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                          SECURITIES PURCHASE AGREEMENT

     SECURITIES  PURCHASE  AGREEMENT (this  "AGREEMENT"),  dated as of March 27,
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 and each of the
purchasers  (the  "PURCHASERS")  set forth on the  execution  pages  hereof (the
"Execution Pages").

     WHEREAS:

     A. The  Company  and each  Purchaser  are  executing  and  delivering  this
Agreement in reliance upon the exemption from securities  registration  afforded
by Section  4(2) of the  Securities  Act of 1933,  as amended  (the  "SECURITIES
ACT");

     B. Each Purchaser desires to purchase, upon the terms and conditions stated
in this  Agreement,  shares (the "PREFERRED  SHARES") of the Company's  Series H
Convertible  Preferred  Stock,  par  value  $.01 per share  ("PREFERRED  STOCK")
convertible into its common stock, par value $.01 per share, of the Company (the
"COMMON STOCK"). The rights,  preferences and privileges of the Preferred Stock,
including the terms upon which such Preferred  Stock is convertible  into shares
of  Common  Stock  are set  forth in the form of  Certificate  of  Designations,
Preferences  and  Rights  attached  hereto  as  Exhibit A (the  "CERTIFICATE  OF
DESIGNATIONS").  The shares of Common  Stock  issuable  upon  conversion  of the
Preferred  Shares or otherwise  pursuant to the Certificate of Designations  are
referred  to  herein  as the  "CONVERSION  SHARES".  The  Preferred  Shares  and
Conversion Shares are collectively referred to herein as the "SECURITIES."

     C. Contemporaneous  with the execution and delivery of this Agreement,  the
parties hereto are executing and delivering a Registration Rights Agreement,  in
the form attached  hereto as Exhibit B (the  "REGISTRATION  RIGHTS  AGREEMENT"),
pursuant to which the Company has agreed to provide certain  registration rights
under the Securities Act and the rules and regulations  promulgated  thereunder,
and applicable state securities laws;

     NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:

     1. PURCHASE AND SALE OF PREFERRED SHARES.

          a.  Purchase of  Preferred  Shares.  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 each
     Purchaser and each Purchaser severally agrees to purchase from the Company,
     such  number  of  Preferred  Shares  as is set  forth  on such  Purchaser's
     signature  page  
<PAGE>
                                      327


     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
     the  Purchasers  shall  be Six  Million  Dollars  ($6,000,000.00).  For the
     avoidance of doubt, in no event shall any Purchaser be required to purchase
     more than the number of Preferred  Shares being subscribed for hereunder by
     such Purchaser as set forth on such Purchaser'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 one additional closing within 60 days of the Closing Date (such closing,
     if any, is herein referred to as the "ADDITIONAL CLOSING").

          b. Form of Payment.  On the Closing Date, each Purchaser shall pay the
     aggregate  Purchase Price for the Preferred  Shares being purchased by such
     Purchaser hereunder 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 such
     Purchaser hereunder and the Company shall deliver such certificates against
     delivery of such aggregate Purchase Price.

          c.  Closing  Date.  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  pursuant to this
     Agreement  (the  "CLOSING  DATE") shall be 12:00 noon eastern time on March
     27, 1997, (subject to a two (2) business day grace period at either party's
     option),  or such other time as may be mutually  agreed upon by the Company
     and the Purchasers. The closing shall occur at the offices of Foley, Hoag &
     Eliot, LLP, One Post Office Square, Boston, MA 02109.

     2. PURCHASERS' REPRESENTATIONS AND WARRANTIES

     Each Purchaser severally represents and warrants to the Company that:

          a. Investment  Purpose.  Purchaser is purchasing the Preferred  Shares
     for Purchaser's own account for investment only and not with a present view
     towards the public sale or distribution  thereof,  except pursuant to sales
     that are exempt from the  registration  requirements  of the Securities Act
     and/or sales  registered  under the Securities Act.  Purchaser  understands
     that Purchaser must bear the economic risk of this investment indefinitely,
     unless the Securities are registered pursuant to the Securities Act and any
     applicable  state  securities  or blue sky laws or an  exemption  from such
     registration is available, and that the Company has no present intention of
     registering  any  such  Securities   other  than  as  contemplated  by  the
     Registration  Rights  Agreement.  Notwithstanding  anything in this Section
     2(a) to the contrary,  by making the representations  herein, the Purchaser
     does not agree to hold the  Securities  for any  minimum or other  specific
     term and  reserves  the right to dispose of the  Securities  at any time in
     accordance  with or pursuant to a  registration  statement  or an exemption
     under the Securities Act.

          b. Accredited Investor Status.  Purchaser is an "ACCREDITED  INVESTOR"
     as that term is 


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                                      328


defined in Rule 501(a) of Regulation D.

          c. Reliance on Exemptions.  Purchaser  understands  that the Preferred
     Shares are being  offered and sold to Purchaser in reliance  upon  specific
     exemptions from the registration  requirements of United States federal and
     state  securities  laws and that the Company is relying  upon the truth and
     accuracy  of,  and  Purchaser's   compliance  with,  the   representations,
     warranties, agreements, acknowledgments and understandings of Purchaser set
     forth herein in order to determine the  availability of such exemptions and
     the eligibility of Purchaser to acquire the Preferred Shares.

          d. Information. Purchaser and its counsel, if any, have been furnished
     all  materials  relating to the  business,  finances and  operations of the
     Company  and  materials  relating  to the offer  and sale of the  Preferred
     Shares which have been specifically  requested by Purchaser or its counsel.
     Purchaser and its counsel,  if any, have been afforded the  opportunity  to
     ask questions of the Company and have received what  Purchaser  believes to
     be complete and  satisfactory  answers to any such inquiries.  Neither such
     inquiries nor any other due diligence  investigation conducted by Purchaser
     or its counsel or any of its representatives  shall modify, amend or affect
     Purchaser's right to rely on the Company's  representations  and warranties
     contained  in  Section  3 below.  Purchaser  understands  that  Purchaser's
     investment in the Securities involves a high degree of risk.

          e. Governmental  Review.  Purchaser  understands that no United States
     federal or state agency or any other government or governmental  agency has
     passed upon or made any recommendation or endorsement of the Securities.

          f.  Transfer  or  Resale.  Purchaser  understands  that (i)  except as
     provided in the Registration Rights Agreement, the Securities have not been
     and  are  not  being  registered  under  the  Securities  Act or any  state
     securities  laws,  and  may  not be  transferred  unless  (a)  subsequently
     registered thereunder, or (b) Purchaser shall have delivered to the Company
     an opinion of counsel (which opinion shall be in form,  substance and scope
     customary for opinions of counsel in comparable transactions) to the effect
     that the  Securities to be sold or  transferred  may be sold or transferred
     pursuant to an exemption  from such  registration  or (c) sold  pursuant to
     Rule 144 promulgated  under the Securities Act (or a successor rule) ("RULE
     144"),  or (d) sold or transferred  to an affiliate of Purchaser;  (ii) any
     sale of such  Securities  made in  reliance on Rule 144 may be made only in
     accordance  with the  terms of said Rule and  further,  if said Rule is not
     applicable,  any resale of such Securities under circumstances in which the
     seller (or the person through whom the sale is made) may be deemed to be an
     underwriter  (as that term is defined in the  Securities  Act) may  require
     compliance  with some other exemption under the Securities Act or the rules
     and  regulations  of the  Securities  and Exchange  Commission  (the "SEC")
     thereunder; and (iii) neither the Company nor any other person is under any
     obligation  to register such  Securities  under the  Securities  Act or any
     state  securities  laws or to comply with the terms and  conditions  of any
     exemption thereunder (in each case, other than pursuant to the Registration
     Rights Agreement).
<PAGE>
                                      329


          g. Legends. Purchaser understands that the Preferred Shares and, until
     such  time  as  the  Conversion  Shares  have  been  registered  under  the
     Securities Act as  contemplated  by the  Registration  Rights  Agreement or
     otherwise  may be sold  by  Purchaser  pursuant  to Rule  144  without  any
     restriction  as to the public  resale  thereof,  the  certificates  for the
     Conversion  Shares  may bear a  restrictive  legend  in  substantially  the
     following form (and a stop-transfer order may be placed against transfer of
     the certificates for such Securities):

          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 said Act, or an opinion of counsel,
          in form,  substance  and scope  customary  for  opinions of counsel in
          comparable transactions,  that registration is not required under said
          Act or unless sold pursuant to Rule 144(k) under said Act.

          The legend set forth  above  shall be removed  and the  Company  shall
     issue a certificate  without such legend to the holder of any Security upon
     which it is stamped,  if,  unless  otherwise  required by state  securities
     laws, (a) the sale of such Security is registered under the Securities Act,
     or (b) such  holder  provides  the Company  with an opinion of counsel,  in
     form,  substance and scope  customary for opinions of counsel in comparable
     transactions, to the effect that a public sale or transfer of such Security
     may be made  without  registration  under  the  Securities  Act or (c) such
     holder provides the Company with  reasonable  assurances that such Security
     has been  sold  pursuant  to Rule 144 or can be sold  pursuant  to Rule 144
     without any  restriction  as to the number of  Securities  acquired as of a
     particular date that can then be immediately sold. Purchaser agrees to sell
     all Securities,  including those represented by a certificate(s) from which
     the  legend  has  been  removed,  pursuant  to  an  effective  registration
     statement and to deliver a prospectus in connection  with such sale (if and
     to the extent such delivery is required) or in compliance with an exemption
     from the registration  requirements of the Securities Act. In the event the
     above legend is removed from any Security and thereafter the  effectiveness
     of a  registration  statement  covering  such  Security is suspended or the
     Company  determines  that a supplement or amendment  thereto is required by
     applicable   securities  laws,  then  upon  reasonable  advance  notice  to
     Purchaser  the Company may require  that the above  legend be placed on any
     such   Security   that  cannot  then  be  sold  pursuant  to  an  effective
     registration statement or Rule 144 without any restriction as to the number
     of Securities acquired as of a particular date that can then be immediately
     sold,  which  legend  shall be  removed  when such  Security  has been sold
     pursuant to Rule 144 or may be sold  pursuant to an effective  registration
     statement  or  Rule  144  without  any  restriction  as to  the  number  of
     Securities  acquired as of a particular  date that can then be  immediately
     sold.

          h. [Intentionally Omitted]

          i.  Authorization;  Enforcement.  This Agreement and the  Registration
     Rights  


<PAGE>
                                      330


     Agreement have been duly and validly authorized,  executed and delivered on
     behalf of  Purchaser  and are valid and  binding  agreements  of  Purchaser
     enforceable in accordance with their terms.

          j. Residency.  Purchaser is a resident of the  jurisdiction  set forth
     under such  Purchaser's  name on the signature page hereto executed by such
     Purchaser.

     3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants to each Purchaser that:

          a.  Organization  and  Qualification.  The  Company  and  each  of its
     subsidiaries is a corporation  duly organized and existing in good standing
     under the laws of the jurisdiction in which it is incorporated, and has the
     requisite  corporate  power  to own  its  properties  and to  carry  on its
     business as now being  conducted.  The Company and each of its subsidiaries
     is duly  qualified as a foreign  corporation  to do business and is in good
     standing in every jurisdiction where the failure so to qualify would have a
     Material  Adverse  Effect.  "MATERIAL  ADVERSE  EFFECT"  means any material
     adverse  effect  on the  operations,  properties,  financial  condition  or
     prospects  of the  Company  and its  subsidiaries,  taken  as a whole  on a
     consolidated basis or on the transactions  contemplated hereby. The Company
     does not have any  significant  subsidiaries  (as  defined  in Rule 1-02 of
     Regulation S-X under the Securities Act) other than those  subsidiaries set
     forth on Schedule 3(a).

          b.  Authorization;  Enforcement.  (i) The  Company  has the  requisite
     corporate  power and authority to enter into and perform this Agreement and
     the Registration  Rights Agreement,  to issue and sell the Preferred Shares
     in accordance  with the terms hereof,  and to issue the  Conversion  Shares
     upon conversion of the Preferred Shares in accordance with the terms of the
     Certificate of Designations;  (ii) the execution,  delivery and performance
     of this Agreement and the Registration  Rights Agreement by the Company and
     the consummation by it of the transactions  contemplated hereby and thereby
     (including  without limitation the issuance of the Preferred Shares and the
     issuance and reservation  for issuance of the Conversion  Shares) have been
     duly  authorized by the Company's Board of Directors and no further consent
     or  authorization  of  the  Company,   its  Board  or  Directors,   or  its
     stockholders  is required  (under Rule 4460(i)  promulgated by the National
     Association of Securities  Dealers or otherwise);  (iii) this Agreement has
     been duly  executed and delivered by the Company;  and (iv) this  Agreement
     constitutes,  and,  upon  execution  and  delivery  by the  Company  of the
     Registration  Rights Agreement,  such agreement will constitute,  valid and
     binding  obligations  of the  Company  enforceable  against  the Company in
     accordance with their terms.

          c.  Capitalization.  The  capitalization of the Company as of the date
     hereof, including the authorized capital stock, the number of shares issued
     and outstanding, the number of shares reserved for issuance pursuant to the
     Company's  stock option plans,  the number of shares  reserved for issuance
     pursuant to securities (other than the Preferred  Shares)  exercisable for,
     or convertible  into or exchangeable for any shares of Common Stock and the
     number  of  shares to be  reserved  for  issuance  upon  conversion  of the
     Preferred  Shares is set forth on Schedule  3(c).  All of such  outstanding
     shares of capital  stock  have  been,  or upon  issuance  will be,  validly
     issued,


<PAGE>
                                      331


     fully paid and  nonassessable.  No shares of capital  stock of the  Company
     (including the Preferred  Shares and the Conversion  Shares) are subject to
     preemptive  rights or any other similar rights of the  stockholders  of the
     Company or any liens or encumbrances.  Except as disclosed in Schedule 3(c)
     or as contemplated herein, as of the date of this Agreement,  (i) there are
     no outstanding options,  warrants,  scrip, rights to subscribe to, calls or
     commitments  of any  character  whatsoever  relating to, or  securities  or
     rights  convertible into or exercisable or exchangeable  for, any shares of
     capital stock of the Company or any of its subsidiaries, or arrangements by
     which the  Company or any of its  subsidiaries  is or may  become  bound to
     issue  additional  shares of  capital  stock of the  Company  or any of its
     subsidiaries,  and (ii) there are no agreements or arrangements under which
     the Company or any of its subsidiaries is obligated to register the sale of
     any of the  Company's  securities  under the  Securities  Act  (except  the
     Registration  Rights  Agreement).  The Company has made  available  to each
     Purchaser  true  and  correct  copies  of  the  Company's   Certificate  of
     Incorporation   as  in  effect  on  the  date   hereof   ("CERTIFICATE   OF
     INCORPORATION"), the Company's By-laws as in effect on the date hereof (the
     "BY-LAWS"),  and all other instruments and agreements  governing securities
     convertible  into or  exercisable or  exchangeable  for Common Stock of the
     Company. The Certificate of Designations,  in the form attached hereto, has
     been duly filed with the  Secretary of State of the State of Delaware  and,
     upon the  issuance of the  Preferred  Shares in  accordance  with the terms
     hereof,  each Purchaser  shall be entitled to the rights set forth therein.
     The Company  shall  provide each  Purchaser  with a written  update of this
     representation  signed by the Company's  Chief  Executive  Officer or Chief
     Financial Officer on behalf of the Company as of the Closing Date.

          d. Issuance of Shares.  The Preferred  Shares are duly authorized and,
     upon  issuance  in  accordance  with the terms of this  Agreement,  will be
     validly  issued,  fully paid and  non-assessable,  and free from all taxes,
     liens, claims and encumbrances and will not be subject to preemptive rights
     or other similar  rights of  stockholders  of the Company.  The  Conversion
     Shares are duly authorized and reserved for issuance,  and, upon conversion
     of the  Preferred  Shares in  accordance  with the terms  thereof,  will be
     validly  issued,  fully paid and  non-assessable,  and free from all taxes,
     liens, claims and encumbrances and will not be subject to preemptive rights
     or other similar rights of stockholders of the Company.

          e. No  Conflicts.  The  execution,  delivery and  performance  of this
     Agreement  and  the  Registration  Rights  Agreement  by the  Company,  the
     performance  by the Company of its  obligations  under the  Certificate  of
     Designations,  and the  consummation  by the  Company  of the  transactions
     contemplated  hereby  and  thereby  (including,   without  limitation,  the
     issuance and  reservation  for issuance,  as  applicable,  of the Preferred
     Shares and  Conversion  Shares)  will not (i) result in a violation  of the
     Certificate  of   Incorporation  or  By-laws  or  (ii)  conflict  with,  or
     constitute  a default  (or an event  which with  notice or lapse of time or
     both  would  become a  default)  under,  or give to  others  any  rights of
     termination,  amendment,  acceleration or  cancellation  of, any agreement,
     indenture or instrument to which the Company or any of its  subsidiaries is
     a party,  or result in a violation  of any law,  rule,  regulation,  order,
     judgment or decree  (including U.S.  federal and state  securities laws and
     regulations) applicable to the Company or any of


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                                      332


          its  subsidiaries  or by which any property or asset of the Company or
     any of its  subsidiaries  is bound or affected  (except for such conflicts,
     defaults,  terminations,   amendments,  accelerations,   cancellations  and
     violations as would not, individually or in the aggregate,  have a Material
     Adverse  Effect).  Neither the Company  nor any of its  subsidiaries  is in
     violation  of its  Certificate  of  Incorporation  or other  organizational
     documents and neither the Company nor any of its subsidiaries is in default
     (and no event has  occurred  which,  with  notice or lapse of time or both,
     would put the Company or any of its subsidiaries in default) under, nor has
     there  occurred  any event  giving  others (with notice or lapse of time or
     both) any rights of  termination,  amendment,  acceleration or cancellation
     of, any  agreement,  indenture or instrument to which the Company or any of
     its  subsidiaries  is a party,  except for  possible  defaults or rights as
     would  not,  individually  or in the  aggregate,  have a  Material  Adverse
     Effect.  The businesses of the Company and its  subsidiaries  are not being
     conducted,  and shall not be conducted  so long as a Purchaser  owns any of
     the  Securities,  in violation of any law,  ordinance or  regulation of any
     governmental entity, except for possible violations the sanctions for which
     either singly or in the aggregate would not have a Material Adverse Effect.
     Except as specifically contemplated by this Agreement and as required under
     the Securities Act and any applicable  state securities laws and the filing
     of an  application  with NASDAQ (as  defined  below) to list or approve for
     quotation the Conversion  Shares, the Company is not required to obtain any
     consent,  authorization  or order  of, or make any  filing or  registration
     with, any court or governmental agency or any regulatory or self regulatory
     agency  in  order  for  it to  execute,  deliver  or  perform  any  of  its
     obligations under this Agreement or the Registration Rights Agreement or to
     perform its obligations under the Certificate of Designations, in each case
     in  accordance  with the terms  hereof or  thereof.  The  Company is not in
     violation  of the  listing  requirements  of the  NASDAQ  Small Cap  Market
     ("NASDAQ") and does not reasonably anticipate that the Common Stock will be
     delisted by NASDAQ in the foreseeable future. The Company does not have any
     agreements other  than  those set forth on  Exhibit B to the legal  opinion
     referred to in Section 7(i) the breach of which would materially  adversely
     affect the Company's  obligations  under this Agreement or the Registration
     Rights  Agreement  or the  Purchasers'  rights  under  the  Certificate  of
     Designation.

          f. SEC Documents,  Financial Statements.  Since December 31, 1993, the
     Company has timely  filed all reports,  schedules,  forms,  statements  and
     other  documents  required  to be filed by it with the SEC  pursuant to the
     reporting  requirements of the Securities  Exchange Act of 1934, as amended
     (the "EXCHANGE ACT") (all of the foregoing,  filed prior to the date hereof
     and  after  December  31,  1993,  and all  exhibits  included  therein  and
     financial  statements  and  schedules  thereto  and  documents  (other than
     exhibits)  incorporated by reference therein together with any registration
     statements  or  other  documents  filed  by  the  Company  pursuant  to the
     Securities  Act prior to the date hereof and those  certain  news  releases
     attached hereto as Schedule 3(f), being  hereinafter  referred to herein as
     the "SEC DOCUMENTS").  The Company has delivered to each Purchaser true and
     complete copies of the SEC Documents,  except for such exhibits,  schedules
     and incorporated documents. As of their respective dates, the SEC Documents
     complied in all material respects with the requirements of the Exchange Act
     or the Securities Act, as the case may be, and the rules and regulations of
     the SEC promulgated thereunder applicable to the SEC Documents, and none of
     the SEC Documents,  at the time they were filed with the SEC, contained any
     untrue  statement  of a material  fact or omitted to state a material  fact
     required to be stated  therein or necessary in order to make the statements
     therein,  in light of the  circumstances  under  which they were made,  not
     misleading.  As of their respective dates, the financial  statements of the
     Company  included in the SEC Documents  complied as to form in all material

<PAGE>
                                      333


     respects with applicable  accounting  requirements  and the published rules
     and regulations of the SEC with respect thereto.  Such financial statements
     have been prepared in accordance with U.S.  generally  accepted  accounting
     principles,  consistently applied,  during the periods involved (except (i)
     as may be otherwise  indicated in such  financial  statements  or the notes
     thereto, or (ii) in the case of unaudited interim statements, to the extent
     they may include  footnotes or may not be condensed or summary  statements)
     and fairly  present in all  material  respects the  consolidated  financial
     position of the Company and its  consolidated  subsidiaries as of the dates
     thereof and the consolidated results of their operations and cash flows for
     the periods then ended (subject,  in the case of unaudited  statements,  to
     normal  year-end audit  adjustments).  Except as set forth in the financial
     statements of the Company included in the SEC Documents, the Company has no
     liabilities,  contingent or otherwise,  other than (i) liabilities incurred
     in the  ordinary  course  of  business  subsequent  to the date of the most
     recent  financial  statements  included  in  the  SEC  Documents  and  (ii)
     obligations under contracts and commitments incurred in the ordinary course
     of business and not required under generally accepted accounting principles
     to be reflected in such financial statements, which, individually or in the
     aggregate, are not material to the financial condition or operating results
     of the Company.

          g. Absence of Certain Changes. Since December 31, 1995, there has been
     no material  adverse  change and no  material  adverse  development  in the
     business,   properties,   operations,   financial  condition,   results  of
     operations  or  prospects  of the  Company,  except as disclosed in the SEC
     Documents.

          h. Absence of Litigation.  Except for the declaratory  judgment action
     filed by the Company  against  MEHL/Biophile  in the United States District
     Court  for  the  District  of  Massachusetts  in  October,   1996  and  the
     Declaratory  judgment action filed by Selvac Acquisitions Corp. against the
     Company  and other  parties in the  United  States  District  Court for the
     District of New Jersey in March,  1997,  or except as  disclosed in the SEC
     Documents,  there is no action, suit, proceeding,  inquiry or investigation
     before or by any court,  public board,  government agency,  self-regulatory
     organization  or body pending or, to the knowledge of the Company or any of
     its subsidiaries,  threatened against or affecting the Company,  any of its
     subsidiaries,  or any of their  respective  directors  or officers in their
     capacities  as such,  wherein an  unfavorable  decision,  ruling or finding
     would have a material adverse effect on the properties, business, condition
     (financial or other), results of operations or prospects of the Company and
     its subsidiaries taken as a whole or the transactions  contemplated by this
     Agreement  or any of the  documents  contemplated  hereby  or  which  would
     adversely  affect the validity or  enforceability  of, or the  authority or
     ability of the Company to perform its obligations  under, this Agreement or
     any of such other documents.

          i. Disclosure.  All information  relating to or concerning the Company
     set forth in this  Agreement  or  provided  to the  Purchasers  pursuant to
     Section  2(d) hereof and  otherwise  in  connection  with the  transactions
     contemplated  hereby is true and correct in all  material  respects and the
     Company has not omitted to state any  material  fact  necessary in order to
     make the statements made herein or therein,  in light of the  circumstances
     under which they were made, not 


<PAGE>
                                      334


     misleading. No event or circumstance has occurred or exists with respect to
     the Company or its subsidiaries or their respective businesses, properties,
     prospects, operations or financial conditions, which, under applicable law,
     rule or  regulation,  requires  public  disclosure or  announcement  by the
     Company but which has not been so publicly announced or disclosed (assuming
     for  this  purpose  that the  Company's  Exchange  Act  Reports  are  being
     incorporated into an effective  registration statement filed by the Company
     under the Securities Act).

          j. Acknowledgment  Regarding  Purchasers'  Purchase of the Securities.
     The Company  acknowledges and agrees that none of the Purchasers are acting
     as a  financial  advisor or  fiduciary  of the  Company  (or in any similar
     capacity) with respect to this Agreement or the  transactions  contemplated
     hereby,   and  any  advice  given  by  any  Purchaser,   or  any  of  their
     representatives  or  agents,  in  connection  with this  Agreement  and the
     transactions  contemplated  hereby is merely incidental to each Purchaser's
     purchase of  Preferred  Shares.  The  Company  further  represents  to each
     Purchaser that the Company's decision to enter into this Agreement has been
     based  solely  on  an  independent   evaluation  by  the  Company  and  its
     representatives.

          k. Current Public  Information.  The Company is currently  eligible to
     register the resale of its Common Stock on a registration statement on Form
     S-3 under the Securities Act.

          l. No General  Solicitation.  Neither the Company nor any  distributor
     participating  on the  Company's  behalf in the  transactions  contemplated
     hereby  (if  any)  nor any  person  acting  for the  Company,  or any  such
     distributor,  has  conducted  any "GENERAL  SOLICITATION,"  as such term is
     defined  in  Regulation  D, with  respect  to any of the  Securities  being
     offered hereby.

          m.  No  Integrated  Offering.  Neither  the  Company,  nor  any of its
     affiliates,  nor any person acting on its or their behalf,  has directly or
     indirectly made any offers or sales of any security or solicited any offers
     to buy any security under circumstances that would require  registration of
     the Securities being offered hereby under the Securities Act.

          n. No Brokers.  The Company has taken no action  which would give rise
     to any claim by any  person for  brokerage  commissions,  finder's  fees or
     similar  payments  by any  Purchaser  relating  to  this  Agreement  or the
     transactions  contemplated hereby, except for dealings with Michael Arnouse
     whose commissions and fees will be paid for by the Company.

          o.  Acknowledgment  of  Dilution.  The  number  of  Conversion  Shares
     issuable upon conversion of the Preferred Shares may increase substantially
     in certain  circumstances,  including the circumstance  wherein the trading
     price of the Common  Stock  declines.  The  Company  acknowledges  that its
     obligation  to issue  Conversion  Shares upon  conversion  of the Preferred
     Shares in accordance  with the  Certificate of Designations is absolute and
     unconditional,  regardless  of the dilution  that such issuance may have on
     the ownership interests of other stockholders.

          p.  Intellectual  Property.  Each of the Company and its  subsidiaries
     owns or  possesses  


<PAGE>
                                      335


     adequate and enforceable  rights to use all patents,  patent  applications,
     trademarks, trademark applications, trade names, service marks, copyrights,
     copyright  applications,  licenses,  know-how  (including trade secrets and
     other   unpatented   and/or   unpatentable   proprietary  or   confidential
     information,   systems  or   procedures)   and  other  similar  rights  and
     proprietary  knowledge  (collectively,  "INTANGIBLES")  necessary  for  the
     conduct of its  business as now being  conducted  and as  described  in the
     Company's Annual Report on Form 10-K for the fiscal year ended December 31,
     1995. Neither the Company nor any subsidiary of the Company infringes or is
     in  conflict  with any  right  of any  other  person  with  respect  to any
     Intangibles which,  individually or in the aggregate,  if the subject of an
     unfavorable  decision,  ruling or  finding,  would have a Material  Adverse
     Effect.

          q. Foreign  Corrupt  Practices.  Neither the  Company,  nor any of its
     subsidiaries,  nor any director,  officer,  agent, employee or other person
     acting on behalf of the  Company or any  subsidiary  has,  in the course of
     acting for, or on behalf of, the Company,  used any corporate funds for any
     unlawful  contribution,  gift,  entertainment  or other  unlawful  expenses
     relating  to  political  activity;  made any  direct or  indirect  unlawful
     payment to any foreign or  domestic  government  official or employee  from
     corporate  funds;  violated or is in violation of any provision of the U.S.
     Foreign Corrupt Practices Act of 1977; or made any bribe,  rebate,  payoff,
     influence  payment,  kickback or other  unlawful  payment to any foreign or
     domestic government official or employee.

     4. COVENANTS.

     a. Best Efforts. The parties shall use their best efforts timely to satisfy
each of the conditions described in Section 6 and 7 of this Agreement.

     b. Blue Sky Laws.  The Company  shall,  on or before the Closing  Date take
such action as the Company  shall  reasonably  determine is necessary to qualify
the  Securities  for sale to the  Purchasers  pursuant to this  Agreement  under
applicable  securities  or "blue sky" laws of the states of the United States or
obtain  exemption  therefrom,  and shall provide  evidence of any such action so
taken to the Purchasers on or prior to the Closing Date.

     c. Reporting Status. So long as any Purchaser  beneficially owns any of the
Securities,  the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange  Act, and the Company  shall not  terminate its
status as an issuer  required to file reports under the Exchange Act even if the
Exchange  Act  or  the  rules  and  regulations  thereunder  would  permit  such
termination.

     d. Use of Proceeds. The Company shall use the proceeds from the sale of the
Preferred   Shares  for  internal   working   capital   purposes,   mergers  and
acquisitions, investments and general corporate purposes.

     e. Additional Equity Capital; Right of First Offer. The Company agrees that
during


<PAGE>
                                      336


     the  period  beginning  on the date  hereof  and  ending  ninety  (90) days
     following  the  later  of (i) the  Closing  Date  and  (ii) the date of the
     Additional  Closing,  if any (the "LOCK-UP PERIOD"),  the Company will not,
     without  the prior  written  consent  of  Purchasers  (or their  designated
     agents)  holding  at least  two  thirds  (2/3rds)  of the then  outstanding
     Preferred Shares, issue or sell or contract with any party to issue or sell
     any Below  Market  Security (as defined  below)  ("FUTURE  OFFERINGS").  In
     addition,  the  Company  will not conduct  any Future  Offering  during the
     period beginning on the date hereof and ending 180 days following the later
     of (i) the Closing Date and (ii) the Additional  Closing, if any, unless it
     shall have first  delivered  to each  Purchaser  at least five (5) business
     days  prior  to  the  closing  of  such  Future  Offering,  written  notice
     describing the proposed Future Offering, including the terms and conditions
     thereof, and providing each Purchaser and its affiliates,  an option during
     the five (5)  business  day period  following  delivery  of such  notice to
     purchase  up to the  Applicable  Portion  (as  defined  below) of the Below
     Market Securities being offered in the Future Offering on the same terms as
     contemplated by such Future Offering (the  limitations  referred to in this
     and the immediately  preceding sentence are collectively referred to as the
     "CAPITAL RAISING  LIMITATIONS").  The Capital Raising Limitations shall not
     apply to the sale of Preferred Shares at the Additional Closing, if any, on
     the terms set forth  herein or to any  transaction  involving  issuances of
     securities in connection with a merger, consolidation,  acquisition or sale
     of assets, or in connection with any strategic partnership or joint venture
     (the  primary  purpose  of  which is not to raise  equity  capital),  or in
     connection  with the  disposition or acquisition of a business,  product or
     license by the Company or exercise of options by employees,  consultants or
     directors.  The Capital Raising Limitations also shall not apply to (i) the
     issuance of securities  pursuant to an underwritten  public offering,  (ii)
     the issuance of  securities  upon  exercise or  conversion of the Company's
     options,  warrants or other  convertible  securities  outstanding as of the
     date hereof or (iii) the grant of  additional  options or warrants,  or the
     issuance  of  additional  securities,  under any  Company  stock  option or
     restricted stock plan for the benefit of the Company's employees, directors
     or consultants.  The  "APPLICABLE  PORTION" shall mean the product of (i) a
     fraction,  the  numerator  of  which  is the  number  of  Preferred  Shares
     purchased by such Purchaser  hereunder and the  denominator of which is the
     total  number  of  Preferred  Shares  purchased  by all  of the  Purchasers
     hereunder (including Preferred Shares issued on the Closing Date and on the
     date of the Additional  Closing,  if any). "BELOW MARKET  SECURITIES" shall
     mean any Common Stock or any security of the Company  which is  convertible
     into or exercisable or exchangeable for Common Stock and which is sold at a
     "gross  selling  price per  share" of Common  Stock  which is less than the
     average  of the  Closing  Bid  Prices (as  defined  in the  Certificate  of
     Designations) for the five (5) trading days immediately  preceding the date
     of issuance of such security, where the price per share of Common Stock for
     any security  convertible  into or  exchangeable  or exercisable for Common
     Stock  shall be  determined  by  dividing  (i) the  total  amount,  if any,
     received or receivable by the Company as consideration for issuance or sale
     of  such  security,   plus  the  minimum  aggregate  amount  of  additional
     consideration, if any, payable to the Company upon the exercise, conversion
     or exchange  thereof by (ii) the maximum  total  number of shares of Common
     Stock issuable upon the exercise, conversion or exchange of such security.

     f.  Expenses.  On the  date of the  Closing,  the  Company  shall  pay Five
Thousand


<PAGE>
                                      337


     Dollars  ($5,000.00)  to RGC  International  Investors,  LDC  ("RGC")  as a
     non-accountable expense allowance to be applied by RGC against all expenses
     incurred by RGC and its  affiliates  in  connection  with the  negotiation,
     preparation,  execution, delivery and performance of this Agreement and the
     other agreements to be executed in connection herewith,  including, without
     limitation, RGC and its affiliates' attorneys' fees and expenses.

          g. Financial  Information.  Upon the written  request of any Purchaser
     holding any  Securities,  the Company shall send the  following  reports to
     such  Purchaser:  a copy of its Annual  Report on Form 10-K,  its Quarterly
     Reports on Form 10-Q, any proxy statements, any Current Reports on Form 8-K
     and any press releases issued by the Company or any of its subsidiaries.

          h.  Reservation  of  Shares.  The  Company  shall  at all  times  have
     authorized and reserved for the purpose of issuance a sufficient  number of
     shares  of  Common  Stock  to  provide  for  the  full  conversion  of  the
     outstanding  Preferred  Shares and  issuance  of the  Conversion  Shares in
     connection  therewith  and as  otherwise  required  by the  Certificate  of
     Designations.  The Company  shall not reduce the number of shares  reserved
     for issuance upon conversion of the Preferred Shares without the consent of
     Purchasers  holding a majority  of the  Preferred  Shares  then held by all
     Purchasers.

          i.  Listing.  Promptly  (and in no event more than  fifteen (15) days)
     following the Company's  receipt of a Conversion  Notice (as defined in the
     Certificate  of  Designations)  with respect to any  Preferred  Share,  the
     Company  shall secure the listing or approval  for  quotation of all of the
     Conversion  Shares upon each  national  securities  exchange  or  automated
     quotation system, if any, upon which shares of Common Stock are then listed
     (subject to official notice of issuance) and thereafter shall maintain,  so
     long as any other shares of Common  Stock shall be so listed,  such listing
     of all Conversion  Shares from time to time issuable upon conversion of the
     Preferred  Shares.  The Company will take all action  necessary to continue
     the  listing  and  trading of its Common  Stock on the  NASDAQ,  the NASDAQ
     National  Market  ("NNM"),  the New York  Stock  Exchange  ("NYSE")  or the
     American Stock  Exchange  ("AMEX") and will comply in all respects with the
     Company's reporting, filing and other obligations under the bylaws or rules
     of the  National  Association  of  Securities  Dealers  ("NASD")  and  such
     exchanges, as applicable.

          j. Corporate Existence.  So long as a Purchaser  beneficially owns any
     Preferred  Shares,  the Company  shall  maintain its  corporate  existence,
     except  in  the  event  of a  merger,  consolidation  or  sale  of  all  or
     substantially  all of the  Company's  assets,  as long as the  surviving or
     successor entity in such transaction (i) assumes the Company's  obligations
     hereunder  and  under  the  agreements  and  instruments  entered  into  in
     connection herewith regardless of whether or not the Company would have had
     a sufficient  number of shares of Common Stock authorized and available for
     issuance  in  order  to  effect  the  conversion  of all  Preferred  Shares
     outstanding  as of the  date of such  transaction  and  (ii) is a  publicly
     traded  corporation whose common stock is listed for trading on the NASDAQ,
     NNM, NYSE or AMEX.

          k. [Intentionally Omitted]


<PAGE>
                                      338


     l. If no Additional  Closing occurs,  or if it occurs for fewer than 14,000
Preferred   Shares,   the  Company  shall  promptly  amend  the  Certificate  of
Designations to reduce the authorized  number of Preferred Shares from 20,000 to
the number actually issued and sold hereunder.

     5. TRANSFER AGENT INSTRUCTIONS.

     The  Company  shall  instruct  its  transfer  agent to issue  certificates,
registered  in the name of each  Purchaser  or its nominee,  for the  Conversion
Shares in such amounts as specified  from time to time by such  Purchaser to the
Company upon  conversion of the Preferred  Shares.  Prior to registration of the
Conversion  Shares under the Securities Act or resale of such  Securities  under
Rule 144, all such certificates  shall bear the restrictive  legend specified in
Section 2(g) of this Agreement.  The Company warrants that no instruction  other
than  such  instructions  referred  to in this  Section  5,  and  stop  transfer
instructions to give effect to Section 2(f) hereof in the case of the Conversion
Shares prior to registration of the Conversion  Shares under the Securities Act,
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely  transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration  Rights Agreement.
Nothing in this Section shall affect in any way each Purchaser's obligations and
agreement set forth in Section 2(g) hereof to resell the Securities  pursuant to
an effective  registration  statement  and to deliver a prospectus in connection
with  such  sale  or in  compliance  with an  exemption  from  the  registration
requirements of applicable  securities law. If a Purchaser  provides the Company
with an opinion of counsel, which opinion of counsel shall be in form, substance
and scope customary for opinions of counsel in comparable  transactions,  to the
effect that the Securities to be sold or transferred  may be sold or transferred
pursuant  to an  exemption  from  registration,  the  Company  shall  permit the
transfer,  and, in the case of the  Conversion  Shares,  promptly  instruct  its
transfer  agent  to  issue  one or more  certificates  in such  name and in such
denominations  as  specified  by a Purchaser.  The Company  acknowledges  that a
breach by it of its  obligations  hereunder  will  cause  irreparable  harm to a
Purchaser by vitiating  the intent and purpose of the  transaction  contemplated
hereby.  Accordingly,  the  Company  acknowledges  that the  remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened  breach by the Company of the  provisions of
this  Section 5, that a Purchaser  shall be  entitled,  in addition to all other
available  remedies,  to an  injunction  restraining  any breach  and  requiring
immediate issuance and transfer,  without the necessity of showing economic loss
and without any bond or other security being required.

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

     The  obligation  of the Company  hereunder to issue and sell the  Preferred
Shares to a  Purchaser  at the  closing is subject  to the  satisfaction,  at or
before the Closing Date, 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.


<PAGE>
                                      339


     (a) The applicable Purchaser shall have executed the signature page to 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(b) above and the
aggregate number of Preferred Shares purchased by all Purchasers hereunder shall
not be less than 6,000.

     (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 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.

     (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 is subject to the satisfaction of each
of the  following  conditions,  provided  that  these  conditions  are for  such
Purchaser's  sole benefit and may be waived by such Purchaser at any time in the
Purchaser's sole discretion:

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

          (b) The  Certificate  of  Designations  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.

          (c) 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(b) above.

          (d)  The  aggregate  number  of  Preferred  Shares  purchased  by  all
     Purchasers  hereunder  shall be 6,000  (plus in the case of the  Additional
     Closing, if any, up to, but not more than, 14,000).


<PAGE>
                                      340


          (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 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.  Such
     Purchaser  shall  have  received  a  certificate,  executed  by  the  chief
     executive  officer  of the  Company,  dated as of the  Closing  Date 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.

          (i) Such  Purchaser  shall have  received an opinion of the  Company's
     counsel,  dated as of the  Closing  Date,  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; PROVIDED,  HOWEVER,  if such evidence is
     not  delivered on or prior to the Closing  Date,  the Company shall use its
     best efforts to deliver such evidence as soon as practicable thereafter.

     8. GOVERNING LAW; MISCELLANEOUS.

          a. Governing Law;  Jurisdiction.  This Agreement  shall be governed by
     and  construed  in  accordance  with  the  laws of the  State  of  Delaware
     applicable to contracts  made and to be performed in the State of Delaware.
     The Company  irrevocably  consents to the jurisdiction of the United States
     federal  courts  located in the County of Kent in the State of  Delaware in
     any suit or  proceeding  based  on or  arising  under  this  Agreement  and
     irrevocably  agrees  that all claims in respect of such suit or  proceeding
     may be  determined  in such  courts.  The  Company  irrevocably  waives the
     defense  of an  inconvenient  forum  to the  maintenance  of  such  suit or
     proceeding.  The Company  further  agrees that  service of process upon the
     Company  mailed  by first  class  mail  shall be  deemed  in every  respect
     effective  service of process  upon the  Company 


<PAGE>
                                      341


     in any suit or proceeding arising hereunder.  Nothing herein shall affect a
     Purchaser's  right to serve  process in any other manner  permitted by law.
     The Company agrees that a final non-appealable judgment in any such suit or
     proceeding  shall be conclusive and may be enforced in other  jurisdictions
     by suit on such judgment or in any other lawful manner.

          b.  Counterparts.  This  Agreement  may be  executed  in  two or  more
     counterparts,  all of which shall be considered  one and the same agreement
     and shall become effective when counterparts have been signed by each party
     and delivered to the other party.

          c.  Headings.  The headings of this  Agreement are for  convenience of
     reference and shall not form part of, or affect the interpretation of, this
     Agreement.

          d.  Severability.  If any provision of this Agreement shall be invalid
     or unenforceable in any jurisdiction,  such invalidity or  unenforceability
     shall not affect the validity or  enforceability  of the  remainder of this
     Agreement or the validity or  enforceability of this Agreement in any other
     jurisdiction.

          e. Entire  Agreement;  Amendments.  This Agreement and the instruments
     referenced  herein  contain the entire  understanding  of the parties  with
     respect  to  the  matters   covered  herein  and  therein  and,  except  as
     specifically  set forth  herein or  therein,  neither  the  Company nor the
     Purchasers make any representation,  warranty, covenant or undertaking with
     respect to such matters. No provision of this Agreement may be waived other
     than by an  instrument  in writing  signed by the party to be charged  with
     enforcement and no provision of this Agreement may be amended other than by
     an instrument in writing signed by the Company and the Purchasers.

          f.  Notices.  Any notices  required or permitted to be given under the
     terms of this  Agreement  shall be sent by  certified  or  registered  mail
     (return  receipt  requested)  or delivered  personally  or by courier or by
     confirmed telecopy,  and shall be effective five days after being placed in
     the mail,  if mailed,  or upon receipt or refusal of receipt,  if delivered
     personally or by courier or confirmed telecopy, in each case addressed to a
     party. The addresses for such communications shall be:

                  If to the Company:

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

          with a copy to each  of the  Company's  General  Counsel  at the  same
          address and to:

                  Foley, Hoag & Eliot, LLP


<PAGE>
                                      342


                  One Post Office Square
                  Boston, Massachusetts  02109
                  Telecopy:  (617) 832-7000
                  Attention:  David Broadwin

                  If to RGC International Investors, LDC:

                  RGC International Investors, LDC
                  c/o Rose Glen Capital Management, L.P.
                  440 E. Swedesford Road
                  Suite 2025
                  Wayne, PA  19087
                  Telecopy: (610) 971-2212
                  Attention: Andrew Daley


          If to any  other  Purchaser,  to such  address  set forth  under  such
     Purchaser's name on the signature page hereto executed by such Purchaser.

          Each party shall provide  notice to the other parties of any change in
     address.

          g.  Successors and Assigns.  This Agreement  shall be binding upon and
     inure to the  benefit of the  parties  and their  successors  and  assigns.
     Neither the Company nor any  Purchaser  shall assign this  Agreement or any
     rights or obligations  hereunder  without the prior written  consent of the
     other.  Notwithstanding the foregoing,  any Purchaser may assign its rights
     hereunder  to any of its  "AFFILIATES,"  as that term is defined  under the
     Exchange Act, without the consent of the Company.  This provision shall not
     limit a Purchaser's right to transfer the Securities  pursuant to the terms
     of the  Certificate  of  Designations  and this Agreement or to assign such
     Purchaser's rights hereunder to any such transferee.

          h. Third Party  Beneficiaries.  This  Agreement  is  intended  for the
     benefit of the parties hereto and their respective permitted successors and
     assigns,  and is not for the  benefit of, nor may any  provision  hereof be
     enforced by, any other person.

          i. Survival. The representations and warranties of the Company and the
     agreements  and covenants set forth in Sections 3, 4, 5 and 8 shall survive
     the closings  hereunder  notwithstanding  any due  diligence  investigation
     conducted  by or on  behalf  of  any  Purchasers.  The  Company  agrees  to
     indemnify  and hold harmless  each  Purchaser and each of such  Purchaser's
     officers, directors, employees, partners, agents and affiliates for loss or
     damage arising as a result of or related to any breach or alleged breach by
     the Company of any of its  representations  or covenants  set forth herein,
     including advancement of expenses as they are incurred.


<PAGE>
                                      343


     j.  Publicity.  The  Company  and each  Purchaser  shall  have the right to
approve before issuance any press releases,  SEC, NASDAQ or NASD filings, or any
other public  statements with respect to the transactions  contemplated  hereby;
PROVIDED,  HOWEVER,  that the  Company  shall be  entitled,  without  the  prior
approval of the  Purchasers,  to make any press  release or SEC,  NASDAQ or NASD
filings with respect to such  transactions  as is required by applicable law and
regulations  (although  the  Purchasers  shall be  consulted  by the  Company in
connection  with any  such  press  release  prior to its  release  and  shall be
provided with a copy thereof).

         k. Further Assurances.  Each party shall do and perform, or cause to be
done and  performed,  all such  further acts and things,  and shall  execute and
deliver all such other agreements,  certificates,  instruments and documents, as
the other  party may  reasonably  request  in order to carry out the  intent and
accomplish  the  purposes  of  this  Agreement  and  the   consummation  of  the
transactions contemplated hereby.

     l. Termination. In the event that the closing shall not have occurred on or
before March 31, 1997, unless the parties agree otherwise,  this Agreement shall
terminate at the close of business on such date.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


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                                      344


     IN WITNESS WHEREOF,  the undersigned  Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.

PURCHASER:

RGC International Investors, LDC



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


RESIDENCE: Cayman Islands

ADDRESS:
                  RGC International Investors, LDC
                  c/o Rose Glen Capital Management, L.P.
                  440 E. Swedesford Road
                  Suite 2025
                  Wayne, PA  19087
                  Telecopy: (610) 971-2212
                  Attention: Andrew Daley



AGGREGATE SUBSCRIPTION AMOUNT

         Number of Preferred Shares:              6,000
         Purchase Price:            $         6,000,000


PALOMAR MEDICAL TECHNOLOGIES, INC.




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