<PAGE>
                                      345

                          REGISTRATION RIGHTS AGREEMENT

     REGISTRATION  RIGHTS  AGREEMENT (this  "AGREEMENT"),  dated as of March 27,
1997 by and among PALOMAR MEDICAL  TECHNOLOGIES,  INC., a corporation  organized
under the laws of the State of Delaware,  with headquarters located at 66 Cherry
Hill Drive,  Beverly,  Massachusetts 01915 (the "COMPANY"),  and the undersigned
purchasers of Preferred Shares under the Securities Purchase Agreement (together
with affiliates, the "INITIAL INVESTORS").

     WHEREAS:

     A. In  connection  with the  Securities  Purchase  Agreement  of even  date
herewith by and between the Company and the Initial  Investors (the  "SECURITIES
PURCHASE AGREEMENT"),  the Company has agreed, upon the terms and subject to the
conditions  contained therein, to issue and sell to the Initial Investors shares
of its Series H  Convertible  Preferred  Stock (the  "PREFERRED  STOCK") that is
convertible into shares (the "CONVERSION SHARES") of the Company's common stock,
par value $.01 per share (the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in the Certificate of Designations,  Rights
and  Preferences  with  respect to such  Preferred  Stock (the  "CERTIFICATE  OF
DESIGNATIONS"); and

     B. To induce the Initial  Investors  to execute and deliver the  Securities
Purchase  Agreement,  the  Company  has agreed to provide  certain  registration
rights  under  the  Securities  Act of  1933,  as  amended,  and the  rules  and
regulations  thereunder,  or any similar  successor statute  (collectively,  the
"SECURITIES ACT"), and applicable state securities laws;

     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  Company  and the  Initial
Investors hereby agree as follows:

     1. DEFINITIONS.

          a. As used in this  Agreement,  the  following  terms  shall  have the
     following meanings:

               (i) "INVESTORS"  means the Initial  Investors and any transferees
          or  assignees  who agree to  become  bound by the  provisions  of this
          Agreement in accordance with Section 9 hereof.

               (ii)  "REGISTER,"  "REGISTERED,"  and  "REGISTRATION"  refer to a
          registration effected by preparing and filing a Registration Statement
          or Statements in compliance  with the  Securities  Act and pursuant to
          Rule 415 under the  Securities Act or any successor rule providing for
          offering  securities  on a  continuous  basis  ("RULE  415"),  and the
          declaration  or  ordering  of  effectiveness   of  such   Registration
          Statement by the United States Securities and Exchange 


<PAGE>
                                      346


          Commission (the "SEC").

               (iii)  "REGISTRABLE   SECURITIES"  means  the  Conversion  Shares
          (including any Conversion  Shares  issuable with respect to Conversion
          Default   Payments  under  the   Certificate  of  Designations  or  in
          redemption of any Preferred  Stock) issued or issuable with respect to
          the  Preferred  Stock  and any  shares  of  capital  stock  issued  or
          issuable, from time to time (with any adjustments),  on or in exchange
          for or otherwise with respect to any of the foregoing.

               (iv) "REGISTRATION  STATEMENT" means a registration  statement of
          the Company under the Securities Act.

          b.  Capitalized  terms used herein and not  otherwise  defined  herein
     shall have the  respective  meanings set forth in the  Securities  Purchase
     Agreement.

     2. REGISTRATION.

          a. Mandatory Registration. The Company shall prepare, and, on or prior
     to the sixtieth (60th) day after the Closing Date (the "FILING DATE"), file
     with the SEC a  Registration  Statement on Form S-3 (or, if Form S-3 is not
     then available, on such form of Registration Statement as is then available
     to effect a registration of all of the Registrable  Securities,  subject to
     the consent of the Initial  Investors  (as  determined  pursuant to Section
     11(j)  hereof))  covering  the  resale  of at  least  4,500,000  shares  of
     Registrable  Securities  (provided  that such number may be  proportionally
     reduced  if fewer  than  20,000  shares  are  issued  under the  Securities
     Purchase Agreement),  which Registration Statement, to the extent allowable
     under the Securities Act and the Rules  promulgated  thereunder  (including
     Rule 416),  shall state that such  Registration  Statement also covers such
     indeterminate  number of  additional  shares of Common  Stock as may become
     issuable  upon  conversion  of the  Preferred  Stock  to  prevent  dilution
     resulting from stock splits, stock dividends or similar  transactions.  The
     Registrable  Securities  included on the  Registration  Statement  shall be
     allocated  to the  Investors  as set forth in  Section  11(k)  hereof.  The
     Registration  Statement (and each amendment or supplement thereto, and each
     request for  acceleration  of  effectiveness  thereof) shall be provided to
     (and subject to the approval of) the Initial  Investors  and their  counsel
     prior to its filing or other submission.

          b. Underwritten  Offering.  If any offering pursuant to a Registration
     Statement   pursuant  to  Section  2(a)  hereof  involves  an  underwritten
     offering,  the Investors who hold a majority in interest of the Registrable
     Securities subject to such underwritten  offering,  with the consent of the
     Initial  Investors,  shall  have the  right to  select a total of one legal
     counsel to represent the Investors and an investment  banker or bankers and
     manager or managers to administer the offering,  which investment banker or
     bankers or manager or  managers  shall be  reasonably  satisfactory  to the
     Company.

          c. Payments by the Company.  The Company shall cause the  registration
     statement to become effective as soon as practicable  after filing,  but in
     no event later than the one hundred  twentieth  (120th) day  following  the
     Closing  Date  (the  "REGISTRATION  DEADLINE").  If  (i)  the  registration
     statement(s)  covering the Registrable  Securities  required to be filed by
     the Company  pursuant to Section 2(a) hereof is not  declared  effective by
     the  SEC  on  or  before  the  Registration   Deadline  or  if,  after  the
     registration statement has been declared effective by the SEC, sales of all
     the Registrable  Securities (including any Registrable  Securities required
     to be registered  pursuant to Section 3(b) hereof)  cannot be made pursuant
     to the registration statement


<PAGE>
                                      347


     (by  reason  of a stop  order  or  the  Company's  failure  to  update  the
     registration  statement  or any other  reason  outside  the  control of the
     Investors) or (ii) the Common Stock is not listed or included for quotation
     on the NASDAQ Small Cap Market ("NASDAQ"),  the NASDAQ National Market (the
     "NNM"),  the New York Stock  Exchange  (the "NYSE") or the  American  Stock
     Exchange (the "AMEX") at any time after the Registration Deadline, then the
     Company  will make  payments to the  Investors  in such amounts and at such
     times as shall be  determined  pursuant  to this  Section  2(c) as  partial
     relief for the damages to the  Investors  by reason of any such delay in or
     reduction of their ability to sell the Registrable Securities (which remedy
     shall  not  be  exclusive  of any  other  remedies  available  at law or in
     equity).  The Company shall pay to each Investor an amount equal to the sum
     of (i) the aggregate  Purchase  Price of the  Preferred  Stock held by such
     Investor  (including,  without  limitation,  Preferred  Stock that has been
     converted  into  Conversion   Shares  then  held  by  such  Investor)  (the
     "AGGREGATE  SHARE  PRICE")  multiplied  by  two  hundredths  (.02)  if  the
     Registration  Statement  filed  pursuant  to Section  2(a) is not  declared
     effective  on or prior to the  Registration  Deadline  plus  (ii) an amount
     equal to the Aggregate Share Price  multiplied by two hundredths  (.02) for
     each thirty (30) days  thereafter that the  Registration  Statement has not
     been  declared  effective  or that  sales  cannot be made  pursuant  to the
     Registration  Statement  after it has been  declared  effective or that the
     Common Stock is not listed or included for quotation on NASDAQ, the NYSE or
     AMEX; PROVIDED,  HOWEVER that there shall be excluded from each such period
     any delays which are solely attributable to changes (other than corrections
     of Company mistakes with respect to information  previously provided by the
     Investors)  required by the Investors in the  Registration  Statement  with
     respect  to  information  relating  to the  Investors,  including,  without
     limitation, changes to the plan of distribution and PROVIDED, FURTHER, that
     the aggregate  amount payable to any Investor under this Section 2(c) shall
     not exceed ten percent (10%) of such Investor's Aggregate Share Price. (For
     example, if the Registration Statement is not effective by the Registration
     Deadline,  the Company  would pay $20,000 for each  $1,000,000 of Aggregate
     Share  Price and the  Company  would  pay an  additional  $20,000  for each
     $1,000,000 of Aggregate Share Price  thereafter for each additional  thirty
     (30) days the  Registration  Statement is not effective (up to a maximum of
     $100,000 for each $1,000,000 Aggregate Share Price)). Such amounts shall be
     paid in cash or, at each Investor's  option, may be convertible into Common
     Stock  at  the  "CONVERSION  PRICE"  (as  defined  in  the  Certificate  of
     Designations).  Any shares of Common Stock issued upon  conversion  of such
     amounts shall be Registrable Securities. If the Investor desires to convert
     the amounts due hereunder  into  Registrable  Securities it shall so notify
     the Company in writing  within two (2)  business  days of the date on which
     such  amounts  are  first  payable  in cash  and such  amounts  shall be so
     convertible  (pursuant to the  mechanics  set forth under Article IV of the
     Certificate of Designations), beginning on the last day upon which the cash
     amount would  otherwise be due in accordance  with the following  sentence.
     Payments of cash  pursuant  hereto shall be made within five (5) days after
     the end of each period that gives rise to such obligation.

          d. [Intentionally Omitted]

          e. Eligibility for Form S-3. The Company  represents and warrants that
     it meets the  requirements  for the use of Form S-3 for registration of the
     sale by the Initial  Investors  and any other  Investor of the  Registrable
     Securities  and the Company shall file all reports  required to be filed by
     the  Company  with  the  SEC in a  timely  manner  so as to  maintain  such
     eligibility for the use of Form S-3.

     3. OBLIGATIONS OF THE COMPANY.

     In connection  with the  registration of the  Registrable  Securities,  the
Company shall have


<PAGE>
                                      348


the following obligations:

          a. The  Company  shall  prepare  promptly  and  file  with the SEC the
     Registration   Statement   required  by  Section   2(a),   and  cause  such
     Registration   Statement  relating  to  Registrable  Securities  to  become
     effective as soon as practicable  after such filing,  but in no event later
     than  the  Registration  Deadline,  and  keep  the  Registration  Statement
     effective  pursuant  to Rule 415 at all  times  until  such  date as is the
     earlier  of (i) the date on which all of the  Registrable  Securities  have
     been sold and (ii) the date on which  all  Registrable  Securities  (in the
     reasonable  opinion of counsel to the Initial Investors) may be immediately
     sold by the  Investors to the public  without  registration  (including  in
     accordance  with Rule 144(k)  promulgated  under the  Securities  Act) (the
     "Registration   Period"),   which  Registration  Statement  (including  any
     amendments or supplements  thereto and prospectuses  contained  therein and
     all  documents  incorporated  by reference  therein)  shall not contain any
     untrue  statement  of a  material  fact or omit to  state a  material  fact
     required to be stated therein,  or necessary to make the statements therein
     not misleading.

          b. The Company  shall  prepare  and file with the SEC such  amendments
     (including  post-effective  amendments)  and  supplements to a Registration
     Statement  and the  prospectus  used in  connection  with the  Registration
     Statement as may be necessary to keep the Registration  Statement effective
     at all times  during the  Registration  Period,  and,  during such  period,
     comply  with the  provisions  of the  Securities  Act with  respect  to the
     disposition  of all  Registrable  Securities of the Company  covered by the
     Registration   Statement  until  such  time  as  all  of  such  Registrable
     Securities have been disposed of in accordance with the intended methods of
     disposition  by  the  seller  or  sellers  thereof  as  set  forth  in  the
     Registration  Statement. In the event an Investor notifies the Company that
     the  number  of  shares  available  under a  Registration  Statement  filed
     pursuant to this Agreement was, for any three (3) consecutive  trading days
     (the date the Investor  notifies the Company of such  occurrence  being the
     "REGISTRATION  TRIGGER DATE"),  is insufficient to cover a number of shares
     equal  to  the  applicable   Registration  Percentage  (as  defined  below)
     multiplied  by all of the  Registrable  Securities  issued or issuable upon
     conversion of the Preferred  Stock held by such  Investor  (without  giving
     effect to any  limitations  on conversion  contained in Article IV.C of the
     Certificate  of  Designations),  the Company  shall amend the  Registration
     Statement,  or  file  a new  Registration  Statement  (on  the  short  form
     available  therefor,  if  applicable),  or both, so as to cover one hundred
     fifty percent (150%) of the  Registrable  Securities  issued or issuable to
     such  Investor  (without  giving  effect to any  limitations  on conversion
     contained  in Article IV.C of the  Certificate  of  Designations),  in each
     case,  as soon as  practicable,  but in any event within  fifteen (15) days
     after the  Registration  Trigger  Date  (based on the  market  price of the
     Common  Stock and other  relevant  factors on which the Company  reasonably
     elects  to rely).  The  Company  shall  cause  such  amendment  and/or  new
     Registration Statement to become effective as soon as practicable following
     the  filing  thereof.  In  the  event  the  Company  fails  to  obtain  the
     effectiveness  of any such  Registration  Statement within ninety (90) days
     after a Registration  Trigger Date, each Investor shall thereafter have the
     option,  exercisable  in whole or in part at any time and from time to time
     by delivery of a written notice to the Company (a "REDEMPTION  NOTICE"), to
     require the Company to purchase  for cash,  at an amount per share equal to
     the Redemption  Amount (as defined in Article VIII.C of the  Certificate of
     Designations),  a portion of the Investor's  Preferred  Stock such that the
     total  number of shares of Common  Stock  issuable  to such  Investor  upon
     conversion of its Preferred Stock (without giving effect to any limitations
     on conversion contained in Article IV.C of the Certificate of Designations)
     does not exceed 135% of the Registrable  Securities issued or issuable upon
     conversion of such Investor's Preferred Stock (without giving effect to any
     limitations on conversion  contained in Article IV.C of the  Certificate of
     Designations). If the 


<PAGE>
                                      349


     Corporation  fails to redeem any of such shares  within  five (5)  business
     days after its receipt of a Redemption Notice,  then such Investor shall be
     entitled to the remedies  provided in Article VIII.D of the  Certificate of
     Designations.  As used herein,  "REGISTRATION PERCENTAGE" means one hundred
     percent (100%) for the period ending on the 150th day following the Closing
     Date and means one hundred and thirty-five percent (135%) thereafter.

          c. The  Company  shall  furnish  to each  Investor  whose  Registrable
     Securities are included in the Registration Statement and its legal counsel
     (i) promptly  after the same is prepared and  publicly  distributed,  filed
     with the SEC,  or  received by the  Company,  one copy of the  Registration
     Statement  and any  amendment  thereto,  each  preliminary  prospectus  and
     prospectus  and each amendment or supplement  thereto,  and, in the case of
     the Registration Statement referred to in Section 2(a), each letter written
     by or on behalf of the Company to the SEC or the staff of the SEC, and each
     item of  correspondence  from the SEC or the staff of the SEC, in each case
     relating to such  Registration  Statement (other than any portion,  if any,
     thereof  which  contains  information  for which  the  Company  has  sought
     confidential  treatment),  and (ii) such number of copies of a  prospectus,
     including a preliminary  prospectus,  and all  amendments  and  supplements
     thereto and such other documents as such Investor may reasonably request in
     order to facilitate the disposition of the Registrable  Securities owned by
     such Investor.

          d. The  Company  shall use  reasonable  efforts  to (i)  register  and
     qualify the Registrable  Securities  covered by the Registration  Statement
     under such other securities or "blue sky" laws of such jurisdictions in the
     United  States as each  Investor  who holds  Registrable  Securities  being
     offered reasonably  requests,  (ii) prepare and file in those jurisdictions
     such amendments  (including  post-effective  amendments) and supplements to
     such  registrations and  qualifications as may be necessary to maintain the
     effectiveness thereof during the Registration Period, (iii) take such other
     actions  as  may  be  necessary   to  maintain   such   registrations   and
     qualifications in effect at all times during the Registration  Period,  and
     (iv) take all other  actions  reasonably  necessary or advisable to qualify
     the  Registrable  Securities  for  sale  in such  jurisdictions;  PROVIDED,
     HOWEVER,  that the Company shall not be required in connection therewith or
     as a condition  thereto to (a)  qualify to do business in any  jurisdiction
     where it would not  otherwise  be required to qualify but for this  Section
     3(d), (b) subject itself to general taxation in any such jurisdiction,  (c)
     file a general consent to service of process in any such jurisdiction,  (d)
     provide any undertakings that cause the Company undue expense or burden, or
     (e) make any change in its charter or bylaws,  which in each case the Board
     of Directors of the Company determines to be contrary to the best interests
     of the Company and its stockholders.

          e. In the event the  Investors  who hold a majority in interest of the
     Registrable Securities being offered in an offering select underwriters for
     the  offering,  the Company  shall  enter into and perform its  obligations
     under an underwriting  agreement,  in usual and customary form,  including,
     without limitation, customary indemnification and contribution obligations,
     with the underwriters of such offering.

          f. As promptly as practicable  after becoming aware of such event, the
     Company shall notify each Investor of the happening of any event,  of which
     the Company has knowledge,  as a result of which the prospectus included in
     the Registration Statement, as then in effect, includes an untrue statement
     of a material  fact or  omission  to state a material  fact  required to be
     stated therein or necessary to make the statements  therein not misleading,
     and use its best efforts  promptly to prepare a supplement  or amendment to
     the  Registration  Statement to correct such untrue  statement or omission,
     and deliver such number of copies of such  supplement  or amendment to each
     Investor as such Investor may reasonably request.


<PAGE>
                                      350


          g. The Company  shall use its best  efforts to prevent the issuance of
     any stop  order or other  suspension  of  effectiveness  of a  Registration
     Statement,  and, if such an order is issued,  to obtain the  withdrawal  of
     such order at the earliest  practicable  moment and to notify each Investor
     who  holds  Registrable  Securities  being  sold  (or,  in the  event of an
     underwritten  offering,  the managing underwriters) of the issuance of such
     order and the resolution thereof.

          h. The Company shall permit a single firm of counsel designated by the
     Initial  Investors to review the Registration  Statement and all amendments
     and supplements  thereto a reasonable  period of time (and in no event less
     than three (3)  business  days) prior to their filing with the SEC, and not
     file any document in a form to which such counsel  reasonably  objects.  In
     the event such  counsel  fails to convey to the Company all of its comments
     (or that it has no comments) to such  Registration  Statement  prior to the
     scheduled  filing  date of such  Registration  Statement  (which date shall
     comply with the requirements set forth in this Section 3(h), the sixty (60)
     and the one  hundred and twenty  (120) day  periods  referred to in Section
     2(a) and 2(c) shall be extended by such number of business  days after such
     scheduled  filing date that such counsel so conveys such  comments (or that
     it has no comments).

          i. The Company shall make generally  available to its security holders
     as soon as  practical,  but not later than ninety (90) days after the close
     of the period  covered  thereby,  an earnings  statement (in form complying
     with the  provisions  of Rule 158  under the  Securities  Act)  covering  a
     twelve-month period beginning not later than the first day of the Company's
     fiscal  quarter  next  following  the  effective  date of the  Registration
     Statement.

          j. At the request of any Investor,  the Company shall furnish,  on the
     date of effectiveness of the Registration  Statement (i) an opinion,  dated
     as of such date,  from counsel  representing  the Company  addressed to the
     Investors and in form,  scope and substance as is  customarily  given in an
     underwritten  public  offering and (ii) in the case of an  underwriting,  a
     letter,  dated such date, from the Company's  independent  certified public
     accountants  in form and substance as is  customarily  given by independent
     certified  public  accountants to underwriters  in an  underwritten  public
     offering, addressed to the underwriters, if any, and the Investors.

          k.  The  Company  shall  make  available  for  inspection  by (i)  any
     Investor, (ii) any underwriter participating in any disposition pursuant to
     the  Registration  Statement,  (iii) one firm of attorneys  and one firm of
     accountants or other agents retained by the Investors, and (iv) one firm of
     attorneys   retained   by  all   such   underwriters   (collectively,   the
     "INSPECTORS")  all  pertinent  financial and other  records,  and pertinent
     corporate  documents  and  properties  of the  Company  (collectively,  the
     "RECORDS"),  as shall be reasonably  deemed  necessary by each Inspector to
     enable each  Inspector to exercise its due  diligence  responsibility,  and
     cause the  Company's  officers,  directors  and  employees  to  supply  all
     information which any Inspector may reasonably request for purposes of such
     due  diligence;  PROVIDED,  HOWEVER,  that  each  Inspector  shall  hold in
     confidence and shall not make any disclosure (except to an Investor) of any
     Record or other information  which the Company  determines in good faith to
     be confidential, and of which determination the Inspectors are so notified,
     unless (a) the  disclosure of such Records is necessary to avoid or correct
     a misstatement or omission in any Registration  Statement,  (b) the release
     of such  Records is ordered  pursuant  to a subpoena  or other order from a
     court or government body of competent jurisdiction,  or (c) the information
     in such Records has been made generally  available to the public other than
     by  disclosure  in  violation of this or any other  agreement.  The Company
     shall not be required  to disclose  any  confidential  information  in such
     Records to any Inspector until and unless such Inspector shall have entered
     into confidentiality  


<PAGE>
                                      351


     agreements  (in form and  substance  satisfactory  to the Company) with the
     Company with  respect  thereto,  substantially  in the form of this Section
     3(k). Each Investor agrees that it shall,  upon learning that disclosure of
     such Records is sought in or by a court or  governmental  body of competent
     jurisdiction or through other means,  give prompt notice to the Company and
     allow the Company,  at its  expense,  to  undertake  appropriate  action to
     prevent  disclosure  of, or to obtain a  protective  order for, the Records
     deemed confidential. Nothing herein shall be deemed to limit the Investor's
     ability  to sell  Registrable  Securities  in a manner  which is  otherwise
     consistent with applicable laws and regulations.

          l. The Company shall hold in confidence and not make any disclosure of
     information  concerning  an Investor  provided  to the  Company  unless (i)
     disclosure of such information is necessary to comply with federal or state
     securities  laws,  (ii) the disclosure of such  information is necessary to
     avoid or correct a misstatement or omission in any Registration  Statement,
     (iii) the release of such  information is ordered pursuant to a subpoena or
     other order from a court or  governmental  body of competent  jurisdiction,
     (iv) such information has been made generally available to the public other
     than by disclosure in violation of this or any other agreement, or (v) such
     Investor  consents  to the form and  content  of any such  disclosure.  The
     Company  agrees  that it  shall,  upon  learning  that  disclosure  of such
     information  concerning  an  Investor  is  sought  in  or  by  a  court  or
     governmental  body of competent  jurisdiction or through other means,  give
     prompt notice to such Investor prior to making such  disclosure,  and allow
     the Investor,  at its expense,  to undertake  appropriate action to prevent
     disclosure of, or to obtain a protective order for, such information.

          m. The Company shall use its best efforts to promptly either (i) cause
     all the Registrable  Securities covered by the Registration Statement to be
     listed on the NYSE or the AMEX or another national  securities exchange and
     on each additional  national securities exchange on which securities of the
     same class or series issued by the Company are then listed,  if any, if the
     listing of such Registrable Securities is then permitted under the rules of
     such exchange,  or (ii) secure the  designation  and quotation,  of all the
     Registrable  Securities covered by the Registration Statement on the NASDAQ
     Small Cap Market or the NNM and,  without  limiting the  generality  of the
     foregoing,  to  arrange  for or  maintain  at least  two  market  makers to
     register with the National Association of Securities Dealers, Inc. ("NASD")
     as such with respect to such Registrable Securities.

          n. The Company shall provide a transfer agent and registrar, which may
     be a single  entity,  for the  Registrable  Securities  not later  than the
     effective date of the Registration Statement.

          o. The Company shall cooperate with the Investors who hold Registrable
     Securities being offered and the managing  underwriter or underwriters,  if
     any, to facilitate the timely preparation and delivery of certificates (not
     bearing any restrictive legends) representing  Registrable Securities to be
     offered pursuant to the Registration Statement and enable such certificates
     to be in such denominations or amounts, as the case may be, as the managing
     underwriter  or  underwriters,  if any,  or the  Investors  may  reasonably
     request  and  registered  in such  names  as the  managing  underwriter  or
     underwriters,  if any, or the Investors may request,  and, within three (3)
     business days after a Registration  Statement  which  includes  Registrable
     Securities  is ordered  effective by the SEC, the Company shall cause legal
     counsel  selected by the Company to deliver,  to the transfer agent for the
     Registrable  Securities  (with copies to the  Investors  whose  Registrable
     Securities are included in such Registration  Statement) an opinion of such
     counsel in the form attached hereto as EXHIBIT 1.


<PAGE>
                                      352


          p. At the request of any Investor,  the Company shall prepare and file
     with the SEC such  amendments  (including  post-effective  amendments)  and
     supplements  to  a  Registration  Statement  and  the  prospectus  used  in
     connection with the Registration  Statement as may be necessary in order to
     change the plan of distribution set forth in such Registration Statement.

     4. OBLIGATIONS OF THE INVESTORS.

     In connection  with the  registration of the  Registrable  Securities,  the
Investors shall have the following obligations:

          a. It shall be a condition precedent to the obligations of the Company
     to complete the registration pursuant to this Agreement with respect to the
     Registrable  Securities of a particular  Investor that such Investor  shall
     furnish to the Company such information  regarding itself,  the Registrable
     Securities  held  by it and  the  intended  method  of  disposition  of the
     Registrable Securities held by it as shall be reasonably required to effect
     the  registration  of such  Registrable  Securities  and shall execute such
     documents  in  connection  with  such   registration  as  the  Company  may
     reasonably  request.  At least ten (10)  business  days  prior to the first
     anticipated  filing date of the Registration  Statement,  the Company shall
     notify each  Investor in writing of the  information  the Company  requires
     from  each  such  Investor  and  each  such  Investor  shall  provide  such
     information no later than five (5) business days prior to such  anticipated
     filing date.

          b. Each Investor,  by such  Investor's  acceptance of the  Registrable
     Securities, agrees to cooperate with the Company as reasonably requested by
     the  Company  in  connection   with  the  preparation  and  filing  of  the
     Registration  Statement  hereunder,  unless such  Investor has notified the
     Company in  writing  of such  Investor's  election  to exclude  all of such
     Investor's Registrable Securities from the Registration Statement.

          c. Each  Investor  whose  Registrable  Securities  are  included  in a
     Registration  Statement  understands  that the  Securities  Act may require
     delivery  of a  prospectus  relating  thereto in  connection  with any sale
     thereof  pursuant to such  Registration  Statement  and each such  Investor
     shall deliver a prospectus in connection with any such sale.

          d. Each  Investor  agrees to notify the Company  promptly,  but in any
     event  within 72 hours after the date on which all  Registrable  Securities
     and  Preferred  Shares  owned  by  such  Investor  have  been  sold by such
     Investor,  if such  date is prior  to the  expiration  of the  Registration
     Period, so that the Company may comply with its obligation to terminate the
     Registration  Statement in accordance  with Item 512 of  Regulation  S-K or
     Regulation S-B, as the case may be.

          e. In the  event  Investors  holding a  majority  in  interest  of the
     Registrable Securities being offered determine to engage the services of an
     underwriter, each Investor agrees to enter into and perform such Investor's
     obligations under an underwriting  agreement,  in usual and customary form,
     including,  without limitation,  customary indemnification and contribution
     obligations,  with the managing  underwriter of such offering and take such
     other actions as are reasonably required in order to expedite or facilitate
     the  disposition of the  Registrable  Securities,  unless such Investor has
     notified the Company in writing of such Investor's  election to exclude all
     of such Investor's Registrable Securities from the Registration Statement.


<PAGE>
                                      353


          f. Each  Investor  agrees  that,  upon  receipt of any notice from the
     Company of the happening of any event of the kind described in Section 3(f)
     or  3(g),  such  Investor  will  immediately   discontinue  disposition  of
     Registrable Securities pursuant to the Registration Statement covering such
     Registrable  Securities until such Investor's  receipt of the copies of the
     supplemented  or amended  prospectus  contemplated  by Section 3(f) or 3(g)
     and, if so directed by the  Company,  such  Investor  shall  deliver to the
     Company (at the  expense of the  Company)  or destroy  (and  deliver to the
     Company  a  certificate  of  destruction)  all  copies  in such  Investor's
     possession,  of the prospectus covering such Registrable Securities current
     at the time of receipt of such notice.

          g.  No  Investor  may  participate  in any  underwritten  offering  of
     Registrable  Securities  hereunder  unless such Investor (i) agrees to sell
     such  Investor's  Registrable  Securities  on  the  basis  provided  in any
     underwriting  arrangements  in usual and customary form entered into by the
     Company,  (ii)  completes  and  executes  all  questionnaires,   powers  of
     attorney,   indemnities,   underwriting   agreements  and  other  documents
     reasonably required under the terms of such underwriting arrangements,  and
     (iii) agrees to pay its pro rata share of all  underwriting  discounts  and
     commissions  and any  expenses  in excess of those  payable by the  Company
     pursuant to Section 5 below.

     5. EXPENSES OF REGISTRATION.

     All  expenses  incurred by the Company in  connection  with  registrations,
filings or  qualifications  pursuant  to  Sections 2 and 3,  including,  without
limitation,  all registration,  listing and  qualifications  fees,  printers and
accounting  fees, the fees and  disbursements of counsel for the Company and the
fees and disbursements contemplated by Section 3(j) hereof shall be borne by the
Company.  The Company shall also reimburse the Investors for the reasonable fees
and  disbursements of one counsel selected by the Investors  pursuant to Section
2(b) hereof.  The Investors shall be responsible for any underwriting  discounts
and commissions attributable to the Registrable Securities to be sold by them.

     6. INDEMNIFICATION.

     In the event any  Registrable  Securities  are  included in a  Registration
Statement under this Agreement:  

          a. To the extent  permitted by law, the Company will  indemnify,  hold
     harmless  and  defend  (i)  each   Investor  who  holds  such   Registrable
     Securities, and (ii) the directors, officers, partners, members, employees,
     agents and each  person who  controls  any  Investor  within the meaning of
     Section 15 of the Securities  Act or Section 20 of the Securities  Exchange
     Act  of  1934,  as  amended  (the  "EXCHANGE   ACT"),  if  any,  (each,  an
     "INDEMNIFIED  PERSON"),  against  any  joint  or  several  losses,  claims,
     damages,  liabilities  or expenses  (collectively,  together  with actions,
     proceedings or inquiries by any regulatory or self-regulatory organization,
     whether commenced or threatened, in respect thereof, "CLAIMS") to which any
     of them may become subject insofar as such Claims arise out of or are based
     upon: (i) any untrue  statement or alleged  untrue  statement of a material
     fact in a  Registration  Statement or the  omission or alleged  omission to
     state  therein a material  fact  required to be stated or necessary to make
     the statements therein not misleading, (ii) any untrue statement or alleged
     untrue statement of a material fact contained in any preliminary prospectus
     if used prior to the  effective  date of such  Registration  Statement,  or
     contained  in the final  prospectus  (as  amended or  supplemented,  if the
     Company files any amendment thereof or supplement  thereto with the SEC) or
     the  omission  or alleged  omission  to state  therein  any  material  fact
     necessary  to  make  the   statements   


<PAGE>
                                      354


     made  therein,  in light of the  circumstances  under which the  statements
     therein  were  made,  not  misleading,  or (iii) any  violation  or alleged
     violation by the Company of the Securities Act, the Exchange Act, any other
     law, including,  without limitation,  any state securities law, or any rule
     or regulation  thereunder  relating to the offer or sale of the Registrable
     Securities  (the matters in the foregoing  clauses (i) through (iii) being,
     collectively,  "VIOLATIONS").  Subject  to the  restrictions  set  forth in
     Section 6(c) with respect to the number of legal counsel, the Company shall
     reimburse the Investors and each such  underwriter or  controlling  person,
     promptly as such  expenses are  incurred  and are due and payable,  for any
     reasonable  legal fees or other  reasonable  expenses  incurred  by them in
     connection with investigating or defending any such Claim.  Notwithstanding
     anything to the contrary  contained herein, the  indemnification  agreement
     contained in this Section 6(a):  (i) shall not apply to a Claim arising out
     of or  based  upon  a  Violation  which  occurs  in  reliance  upon  and in
     conformity  with  information  furnished  in writing to the Company by such
     Indemnified  Person expressly for use in the Registration  Statement or any
     such  amendment  thereof  or  supplement  thereto;  (ii) shall not apply to
     amounts  paid in  settlement  of any Claim if such  settlement  is effected
     without the prior written  consent of the Company,  which consent shall not
     be  unreasonably  withheld;  and  (iii)  with  respect  to any  preliminary
     prospectus, shall not inure to the benefit of any Indemnified Person if the
     untrue  statement or omission of material fact contained in the preliminary
     prospectus  was  corrected  on a timely  basis in the  prospectus,  as then
     amended or  supplemented,  if such  corrected  prospectus  was timely  made
     available  by  the  Company  pursuant  to  Section  3(c)  hereof,  and  the
     Indemnified Person was promptly advised in writing not to use the incorrect
     prospectus prior to the use giving rise to a Violation and such Indemnified
     Person,  notwithstanding  such advice, used it. Such indemnity shall remain
     in full  force and effect  regardless  of any  investigation  made by or on
     behalf of the  Indemnified  Person and shall  survive  the  transfer of the
     Registrable Securities by the Investors pursuant to Section 9.

          b. In connection with any Registration  Statement in which an Investor
     is  participating,  each such Investor agrees  severally and not jointly to
     indemnify,  hold  harmless  and defend,  to the same extent and in the same
     manner set forth in Section 6(a), the Company, each of its directors,  each
     of its officers who signs the Registration Statement, its employees, agents
     and each person,  if any,  who  controls the Company  within the meaning of
     Section 15 of the Securities Act or Section 20 of the Exchange Act, and any
     other stockholder selling securities pursuant to the Registration Statement
     or any of its  directors  or  officers  or any  person  who  controls  such
     stockholder or underwriter  within the meaning of the Securities Act or the
     Exchange Act  (collectively  and together with an  Indemnified  Person,  an
     "INDEMNIFIED  PARTY"),  against  any Claim to which any of them may  become
     subject,  under the Securities Act, the Exchange Act or otherwise,  insofar
     as such Claim arises out of or is based upon any Violation, in each case to
     the extent (and only to the extent) that such Violation  occurs in reliance
     upon and in conformity with written information furnished to the Company by
     such  Investor  expressly  for use in  connection  with  such  Registration
     Statement;  and subject to Section 6(c) such  Investor  will  reimburse any
     legal or other expenses (promptly as such expenses are incurred and are due
     and payable)  reasonably  incurred by them in connection with investigating
     or  defending  any  such  Claim;  PROVIDED,  HOWEVER,  that  the  indemnity
     agreement contained in this Section 6(b) shall not apply to amounts paid in
     settlement of any Claim if such  settlement  is effected  without the prior
     written  consent of such Investor,  which consent shall not be unreasonably
     withheld;  PROVIDED,  FURTHER,  HOWEVER,  that the Investor shall be liable
     under this Agreement  (including  this Section 6(b) and Section 7) for only
     that amount as does not exceed the net proceeds  actually  received by such
     Investor as a result of the sale of Registrable Securities pursuant to such
     Registration  Statement.  Such  indemnity  shall  remain in full  force and
     effect  regardless  of any  investigation  made  by or on  behalf  of  such
     Indemnified  Party  and  shall  survive  the  transfer  of the  Registrable

<PAGE>
                                      355


     Securities by the Investors pursuant to Section 9. Notwithstanding anything
     to the contrary contained herein, the  indemnification  agreement contained
     in this Section 6(b) with respect to any preliminary  prospectus  shall not
     inure to the benefit of any  Indemnified  Party if the untrue  statement or
     omission of material  fact  contained  in the  preliminary  prospectus  was
     corrected  on a  timely  basis  in  the  prospectus,  as  then  amended  or
     supplemented,  and the  Indemnified  Party failed to utilize such corrected
     prospectus.

          c. Promptly  after  receipt by an  Indemnified  Person or  Indemnified
     Party  under  this  Section 6 of notice of the  commencement  of any action
     (including any governmental action), such Indemnified Person or Indemnified
     Party  shall,  if a  Claim  in  respect  thereof  is to  made  against  any
     indemnifying  party under this Section 6, deliver to the indemnifying party
     a written notice of the commencement  thereof,  and the indemnifying  party
     shall have the right to participate in, and, to the extent the indemnifying
     party so  desires,  jointly  with any other  indemnifying  party  similarly
     noticed,  to assume  control of the defense  thereof with counsel  mutually
     satisfactory to the  indemnifying  party and the Indemnified  Person or the
     Indemnified  Party,  as the  case  may be;  PROVIDED,  HOWEVER,  that  such
     indemnifying  party shall not be  entitled  to assume  such  defense and an
     Indemnified  Person or Indemnified Party shall have the right to retain its
     own  counsel  with  the fees and  expenses  to be paid by the  indemnifying
     party,   if,  in  the  reasonable   opinion  of  counsel  retained  by  the
     indemnifying  party, the  representation by such counsel of the Indemnified
     Person  or  Indemnified   Party  and  the   indemnifying   party  would  be
     inappropriate due to actual or potential conflicts of interest between such
     Indemnified  Person or Indemnified Party and any other party represented by
     such counsel in such  proceeding or the actual or potential  defendants in,
     or targets of, any such action include both the  Indemnified  Person or the
     Indemnified  Party  and the  indemnifying  party  and any such  Indemnified
     Person or Indemnified  Party reasonably  determines that there may be legal
     defenses  available to such Indemnified  Person or Indemnified  Party which
     are different from or in addition to those  available to such  indemnifying
     party. The indemnifying party shall pay for only one separate legal counsel
     for the Indemnified Persons or the Indemnified Parties, as applicable,  and
     such   legal   counsel   shall  be   selected   by   Investors   holding  a
     majority-in-interest   of  the  Registrable   Securities  included  in  the
     Registration Statement to which the Claim relates (with the approval of the
     Initial  Investors  if it holds  Registrable  Securities  included  in such
     Registration  Statement),  if the Investors are entitled to indemnification
     hereunder, or by the Company, if the Company is entitled to indemnification
     hereunder,  as  applicable.  The failure to deliver  written  notice to the
     indemnifying party within a reasonable time of the commencement of any such
     action shall not relieve such  indemnifying  party of any  liability to the
     Indemnified Person or Indemnified Party under this Section 6, except to the
     extent that the indemnifying party is actually prejudiced in its ability to
     defend such action. The indemnification required by this Section 6 shall be
     made by periodic  payments of the amount  thereof  during the course of the
     investigation  or defense,  as such expense,  loss,  damage or liability is
     incurred and is due and payable.

     7. CONTRIBUTION.

          To  the  extent  any  indemnification  by  an  indemnifying  party  is
     prohibited  or limited by law,  the  indemnifying  party agrees to make the
     maximum  contribution  with  respect  to any  amounts  for  which  it would
     otherwise be liable under Section 6 to the fullest extent permitted by law;
     PROVIDED,   HOWEVER,   that  (i)  no  contribution   shall  be  made  under
     circumstances   where  the  maker   would   not  have   been   liable   for
     indemnification  under the fault  standards set forth in Section 6, (ii) no
     person  guilty of  fraudulent  misrepresentation  (within  the  meaning  of
     Section 11(f) of the Securities Act) shall be entitled to contribution from
     any seller of Registrable  Securities who was not guilty of such fraudulent
     misrepresentation,    and   (iii)    contribution    


<PAGE>
                                      356


     (together  with  any   indemnification  or  other  obligations  under  this
     Agreement)  by any  seller of  Registrable  Securities  shall be limited in
     amount to the net amount of proceeds  received by such seller from the sale
     of such Registrable Securities.

     8. REPORTS UNDER THE EXCHANGE ACT.

     With a view to making  available to the  Investors the benefits of Rule 144
promulgated  under the Securities Act or any other similar rule or regulation of
the SEC that may at any time  permit the  Investors  to sell  securities  of the
Company to the public without registration ("RULE 144"), the Company agrees to:

          a. file with the SEC in a timely  manner  and make and keep  available
     all  reports  and  other  documents  required  of  the  Company  under  the
     Securities Act and the Exchange Act so long as the Company  remains subject
     to such  requirements  (it being understood that nothing herein shall limit
     the Company's  obligations  under Section 4(c) of the  Securities  Purchase
     Agreement)  and the  filing  and  availability  of such  reports  and other
     documents is required for the applicable provisions of Rule 144; and

          b. furnish to each  Investor so long as such  Investor  owns shares of
     Preferred  Stock or Registrable  Securities,  promptly upon request,  (i) a
     written  statement by the Company that it has complied  with the  reporting
     requirements  of Rule 144, the  Securities Act and the Exchange Act, (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.

     9. ASSIGNMENT OF REGISTRATION RIGHTS.

     The  rights of the  Investors  hereunder,  including  the right to have the
Company register  Registrable  Securities  pursuant to this Agreement,  shall be
automatically  assignable  by  each  Investor  to any  transferee  of all or any
portion of the shares of Preferred Stock or the  Registrable  Securities if: (i)
the Investor  agrees in writing with the  transferee  or assignee to assign such
rights,  and a copy of such  agreement  is  furnished  to the  Company  within a
reasonable time after such assignment,  (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such  transferee or assignee,  and (b) the  securities  with
respect to which such  registration  rights are being  transferred  or assigned,
(iii)  following  such transfer or assignment,  the further  disposition of such
securities by the transferee or assignee is restricted  under the Securities Act
and applicable  state  securities  laws,  (iv) at or before the time the Company
receives the written notice  contemplated  by clause (ii) of this sentence,  the
transferee or assignee  agrees in writing with the Company to be bound by all of
the provisions  contained herein,  and (v) such transfer shall have been made in
accordance  with  the  applicable   requirements  of  the  Securities   Purchase
Agreement.

     10. AMENDMENT OF REGISTRATION RIGHTS.

     Provisions of this Agreement may be amended and the observance  thereof may
be waived (either generally or in a particular instance and either retroactively
or  prospectively),  only with  written  consent  of the  Company,  the  Initial
Investors  (to the extent the Initial  Investors  still own shares of  Preferred
Stock or Registrable  Securities) and Investors who hold a majority  interest of
the Registrable Securities.  Any amendment or waiver effected in accordance with
this Section 


<PAGE>
                                      357


10 shall be binding upon each Investor and the Company.

     11. MISCELLANEOUS.

          a. A  person  or  entity  is  deemed  to be a  holder  of  Registrable
     Securities  whenever such person or entity owns of record such  Registrable
     Securities.  If the Company receives conflicting  instructions,  notices or
     elections  from two or more  persons or entities  with  respect to the same
     Registrable   Securities,   the  Company   shall  act  upon  the  basis  of
     instructions, notice or election received from the registered owner of such
     Registrable Securities.

          b. Any notices  required or  permitted  to be given under the terms of
     this  Agreement  shall be sent by  certified  or  registered  mail  (return
     receipt  requested)  or delivered  personally or by courier or by confirmed
     telecopy,  and shall be effective five days after being placed in the mail,
     if mailed, or upon receipt or refusal of receipt,  if delivered  personally
     or by courier or confirmed telecopy, in each case addressed to a party. The
     addresses for such communications shall be:

                  If to the Company:

                  Palomar Medical Technologies, Inc.
                  66 Cherry Hill Drive
                  Beverly, Massachusetts 01915
                  Telecopy:  (508) 921-5801
                  Attention:  Paul Weiner, Director of Finance

                  with a copy to each of the Company's General Counsel at the
                  same address and to:

                  Foley, Hoag & Eliot, LLP
                  One Post Office Square
                  Boston, Massachusetts  02109
                  Telecopy:  (617) 832-7000
                  Attention:  David Broadwin

                  If to RGC International Investors, LDC:

                  RGC International Investors, LDC
                  c/o Rose Glen Capital Management, L.P.
                  440 E. Swedesford Road
                  Suite 2025
                  Wayne, PA  19087
                  Telecopy: (610) 971-2212
                  Attention: Andrew Daley


and if to any other  Investor,  at such  address  as such  Investor  shall  have
provided in writing to the Company,  or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b).

          c.  Failure of any party to  exercise  any right or remedy  under this
     Agreement 


<PAGE>
                                      358


     or otherwise, or delay by a party in exercising such right or remedy, shall
     not operate as a waiver thereof.

          d. This  Agreement  shall be governed by and  construed in  accordance
     with the laws of the State of Delaware  applicable to contracts made and to
     be performed in the State of Delaware.  The Company irrevocably consents to
     the  jurisdiction of the United States federal courts located in the County
     of Kent in the  State of  Delaware  in any suit or  proceeding  based on or
     arising  under this  Agreement  and  irrevocably  agrees that all claims in
     respect of such suit or proceeding  may be  determined in such courts.  The
     Company  irrevocably  waives the  defense of an  inconvenient  forum to the
     maintenance  of such suit or  proceeding.  The Company  further agrees that
     service of process  upon the  Company,  mailed by first class mail shall be
     deemed in every  respect  effective  service of process upon the Company in
     any such suit or  proceeding.  Nothing  herein shall affect the  Investors'
     right to serve  process in any other  manner  permitted by law. The Company
     agrees that a final non-appealable  judgment in any such suit or proceeding
     shall be conclusive and may be enforced in other  jurisdictions  by suit on
     such judgment or in any other lawful manner.

          e. This Agreement and the Securities Purchase Agreement (including all
     schedules and exhibits  thereto)  constitute the entire agreement among the
     parties hereto with respect to the subject matter hereof and thereof. There
     are no restrictions, promises, warranties or undertakings, other than those
     set forth or  referred  to  herein  and  therein.  This  Agreement  and the
     Securities   Purchase   Agreement   supersede  all  prior   agreements  and
     understandings  among the parties hereto with respect to the subject matter
     hereof and thereof.

          f. Subject to the  requirements  of Section 9 hereof,  this  Agreement
     shall  inure to the  benefit  of and be  binding  upon the  successors  and
     assigns of each of the parties hereto.

          g. The headings in this  Agreement  are for  convenience  of reference
     only and shall not limit or otherwise affect the meaning hereof.

          h. This Agreement may be executed in two or more counterparts, each of
     which shall be deemed an original but all of which shall constitute one and
     the same  agreement.  This  Agreement,  once  executed  by a party,  may be
     delivered to the other party hereto by facsimile  transmission of a copy of
     this  Agreement  bearing  the  signature  of the party so  delivering  this
     Agreement.

          i. Each party shall do and perform, or cause to be done and performed,
     all such  further acts and things,  and shall  execute and deliver all such
     other  agreements,  certificates,  instruments and documents,  as the other
     party  may  reasonably  request  in  order  to  carry  out the  intent  and
     accomplish  the  purposes of this  Agreement  and the  consummation  of the
     transactions contemplated hereby.

          j. All consents and other  determinations  to be made by the Investors
     or the Initial  Investors  pursuant to this Agreement  shall be made by the
     Investors or the Initial  Investors  holding a majority of the  Registrable
     Securities (determined as if all shares of Preferred Stock then outstanding
     had been converted into or exercised for  Registrable  Securities)  held by
     all Investors or Initial Investors, as the case may be.

          k. The  initial  number  of  Registrable  Securities  included  on any
     Registration  Statement  and each  increase  to the  number of  Registrable
     Securities included thereon shall be 


<PAGE>
                                      359


     allocated pro rata among the Investors  based on the number of  Registrable
     Securities  held by each  Investor  at the  time of such  establishment  or
     increase,  as the  case may be.  In the  event an  Investor  shall  sell or
     otherwise  transfer  any of  such  holder's  Registrable  Securities,  each
     transferee  shall  be  allocated  a pro  rata  portion  of  the  number  of
     Registrable  Securities  included  on a  Registration  Statement  for  such
     transferor. Any shares of Common Stock included on a Registration Statement
     and which remain  allocated to any person or entity which does not hold any
     Registrable  Securities shall be allocated to the remaining Investors,  pro
     rata based on the number of shares of Registrable  Securities  then held by
     such Investors.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


<PAGE>
                                      360


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


PALOMAR MEDICAL TECHNOLOGIES, INC.


By:
     -----------------------------
Name:
     -----------------------------
Its:
     -----------------------------


Initial Investors:

         RGC International Investors, LDC


         By:
               --------------------------
         Name:
               --------------------------
         Its:
               --------------------------


<PAGE>
                                      361




                                                                    EXHIBIT 1
                                                                    TO
                                                                    REGISTRATION
                                                                    RIGHTS
                                                                    AGREEMENT

[Date]

VIA FACSILIME

Herbert Lemmer, Esq.
AMERICAN  STOCK  TRANSFER  & TRUST  COMPANY 
40 Wall  Street 
New York,  NY 10005
Facsimile (718) 331-1852


                           RE:      PALOMAR MEDICAL TECHNOLOGIES, INC.

Dear Mr. Lemmer:

     We are  counsel  to  PALOMAR  MEDICAL  TECHNOLOGIES,  INC.,  a  corporation
organized  under  the laws of the  State of  Delaware  (the  "COMPANY"),  and we
understand that [Name of Investor] (the "HOLDER") has purchased from the Company
shares of the Company's  Series H Convertible  Preferred  Stock (the  "PREFERRED
STOCK") that are  convertible  into shares of the Company's  Common  Stock,  par
value $.01 per share (the "COMMON STOCK"). The Preferred Stock were purchased by
the Holder pursuant to a Securities  Purchase  Agreement,  dated as of March 27,
1997, by and among the Company and the  signatories  thereto (the  "AGREEMENT").
Pursuant to a Registration Rights Agreement,  dated as of March 27, 1997, by and
among  the  Company  and  the  signatories  thereto  (the  "REGISTRATION  RIGHTS
AGREEMENT"), the Company agreed with the Holder, among other things, to register
the Registrable  Securities (as that term is defined in the Registration  Rights
Agreement) under the Securities Act of 1933, as amended (the "SECURITIES  ACT"),
upon the terms provided in the Registration Rights Agreement. In connection with
the Company's obligations under the Registration Rights Agreement,  on ________,
1997,  the Company filed a  Registration  Statement on Form S-___ (File No. 333-
_____________)  (the "REGISTRATION  STATEMENT") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable  Securities,  which names the
Holder as a selling stockholder thereunder.

     [Customary introductory and scope of examination language to be inserted]

     Based  on  the  foregoing,  we  are of the  opinion  that  the  Registrable
Securities have been registered under the Securities Act.

                   [Other customary language to be included.]


                                                              Very truly yours,



cc:   [Name of Investor]