<PAGE>
                                      309

                             KEY EMPLOYEE AGREEMENT

To:  Anthony Fiorillo

     The undersigned, PALOMAR MEDICAL PRODUCTS INC., a Delaware corporation (the
"Company" or "PMP"),  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  PRESIDENT  AND  CHIEF  EXECUTIVE  OFFICER  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.


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                                      310


     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,  Two  Hundred
     Thousand Dollars ($200,000) 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
     Hundred  Thousand  Dollars  ($100,000) 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 Two
     Hundred  Thousand  Dollars  ($200,000) 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.


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                                      311


     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 


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                                      312


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  


<PAGE>
                                      313


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.

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)  


<PAGE>
                                      314


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 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.


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                                      315


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.

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.

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                                      316


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 .

     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 PRODUCTS INC.




                                            By:        /s/
                                                -----------------------------
                                                Steven Georgiev
                                                Chairman of the Board
                                                Duly Authorized

Accepted and Agreed:




--------------------------
Anthony Fiorillo


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                                      317




                                                                      EXHIBIT A


                   EMPLOYMENT TERM, COMPENSATION AND BENEFITS


                                       OF

                                Anthony Fiorillo
                      President and Chief Executive Officer


1. Term

     The  term  of  the  Agreement  to  which  this  Exhibit  A is  annexed  and
incorporated  shall be for  three  (3)  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 be Two Hundred and  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 Executive Committee.

     (b) Performance  Compensation.  You will be eligible for a bonus at the end
     of each fiscal year that is up to 50% of your Base Salary.

          You will receive an incentive  payment of $500,000,  to be paid either
     in  stock  of  Palomar  Medical  Technologies,   Inc.  ("Palomar")  (to  be
     determined on the basis of the stock's then current  market value) or cash,
     at  Palomar's  sole  discretion,  if the Company  achieves a 12%  operating
     income and One Hundred  Million  Dollars  ($100,000,000)  in annual revenue
     during the initial term of the Agreement,  as long as you are  continuously
     employed by the Company during the initial term of the Agreement.

          You will receive an incentive  stock  payment of  $1,000,000  worth of
     Palomar  stock (to be  determined  on the basis of the stock's then current
     market  value) if the  Company  achieves  a 20%  operating  income  and Two
     Hundred Million Dollars  ($200,000,000)  in annual revenue during the first
     five years from the date of this Agreement, as long as you are continuously
     employed by the Company during that five year period.

     (c) You will  receive a five year  warrant  for  300,000  shares of Palomar
     stock at its current  market value;  60,000 of the 300,000 shares will vest
     every six months from the date of this  Agreement.  If your  employment  is
     terminated  pursuant to Section 2.1 or 2.2(d) of the Agreement,  any vested
     shares  must  be  exercised  within  three  months  of  the  date  of  such

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                                      318


     termination;  if your  employment is terminated  for any other reason,  any
     vested  shares  must be  exercised  within  six  months of the date of such
     termination.

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 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 relocation,
travel, lodging, temporary housing,  entertainment and meal 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.

     If you relocate in furtherance of the Company's business and at the request
of the Company,  the Company will  guaranty that you receive the market value of
your current principle residence  ("Residence") upon your sale of the Residence,
by  obligating  itself  to pay any  difference  between  the  sale  price of the
Residence and its market value,  as long as you in good faith endeavor to obtain
the highest sale price for the Residence within a reasonable period of time from
when the Residence is put on the market.

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

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                                      319


                                                                       EXHIBIT B









                      OUTSIDE EMPLOYMENTS AND DIRECTORSHIPS



                                       OF


                                Anthony Fiorillo



     Two year  consulting  agreement  (11/1/96 - 11/1/98) with  American  Dental
     Technologies.

     Member of Board of Directors of Labconco, Inc.

     Member of Board of Directors of Solid State Farm, Inc.

     Member of Board of Directors of Dial, Inc.
<PAGE>
                                      320



                                                                       EXHIBIT C




                PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT




                                      As of
                                           ----------------------

To:  Anthony Fiorillo


     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.


<PAGE>
                                      321


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.
<PAGE>
                                      322



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 


<PAGE>
                                      323


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.


<PAGE>
                                      324


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


                                     --------------------------
                                     Anthony Fiorillo

                                                   Accepted and Agreed:

                                                   PALOMAR MEDICAL PRODUCTS INC.



                                                   By:-----------/s/------------
                                                          Steven Georgiev
                                                          Chairman of the Board
                                                          Duly Authorized
<PAGE>
                                      325





                                                                      SCHEDULE A










                            LIST OF PRIOR INVENTIONS



                                       OF


                                Anthony Fiorillo



                                      None