-127-

                             SUBSCRIPTION AGREEMENT
                       PALOMAR MEDICAL TECHNOLOGIES, INC.

         THESE  SECURITIES  HAVE NOT BEEN  REGISTERED  WITH  THE  UNITED  STATES
SECURITIES  AND EXCHANGE  COMMISSION OR THE  SECURITIES  COMMISSION OF ANY STATE
BECAUSE THEY ARE BELIEVED TO BE EXEMPT FROM REGISTRATION UNDER SECTIONS 4(2) AND
4(6) OF THE  SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").  THIS  SUBSCRIPTION
AGREEMENT  SHALL NOT CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION  OF AN OFFER
TO BUY THE SECURITIES IN ANY  JURISDICTION  IN WHICH SUCH OFFER OR  SOLICITATION
WOULD BE UNLAWFUL.  THE  SECURITIES  ARE  "RESTRICTED"  AND MAY NOT BE RESOLD OR
TRANSFERRED  EXCEPT AS  PERMITTED  UNDER THE ACT  PURSUANT  TO  REGISTRATION  OR
EXEMPTION THEREFROM.

         IN REACHING THE  CONCLUSION  THAT BUYER  DESIRES TO PURCHASE THE UNITS,
BUYER  HAS  CAREFULLY  EVALUATED  BUYER'S  FINANCIAL  RESOURCES  AND  INVESTMENT
POSITION,  AND THE RISKS ASSOCIATED WITH THIS INVESTMENT,  AND ACKNOWLEDGES THAT
THE UNITS  INVOLVE A HIGH  DEGREE OF RISK AND THAT  BUYER  COULD LOSE THE ENTIRE
INVESTMENT.

         This  Subscription  Agreement (the  "Agreement") is entered into by and
between  Palomar  Medical  Technologies,   Inc.,  a  Delaware  corporation  (the
"Company",  "PMTI" or "Seller"), and the undersigned (the "Buyer") in connection
with the offer and subscription by the Buyer to purchase 60 Units, each Unit for
$XXXXXX,  for an aggregate  amount of ($XXXXXXUS).  Each Unit consists of 10,000
shares of PMTI  Common  Stock (the  "Common  Stock")  and three (3)  warrants to
purchase Common Stock (the "Warrants") expiring on February 28, 1997 as follows:
Warrant  A -  representing  7,000  shares of  Common  Stock at $7.50 per  share;
Warrant B -  representing  5,000  shares of Common Stock at $9.50 per share and;
Warrant  C -  representing  3,000  shares of  Common  Stock at $11.50  per share
(collectively,  the  "Warrant  Shares").  The  number of shares of Common  Stock
issuable upon a cashless  exercise  shall be determined by  multiplying  (1) the
difference  between  (a) the  closing  bid price of the Common  Stock on the day
prior  to the  date  exercised,  as  reported  by the  National  Association  of
Securities Dealers Automated  Quotation System ("NASDAQ"),  and (b) the exercise
price, by (2) the number of Warrant  Shares.  The shares of Common Stock and the
shares of Common Stock underlying the Warrants are  collectively  referred to as
the "Shares".  This Subscription and, if accepted by the Company,  the offer and
sale of the Units,  are being made in reliance  upon the  provisions of Sections
4(2) and 4(6) of the United  States  Securities  Act of 1933,  as  amended  (the
"Act").  The  undersigned,  in order to induce the  Company  will rely  thereon,
represents, warrants and agrees as follows:
<PAGE>
                                     -128-

1.       OFFER TO SUBSCRIBE; PURCHASE PRICE

         The Buyer hereby  offers to purchase and  subscribes  for the number of
         Units set forth above.  The Closing  shall be deemed to occur when this
         Agreement  has been  executed by both Buyer and Company  (the  "Closing
         Date").  The Company agrees to deliver  certificates  representing  the
         Common Stock and Warrants  subscribed within 10 days of Closing.  On or
         prior to the Closing  Date,  the Buyer shall pay the purchase  price by
         delivering  good funds in United States  Dollars to the Company by 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.

2.       REPRESENTATIONS AND WARRANTIES BY BUYER

         Buyer hereby represents and warrants as follows:

                (a) Buyer is an  Accredited  Investor as  evidenced by the Buyer
        meeting at least one of the following standards:

                        (A)  is an  individual  and  had  income  in  excess  of
                $200,000  in the two most recent tax years (or  $300,000  income
                jointly with his spouse) and reasonably expect to have income at
                the same level in the current tax year; or

                        (B) is an individual  and his net worth (i.e.  excess of
                total assets over total  liabilities),  either  individually  or
                together with my spouse, is at least $1,000,000; or

                        (C)   is   a   trust,   corporation,   partnership,   or
                organization  defined  in  Section  501(c)(3)  of the Code,  not
                formed for the purpose or purchasing  the Units,  with assets in
                excess of $5,000,000; or

                        (D) is a national bank; a state banking institution, the
                business  of which is  substantially  confined to banking and is
                supervised  by  state  banking  officials;  a  savings  and loan
                association;  a broker or dealer registered  pursuant to Section
                15 of the Securities Exchange Act of 1934; an insurance company;
                an investment  company  registered under the Investment  Company
                Act of 1940;  a  business  development  company  as  defined  in
                Section 2(a)(48) of that Act or a private  business  development
                company  as  defined in  Section  202(a)(22)  of the  

<PAGE>
                                     -129-

               Investment  Advisors  Act of 1940;  a Small  Business  Investment
               Company  licensed  by the  Small  Business  Administration  under
               Section  301(c) or (d) of the Small  Business  Investment  Act of
               1958;  or an employee  benefit plan within the meaning of Title I
               of the Employee  Retirement  Income  Security Act of 1974, if the
               investment  decision is made by a plan  fiduciary,  as defined in
               Section  3(21) of such Act,  which is either a bank,  savings and
               loan association,  insurance  company,  or registered  investment
               adviser,  or if the  employee  benefit  plan has total  assets in
               excess  of  $5,000,000  or,  a   self-directed   plan  where  the
               investment decisions are made by accredited investors; or

                        (E) is an entity in which each of the equity owners meet
                the  standards  set  forth in any of the  immediately  preceding
                subparagraphs (A), (B), (C), or (D). (IF YOU MEET THE STANDARDS

                IN THIS  SUBPARAGRAPH,  PLEASE ALSO  COMPLETE THE  FOLLOWING:)

                I certify that the following is a complete list of all owners of
                equity  or  trustees,  that  each  such  owner  or  trustee  has
                initialed  the space  opposite his name and that each such owner
                or  trustee  understands  that by  initialing  that  space he is
                representing that he is an accredited investor satisfying either
                A, B, C or D above.

                 Name of Owner of            Type of
                 Equity or Trustee      Accredited Investor      Initials

                 -----------------      -------------------      --------
                 -----------------      -------------------      --------
                 -----------------      -------------------      --------

                (b) The Buyer and its advisors, if any, have been furnished with
        all materials  relating to the business,  finances and operations of the
        Company  and  materials  relating to the offer and sale of the Units and
        the offer of the Shares  which  have been  requested  by the Buyer.  The
        Buyer and its advisors,  if any, have been afforded the  opportunity  to
        ask questions of the Company and have received complete and satisfactory
        answers to any such  inquiries.  Without  limiting the generality of the
        foregoing, the Buyer has had the opportunity to obtain and to review the
        Company's  (1) Annual  Report on Form  10-KSB for the fiscal  year ended
        December  31,  1995 (as  amended  by  Amendment  No. 1  thereto  on Form
        10-KSB/A filed with the Securities and Exchange Commission (the "SEC" on
        August 23, 1996),  (2)  Quarterly  Reports on Form 10-QSB for the fiscal
        quarters  ended March 31, 1996 (as amended by Amendment No. 1 thereto on
        Form  10-QSB/A  filed with SEC on August 23,  1996),  June 30,  1996 and
        September 30, 1996,  (3) Current  Report on Form 8-K, dated May 3, 1996,
        as amended by  Amendment  No. 1 thereto on Form 8-K/A dated May 3, 1996,
        (4)  definitive   Proxy   Statement  for  its  1996  Annual  Meeting  of
        Stockholders,  and (5) Registration  Statement on Form S-3 (the "October
        Registration   Statement")   declared  effective  on  October  17,  1996
        (Registration No. 333-10681), in each case as filed with the SEC.

<PAGE>
                                     -130-

                (c) Buyer is acquiring the Units solely for Buyer's own account,
        for investment, and not with a view to the distribution thereof. Buyer's
        financial  condition is such that he is not under any present  necessity
        or  constraint  to  dispose  of the Units to  satisfy  any  existing  or
        contemplated  debt or  undertaking.  If Buyer is a  corporation,  trust,
        association,  partnership, or any other entity other than an individual,
        the purchase of the Units by Buyer has been duly  authorized as required
        by law or  agreement  to be  taken,  and the  Units  constitute  a legal
        investment for such entity.

                (d)  Buyer is aware of the  fact  that the  Units  have not been
        registered   under  the  Securities  Act  of  1933  (the  "Act"),   and,
        accordingly,  no federal agency has recommended or endorsed the purchase
        of the Units or passed on the  adequacy or  accuracy of the  information
        provided by the Company. Buyer understands that since the Units have not
        been  registered  under the Act, they must be held  indefinitely  unless
        they are subsequently registered under the Act or unless, in the opinion
        of counsel  for the  Company,  a sale or  transfer  may be made  without
        registration thereunder. Buyer agrees that the Units, the Shares and the
        Warrants may bear a legend  restricting the transfer thereof  consistent
        with the foregoing and that a notation may be made in the records of the
        Company's transfer agent restricting the transfer of the Units in manner
        consistent with the foregoing.

                (e) Buyer, in electing to subscribe for the Units hereunder, has
        relied   upon  an   independent   investigation   made  by  it  and  its
        representative,  if any.  Buyer  has  been  given  no  oral  or  written
        representations  or assurances from the Company or any representation of
        the Company  other than as set forth in this  Agreement or in a document
        executed  by a duly  authorized  representative  of the  Company  making
        reference to this Agreement.

3.      REGISTRATION RIGHTS

        The Company agrees to file and use reasonable  efforts to make effective
a registration statement with the Securities and Exchange Commission (the "SEC")
(on Form S-3, its successor  form, or any other form under the Securities Act of
1933 under which the Shares underlying the Units are eligible to be registered),
by January 31, 1997,  covering the Shares underlying the Units, at the Company's
cost and  expense  (excluding  the costs of legal  counsel to the holders of the
Units). The Buyer shall furnish the Company with such information as the Company
may  request  in  writing  and as  shall  be  required  in  connection  with any
registration thereunder.

4.      RESALES

        Buyer acknowledges and agrees that the Securities may only be resold (a)
pursuant  to a  Registration  Statement  under the Act;  or (b)  pursuant  to an
exemption from registration.

        If Buyer desires to sell and distribute  Shares pursuant to an effective
registration statement, then Buyer shall execute and deliver to the Company such
written  undertakings  as the Company and its Counsel may reasonably  require in
order to assure full compliance  with relevant  provisions of the Securities Act
and the Exchange Act including,  without limitation,  providing the Company with
48 hours' prior written  notice of each such sale and providing the Company with

<PAGE>
                                     -131-

assurances,  reasonably  satisfactory  to the Company,  that Buyer will meet the
prospectus delivery requirements under the Security Act.

5.      SUBSEQUENT TRANSFER OF SECURITIES

        Once a registration  statement has been filed and declared  effective as
contemplated  in Section 3 above,  the Company  agrees,  and shall  instruct its
transfer  agent,  that the Securities may be transferred to any person or entity
who is not an affiliate of the Company  without (a) any further  restriction  on
transfer or (b) the entry of a "stop  transfer"  order against such  Securities,
provided  that the  person(s) or  entity(ies)  requesting  transfer  furnish the
appropriate representations to the Company's legal counsel.

6.      RELEASE OF PROCEEDS TO THE COMPANY

        The proceeds of the  offering  shall be released to the Company upon the
Closing of this offering, as defined in Section 1 of this Agreement.

7.      GOVERNING LAW

        This Agreement shall be governed by and construed in accordance with the
laws of the  Commonwealth of  Massachusetts  except for matter arising under the
Act or the Securities  Exchange Act of 1934 which matters shall be construed and
interpreted in accordance with such laws.

8.      NOTICES

        All  communications  hereunder shall be in writing,  and, if sent to the
Buyer shall be sufficient in all respects if delivered, sent by registered mail,
or by telecopy and confirmed to the Buyer at:

         Name:
         Address:
         City:
         Country:
         Attention:

or, if sent to the Company,  shall be delivered,  sent by registered  mail or by
telecopy and confirmed to the Company at:

         Palomar Medical Technologies, Inc.
         66 Cherry Hill Drive
         Beverly, MA  01915
         Attention:  Paul S. Weiner, Director of Finance
         Telephone:        (508) 921-9300
         Telecopy:         (508) 921-5801

<PAGE>
                                     -132-

9.      FEES AND EXPENSES

        Each of the Buyer and the Seller agrees to pay its own expenses incident
on the performance of its obligations  hereunder,  including but not limited to,
the fees, expenses and disbursements of such party's counsel.

        The  undersigned  acknowledges  that  this  subscription  shall  not  be
effective unless accepted by the Company as indicated below.

Dated this 19 day of December, 1996.



Finmanagement, Inc.
(Printed Name)


         /s/
--------------------------------
Conrad Meyer
(Signature)



(Mailing Address)


THIS SUBSCRIPTION IS ACCEPTED BY THE COMPANY ON THE 27 DAY OF December, 1996.

PALOMAR MEDICAL TECHNOLOGIES, INC.




                                 By:                        /s/
                                        ----------------------------------------
                                 Printed Name/Title:      Steven Georgiev
                                                     Chief Executive Officer
                                                              Chairman