SECURITY AGREEMENT (TRADEMARKS)


         WHEREAS,  PALOMAR MEDICAL  TECHNOLOGIES,  INC., a Delaware corporation,
with a principal place of business at 45 Hartwell  Avenue,  Lexington,  MA 02421
(the "Company") and FLEET NATIONAL BANK, with a place of business at One Federal
Street, Boston, Massachusetts 02110 (the "Bank") have entered into an Inventory,
Accounts  Receivable and Intangibles  Security Agreement dated November 16, 1998
(the "Security  Agreement")  and are also parties to a related letter  agreement
(the "Letter Agreement") between the Bank and the Company; and

         WHEREAS,  the Company is the owner and user of the trademarks listed on
Schedule A hereto and identified in said Security Agreement (the  "Trademarks");
and

         WHEREAS,  among the  security  interests  granted by the Company to the
Bank pursuant to the Security Agreement is a security interest in the Trademarks
listed  on  Schedule  A  hereto,  together  with the  goodwill  of the  business
associated with and symbolized by such Trademarks; and

         WHEREAS,  the parties to the Security Agreement  contemplate and intend
that,  if an Event of Default (as defined in the Letter  Agreement)  shall occur
and be  continuing,  the Bank shall have all rights of the Company in and to the
Trademarks and the goodwill of the business of the Company  associated  with and
symbolized  by the  Trademarks  as may be necessary or proper in order to enable
the Bank, as foreclosing secured party, to continue such business of the Company
or,  following such  foreclosure,  to transfer to a purchaser all such rights as
may be necessary or proper to enable such purchaser to continue such business of
the Company;

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the parties reconfirm the terms of
the Security  Agreement,  as if set forth fully herein, and acknowledge that the
Bank has a security  interest  in the  Trademarks  listed on  Schedule A hereto,
together  with the goodwill of the business  associated  with and  symbolized by
such  Trademarks;  as security for the  Obligations  (as defined in the Security
Agreement),  the Company hereby  collaterally  assigns to the Bank, and grants a
security  interest to the Bank in and to, all of the Company's right,  title and
interest in and to said  Trademarks and the goodwill of the business  associated
therewith;  the  Company  agrees  that it will  not  sell or  assign  any of the
Trademarks  without the prior written  consent of the Bank;  and the Company and
the Bank request that the  Commissioner  of Patents and  Trademarks  record this
document with respect to the Trademarks.

         The Company hereby appoints the Bank as the Company's  attorney-in-fact
(with  full  power  of  substitution  and  resubstitution)  with the  power  and
authority,  after the  occurrence  and  during the  continuance  of any Event of
Default (as defined in the Letter  Agreement),  to execute and  deliver,  in the
name and on  behalf  of the  Company,  and to cause  the  recording  of all such
further  assignments  and other  instruments  as the Bank may deem  necessary or
desirable  in order to carry out the intent of the Security  Agreement  and this
Security Agreement  (Trademarks).  The Company agrees that all third parties may
conclusively rely on any such further assignment or

<PAGE>

other instrument, so executed, delivered and recorded by the Bank (or the Bank's
designee  in  accordance  with the  terms  hereof)  and on the  statements  made
therein.


PALOMAR MEDICAL TECHNOLOGIES, INC.                   FLEET NATIONAL BANK


By:  /s/ Joseph P. Caruso                            By:    /s/  Lucie Burke
   ------------------------------                       ------------------------
     Name:                                                  Its Vice President
     Title:


COMMONWEALTH OF MASSACHUSETTS)
                             ) ss.
COUNTY OF MIDDLESEX          )


         Then personally  appeared  before me the above-named  JOSEPH P. CARUSO,
the CHIEF FINANCIAL  OFFICER of Palomar Medical  Technologies,  Inc., and stated
that he/she  executed  the  foregoing  instrument  under the  authority  of said
corporation's Board of Directors and acknowledged the foregoing instrument to be
the free act and deed of said corporation.

         WITNESS my hand and seal this 16th day of November, 1998.

                                                    /s/ Marianne Barrett
                                                    ----------------------------
                                                        Notary Public
                                                        My commission expires:
                                                            November 19, 2004

<PAGE>


                                   SCHEDULE A
                                       TO
                         SECURITY AGREEMENT (TRADEMARKS)

Marks with Federal Registration
<TABLE>
<S>                                         <C>                                                 <C>

Marks                                       Registration No./Reg. Date                           Use
-----                                       --------------------------                           ---

                                                     None.

Marks with Pending Applications

Marks                                       Serial No./Filing Date                               Use
-----                                       ----------------------                               ---

CTI and design                              75-182,709/Oct. 16, 1996                    Cosmetic, plastic and
                                                                                        laser surgery; dermatological 
                                                                                        medical services

LASERTROLOGY                                75-150,492/Aug. 15, 1996                    Medical services, namely performing 
                                                                                        laser dermatology treatments

LASERTROLOGIST                              75-150,460/Aug. 15, 1996                    Dermatology services, namely, 
                                                                                        laser hair removal
</TABLE>