|Given to Each Participant Page 1 of 2



PERSONAL AND
CONFIDENTIAL

EXECUTIVE OFFICER LEVEL



Palomar Medical
Technologies, Inc. 2008 Incentive
Compensation Program Operating Period
 January 1, 2008 to December 31, 2008


Participant



General

The amount of bonus each participant receives will depend on the 2008 actual performance of Palomar against the
Palomar 2008 Operating Plan and each participants contribution toward achieving the Plan.  The payout is
calculated based on each participants base salary as of January 1, 2008 and has both Corporate and Individual
Objectives as shown below:


Specific Rules



     1.    
          Calculation of Incentive Compensation Amounts:
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                      |    
|--------------------- | ---
|At base level $ **    |    
|Corporate Objective   | 40%
|Individual Objectives | 40%
|Total                 | 80%

Additional
4% for every $** above base level:

| | The Corporate Objective payout will be determined based on the 2008 Operating Plan operating profit
         (including the P&L charge for this Incentive Compensation Program, **).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The Individual Objective payout will be determined based on evaluation of individual performance.
| | -------------------------------------------------------------------------------------------------

|The Total Bonus payout shall be no more than 200% of each participants base salary.
|------------------------------------------------------------------------------------

|1. |  | No Corporate or Individual incentive compensation will paid unless Palomar achieves the Base Level as
              listed above.  Even if the Base Level is achieved, the Compensation Committee of the Board of
              Directors (BOD) may adjust the Corporate incentive compensation based on the individuals
              performance.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | This
material was omitted pursuant to a request for confidential treatment and was separately
filed with the SEC on March 6, 2008.
|-- | ----------------------------------------------------------------------------------------------------------------------------------

|Given to Each Participant Page 2 of 2



PERSONAL AND
CONFIDENTIAL
|------------------------------------------------------------------

|2. |  | No incentive compensation will accrue to the benefit of any participant until January 5, 2009, at which
              time the participant must be an employee of Palomar.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Incentive compensation for the 2008 operating period will be paid by March 15, 2009, unless otherwise
              determined by the Compensation Committee of the BOD.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | Where necessary, the Compensation Committee of the BOD may adjust financial results to exclude unusual
              transactions not deemed to be part of normal current operations.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | This Incentive Compensation Program may be modified for any reason without notice to the employee in
              part or in its entirety by the Compensation Committee of the BOD, with the approval of the
              Compensation Committee of the BOD.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | Continuance of this particular Incentive Compensation Program beyond December 31, 2008 is not guaranteed.
|-- |  | ---------------------------------------------------------------------------------------------------------

| |                                       
| | --------------------------------------
| | Approved by:                          
| |                                       
| | /s/ James G. Martin                   
| | James G. Martin                       
| | Chairman of the Compensation Committee
| | Palomar Medical Technologies, Inc.    
| | Approved by BOD on February 5, 2008   
| |                                       

|                     | 
|-------------------- | 
|Received by:         | 
|                     | 
|/s/ Louis P. Valente | 
|Participant          | 

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