<PAGE>
                                      300

                              EMPLOYMENT AGREEMENT


        THIS EMPLOYMENT AGREEMENT (this "Agreement") made as of January 1, 1997,
between  Palomar  Medical  Technologies,   Inc.,  a  Delaware  corporation  (the
"Company"), and Joseph Caruso, an individual (the "Executive"),

                          W I T N E S S E T H T H A T:

        WHEREAS,  the Company desires to employ Executive as its Chief Financial
Officer for the period and upon and subject to the terms herein provided; and

        WHEREAS,  the  Company  desires to be assured  that  Executive  will not
compete  with the  Company  for the period and  within  the  geographical  areas
hereinafter specified; and

        WHEREAS, Executive is willing to agree to be employed by the Company for
the period and upon and subject to the terms herein provided; and

        WHEREAS, Executive does not desire to work for the Company in a position
lower  than  that of Chief  Financial  Officer  and is  willing  to agree not to
compete with the Company;

        NOW,  THEREFORE,  in consideration  of the premises,  the parties hereto
covenant and agree as follows:

        Section  1. Term of  Employment;  Compensation.  The  Company  agrees to
employ  Executive  from the date hereof until  December 31, 1999 (the "Term") as
its Chief Financial Officer, with the responsibilities  normally associated with
such position (the "Executive Position"). The Company will pay Executive for his
services  during the term of his  employment  hereunder at an annual rate of Two
Hundred Thousand Dollars ($200,000), subject to a 15% increase per year, payable
in arrears, in equal installments, in accordance with standard Company practice,
but in any event not less often than  monthly,  subject only to such payroll and
withholding deductions as are required by law.

        Section 2. Office and  Duties.  Executive  shall have the usual  duties,
responsibilities  and  authority  (the  "Executive's   Authority")  of  a  Chief
Financial  Officer,  and shall  report to the Board of Directors of the Company,
and shall perform such  specific  other tasks,  consistent  with his position as
Chief  Financial  Officer,  as may from time to time be  assigned  to him by the
Board of Directors.  Executive  shall devote  substantially  all of his business
time, labor,  skill,  undivided attention and best ability to the performance of
his  duties  hereunder.  Executive  may not,  without  Executive's  consent,  be
required to perform  Executive's  duties at any location that is more than fifty
(50) miles from the Company's principal office in Beverly, Massachusetts, except
that  Executive  agrees  that he will travel to  whatever  extent is  reasonably
necessary in the conduct of the Company's business.

        Section 3. Expenses.  Executive shall be entitled to  reimbursement  for
expenses  incurred  by him in  connection  with the  performance  of his  duties
hereunder upon receipt of vouchers  therefor in accordance  with such procedures
as the Company has heretofore or may hereafter establish.

        Section 4. Vacation  During  Employment.  Executive shall be entitled to
such  reasonable  vacations as may be allowed by the Company in accordance  with
general  practices  to be  established,  but in any event not less than four (4)
weeks during each twelve (12) month period.
<PAGE>
                                      301


        Section 5.  Additional  Benefits.  The Company  shall make  available to
Executive at least those  perquisites  presently  granted to Executive.  Nothing
herein  contained  shall  preclude  Executive,  to the  extent  he is  otherwise
eligible,  from  participation  in all group insurance  programs or other fringe
benefit  plans  which  the  Company  may  hereafter  in its  sole  and  absolute
discretion make available generally to its employees,  but the Company shall not
be required to establish or maintain any such program or plan.

        Section 6. Termination by the Company.  The Company shall have the right
to terminate  Executive's  employment  at any time for "Cause".  For purposes of
this  Agreement,  "Cause" shall mean (a)  termination by action of a majority of
the members of the Company's  Board of Directors,  acting on the written opinion
of counsel, because of Executive's willful and continued refusal, without proper
cause, to perform substantially  Executive's duties under this Agreement; or (b)
the  conviction  of  Executive  of a felony  or an act of fraud or  embezzlement
against the Company or any of its divisions,  subsidiaries of affiliates  (which
through lapse of time or otherwise is not subject to appeal).  Such  termination
shall be effected by written notice  thereof,  personally  hand delivered by the
Company to Executive, and, except as hereinafter provided, shall be effective as
of the thirtieth (30th) calendar day after such notice; provided,  however, that
if within such thirty (30) calendar day period Executive shall cease Executive's
refusal and shall use Executive's best efforts to perform such obligations,  the
termination shall not be effective.

        Section 7.  Termination by Death. In the event Executive dies during the
Term,   Executive's  employment  shall  terminate  (effective  on  the  date  of
Executive's death) and the provisions of Section 10 shall be applicable.

        Section  8.  Termination  by  Disability.  In the event  that  Executive
suffers a disability  which  prevents  Executive from  substantially  performing
Executive's  duties  under this  Agreement  for a period of at least one hundred
eighty  (180)  consecutive  or  nonconsecutive  calendar  days  within any three
hundred  sixty-five (365) calendar day period, the Company shall have the right,
after  such one  hundred  eighty  (180)  calendar  day period  has  elapsed,  to
terminate  Executive's  employment  hereunder  upon  thirty (30)  calendar  days
written  notice  to  Executive  and  the  provisions  of  Section  10  shall  be
applicable.

        Section  9.   Termination  by  Executive.   Notwithstanding   any  other
provisions of this  Agreement,  Executive may terminate  Executive's  employment
either  (i) in the event of a "Change  in  Control"  or (ii) by  written  notice
served upon the Company  within thirty (30)  calendar  days after  Executive has
knowledge of an event constituting "Good Reason."

        For purposes of this Agreement,  the term "Change in Control" shall mean
either (i) that,  after the date  hereof,  any person (an  "Acquiring  Person"),
together with its  affiliates and associates (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934, or any successor rule thereto) shall become the
beneficial  owner (as defined in Rule 13d-3 under the  Securities  and  Exchange
Act), including by merger or otherwise,  of more than fifty percent (50%) of the
total  voting  power of all classes of voting  stock of the Company or (ii) that
one or more  Acquiring  Persons has succeeded as the result of or in response to
actual or threatened election contests,  whether by settlement or otherwise,  in
having elected to the Board of Directors of the Company,  whether at one time or
on a cumulative  basis,  a sufficient  number of its nominees to constitute  (x)
more  than  thirty  percent  (30%)  of the  members  of the  Company's  Board of
Directors,  rounded down to the nearest whole number, if the number of directors
on the Company's Board is eight or less, or (y) more than forty percent (40%) of
the members of the Company's Board, rounded down to the nearest whole number, if
the number of directors on the Company's Board is nine or more.

        For purposes of this Agreement, the term "Good Reason" shall mean:
<PAGE>
                                      302


                (i) any action by the Company  which  results in a diminution in
        the Executive Position or in the Executive's Authority;

                (ii) any  failure by the  Company  to timely pay the  amounts or
        provide the benefits described in this Agreement, other than an isolated
        failure not occurring in bad faith and which is remedied  promptly after
        receipt of written notice thereof given by Executive; or

                (iii) a material  breach by the Company of any of the provisions
        of this  Agreement  which  failure or breach  shall have  continued  for
        thirty  (30) days after  written  notice from  Executive  to the Company
        specifying the nature of such failure or breach; or

                (iv) any action by the Company  that would result in a violation
        of Section 2.

        Section 10. Effect of  Termination.  (a) For Cause;  Without Good Reason
and No  Change in  Control;  and  Death.  In the  event of  termination  of this
Agreement  (i) by the  Company for Cause,  (ii) by the  Executive  without  Good
Reason  or with no  Change  in  Control  or (iii) by  reason of the death of the
Executive,  the Company shall pay Executive (or  Executive's  beneficiary in the
event of the  Executive's  death) any base salary or other  compensation  earned
(and a pro rata  portion of the bonus  payable with respect to the year in which
termination  occurred) but not paid to Executive  prior to the effective date of
such termination and, in the case of termination by reason of death, the Company
shall pay Executive's  beneficiary (i) the base salary that Executive would have
earned for a period of twelve (12) months  following his death,  plus (ii) a pro
rata portion of any bonuses or other incentive compensation that Executive would
have  earned if he had been  employed  for the full fiscal year in which he died
payable at the time of payment of similar  bonuses made to other  Executives  of
the Company,  plus (iii) any death  benefits that Executive is entitled to under
the Company's policies in effect on Executive's date of death.

                                                                                
                (b)  Without  Cause;  For  Good  Reason.  In  the  event  of (i)
termination  of this  Agreement  by the  Company  other than for Cause,  or (ii)
termination  of this  Agreement  by Executive  for Good Reason,  in either case,
other  than  within  one year of a Change  in  Control,  the  Company  shall pay
Executive,  in a lump sum within thirty (30) days after  termination  under this
Section  10(b),  the sum of (A) the amount  described  in Section  10(a) of this
Agreement  (other than the payments to be paid in case of termination by death),
and (B) the amount equal to four times (4x) the  Executive's  annual base salary
in effect at the time of termination  under this Section 10(b),  and the Company
shall continue  during the Term all of the benefits and perquisites set forth in
Section 5,  notwithstanding the fact that Executive may no longer be an employee
eligible to participate in one or more of the employee  benefit plans maintained
by the Company.

                (c)  Change  in  Control  (other  than  an  Approved  Change  in
Control).  In the event of  termination  of this  Agreement  by the  Company  or
Executive  within one (1) year after a Change in Control (other than an Approved
Change in  Control),  the  Company  shall pay  Executive,  in a lump sum payment
within thirty (30) days after  termination  under this Section 10(c), the sum of
(A) the amount  described  in Section  10(a) of this  Agreement  (other than the
payments to be made in case of termination  by death),  and (B) the amount equal
to eight (8x) times  Executive's  Annual  Compensation,  and the  Company  shall
continue  during  the Term all of the  benefits  and  perquisites  set  forth in
Section 5,  notwithstanding the fact that Executive may no longer be an employee
eligible to participate in one or more of the employee  benefit plans maintained
by the Company.

        For purposes of this  Agreement,  the term "Approved  Change in Control"
shall mean a Change of Control  that has occurred  with the prior  approval of a
majority of the Continuing  
<PAGE>
                                      303


Directors and the term "Continuing  Director" shall mean any member of the Board
of  Directors  of the  Company  who is not an  Acquiring  Person or a nominee or
representative  of an  Acquiring  Person or of any  affiliate or associate of an
Acquiring Person and any successor to a Continuing  Director who was recommended
for  election or elected to succeed a  Continuing  Director by a majority of the
Continuing Directors then on the Board of Directors of the Company.

        For  purposes  of  this  Section  10(c)  of  this   Agreement  the  term
"Executive's Annual  Compensation" shall mean (i) the sum of (A) the Executive's
base  salary  set forth in  Section 1 and (B) any  bonus  compensation  to which
Executive  would have been entitled if Executive  continued to be employed under
this Agreement to the end of 1996,  provided that if the Executive's base salary
or bonuses  compensation  is increased after 1996 the term shall mean the higher
of the Executive  annual salary  immediately  prior to such change or the sum of
(a) the base  salary  in  effect  at the time of  termination  and (b) any bonus
compensation  to which  Executive  would have been  entitled  if  Executive  had
continued to be employed under this Agreement to the end of the Company's fiscal
year in which his employment terminated.

                (d) With Good Reason following an Approved Change in Control. In
the event of  termination of this Agreement by Executive with Good Reason within
one (1) year  after an  Approved  Change  in  Control,  the  Company  shall  pay
Executive, in a lump sum payment within thirty (30) days after termination under
this Section 10(c), the sum of (A) the amount described in Section 10(a) of this
Agreement  (other than the payments to be made in case of termination by death),
(B) the amount equal to eight (8x) times the sum of (i) Executive's  annual base
salary in effect at the time of termination,  and (ii) any bonus compensation to
which  Executive  would have been  entitled  if  Executive  had  remained  as an
employee under this  Agreement to the end of the Company's  fiscal year in which
his employment terminated, and the Company shall continue during the Term all of
the benefits and  perquisites set forth in Section 5,  notwithstanding  the fact
that  Executive may no longer be an employee  eligible to  participate in one or
more of the employee benefit plans maintained by the Company.

                (e) Disability. In the event of termination of this Agreement by
reason of disability,  the Company shall continue to pay Executive's base salary
at the time of such  termination  for the remainder of the Term,  reduced by the
maximum  amount of salary  which may be insured  under the  Company's  Long Term
Disability Plan at the time of disability.

        Section 11. Excise Taxes. In the event that Executive shall have imposed
upon him the tax which is imposed by Section 4999 of the  Internal  Revenue Code
of 1986, as amended (the "Code"),  or by any successor  provision,  by reason of
any payment or benefit which  Executive has received under this  Agreement,  the
Company shall pay as additional compensation to Executive an amount equal to the
amount of the tax imposed by Code Section 4999 (the  "Special Tax Payment") as a
result of the receipt of such payment, or benefit; provided that the Special Tax
Payment  shall not be  increased to account for excise or other tax imposed as a
result of the making of the Special Tax Payment.

        Section 12.  Acceleration  and  Expiration  of  Options.  Any options or
warrants to purchase capital stock of the Company (collectively,  the "Options")
granted by the Company to Executive that have not yet become  exercisable  shall
become  exercisable  upon  the  earliest  to  occur  of (a) the  termination  of
Executive's  employment as a result of Executive's death or disability;  (b) the
termination by Executive with Good Reason;  or (c) the  termination by Executive
after  a  Change  in  Control  (other  than  an  Approved  Change  in  Control).
Notwithstanding  the foregoing,  all Options,  whether currently  exercisable or
not, shall expire and cease to be exercisable as follows:

                (a) if the Company terminates  Executive's employment for Cause,
        immediately upon the effective date of such termination;
<PAGE>
                                      304


                (b) if  Executive  terminates  Executive's  employment  with the
        Company  other than for Good  Reason,  a Change in  Control,  death,  or
        disability, immediately upon the effective date of such termination;

                (c) if  Executive  terminates  Executive's  employment  with the
        Company  with Good  Reason or after a Change in Control  (other  than an
        Approved  Change in Control),  ninety (90) days after the effective date
        of such  termination (but in no event later than the date the Term would
        expire without giving effect to any automatic renewal.

                (d) if Executive  dies while  employed by the  Company,  six (6)
        calendar months after  Executive's death (but in no event later than the
        date the Term  would  expire  without  giving  effect  to any  automatic
        renewal); and

                (e) if  Executive's  employment  is  terminated  as a result  of
        disability,  six (6) calendar  months after the  effective  date of such
        termination  (but in no event later than the date the Term would  expire
        without giving effect to any automatic renewal.

        Section  13.  No  Mitigation;  No  Offset.  Executive  shall be under no
obligation to mitigate  damages or the amount of any payment  provided for under
this Agreement by seeking other  employment or otherwise,  and there shall be no
offset  against  amounts due  Executive  under this  Agreement on account of any
remuneration  attributable  to any  subsequent  employment  that  Executive  may
obtain.

        Section 14. Disclosure and Assignment of Intellectual Property.

                (a) Executive  agrees that the Company,  and its  successors and
assigns shall own all right,  title and interest  throughout the world in and to
all  research,  information,   inventions,  designs,  procedures,  developments,
discoveries,  improvements,  patents and applications  therefor,  trademarks and
applications  therefor,  copyrights and  applications  therefor,  trade secrets,
drawings, plans, systems, methods, specifications,  and all other manufacturing,
engineering,  technical,  research and  development  data and  know-how  (herein
sometimes "Intellectual Property") made, conceived, developed and/or acquired by
him solely or jointly with others during the period of his  employment  with the
Company  or  within  one  year  thereafter,  which  relate  to the  manufacture,
production or processing of any products developed or sold by the Company during
the term of this  Agreement  or which  are  within  the  scope of or  usable  in
connection with the Company's  business as it may, from time to time,  hereafter
be conducted or proposed to be conducted,  whether or not made during my regular
working hours and whether or not made on the Company's premises.

                (b) Executive agrees that any such  Intellectual  Property shall
constitute a work made for hire under the  copyright  laws of the United  States
and, to the extent any such Intellectual  Property shall be determined not to be
a work made for hire,  Executive  hereby  assigns,  and,  to the extent any such
assignment  cannot  be made at the  present  time,  Executive  hereby  agrees to
assign, to the Company all of my right, title and interest throughout the world,
including, without limitation, copyright, patent and trade secret rights, in and
to the Intellectual Property, together with Executive's right to file for and/or
own wholly without restriction United States and foreign patents, trademarks and
copyrights with respect thereto.  Executive specifically agrees and acknowledges
that the foregoing  assignment  covers all results,  outputs and products of his
work for the Company  prior to the date  hereof,  whether as an employee or as a
consultant,  and all related  copyrights,  patents and other proprietary rights,
and that all such results,  outputs and products shall be Intellectual  Property
hereunder and the sole property of the Company hereafter.


<PAGE>
                                      305


                (c)  Executive   agrees  to  execute  all   appropriate   patent
applications  securing all United States and foreign patents on all Intellectual
Property,  and to do, execute and deliver any and all acts and instruments  that
may be necessary or proper to vest all  Intellectual  Property in the Company or
its nominee or designee and to enable the  Company,  or its nominee or designee,
to obtain all such patents;  and Executive  agrees to render to the Company,  or
its  nominee  or  designee,  all  such  assistance  as it  may  require  in  the
prosecution of all such patent applications and applications for the re-issue of
such patents,  and in the prosecution or defense of all interferences  which may
be declared  involving  any of said  patent  applications  or  patents,  but the
expense  of  all  such  assignments  and  patent  applications,   or  all  other
proceedings  referred to herein above, shall be borne by the Company.  Executive
shall be entitled to fair and reasonable  compensation  for any such  assistance
requested by the Company or its nominee or designee  and  furnished by him after
the  termination of his employment.  Executive shall make and maintain  adequate
and current written records of all  Intellectual  Property,  and Executive shall
disclose all Intellectual Property promptly, fully and in writing to the Company
immediately upon development of the same and at any time upon request.

        Section 15.  Confidentiality.  Executive  shall not,  either  during the
period of his employment  with the Company or thereafter,  reveal or disclose to
any person outside the Company or use for his own benefit, without the Company's
specific written  authorization,  whether by private  communication or by public
address  or  publication  or  otherwise,   any  Confidential   Information,   as
hereinafter defined. The term "Confidential Information" as used throughout this
Agreement shall mean all trade secrets,  proprietary  information and other data
or information (and any tangible  evidence,  record or representation  thereof),
whether  prepared,  conceived  or  developed  by an  employee  of the Company or
received by the Company from an outside  source,  which is in the  possession of
the Company  (whether  or not the  property  of the  Company),  which in any way
relates to the present or future business of the Company, which is maintained in
confidence by the Company, or which might permit the Company or its customers to
obtain a competitive  advantage over  competitors who do not have access to such
trade  secrets,  proprietary  information,  or other  data or  information.  All
originals  and copies of any of the  foregoing,  relating to the business of the
Company,  however  and  whenever  produced,  shall be the sole  property  of the
Company,  not to be removed from the premises or custody of the Company  without
in each  instance  first  obtaining  written  consent  or  authorization  of the
Company. Upon the termination of Executive's employment in any manner or for any
reason,  Executive shall promptly  surrender to the Company all copies of any of
the foregoing,  together with any other documents,  materials, data, information
and  equipment  belonging  to or relating to the  Company's  business and in his
possession,  custody or control,  and Executive  shall not thereafter  retain or
deliver to any other  person,  any of the foregoing or any summary or memorandum
thereof.

        Section 16. Restriction.  The Company has invested and may in the future
be required to invest  substantial  sums of money,  directly or  indirectly,  to
continue and expand the business  heretofore  conducted by it and in  connection
therewith,  and as Executive  recognizes that the Company would be substantially
injured by Executive  disclosing  to others,  or by Executive  using for his own
benefit,  any  Intellectual  Property or any of the other  types of  information
referred to in Section 15 as  Confidential  Information,  Executive  agrees that
during  the  period  of  his  employment  hereunder  and  for  a  period  ending
twenty-four (24) months after the term of this Agreement:

                (a) Neither he nor any member of his family will be  interested,
directly  or  indirectly,  as an investor  in any other  business or  enterprise
similar to that of the Company or in competition  with the Company (except as an
investor  in  securities  listed on a national  securities  exchange or actively
traded over the counter; and

                (b) He will not, directly or indirectly,  for his own account or
as employee,  


<PAGE>
                                      306


officer,  director,  partner,  joint  venturer or  otherwise,  engage within the
United  States  or  Canada,  in any  phase  of the  business  of  manufacturing,
distributing or selling of lasers for use in medical or cosmetic procedures.

                (c)  Executive  shall not solicit,  induce,  attempt to hire, or
hire any employee of the Company (or any other person who may have been employed
by the Company during the term of his employment with the Company), or assist in
such  hiring  by any other  person or  business  entity  or  encourage  any such
employee to terminate his or her employment with the Company.

        Executive and the Company are of the belief that the period of time, the
geographic  area and the range of  activities  limited  by this  Section  16 are
reasonable,  in view of the  nature  of the  business  in which the  Company  is
engaged  and  proposes  to  engage,  the state of its  product  development  and
Executive's  knowledge of this business.  However,  if such period,  or range of
activities area should be adjudged unreasonable in any judicial proceeding, then
the period of time shall be reduced by such number of months, such area shall be
reduced  by  elimination  of such  portion of such  area,  and/or  such range of
activities  shall be reduced by  elimination of such  activities,  as are deemed
unreasonable, so that this covenant may be enforced in such area and during such
period of time as is adjudged to be reasonable.

        Section 17.  Notices.  All notices  and other  communications  hereunder
shall be in writing  and shall be deemed to have been given  when  delivered  or
three (3) days after mailing if mailed by  first-class,  registered or certified
mail, postage prepaid,  addressed (a) if to Executive,  at the address set forth
below his name on the  signature  page  hereof,  or to such other  person(s)  or
address(es) as Executive shall have furnished to the Company in writing; and (b)
if to the Company, at 66 Cherry Hill Drive,  Beverly, MA 01915, Attn: Mr. Joseph
Caruso,  with a copy to Foley,  Hoag & Eliot,  One Post Office  Square,  Boston,
Massachusetts 02109, Attn: David A. Broadwin, Esq. or to such other person(s) or
address(es) as the Company shall have furnished to Executive in writing.

        Section 18. Assignability. In the event that the Company shall be merged
with, or consolidated into, any other corporation, or in the event that it shall
sell and transfer  substantially all of its assets to another  corporation,  the
terms of this  Agreement  shall  inure to the benefit of, and be assumed by, the
corporation  resulting  from  such  merger  or  consolidation,  or to which  the
Company's  assets shall be sold and  transferred.  This  Agreement  shall not be
assignable  by Executive,  but it shall be binding upon,  and shall inure to the
benefit of, his heirs, executors, administrators and legal representatives.

         Section  19.  Entire  Agreement.  This  Agreement  contains  the entire
agreement  between the Company and Executive  with respect to the subject matter
hereof and there have been no oral or other agreements of any kind whatsoever as
a  condition  precedent  or  inducement  to the  signing  of this  Agreement  or
otherwise concerning this Agreement or the subject matter hereof.

        Section 20. Expenses.  Each party shall pay its own expenses incident to
the  performance  or  enforcement  of this  Agreement,  including  all  fees and
expenses of its counsel for all activities of such counsel  undertaken  pursuant
to this Agreement, except as otherwise herein specifically provided.

        Section 21. Equitable Relief.  Executive  recognizes and agrees that the
Company's  remedy at law for any breach of the  provisions of Sections 14, 15 or
16 hereof would be inadequate, and he agrees that for breach of such provisions,
the Company shall,  in addition to such other remedies as may be available to it
at law or in equity or as provided in this Agreement,  be entitled to injunctive
relief and to enforce its rights by an action for  specific  performance  to the
extent permitted by law. Should Executive engage in any activities prohibited 


<PAGE>
                                      307


by this  Agreement,  he  agrees  to pay over to the  Company  all  compensation,
remunerations or moneys or property of any sort received in connection with such
activities;  such payment shall not impair any rights or remedies of the Company
or obligations  or  liabilities  of Executive  which such parties may have under
this Agreement or applicable law.

        Section 22. Waivers and Further  Agreements.  Any waiver of any terms or
conditions of this  Agreement  shall not operate as a waiver of any other breach
of such  terms or  conditions  or any  other  term or  condition,  nor shall any
failure to enforce any provision hereof operate as a waiver of such provision or
of any other provision hereof;  provided,  however, that no such written waiver,
unless it, by its own  terms,  explicitly  provides  to the  contrary,  shall be
construed to effect a  continuing  waiver of the  provision  being waived and no
such waiver in any instance  shall  constitute a waiver in any other instance or
for any other  purpose or impair the right of the party against whom such waiver
is claimed in all other  instances  or for all other  purposes  to require  full
compliance with such provision. Each of the parties hereto agrees to execute all
such further  instruments  and documents and to take all such further  action as
the other  party may  reasonably  require in order to  effectuate  the terms and
purposes of this Agreement.

        Section 23. Amendments. This Agreement may not be amended, nor shall any
waiver,  change,  modification,  consent or discharge  be effected  except by an
instrument  in  writing  executed  by or on  behalf of the  party  against  whom
enforcement of any waiver, change, modification, consent or discharge is sought.

        Section 24.  Severability.  If any provision of this Agreement  shall be
held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable
as applied to any particular case in any  jurisdiction or  jurisdictions,  or in
all  jurisdictions or in all cases,  because of the conflicting of any provision
with any  constitution  or  statute  or rule of  public  policy or for any other
reason,  such circumstance  shall not have the effect of rendering the provision
or provisions in question,  invalid,  inoperative or  unenforceable in any other
jurisdiction  or in any other case or  circumstance  or of  rendering  any other
provision or provisions herein contained  invalid,  inoperative or unenforceable
to the extent that such other provisions are not themselves actually in conflict
with such  constitution,  statute or rule of public  policy,  but this Agreement
shall be reformed  and  construed  in any such  jurisdiction  or case as if such
invalid,  inoperative or unenforceable provision had never been contained herein
and such provision reformed so that it would be valid, operative and enforceable
to the maximum extent permitted in such jurisdiction or in such case.

        Section 25. Counterparts.  This Agreement may be executed in two or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together  shall  constitute  one and the same  instrument,  and in  pleading  or
proving any  provision of this  Agreement,  it shall not be necessary to produce
more than one of such counterparts.

        Section 26. Section Headings.  The headings  contained in this Agreement
are for  reference  purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

        Section 27. General Provisions.

                (a) Executive further agrees that his obligations under Sections
14, 15 and 16 of this Agreement  shall be binding upon him  irrespective  of the
duration of his employment by the Company,  the reasons for any cessation of his
employment by the Company,  or the amount of his  compensation and shall survive
the termination of this Agreement  (whether such  termination is by the Company,
by Executive, upon expiration of this Agreement or otherwise).

                (b) Executive  represents and warrants to the Company that he is
not now under 


<PAGE>
                                      308


any obligations to any person,  firm or  corporation,  and has no other interest
which is  inconsistent  or in  conflict  with  this  Agreement,  or which  would
prevent,  limit or  impair,  in any way,  the  performance  by him of any of the
covenants or his duties in his said employment.

        Section 28.  Gender.  Whenever  used herein,  the singular  number shall
include the plural,  the plural shall include the  singular,  and the use of any
gender shall include all genders.

        Section  29.  Governing  Law.  This  Agreement  shall be governed by and
construed and enforced in accordance  with the law (other than the law governing
conflict of law questions) of the Commonwealth of Massachusetts.

        IN WITNESS  WHEREOF,  the parties have executed or caused to be executed
this Agreement as of the date first above written.


                                              PALOMAR MEDICAL TECHNOLOGIES, INC.



                                       By:                  /s/
                                                --------------------------------
                                       Name:      Steven Georgiev
                                                --------------------------------
                                       Title:   
                                                --------------------------------


        BY PLACING MY SIGNATURE  HEREUNDER,  I ACKNOWLEDGE  THAT I HAVE READ ALL
THE PROVISIONS OF THIS AGREEMENT AND THAT I AGREE TO ALL OF ITS TERMS.


                                         EXECUTIVE:


                                                            /s/
                                         ---------------------------------------
                                             Joseph P. Caruso

                                         Notice Address:


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

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

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