[COHERENT LETTERHEAD]
                                February 1, 1999
Mr. Louis P. Valente
Chief Executive Officer
Palomar Medical Technologies, Inc.
45 Hartwell Avenue
Lexington, MA 02173

Dear Dan:

         This  letter  is  to  confirm  the  agreement  between  Coherent,  Inc.
("Coherent") and Palomar Medical Technologies, Inc. ("Palomar") relating, to the
Sales Agency,  Development and License Agreement dated November 17, 1998 ("Sales
Agency   Agreement")   pending  the  Closing  of  the   Agreement  and  Plan  of
Reorganization   dated  as  of  December  7,  1998   ("Agreement   and  Plan  of
Reorganization") as follows:

         1.  Effective from January 20, 1999 until the first to occur of (i) the
satisfaction  of all of Coherent's  closing  conditions set forth in Section 6.2
(except for Section 6.2(i)) (the "Closing Conditions") of the Agreement and Plan
or   Reorganization   or  (ii)   termination   of  the  Agreement  and  Plan  of
Reorganization,  Coherent  hereby  consents  to the  appointment  of other sales
agents and/or distributors for Palomar's ruby laser based hair removal products.
As consideration  for Coherent  waiving- its exclusive rights to market and sell
these  products  in  accordance  with the terms of the Sales  Agency  Agreement,
Palomar  agrees to pay Coherent  S2,739.73 per day between  January 20, 1999 and
the first to occur of satisfaction of all Closing-  Conditions or termination of
the Agreement and Plan of  Reorganization.  This amount shall be paid at Closing
by a deduction in the Merger  Consideration,  or if the Closing, does not occur,
within 15 days of  termination of the Agreement and Plan of  Reorganization.  If
the  Closing  does  not  occur,  all  such  marketing  and  sales  rights  shall
exclusively  revert  back to Coherent  unless  Coherent  agrees with  Palomar in
writing to extend this  arrangement.  In addition,  Palomar may also at any time
immediately  terminate  its  obligation  to pay Coherent  $2,739.73 by notifying
Coherent in writing that  exclusive  rights to distribute  Palomar's  ruby laser
based hair removal products are reverting back to Coherent. During the remaining
term of the Sales  Agency  Agreement,  Coherent  shall be  entitled  to its full
commission  for any sales of Palomar's  ruby laser based hair  removal  products
occurring after the date of reversion of such exclusive rights to Coherent.

         2.  Coherent  agrees  to  purchase  at least  $125,000  of spare  parts
relating to the  LightSheer at Star's cost. As  consideration  for such pricing,
Coherent  agrees to provide Star with a line of credit up to $750,000.  Coherent
shall have the right to purchase up to  $250,000  of  LightSheer  spare parts at
Star's cost. In the event Coherent purchases more



<PAGE>


than  $125,000 of such spare  parts,  the line of credit  shall be  increased by
$2,000 for every $ 1,000 of purchases in excess of S 125,000.  In no event shall
the line of credit exceed $1 million.  Any loans under this  paragraph  shall be
'interest  free.  Amounts  drawn on this line of credit shall be used for Star's
working-  capital  purposes only. The principal  amount shall be due and payable
upon the earlier of the Closing- (in which case Star can decide whether to repay
such amount or have it included as a liability on the Closing  Balance Sheet) or
15 days following termination of the Agreement and Plan of Reorganization. Loans
shall be evidenced  by a  promissory  note in  substantially  the form  attached
hereto as Exhibit A.

         3. Palomar  agrees that the  LightSheer  EP and  LightSheer SP shall be
considered  Distributed  Products  under the  Sales  Agency  Agreement  and that
Coherent  shall  have the  exclusive  right to  market  and sell  such  products
according to the Sales Agency Agreement.  In regards to the LightSheer EP and SP
products, we agree as follows:
<TABLE>
<S>               <C>                                 <C>                        <C>                           <C>

                  a.The  Light  Sheer EP will  have the  following  pricing  and
                    commission structure:

                    Price                              Coherent                  Palomar
                    End-User                           $125,000                  $47,000                       $78,000
                    Distributor                        $100,000                  S22,000                       $78,000

                  b. The LightSheer SP pricing, and commission will be:

                                                       Price                     Coherent                      Palomar
                    End-User                           $105,000                  S35,000                       $70,000
                    Distributor                        $90,000                   S20,000                       $70,000
</TABLE>

                  c. Coherent  shall not sell these products at prices less than
those quoted above without Palomar's prior approval.  In the event that Coherent
sells these  products  for prices in excess of those  quoted  above,  Coherent's
commission shall be increased by 60% of such excess amount.  Notwithstanding the
immediately  preceding sentence,  Coherent's commission on sales to distributors
of the LightSheer SP shall be $20,000 until the purchase price exceeds  $97,000,
at which point it shall be increased by 60% of any excess over $97,000.

                  d. Coherent  agrees not to announce  these  products  prior to
February 1, 1999.


                  e. in addition to the 95 units already  committed for shipment
in January,  February and March,  1999,  Coherent will buy five demos at $72,000
each.

         Terms that are not  otherwise  defined  herein  shall have the  meaning
assigned to them in the Sales  Agency  Agreement  or the  Agreement  and Plan of
Reorganization, as applicable.



<PAGE>


        If  this  letter  accurately  sets  forth  your   understanding  of  our
agreement,  please  countersign  this  letter  and  return  a copy to me at your
earliest convenience.

                                                  Sincerely,


                                                  /s/ Robert J. Quillinan
                                                  ------------------------------
                                                  Robert J. Quillinan
                                                  Executive Vice President & CFO

AGREED AND ACCEPTED

PALOMAR MEDICAL TECHNOLOGIES, INC.


By:      /s/ Louis P. Valente
         ----------------------
         Louis P. Valente
         Chief Executive Officer

Date: January    1999
<PAGE>

                                    EXHIBIT A

                                 PROMISSORY NOTE

                                                         Santa Clara, California
                                                              January  ___, 1999

         FOR VALUE RECEIVED, the undersigned, Star Medical Technologies, Inc., a
California corporation ("Star"),  promises to pay to Coherent,  Inc., a Delaware
corporation  ("Coherent"),  or order, the principal sum of S . No interest shall
accrue on the outstanding  principal balance.  The principal amount shall be due
and payable on or before the earlier of (1) the closing,  of the  Agreement  and
Plan of Reorganization between Coherent,  PMTI and others dated December 7, 1998
(either by payment directly to Coherent or having- the principal amount included
as a  liability  on the  Closing  Balance  Sheet)  or  (ii)  15  days  following
termination of such Agreement and Plan of Reorganization.

         Should the principal  not be paid in a timely  manner,  interest  shall
accrue on the outstanding  principal and interest balance at the lesser of 1 V2%
per month or the highest rate permitted by law.

         Star shall reimburse Coherent for all costs and expenses incurred by it
and shall pay the reasonable  fees and  disbursements  of counsel to Coherent in
connection with the enforcement of Coherent's rights hereunder.

         No amendment,  modification or waiver of any provision of this Note nor
consent to any departure by Star  therefrom  shall be effective  unless the same
shall be in  writing-  and signed by  Coherent  and then such  waiver or consent
shall be effective only 'in the specific  instance and for the specific  purpose
for which given.

         Star hereby  waives any  requirement  of notice of dishonor,  notice of
protest and protest.

         This Note shall be deemed to be a  contract  made under the laws of the
State of California  and shall be construed in accordance  with the laws of said
State.  This Note shall be binding upon Star and its  successors and assigns and
the terms hereof shall inure to the benefit of Coherent and its  successors  and
assigns,  including  subsequent holders hereof. The holding, of any provision of
this Note to be invalid or  unenforceable  by a court of competent  jurisdiction
shall not  affect any other  provisions  and the other  provisions  of this Note
shall remain in fall force and effect.

                                              STAR MEDICAL TEC@LNOLOGIES, INC.


                                              By
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