SUPPLEMENT TO SECURITIES PURCHASE AGREEMENT

         SUPPLEMENT TO SECURITIES PURCHASE AGREEMENT (this "SUPPLEMENT"),  dated
as of  May  5,  1997,  by  and  among  PALOMAR  MEDICAL  TECHNOLOGIES,  INC.,  a
corporation  organized under the laws of the State of Delaware (the  "Company"),
with headquarters located at 66 Cherry Hill Drive, Beverly, Massachusetts 01915,
RGC  INTERNATIONAL  INVESTORS,  LDC ("RGC") and (i) each of the  investors  (the
"CURRENT  INVESTORS")  set forth on the execution  pages hereof (the  "EXECUTION
PAGES") and (ii) each of the investors (the "SUBSEQUENT  INVESTORS" and together
with  the  Current  Investors,  the  "ADDITIONAL  INVESTORS")  set  forth on the
Execution Pages which may hereafter be appended to this Supplement in accordance
with Section 7 hereof.

         WHEREAS:

         A. The Company and RGC are parties to a Securities  Purchase  Agreement
dated as of March 27, 1997 (the "ORIGINAL  SECURITIES PURCHASE AGREEMENT" and as
supplemented by this Supplement,  the "SECURITIES  PURCHASE AGREEMENT") pursuant
to which the Company sold to RGC,  and RGC  purchased  from the  Company,  6,000
shares of the Company's Series H Convertible Preferred Stock ("SERIES H STOCK");

         B.  Contemporaneous  with their  execution and delivery of the Original
Securities  Purchase  Agreement,  the Company and RGC executed  and  delivered a
Registration  Rights  Agreement,  in  the  form  attached  as  Exhibit  B to the
Securities  Purchase Agreement (the "ORIGINAL  REGISTRATION  RIGHTS AGREEMENT"),
pursuant  to which the Company  agreed to provide  certain  registration  rights
under the Securities Act and the rules and regulations  promulgated  thereunder,
and applicable state securities laws;

         C. The Original Securities Purchase Agreement  contemplates the sale by
the Company of up to an additional  14,000  shares of Series H Stock  thereunder
and the Company desires to sell to each Additional Investor, and each Additional
Investor  desires to purchase  from the Company,  pursuant to and upon the terms
and  conditions  stated in the  Securities  Purchase  Agreement,  such number of
shares of the Company's  Series H Stock as are set forth on the  Execution  Page
hereof  executed  by such  Additional  Investor,  up to an  aggregate  of 14,000
shares;

         D.  Contemporaneous with the execution and delivery of this Supplement,
the Company, RGC and the Current Investors are executing and delivering (or will
execute and deliver in the case of the Subsequent Investors) a Supplement to the
Registration  Rights  Agreement,  in the form attached  hereto as Exhibit A (the
Original   Registration   Rights  Agreement  as  supplemented   thereby,   being
hereinafter  referred to as the "REGISTRATION  RIGHTS  AGREEMENT"),  pursuant to
which the Company has agreed to extend to the Additional Investors the benefits,
rights and obligations set forth in the Original Registration Rights Agreement.

         E. All other capitalized terms used herein and not otherwise defined in
this  Supplement  shall have the meanings  set forth in the Original  Securities
Purchase Agreement.

         NOW, THEREFORE,  the Company,  RGC and the Additional  Investors hereby
agree to amend and  supplement  the Original  Securities  Purchase  Agreement as
follows:

1.       DEFINITIONS.  The definitions of the following terms contained in the
Original Securities Purchase Agreement are amended as follows:

        (a) "RGC" shall mean RGC International Investors, LDC.

        (b)  "PURCHASERS"  shall  be  deemed  to  include  RGC  and  each of the
Additional Investors.

        (c)  "PREFERRED  SHARES"  shall mean all of the shares of Series H Stock
purchased  by the  Purchasers  pursuant  to the  Securities  Purchase  Agreement
(whether  on the  initial  Closing  Date or on an  Additional  Closing  Date (as
defined in Section 1(e)(ii) of the Securities Purchase Agreement)).

        (d) "ADDITIONAL INVESTORS," "CURRENT INVESTORS," "SUBSEQUENT INVESTORS,"
"SECURITIES  PURCHASE AGREEMENT" and "REGISTRATION  RIGHTS AGREEMENT" shall have
the meanings set forth in the recitals to this Supplement.

        (e) "SEC  DOCUMENTS"  shall have the meaning  set forth in the  Original
Securities Purchase Agreement but shall include all reports,  schedules,  forms,
statements and other documents filed by the Company with the SEC pursuant to the
Exchange Act prior to the date of the Additional Closing contemplated by Section
1(b) of the Securities Purchase Agreement.

2.      Section 1 of the  Original  Securities  Purchase  Agreement is hereby
amended and restated in its entirety to read as follows:

                  "1.      PURCHASE AND SALE OF PREFERRED SHARES.

        (a) Purchase of Preferred Shares by RGC. On the Closing Date (as defined
below),  subject to the  satisfaction (or waiver) of the conditions set forth in
Sections  6 and 7  below,  the  Company  shall  issue  and  sell  to RGC and RGC
severally  agrees to purchase from the Company,  such number of Preferred Shares
as is set  forth on  RGC's  signature  page  hereto.  The  purchase  price  (the
"PURCHASE  PRICE") per  Preferred  Share at such  closing  shall be equal to One
Thousand  Dollars  ($1,000.00)  and the aggregate  purchase price for all of the
Preferred   Shares  to  be  purchased  by  RGC  shall  be  Six  Million  Dollars
($6,000,000.00).  For the avoidance of doubt,  in no event shall RGC be required
to  purchase  more than the number of  Preferred  Shares  being  subscribed  for
hereunder by RGC as set forth on RGC's  Execution  Page. The Company may sell up
to Fourteen Million Dollars  ($14,000,000.00) of additional Preferred Shares, at
One Thousand Dollars ($1,000.00) per Preferred Share, at the additional closings
(the "ADDITIONAL CLOSINGS") contemplated by Sections 1(b) and 1(c) below.

        (b) Purchase of Preferred Shares by Current  Investors.  The Purchase of
the  Preferred  Shares by the Current  Investors may take place at an Additional
Closing; PROVIDED, HOWEVER, that such Additional Closing may not occur after May
7, 1997.  On such  Additional  Closing  Date,  subject to the  satisfaction  (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company shall
issue and sell to each  Current  Investor  purchasing  Preferred  Shares on such
Additional Closing Date and each Current Investor purchasing Preferred Shares on
such Additional Closing Date severally agrees to purchase from the Company, such
number of Preferred Shares as is set forth on such Current Investor's  signature
page hereto.  The purchase price per Preferred Share at such Additional  Closing
shall be equal to the Purchase  Price.  For the avoidance of doubt,  in no event
shall any Current  Investor  be  required  to  purchase  more than the number of
Preferred  Shares being subscribed for hereunder by such Current Investor as set
forth on such Current Investor's Execution Page.

        (c) Purchase of Preferred Shares by Subsequent  Investors.  The purchase
of the  Preferred  Shares by the  Subsequent  Investors may take place at one or
more Additional  Closings;  PROVIDED,  however,  that no Additional  Closing may
occur after June 19, 1997 or if the  additional  conditions set forth in Section
1(f)  hereof  for  such  Additional  Closing  are not  satisfied.  On each  such
Additional  Closing  Date,  subject  to  the  satisfaction  (or  waiver)  of the
conditions set forth in Sections 6 and 7 below, the Company shall issue and sell
to each  Subsequent  Investor  purchasing  Preferred  Shares on such  Additional
Closing Date and each Subsequent  Investor  purchasing  Preferred Shares on such
Additional  Closing Date  severally  agrees to purchase  from the Company,  such
number  of  Preferred  Shares  as is set  forth  on such  Subsequent  Investor's
signature  page hereto.  The  purchase  price per  Preferred  Share at each such
Additional  Closing  shall be  equal to the  Purchase  Price  and the  aggregate
purchase price for all of the Preferred Shares to be purchased by the Subsequent
Investors shall not exceed Seven Million Dollars ($7,000,000).

        (d) Form of Payment.  On the Closing Date or Additional Closing Date (as
applicable),  the  Purchaser  shall  pay the  aggregate  Purchase  Price for the
Preferred  Shares  being  purchased  by such  Purchaser  at such closing by wire
transfer  to the  Company,  in  accordance  with the  Company's  written  wiring
instructions,  against delivery of duly executed  certificates  representing the
Preferred  Shares being  purchased by the  Purchaser  hereunder  and the Company
shall deliver such  certificates  against  delivery of such  aggregate  Purchase
Price.

        (e) Closing Date and Additional Closing Date.

                (i) Subject to the  satisfaction  (or waiver) of the  conditions
        thereto set forth in Section 6 and Section 7 below, the date and time of
        the  issuance and sale of the  Preferred  Shares to RGC pursuant to this
        Agreement  (the "CLOSING  DATE") was at 12:00 noon eastern time on March
        31, 1997. This closing  occurred at the offices of Foley,  Hoag & Eliot,
        LLP, One Post Office Square, Boston MA 02109.

        (ii) Subject to the satisfaction  (or waiver) of the conditions  thereto
set forth in  Section 6 and  Section 7 below,  the date,  place and time of each
issuance and sale of Preferred Shares to an Additional Investor pursuant to this
Agreement  (each, an "ADDITIONAL  CLOSING DATE") shall be on such date as may be
mutually agreed upon by the Company and such Additional Investor."

        (f) Additional  Closing  Conditions  With Respect to Sales to Subsequent
Purchasers.  If (i) a Subsequent  Investor  has not been  approved in writing by
State Capital Market Group,  Ltd. and (ii) the average of the Closing Bid Prices
(as defined in the Certificate of Designation) for the Common Stock for the five
(5) trading days immediately preceding an Additional Closing Date is not greater
than or equal to $4.50 per share, the Company may not sell Preferred Shares to a
Subsequent Investor; PROVIDED, HOWEVER, that the restriction contained in clause
(ii) of this  sentence  shall  not  apply to the first  three  thousand  (3,000)
Preferred Shares sold by the Company to Subsequent Investors.

        3. Sections 6 and 7 of the Original  Securities  Purchase  Agreement are
amended and restated in their entireties to read as follows:

                  "6.      CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

        The obligation of the Company  hereunder to issue and sell the Preferred
Shares  to  RGC on the  Closing  Date  or to  the  Additional  Investors  on the
Additional Closing Date is subject to the satisfaction, at or before the Closing
Date or  Additional  Closing  Date  (as  applicable),  of each of the  following
conditions  thereto,  provided that these  conditions are for the Company's sole
benefit and may be waived by the Company at any time in its sole discretion.

        (a) The applicable  Purchaser  shall have executed the signature page to
the this Agreement and the Registration Rights Agreement, and delivered the same
to the Company.

        (b) The applicable Purchaser shall have delivered the Purchase Price for
the Preferred Shares purchased in accordance with Section 1(c) above.

        (c) The representations and warranties of the applicable Purchaser shall
be true and correct as of the date when made and as of the Closing  Date (solely
in the case of RGC) or the  Additional  Closing  Date (solely in the case of the
Additional  Investors)  as though made at that time (except for  representations
and warranties that speak as of a specific date),  and the applicable  Purchaser
shall have performed,  satisfied and complied in all material  respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied  or  complied  with by the  applicable  Purchaser  at or  prior to the
Closing Date (solely in the case of RGC) or the Additional  Closing Date (solely
in the case of the  Additional  Investors).  (d) No statute,  rule,  regulation,
executive order, decree, ruling or injunction shall have been enacted,  entered,
promulgated  or endorsed by any court or  governmental  authority  of  competent
jurisdiction  or any  self-regulatory  organization  having  authority  over the
matters  contemplated  hereby which  prohibits  the  consummation  of any of the
transactions contemplated by this Agreement.

        7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.

        The  obligation  of each  Purchaser  hereunder to purchase the Preferred
Shares to be purchased by it on the Closing Date or Additional  Closing Date (as
applicable) is subject to the satisfaction of each of the following  conditions,
provided that these  conditions are for each Purchaser's sole benefit and may be
waived by a Purchaser at any time in the Purchaser's sole discretion:

        (b) The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to such Purchaser.

        (c) The  Certificate of Designation  shall have been accepted for filing
with the  Secretary  of  State  of the  State  of  Delaware  and a copy  thereof
certified  by the  Secretary of State of Delaware  shall have been  delivered to
such Purchaser.

        (d) The Company shall have delivered duly executed certificates (in such
denominations as such Purchaser shall request) representing the Preferred Shares
being so purchased to such Purchaser in accordance with Section 1(c) above.

        (e) The Common  Stock shall be  authorized  for  quotation on NASDAQ and
trading in the Common Stock (or NASDAQ  generally) shall not have been suspended
by the SEC or NASD.

        (f) The  representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing  Date (solely in the case
of RGC) and  Additional  Closing  Date  (solely  in the  case of the  Additional
Investors)  as  though  made  at  that  time  (except  for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied  with by the Company at or prior to the Closing  Date (solely in the
case of RGC) and  Additional  Closing Date (solely in the case of the Additional
Investors).  Such Purchaser  shall have received a certificate,  executed by the
chief  executive  officer of the  Company,  dated as of the Closing Date (in the
case of the  certificate to be delivered to RGC) or the Additional  Closing Date
(in the case of the certificate to be delivered to the Additional  Investors) to
the foregoing effect and as to such other matters as may be reasonably requested
by such Purchaser.

        (g) No statute,  rule,  regulation,  executive order, decree,  ruling or
injunction  shall have been  enacted,  entered,  promulgated  or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization  having  authority  over  the  matters  contemplated  hereby  which
prohibits  the  consummation  of any of the  transactions  contemplated  by this
Agreement.

        (h)  Such  Purchaser  shall  have  received  the  officer's  certificate
described  in Section  3(c) above,  dated as of the Closing Date (in the case of
the  certificate to be delivered to RGC) or the Additional  Closing Date (in the
case of the certificate to be delivered to the Additional Investors).

        (i) Such  Purchaser  shall have  received  an  opinion of the  Company's
counsel,  dated  as of the  Closing  Date  (in  the  case of the  opinion  to be
delivered to RGC) or the Additional  Closing Date (in the case of the opinion to
be  delivered  to the  Additional  Investors),  in  form,  scope  and  substance
reasonably  satisfactory  to the  Purchaser  and in  substantially  the  form of
Exhibit C attached hereto.

        (j) The Company shall have executed,  and shall have delivered  evidence
reasonably  satisfactory to the Purchasers that the Company's transfer agent has
agreed to act in  accordance  with,  the  irrevocable  instructions  in the form
attached hereto as Exhibit D."

4. Section 3 of the Original  Securities Purchase Agreement is hereby amended to
add at the end of the ninth word thereof: "(which representations and warranties
shall be true and correct as of the date  hereof and as of the Closing  Date and
each Additional Closing Date)".

5. Except as expressly  supplemented  and/or modified  herein,  the terms of the
Original  Securities  Purchase Agreement shall continue in full force and effect
(including,  without limitation, the terms of Section 4(e)). This Supplement may
only be  modified  with the  consent  of the  Company,  RGC and each  Additional
Investor.

6. In the event that an Additional  Closing shall not have occurred on or before
May 7, 1997, unless the Company,  RGC and the Current Investors agree otherwise,
this Supplement  shall terminate at the close of business on such date and shall
be of no further force or effect.

7. A  Subsequent  Investor  shall  become  a party  to the  Securities  Purchase
Agreement upon execution of an Execution Page by such Subsequent  Investor on or
before June 19, 1997. Upon execution, such Subsequent Investor shall be entitled
to all of the  benefits  conferred  thereby  and shall be  subject to all of the
obligations thereunder.


<PAGE>

         IN WITNESS WHEREOF, the undersigned Investor,  RGC and the Company have
caused this  Supplement to be duly executed as of the date first above  written.
This signature page constitutes an Execution Page under the Securities  Purchase
Agreement.

INVESTOR:

CREDIT SUISSE FIRST BOSTON CORPORATION


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


RESIDENCE:   New York

ADDRESS:
                  Credit Suisse First Boston Corporation
                  11 Madison Avenue
                  New York, NY 10010
                  Telecopy:_(212) 325-6519
                  Attn: Allan D. Weine

AGGREGATE SUBSCRIPTION AMOUNT

         Number of Preferred Shares:              4,000
                                                 ------
         Purchase Price:                    $ 4,000,000
                                            -----------


PALOMAR MEDICAL TECHNOLOGIES, INC.



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


RGC INTERNATIONAL INVESTORS, LDC



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


<PAGE>





         IN WITNESS WHEREOF, the undersigned Investor,  RGC and the Company have
caused this  Supplement to be duly executed as of the date first above  written.
This signature page constitutes an Execution Page under the Securities  Purchase
Agreement.

INVESTOR:

CC INVESTMENTS, LDC


-----------------------------
By:      CSS Corporation Ltd.
         Corporate Secretary

         By:
         Name:
         Title:


RESIDENCE:  Cayman Islands

ADDRESS:
                  CC Investments, LDC
                  c/o Citco Fund Services (Cayman Islands) Ltd.
                  Corporate Center, West Bay Road
                  P.O. Box 31106
                  SMB Grand Cayman, Cayman Islands

AGGREGATE SUBSCRIPTION AMOUNT

         Number of Preferred Shares:                   3,000
         Purchase Price:                          $3,000,000

PALOMAR MEDICAL TECHNOLOGIES, INC.

         By:
         Name:
         Title:


RGC INTERNATIONAL INVESTORS, LDC

         By:
         Name:
         Title: