PROMISSORY NOTE


$10,000,000.00                                             Boston, Massachusetts
                                                           November 16, 1998


         FOR VALUE RECEIVED, the undersigned Palomar Medical Technologies, Inc.,
a Delaware  corporation (the "Borrower")  hereby promises to pay to the order of
FLEET NATIONAL BANK (the "Bank") the principal  amount of Ten Million and 00/100
($10,000,000.00)  Dollars or such portion thereof as may be advanced by the Bank
pursuant  to ss.1.2  of that  certain  letter  agreement  of even date  herewith
between  the  Bank  and  the  Borrower  (the  "Letter  Agreement")  and  remains
outstanding  from time to time hereunder  ("Principal"),  with interest,  at the
rate hereinafter set forth, on the daily balance of all unpaid  Principal,  from
the date hereof until payment in full of all Principal and interest hereunder.

         Interest on all unpaid  Principal  shall be due and payable  monthly in
arrears, on the first day of each month, commencing on the first such date after
the  advance  of any  Principal  and  continuing  on the first day of each month
thereafter  and on the date of  payment of this note in full,  at a  fluctuating
rate per annum  (computed  on the basis of a year of three  hundred  sixty (360)
days for the actual number of days elapsed)  which shall at all times (except as
described in the next  sentence)  be equal to the Prime Rate,  as in effect from
time to time (but in no event in excess of the maximum  rate  permitted  by then
applicable  law),  with a change in the  aforesaid  rate of  interest  to become
effective  on the same day on which any change in the Prime  Rate is  effective.
Overdue  Principal and, to the extent  permitted by law,  overdue interest shall
bear interest at a fluctuating  rate per annum which at all times shall be equal
to the sum of (i) four  (4%)  percent  per annum  plus  (ii) the per annum  rate
otherwise payable under this note (but in no event in excess of the maximum rate
permitted by then applicable law),  compounded monthly and payable on demand. As
used  herein,  "Prime  Rate"  means  the  variable  rate of  interest  per annum
designated by the Bank from time to time as its prime rate, it being  understood
that such rate is merely a reference rate and does not necessarily represent the
lowest or best rate being charged to any  customer.  If the entire amount of any
required  Principal  and/or  interest is not paid within ten (10) days after the
same is due, the Borrower shall pay to the Bank a late fee equal to five percent
(5%) of the required  payment,  provided  that such late fee shall be reduced to
three  percent (3%) of any  required  Principal  and  interest  that is not paid
within  fifteen  (15)  days of the date it is due if this note is  secured  by a
mortgage on an owner-occupied residence of 1-4 units.

         All outstanding Principal and all interest accrued thereon shall be due
and payable in full on the first to occur of: (i) an  acceleration  under ss.5.2
of the Letter Agreement or (ii) March 31, 2000. The Borrower may at any time and
from time to time prepay all or any portion of said  Principal,  without premium
or  penalty.  Under  certain  circumstances  set forth in the Letter  Agreement,
prepayments of Principal may be required.

<PAGE>

         Payments of both  Principal and interest shall be made, in lawful money
of the United States in immediately  available  funds, at the office of the Bank
located at One Federal  Street,  Boston,  Massachusetts  02110, or at such other
address as the Bank may from time to time designate.

         The  undersigned  Borrower  irrevocably  authorizes the Bank to make or
cause to be made,  on a  schedule  attached  to this note or on the books of the
Bank, at or following  the time of making any Revolving  Loan (as defined in the
Letter  Agreement)  and of receiving  any payment of Principal,  an  appropriate
notation  reflecting such  transaction and the then aggregate  unpaid balance of
Principal.  Failure of the Bank to make any such  notation  shall not,  however,
affect any obligation of the Borrower  hereunder or under the Letter  Agreement.
The unpaid  Principal  amount of this note, as recorded by the Bank from time to
time on such schedule or on such books, shall constitute presumptive evidence of
the aggregate unpaid principal amount of the Revolving Loans.

         The  Borrower  hereby (a) waives  notice of and consents to any and all
advances,  settlements,  compromises, favors and indulgences (including, without
limitation,  any extension or postponement of the time for payment), any and all
receipts,  substitutions,  additions,  exchanges and releases of collateral, and
any and all  additions,  substitutions  and releases of any person  primarily or
secondarily  liable, (b) waives  presentment,  demand,  notice,  protest and all
other demands and notices  generally  (other than any such notices and rights to
cure as are expressly  provided for in the Letter  Agreement) in connection with
the delivery, acceptance,  performance,  default or enforcement of or under this
note,  and  (c)  agrees  to pay  all  costs  and  expenses,  including,  without
limitation,  reasonable  attorneys'  fees,  incurred  or  paid  by the  Bank  in
enforcing this note and any collateral or security therefor,  all whether or not
litigation is commenced.

         This note is the Revolving  Note  referred to in the Letter  Agreement.
This note is secured  by,  and is  entitled  to the  benefits  of, the  Security
Agreement  (as  defined  in the  Letter  Agreement).  This  note is  subject  to
prepayment as set forth in the Letter  Agreement.  The maturity of this note may
be accelerated  upon the  occurrence of an Event of Default,  as provided in the
Letter Agreement.

         THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT TO A TRIAL BY JURY IN RESPECT  OF ANY CLAIM  BASED ON THIS NOTE OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR ANY RELATED DOCUMENTS OR OUT OF
ANY COURSE OF CONDUCT,  COURSE OF DEALING,  STATEMENTS (WHETHER ORAL OR WRITTEN)
OR ACTIONS OF ANY PERSON.  THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
BANK TO  ACCEPT  THIS  NOTE AND TO MAKE  LOANS  AS  CONTEMPLATED  IN THE  LETTER
AGREEMENT.

<PAGE>

         Executed,  as an  instrument  under seal,  as of the day and year first
above written.

CORPORATE SEAL                                PALOMAR MEDICAL TECHNOLOGIES, INC.


ATTEST:

/s/ Sarah Reed                                By: /s/ Joseph P. Caruso
--------------                                    --------------------
Assistant Secretary                               Name:  Joseph P. Caruso
                                                  Title: Chief Financial Officer