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                       PALOMAR MEDICAL TECHNOLOGIES, INC.

                             STOCK OPTION AGREEMENT

     THIS AGREEMENT is made as of by and between PALOMAR  MEDICAL  TECHNOLOGIES,
INC., a Delaware corporation (the "Company"), and Name ("Employee").

     WHEREAS,  Employee is a valuable and trusted  employee of the Company,  and
the Company  considers it desirable and in its best  interests  that Employee be
given an  inducement to acquire a  proprietary  interest in the Company,  and an
added  incentive to advance the interests of the Company by possessing an option
to purchase  shares of the $.01 par value Common Stock ("Stock") of the Company,
in accordance with the Palomar Medical Technologies, Inc. 1996 Stock Option Plan
(the "Plan"); and

     WHEREAS, Employee is desirous of obtaining the option to purchase an equity
interest in the Company upon the terms herein contained; and

     WHEREAS,  if there is a number of shares listed under Column 2 in Paragraph
2 below,  the number of shares  listed are  intended  to qualify  for  favorable
federal  income tax treatment as Incentive  Stock  Options  issued in accordance
with a plan which meets the  criteria  set forth in Section 422 of the  Internal
Revenue Code of 1986, as amended (the "Code").

     NOW,  THEREFORE,  in consideration  of these premises,  it is agreed by and
between the parties as follows:

     1.  Grant of Option.  The  Company  hereby  grants to  Employee  the right,
privilege,  and option to purchase shares of the Stock at the aggregate purchase
price of Dollars  ($___________  per  share),  in the manner and  subject to the
conditions hereinafter provided.

     2. Time of Exercise of Option.  The aforesaid  option may be exercised with
respect  to those  shares  for  which an option  has been  granted  pursuant  to
Paragraph 1 hereof, on the dates set forth, respectively, in Column 1, Column 2,
Column 3 and  Column 4 below,  until the  termination  thereof  as  provided  in
Paragraph 4 hereof:

<TABLE>
          <C>                                          <C>                    <C>                    <C>
                                                        Column 2                Column 3              Column 4
                                                       Exercisable             Exercisable              Total
                                                        Incentive             Non-qualified          Exercisable
                     Column 1                             Stock                   Stock                 Stock
                      Period                             Options                 Options               Options

         AUGUST 27, 1996 - AUGUST 26, 1997                 12,500                  37,500                50,000
         AUGUST 27, 1997 - AUGUST 26, 1998                 25,000                  50,000                75,000
         AUGUST 27, 1998 - AUGUST 26, 1999                 37,500                  75,000               112,500
         AUGUST 27, 1999 - AUGUST 26, 2001                 50,000                  75,000               125,000

</TABLE>

<PAGE>
                                      -72-

     3. Method of Exercise.  An option may be  exercised  by (1) giving  written
notice to the Company  (a) stating  that the  optionee  wishes to exercise  such
option,  and (b)  specifying a date not less than ten (10) nor more than fifteen
(15) days after the date of such notice for the issuance of the shares of Stock,
(2)  delivering  the full  purchase  price  for the  shares  of  Stock,  and (3)
delivering  all other  documents  required  hereunder,  under the Plan and under
applicable laws and regulations  with regard to the purchase of shares of Stock.
The Employee  shall deliver the purchase  price in cash or by check or such form
of payment as has been  previously  approved by the Company's Board of Directors
or, as the case may be, the  committee  designated  by the Board of Directors to
administer the Plan.

     The  shares  of  Stock  issued  upon  exercise  of an  option  may  not  be
transferred   except  in  accordance  with  all  applicable  federal  and  state
securities  laws,  rules and  regulations  and the  certificates  evidencing the
shares of Stock issued may bear a legend to such effect. The Company may require
investment  or  residency  representations  from an  optionee  or  impose  other
restrictions  prior to  transfer.  Shares  of Stock  shall  not be  issued  upon
exercise of options until the Company shall have obtained any required  approval
of any governmental authority or of any stock exchange on which any stock of the
Company may be listed and the Company  and its  counsel are  satisfied  that the
proposed  transfer  complies with all  applicable  federal and state  securities
laws.  No optionee  shall have any rights of a  shareholder  of the Company with
respect to any shares of Stock subject to an option until such shares shall have
been paid for and issued upon exercise of the option.

     An option may be exercised in whole or in part from time to time  provided,
however,  that an  option  may not be  exercised  as to less  than one  thousand
(1,000) shares at any time, unless it is being exercised in full and the balance
of shares subject to option is less than one thousand (1,000).

     4. Termination of Option.  Except as herein otherwise provided,  the option
to  the  extent  not  theretofore  exercised  shall  terminate  upon  one of the
following dates, as applicable:

          (a)  The  date  on  which  Employee's  employment  by the  Company  is
     terminated  (except  if such  termination  be by  reason  of the  death  or
     disability of Employee or as otherwise  provided in paragraph 4(d) hereof),
     without  regard to unused  vacation  or other  leave days or any  vacation,
     severance or other payments on termination;

          (b) With  regard to any option  which the  Employee  was  entitled  to
     exercise  on the date on which  Employee's  employment  by the  Company  is
     terminated,  the  expiration  of  twelve  (12)  months  after  such date of
     termination, if such termination be by reason of Employee's permanent total
     disability; or

          (c) With  regard to any option  which the  Employee  was  entitled  to
     exercise  on the date on which  Employee's  employment  by the  Company  is
     terminated,  the  expiration  of  three  (3)  months  after  such  date  of
     termination if such  termination  be by reason of Employee's  retirement or
     Employee's dismissal by the Company for reasons other than cause; or

          (d) With  regard to any option  which the  Employee  was  entitled  to
     exercise on the date of  Employee's  death,  the  expiration of twelve (12)
     months following such date of death if 

<PAGE>
                                      -73-

     such death  occurs  while the  Employee  is in the employ of the Company or
     during the twelve (12) or three (3) month periods set forth in (b) and (c),
     above; or

          (e) The  expiration of the exercise  period of the option as stated in
     item  number 2 above,  but in no event  more than 10 years from the date of
     issue or 20 years from the effective date of the Plan.

     5. Reclassification,  Consolidation,  Acquisition, or Merger. If and to the
extent  that the number of issued  shares of the Stock of the  Company  shall be
increased or reduced by change in par value,  merger,  exchange of shares, split
up, reclassification,  distribution of a dividend payable in stock, or the like,
the number of shares subject to this option and the option price per share shall
be  proportionately  adjusted such that each outstanding option shall thereafter
be  exercisable  for such  securities,  cash and/or other property as would have
been  received in respect of the shares of Stock subject to such option had such
option been  exercised in full  immediately  prior to such  change,  and such an
adjustment shall be made successively each time any such change shall occur.

     6.   Transferability   Prior  to  Exercise   of  Option.   This  option  is
non-transferable  by  Employee,  except  in the  event of death as  provided  in
paragraph 4(d) above,  and during  Employee's  lifetime is  exercisable  only by
Employee,  or in the event of employee's  incompetence,  by the employee's legal
guardian  or other  legal  representative.  Employee  shall  have no rights as a
stockholder  with respect to the option shares until payment of the option price
and delivery to Employee of such shares as herein provided.

     7.  Restrictions on Transfer.  All shares acquired by Employee  pursuant to
the Plan  and  this  Incentive  Stock  Option  Agreement  shall  be  subject  to
restrictions  on sale,  encumbrance  and other  disposition  under  the  Federal
Securities Act of 1933 (the "Act") and applicable  state  securities  laws. Such
restrictions  shall  continue in effect until (i) the Company causes said shares
to be registered under the Act and any applicable state securities laws, or (ii)
the shares may be transferred  pursuant to the availability of a valid exemption
from registration under the Act and any applicable state securities laws. In the
event shares of Stock shall be issued which are not so registered,  the Employee
agrees that he will  receive such shares for  investment  and not with a view to
the  resale  or  distribution   thereof,  and  further  agrees  that  the  stock
certificate  or  certificates  evidencing  such shares may bear a legend setting
forth such restrictions and their transferability.

     8. No Employment  Obligation.  The granting of an option as provided herein
shall not give rise to any obligation on the part of the Company to continue the
employment  of the optionee or evidence any  intention or  understanding  of the
Company with respect to any of the terms or conditions of such employment.

     9. In the event of a sale or acquisition of substantially  all of the stock
or assets of the Company, the Company shall give thirty (30) days notice of such
an event to you and you may exercise up to 100% of this option  before the event
takes place.  The terms of this provision  shall not be void if the inclusion of
this provision in the option  agreement  causes this option not to qualify as an
Incentive Stock Option under Section 422 of the code.

<PAGE>
                                      -74-

     10.  Notice to the  Company  of  Disqualifying  Disposition.  If there is a
number of shares listed under Column 2 in Paragraph 2 above, the Employee hereby
agrees to promptly give notice to the Company in the event that Employee  sells,
transfers,  exchanges or otherwise  disposes of any stock  obtained  pursuant to
this option before the later of (a) the second  anniversary of the date of grant
set forth at the conclusion of this  Agreement and (b) the first  anniversary of
the date on which the Stock was transferred to Employee pursuant to the exercise
of this option.

     11.  Subject to Plan.  This  Agreement is subject to and  controlled by the
terms and conditions of the Palomar Medical Technologies, Inc. 1996 Stock Option
Plan, which Plan is incorporated  herein by reference.  To the extent that there
is any  inconsistency  between the terms of this  Agreement and any provision of
the Plan, the Plan shall control.

     12.  Miscellaneous.  This  Agreement  shall  inure to the benefit of and be
binding  upon  the  parties  hereto  and  their  respective  heirs,   executors,
administrators,  successors  and  assigns,  and shall be  interpreted  under and
controlled  by the  laws  of The  Commonwealth  of  Massachusetts.  All  notices
required  hereunder  shall be in  writing  and  shall be deemed  delivered  when
received  if  notice is given by  personal  delivery,  or three  (3) days  after
mailing if notice is given by mailing,  by or registered mail,  postage prepaid,
return receipt requested, or one (1) after being delivered to Federal Express or
other comparable overnight courier, delivery charges prepaid,  addressed, in the
case of the Company, to its principal offices,  and, in the case of Employee, to
the address on file with the Company.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed on the day and year first above written.


                                              PALOMAR MEDICAL TECHNOLOGIES, INC.


                                              By:
                                                  ------------------------------
                                                    Officer Name:
                                                    Officer Title:
                                                       [Corporate Seal]


ACKNOWLEDGMENT AND ACCEPTANCE:





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