar as
currently  conducted,  the absence of which would have a material adverse effect
on the business or operations of Nexar.

          SECTION 5.9. Financial  Statements.  The Company has made available to
Purchaser  certain  internally  generated  financial  statements  of Nexar  (the
"Financial Statements").  The Financial Statements and the related notes present
fairly the financial position of Nexar as of the dates indicated therein and its
results of operations  and cash flows for the periods  therein  specified.  Such
Financial  Statements  (including  the  related  notes)  have been  prepared  in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified.

          SECTION 5.10. No Material  Adverse Change.  Since the date of the most
recent  balance  sheet  included  in the  Financial  Statements,  Nexar  has not
incurred any material  liabilities or obligations,  direct or contingent,  other
than in the  ordinary  course of  business,  and there has not been any material
adverse change in its business, financial condition or results of operations.

          SECTION 5.11.  Intellectual  Property.  Nexar has the right to use all
intellectual  property  (the  "Intellectual  Property")  now  used  by it in its
business.  Nexar  owns all  right,  title  and  interest  in and to,  all of the
intellectual  property it owns, free and clear of any liens or encumbrances.  In
any case in which Nexar does not own the Intellectual  Property, it has good and
valid  licenses for the same which are in full force and effect.  No claims have
been  asserted  

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                                      -78-

with  respect to the use of any such  Intellectual  Property  or
challenging or questioning the validity or  effectiveness of any such license or
agreement.

          SECTION  5.12.  Title to  Properties  and  Assets.  Nexar has good and
marketable  title  to its  properties  and  assets,  and has  good  title to its
leasehold  interests,  in each case, free and clear of any liens, except (i) the
lien of current  taxes not yet due and payable  and (ii) minor liens  arising in
the ordinary course of business which do not in any case materially detract from
the value of the property subject thereto or impair Nexar's operations.

     SECTION 6. Representations, Warranties and Covenants of the Purchaser.

          (a) The Purchaser  represents and warrants to, and covenants with, the
Company,  as of the  date  hereof  and as of the  Closing  Date,  that:  (i) the
Purchaser is an  "accredited  investor"  as defined in Rule 501 of  Regulation D
promulgated under the Securities Act; (ii) the Purchaser is acquiring the Shares
for its own account for investment and with no present intention of distributing
any of such  Shares  other than to any  affiliate  of the  Purchaser;  (iii) the
Purchaser will not, directly or indirectly,  voluntarily  offer,  sell,  pledge,
transfer or  otherwise  dispose of (or  solicit  any offers to buy,  purchase or
otherwise  acquire or take a pledge of) any of the Shares,  except in compliance
with the Securities Act and the rules and  regulations  promulgated  thereunder;
(iv) the  Purchaser is an  "institutional  buyer"  within the meaning of Section
36b-21(b)(8)  of the Connecticut  Uniform  Securities Act, (v) the Purchaser has
had an opportunity  to ask questions and receive  answers from the management of
the Company and Nexar  regarding  Nexar,  its  business  and the offering of the
Shares;  and (vi) the Purchaser has, in connection with its decision to purchase
Shares,  relied solely upon the  representations  and  warranties of the Company
contained herein.

          (b) The  Purchaser  agrees not to make any sale of the  Shares  except
pursuant to an effective  registration  statement under the Securities Act or an
exemption from the registration requirements thereof.

          (c) The Purchaser  further  represents  and warrants to, and covenants
with,  the Company that (i) the Purchaser has full right,  power,  authority and
capacity  to enter  into  this  Agreement  and to  consummate  the  transactions
contemplated  hereby  and has  taken  all  necessary  action  to  authorize  the
execution,  delivery  and  performance  of this  Agreement,  and  (ii)  upon the
execution and delivery of this  Agreement,  this  Agreement  shall  constitute a
valid and binding obligation of the Purchaser enforceable in accordance with its
terms,  except  as  enforceability  may be  limited  by  applicable  bankruptcy,
insolvency, reorganization,  moratorium, usury, fraudulent conveyance or similar
laws affecting  creditors' and contracting  parties' rights generally and except
as enforceability  may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).

          (d) The  Purchaser  represents  that it  understands  and agrees that,
until  registered  under  the  Securities  Act or  transferred  pursuant  to the
provisions of Rule 144 

<PAGE>
                                      -79-

promulgated  thereunder,  all  certificates  evidencing  the Shares shall bear a
legend,  prominently  stamped  or  printed  therein,  reading  substantially  as
follows:

          "The  securities   represented  by  this  certificate  have  not  been
          registered  under  the  Securities  Act of 1933,  as  amended,  or the
          securities laws of any state.  These securities have been acquired for
          investment  and not with a view toward  distribution  or resale.  Such
          securities may not be offered for sale,  sold,  delivered  after sale,
          transferred,  pledged or  hypothecated  in the absence of an effective
          registration  statement covering such securities under the Act and any
          applicable  state  securities  laws,  unless  the  holder  shall  have
          obtained an opinion of counsel  satisfactory to the  corporation  that
          such registration is not required."

     SECTION  7.  Survival  of   Representations,   Warranties  and  Agreements.
Notwithstanding  any  investigation  made by any  party to this  Agreement,  all
covenants,  agreements,  representations  and warranties made by the Company and
the Purchaser herein shall survive the Closing.

     SECTION 8. Lock-up Agreements with Underwriters; Registration. In the event
of an initial  underwritten  public offering of Nexar's equity  securities,  the
Purchaser   agrees  to  enter  into  an  agreement   with  the   Underwriter  or
Underwriters' Representative for such offering restricting the sale, transfer or
other  disposition  of the  Shares  for a period  not to exceed  180 days to the
extent  that such  agreement  is  required  to be  executed by members of senior
management of Nexar.

     SECTION 9. Legal Fees. The Company  agrees to pay the  reasonable  fees and
expenses of the Purchaser's  counsel in connection with the purchase and sale of
the Shares up to a maximum of $5,000.

     SECTION 10. Conditions to Closing.

          (a) The  obligations of the Purchaser to consummate  the  transactions
contemplated  hereby shall be subject to the satisfaction by the Company of each
of the following  conditions  on or before the Closing Date,  any one or more of
which may be waived by the Purchaser:

                    (i) The  representations  and  warranties of the Company set
          forth in this Agreement  delivered to the Purchaser by or on behalf of
          the Company shall be true and correct as if made on the Closing Date.

                    (ii) Each of the covenants,  agreements and conditions to be
          performed and satisfied by the Company  pursuant to this  Agreement at
          or prior to Closing shall have been duly performed and satisfied.

<PAGE>
                                      -80-

          (b) The  obligations  of the Company to  consummate  the  transactions
contemplated  hereby shall be subject to the  satisfaction  by the  Purchaser of
each of the following  conditions on or before the Closing Date, any one or more
of which may be waived by the Company:

                    (i) The  representations and warranties of the Purchaser set
          forth in this  Agreement  shall be true and  correct as if made on the
          Closing Date.

                    (ii) Each of the covenants,  agreements and conditions to be
          performed and satisfied by the Purchaser pursuant to this Agreement at
          or prior to Closing shall have been duly performed and satisfied.

                    (iii) The  Purchaser  shall have paid the Purchase  Price in
          accordance with Section 3.

     SECTION 11. No Brokers.  The parties hereto hereby represent that there are
no  brokers  or  finders   entitled  to  compensation  in  connection  with  the
transactions contemplated hereby.

     SECTION  12.   Notices.   All   notices,   requests,   consents  and  other
communications  hereunder  shall be in writing,  shall be mailed by  first-class
registered or certified mail, postage prepaid, and shall be deemed given when so
mailed:

          (a) if to the Company to:

                  General Counsel
                  Palomar Medical Technologies, Inc.
                  66 Cherry Hill Drive
                  Beverly, MA  01915

         with a copy to:

                  Foley, Hoag & Eliot LLP
                  One Post Office Square
                  Boston, MA 02109
                  Attn:  David Broadwin

          (b) if to the  Purchaser,  at its  address  as set forth at the end of
this Agreement, or at such other address or addresses as may have been furnished
to the Company in writing.

     SECTION 13. Termination.  Either party to this Agreement may terminate this
Agreement upon written notice to the other at any time prior to the Closing.

<PAGE>
                                      -81-

     SECTION  14.  Changes.  Any  term  of  the  Agreements  may be  amended  or
compliance  therewith  waived  with the  written  consent of the Company and the
holders of a majority of the Shares purchased pursuant to the Agreement.

     SECTION 15. Tag Along  Rights.  In the event the Company  should  decide to
sell  from  time to time any  shares  of  Common  Stock or  other  common  stock
equivalent  to any third party,  Purchaser  shall have the right to sell its pro
rata portion of the Shares to such third party on the same terms and conditions.
The Company  shall give prompt  written  notice to Purchaser of the terms of any
such offer.  Notwithstanding  the foregoing,  if Purchaser  should own less than
2.5% of the  outstanding  Common Stock, it shall be entitled to sell the greater
of (x) the remaining Shares or (y) its pro rata portion.

     SECTION 16. Confidentiality. No press release or public announcement may be
made naming Purchaser or its affiliates  without the prior consent of Purchaser;
provided that Nexar may disclose Purchaser's stockholdings in the prospectus for
Nexar's initial public offering or as may be required by law.

     SECTION 17. No  Impairment.  Each of  Palomar,  the Company and Nexar agree
that until such time as the Shares have been registered pursuant to the terms of
the Registration Rights Agreement and sold by Purchaser,  they will not take any
action,  directly or indirectly,  that could reasonably be expected to adversely
affect or  otherwise  impair  (i) the value of the  Shares or (ii) the rights of
Purchaser under this Agreement,  the Registration  Rights Agreement or otherwise
under law.

     SECTION  18.  Headings.  The  headings  of the  various  sections  of  this
Agreement have been inserted for  convenience of reference only and shall not be
deemed to be part of this Agreement.

     SECTION 19.  Severability.  If any  provision  contained in this  Agreement
shall be  invalid,  illegal  or  unenforceable  in any  respect,  the  validity,
legality and enforceability of the remaining  provisions  contained herein shall
not in any way be affected or impaired thereby.

     SECTION  20.  Governing  Law.  This  Agreement  shall  be  governed  by and
construed  in  accordance  with  the  internal  laws  of  The   Commonwealth  of
Massachusetts and United States federal law.

     SECTION  21.   Counterparts.   This   Agreement  may  be  executed  in  two
counterparts,  each of which shall  constitute  an original,  but both of which,
when taken  together,  shall  constitute  but one  instrument,  and shall become
effective  when one or more  counterparts  have been signed by each party hereto
and delivered to the other parties.

<PAGE>
                                      -82-

     IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement  to be executed  by their duly  authorized  representatives  as of the
following date.

Dated: December 31, 1996   PALOMAR ELECTRONICS CORPORATION


                            By:         /s/
                                ------------------------------------------------
                            Name:   Joseph P. Caruso
                            Title:  Treasurer

                            PALOMAR MEDICAL TECHNOLOGIES, INC.


                            By:         /s/
                                ------------------------------------------------
                            Name:   Joseph P. Caruso
                            Title:  Chief Financial Officer


[Purchaser Signature Page Continues on the Following Page]

<PAGE>
                                      -83-

                   PURCHASER SIGNATURE PAGE AND QUESTIONNAIRE

         The  undersigned  Purchaser  hereby  executes the  Securities  Purchase
Agreement with Palomar Electronics Corporation and Palomar Medical Technologies,
Inc. (the "Company") and hereby authorizes this signature page to be attached to
a counterpart  of such  document  executed by a duly  authorized  officer of the
Company.

                                           CLEARWATER FUND IV LLC


                                           By:              /s/
                                                --------------------------------
                                           Name:     Hans. F. Heye
                                           Title:    President/Managing Member

Name in which Shares are to be registered:           Clearwater Fund IV LLC

Address of registered holder:                        611 Druid Road East
                                                     Suite 200
                                                     Clearwater, FL  34616

Social Security or Tax ID Number:                    59 3349309

Contact name and telephone number
regarding settlement and Name registration:          Hans F. Heye

Telephone Number:                                    813-442-0825