PALOMAR MEDICAL TECHNOLOGIES, INC.

                         AMENDED 1991 STOCK OPTION PLAN

                                    ARTICLE I

                               Purpose of the Plan

     The purpose of this plan is to encourage and enable employees, consultants,
directors and others who are in a position to make significant  contributions to
the  success  of  PALOMAR  MEDICAL  TECHNOLOGIES,  INC.  and of  its  affiliated
corporations  upon whose  judgment,  initiative,  and  efforts  the  Corporation
depends  for the  successful  conduct  of its  business,  to  acquire  a  closer
identification  of their  interests  with those of the  corporation by providing
them with opportunities to purchase stock in the Corporation pursuant to options
granted  hereunder,   thereby   stimulating  their  efforts  on  behalf  of  the
Corporation  and  strengthening   their  desire  to  remain  involved  with  the
Corporation.

                                   ARTICLE II

                                   Definitions

     2.1  "Affiliated  Corporation"  means  any  stock  corporation  of  which a
majority of the voting common or capital  stock is owned  directly or indirectly
by the Corporation.

     2.2 "Award" means an Option  granted under Article V. 

     2.3 "Board" means the Board of Directors of the Corporation.

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     2.4 "Code" means the Internal Revenue Code of 1986, as amended form time to
time.

     2.5 "Committee" means a committee of not less than two members of the Board
appointed by the Board to administer the Plan, each of whom is a  "disinterested
person"  within the meaning of Rule 16b-3 under the  Securities  Exchange Act of
1934, or any successor provision.

     2.6  "Corporation"  means PALOMAR  MEDICAL  TECHNOLOGIES,  INC., a Delaware
corporation, or its successor.

     2.7  "Employee"  means any person who is a regular  full-time  or part-time
employee of the Corporation or an Affiliated  Corporation on or after August 30,
1991.

     2.8  "Option"  means an  Incentive  Stock  Option or  Non-Qualified  Option
granted by the Committee  under Article V of this Plan in the form of a right to
purchase  Stock  evidenced by an instrument  containing  such  provisions as the
Committee may establish.

     2.9  "Participant"  means a person  selected by the Committee to receive an
award  under the Plan.

     2.10 "Plan" means this 1991 Stock Option Plan.

     2.11 "Incentive Stock Option" ("ISO") means an option which qualifies as an
incentive stock option as defined in Section 422 of the Code, as amended.

     2.12 "Non-Qualified  Option" means any option not intended to qualify as an
Incentive Stock Option.

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     2.13 "Stock" means the Common Stock,  $.01 par value, of the Corporation or
any  successor,  including  any  adjustments  in the event of changes in capital
structure of the type described in Article IX.

     2.14  "Reporting  Person"  means a  person  subject  to  Section  16 of the
Securities Exchange Act of 1934 or any successor provision.

     2.15 "Restricted Period" means the period of time selected by the Committee
during which an Award may be forfeited by the person.

                                   ARTICLE III

                           Administration of the Plan

     3.1 ADMINISTRATION BY THE COMMITTEE. This Plan shall be administered by the
Committee as defined  herein.  From time to time the Board may increase the size
of the Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor,  fill vacancies
however caused,  or remove all members of the Committee and thereafter  directly
administer  the Plan. No member of the Committee  shall be liable for any action
or  determination  made in good  faith with  respect to the Plan or any  options
granted under it.

     3.2 POWERS.  The Committee  shall have full and final authority to operate,
manage,  and  administer the Plan on behalf 

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of the Corporation. This authority includes, but is not limited to:

          (a)  The power to grant Awards conditionally or unconditionally,

          (b)  The  power to  prescribe  the  form or  forms of the  instruments
               evidencing Awards granted under this Plan,

          (c)  The power to interpret the Plan,

          (d)  The  power  to  provide  regulations  for  the  operation  of the
               incentive  features of the Plan,  and  otherwise to prescribe and
               rescind   regulations   for   interpretation,    management   and
               administration of the Plan,

          (e)  The  power  to  delegate   responsibility   for  Plan  operation,
               management and administration of the Plan,

          (f)  The power to delegate  to other  persons  the  responsibility  of
               performing ministerial acts in furtherance of the Plan's purpose,
               and

          (g)  The  power to engage  the  services  of  persons,  companies,  or
               organizations in furtherance of the Plan's purpose, including but
               not limited to, banks, insurance companies,  brokerage firms, and
               consultants.

     3.3 ADDITIONAL  POWERS. In addition,  as to each Option to buy Stock of the
Corporation, the Committee shall have full and

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final  authority in its  discretion:  (a) to  determine  the number of shares of
Stock  subject  to each  Option;  (b) to  determine  the  time or times at which
Options  will be granted;  (c) to  determine  the option  price of the shares of
Stock  subject to each  Option,  which  price shall be not less than the minimum
price  specified in Article V of this Plan;  (d) to determine  the time or times
when each Option  shall  become  exercisable  and the  duration of the  exercise
period  (including the  acceleration  of any exercise  period),  which shall not
exceed the maximum period  specified in Article V; and (e) to determine  whether
each  Option  granted  shall be an  Incentive  Stock  Option or a  Non-qualified
Option.

     In no event may the  Corporation  grant an  Employee  any  Incentive  Stock
Option that is first exercisable  during any one calendar year to the extent the
aggregate fair market value of the Stock (determined at the time the options are
granted)  exceeds $100,000 (under all stock options plans of the Corporation and
any Affiliated Corporation);  provided,  however, that this paragraph shall have
no force and effect if its  inclusion in the Plan is not necessary for Incentive
Stock  Options  issued  under the Plan to  qualify as such  prusuant  to Section
422(d)(1) of the Code.

                                   ARTICLE IV

                                   Eligibility

     4.1 ELIGIBLE EMPLOYEES. All Employees (including Directors and Officers who
are  Employees  and  who  have  not  irrevocably  

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elected to be ineligible to  participate in the Plan) are eligible to be granted
Incentive Stock Optona and Non-Qualified Option Awards under this Plan.

     4.2  CONSULTANTS,   DIRECTORS  AND  OTHER  NON-EMPLOYEES.  Any  Consultant,
Director (whether or not an Employee) and any other  Non-Employee is eligible to
be granted  Non-Qualified  Option  Awards under the Plan provided the person has
not  irrevocably  elected  to be  ineligible  to  participate  in the Plan,  and
provided  further that upon  appointment  to the Committee at the first Board of
Directors  meeting  following  the  Annual  Meeting  of the  Shareholders,  each
non-employee  director  appointed  to  the  Committee  shall  be  deemed  to  be
ineligible to participate  under the Plan during his or her period of service on
the Committee.

     4.3 RELEVANT  FACTORS.  In  selecting  individual  Employees,  Consultants,
Directors,  and  other  Non-Employees  to whom  Awards  shall  be  granted,  the
Committee  shall weigh such factors as are relevant to accomplish the purpose of
the Plan as stated in Article I. An individual who has been granted an Award may
be granted one or more additional  Awards,  if the Committee so determines.  The
granting of an Award to any individual shall neither entitle that individual to,
nor disqualify him from, participation in any other grant of Awards.

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                                    ARTICLE V

                               Stock Option Awards

     5.1 NUMBER OF SHARES.  Subject to the provisions of Article X of this Plan,
the  aggregate  number of shares of stock for which Options may be granted under
this Plan shall not exceed  350,000  shares.  The  shares to be  delivered  upon
exercise of Options under this Plan shall be made  available,  at the discretion
of the Committee,  either from authorized but unissued shares or from previously
issued  and  reacquired  shares of Stock  held by the  Corporation  as  treasury
shares, including shares purchased in the open market.

     Stock  issuable  upon  exercise of an option  granted under the Plan may be
subject  to  such   restrictions  on  transfer,   repurchase   rights  or  other
restrictions as shall be determined by the Committee.

     5.2 EFFECT OF EXPIRATION, TERMINATION OR SURRENDER. If an Option under this
Plan shall expire or terminate  unexercised as to any shares covered thereby, or
shall  cease for any  reason to be  exercisable  in whole or in part,  or if the
Company shall reacquire any unvested shares issued pursuant to Options under the
Plan,  such shares  shall  thereafter  be  available  for the  granting of other
Options under this Plan.

     5.3 TERM OF OPTIONS.  The full term of each Option granted  hereunder shall
be for such period as the Committee  shall  determine.  In the case of Incentive
Stock Options granted  hereunder,  the term shall not exceed ten (10) years from
the  date  

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of granting  thereof.  Each Option  shall be subject to earlier  termination  as
provided  in Section 6.3 and 6.4.  Notwithstanding  the  foregoing,  the term of
options  intended to qualify as "Incentive  Stock Options" shall not exceed five
(5) years from the date of  granting  thereof  if such  option is granted to any
employee  who at the time such option is granted owns more than ten percent (10%
of the total combined voting power of all classes of stock of the Corporation.

     5.4 OPTION PRICE.  The option price shall be determined by the Committee at
the time any Option is granted.  In the case of  Incentive  Stock  Options,  the
exercise  price  shall  not be less than  100% of the fair  market  value of the
shares covered thereby at the time the Incentive Stock Option is granted (but in
no event less than par  value),  provided  that in the case  where an  Incentive
Stock Option is granted  hereunder to any Employee who at the time of grant owns
Stock  possessing  more than 10% of the combined  voting power of all classes of
stock of the  Corporation and its Affiliated  Corporations,  the Incentive Stock
Option  price  shall  equal not less than 110% of the fair  market  value of the
shares covered thereby at the time the Incentive Stock Option is granted. In the
case of Non-Qualified  Stock Options,  the exercise price shall not be less than
par value.

     5.5 FAIR MARKET VALUE. If, at the time an Option is granted under the Plan,
the  Corporation's  Stock is  publicly  traded,  "fair  market  value"  shall be
determined as of the last business day for which the prices or quotes  discussed
in this  

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sentence are  available  prior to the date such Option is granted and shall mean
(i) the  average  (on that  date) of the high and low prices of the Stock on the
principal  national  securities  exchange  on which the Stock is traded,  if the
Stock  is then  traded  on a  national  securities  exchange;  or (ii)  the last
reported  sale price (on that date) of the Stock on the NASDAQ  National  Market
List, if the Stock is not the traded on a national securities exchange; or (iii)
the closing  bid price (or average of bid prices)  last quoted (on that date) by
an established quotation service for over-the-counter  securities,  if the Stock
is not reported on the NASDAQ National Market List. However, if the Stock is not
publicly  traded at the time an Option is granted  under the Plan,  "fair market
value"  shall be deemed to be the fair value of the Stock as  determined  by the
Committee under Section 3.3.

     5.6 NON-TRANSFERABILITY OF OPTIONS. No Option granted under this Plan shall
be transferable by the grantee otherwise than by will or the laws of descent and
distribution,  and such Option may be exercised  during the  grantee's  lifetime
only by the grantee.

     5.7  FOREIGN  NATIONALS.  Awards  may be granted  to  Participants  who are
foreign  nationals  or  employed  outside  the  United  States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary  or  advisable  to achieve  the  purposes  of the Plan or comply  with
applicable laws.

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                                   ARTICLE VI

                               Exercise of Option

     6.1 EXERCISE.  Each Option  granted under the Plan shall be  exercisable on
such date or dates and during such period and for such number of shares as shall
be determined  pursuant to the  provisions  of the  instrument  evidencing  such
Option. The Committee shall have the right to accelerate the date of exercise of
any option.

     6.2 NOTICE OF EXERCISE.  A person electing to exercise an Option shall give
written  notice to the  Corporation of such electino and of the number of shares
he or she has elected to purchase  and shall at the time of exercise  tender the
full purchase price of the shares he or she has elected to purchase.

     6.3 DELIVER OF STOCK. No shares shall be delivered pursuant to any exercise
of an Option until  payment in full of the option price  therefor is received by
the Corporation. Such payment may be made in whole or in part in cash or, to the
extent  permitted  by the  Committee  at or after  the  grant of an  Option,  by
delivery  of a note or  shares  of the Stock  owned by the  optionee,  including
Restricted Stock, valued at their fair market value on the date of delivery,  or
such other lawful  consideration  as the  Committee  may  determine.  Until such
person  has  been  issued  a  certificate  or  certificates  for the  shares  so
purchased,  he or she shall possess no rights of a record holder with respect to
any of such shares.

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     6.4 OPTION UNAFFECTED BY CHANGE IN DUTIES. No Incentive Stock Option,  and,
unless otherwise determined by the Committee, no Non-Qualified Option granted to
a person who is, on the date of the grant,  an Employee of the Corporation or an
Affiliated Corporation, shall be affected by any change of duties or position of
the optionee (including transfer to or from an Affiliated Corporation),  so long
as he or she  continues to be an Employee.  Employment  shall be  considered  as
continuing  and  uninterrupted  during any bona fide  leave of absence  (such as
those  attributable to illness,  military  obligations or governmental  service)
provided  that the  period of such  leave does not exceed 90 days or, if longer,
any period during which such  optionee's  right to reemployment is guaranteed by
statute. A bona fide leave of absence with the written approval of the Committee
shall not be considered an interruption of employment  under the Plan,  provided
that such  written  approval  contractually  obligates  the  Corporation  or any
Affiliated  Corporation  to continue the  employment  of the optionee  after the
approved period of absence.

     If the  optionee  shall cease to be an Employee  for any reason  other than
death,  such Option shall  thereafter be  exercisable  only to the extent of the
purchase  rights,  if any, which have ac rued as of the date of such  cessation;
provided  that (i) the Committee may provide in the  instrument  evidencing  any
Option  that  the  Committee  may in its  absolute  discretion,  upon  any  such
cessation of employment, determine (but be under no obligation to

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determine)  that  such  accrued  purchase  rights  shall be  deemed  to  include
additional  shares covered by such Option;  and (ii) unless the Committee  shall
otherwise  provide  in the  instrument  evidencing  any  Option,  upon  any such
cessation of employment,  such  remaining  rights to purchase shall in any event
terminate  upon the earlier of (A) the  expiration  of the original  term of the
Option;  or (B) where such  cessation of employment is on account of disability,
the  expiration of one year from the date of such  cessation of employment  and,
otherwise,  the  expiration of three months from such date.  For purposes of the
Plan,  the term  "disability"  shall mean  "permanent  and total  disability" as
defined in Section 22(e)(3) of the Code.

     6.5 DEATH OF OPTIONEE.  Should an optionee die while in  possession  of the
legal right to exercise an Option or Options  under this Plan,  such  persons as
shall have  acquired,  by will or by the laws of descent and  distribution,  the
right to  exercise  any  Options  theretofore  granted,  may,  unless  otherwise
provided by the Committee in any instrument evidencing any Option, exercise such
Options at any time prior to one year from the ate of death; provided, that such
Option or Options  shall  expire in all events no later than the last day of the
original term of such Option; provided, further, that any such exercise shall be
limited  to the  purchase  rights  that  have  accrued  as of the date  when the
optionee  ceased to be an Employee,  whether by death or  otherwise,  unless the
Committee  provides  in the  instrument  evidencing  such  Option  that,  in the
discretion of the Committee, 

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additional  shares  covered  by such  Option  may  become  subject  to  purchase
immediately upon the death of the optionee.

                                   ARTICLE VII

                          Reporting Person Limitations

     Notwithstanding  any other provision of the Plan, to the extent required to
qualify for the exemption  provided by Rule 16b-3 under the Securities  Exchange
Act of 1934, and any successor provision, (i) any Stock or other equity security
offered  under the Plan to a  Reporting  Person may not be sold for at least six
(6) months after acquisition, except in case of death or disability and (ii) any
Option,  or other similar right related to an equity security,  issued under the
Plan to a Reporting  Person shall not be transferable  other than by will or the
laws of descent and distribution,  shall not be exercisable for at least six (6)
months  except  in the case of death or  disability,  and  shall be  exercisable
during the  Participant's  lifetime only by the Participant or the Participant's
guardian or legal representative.

                                  ARTICLE VIII

                         Terms and Conditions of Options

     Options shall be evidenced by instruments  (which need not be identical) in
such forms as the  Committee  may from time to time  approve.  Such  instruments
shall  conform to the terms and  conditions  set forth in Article 5 and 6 hereof
and may contain 

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such other provisions as the Committee deems advisable that are not inconsistent
with the Plan,  including  restrictions  applicable to shares of Stock  issuable
upon exercise of Options.  In granting any Non-Qualified  Option,  the Committee
may specify that such Non-Qualified  Option shall be subject to the restrictions
set forth  herein with  respect to  Incentive  Stock  Options,  or to such other
termination  and  cancellation  provisions as the Committee may  determine.  The
Committee may from time to time confer  authority and  responsibility  on one or
more of its own  members  and/or  one or more  officers  of the  Corporation  to
execute and deliver such instruments. The proper officers of the Corporation are
authorized  and directed to take any and all action  necessary or advisable from
time to time to carry out the terms of such instruments.

                                   ARTICLE IX

                                  Benefit Plans

     Awards  under  the Plan  are  discretionary  and are not a part of  regular
salary. Awards may not be used in determining the amount of compensation for any
purpose  under  the  benefit  plans  of  the   Corporation,   or  an  Affiliated
Corporation,  except as the Committee may from time to time  expressly  provide.
Neither the Plan, an Option or any instrument  evidencing an Option confers upon
any  Employee  the right to  continued  employment  with the  Corporation  or an
Affiliated Corporation.

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                                    ARTICLE X

                Amendment, Suspension or Termination of the Plan

     The  Board  may  suspend  the Plan or any part  thereof  at any time or may
terminate  the Plan in its  entirety.  Awards  shall not be  granted  after Plan
termination.

     The Board may also amend the Plan from time to time, except that amendments
which affect the  following  subjects  must be approved by  stockholders  of the
Corporation:

          (a) Except as provided in Article XI relative to capital changes,  the
number of shares as to which Options may be granted pursuant to Article V;

          (b) The maximum term of Options granted;

          (c) The minimum price at which Options may be granted;

          (d) The term of the Plan; and

          (e) The requirements as to eligibility for participation in the Plan.

     Awards  granted prior to suspension or  termination  of the Plan may not be
cancelled  solely  because of such  suspension or  termination,  except with the
consent of the grantee of the Award.

                                   ARTICLE XI

                          Changes in Capital Structure

     The instruments  evidencing  Options granted  hereunder shall be subject to
adjustment in the event of changes in the  outstanding  Stock of the Corporation
by reason of stock dividends, stock splits, recapitalizations, reorganizations,

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mergers,  consolidations,  combinations,  exchanges or other relevant changes in
capitalization  occurring after the date of an Award to the same extent as would
affect an actual share of stock issued and  outstanding on the effective date of
such change. Such adjustment to outstanding Options shall be made without change
in the total price applicable to the unexercised portion of such options,  and a
corresponding adjustment in the applicable option price per share shall be made.
In the event of any such change,  the aggregate number and classes of shares for
which  Options may  thereafter  be granted under Section 5.1 of this Plan may be
appropriately  adjusted as  determined  by the  Committee  so as to reflect such
change.

     Notwithstanding  the  foregoing,  any  adjustments  made  pursuant  to this
Article XI with respect to Incentive  Stock Options shall be made only after the
Committee, after consulting with counsel for the Corporation, determines whether
such  adjustments  would  constitute a  "modification"  of such Incentive  Stock
Options  (as that term is defined in Section 425 of the Code) or would cause any
adverse tax consequences for the holders of such Incentive Stock Options. If the
Committee  determines that such adjustments made with respect to Incentive Stock
Options would constitute a modification of such Incentive Stock Options,  it may
refrain from making such adjustments.

     In the event of the proposed dissolution or liquidation of the Corporation,
each  Option  will  terminate  immediately  prior  to the  consummation  of such
proposed action or at such other time

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and subject to such other conditions as shall be determined by the Committee.

     Except as expressly  provided  herein,  no issuance by the  Corporation  of
shares of stock of any class, or securities  convertible into shares of stock of
any class,  shall affect, and no adjustment by reason thereof shall be made with
respect  to, the number or price of shares  subject to Options.  No  adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.

     No fractional  shares shall be issued under the Plan and the optionee shall
receive from the Corporation cash in lieu of such fractional shares.

                                   ARTICLE XII

                       Effective Date and Term of the Plan

     The Plan shall become effective on August 30, 1991. The Plan shall continue
until  such  time as it may be  terminated  by action  of the  Board;  provided,
however,  that no Options  may be granted  under this Plan on or after the tenth
anniversary of the effective date hereof.

                                   ARTICE XIII

                 Conversion of ISO's into Non-Qualified Options;

                              Termination of ISO's

     The  Committee,  at  the  written  request  of  any  optionee,  may  in its
discretion take such actions as may be necessary to

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convert such optionee's Incentive Stock Options, that have not been exercised on
the date of  conversion,  into  Non-Qualified  Options  at any time prior to the
expiration of such Incentive  Stock Options,  regardless of whether the optionee
is an employee of the  Corporation  or an Affiliated  Corporation at the time of
such conversion.  Such actions may include, but not be limited to, extending the
exercise  period or reducing the exercise price of such Options.  At the time of
such  conversion,  the  Committee  (with the consent of the optionee) may impose
such  conditions on the Exercise of the resulting  Non-Qualified  Options as the
Committee in its discretion may determine,  provided that such conditions  shall
be not inconsistent  with the Plan.  Nothing in the Plan shall be deemed to give
any optionee the right to have such optionee's Incentive Stock Options converted
into Non-Qualified  Options, and no such conversion shall occur until and unless
the Committee takes appropriate  action. The Committee,  with the consent of the
optionee,  may also terminate any portion of any Incentive Stock Option that has
not been exercised at the time of such termination.

                                   ARTICLE XIV

                              Application of Funds

     The proceeds  received by the Corporation  from the sale of shares pursuant
to Options granted under the Plan shall be used for general corporate purposes.

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                                   ARTICLE XV

                             Governmental Regulation

     The Corporation's obligation to sell and deliver shares of Stock under this
Plan is  subject to the  approval  of any  governmental  authority  required  in
connection with the authorization, issuance or sale of such shares.

                                   ARTICLE XVI

                     Withholding of Additional Income Taxes

     Upon  the  exercise  of  a   Non-Qualified   Option  or  the  making  of  a
Disqualifying  Disposition  (as  defined in  Article  XVI) the  Corporation,  in
accordance  with  Section  3402(a) of the Code,  may require the optionee to pay
additional  withholding  taxes  in  respect  of the  amount  that is  considered
compensation  includible  in such person's  gross  income.  The Committee in its
discretion  may  condition  the  exercise  of an Option on the  payment  of such
additional withholding taxes.

                                  ARTICLE XVII

                 Notice to Company of Disqualifying Disposition

     Each  employee who receives an Incentive  Stock Option must agree to notify
the Corporation in writing  immediately after the employee makes a Disqualifying
Disposition of any Stock acquired pursuant to the exercise of an Incentive Stock
Option. A Disqualifying  Disposition is any disposition  (including any sale) of
such Stock  before the later of (a) two years  after the date 

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the  employee was granted the  Incentive  Stock Option or (b) one year after the
date the employee  acquired Stock by exercising the Incentive  Stock Option.  If
the  employee  has  died  before  such  stock  is  sold,  these  holding  period
requirements do not apply and no Disqualifying Disposition can occur thereafter.

                                  ARTICLE XVIII

                           Governing Law; Construction

     The validity and  construction of the Plan and the  instruments  evidencing
Options  shall be governed by the laws of the State of Delaware.  In  construing
this Plan, the singular shall include the plural and the masculine  gender shall
include the feminine and neuter, unless the context otherwise requires.