168

THIS  SECURITY  HAS NOT BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933 OR
APPLICABLE  STATE  SECURITIES  LAWS  AND  MAY NOT BE  SOLD,  OFFERED  FOR  SALE,
TRANSFERRED,  PLEDGED OR  OTHERWISE  DISPOSED  OF UNLESS IT HAS BEEN  REGISTERED
UNDER  THOSE  LAWS OR UNLESS  THE  COMPANY  HAS  RECEIVED  AN OPINION OF COUNSEL
SATISFACTORY TO IT THAT AN EXEMPTION FROM REGISTRATION  UNDER EACH OF THOSE LAWS
IS AVAILABLE.

                                             Right to  Purchase  304,259
                                             Shares of Common  Stock of
                                             Palomar Medical Technologies, Inc.

                       PALOMAR MEDICAL TECHNOLOGIES, INC.

                          COMMON STOCK PURCHASE WARRANT


     PALOMAR MEDICAL TECHNOLOGIES,  INC., a Delaware corporation (the "Company")
hereby  certifies  that,  for value  received,  GFL  Advantage  Fund  Limited or
registered assigns (the "Holder"),  is entitled,  subject to the terms set forth
below,  to purchase  from the Company at any time or from time to time after the
date hereof,  and before 5:00 p.m., New York City time, on the  Expiration  Date
(as hereinafter defined),  304,259 fully paid and nonassessable shares of Common
Stock,  $.01 par value per share,  of the Company at a purchase  price per share
equal to the Purchase Price (as hereinafter defined).  The number of such shares
of Common Stock and the Purchase  Price are subject to adjustment as provided in
this Warrant.

     As used herein the following terms,  unless the context otherwise requires,
have the following respective meanings:

          (a) The term  "Business  Day" as used herein shall mean a day on which
     the New York Stock Exchange is open for business.

          (b) The term "Common Stock" includes the Company's Common Stock,  $.01
     par  value per  share,  as  authorized  on the date  hereof,  and any other
     securities  into which or for which the Common  Stock may be  converted  or
     exchanged pursuant to a plan of recapitalization,  reorganization,  merger,
     sale of assets or otherwise.

          (c) The term "Company"  shall include  Palomar  Medical  Technologies,
     Inc. and any corporation  that shall succeed to or assume the obligation of
     Palomar Medical Technologies, Inc. hereunder.

<PAGE>
                                      169

          (d) The term "Expiration Date" refers to April 17, 2001.

          (e) The term "Other Securities" refers to any stock (other than Common
     Stock) and other  securities of the Company or any other person  (corporate
     or  otherwise)  which  the  Holder  of this  Warrant  at any time  shall be
     entitled  to  receive,  or shall have  received,  on the  exercise  of this
     Warrant,  in lieu of or in addition to Common  Stock,  or which at any time
     shall  be  issuable  or  shall  have  been  issued  in  exchange  for or in
     replacement of Common Stock or Other Securities pursuant to Section 4.

          (f) The term "Purchase Price" shall mean $15.00, subject to adjustment
     as provided in this Warrant.

     1. EXERCISE OF WARRANT.

     1.1  EXERCISE.  (a) This Warrant may be  exercised by the Holder  hereof in
full or in part at any time or from  time to time  during  the  exercise  period
specified in the first  paragraph  hereof until the Expiration Date by surrender
of this Warrant and the subscription form annexed hereto (duly executed) by such
Holder, to the Company at its principal office,  accompanied by payment, in cash
or by  certified or official  bank check  payable to the order of the Company in
the amount  obtained  by  multiplying  (a) the number of shares of Common  Stock
designated by the Holder in the subscription form by (b) the Purchase Price then
in effect.  On any partial exercise the Company will forthwith issue and deliver
to or upon the order of the  Holder  hereof a new  Warrant or  Warrants  of like
tenor,  in the name of the Holder hereof or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may request, providing in the aggregate
on the face or faces  thereof for the purchase of the number of shares of Common
Stock for which such Warrant or Warrants may still be exercised.

          (b)  Notwithstanding  any other provision of this Warrant, in no event
     shall GFL Advantage Fund Limited  ("Advantage")  be entitled at any time to
     purchase a number of shares of Common  Stock on exercise of this Warrant in
     excess of that number of shares  upon  purchase of which the sum of (1) the
     number of shares of Common Stock  beneficially  owned by Advantage,  or any
     person  associated with, or serving as an adviser to Advantage (each a "GFL
     Person" and  collectively,  the "GFL Persons") (other than shares of Common
     Stock deemed  beneficially  owned through the ownership of the  unexercised
     portion of this Warrant and shares of Series E Convertible Preferred Stock,
     $.01 par value, of the Company  beneficially  owned by all GFL Persons) and
     (2) the number of shares of Common  Stock  issuable  upon  exercise  of the
     portion of this  Warrant with  respect to which the  determination  in this
     sentence is being made,  would  result in  beneficial  ownership by any GFL
     Person of more than 4.9% of the  

<PAGE>
                                      170

     outstanding  shares  of  Common  Stock.  For  purposes  of the  immediately
     preceding sentence,  beneficial ownership shall be determined in accordance
     with Section 13(d) of the Securities Exchange Act of 1934, as amended,  and
     Regulation 13D-G thereunder,  except as otherwise provided in clause (1) of
     the immediately  preceding  sentence.  For purposes of the second preceding
     sentence,  the  Company  shall  be  entitled  to rely,  and  shall be fully
     protected in relying,  on any statement or representation made by Advantage
     to the Company in  connection  with a particular  exercise of this Warrant,
     without  any  obligation  on the part of the Company to make any inquiry or
     investigation  or to examine  its  records or the  records of any  transfer
     agent for the Common Stock.

     1.2 NET  ISSUANCE.  Notwithstanding  anything to the contrary  contained in
Section  1.1,  in the case of any  exercise  on or prior to April  17,  1998 the
Holder  may elect to  exercise  this  Warrant  in whole or in part by  receiving
shares of Common Stock equal to the net issuance value (as determined  below) of
this  Warrant,  or any  part  hereof,  upon  surrender  of this  Warrant  at the
principal office of the Company together with notice of such election,  in which
event the Company  shall issue to the Holder a number of shares of Common  Stock
computed using the following formula:

                  X = Y (A-B)
                        -----
                          A

         Where:   X =    the number of shares of Common Stock to be
                         issued to the Holder

                  Y =    the  number  of  shares  of  Common  Stock as to
                         which  this  Warrant  is to be exercised

                  A      = the current  fair market value of one share of Common
                         Stock calculated as of the last trading day immediately
                         preceding the exercise of this Warrant

                  B =    the Purchase Price

     As used herein, current fair market value of Common Stock as of a specified
date shall mean with  respect to each share of Common  Stock the  average of the
closing bid prices of the Common  Stock on the  principal  securities  market on
which the Common Stock may at the time be traded over a period of five  Business
Days  consisting of the day as of which the current fair market value of a share
of Common Stock is being  determined  (or if such day is not a Business Day, the
Business Day next  preceding  such day) and the four  consecutive  Business Days
prior to such day. If on the date for which  current  fair market value is to be
determined  the Common  Stock is not  eligible  for  trading  on any  securities
market, the current fair market value of Common 

<PAGE>
                                      171

Stock shall be the highest  price per share which the Company  could then obtain
from a willing  buyer (not a current  employee or director) for shares of Common
Stock sold by the Company, from authorized but unissued shares, as determined in
good faith by the Board of Directors  of the Company,  unless prior to such date
the Company has become subject to a merger,  acquisition or other  consolidation
pursuant  to which the  Company is not the  surviving  party,  in which case the
current  fair market  value of the Common  Stock shall be deemed to be the value
received by the holders of the  Company's  Common  Stock for each share  thereof
pursuant to the Company's acquisition.

     2.  DELIVERY  OF  STOCK  CERTIFICATES,   ETC.,  ON  EXERCISE.  As  soon  as
practicable  after the exercise of this  Warrant,  and in any event within three
days thereafter,  the Company at its expense (including the payment by it of any
applicable  issue or stamp  taxes)  will  cause to be  issued in the name of and
delivered to the Holder  hereof,  or as such Holder (upon payment by such Holder
of any applicable  transfer taxes) may direct, a certificate or certificates for
the  number of fully  paid and  nonassessable  shares of Common  Stock (or Other
Securities)  to which such Holder  shall be entitled on such  exercise,  in such
denominations  as  may be  requested  by  such  Holder,  plus,  in  lieu  of any
fractional share to which such Holder would otherwise be entitled, cash equal to
such fraction multiplied by the then current fair market value (as determined in
accordance with subsection 1.2) of one full share, together with any other stock
or other securities any property  (including  cash,  where  applicable) to which
such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

     3.   ADJUSTMENT   FOR   DIVIDENDS   IN   OTHER   STOCK,   PROPERTY,   ETC.;
RECLASSIFICATION, ETC. In case at any time or from time to time, all the holders
of Common Stock (or Other Securities)  shall have received,  or (on or after the
record date fixed for the  determination  of  stockholders  eligible to receive)
shall have become entitled to receive, without payment therefor,

          (a) other or additional  stock or other  securities or property (other
     than cash) by way of dividend, or

          (b) any cash (excluding cash dividends  payable solely out of earnings
     or earned surplus of the Company), or

          (c)  other  or  additional  stock  or  other  securities  or  property
     (including   cash)  by  way  of   spin-off,   split-up,   reclassification,
     recapitalization, combination of shares or similar corporate rearrangement,

other than additional shares of Common Stock (or Other  Securities)  issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in Section 5), then and in each such case the Holder of this Warrant, on the
exercise  hereof as  provided  in Section 1, shall be  entitled  to receive  the

<PAGE>
                                      172

amount of stock and other  securities and property  (including cash in the cases
referred  to in  subdivisions  (b) and (c) of this  Section 3) which such Holder
would  hold on the date of such  exercise  if on the date  hereof the Holder had
been the holder of record of the number of shares of Common  Stock called for on
the face of this  Warrant  and had  thereafter,  during the period from the date
hereof to and including the date of such exercise,  retained such shares and all
such other or additional stock and other securities and property (including cash
in the  case  referred  to in  subdivisions  (b)  and  (c) of  this  Section  3)
receivable by the Holder as aforesaid  during such period,  giving effect to all
adjustments called for during such period by Section 4.

     4. EXERCISE UPON REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at any
time or from time to time,  the Company shall (a) effect a  reorganization,  (b)
consolidate  with or  merge  into  any  other  person,  or (c)  transfer  all or
substantially all of its properties or assets to any other person under any plan
or arrangement  contemplating the dissolution of the Company, then, in each such
case,  as a condition of such  reorganization,  consolidation,  merger,  sale or
conveyance, the Company shall give at least 30 days notice to the Holder of such
pending  transaction  whereby the Holder  shall have the right to exercise  this
Warrant  prior  to any  such  reorganization,  consolidation,  merger,  sale  or
conveyance. Any exercise of this Warrant pursuant to notice under this paragraph
shall be  conditioned  upon the closing of such  reorganization,  consolidation,
merger,  sale or conveyance  which is the subject of the notice and the exercise
of this Warrant shall not be deemed to have occurred until  immediately prior to
the closing of such transaction.

     5. ADJUSTMENT FOR EXTRAORDINARY EVENTS. In the event that the Company shall
(i)  issue  additional  shares  of the  Common  Stock  as a  dividend  or  other
distribution  on  outstanding  Common Stock,  (ii)  subdivide or reclassify  its
outstanding  shares of Common Stock, or (iii) combine its outstanding  shares of
Common Stock into a smaller number of shares of Common Stock, then, in each such
event,  the Purchase  Price  shall,  simultaneously  with the  happening of such
event,  be adjusted by multiplying  the then Purchase  Price by a fraction,  the
numerator  of which  shall be the number of shares of Common  Stock  outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common  Stock  outstanding  immediately  after such event,  and the
product so obtained shall  thereafter be the Purchase Price then in effect.  The
Purchase Price, as so adjusted,  shall be readjusted in the same manner upon the
happening of any successive  event or events described herein in this Section 5.
The Holder of this Warrant shall thereafter,  on the exercise hereof as provided
in  Section 1, be  entitled  to receive  that  number of shares of Common  Stock
determined  by  multiplying  the 

<PAGE>
                                      173

number of shares of Common Stock which would be
issuable on such exercise as of immediately prior to such issuance by a fraction
of which (i) the numerator is the Purchase Price in effect  immediately prior to
such issuance and (ii) the  denominator  is the Purchase  Price in effect on the
date of such exercise.

     6.  FURTHER  ASSURANCES.  The  Company  will  take all  action  that may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and  nonassessable  shares of stock,  free from all taxes,  liens and
charges with respect to the issue thereof, on the exercise of all or any portion
of this Warrant from time to time outstanding.

     7. NOTICES OF RECORD DATE, ETC. In the event of

          (a) any taking by the  Company of a record of the holders of any class
     of securities  for the purpose of determining  the holders  thereof who are
     entitled  to  receive  any  dividend  on,  or any right to  subscribe  for,
     purchase or otherwise acquire any shares of stock of any class or any other
     securities or property, or to receive any other right, or

          (b) any capital reorganization of the Company, any reclassification or
     recapitalization of the capital stock of the Company or any transfer of all
     or  substantially  all of the assets of the Company to or  consolidation or
     merger of the Company with or into any other person, or

          (c)  any  voluntary  or   involuntary   dissolution,   liquidation  or
     winding-up of the Company,

then and in each such event the  Company  will mail or cause to be mailed to the
Holder, at least ten days prior to such record date, a notice specifying (i) the
date on which any such record is to be taken for the  purpose of such  dividend,
distribution  or right,  and stating the amount and character of such  dividend,
distribution  or  right,  (ii)  the  date  on  which  any  such  reorganization,
reclassification,    recapitalization,    transfer,    consolidation,    merger,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed,  as of which  the  holders  of  record  of  Common  Stock (or Other
Securities) shall be entitled to exchange their shares of Common Stock (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification,    recapitalization,    transfer,    consolidation,    merger,
dissolution,  liquidation or  winding-up,  and (iii) the amount and character of
any stock or other  securities,  or  rights or  options  with  respect  thereto,
proposed to be issued or granted,  the date of such proposed  issue or grant and
the  persons or class of persons to whom such  proposed  issue or grant is to be
offered or made. Such notice shall also state that the action in question or the
record date is subject to the  effectiveness  of a registration  statement under
the Securities 

<PAGE>
                                      174

Act of  1933,  as  amended  (the  "Securities  Act"),  or a  favorable  vote  of
stockholders  if either is  required.  Such notice  shall be mailed at least ten
days prior to the date  specified  in such notice on which any such action is to
be taken or the record date, whichever is earlier.

     8.  RESERVATION  OF STOCK,  ETC.,  ISSUABLE ON EXERCISE  OF  WARRANTS.  The
Company will at all times  reserve and keep  available,  solely for issuance and
delivery on the exercise of this  Warrant,  all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of this Warrant.

     9.  TRANSFER OF  WARRANT.  This  Warrant  shall inure to the benefit of the
successors to and assigns of the Holder.  This Warrant and all rights hereunder,
in whole or in part,  is  registrable  at the  office or  agency of the  Company
referred  to below by the  Holder  hereof in  person  or by his duly  authorized
attorney, upon surrender of this Warrant properly endorsed.

     10.  REGISTER OF WARRANTS.  The Company  shall  maintain,  at the principal
office of the Company (or such other office as it may designate by notice to the
Holder  hereof),  a  register  in which the  Company  shall  record the name and
address of the person in whose name this Warrant has been issued, as well as the
name and address of each successor and prior owner of such Warrant.  The Company
shall  be  entitled  to treat  the  person  in whose  name  this  Warrant  is so
registered as the sole and absolute owner of this Warrant for all purposes.

     11. EXCHANGE OF WARRANT.  This Warrant is exchangeable,  upon the surrender
hereof by the Holder  hereof at the office or agency of the Company  referred to
in Section 10, for one or more new  Warrants of like tenor  representing  in the
aggregate the right to subscribe for and purchase the number of shares of Common
Stock which may be subscribed for purchase hereunder,  each of such new Warrants
to represent  the right to subscribe  for and purchase  such number of shares as
shall be designated by said Holder hereof at the time of such surrender.

     12. REPLACEMENT OF WARRANT. On receipt of evidence reasonably  satisfactory
to the Company of the loss,  theft,  destruction  or  mutilation of this Warrant
and, in the case of any such loss,  theft or  destruction  of this  Warrant,  on
delivery of an indemnity agreement or security  reasonably  satisfactory in form
and amount to the Company or, in the case of any such  mutilation,  on surrender
and  cancellation  of this Warrant,  the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

     13.  WARRANT  AGENT.  The  Company  may,  by written  notice to the Holder,
appoint  an agent  having an office in the  United  States of  America,  for the
purpose of issuing  Common Stock (or 

<PAGE>
                                      175

Other  Securities)  on the  exercise  of this  Warrant  pursuant  to  Section 1,
exchanging  this  Warrant  pursuant to Section 11, and  replacing  this  Warrant
pursuant  to  Section  12,  or any of the  foregoing,  and  thereafter  any such
issuance,  exchange or  replacement,  as the case may be,  shall be made at such
office by such agent.

     14. REMEDIES. The Company stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Company
in the  performance  of or compliance  with any of the terms of this Warrant are
not and will not be adequate,  and that such terms may be specifically  enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.

     15. NO RIGHTS OR  LIABILITIES  AS A  STOCKHOLDER.  This  Warrant  shall not
entitle the Holder  hereof to any voting rights or other rights as a stockholder
of the  Company.  No provision of this  Warrant,  in the absence of  affirmative
action by the Holder hereof to purchase  Common Stock,  and no mere  enumeration
herein of the rights or privileges of the Holder hereof,  shall give rise to any
liability  of such  Holder for the  Purchase  Price or as a  stockholder  of the
Company,  whether  such  liability is asserted by the Company or by creditors of
the Company.

     16. NOTICES,  ETC. All notices and other communications from the Company to
the registered  Holder of this Warrant shall be mailed by first class  certified
mail, postage prepaid, at such address as may have been furnished to the Company
in  writing  by such  Holder  or at the  address  shown  for such  Holder on the
register of Warrants referred to in Section 10.

     17.  TRANSFER  RESTRICTIONS.  By  acceptance  of this  Warrant,  the Holder
represents  to the Company that this Warrant is being  acquired for the Holder's
own  account and for the  purpose of  investment  and not with a view to, or for
sale in  connection  with,  the  distribution  thereof,  nor  with  any  present
intention of  distributing  or selling the Warrant or the Common Stock  issuable
upon  exercise  of the  Warrant.  The Holder  acknowledges  and agrees that this
Warrant and, except as otherwise  provided in the Registration  Rights Agreement
by and  between  the  Company  and the  original  Holder  of this  Warrant  (the
"Registration  Rights  Agreement"),  the Common Stock  issuable upon exercise of
this  Warrant  (if any)  have not been  (and at the time of  acquisition  by the
Holder,  will not have been or will not be), registered under the Securities Act
or under the securities  laws of any state,  in reliance upon certain  exemptive
provisions of such statutes. The Holder further recognizes and acknowledges that
because  this  Warrant  and,  except  as  provided  in the  Registration  Rights
Agreement,  the Common Stock issuable upon exercise of this Warrant (if any) are
unregistered, they may not 

<PAGE>
                                      176

be  eligible  for  resale,  and may only be resold in the future  pursuant to an
effective  registration  statement  under the  Securities Act and any applicable
state securities  laws, or pursuant to a valid exemption from such  registration
requirements.  Unless the shares of Common Stock  issuable upon exercise of this
Warrant have  theretofore  been  registered for resale under the Securities Act,
the Company may require, as a condition to the issuance of Common Stock upon the
exercise  of this  Warrant (i) in the case of an  exercise  in  accordance  with
Section 1.1 hereof,  a  confirmation  as of the date of exercise of the Holder's
representations  pursuant to this Section 17, or (ii) in the case of an exercise
in  accordance  with  Section  1.2  hereof,  an opinion  of  counsel  reasonably
satisfactory  to the Company  that the shares of Common  Stock to be issued upon
such exercise may be issued without registration under the Securities Act.

     18. LEGEND.  Unless theretofore  registered for resale under the Securities
Act, each certificate for shares issued upon exercise of this Warrant shall bear
the following legend:

               The  securities  represented  by this  certificate  have not been
               registered  under the  Securities  Act of 1933,  as amended.  The
               securities have been acquired for investment and may not be sold,
               transferred   or  assigned   in  the  absence  of  an   effective
               registration  statement for the  securities  under the Securities
               Act  of  1933,  as  amended,   or  an  opinion  of  counsel  that
               registration is not required under said Act.

     19.  MISCELLANEOUS.  This  Warrant  and any terms  hereof  may be  changed,
waived,  discharged or terminated only by an instrument in writing signed by the
party against which enforcement or such change, waiver, discharge or termination
is sought.  This Warrant shall be construed and enforced in accordance  with and
governed by the  internal  laws of the State of  Delaware.  The headings in this
Warrant are for  purposes of  reference  only,  and shall not limit or otherwise
affect  any of the terms  hereof.  The  invalidity  or  unenforceability  of any
provision  hereof shall in no way affect the validity or  enforceability  of any
other provision.

<PAGE>
                                      177

     IN WITNESS  WHEREOF,  Palomar  Medical  Technologies,  Inc. has caused this
Warrant to be  executed  on its  behalf by one of its  officers  thereunto  duly
authorized.

Dated:          , 1996                        PALOMAR MEDICAL TECHNOLOGIES, INC.



                                              By:             /s/
                                            -------------------------------
                                                     Joseph P. Caruso
                                              Title: Chief Financial Officer

<PAGE>
                                      178

                              FORM OF SUBSCRIPTION

                   (To be signed only on exercise of Warrant)

TO PALOMAR MEDICAL TECHNOLOGIES, INC.

     1. The undersigned Holder of the attached original, executed Warrant hereby
elects to  exercise  its  purchase  right  under such  Warrant  with  respect to
______________  shares of Common  Stock,  as defined in the Warrant,  of Palomar
Medical Technologies, Inc. (the "Company").

     2. The undersigned Holder

          (a)  elects to pay the  aggregate  purchase  price for such  shares of
               Common Stock (the  "Exercise  Shares") (i) by lawful money of the
               United  States or the enclosed  certified or official  bank check
               payable in United  States  dollars to the order of the Company in
               the amount of  $___________,  or (ii) by wire  transfer of United
               States  funds to the  account  of the  Company  in the  amount of
               $____________,   which   transfer   has  been   made   before  or
               simultaneously  with the  delivery  of this Form of  Subscription
               pursuant to the instructions of the Company;

                  or

          (b)  elects to receive  shares of Common Stock having a value equal to
               the value of the Warrant  calculated in  accordance  with Section
               1.2 of the Warrant.

     3.  Please  issue a stock  certificate  or  certificates  representing  the
appropriate  number of shares of Common Stock in the name of the  undersigned or
in such other names as is specified below:

     4. If this form is being  submitted by GFL Advantage Fund Limited  ("GFL"),
GFL hereby  represents  to the Company that the exercise of the Warrant  elected
hereby does not violate Section 1.1(b) of the Warrant.

         Name:
                  -------------------------------------

         Address:
                  -------------------------------------

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


Dated:                   199
       ------------ ---,    --                      ----------------------------
                                                    (Signature  must  conform
                                                    to name of  Holder  as
                                                    specified on the face of the
                                                    Warrant)

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

----------------------------
        (Address)