SUPPLEMENT TO SECURITIES PURCHASE AGREEMENT

         SUPPLEMENT TO SECURITIES PURCHASE AGREEMENT (this "SUPPLEMENT"),  dated
as of  May  23,  1997,  by and  among  PALOMAR  MEDICAL  TECHNOLOGIES,  INC.,  a
corporation  organized under the laws of the State of Delaware (the  "Company"),
with headquarters located at 66 Cherry Hill Drive, Beverly, Massachusetts 01915,
RGC  INTERNATIONAL  INVESTORS,  LDC ("RGC") and (i) each of the  investors  (the
"CURRENT  INVESTORS")  set forth on the execution  pages hereof (the  "EXECUTION
PAGES") and (ii) each of the investors (the "SUBSEQUENT  INVESTORS" and together
with  the  Current  Investors,  the  "ADDITIONAL  INVESTORS")  set  forth on the
Execution Pages which may hereafter be appended to this Supplement in accordance
with Section 7 hereof.

         WHEREAS:

         A. The Company and RGC are parties to a Securities  Purchase  Agreement
dated as of March 27, 1997 (the "ORIGINAL  SECURITIES PURCHASE AGREEMENT" and as
supplemented by this Supplement,  the "SECURITIES  PURCHASE AGREEMENT") pursuant
to which the Company sold to RGC,  and RGC  purchased  from the  Company,  6,000
shares of the Company's Series H Convertible Preferred Stock ("SERIES H STOCK");

         B.  Contemporaneous  with their  execution and delivery of the Original
Securities  Purchase  Agreement,  the Company and RGC executed  and  delivered a
Registration  Rights  Agreement,  in  the  form  attached  as  Exhibit  B to the
Securities  Purchase Agreement (the "ORIGINAL  REGISTRATION  RIGHTS AGREEMENT"),
pursuant  to which the Company  agreed to provide  certain  registration  rights
under the Securities Act and the rules and regulations  promulgated  thereunder,
and applicable state securities laws;

         C. The Original Securities Purchase Agreement  contemplates the sale by
the Company of up to an additional  14,000  shares of Series H Stock  thereunder
and the Company desires to sell to each Additional Investor, and each Additional
Investor  desires to purchase  from the Company,  pursuant to and upon the terms
and  conditions  stated in the  Securities  Purchase  Agreement,  such number of
shares of the Company's  Series H Stock as are set forth on the  Execution  Page
hereof  executed  by such  Additional  Investor,  up to an  aggregate  of 14,000
shares;

         D.  Contemporaneous with the execution and delivery of this Supplement,
the Company, RGC and the Current Investors are executing and delivering (or will
execute and deliver in the case of the Subsequent Investors) a Supplement to the
Registration  Rights  Agreement,  in the form attached  hereto as Exhibit A (the
Original   Registration   Rights  Agreement  as  supplemented   thereby,   being
hereinafter  referred to as the "REGISTRATION  RIGHTS  AGREEMENT"),  pursuant to
which the Company has agreed to extend to the Additional Investors the benefits,
rights and obligations set forth in the Original Registration Rights Agreement.

         E. All other capitalized terms used herein and not otherwise defined in
this  Supplement  shall have the meanings  set forth in the Original  Securities
Purchase Agreement.

         NOW, THEREFORE,  the Company,  RGC and the Additional  Investors hereby
agree to amend and  supplement  the Original  Securities  Purchase  Agreement as
follows:

1.          DEFINITIONS. The definitions of the following terms contained in the
Original Securities Purchase Agreement are amended as follows:

        (a) "RGC" shall mean RGC International Investors, LDC.

        (b)  "PURCHASERS"  shall  be  deemed  to  include  RGC  and  each of the
Additional Investors.

        (c)  "PREFERRED  SHARES"  shall mean all of the shares of Series H Stock
purchased  by the  Purchasers  pursuant  to the  Securities  Purchase  Agreement
(whether  on the  initial  Closing  Date or on an  Additional  Closing  Date (as
defined in Section 1(e)(ii) of the Securities Purchase Agreement)).

        (d) "ADDITIONAL INVESTORS," "CURRENT INVESTORS," "SUBSEQUENT INVESTORS,"
"SECURITIES  PURCHASE AGREEMENT" and "REGISTRATION  RIGHTS AGREEMENT" shall have
the meanings set forth in the recitals to this Supplement.

        (e) "SEC  DOCUMENTS"  shall have the meaning  set forth in the  Original
Securities Purchase Agreement but shall include all reports,  schedules,  forms,
statements and other documents filed by the Company with the SEC pursuant to the
Exchange Act prior to the date of the Additional Closing contemplated by Section
1(b) of the Securities Purchase Agreement.

        2. Section 1 of the  Original  Securities  Purchase  Agreement is hereby
amended and restated in its entirety to read as follows:

                  "1.      PURCHASE AND SALE OF PREFERRED SHARES.

                  (a) Purchase of  Preferred  Shares by RGC. On the Closing Date
         (as  defined  below),  subject to the  satisfaction  (or waiver) of the
         conditions set forth in Sections 6 and 7 below, the Company shall issue
         and sell to RGC and RGC severally  agrees to purchase from the Company,
         such number of Preferred Shares as is set forth on RGC's signature page
         hereto.  The purchase price (the "PURCHASE  PRICE") per Preferred Share
         at such closing shall be equal to One Thousand Dollars  ($1,000.00) and
         the  aggregate  purchase  price for all of the  Preferred  Shares to be
         purchased by RGC shall be Six Million Dollars ($6,000,000.00).  For the
         avoidance of doubt,  in no event shall RGC be required to purchase more
         than the number of Preferred  Shares being  subscribed for hereunder by
         RGC as set forth on RGC's  Execution  Page.  The Company may sell up to
         Fourteen  Million  Dollars  ($14,000,000.00)  of  additional  Preferred
         Shares, at One Thousand Dollars ($1,000.00) per Preferred Share, at the
         additional  closings  (the  "ADDITIONAL   CLOSINGS")   contemplated  by
         Sections 1(b) and 1(c) below.

                  (b) Purchase of  Preferred  Shares by Current  Investors.  The
         Purchase  of the  Preferred  Shares by the Current  Investors  may take
         place at an Additional Closing; PROVIDED, HOWEVER, that such Additional
         Closing may not occur  after May 7, 1997.  On such  Additional  Closing
         Date,  subject to the  satisfaction  (or waiver) of the  conditions set
         forth in Sections 6 and 7 below,  the  Company  shall issue and sell to
         each Current  Investor  purchasing  Preferred Shares on such Additional
         Closing Date and each Current Investor  purchasing  Preferred Shares on
         such  Additional  Closing Date  severally  agrees to purchase  from the
         Company,  such  number  of  Preferred  Shares  as is set  forth on such
         Current  Investor's  signature  page  hereto.  The  purchase  price per
         Preferred  Share  at such  Additional  Closing  shall  be  equal to the
         Purchase  Price.  For the  avoidance  of doubt,  in no event  shall any
         Current  Investor  be  required  to  purchase  more than the  number of
         Preferred  Shares  being  subscribed  for  hereunder  by  such  Current
         Investor as set forth on such Current Investor's Execution Page.

                  (c) Purchase of Preferred Shares by Subsequent Investors.  The
         purchase of the Preferred  Shares by the Subsequent  Investors may take
         place at one or more Additional Closings;  PROVIDED,  however,  that no
         Additional  Closing may occur after June 19, 1997 or if the  additional
         conditions set forth in Section 1(f) hereof for such Additional Closing
         are not satisfied. On each such Additional Closing Date, subject to the
         satisfaction  (or waiver) of the conditions set forth in Sections 6 and
         7 below,  the Company shall issue and sell to each Subsequent  Investor
         purchasing  Preferred  Shares on such Additional  Closing Date and each
         Subsequent  Investor  purchasing  Preferred  Shares on such  Additional
         Closing Date severally agrees to purchase from the Company, such number
         of  Preferred  Shares  as is set  forth on such  Subsequent  Investor's
         signature page hereto.  The purchase price per Preferred  Share at each
         such  Additional  Closing shall be equal to the Purchase  Price and the
         aggregate  purchase  price  for  all  of  the  Preferred  Shares  to be
         purchased by the  Subsequent  Investors  shall not exceed Seven Million
         Dollars ($7,000,000).

                  (d) Form of Payment. On the Closing Date or Additional Closing
         Date (as  applicable),  the Purchaser shall pay the aggregate  Purchase
         Price for the  Preferred  Shares being  purchased by such  Purchaser at
         such closing by wire transfer to the Company,  in  accordance  with the
         Company's  written  wiring  instructions,   against  delivery  of  duly
         executed certificates representing the Preferred Shares being purchased
         by  the  Purchaser   hereunder  and  the  Company  shall  deliver  such
         certificates against delivery of such aggregate Purchase Price.

                  (e) Closing Date and Additional Closing Date.

                           (i)  Subject to the  satisfaction  (or waiver) of the
                  conditions thereto set forth in Section 6 and Section 7 below,
                  the date and time of the  issuance  and sale of the  Preferred
                  Shares to RGC pursuant to this Agreement (the "CLOSING  DATE")
                  was at 12:00 noon eastern time on March 31, 1997. This closing
                  occurred at the offices of Foley,  Hoag & Eliot, LLP, One Post
                  Office Square, Boston MA 02109.

                           (ii) Subject to the  satisfaction  (or waiver) of the
                  conditions thereto set forth in Section 6 and Section 7 below,
                  the  date,  place  and  time  of  each  issuance  and  sale of
                  Preferred  Shares to an Additional  Investor  pursuant to this
                  Agreement  (each,  an  "ADDITIONAL  CLOSING DATE") shall be on
                  such date as may be  mutually  agreed  upon by the Company and
                  such Additional Investor."

                  (f)  Additional  Closing  Conditions  With Respect to Sales to
         Subsequent  Purchasers.  If (i) a  Subsequent  Investor  has  not  been
         approved in writing by State Capital  Market  Group,  Ltd. and (ii) the
         average of the  Closing Bid Prices (as  defined in the  Certificate  of
         Designation)  for the  Common  Stock  for the  five  (5)  trading  days
         immediately preceding an Additional Closing Date is not greater than or
         equal to $4.50 per share,  the Company may not sell Preferred Shares to
         a  Subsequent  Investor;   PROVIDED,   HOWEVER,  that  the  restriction
         contained in clause (ii) of this sentence  shall not apply to the first
         three  thousand  (3,000)  Preferred  Shares  sold  by  the  Company  to
         Subsequent Investors.

        3. Sections 6 and 7 of the Original  Securities  Purchase  Agreement are
amended and restated in their entireties to read as follows:

                  "6.      CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.

                  The obligation of the Company  hereunder to issue and sell the
Preferred  Shares to RGC on the Closing Date or to the  Additional  Investors on
the  Additional  Closing Date is subject to the  satisfaction,  at or before the
Closing  Date  or  Additional  Closing  Date  (as  applicable),  of  each of the
following  conditions  thereto,  provided  that  these  conditions  are  for the
Company's  sole benefit and may be waived by the Company at any time in its sole
discretion.

        (a) The applicable  Purchaser  shall have executed the signature page to
the this Agreement and the Registration Rights Agreement, and delivered the same
to the Company.

        (b) The applicable Purchaser shall have delivered the Purchase Price for
the Preferred Shares purchased in accordance with Section 1(c) above.

        (c) The representations and warranties of the applicable Purchaser shall
be true and correct as of the date when made and as of the Closing  Date (solely
in the case of RGC) or the  Additional  Closing  Date (solely in the case of the
Additional  Investors)  as though made at that time (except for  representations
and warranties that speak as of a specific date),  and the applicable  Purchaser
shall have performed,  satisfied and complied in all material  respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied  or  complied  with by the  applicable  Purchaser  at or  prior to the
Closing Date (solely in the case of RGC) or the Additional  Closing Date (solely
in the case of the Additional Investors).

        (d) No statute,  rule,  regulation,  executive order, decree,  ruling or
injunction  shall have been  enacted,  entered,  promulgated  or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization  having  authority  over  the  matters  contemplated  hereby  which
prohibits  the  consummation  of any of the  transactions  contemplated  by this
Agreement.

                  7.      CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.

                  The  obligation  of each  Purchaser  hereunder to purchase the
Preferred Shares to be purchased by it on the Closing Date or Additional Closing
Date (as  applicable)  is subject to the  satisfaction  of each of the following
conditions, provided that these conditions are for each Purchaser's sole benefit
and may be waived by a Purchaser at any time in the Purchaser's sole discretion:

        (b) The Company shall have executed the signature page to this Agreement
and the Registration Rights Agreement, and delivered the same to such Purchaser.

        (c) The  Certificate of Designation  shall have been accepted for filing
with the  Secretary  of  State  of the  State  of  Delaware  and a copy  thereof
certified  by the  Secretary of State of Delaware  shall have been  delivered to
such Purchaser.

        (d) The Company shall have delivered duly executed certificates (in such
denominations as such Purchaser shall request) representing the Preferred Shares
being so purchased to such Purchaser in accordance with Section 1(c) above.

        (e) The Common  Stock shall be  authorized  for  quotation on NASDAQ and
trading in the Common Stock (or NASDAQ  generally) shall not have been suspended
by the SEC or NASD.

        (f) The  representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing  Date (solely in the case
of RGC) and  Additional  Closing  Date  (solely  in the  case of the  Additional
Investors)  as  though  made  at  that  time  (except  for  representations  and
warranties  that  speak  as of a  specific  date)  and the  Company  shall  have
performed,  satisfied and complied in all material  respects with the covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied  with by the Company at or prior to the Closing  Date (solely in the
case of RGC) and  Additional  Closing Date (solely in the case of the Additional
Investors).  Such Purchaser  shall have received a certificate,  executed by the
chief  executive  officer of the  Company,  dated as of the Closing Date (in the
case of the  certificate to be delivered to RGC) or the Additional  Closing Date
(in the case of the certificate to be delivered to the Additional  Investors) to
the foregoing effect and as to such other matters as may be reasonably requested
by such Purchaser.

        (g) No statute,  rule,  regulation,  executive order, decree,  ruling or
injunction  shall have been  enacted,  entered,  promulgated  or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization  having  authority  over  the  matters  contemplated  hereby  which
prohibits  the  consummation  of any of the  transactions  contemplated  by this
Agreement.

        (h)  Such  Purchaser  shall  have  received  the  officer's  certificate
described  in Section  3(c) above,  dated as of the Closing Date (in the case of
the  certificate to be delivered to RGC) or the Additional  Closing Date (in the
case of the certificate to be delivered to the Additional Investors).

        (i) Such  Purchaser  shall have  received  an  opinion of the  Company's
counsel,  dated  as of the  Closing  Date  (in  the  case of the  opinion  to be
delivered to RGC) or the Additional  Closing Date (in the case of the opinion to
be  delivered  to the  Additional  Investors),  in  form,  scope  and  substance
reasonably  satisfactory  to the  Purchaser  and in  substantially  the  form of
Exhibit C attached hereto.

        (j) The Company shall have executed,  and shall have delivered  evidence
reasonably  satisfactory to the Purchasers that the Company's transfer agent has
agreed to act in  accordance  with,  the  irrevocable  instructions  in the form
attached hereto as Exhibit D."

4. Section 3 of the Original  Securities Purchase Agreement is hereby amended to
add at the end of the ninth word thereof: "(which representations and warranties
shall be true and correct as of the date  hereof and as of the Closing  Date and
each Additional Closing Date)".

5. Except as expressly  supplemented  and/or modified  herein,  the terms of the
Original  Securities  Purchase Agreement shall continue in full force and effect
(including,  without limitation, the terms of Section 4(e)). This Supplement may
only be  modified  with the  consent  of the  Company,  RGC and each  Additional
Investor.

6. In the event that an Additional  Closing shall not have occurred on or before
May 7, 1997, unless the Company,  RGC and the Current Investors agree otherwise,
this Supplement  shall terminate at the close of business on such date and shall
be of no further force or effect.

7. A  Subsequent  Investor  shall  become  a party  to the  Securities  Purchase
Agreement upon execution of an Execution Page by such Subsequent  Investor on or
before June 19, 1997. Upon execution, such Subsequent Investor shall be entitled
to all of the  benefits  conferred  thereby  and shall be  subject to all of the
obligations thereunder.

<PAGE>

         IN WITNESS WHEREOF, the undersigned Investor,  RGC and the Company have
caused this  Supplement to be duly executed as of the date first above  written.
This signature page constitutes an Execution Page under the Securities  Purchase
Agreement.

INVESTOR:

SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.



By:
   ---------------------------------------
Name:
Title:

RESIDENCE:  New York

ADDRESS: Southbrook International Investments, Ltd.
                  c/o Trippoak Advisors, Inc.
                  630 Fifth Avenue, Suite 2000
                  New York, NY  10111
                  Attn:  Robert Miller
                  Facsimile No.:  (212) 332-3256

with copies to:   Robinson, Silverman, Pearce, Aronsohn & Berman LLP
                  1290 Avenue of the Americas
                  New York, NY  10104
                  Attn:  Eric L. Cohen
                  Facsimile No.:  (212) 541-4630

AGGREGATE SUBSCRIPTION AMOUNT

         Number of Preferred Shares:                    3,000
                                                       ------
         Purchase Price:                          $ 3,000,000
                                                  -----------

PALOMAR MEDICAL TECHNOLOGIES, INC.

By:
   -------------------------------
Name:
Title:

RGC INTERNATIONAL INVESTORS, LDC



By:
   ------------------------------
Name:
Title: