EXCHANGE AGREEMENT

     THIS  EXCHANGE  AGREEMENT,  dated as of December 31,  1997,  by and between
PALOMAR MEDICAL TECHNOLOGIES,  INC., a Delaware  corporation,  with headquarters
located at 45 Hartwell Avenue,  Lexington,  Massachusetts 02173 (the "Company"),
and  ADVANTAGE  FUND  LIMITED  a  British  Virgin  Islands   corporation,   with
administrative  offices  located  at  c/o  CITCO,  Kaya  Flamboyan  9,  Curatao,
Netherlands Antilles (the "Buyer").

                              W I T N E S S E T H:

     WHEREAS,  the Company and Genesee Fund Limited,  a British  Virgin  Islands
corporation   ("GFL")  have  executed  and  delivered,   one  to  the  other,  a
Subscription  Agreement,  dated as of  September  26,  1996  (the  "Subscription
Agreement"),  pursuant  to which the  Company  issued  and sold to GFL,  and GFL
purchased from the Company 10,000 shares of Series G Convertible Preferred Stock
(the  "Series G Preferred  Stock") of the  Company,  of which 2,684  shares (the
"Series G Preferred Shares") are issued and outstanding and held by the Buyer;

     WHEREAS,  pursuant  to  the  Securities  Purchase  Agreement,  dated  as of
December 31, 1996, by and between Palomar  Electronics  Corporation,  a Delaware
corporation,  the Company and the Buyer,  the Company  sold to the Buyer and the
Buyer purchased from the Company 200,000 shares (the "Outstanding Nexar Shares")
of  Common  Stock,  $.01  par  value  (the  "Nexar  Common  Stock"),   of  Nexar
Technologies, Inc., a Delaware corporation ("Nexar") and in connection therewith
the Company and the Buyer  executed and delivered,  one to the other,  an Option
Agreement,  dated as of December 31, 1996 (the "Option Agreement"),  pursuant to
which,  among other things, the Company granted to the Buyer the right, upon the
terms and subject to the  conditions  of the Option  Agreement,  to exchange the
Outstanding Nexar Shares for shares of Common Stock, $.01 par value (the "Common
Stock") of the Company;

     WHEREAS,  the  Company and the Buyer wish to provide the Buyer the right to
exchange the Series G Preferred Shares for shares of Common Stock upon the terms
and subject to the conditions of this Agreement;

     WHEREAS,  disputes  have arisen  regarding the exercise by the Buyer of its
rights  under the Option  Agreement  and the  performance  by the Company of its
obligations  under the Option  Agreement  and the Buyer and the Company  wish to
resolve such disputes as provided in this Agreement; and

     WHEREAS,  the Company and the Buyer have  executed and delivered one to the
other a Stock  Purchase  Agreement,  dated as of the  date  hereof  (the  "Stock
Purchase Agreement")  pursuant to which the Buyer is purchasing,  upon the terms
and subject to the conditions of the Stock Purchase  Agreement,  shares of Nexar
Common Stock owned by the Company;

     NOW THEREFORE,  in  consideration  of the premises and the mutual covenants
contained  herein and other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

1.   BUYER REPRESENTATIONS, WARRANTIES, ETC.

     The Buyer  represents  and warrants to, and covenants and agrees with,  the
Company as follows:

     (a) ACCREDITED INVESTOR. The Buyer is an oaccredited investoro as that term
is defined in Rule 501 of the General Rules and Regulations under the Securities
Act of 1933, as amended (the "1933 Act") by reason of Rule 501(a)(3);

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     (b) REOFFERS AND RESALES.  All subsequent  offers and sales by the Buyer of
the shares of Common  Stock  issuable  upon  exchange  of the Series G Preferred
Shares  pursuant to this Agreement (the "Common  Shares") shall be made pursuant
to  registration  of such  Common  Shares  under the 1933 Act or  pursuant to an
exemption from registration;

     (c) COMPANY  RELIANCE.  The Buyer  understands  that the Common  Shares are
being  offered  to it  in  reliance  on  the  exemption  from  the  registration
requirements of the 1933 Act provided by Section 3(a)(9) of the 1933 Act and may
also be offered in reliance on Regulation D under the 1933 Act  ("Regulation D"}
and exemptions from state securities  laws,  including  exemptions  available by
reason of satisfying the  requirements  of Regulation D, and that the Company is
relying  upon the truth and accuracy of, and the Buyer's  compliance  with,  the
representations,  warranties, agreements,  acknowledgments and understandings of
the Buyer  set  forth  herein in order to  determine  the  availability  of such
exemptions;

     (d)  INFORMATION  PROVIDED.  The Buyer and its advisors,  if any, have been
furnished with all materials  relating to the business,  finances and operations
of the Company and its Subsidiaries  and materials  relating to the offer of the
Common  Shares  which  have  been  requested  by the  Buyer;  the  Buyer and its
advisors,  if any,  have been afforded the  opportunity  to ask questions of the
Company and have received  satisfactory  answers to any such inquiries.  Without
limiting the generality of the foregoing,  the Buyer has had the  opportunity to
obtain and to review the  Company's  (1)  Annual  Report on Form  10-KSB for the
fiscal year ended December 31, 1996, (2) Quarterly  Reports on Form 10-Q for the
fiscal  quarters  ended March 31, June 30 and  September  30, 1997,  (3) Current
Report  on Form 8-K dated  December  9,  1997,  and (4)  Amendment  No. 2 to the
Company's  Registration  Statement on Form S-3 (Registration No. 333-42129) (the
"Company  Registration  Statement")  filed  with  the  Securities  and  Exchange
Commission (the "SEC") on January 9, 1998 (collectively, the "SEC Reports"); and
the Buyer  understands  that its investment in the Common Shares involves a high
degree of risk;

     (e)  ABSENCE OF  APPROVALS.  The Buyer  understands  that no United  States
federal  or state  agency or any other  government  or  governmental  agency has
passed on or made any recommendation or endorsement of the Common Shares; and

     (f)  AGREEMENT.  This  Agreement  has  been  duly and  validly  authorized,
executed  and  delivered  on behalf  of the  Buyer  and is a valid  and  binding
agreement of the Buyer  enforceable in accordance with its terms,  subject as to
enforceability  to general  principles of equity and to bankruptcy,  insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.

     (g)  The  Buyer  acknowledges  that,  except  for the  historical  material
contained herein or in the SEC Reports, the matters disclosed herein and therein
are  forward-looking  statements under the federal  securities laws that involve
risks and  uncertainties,  including,  but not  limited to,  product  demand and
market  acceptance  risks,  the  effect of  economic  conditions,  the impact of
competitive  products and pricing,  product development,  commercialization  and
technological difficulties, capacity and supply constraints or difficulties, the
results of financing efforts,  actual purchases under agreements,  the effect of
the Company's accounting policies,  and other risks detailed in the SEC Reports.
Actual results could differ  materially  from those  estimated or anticipated in
these  forward-looking  statements.  Without  limiting  the  generality  of  the
foregoing,  the Buyer  acknowledges  the Risk  Factors  set forth in the Company
Registration Statement.

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<PAGE>

2.   COMPANY REPRESENTATIONS, WARRANTIES, ETC.

     The Company  represents and warrants to, and covenants and agrees with, the
Buyer that:

     (a)  ORGANIZATION  AND  AUTHORITY.   The  Company  is  a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Delaware,  and has all requisite corporate power and authority to (i) own, lease
and operate its properties and to carry on its business as now being  conducted,
and (ii) to execute,  deliver and perform its  obligations  under this Agreement
and the  other  agreements  to be  executed  and  delivered  by the  Company  in
connection herewith, and to consummate the transactions contemplated hereby. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in all jurisdictions  wherein such qualification is necessary and where
failure so to qualify  could have a  material  adverse  effect on the  business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company.

     (b)  CONCERNING  THE  COMMON  SHARES.  The  Common  Shares  have  been duly
authorized  and,  when issued in exchange  for the Series G Preferred  Shares in
accordance with this Agreement,  will be duly and validly issued, fully paid and
non-assessable  and will not subject the holder thereof to personal liability by
reason of being such holder.  There are no preemptive  rights of any stockholder
of the Company,  as such, to acquire any of the Common Shares.  The Common Stock
has been duly listed for trading on the Nasdaq SmallCap Market ("Nasdaq") and is
currently  listed for trading  thereon and (1) the Company has not been notified
since  December 31, 1994 by Nasdaq of any failure or  potential  failure to meet
the criteria for  continued  listing and trading on Nasdaq and (2) no suspension
of trading in the Common Stock is in effect.  The  transactions  contemplated by
this  Agreement will not be subject to the rules adopted by Nasdaq which require
stockholder  approval of certain  transactions,  including  issuances  of common
stock  below the lower of book value or market  price (the  "Nasdaq  Stockholder
Approval Rule").

     (c) EXCHANGE  AGREEMENT AND REGISTRATION  RIGHTS AGREEMENT.  This Agreement
has been duly and validly authorized,  executed and delivered by the Company and
this Agreement is the valid and binding agreement of the Company  enforceable in
accordance with its terms, subject as to enforceability to general principles of
equity  and  to  bankruptcy,  insolvency,  moratorium  and  other  similar  laws
affecting the  enforcement  of creditors'  rights  generally.  The  Subscription
Agreement and the Registration Rights Agreement, dated as of September 26, 1996,
by and between the Company and the Buyer (the "Registration  Rights Agreement"),
are in full force and effect and are valid and binding agreements of the Company
enforceable  in  accordance  with  their   respective   terms,   subject  as  to
enforceability  to general  principles of equity and to bankruptcy,  insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.

                  (d)  NON-CONTRAVENTION.  The  execution  and  delivery of this
Agreement  by the  Company  and  the  issuance  of the  Common  Shares  and  the
consummation  by the  Company  of the other  transactions  contemplated  by this
Agreement,  do not and will  not  conflict  with or  result  in a breach  by the
Company of any of the terms or provisions of, or constitute a default under, the
certificate  of  incorporation  or by-laws  of the  Company,  or any  indenture,
mortgage,  deed of trust or other material  agreement or instrument to which the
Company is a party or by which it or any of its  properties or assets are bound,
or any applicable law, rule or regulation or any applicable decree,  judgment or
order  of  any  court,   United  States  federal  or  state   regulatory   body,
administrative  agency or other  governmental body having  jurisdiction over the
Company or any of its properties or assets.

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<PAGE>

     (e) APPROVALS.  No  authorization,  approval or consent of, or filing with,
any court, governmental body, regulatory agency,  self-regulatory  organization,
or stock exchange or market or the stockholders of the Company is required to be
obtained  or made by the  Company  for the  issuance  of the Common  Shares upon
exchange of the Series G Preferred Shares pursuant to this Agreement, other than
the requirements of any applicable blue sky laws.

     (f) INFORMATION  PROVIDED.  The information provided by or on behalf of the
Company to the Buyer, including, without limitation, the information referred to
in Section 2(e) of this  Agreement,  does not contain any untrue  statement of a
material fact or omit to state any material fact  necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.

     (g) ABSENCE OF CERTAIN CHANGES.  Since December 31, 1996, there has been no
material  adverse  change and no material  adverse  development in the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company or any of its subsidiaries,  except as disclosed in the
SEC Reports.

     (h) ABSENCE OF CERTAIN PROCEEDINGS. Except as disclosed in the SEC Reports,
there is no action, suit, proceeding,  inquiry or investigation before or by any
court,  public board or body pending or, to the  knowledge of the Company or any
of its subsidiaries,  threatened  against or affecting the Company or any of its
subsidiaries,  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)  PROPERTIES.  The Company and its  subsidiaries  have good title to all
property real and personal  (tangible and  intangible) and other assets owned by
them, free and clear of all security  interests,  charges,  mortgages,  liens or
other  encumbrances,  except such as are described in the SEC Reports or such as
do not  materially  interfere with the use of such property made, or proposed to
be made,  by the  Company or its  subsidiaries.  The  leases,  licenses or other
contracts or  instruments  under which the Company and its  subsidiaries  lease,
hold  or are  entitled  to use  any  property,  real  or  personal,  are  valid,
subsisting  and  enforceable  with only  such  exceptions  as do not  materially
interfere  with the use of such  property  made,  or proposed to be made, by the
Company or its subsidiaries. Neither the Company nor any of its subsidiaries has
received  notice of any material  violation of any  applicable  law,  ordinance,
regulation, order or requirement relating to its owned or leased properties.

     (j) LABOR RELATIONS.  No material labor problem exists or, to the knowledge
of the Company,  is imminent with respect to any of the employees of the Company
or any of its subsidiaries.

     (k) SEC FILINGS.  The Company has timely filed all required forms,  reports
and other  documents  with the SEC since  December  1, 1996.  All of such forms,
reports and other documents complied, when filed, in all material respects, with
all applicable  requirements of the 1933 Act and the Securities  Exchange Act of
1934, as amended (the "1934 Act").

     (l) NO COMMISSIONS.  The Company has not and will not pay any commission or
other remuneration to any person in connection with the exchange by the Buyer of
the Common Shares for the Series G Preferred Shares.

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<PAGE>

     (m) RULE 144.  The Common  Shares  may be sold by the Buyer or its  nominee
pursuant to Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation  of the SEC that may at any time permit the holders of Common  Shares
to sell securities of the Company without registration ("Rule 144") (1) prior to
September 26, 1998 if the holder thereof is in compliance  with  paragraphs (e),
(f), (g), (h) and (i) of Rule 144 at the time of such sale, and (2) on and after
September  26, 1998  pursuant to paragraph  (k) of Rule 144 if the holder of the
Common  Shares is not and has not been an affiliate  (as such term is defined in
Rule 144) during the  preceding  three months.  As of the date hereof,  adequate
current  public  information  with  respect  to  the  Company  is  available  in
accordance with paragraph (c)(1) of Rule 144.

     (n) SUBORDINATED NOTE. The outstanding  principal amount under that certain
4.5%  Convertible  Subordinated  Promissory  Note dated  October 17, 1996 of the
Company in the original  principal  amount of $2,500,000 is currently  $100,000.
The Company is not currently in default under such Note.

3.   CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

     (a) TRANSFER RESTRICTIONS. The Buyer acknowledges that, except as otherwise
provided in Section 3(b),  (1) the Common Shares have not been and are not being
registered  under  the  1933  Act,  and  may  not  be  transferred   unless  (A)
subsequently  registered  thereunder  for  resale  or (B) the Buyer  shall  have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and  substance to the Company,  to the effect that the Common Shares to be
sold or transferred may be sold or transferred  without such  registration;  (2)
any sale of the Common  Shares  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 Common Shares 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 used in the 1933 Act, may require  compliance with
some other  exemption under the 1933 Act or the rules and regulations of the SEC
thereunder;  and (3)  neither  the  Company  nor any  other  person is under any
obligation  to register  the Common  Shares under the 1933 Act or to comply with
the terms and conditions of any exemption thereunder.

     (b) RULE 144.  With a view to making  available to the Buyer and each other
holder of Series G  Preferred  Stock and Common  Shares (the Buyer and each such
other holder, an "Investor") the benefits of Rule 144, the Company agrees to:

          (1)  make and  keep  public  information  available,  as that  term is
understood and defined in Rule 144;

          (2)  file  with the SEC in a  timely  manner  all  reports  and  other
documents required of the Company under the 1933 Act and the 1934 Act;

          (3) furnish to each  Investor so long as such  Investor owns shares of
Series G Preferred Stock and Common Shares, promptly upon request, (i) a written
statement by the Company  that it has filed all reports  required to be filed by
Section 13 or 15(d) of the 1934 Act during the  preceding 12 months and has been
subject to such  filing  requirements  for the past 90 days,  (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents  so filed by the  Company and (iii) such other  information  as may be
reasonably requested to permit the Investors to sell such securities pursuant to
Rule 144 without registration;

          (4) if at any time the Company is not  required  to file such  reports
with the SEC under Sections 13 or 15(d) of the 1934 Act, to use its best efforts
to make publicly available other  information,  upon the request of an Investor,
so long as is  necessary  to  permit  publication  

                                       5
<PAGE>

by brokers  and  dealers  of  quotations  for the Common  Stock and sales of the
Common Shares in accordance with Rule 15c2-11 under the 1934 Act; and

          (5) within two  business  days after the  provision  to the Company of
evidence  reasonably  satisfactory  to the  Company (x) of  compliance  with the
applicable  provisions  of  paragraphs  (e),  (f),  (g) and  (h) of Rule  144 in
connection  with the sale of Common  Shares by an Investor  (which  evidence may
include an opinion of counsel for the  Investor,  in form,  scope and  substance
customary for opinions in comparable  transactions,  if an opinion of counsel is
reasonably  requested  by the  Company),  the  Company  will take all  necessary
actions to permit and cooperate with such Investor in completing the transfer of
such Common Shares including  instructing the Transfer Agent (as defined herein)
to  effect  such  transfer,  and  will  not  place  any  restrictive  legend  on
certificates  for the  Common  Shares or impose  any  stop-transfer  restriction
thereon,  and (y) of compliance  with the  requirements of paragraph (k) of Rule
144,  the Company will  promptly  remove any  restrictive  legend and cancel any
stop-transfer restriction on Common Shares held by an Investor.

     (c) NO  RESTRICTIVE  LEGEND.  The Company  shall not place any  restrictive
legend on  certificates  for Common  Shares  issued on  exchange of the Series G
Preferred  Shares  pursuant  to  this  Agreement  or  impose  any  stop-transfer
restriction thereon.

     (d) NASDAQ  LISTING;  REPORTING  STATUS.  Within ten days after the Closing
Date, the Company shall file with Nasdaq an amended listing application or other
document  required by Nasdaq in order that the listing of shares of Common Stock
originally  made by the Company in connection  with the issuance of the Series G
Preferred  Stock will be  applicable  to the Common  Shares  and, if required by
Nasdaq because the listing application  relating to the Series G Preferred Stock
may not be made  applicable  to the  Common  Shares,  shall  file with  Nasdaq a
listing  application  for the number of Common Shares which may be issuable upon
exchange of the Series G Preferred Shares pursuant to this Agreement,  on Nasdaq
and shall  provide  evidence  of such  filing to the Buyer  promptly  after such
filing.  The Company shall use its best efforts to obtain such  modification  or
listing.  So long as the Buyer  beneficially owns any of the Common Shares,  the
Company  shall file all reports  required  to be filed with the SEC  pursuant to
Section 13 or 15(d) of the 1934 Act,  and the  Company  shall not,  prior to the
date  which is two years  after the  Closing  Date,  terminate  its status as an
issuer  required to file reports  under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.

     (e) MARGIN  REQUIREMENTS.  Neither the Company nor any agent  acting on its
behalf has taken or will take any action which might cause this Agreement or the
transactions  contemplated  hereby to violate  Regulation G, Regulation T or any
other  regulation of the Board of Governors of the Federal  Reserve System or to
violate the 1934 Act, in each case as in effect now or as the same may hereafter
be in effect.

     (f) BLUE SKY LAWS.  On or before the Closing  Date,  the Company shall take
such action as shall be necessary to qualify, or to obtain an exemption for, the
Common Shares for issuance to the Buyer pursuant to this Agreement under such of
the securities or oblue skyo laws of jurisdictions in the United States as shall
be applicable to the issuance of the Common Shares to the Buyer pursuant to this
Agreement. The Company shall furnish copies of all filings, applications, orders
and grants or confirmations  of exemptions  relating to such securities or oblue
skyo laws on or before the Closing Date.

     (g) CERTAIN EXPENSES.  Whether or not the closing occurs, the Company shall
pay or  reimburse  the Buyer for all  reasonable  expenses  (including,  without
limitation,  legal fees and  expenses  of counsel to the Buyer)  incurred by the
Buyer in  connection  with  this  Agreement  and the  transactions  contemplated
hereby.

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<PAGE>

     (h) CERTAIN  ISSUANCES OF SECURITIES.  If the transactions  contemplated by
this Agreement are subject to the Nasdaq  Stockholder  Approval Rule, unless the
Company  obtains  Stockholder  Approval or a waiver  thereof  from  Nasdaq,  the
Company  will not issue any shares of Common Stock or shares of any other series
of preferred stock or other  securities  convertible  into,  exchangeable for or
otherwise  entitling the holder to acquire shares of Common Stock which would be
subject to the  requirements  of the Nasdaq  Stockholder  Approval  Rule (or any
successor or replacement  provision  thereof) and which would be integrated with
the sale of the Series G Preferred Shares to the Buyer or the issuance of Common
Shares  upon  conversion  or  exchange   thereof  for  purposes  of  the  Nasdaq
Stockholder  Approval  Rule (or any  successor,  replacement  or  other  similar
provision  applicable to the Company).  As used herein,  "Stockholder  Approval"
means the  approval  by a majority of the votes cast by the holders of shares of
Common  Stock (in  person or by proxy) at a meeting of the  stockholders  of the
Company (duly convened at which a quorum was present),  or a written  consent of
holders of shares of Common Stock entitled to such number of votes given without
a meeting,  of the issuance by the Company of 20% or more of the Common Stock of
the Company for less than the greater of the book or market value of such Common
Stock on conversion or exchange of the Series G Preferred  Stock,  as and to the
extent  required  under the Nasdaq  Stockholder  Approval Rule as in effect from
time to time or any successor, replacement or other similar provision applicable
to the Company.

     (i) BEST EFFORTS.  Each of the parties shall use its best efforts timely to
satisfy each of the conditions to the other party's  obligations to complete the
closing of the transactions  contemplated by this Agreement set forth in Section
6 or 7, as the case may be, of this Agreement on or before the Closing Date.

4.   EXCHANGE RIGHTS; TRANSFER AGENT INSTRUCTIONS.

     (a) EXCHANGE RIGHTS.  (i) The Company hereby agrees that, at any time after
the closing  under this  Agreement,  the Buyer and each other holder of Series G
Preferred Stock (the Buyer and each such other holder,  a "Holder") may exchange
shares  of Series G  Preferred  Stock  for  shares  of  Common  Stock in lieu of
converting such shares in accordance with the Certificate of Designations of the
Series G Convertible  Preferred Stock (the "Certificate of  Designations").  The
terms and conditions pursuant to which shares of Series G Preferred Stock may be
exchanged  for shares of Common  Stock shall in all respects be identical to the
terms  pursuant to which such shares may be converted  under the  Certificate of
Designations  and the provisions of Section 9 of the Certificate of Designations
are hereby incorporated herein by this reference as if set forth in full herein,
except as set forth below:

          (a) the Minimum Conversion Price shall be $.01;

          (b) The  number of trading  days used in  calculating  the  arithmetic
     average  of the  Closing  Price of the  Common  Stock  described  in clause
     (a)(i)(z)(II)(B)  of Section 9 of the Certificate of Designations  shall be
     five  (such  arithmetic  average  is  referred  to herein as the  "Exchange
     Price");

          (c) each reference in the  provisions of Section 9 of the  Certificate
     of Incorporation to oconversion o or oconverto or other forms of such words
     shall be deemed to be a reference to oexchangeo or the appropriate  form of
     such word;

          (d) each reference in the  provisions of Sections 9(a),  9(b) and 9(c)
     to the  oConversion  Amounto  shall  be  deemed  to be a  reference  to the
     oExchange  Amount,o  which  initially  shall  mean  $1,000.00,  subject  to
     adjustment  in  accordance  with  Sections  9(a),  9(b)  and  9(c)  of  the
     Certificate of Designations as if it were the Conversion Amount;

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<PAGE>

          (e) each reference in the  provisions of Sections 9(a),  9(b) and 9(c)
     of the Certificate of Designations to the oConversion Dateo shall be deemed
     to be a reference  to Exchange  Date and,  for  purposes of this  Section 4
     oExchange  Dateo  shall  mean the date on which the Notice of  Exchange  is
     actually  received  by the  Company,  any  transfer  agent for the Series G
     Preferred  Stock or the transfer agent for the Common Stock,  in case of an
     exchange at the option of a Holder pursuant to Section 4(a).

     (b) LIMITATION ON EXCHANGES.  So long as the Company shall be in compliance
in all material respects with its obligations to the Holders (including, without
limitation,  its obligations under the Subscription Agreement,  the Registration
Rights  Agreement,  this Certificate of Designations  and this Agreement,  then,
notwithstanding  any other  provisions of Section  4(a),  (x) no Holder shall be
entitled to exercise  exchange  rights  prior to March 1, 1998 and (y) no Holder
shall be  entitled  on any  Exchange  Date to  exchange  any  shares of Series G
Preferred Stock to the extent that the sum of (1) the number of shares of Series
G Preferred  Stock for which valid notices of exchange were given by such Holder
within 30 days  preceding  such  Exchange  Date plus (2) the number of shares of
Series  G  Preferred  Stock  held by such  Holder  with  respect  to  which  the
determination  in this Section  4(b) is being made would  exceed the  applicable
Exchangeability Amount.

     As used herein,  oExchangeability  Amounto for any Exchange  Date means the
number of  shares of Series G  Preferred  Stock  set forth  below  opposite  the
Exchange Rate which is in effect for exchanges on such Exchange Date

        EXCHANGE RATE                                 EXCHANGEABILITY AMOUNT

        $.01 to $2.00 per share                                  268
        $2.01 to $3.00 per share                                 536
        $3.01 to $4.00 per share                                 804
        $4.01 per share or greater                             1,072

; PROVIDED,  HOWEVER,  that the  Exchange  Rates shown above shall be subject to
equitable   adjustments  for  stock  splits,   stock  dividends,   combinations,
recapitalizations,  and similar events which occur on or after the Closing Date.
If at any time by reason of a  proposed  transfer  or  otherwise  the  number of
Holders is to be  increased,  then the Exchange  Amount  applicable to each such
Holder shall be allocated  between or among the transferring  Holder and the new
Holders pro rata,  the Company  shall be entitled to make a notation  thereof on
the particular certificates and any such new Holder, by such Holder's acceptance
of shares of Series G Preferred Stock, agrees to such allocation and notation.

     (c)  EXCHANGE  AT OPTION OF  COMPANY.  So long as the  Company  shall be in
compliance in all material  respects with its  obligations to the holders of the
Series G Preferred Stock (including,  without limitation,  its obligations under
this  Agreement,  the  Registration  Rights  Agreement  and the  Certificate  of
Designations), the Company shall have the right, exercisable at any time or from
time to time after  February 28, 1998 by at least 15 business  days but not more
than 20 business days prior notice (a "Company  Exchange Notice") to the holders
of the Series G  Preferred  Stock,  to require  such  holders  to  exchange,  in
accordance with the provisions, and subject to the limitations,  of this Section
4, all or any part of the  outstanding  shares of Series G  Preferred  Stock for
shares of Common Stock to the extent the same are at such time  exchangeable for
shares of Common  Stock.  Unless  paragraph  (k) of Rule 144 is available to the
holder  and  the  Company  has  complied  with  all of its  obligations  in this
Agreement with respect  thereto,  the number of  outstanding  shares of Series G
Preferred  Stock  which the  Company  may  require a holder to  exchange  on any
exchange  date may not exceed such number of shares of Series G Preferred  Stock
which are  exchangeable  for a number of shares of Common 

                                       8
<PAGE>

Stock  which,  together  with the number of shares of Common  Stock sold for the
account of such holder within the preceding three months,  equals one percent of
the  outstanding  shares of Common  Stock as shown by the most recent  report or
statement published by the Company.  The Company Exchange Notice shall state (1)
the number of shares of Series G  Preferred  Stock  which the  Company  seeks to
require to be exchanged  for shares of Common  Stock and (2) the  exchange  date
(which  shall not be less than 15 business  days or more than 20  business  days
after the date the Company Exchange Notice is given).  If the Company shall give
a Company Exchange Notice, then, unless theretofore  exchanged by a Holder, and,
so long as the Company shall be in compliance in all material  respects with its
obligations to the holders of the Series G Preferred Stock  (including,  without
limitation,  its  obligations  under this  Agreement,  the  Registration  Rights
Agreement and the  Certificate  of  Designations)  on such exchange date, on the
exchange date properly set forth therein, the lesser of (A) the number of shares
of Series G Preferred  Stock which the Company seeks to require to be exchanged,
as set forth in such Company Exchange Notice or (B) the maximum number of shares
of Series G  Preferred  Stock which on such  exchange  date is  exchangeable  in
accordance  with  Section 4(a)  hereof,  shall be  exchanged  for such number of
shares of Common Stock as shall be  determined  pursuant to this Section 4 as if
the  exchange of such number of shares of Series G Preferred  Stock were made by
the Holders  thereof in accordance  herewith  without any further  action on the
part of the holders of such shares of Series G Preferred Stock.  Upon receipt by
the Company of certificates for shares of Series G Preferred Stock exchanged for
shares of Common  Stock in  accordance  with this  Section  4(c) after a Company
Exchange Notice is given, the Company shall issue and, within three trading days
after  such  surrender,  deliver  to or upon the order of such  Holder  (1) that
number of shares of Common  Stock for the number of shares of Series G Preferred
Stock  exchanged as shall be  determined  in  accordance  herewith and (2) a new
certificate for the balance of shares of Series G Preferred Stock, if any.

     (d) CONVERSIONS  DEEMED EXCHANGES.  On and after March 1, 1998, the Company
shall to treat any request for conversion of Series G Preferred  Stock submitted
by a Holder in accordance  with the terms and  conditions of the  Certificate of
Designations  as a  request  for  exchange  in  accordance  with the  terms  and
conditions hereof,  subject to Section 4(f). On and after the closing under this
Agreement,  any  Corporation  Conversion  Notice  submitted  by the  Company  in
accordance  with the terms and  conditions of the  Certificate  of  Designations
shall be deemed to be a Company Exchange Notice in accordance with the terms and
conditions of Section 4(c).

     (e) TRANSFER  AGENT  INSTRUCTIONS.  Prior to the Closing Date,  the Company
will (1) execute and deliver the Transfer Agent  Instructions  substantially  in
the  form  attached  hereto  as  ANNEX I to and  thereby  irrevocably  instruct,
American Stock  Transfer & Trust  Company,  as Transfer Agent and Registrar (the
"Transfer Agent"), to issue certificates for the Common Shares from time to time
upon exchange of the Series G Preferred Shares in such amounts as specified from
time to time to the  Transfer  Agent  in the  Exchange  Notices  surrendered  in
connection  with such  exchanges and (2) appoint the Transfer Agent the exchange
agent for the Series G Preferred  Stock.  The certificates for the Common Shares
shall  be  registered  in the  name  of the  Buyer  or its  nominee  and in such
denominations  to be specified by the Buyer in connection  with each exchange of
Series G Preferred  Shares.  The Company warrants that no instruction other than
such instructions  referred to in this Section 4(e) will be given by the Company
to the  Transfer  Agent and that the Common  Shares  shall  otherwise  be freely
transferable  on the books  and  records  of the  Company  as and to the  extent
provided in this Agreement.  Nothing in this Section 4(e) shall limit in any way
the  Buyer's   obligations  and  agreement  to  comply  with  the   registration
requirements of all applicable  securities laws upon any resale of Common Shares
by the  Buyer.  If the Buyer  provides  the  Company  with an opinion of counsel
reasonably  satisfactory  in form,  scope  and  substance  to the  Company  that
registration  of a resale by the Buyer of any of the Common Shares in accordance
with clause (1)(B) of Section 3(a) of this  Agreement is not required  under the
1933 Act,  the Company  shall  permit the  transfer

                                       9
<PAGE>

of such Common  Shares and promptly  instruct the  Company's  transfer  agent to
issue upon  transfer no later than three days after  receipt of such opinion one
or more share  certificates in such name and in such  denominations as specified
by the Buyer.  Nothing in this Section 4(e) shall limit the  obligations  of the
Company under Section 3(n) of the Registration Rights Agreement.

     (f)  LIMITATION ON EXERCISE OF CONVERSION  RIGHTS.  Prior to March 1, 1998,
the Holders shall be entitled to exercise  conversion  rights in accordance with
the  Certificate  of  Designations.  On and after March 1, 1998,  so long as the
Company is in compliance in all material  respects with its  obligations  to the
holders of the Series G Preferred  Stock  (including,  without  limitation,  its
obligations  under this Agreement,  the  Registration  Rights  Agreement and the
Certificate of Designations), the Buyer and any other holder of shares of Series
G  Preferred  Stock who is bound by this  Section  4(f) shall not  exercise  the
conversion rights provided in Section 9(a) of the Certificate of Designations.

     (g) EXCHANGE NOTICE. Any notice of exchange of shares of Series G Preferred
Stock by a Holder  pursuant to Section 4(a) shall be in the form attached hereto
as ANNEX II.

     (h) TRANSFERS.  The Buyer agrees not to sell, assign or otherwise  transfer
any Series G  Preferred  Shares  unless the  transferee  becomes a party to this
Agreement. The Company agrees to be bound by the terms of this Agreement for the
benefit of each such transferee.

     (i) RETIREMENT OF SERIES G PREFERRED STOCK. Upon each exchange of shares of
Series G Preferred  Stock pursuant to this  Agreement,  the Company shall retire
such shares.

5.   CLOSING DATE.

     The date and time of the closing under this Agreement (the "Closing  Date")
shall be 12:00 noon, New York City time, on January 23, 1998. Such closing shall
occur on the Closing Date at the Law Offices of Brian W Pusch.

6.   CONDITIONS TO THE COMPANY'S OBLIGATIONS.

     The Buyer  understands that the Company's  obligations under this Agreement
are conditioned upon the satisfaction of the following  conditions  precedent on
or before the Closing  Date (any or all of which may be waived by the Company in
its sole discretion):

     (a)  The  receipt  and  acceptance  by the  Company  of this  Agreement  as
evidenced  by  execution  of this  Agreement  by the Company and  delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;

     (b) The accuracy on the Closing Date of the  representations and warranties
of the Buyer  contained in this Agreement as if made on the Closing Date and the
performance  by the Buyer on or before the  Closing  Date of all  covenants  and
agreements of the Buyer  required to be performed on or before the Closing Date;
and

     (c) The Buyer shall have  executed  and  delivered to the Company a General
Release in the form attached hereto as ANNEX III.

                                       10
<PAGE>

     7. CONDITIONS TO THE BUYER'S OBLIGATIONS.

     The Company understands that the Buyer's obligation under this Agreement is
conditioned  upon the satisfaction of the following  conditions  precedent on or
before the  Closing  Date (any or all of which may be waived by the Buyer in its
sole discretion):

     (a) The accuracy on the Closing Date of the  representations and warranties
of the Company  contained  in this  Agreement as if made on the Closing Date and
the  performance  by the Company on or before the Closing Date of all  covenants
and agreements of the Company  required to be performed on or before the Closing
Date and receipt by the Buyer of a  certificate,  dated the Closing Date, of the
Chief Executive Officer or the Chief Financial Officer of the Company confirming
such matters and such other matters as the Buyer may reasonably request;

     (b) The closing under the Stock Purchase Agreement shall have occurred;

     (c) The receipt by the Buyer of a  certificate,  dated the Closing Date, of
the Secretary of the Company certifying (1) the certificate of incorporation and
by-laws of the Company as in effect on the Closing Date, (2) all  resolutions of
the Board of Directors (and committees  thereof) of the Company relating to this
Agreement and the transactions contemplated hereby and (3) such other matters as
reasonably requested by the Buyer;

     (d) The Company  shall have  executed and  delivered to the Buyer a General
Release in the form attached hereto as ANNEX III; and

     (e) Receipt by the Buyer on the  Closing  Date of an opinion of counsel for
the Company,  dated the Closing  Date, in form,  scope and substance  reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX IV attached hereto.

8.   MISCELLANEOUS.

     (a) This Agreement  shall be governed by and interpreted in accordance with
the laws of the Commonwealth of Massachusetts.

     (b) This  Agreement  may be  executed  in  counterparts  and by the parties
hereto on separate counterparts,  all of which together shall constitute one and
the same  instrument.  A  facsimile  transmission  of this  Agreement  bearing a
signature  on behalf of a party hereto shall be legal and binding on such party.
Although  this  Agreement  is dated as of the date  first set forth  above,  the
actual date of  execution  and  delivery of this  Agreement by each party is the
date set forth below such party's  signature on the signature  page hereof.  Any
reference in this Agreement or in any of the documents executed and delivered by
the parties hereto in connection  herewith to the date of execution and delivery
of this  Agreement  shall be deemed a  reference  to the later of such dates set
forth below each party's respective signature on the signature page hereof.

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

     (d) 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) This  Agreement may be amended only by an instrument in writing  signed
by the party to be charged with enforcement.

                                       11
<PAGE>

     (f)  Failure  of any  party to  exercise  any right or  remedy  under  this
Agreement or otherwise,  or delay by a party in exercising such right or remedy,
or any course of  dealings  between the  parties,  shall not operate as a waiver
thereof or an amendment hereof,  nor shall any single or partial exercise of any
such right or power,  or any abandonment or  discontinuance  of steps to enforce
such a right or  power,  preclude  any  other or  further  exercise  thereof  or
exercise of any other right or power.

                  (g) Any notices  required or  permitted  to be given under the
terms of this  Agreement  shall be sent by mail or delivered  personally  (which
shall  include   telephone   line  facsimile   transmission   with  answer  back
confirmation)  or by courier and shall be effective five days after being placed
in the mail, if mailed, or upon receipt, if delivered  personally or by courier,
in the case of the Company  addressed to the Company at its address shown in the
introductory  paragraph  of  this  Agreement,  Attention:  Director  of  Finance
(telephone line facsimile transmission number (781) 676-7330) or, in the case of
the Buyer, at its address shown on the signature page of this Agreement,  with a
copy to  Genesee  International,  Inc.,  10500  N.E.  8th  Street,  Suite  1920,
Bellevue,  Washington 98004-4332  (telephone line facsimile  transmission number
(425)  462-4645) or such other  address as a party shall have provided by notice
to the  other  party  in  accordance  with  this  provision.  The  Buyer  hereby
designates as its address and telephone line facsimile  transmission  number for
any  notice  required  or  permitted  to be given to the Buyer  pursuant  to the
Certificate  of  Designations  or the  provisions  of Section 4 the  address and
telephone line facsimile transmission number shown on the signature page of this
Agreement,  with a copy to: Advantage Fund Limited,  c/o Genesee  International,
Inc.,  10500 N.E.  8th  Street,  Suite  1920,  Bellevue,  Washington  98004-4332
(facsimile  number  (425)  462-4645),  until the Buyer shall  designate  another
address for such purpose.

     (h) The Buyer  shall have the right to assign  its  rights and  obligations
under this  Agreement  to any  transferee  of all or any portion of the Series G
Preferred  Shares,  provided  any such  assignee,  by  written  instrument  duly
executed by such assignee,  assumes all  obligations of the Buyer hereunder with
respect to the Series G Preferred  Shares so  transferred,  whereupon  the Buyer
shall be relieved of any further  obligations,  responsibilities and liabilities
under  this  Agreement  with  respect  to  the  Series  G  Preferred  Shares  so
transferred.

     (i) The respective representations, warranties, covenants and agreements of
the Buyer and the Company contained in this Agreement or made by or on behalf of
them, respectively,  pursuant to this Agreement shall survive the closing on the
Closing  Date and  shall  remain  in full  force and  effect  regardless  of any
investigation made by or on behalf of them or any person controlling or advising
any of them.

     (j) This Agreement and its Annexes set forth the entire  agreement  between
the parties  hereto with respect to the subject  matter hereof and supersede all
prior  agreements  and  understandings,  whether  written or oral,  with respect
thereto.

     (k) The language used in this  Agreement  will be deemed to be the language
chosen by the parties to express  their  mutual  intent,  and no rules of strict
construction will be applied against any party.

                                       12
<PAGE>

     IN WITNESS  WHEREOF,  this  Agreement has been duly executed by the parties
hereto by their  respective  officers  thereunto duly  authorized as of the date
first set forth above.

                                       ADVANTAGE FUND LIMITED

                                       By:  /s/  A.P. de Groot
                                          --------------------
                                            A.P. de Groot
                                            President

                                       Address:   c/o CITCO
                                                  Kaya Flamboyan 9
                                                  Curatao, Netherlands Antilles
                                       Facsimile No.:   011-599-9322008

                                       PALOMAR MEDICAL TECHNOLOGIES, INC.

                                       By:  /s/  Joseph P. Caruso
                                          -------------------------------
                                       Title:  Treasurer and Chief Financial
                                               Officer
<PAGE>
   
                                                                   ANNEX I
                                                                     TO

                                                                  EXCHANGE
                                                                  AGREEMENT

                       PALOMAR MEDICAL TECHNOLOGIES, INC.

                               45 HARTWELL AVENUE
                         LEXINGTON, MASSACHUSETTS 02173

                                                          January    , 1998
                                                                  ---     


American Stock Transfer & Trust Company,
   as Transfer Agent and Registrar
40 Wall Street
New York, New York 10005

Dear Sir or Madam:

         Pursuant to an Exchange  Agreement,  dated as of December 31, 1997 (the
"Agreement"),  by and between  Palomar  Medical  Technologies,  Inc., a Delaware
corporation (the "Company"), and Advantage Fund Limited (the "Original Holder"),
the Company has agreed with the Original  Holder and will agree with  subsequent
holders  (together with the Original  Holder,  the "Holders") to exchange shares
(the "Series G Preferred Shares") of Series G Convertible  Preferred Stock, $.01
par value (the  "Series G  Preferred  Stock")  of the  Company  for shares  (the
"Common Shares") of Common Stock,  $.01 par value (the "Common  Stock"),  of the
Company.  As a condition  precedent to the closing under the Exchange Agreement,
the Original  Holder  requires the Company to send this letter as the  Company's
irrevocable  instruction to American Stock Transfer & Trust Company, as Transfer
Agent and Registrar (the "Transfer Agent"),  so that the Holders will be assured
of the timely  issuance and receipt of shares of Common  Stock upon  exchange of
shares of Series G Preferred Stock.

         The Company  hereby  appoints the Transfer  Agent as exchange agent for
the Series G Preferred Stock. Enclosed with this letter is the form of Notice of
Exchange  of  Series G  Convertible  Preferred  Stock  (the  "Exchange  Notice")
relating  to the  Series G  Preferred  Stock.  The  Company  hereby  irrevocably
instructs the Transfer  Agent to issue the Common Shares upon exchange of shares
of Series G  Preferred  Stock  from time to time  upon  receipt  of a copy of an
Exchange  Notice  delivered by a Holder which Exchange  Notice shall specify the
number of Common  Shares to be issued.  The  certificates  for the Common Shares
shall not bear any  restrictive  legend and neither the Company nor the Transfer
Agent shall place any stop-transfer restriction against the Common Shares.

         This  instruction  is expressly  made for the benefit of the holders of
record from time to time of the Series G Preferred  Stock and the Common  Shares
and may not be changed,


<PAGE>


amended or modified to diminish or  adversely  affect the rights of such holders
hereunder without the prior written consent of all such holders so affected.

                                             PALOMAR MEDICAL TECHNOLOGIES, INC.



                                             By:
                                                -------------------------------
                                                Name:
                                                Title:
<PAGE>

                                                              ANNEX II
                                                                 TO
                                                              EXCHANGE
                                                              AGREEMENT

                               NOTICE OF EXCHANGE
                     OF SERIES G CONVERTIBLE PREFERRED STOCK
                      OF PALOMAR MEDICAL TECHNOLOGIES, INC.

     TO: PALOMAR MEDICAL  TECHNOLOGIES,  INC. 
         45 Hartwell Avenue  
         Lexington, Massachusetts 02173

         Attention:        Director of Finance

         Facsimile:        (781) 676-7330

         (1) Pursuant to the Exchange Agreement,  dated as of December 31, 1997,
by and between Palomar Medical  Technologies,  Inc., a Delaware corporation (the
"Company"),   and  Advantage  Fund  Limited  (the  "Exchange  Agreement"),   the
undersigned  hereby elects to exchange  ________  shares of Series G Convertible
Preferred  Stock,  $.01 par value  per share  (the  "Preferred  Stock"),  of the
Company  for  shares of Common  Stock,  $.01 par  value per share  (the  "Common
Stock"),  of the Company, or such other securities for which the Preferred Stock
is  currently  exchangeable.  Capitalized  terms used  herein and not  otherwise
defined herein have the respective meanings provided in the Exchange Agreement.

         (2) Please issue a certificate or certificates for the number of shares
of Common Stock or other securities for which such number of shares of Preferred
Stock  is  exchangeable  in the  name(s)  specified  immediately  below  or,  if
additional space is necessary, on an attachment hereto:




       ---------------------                       ---------------------
       Name                                        Name

       ---------------------                       ---------------------
       Address                                     Address

       ---------------------                       ---------------------
       SS or Tax ID Number                         SS or Tax ID Number

         (3) The Exchange  Date is         and the Closing  Price of the Common
                                  --------
Stock on the five consecutive trading days preceding the Exchange Date and the 
arithmetic average thereof are as follows:

                   DATE                                     CLOSING PRICE


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

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

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

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

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

                  Arithmetic Average: $
                                       ----------------

         (4) In the event of  partial  exercise,  the  Company  must  reissue an
appropriate  certificate for the number of shares of Preferred Stock which shall
not have been exchanged.

         (5) The undersigned  hereby represents to the Company that the exercise
of exchange rights  contained  herein does not violate the provisions of Section
5(a) of the Exchange Agreement relating to limitation on beneficial ownership of
Common Stock upon exchange of the Preferred Stock.

                                                NAME OF HOLDER


                                                --------------------------------
Date:
     ----------------


                                                --------------------------------
                                                Signature  of  Holder  (must  be
                                                signed  exactly as name  appears
                                                on    the    Preferred     Stock
                                                Certificate.)
<PAGE>

                          MUTUAL RELEASE OF ALL CLAIMS

         FOR GOOD AND VALUABLE  CONSIDERATION,  the receipt and  sufficiency  of
which is hereby acknowledged,  Palomar, as hereinafter defined,  hereby remises,
releases,  and forever discharges Genesee  International,  Inc.,  Advantage Fund
Ltd.,  GFL  Advantage  Fund Ltd.,  Advantage  Fund II, Ltd.,  their  general and
limited partners,  employees,  servants,  agents,  representatives,  affiliates,
investors,  attorneys and insurers,  past and present, and its and their agents,
servants,  heirs,  successors and assigns (all hereinafter jointly and severally
referred to as "Genesee"),  from any and all actions,  causes of action, claims,
suits, accounts,  covenants,  contracts,  debts, demands,  agreements,  damages,
liabilities or obligations  whatsoever of every name and nature,  whether at law
or in equity,  whether in contract or tort or by statute or on any other  basis,
known or unknown, suspected or unsuspected, vested or contingent (the "Claims"),
which  Palomar now has or ever had from the  beginning of the world to this date
(all hereinafter referred to as the "Palomar Claims");  provided,  however, that
this shall not include any Claims  which  Palomar  may have  against  Genesee in
connection  with the  Exchange  Agreement  of even date  herewith  and the Stock
Purchase  Agreement dated as of January 8, 1998 between Palomar and Genesee (the
"Excluded Agreements").

         Palomar  expressly  understands  and agrees that  Genesee  does not, by
accepting this Release or providing the consideration set forth herein, admit or
agree that it has, will have or ever had any liability to Palomar.
<PAGE>

         Further,  for  good  and  valuable   consideration,   the  receipt  and
sufficiency of which is hereby acknowledged,  including the foregoing release of
claims by Palomar against Genesee, Genesee likewise hereby remises, releases and
forever  discharges  Palomar  Medical  Technologies,   Inc.  and  its  servants,
employees,   agents,   representatives,    affiliates,    officers,   directors,
subsidiaries,  subsidiary officers, subsidiary directors,  subsidiary employees,
attorneys  and  insurers,   past  and  present,  and  their  heirs,   executors,
administrators,   estates,   legal   representatives,   successors  and  assigns
("Palomar")  from any and all Claims which  Genesee now has or ever had from the
beginning of the world to this date (all hereinafter referred to as "the Genesee
Claims");  provided,  however,  that this shall not  include  any  Claims  which
Genesee may have against Palomar in connection with the Excluded Agreements.

         Genesee  expressly  understands  and agrees that  Palomar  does not, by
accepting this Release or providing the consideration set forth herein, admit or
agree that it has, will have or ever had any liability to Genesee.

         WARRANTY OF CAPACITY TO EXECUTE AGREEMENT AND RELEASE

         The parties represent and warrant that no other person or entity has or
has had any interest in the Palomar Claims or the Genesee Claims, that they have
the sole right and  exclusive  authority to execute this  Agreement and Release,
and that  they have not  sold,  assigned,  transferred,  conveyed  or  otherwise
disposed of any of the Palomar Claims or the Genesee Claims.

         CONFIDENTIALITY

         The parties  mutually agree that neither they nor their attorneys shall
reveal to anyone other than the parties and their attorneys and their attorneys'
legal staff, other than as may be mutually agreed to in writing (which agreement
shall not be unreasonably withheld) or required by law, any of the terms of this
Agreement and Release.

<PAGE>

         ENTIRE AGREEMENT

         This Agreement and Release constitutes the entire agreement between and
among the  parties  with  regard to the  subject  matter  set forth  herein  and
supersede  all  prior  and   contemporaneous   agreements,   understandings  and
representations  between or among the parties,  oral or written,  concerning the
subject matter hereof.  No  representation,  promise,  condition,  inducement or
statement  of  intention,  express  or  implied,  that is not set  forth in this
Agreement and Release has been made by any party concerning such subject matter,
no party has relied upon any representation,  promise, condition,  inducement or
statement  of  intention,  express  or  implied,  that is not set  forth in this
Agreement  and Release  concerning  such subject  matter,  and no party shall be
bound  by  any  purported  representation,  promise,  condition,  inducement  or
statement  of  intention,  express  or  implied,  that is not set  forth in this
Agreement and Release concerning such subject matter.

         REPRESENTATION AS TO COMPREHENSION OF DOCUMENT AND ADVICE OF COUNSEL

         In entering into this Agreement and Release the parties  represent that
they have relied upon the legal advice of their attorneys, who are the attorneys
of their  own  choice,  and that  they  have  completely  read the terms of this
Agreement  and Release  and had the  opportunity  to inquire of their  attorneys
about these terms,  and that those terms are fully  understood  and  voluntarily
accepted by them.

         AMENDMENTS

         This Agreement and Release may not be amended, supplemented,  waived or
changed orally, but only by a writing signed by the party as to whom enforcement
of any such amendment,  supplement,  waiver or modification is sought and making
specific reference to this Agreement and Release.


<PAGE>

         BINDING EFFECT

         All of the terms and  provisions of this Agreement and Release shall be
operative and binding upon each of the parties hereto upon  execution  hereof by
the  applicable  party,  binding  upon  and  inure  to the  benefit  of,  and be
enforceable  by,  the  parties  and  their  respective  heirs,   administrators,
executors,  estates,  legal  representatives,  successors  and assigns,  and the
possession of this Agreement and Release was not delivered in escrow or pursuant
to any agreement that it should not be effective until any conditions  precedent
or subsequent had been complied with.

         GOVERNING LAW

         This  Agreement  and Release  shall be governed  by and  construed  and
enforced in accordance with the laws of the Commonwealth of Massachusetts.

         COUNTERPARTS

         This  Agreement and Release may be executed and delivered in any number
of  counterparts  each of which,  when so executed and  delivered,  shall be and
constitute an original and one and the same document.

                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.


<PAGE>


         WITNESS MY HAND AND SEAL this 22nd day of January, 1998.

                                              PALOMAR MEDICAL TECHNOLOGIES, INC.


                                              By:    /s/ Louis P. Valente
                                                 -------------------------------
                                                 Name:   Louis P. Valente
                                                 Title:  President and 
                                                         Chief Executive Officer

State of Massachusetts
County of Middlesex

            On this 22nd day of January,  1998,  before me  personally  appeared
Louis P.  Valente,  who  acknowledges  himself  to be the  President  and  Chief
Executive Officer of Palomar Medical Technologies, Inc., a Delaware corporation,
and as such President and Chief Executive  Officer,  being  authorized so to do,
executed the foregoing  instrument for the purposes  contained therein on behalf
of Palomar  Medical  Technologies,  Inc.  and  acknowledged  that the  foregoing
instrument was Palomar Medical Technologies, Inc.'s free act and deed.


                                                 /s/  Marianne Barrett
                                                --------------------------------
                                                Notary Public
                                                Name:  Marianne Barrett
                                                My Commission Expires:  11/19/04

         WITNESS MY HAND AND SEAL this ____ day of _______________, 1998.

                                                GENESEE INTERNATIONAL, INC.



                                                By:    /s/ Michelle Kline
                                                   -----------------------------
                                                Name:  Michelle Kline
                                                Title: Authorized Agent

State of Wasington
County of King

            On this 22 day of  January,  1998,  before  me  personally  appeared
Michelle Kline, who  acknowledges  himself to be the authorized agent of Genesee
International,  Inc.,  a Delaware  corporation,  and as such  authorized,  being
authorized  so to  do,  executed  the  foregoing  instrument  for  the  purposes
contained  therein on behalf of Genesee  International,  Inc., and  acknowledged
that the foregoing  instrument  was Genesee  International,  Inc.'s free act and
deed.

                                                  /s/ Howard Coleman
                                                --------------------------------
                                                Notary Public
                                                Name: Howard Coleman
                                                My Commission Expires: 2/10/01


         WITNESS MY HAND AND SEAL this ____ day of _______________, 1998.

                                                ADVANTAGE FUND LTD.,
                                                GFL ADVANTAGE FUND LTD.,
                                                ADVANTAGE FUND II, LTD.



                                                By:   /s/ A.P. de Groot
                                                   -----------------------------
                                                Name:  A.P. de Groot
                                                Title: President

State of
         ---------------
County of
          -----------------

         On this ___ day of ______________,  1998, before me personally appeared
_______________,  who  acknowledges  himself  to  be  the  _________________  of
Advantage  Fund Ltd.,  GFL Advantage  Fund Ltd., and Advantage Fund II, Ltd.., a
Delaware corporation,  and as such ________________,  being authorized so to do,
executed the foregoing  instrument for the purposes  contained therein on behalf
of Advantage  Fund Ltd.,  GFL Advantage  Fund Ltd., and Advantage Fund II, Ltd.,
and acknowledged that the foregoing instrument was Genesee International, Inc.'s
free act and deed.


                                                --------------------------------
                                                Notary Public
                                                Name:
                                                My Commission Expires:
<PAGE>
                                                  ANNEX IV TO EXCHANGE AGREEMENT

                                                     January 26, 1998

Advantage Fund Limited
c/o CITCO
Kaya Flamboyan 9
Curacao, Netherlands Antilles

         Re:  PALOMAR MEDICAL TECHNOLOGIES, INC.

Ladies and Gentlemen:

         We have  acted as  counsel to Palomar  Medical  Technologies,  Inc.,  a
Delaware corporation (the "Company"), in connection with the Exchange Agreement,
dated as of December 31, 1997,  between Advantage Fund Limited, a British Virgin
Islands corporation ("Advantage"),  and the Company (the "Agreement") providing,
among other things, for the right of Advantage and any other holder of shares of
Series G Convertible  Preferred  Stock,  $.01 par value per share (the "Series G
Preferred Stock"), to exchange shares of Series G Preferred Stock of the Company
for shares of Common Stock, $.01 par value (the "Common Stock"), of the Company.
The Series G Preferred  Stock was  acquired  from the Company on  September  26,
1996.  Capitalized  terms used and not otherwise  defined  herein shall have the
respective meanings assigned to such terms in the Agreement.

         In connection  with our rendering of the opinions  expressed  below, we
reviewed (i) the  Certificate  of  Incorporation  (the  "Company  Charter")  and
By-Laws (the "Company By-Laws") of the Company,  each as amended to date; (ii) a
certificate  issued by the  Secretary  of State of the State of  Delaware  dated
January 9, 1998 with  respect to the legal  existence  and good  standing of the
Company in Delaware; (iii) the relevant records of meetings of the directors and
stockholders of the Company and consents of the directors and stockholders filed
therewith;  (iv) the Agreement, the Certificate of Designations and the Transfer
Agent Instructions;  (v) the other documents delivered at the Closing,  (vi) the
agreements,  instruments and documents  listed on EXHIBIT A attached hereto (the
"Listed Agreements"); and (vii) such other documents and certificates as we have
deemed necessary to enable us to render the opinions expressed below.

         In rendering the opinion expressed in paragraph 1 below with respect to
the legal existence and good standing of the Company in Delaware, we have relied
solely  upon  the  certificate  referred  to in  clause  (ii)  of the  preceding
paragraph, and such opinion is given as of the date of such certificate.


<PAGE>


         With respect to the opinion  expressed  in  paragraph 4 below,  we note
that we did not  observe  or  supervise  the  activities  of the  Company or its
representatives  in  connection  with the  offering  of the  Common  Shares.  In
rendering such opinion we have assumed without  investigation that in connection
with such offering there has been no general solicitation or general advertising
by the Company or its representatives with respect to the Common Shares. We have
also assumed that no person subject to 950 C.M.R. 14.402(b)(9)(F) has engaged in
any  activity  prohibited  thereby  and  that  no  subsequent  offer  or sale of
securities  of  the  Company  will  adversely  affect  the  availability  of the
exemptions  from  registration  referred to in  paragraph 4 of this opinion with
respect to the offer or sale of the Common Shares.

         We call  your  attention  to the  fact  that  the  Company  has  issued
securities that are  convertible  into shares of its common stock at rates based
on the market price of its common stock at the time conversion is requested.  We
express no opinion as to the  sufficiency of the number of authorized  shares of
the Company's common stock as of any date.

         When an  opinion  set  forth  below  is  given  to our  knowledge,  the
knowledge  is  limited  to the  facts  or  other  information  known to David A.
Broadwin,  Esquire,  Marcel A. Bryar,  Esquire,  Dean F.  Hanley,  Esquire,  and
Alexander H. Pyle, Esquire,  who are the individual lawyers in our firm who were
actively  involved  in  representation  of  the  Company  with  respect  to  the
transactions  contemplated  by the  Agreement  and,  except as expressly  stated
herein,  without  any special or  additional  investigation  undertaken  for the
purposes of this opinion.

         In rendering the opinions  expressed  herein, we have also examined and
have relied  completely  upon all of the  representations  and  warranties as to
matters  of  fact  contained  in the  Agreement  and  contained  in the  related
instruments  and other  documents  delivered by the Company to you in connection
with the  Closing,  and we have  assumed the  completeness  and  accuracy of all
factual matters described in such representations and warranties.

         We have not, except as specifically  noted above,  made any independent
review or  investigation  of facts  relating to the Company,  including  without
limiting the generality of the foregoing,  any investigation as to the existence
of any actions,  suits or proceedings  pending or threatened against the Company
or  agreements,  judgments,  injunctions,  orders or  decrees  binding  upon the
Company or which might result in the imposition of any lien or other encumbrance
on any assets of the Company.

         We have assumed the  authenticity  and  completeness  of all  documents
furnished to us as  originals,  the  genuineness  of all  signatures,  the legal
capacity of natural  persons,  the  conformity to the originals of all documents
furnished to us as copies,  and the accuracy and  completeness  of all corporate
records made available to us by the Company.


<PAGE>


         You have not asked us to pass upon your  power and  authority  to enter
into the  Agreement.  Accordingly,  for the  purposes of this  opinion,  we have
assumed  that you have all  requisite  power  and  authority  to enter  into the
Agreement  and to  effect  all of the  transactions  thereunder,  and  that  the
Agreement and each other  agreement or  instrument we have reviewed  constitutes
the legal,  valid and binding  obligation of all parties  thereto other than the
Company.

         We have made such examination of Massachusetts law, federal law and the
corporation  law of the State of Delaware as we deem  necessary for the purposes
of this  opinion.  We do not  purport to pass herein on the laws of any state or
jurisdiction other than the federal law of the United States of America, the law
of The  Commonwealth  of  Massachusetts  and the corporation law of the State of
Delaware.  Our opinions  are given only as of the date hereof,  and we expressly
disclaim any continuing obligation or undertaking to supplement or update any of
our  statements  herein.  We have assumed  that the Buyer is not an  "interested
stockholder"  within  the  meaning  of  Section  203  of  the  Delaware  General
Corporation Law.

         The opinions herein  expressed are qualified to the extent that (i) the
validity or  enforceability of any provisions of any agreement or instrument may
be  subject  to or  affected  by  any  bankruptcy,  reorganization,  insolvency,
moratorium or similar law of general application from time to time in effect and
relating to or affecting the rights or remedies of creditors generally, (ii) the
remedy of specific  performance or any other equitable remedy may be unavailable
in any  jurisdiction  or may be withheld as a matter of judicial  discretion and
(iii) the  enforcement  of any  rights or  remedies  is or may be  subject to an
implied  duty on the part of the party  seeking to enforce  such  rights to take
action and make  determinations  on a  reasonable  basis and in good  faith.  In
addition,  we express no opinion herein as to: prospective  waivers of rights to
notice or a hearing or of other  rights  granted  by  constitution  or  statute;
powers of attorney; provisions purporting to relieve parties of the consequences
of their own  negligence  or  misconduct;  provisions  purporting  to  establish
evidentiary  standards;  or provisions to the effect that rights or remedies are
not exclusive,  that every right or remedy is cumulative and may be exercised in
addition to any other right or remedy,  or that  failure to exercise or delay in
exercising rights and remedies will not operate as a waiver of any such right or
remedy.  With your  permission,  we have  assumed  for all  purposes  under this
opinion that the Company is not, and following  completion  of the  transactions
contemplated  by the Agreement will not be,  insolvent,  left with  unreasonably
small capital, or unable to pay its debts as they mature.

         Based upon and subject to the foregoing, we are of the opinion that:

         1. The Company is a corporation duly organized, validly existing and in
good  standing  under the laws of the State of  Delaware  and has all  requisite
corporate power and authority to conduct its business as currently conducted.


<PAGE>


         2. The Company has all requisite  power and authority to enter into the
Agreement and the Transfer Agent Instructions and to consummate the transactions
contemplated  thereby. The execution,  delivery and performance of the Agreement
and the Transfer Agent  Instructions  and the  consummation of the  transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of the Company.  The Agreement and the Transfer  Agent  Instructions
have been duly executed and delivered by the Company and  constitute  the legal,
valid and binding  obligations of the Company enforceable against the Company in
accordance with their respective terms.

         3. The Common  Shares  have been duly  authorized  and,  when issued in
exchange  for  shares  of  Series  G  Preferred  Stock  in  accordance  with the
Agreement, will be validly issued, fully paid and non-assessable.

         4.  Assuming the accuracy as of the date hereof of the  representations
and warranties of the Buyer set forth in the Agreement, the Common Shares may be
issued to you upon  exchange  of the Series G Preferred  Shares  pursuant to the
Agreement without registration under the 1933 Act.

         5. Other than the filing contemplated by Section 3(d) of the Agreement,
no   authorization,   approval  or  consent  of,  or  filing  with,  any  court,
governmental  body,  regulatory  agency or stock  exchange,  market or automated
quotation  system or the  stockholders of the Company is required to be obtained
or made by the Company for the issuance of the Common Shares as  contemplated by
the  Agreement  except such as have been obtained or made and other than such as
may be required under the securities or "blue sky" laws of certain jurisdictions
(as to which we express no opinion).

         6.  Except  for the  effects,  if any,  that may  arise  from  lawsuits
disclosed  in the SEC  Reports,  to our  knowledge,  there is no  action,  suit,
proceeding,  inquiry or  investigation  before or by any court,  public board or
body  pending or  threatened  against  or  affecting  the  Company or any of its
subsidiaries,  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 the Agreement or any of the
documents  contemplated  thereby or delivered in  connection  therewith or which
would adversely  affect the validity or  enforceability  of, or the authority or
ability of the Company to perform its obligations under, the Agreement or any of
such other documents.


<PAGE>


         7. The  execution,  delivery  and  performance  by the  Company  of the
Agreement and the Transfer Agent  Instructions and the offer and issuance of the
Common Shares and the  fulfillment  of and the  compliance  with the  respective
terms  thereof by the Company will not result in a breach of any of the terms or
provisions of, or constitute a default under, the Company  Charter,  the Company
By-Laws, or any law, statute, rule or regulation to which the Company is subject
or any Listed  Agreement;  provided,  however,  that we express no opinion  with
respect to the  provisions  of Section  6(a) of that  certain  4.5%  Convertible
Subordinated  Promissory  Note dated October 17, 1996 which is one of the Listed
Agreements.

         8.  Assuming  (i)  compliance  by the  holder  of  Common  Shares  with
paragraphs (e), (f), (g), (h) and (i) of Rule 144 promulgated under the 1933 Act
("Rule  144") at the time of a sale of Common  Shares,  (ii)  compliance  by the
Company at such time with  paragraph  (c) of Rule 144 and (iii) no change in the
terms of Rule 144 as currently in effect, the Common Shares may be sold prior to
September 26, 1998 pursuant to Rule 144 without registration under the 1933 Act.
On and after September 26, 1998,  assuming no change in the terms of Rule 144 as
currently in effect,  the Common Shares may be sold pursuant to paragraph (k) of
Rule 144  without  registration  under the 1933 Act,  provided  that the  Common
Shares  are sold for the  account  of a person  who is not an  affiliate  of the
Company at the time of sale,  and who has not been an  affiliate  of the Company
during the preceding three months.

         These opinions are limited to the matters  expressly  stated herein and
are  rendered  solely for your  benefit and may not be quoted or relied upon for
any other purpose or by any other person,  except that the opinion  expressed in
paragraph  4 above,  insofar as it relates to the Common  Shares,  may be relied
upon by American Stock Transfer & Trust Company, as Transfer Agent and Registrar
for the Common Stock.

                                                      Very truly yours,

                                                      FOLEY, HOAG & ELIOT LLP

                                                      By:
                                                         -----------------------
                                                         A Partner

cc:      American Stock Transfer &
         Trust Company, as Transfer
         Agent and Registrar

<PAGE>
                                   EXHIBIT A

                                    EXHIBIT A

Agreement  and Plan of  Reorganization  dated  March 9,  1996 by and  among  the
Company, TTI Acquisition Corp., Tissue Technologies, Inc. and Mario Barton

Amendment to Agreement  and Plan of  Reorganization  dated April  29,1996 by and
among the Company,  TTI Acquisition Corp., Tissue  Technologies,  Inc. and Mario
Barton

Letter from the Company to Tissue Technologies, Inc. waiving the Company's right
to  receive  indemnification  under  Section  6 of the  Agreement  and  Plan  of
Reorganization under certain circumstances

Plan of Merger  dated May 3, 1996 by and between the  Company,  TTI  Acquisition
Corp. and Tissue Technologies, Inc.

Stock Purchase Agreement dated March 19, 1996, by and between Dynaco Acquisition
Corp.,  Comtel  Electronics,  Inc.,  Mikel C.  Green,  Peter  Rogal and  Palomar
Electronics Corp.

Agreement for Purchase of Stock dated July 12,1996,  by and between the Company,
Eleanor Roberts Weisman and Wallace Roberts

Restated Certificate of Incorporation, as amended

Bylaws, as amended

Patent  License  Agreement  by and between  the Company and Patlex  Corporation,
effective as of January 1, 1992

1996 Stock Option Plan

Amended 1996 Employee Stock Purchase Plan

Form of Stock Option Agreement under the 1996 Stock Option Plan

Securities  Purchase  Agreement between the Company and The Travelers  Insurance
Company dated July 12, 1996

Warrant to purchase Common Stock of the Company, dated July 12, 1996

Subscription  Agreement dated September 26, 1996 between the Company and Genesee
Fund Limited
<PAGE>

Registration  Rights  Agreement dated September 26, 1996 between the Company and
Genesee Fund Limited

Warrant to purchase Common Stock of the Company dated September 27, 1996

Berckeley  Subscription  Agreement dated December 31, 1996 and Amendment thereto
dated January 10, 1997

Berckeley Debenture dated December 31, 1996

High Risk Opportunities Hub Fund, Ltd. Subscription  Agreement dated January 14,
1997

High Risk Opportunities Hub Fund, Ltd. Debenture dated January 13, 1997

Securities   Purchase   Agreement   dated  December  31,  1996  between  Palomar
Electronics Corporation and Clearwater Fund IV, LLC

Securities  Purchase  Agreement  dated as of December 18, 1996  between  Palomar
Electronics Corporation, the Company and The Travelers Insurance Company

Securities   Purchase   Agreement   dated  December  31,  1996  between  Palomar
Electronics Corporation and GFL Advantage Fund Limited

Option  Agreement  dated December 31, 1996 between the Company and GFL Advantage
Fund Limited

Common Stock Purchase Warrant dated December 31, 1996

Form of Net Warrant to Purchase Common Stock

Subscription   Agreement  dated  December  27,  1996  between  the  Company  and
Finmanagement, Inc.

Subscription  Agreement  dated as of April 12, 1996  between the Company and GFL
Advantage Fund Limited

Registration  Rights  Agreement  dated as of April 17,  1996 by and  between the
Company and GFL Advantage Fund Limited

Warrant dated as of April 16, 1996

Form of Warrant to purchase Common Stock dated February 1, 1996
<PAGE>

Form of Offshore Stock Subscription Agreement dated February 1, 1996

Form of Subscription Agreement dated as of March 10, 1997

Form Registration Rights Agreement dated as of March 10, 1997

Form of 5% Convertible Debenture due March 10, 2002

Subscription  Agreement  dated as of March 13,  1997  between  the  Company  and
Soginvest Bank

Form of 6% Convertible Debenture due March 13, 2002

Asset Purchase and Settlement Agreement dated February 28, 1997 by and among the
Company, Nexar Technologies, Inc., Technovation Computer Labs, Inc. and Babar I.
Hamirani

Employment  Agreement  dated as of May 1, 1996 between the Company and Ronald G.
Wheeland

Employment Agreement dated as of January 1, 1997, between the Company and Steven
Georgiev

Employment  Agreement  dated as of January  1, 1997,  between  the  Company  and
Michael H. Smotrich

Employment Agreement dated as of January 1, 1997, between the Company and Joseph
P. Caruso

Key Employee Agreement dated as of May 15, 1997 between the Company and Louis P.
Valente

Employment  Agreement  dated as of January  1, 1997,  between  the  Company  and
Anthony Fiorillo

Securities  Purchase  Agreement dated March 27, 1997 between the Company and RGC
International Investors, LDC

Registration  Rights  Agreement dated March 27, 1997 between the Company and RGC
International Investors, LDC

Form of 4.5% Convertible Subordinated Promissory Note dated October 17,1996

Form of Subscription Agreement dated October 16, 1996

Supplement to Securities Purchase Agreement dated May 5, 1997

Supplement to Registration Rights Agreement dated May 5, 1997
<PAGE>

Supplement to Securities Purchase Agreement dated May 23, 1997

Supplement to Registration Rights Agreement dated May 23, 1997

Agreement dated December 30, 1993 by and between the Company, Dynaco Corporation
and Dynaco West Corporation

First  Amendment to Purchase and Sale  Agreement  dated  January 24, 1994 by and
between the Company, Dynaco Corporation and Dynaco West Corporation

Purchase and Sale Agreement dated March 14, 1995, by and between the Company and
SPMT Acquisition Corp., Spectrum Medical Technologies, Inc., Sanford R. Lane and
CSF Investments Ltd.

Purchase  and  Sale  Agreement  dated  June  5,  1995,  by  and  between  Dynaco
Acquisition Corporation and Allard Industries, Inc.

Company's 1991 Stock Option Plan, as amended

Company's 1993 Stock Option Plan

Company's 1995 Stock Option Plan

Form of Stock Option Grant under the Company's  1991, 1993 and 1995 Stock Option
Plans

Form of Company Warrant to Purchase Common Stock

Lease for premises at 66 Cherry Hill Drive,  Beverly,  Massachusetts,  dated May
25, 1993

The Company's 401(k) Plan

Form of 6%, 7% and 8% Convertible Debentures due September 30, 2002

Form of Registration Rights Agreement dated September 30, 1997

Form of Securities Purchase Agreement dated September 30, 1997

Stock  Purchase  Agreement  dated  December 9, 1997 between and among  Biometric
Technologies Corp., the Company and Dynaco Corp. and certain exhibits thereto.

Securities  Purchase  Agreement  dated as of  December  29,1997 by and among the
Company and Clearwater Fund IV, LLC