SECURITIES PURCHASE AGREEMENT

         THIS AGREEMENT is by and between  Palomar  Medical  Technologies,  Inc.
(the  "Company"),  a Delaware  corporation with an office at 45 Hartwell Avenue,
Lexington,  Massachusetts  02173 U.S.A.,  and the purchasers (each a "Purchaser"
and,  collectively,  the  "Purchasers")  named on the purchaser  signature pages
hereto (the "Purchaser Signature Pages").

         IN CONSIDERATION  of the mutual  covenants  contained in this Agreement
and good and valuable  consideration,  the receipt and  sufficiency of which are
hereby acknowledged, the parties agree as follows:

         SECTION 1.  AUTHORIZATION OF SHARES. The Company has authorized (a) the
sale of up to 10,000,000  shares (the  "Shares") of the Company's  Common Stock,
par value $.01 per share (the "Common Stock"), and (b) the sale of warrants (the
"Warrants" and, together with the Shares, the "Securities") to purchase up to an
aggregate of 10,000,000 shares (the "Warrant Shares") of Common Stock.

         SECTION 2.  AGREEMENT  TO SELL AND  PURCHASE  THE  SECURITIES.  At each
Closing  (as  defined   below),   the  Company  will  sell  to  each   Purchaser
participating  in such  Closing,  and  each  such  Purchaser  will  buy from the
Company,  upon the terms and conditions  hereinafter  set forth,  the Securities
being  purchased by such  Purchaser.  The number of shares of Common Stock to be
purchased by each Purchaser,  and the number of Warrant Shares to be purchasable
under each  Purchaser's  Warrant,  shall be determined on the basis of the total
amount payable by such  Purchaser  (the  "Purchase  Price") as set forth on such
Purchaser's  Purchaser  Signature Page, based on an aggregate  purchase price of
$1.00 for each share of Common Stock and Warrant to purchase one share of Common
Stock.

         SECTION 3. PAYMENT OF PURCHASE PRICE. On or prior to each Closing Date,
as defined below,  each Purchaser that is purchasing  Securities on such Closing
Date will deliver to the Company the full amount of the Purchase  Price  payable
by such Purchaser by check or wire transfer.  Wire transfers  should be directed
as follows:

      Chase Manhattan Bank
      ABA No.:  021000021
      Account No.:  066296390

      Account Name:  Prudential Securities Incorporated
      For further credit to:    account no.:  ABX-960805-28
                                account name: Palomar Medical Technologies, Inc.

         SECTION  4.  THE  CLOSING.   The   consummation  of  the   transactions
contemplated by this Agreement (the "Closings") shall occur as to each Purchaser
on the date that all  conditions to Closing with respect to the Company and such
Purchaser  have been  satisfied  or at such other time as shall be agreed by the
Company and the Purchasers (the "Closing

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Date").  Within  thirty (30) days after each  Closing  Date,  the Company  shall
deliver to each Purchaser that purchased  Securities on such Closing Date one or
more certificates for the Securities registered in the name of such Purchaser or
its nominee.

         SECTION 5.  REPRESENTATIONS,  WARRANTIES  AND COVENANTS OF THE COMPANY.
The  Company  hereby  represents  and  warrants  to,  and  covenants  with,  the
Purchasers as follows:

               SECTION 5.1. ORGANIZATION. The Company is duly organized, validly
existing  and in good  standing  under  the laws of the State of  Delaware.  The
Company has full power and  authority to own and operate its  properties  and to
conduct its business as currently conducted and is registered or qualified to do
business and is in good standing in each jurisdiction in which it owns or leases
property or transacts  business  and where the failure to be so qualified  would
have  a  material  adverse  effect  upon  the  business,   financial  condition,
properties or operations of the Company.

               SECTION 5.2.  DUE  AUTHORIZATION.  The Company has all  requisite
power and authority to execute,  deliver and perform its obligations  under this
Agreement and the Warrants,  and this  Agreement and the Warrants have been duly
authorized  and validly  executed and  delivered  by the Company and  constitute
valid and binding agreements of the Company  enforceable  against the Company in
accordance  with  their  terms,  except  as  enforceability  may be  limited  by
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting  creditors' and contracting  parties'  rights  generally and except as
enforceability  may be subject to general  principles of equity  (regardless  of
whether such enforceability is considered in a proceeding in equity or at law).

               SECTION 5.3.  NON-CONTRAVENTION.  The  execution  and delivery of
this  Agreement and the Warrants,  the issuance and sale of the Securities to be
sold  by the  Company  hereunder,  and  the  consummation  of  the  transactions
contemplated  hereby will not conflict  with or  constitute  a violation  of, or
default (with the passage of time or otherwise) under, any material agreement or
instrument  to  which  the  Company  is a party  or by  which it is bound or the
Certificate of  Incorporation  (the "Charter") or the By-Laws of the Company nor
result in the creation or imposition of any lien,  encumbrance,  claim, security
interest or restriction whatsoever upon any of the material properties or assets
of the Company or an acceleration  of  indebtedness  pursuant to any obligation,
agreement or condition  contained in any material bond,  debenture,  note or any
other evidence of  indebtedness  or any material  indenture,  mortgage,  deed of
trust or any other agreement or instrument to which the Company is a party or by
which  the  Company  is bound or to which any of the  property  or assets of the
Company is subject,  nor conflict  with,  or result in a violation  of, any law,
administrative  regulation,  ordinance  or  order of any  court or  governmental
agency,  arbitration panel or authority  applicable to the Company.  No consent,
approval,  authorization  or other order of, or  registration,  qualification or
filing with, any regulatory body,  administrative  agency, or other governmental
body in the United  States,  other  than with  respect to "blue sky" laws and is
required by the rules and regulations of the Nasdaq SmallCap Market, is required
for the valid  issuance and sale of the  Securities  to be sold pursuant to this
Agreement (other than such as have been made or obtained).

                                       2
<PAGE>

               SECTION 5.4. THE SHARES; THE WARRANT SHARES. The Shares have been
duly  authorized,  and when issued and paid for in accordance  with the terms of
this  Agreement,  will be  validly  issued,  fully paid and  nonassessable.  The
Warrant  Shares  have  been duly  authorized,  and when  issued  and paid for in
accordance with the terms of the Warrants will be validly issued, fully paid and
nonassessable.  On and  after the later to occur of (i) six  months  after  each
Purchaser's  Closing Date and (ii) the first date following such Closing Date on
which the Closing  Price (as defined in the Warrants) of a share of Common Stock
has equaled or exceeded $2.50 for a period of ten (10) consecutive trading days,
the Company  shall reserve and keep  available,  solely for issuance or delivery
upon exercise of such Purchaser's Warrants, the number of shares of Common Stock
as from time to time shall be receivable upon the exercise of such Warrants.

               SECTION 5.5.  LEGAL  PROCEEDINGS.  Except as disclosed in the SEC
Filings  (as  defined  below),  there  is  no  material  legal  or  governmental
proceeding  pending  or,  to  the  knowledge  of  the  Company,   threatened  or
contemplated  to which the Company is or may be a party or of which the business
or property of the Company is or may be subject.

               SECTION  5.6.  NO  VIOLATIONS.  Except  as  disclosed  in the SEC
Filings, the Company is not in violation of its Charter or By-Laws, in violation
of any law,  administrative  regulation,  ordinance  or  order  of any  court or
governmental  agency,  arbitration panel or authority applicable to the Company,
which violation, individually or in the aggregate, would have a material adverse
effect on the business or financial  condition of the Company,  or in default in
any  material  respect  in the  performance  of  any  obligation,  agreement  or
condition  contained  in any  bond,  debenture,  note or any other  evidence  of
indebtedness in any indenture, mortgage, deed of trust or any other agreement or
instrument  to which the  Company is a party or by which the Company is bound or
by which the  properties of the Company are bound or affected,  and there exists
no  condition  which,  with the passage of time or the giving of notice or both,
would  constitute a material  default  under any such  document or instrument or
result in the  imposition  of any material  penalty or the  acceleration  of any
indebtedness.

               SECTION 5.7.  GOVERNMENTAL  PERMITS,  ETC. Except as disclosed in
the  SEC  Filings,   the  Company  has  all  necessary   franchises,   licenses,
certificates and other authorizations from any foreign,  federal, state or local
government  or  governmental  agency,  department,  or body  that are  currently
necessary  for  the  operation  of the  business  of the  Company  as  currently
conducted,  the  absence of which  would have a material  adverse  effect on the
business or operations of the Company.

               SECTION 5.8. FINANCIAL STATEMENTS. Except as disclosed in the SEC
Filings, the financial statements of the Company and the related notes contained
in the Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1996 and its Quarterly Report on Form 10-QSB for the quarter ended September
30, 1997,  present fairly the financial  position of the Company as of the dates
indicated  therein and its results of operations  and cash flows for the periods
therein specified.  Such financial statements 

                                       3
<PAGE>

(including  the related  notes) have been prepared in accordance  with generally
accepted  accounting  principles  applied on a consistent  basis  throughout the
periods therein specified and are true, correct and complete in all respects.

               SECTION 5.9. NO MATERIAL  ADVERSE CHANGE.  Except as disclosed in
the SEC Filings,  since  September  30,  1997,  the Company has not incurred any
material  liabilities or  obligations,  direct or contingent,  other than in the
ordinary course of business,  and there has not been any material adverse change
in its business, financial condition or results of operations.

               SECTION 5.10. ADDITIONAL INFORMATION.  The Company has filed in a
timely  manner all  documents  that the Company  was  required to file under the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act") during the 12
months   preceding  the  date  of  this  Agreement.   The  following   documents
(collectively,  the "SEC  Filings")  complied in all material  respects with the
requirements  of the Exchange Act or the Securities Act of 1933, as amended (the
"Securities  Act"),  as the  case  may be,  as of  their  respective  filing  or
effective dates, and the information  contained  therein was true and correct in
all material  respects as of the date or effective date of such  documents,  and
each of the following documents as of the date thereof did not contain an untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated  therein or necessary  to make the  statements  therein,  in light of the
circumstances under which they were made, not misleading:

               (a) The  Company's  Annual  Report on Form  10-KSB for the fiscal
year ended  December  31, 1996 and its  Quarterly  Report on Form 10-QSB for the
quarter ended September 30, 1997;

               (b) All other  documents,  if any,  filed by the Company with the
Securities and Exchange Commission (the "SEC") since September 30, 1997 pursuant
to the reporting requirements of the Exchange Act; and

               (c) Amendment No. 2 to the  Company's  Registration  Statement on
Form S-3 (No. 333-42129), filed with the SEC on January 9, 1998.

               SECTION 5.11. INTELLECTUAL PROPERTY. The Company has the right to
use all intellectual  property (the  "Intellectual  Property") now used by it in
its business.  The Company owns all right,  title and interest in and to, all of
the intellectual  property it owns, free and clear of any liens or encumbrances.
In any case in which the Company does not own the Intellectual  Property, it has
good and valid  licenses  for the same,  which are in full force and effect.  No
claims  have been  asserted  with  respect  to the use of any such  Intellectual
Property or challenging or questioning the validity or effectiveness of any such
license or agreement.

               SECTION 5.12. LISTING.  The Company shall use its best efforts to
comply with all requirements of the National  Association of Securities Dealers,
Inc.  (the "NASD") 

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<PAGE>

with respect to the issuance of the Shares and the listing of the Shares and the
Warrant Shares on the Nasdaq SmallCap Market.

               SECTION 5.13. USE OF PROCEEDS.  The Company will use the proceeds
of the sale of the Securities for the purpose of redeeming,  repurchasing and/or
repaying  certain  convertible  preferred  stock and/or  convertible  debentures
previously issued by it.

         SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.

         (a) Each Purchaser,  severally and not jointly, represents and warrants
to, and covenants with, the Company, as of the date hereof and as of the Closing
Date on which such Purchaser  acquires the Securities,  that: (i) such Purchaser
is an  "accredited  investor" as defined in Rule 501 of Regulation D promulgated
under the  Securities  Act; (ii) such  Purchaser is acquiring the Securities for
its own account for investment and with no present intention of distributing any
of such  Shares  other  than to any  affiliate  of such  Purchaser;  (iii)  such
Purchaser will not, directly or indirectly,  voluntarily  offer,  sell,  pledge,
transfer or  otherwise  dispose of (or  solicit  any offers to buy,  purchase or
otherwise  acquire  or  take a  pledge  of)  any of the  Securities,  except  in
compliance  with the  Securities Act and the rules and  regulations  promulgated
thereunder;  (iv) such  Purchaser  has received  and reviewed  copies of the SEC
Filings,  (v) such Purchaser has had an opportunity to ask questions and receive
answers from the management of the Company  regarding the Company,  its business
and the offering of the  Securities;  and (vi) such Purchaser has, in connection
with its decision to purchase Shares, relied solely upon the documents described
in Section 5.10 and the  representations and warranties of the Company contained
herein.

         (b) Each Purchaser agrees not to make any sale of the Securities except
pursuant to an effective  registration  statement under the Securities Act or an
exemption from the registration requirements thereof.

         (c) Each Purchaser,  severally and not jointly,  further represents and
warrants to, and covenants  with,  the Company that (i) such  Purchaser has full
right,  power,  authority  and  capacity  to enter  into this  Agreement  and to
consummate  the  transactions  contemplated  hereby and has taken all  necessary
action to authorize the execution,  delivery and  performance of this Agreement,
and (ii) upon the execution and delivery of this Agreement, this Agreement shall
constitute  a valid and binding  obligation  of such  Purchaser  enforceable  in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy,  insolvency,  reorganization,  moratorium or similar laws  affecting
creditors'   and   contracting   parties'   rights   generally   and  except  as
enforceability  may be subject to general  principles of equity  (regardless  of
whether such enforceability is considered in a proceeding in equity or at law).

         (d) Each  Purchaser,  severally  and not  jointly,  represents  that it
understands  and agrees  that,  until  registered  under the  Securities  Act or
transferred pursuant to the provisions of Rule 144 promulgated  thereunder,  all
certificates  evidencing  the Securities  and the Warrant  Shares,  

                                       5
<PAGE>

whether upon initial issuance or upon any transfer thereof, shall bear a legend,
prominently stamped or printed therein, reading substantially as follows:

                  "The securities  represented by this certificate have not been
         registered  under the Securities Act of 1933 or the securities  laws of
         any state.  These  securities have been acquired for investment and not
         with a view toward  distribution or resale.  Such securities may not be
         offered for sale, sold, delivered after sale,  transferred,  pledged or
         hypothecated  in the  absence of an  effective  registration  statement
         covering  such  securities  under  the  Act and  any  applicable  state
         securities  laws,  unless the holder shall have  obtained an opinion of
         counsel  satisfactory to the corporation that such  registration is not
         required."

         SECTION 7.  SURVIVAL OF  REPRESENTATIONS,  WARRANTIES  AND  AGREEMENTS.
Notwithstanding  any  investigation  made by any  party  to this  Agreement  all
covenants,  agreements,  representations  and warranties made by the Company and
the  Purchasers  herein  shall  survive the  execution  of this  Agreement,  the
delivery  to the  Purchasers  of the  Securities  being  purchased  and  payment
therefor.

         SECTION  8.  REGISTRATION  STATEMENT.  Within  120 days  after the date
hereof and, in any event,  subject to the receipt of necessary  information from
the Purchasers,  the Company shall file with the SEC a registration statement on
Form S-3  (the  "Registration  Statement"),  which  may  include  other  selling
stockholders,  providing  for the  resale of the  Warrant  Shares and the Shares
(collectively,  the "Registrable Shares") by the Purchasers from time to time in
accordance with Rule 415 promulgated under the Securities Act. The Company shall
use its best efforts to cause the  Registration  Statement  to become  effective
within 180 days after the date hereof and the Company shall use its best efforts
to keep the Registration  Statement  effective until the earlier of (a) the time
all the Registrable Shares have been sold pursuant to the Registration Statement
or (b) the  expiration  of the  Warrants.  The  Company  shall  furnish  to each
Purchaser such number of copies of the prospectus  contained in the Registration
Statement as such Purchaser  shall  reasonably  require to facilitate the public
sale of the Registrable Shares.

         SECTION 9.  LOCKUP  AGREEMENTS  WITH  UNDERWRITERS.  In the event of an
underwritten public offering of the Company's securities,  each Purchaser agrees
to enter into an agreement with the Underwriter or Underwriters'  Representative
for such offering  restricting  the sale,  transfer or other  disposition of the
Securities  and the Warrant Shares to the extent that such agreement is required
to be executed by members of senior management of the Company.

         SECTION 10.  PAYMENTS IN RESPECT OF UNSOLD  SHARES.  Within thirty (30)
days  following  May 31, 1998 and the end of each three month  period  following
such date,  the Company  shall pay to each  Purchaser an amount equal to $0.0125
multiplied by the number of Shares that continue to be held by such Purchaser or
its nominee named on the signature page to this Agreement as of such date.  Such
number of Shares shall be determined  by the Company  solely by reference to the
monthly list of  stockholders  furnished  to the Company 

                                       6
<PAGE>

by its transfer agent,  American Stock Transfer & Trust Company.  Each Purchaser
understands  and  agrees  that,  in  order  to  be  eligible  for  the  payments
contemplated by this Section, it must either continue to hold the certificate or
certificates  issued to it by the Company in  connection  with such  Purchaser's
Closing  or  provide  evidence  satisfactory  to  the  Company  that  any  other
certificate held by it represents the Shares or a portion  thereof.  The Company
shall send all  payments  by the  Company  pursuant  to this  Section 10 to each
Purchaser at such  Purchaser's  address  determined in  accordance  with Section
13(b) of this Agreement.

         SECTION 11. CONDITIONS TO CLOSING.

         (a) The  obligations of each  Purchaser to consummate the  transactions
contemplated  hereby shall be subject to the satisfaction by the Company of each
of the  following  conditions  on or  before  the  Closing  Date on  which  such
Purchaser  is to acquire  Securities,  any one or more of which may be waived by
such Purchaser:

               (i) The  representations  and warranties of the Company set forth
in this  Agreement  delivered to the  Purchasers  by or on behalf of the Company
shall be true and correct as if made on such Closing Date.

               (ii)  Each of the  covenants,  agreements  and  conditions  to be
performed and satisfied by the Company pursuant to this Agreement at or prior to
such Purchaser's Closing shall have been duly performed and satisfied.

               (iii) The Company shall have delivered an executed counterpart of
this Agreement to such Purchaser.

         (b) The  obligations  of the  Company to  consummate  the  transactions
contemplated hereby on each Closing Date shall be subject to the satisfaction by
each  Purchaser  acquiring  Securities  on  such  Closing  Date  of  each of the
following  conditions on or before such Closing  Date,  any one or more of which
may be waived by the Company:

               (i) The  representations  and  warranties  of such  Purchaser set
forth in this  Agreement  shall be true and  correct as if made on such  Closing
Date.

               (ii)  Each of the  covenants,  agreements  and  conditions  to be
performed and satisfied by such Purchaser pursuant to this Agreement at or prior
to such Purchaser's Closing shall have been duly performed and satisfied.

               (iii) Such  Purchaser  shall have paid the  Purchase  Price to be
paid by it in accordance with Section 3.

               (iv) Such Purchaser shall have delivered a completed and executed
Purchaser Signature Page to the Company.

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<PAGE>

         (c) The  Company  and each  Purchaser  shall use their best  efforts to
cause their respective  conditions to closing set forth in this Section 11 to be
satisfied.

         SECTION 12. NO BROKERS.  The parties hereto hereby represent that there
are no  brokers or finders  entitled  to  compensation  in  connection  with the
transactions  contemplated hereby, other than Fechtor, Detwiler & Co., Inc., who
will be paid a commission by the Company.

         SECTION  13.  NOTICES.  All  notices,  requests,   consents  and  other
communications  hereunder  shall be in writing,  shall be mailed by  first-class
registered or certified mail, postage prepaid, or sent by facsimile and shall be
deemed given when actually received:

         (a) if to the Company to:

                  Palomar Medical Technologies, Inc.
                  45 Hartwell Avenue
                  Lexington, MA 02173
                  Facsimile:  (781) 676-7330
                  Attention:  Paul S. Weiner, Director of Finance

         (b)  if to  any  Purchaser,  to  its  address  as  set  forth  on  such
Purchaser's  Purchaser  Signature Page, or to such other address or addresses as
may have been furnished to the Company in writing.

         SECTION  14.  CHANGES.  Any term of the  Agreements  may be  amended or
compliance  therewith  waived  with the  written  consent of the Company and the
holders of a majority of the Shares purchased pursuant to this Agreement.

         SECTION 15.  HEADINGS.  The  headings  of the various  sections of this
Agreement have been inserted for  convenience of reference only and shall not be
deemed to be part of this Agreement.

         SECTION 16. SEVERABILITY.  If any provision contained in this Agreement
shall be  invalid,  illegal  or  unenforceable  in any  respect,  the  validity,
legality and enforceability of the remaining  provisions  contained herein shall
not in any way be affected or impaired thereby.

         SECTION 17.  GOVERNING  LAW.  This  Agreement  shall be governed by and
construed  in  accordance  with  the  internal  laws  of  The   Commonwealth  of
Massachusetts and United States federal law.

         SECTION  18.  COUNTERPARTS.  This  Agreement  may  be  executed  in two
counterparts,  each of which shall  constitute  an original,  but both of which,
when taken  together,  shall  constitute  but one  instrument,  and shall become
effective  when one or more  counterparts  have been signed by each party hereto
and delivered to the other parties.

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<PAGE>

         IN WITNESS  WHEREOF,  the parties  hereto  have caused this  Securities
Purchase Agreement to be executed by their duly authorized representatives as of
the following date.

Dated:    , 1998                    PALOMAR MEDICAL TECHNOLOGIES, INC.
      ----


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

 [Purchaser Signature Page Continues on the Following Page]


<PAGE>


PURCHASER SIGNATURE PAGE

         The  undersigned  Purchaser  hereby  executes the  Securities  Purchase
Agreement with Palomar  Medical  Technologies,  Inc. (the  "Company") and hereby
authorizes  this signature page to be attached to a counterpart of such document
executed by a duly authorized officer of the Company.

                   Purchaser Name: 
                                   --------------------------

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

Amount of Investment: $
                       ------------------

Name in which Securities are to be registered:
                                               ---------------------------------

Address and facsimile number of registered holder:

--------------------------------------------------
--------------------------------------------------
facsimile number: 
                  --------------------------------

Social Security or Tax ID Number: 
                                  ----------------

Contact name and telephone number
regarding settlement and registration: 
                                       -----------------------------------------

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