Document:

AMENDMENT NO. 2 TO KEY EMPLOYEE AGREEMENT

         AMENDMENT NO. 2, by and among  Palomar  Medical  Technologies,  Inc., a
Delaware corporation (the "Company") and Louis P. Valente ("Employee"), dated as
of February 1, 2000 (this "Amendment"),  to Key Employee Agreement,  dated as of
May 15, 1997, between the Company and Employee.

                              W I T N E S S E T H :

         WHEREAS,  the  Company  and  Employee  are  parties  to a Key  Employee
Agreement dated as of May 15, 1997 (the "Agreement");

         WHEREAS,  the Company and Employee wish to amend the Agreement upon the
terms and subject to the conditions set forth herein; and

         NOW  THEREFORE,  in  consideration  of the premises  and the  covenants
contained  in this  Amendment  and other good and  valuable  consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereto
agree as follows:

         1.  Amendments.  (a)  Section  2  (Compensation)  of  Exhibit  A to the
Agreement  is amended by deleting  the figure  THREE  HUNDRED  THOUSAND  DOLLARS
($300,000) and replacing it with the figure TWO HUNDRED SEVENTY THOUSAND DOLLARS
($270,000).

         2. Effectiveness. From and after the date hereof, all references in the
Agreement to the Agreement shall be deemed to be references to such Agreement as
amended hereby.

         3. Agreement.  Except as amended by this Amendment, the Agreement shall
remain in effect in accordance with its terms.

         4. Miscellaneous. (a) This Amendment shall be construed and interpreted
in accordance with the laws of the Commonwealth of Massachusetts.

                  (b)  This   Amendment   may  be  executed  in  any  number  of
         counterparts and by different parties hereto on separate  counterparts,
         each of which  counterparts  when so executed and  delivered,  shall be
         deemed to be an original and all of which counterparts, taken together,
         shall constitute but one and the same instrument. This Amendment may be
         executed  and  delivered  by a  party  by a  telephone  line  facsimile
         transmission bearing a signature on behalf of such party transmitted by
         such party to the other party.

                  (c)  Section and  paragraph  headings  in this  Amendment  are
         included  herein  for  convenience  of  reference  only and  shall  not
         constitute a part of this Amendment for any other purpose.

                  (d) Any  provision  of  this  Amendment  that  is  prohibited,
         unenforceable or not authorized in any  jurisdiction  shall, as to such
         jurisdiction,  be  ineffective  to  the  extent  of  such  prohibition,
         unenforceability   or   non-authorization   without   invalidating  the
         remaining  provisions hereof or affecting the validity,  enforceability
         or legality of such provision in any other jurisdiction.

                  (e) No amendment or waiver of any provision of this  Amendment
         shall in any event be effective unless the same shall be in writing and
         signed by the party to be charged with enforcement thereof and any such
         waiver  shall be effective  only in the  specific  instance and for the
         specific  instance  and for the specific  purpose for which  given.  No
         failure  on the  part  of any  party  to  exercise,  and  no  delay  in
         exercising,  any right under this  Amendment  shall operate as a waiver
         thereof by such party. No single or partial exercise of any right under
         this Amendment shall preclude any other or further  exercise thereof or
         the exercise of any other right.

         IN WITNESS  WHEREOF,  the parties hereto have  executed,  delivered and
made effective this Amendment as of February 1, 2000.

                                              PALOMAR MEDICAL TECHNOLOGIES, INC.

                                              By:  /s/ Joseph P. Caruso
                                                 ------------------------------
                                                 Name: Joseph P. Caruso
                                                 Title:Chief Financial Officer

/s/ Louis P. Valente
--------------------
Louis P. ValenteEMPLOYMENT AGREEMENT

         THIS EMPLOYMENT  AGREEMENT ( "Agreement")  dated as of January 1, 2000,
between  Palomar  Medical  Technologies,   Inc.,  a  Delaware  corporation  (the
"Company"), and Joseph Caruso, an individual (the "Executive"),

                                WITNESSETH THAT:

         WHEREAS, the Company desires to employ Executive as its Chief Financial
Officer for the period and upon and subject to the terms herein provided; and

         WHEREAS,  the Company  desires to be assured  that  Executive  will not
compete  with the  Company  for the period and  within  the  geographical  areas
hereinafter specified; and

         WHEREAS,  Executive  is willing to agree to be  employed by the Company
for the period and upon and subject to the terms herein provided; and

         WHEREAS,  Executive  does  not  desire  to work  for the  Company  in a
position lower than that of Chief Financial  Officer and is willing to agree not
to compete with the Company;

         NOW,  THEREFORE,  in consideration of the premises,  the parties hereto
covenant and agree as follows:

         Section 1. Term of  Employment;  Compensation.  The  Company  agrees to
employ  Executive  from January 1, 2000 until  December 31, 2001 (the "Term") as
its Chief Financial Officer, with the responsibilities  normally associated with
such position (the "Executive Position"). The Company will pay Executive for his
services  during the term of his  employment  hereunder at an annual rate of Two
Hundred Fifty Thousand Dollars  ($250,000.00) subject to increases thereafter as
determined  by the  Company's  Board of Directors  and  Compensation  Committee,
payable in arrears, in equal  installments,  in accordance with standard Company
practice,  but in any event not less often than  monthly,  subject  only to such
payroll and  withholding  deductions  as are required by law.  Thereafter,  this
Agreement shall be automatically renewed for successive periods of one (1) year,
unless you or the  Company  shall  give the other  party not less than three (3)
months prior written notice of non-renewal.

         Section 2. Office and Duties.  Executive  shall have the usual  duties,
responsibilities  and  authority  (the  "Executive's   Authority")  of  a  Chief
Financial  Officer,  and shall  report to the Board of Directors of the Company,
and shall perform such  specific  other tasks,  consistent  with his position as
Chief  Financial  Officer,  as may from time to time be  assigned  to him by the
Board of Directors.  Executive  shall devote  substantially  all of his business
time, labor,  skill,  undivided attention and best ability to the performance of
his  duties  hereunder.  Executive  may not,  without  Executive's  consent,  be
required to perform  Executive's  duties at any location that is more than fifty
(50) miles from the Company's  principal  office in  Burlington,  Massachusetts,
except  that  Executive  agrees  that he  will  travel  to  whatever  extent  is
reasonably necessary in the conduct of the Company's business.

         Section 3. Expenses.  Executive shall be entitled to reimbursement  for
expenses  incurred  by him in  connection  with the  performance  of his  duties
hereunder upon receipt of vouchers  therefor in accordance  with such procedures
as the Company has  heretofore  or may  hereafter  establish.  The Company  will
reimburse you for automobile expenses during the term of this Agreement.

         Section 4. Vacation During  Employment.  Executive shall be entitled to
such  reasonable  vacations as may be allowed by the Company in accordance  with
general  practices  to be  established,  but in any event not less than four (4)
weeks during each twelve (12) month period.

         Section 5.  Additional  Benefits.  The Company shall make  available to
Executive at least those  perquisites  presently  granted to Executive.  Nothing
herein  contained  shall  preclude  Executive,  to the  extent  he is  otherwise
eligible,  from  participation  in all group insurance  programs or other fringe
benefit  plans  which  the  Company  may  hereafter  in its  sole  and  absolute
discretion make available generally to its employees,  but the Company shall not
be required to establish or maintain any such program or plan.

         Section 6. Termination by the Company. The Company shall have the right
to terminate  Executive's  employment  at any time for "Cause".  For purposes of
this  Agreement,  "Cause" shall mean (a)  termination by action of a majority of
the members of the Company's  Board of Directors,  acting on the written opinion
of counsel, because of Executive's willful and continued refusal, without proper
cause, to perform substantially  Executive's duties under this Agreement; or (b)
the  conviction  of  Executive  of a felony  or an act of fraud or  embezzlement
against the Company or any of its divisions,  subsidiaries of affiliates  (which
through lapse of time or otherwise is not subject to appeal).  Such  termination
shall be effected by written notice  thereof,  personally  hand delivered by the
Company to Executive, and, except as hereinafter provided, shall be effective as
of the thirtieth (30th) calendar day after such notice; provided,  however, that
if within such thirty (30) calendar day period Executive shall cease Executive's
refusal and shall use Executive's best efforts to perform such obligations,  the
termination shall not be effective.

         Section 7. Termination by Death. In the event Executive dies during the
Term,   Executive's  employment  shall  terminate  (effective  on  the  date  of
Executive's death) and the provisions of Section 10 shall be applicable.

         Section 8.  Termination  by  Disability.  In the event  that  Executive
suffers a disability  which  prevents  Executive from  substantially  performing
Executive's  duties  under this  Agreement  for a period of at least one hundred
eighty  (180)  consecutive  or  nonconsecutive  calendar  days  within any three
hundred  sixty-five (365) calendar day period, the Company shall have the right,
after  such one  hundred  eighty  (180)  calendar  day period  has  elapsed,  to
terminate  Executive's  employment  hereunder  upon  thirty (30)  calendar  days
written  notice  to  Executive  and  the  provisions  of  Section  10  shall  be
applicable.

         Section  9.  Termination  by  Executive.   Notwithstanding   any  other
provisions of this  Agreement,  Executive may terminate  Executive's  employment
either  (i) in the event of a "Change  in  Control"  or (ii) by  written  notice
served upon the Company  within thirty (30)  calendar  days after  Executive has
knowledge of an event constituting "Good Reason."

         For purposes of this Agreement,  "change in control" shall be deemed to
be (i) the sale of all or substantially  all of the assets of the Company;  (ii)
any person,  together with its  affiliates  and  associates  (as defined in Rule
12b-2 under the Securities  Exchange Act of 1934, or any successor rule thereto)
shall become the beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange  Act),  including by merger or  otherwise,  of more than fifty  percent
(50%) of the total  voting  power of all classes of voting stock of the Company;
or (iii) that any  person,  together  with its  affiliates  and  associates  (as
defined  in Rule  12b-2  under  the  Securities  Exchange  Act of  1934,  or any
successor  rule thereto) has succeeded as the result of or in response to actual
or threatened election contests,  whether by settlement or otherwise,  in having
elected to the Board of Directors  of the  Company,  whether at one time or on a
cumulative  basis,  a sufficient  number of nominees to constitute (x) more than
thirty percent (30%) of the members of the Company's Board of Directors, rounded
down to the nearest  whole  number,  if the number of directors on the Company's
Board is eight or less,  or (y) more than forty  percent (40%) of the members of
the Company's Board,  rounded down to the nearest whole number, if the number of
directors on the Company's Board is nine or more.

         For purposes of this Agreement, the term "Good Reason" shall mean:

         (i) any action by the  Company  which  results in a  diminution  in the
Executive Position or in the Executive's Authority;

         (ii) any  failure by the  Company to timely pay the  amounts or provide
the benefits  described in this  Agreement,  other than an isolated  failure not
occurring in bad faith and which is remedied  promptly  after receipt of written
notice thereof given by Executive; or

         (iii) a material breach by the Company of any of the provisions of this
Agreement  which  failure or breach  shall have  continued  for thirty (30) days
after written notice from Executive to the Company specifying the nature of such
failure or breach; or

         (iv) any action by the  Company  that would  result in a  violation  of
Section 2.

         Section 10. Effect of  Termination.  (a) For Cause;  and Death.  In the
event of termination of this Agreement (i) by the Company for Cause,  or (ii) by
reason of the death of the  Executive,  the  Company  shall  pay  Executive  (or
Executive's  beneficiary in the event of the Executive's  death) any base salary
or other  compensation  earned (and a pro rata portion of the bonus payable with
respect to the year in which  termination  occurred)  but not paid to  Executive
prior to the effective date of such  termination and, in the case of termination
by reason of death,  the Company shall pay Executive's  beneficiary (i) the base
salary that  Executive  would have earned for a period of one (1) year following
his  death,  plus (ii) a pro rata  portion  of any  bonuses  or other  incentive
compensation  that  Executive  would have earned if he had been employed for the
full  fiscal  year in which he died  payable  at the time of  payment of similar
bonuses made to other  Executives of the Company,  plus (iii) any death benefits
that  Executive  is  entitled  to under  the  Company's  policies  in  effect on
Executive's date of death.

         (b) Without Cause; For Good Reason.  In the event of (i) termination or
non-renewal  of this  Agreement  by the  Company  other  than  for  Cause,  (ii)
termination  of this  Agreement by Executive for Good Reason without a Change in
Control, the Company shall pay Executive,  in a lump sum within thirty (30) days
after  termination under this Section 10(b), the sum of (A) the amount described
in Section 10(a) of this  Agreement  (other than the payments to be paid in case
of  termination  by  death),  and (B) the  amount  equal  to one  time  (lx) the
Executive's Annual  Compensation in effect at the time of termination under this
Section  10(b),  and  the  Company  shall  continue  all  of  the  benefits  and
perquisites set forth in Section 5 for a period of one (1) year, notwithstanding
the fact that Executive may no longer be an employee  eligible to participate in
one or more of the employee benefit plans maintained by the Company.

         (c) Change in Control.  In the event of  termination  or non-renewal of
this Agreement by Executive or the Company within one (1) year after a Change in
Control,  the Company shall pay  Executive,  in a lump sum payment within thirty
(30) days after  termination under this Section 10(c), the sum of (A) the amount
described in Section 10(a) of this Agreement (other than the payments to be made
in case of termination  by death),  and (B) the amount equal to three (3x) times
Executive's Annual Compensation,  and the Company shall continue for a period of
two (2) years all of the  benefits  and  perquisites  set  forth in  Section  5,
notwithstanding the fact that Executive may no longer be an employee eligible to
participate  in one or more of the  employee  benefit  plans  maintained  by the
Company.

         For  purposes  of  this  Section  10(c)  of  this  Agreement  the  term
"Executive's Annual  Compensation" shall mean (i) the sum of (A) the Executive's
then-current  salary  pursuant  to Section 1 and (B) any bonus  compensation  to
which Executive  would have been entitled if Executive  continued to be employed
under this Agreement or the Executive's last annual bonus, whichever is higher.

         (d) Disability. In the event of termination of this Agreement by reason
of disability, the Company shall continue to pay Executive's Annual Compensation
at the time of such  termination  for a period of one (1) year,  reduced  by the
maximum  amount of salary  which may be insured  under the  Company's  Long Term
Disability Plan at the time of disability.

         Section 11.  Acceleration  and  Expiration  of Options.  Any options or
warrants to purchase capital stock of the Company (collectively,  the "Options")
granted by the Company to Executive that have not yet become  exercisable  shall
become  exercisable  upon  the  earliest  to  occur  of (a) the  termination  of
Executive's  employment as a result of Executive's death or disability;  (b) the
termination  by Executive  with Good Reason;  (c) the  termination  by Executive
after a Change in Control;  or (d)  termination  by the Company  without  Cause.
Notwithstanding  the foregoing,  all Options,  whether currently  exercisable or
not, shall expire and cease to be exercisable as follows:

         (a)  if  the  Company  terminates  Executive's  employment  for  Cause,
immediately upon the effective date of such termination;

         (b) if the Company terminates the Executive's  employment without cause
or if Executive  terminates  Executive's  employment  with the Company with Good
Reason or after a Change in Control,  ninety (90) days after the effective  date
of such  termination  (but in no event later than the date the Term would expire
without giving effect to any automatic renewal).

         (c) if Executive dies while  employed by the Company,  six (6) calendar
months after Executive's death; and

         (d) if Executive's  employment is terminated as a result of disability,
six (6)calendar months after the effective date of such termination.

         Section  12. No  Mitigation;  No  Offset.  Executive  shall be under no
obligation to mitigate  damages or the amount of any payment  provided for under
this Agreement by seeking other  employment or otherwise,  and there shall be no
offset  against  amounts due  Executive  under this  Agreement on account of any
remuneration  attributable  to any  subsequent  employment  that  Executive  may
obtain.

         Section 13.  Disclosure and Assignment of Intellectual Property.

         (a) Executive  agrees that the Company,  and its successors and assigns
shall own all  right,  title  and  interest  throughout  the world in and to all
research,   information,    inventions,   designs,   procedures,   developments,
discoveries,  improvements,  patents and applications  therefor,  trademarks and
applications  therefor,  copyrights and  applications  therefor,  trade secrets,
drawings, plans, systems, methods, specifications,  and all other manufacturing,
engineering,  technical,  research and  development  data and  know-how  (herein
sometimes "Intellectual Property") made, conceived, developed and/or acquired by
him solely or jointly with others during the period of his  employment  with the
Company  or  within  one  year  thereafter,  which  relate  to the  manufacture,
production or processing of any products developed or sold by the Company during
the term of this  Agreement  or which  are  within  the  scope of or  usable  in
connection with the Company's  business as it may, from time to time,  hereafter
be conducted or proposed to be conducted,  whether or not made during my regular
working hours and whether or not made on the Company's premises.

         (b)  Executive  agrees  that  any  such  Intellectual   Property  shall
constitute a work made for hire under the  copyright  laws of the United  States
and, to the extent any such Intellectual  Property shall be determined not to be
a work made for hire,  Executive  hereby  assigns,  and,  to the extent any such
assignment  cannot  be made at the  present  time,  Executive  hereby  agrees to
assign, to the Company all of my right, title and interest throughout the world,
including, without limitation, copyright, patent and trade secret rights, in and
to the Intellectual Property, together with Executive's right to file for and/or
own wholly without restriction United States and foreign patents, trademarks and
copyrights with respect thereto.  Executive specifically agrees and acknowledges
that the foregoing  assignment  covers all results,  outputs and products of his
work for the  Company  prior to January 1, 1997,  whether as an employee or as a
consultant,  and all related  copyrights,  patents and other proprietary rights,
and that all such results,  outputs and products shall be Intellectual  Property
hereunder and the sole property of the Company hereafter.

         (c) Executive  agrees to execute all  appropriate  patent  applications
securing all United States and foreign patents on all Intellectual Property, and
to do,  execute  and  deliver  any and all  acts  and  instruments  that  may be
necessary  or proper to vest all  Intellectual  Property  in the  Company or its
nominee or designee  and to enable the Company,  or its nominee or designee,  to
obtain all such patents;  and Executive agrees to render to the Company,  or its
nominee or designee, all such assistance as it may require in the prosecution of
all such patent  applications and applications for the re-issue of such patents,
and in the  prosecution  or defense of all  interferences  which may be declared
involving  any of said patent  applications  or patents,  but the expense of all
such assignments and patent  applications,  or all other proceedings referred to
herein above, shall be borne by the Company. Executive shall be entitled to fair
and reasonable  compensation for any such assistance requested by the Company or
its  nominee or  designee  and  furnished  by him after the  termination  of his
employment.  Executive  shall make and  maintain  adequate  and current  written
records  of  all  Intellectual   Property,  and  Executive  shall  disclose  all
Intellectual Property promptly,  fully and in writing to the Company immediately
upon development of the same and at any time upon request.

         Section 14.  Confidentiality.  Executive  shall not,  either during the
period of his employment  with the Company or thereafter,  reveal or disclose to
any person outside the Company or use for his own benefit, without the Company's
specific written  authorization,  whether by private  communication or by public
address  or  publication  or  otherwise,   any  Confidential   Information,   as
hereinafter defined. The term "Confidential Information" as used throughout this
Agreement shall mean all trade secrets,  proprietary  information and other data
or information (and any tangible  evidence,  record or representation  thereof),
whether  prepared,  conceived  or  developed  by an  employee  of the Company or
received by the Company from an outside  source,  which is in the  possession of
the Company  (whether  or not the  property  of the  Company),  which in any way
relates to the present or future business of the Company, which is maintained in
confidence by the Company, or which might permit the Company or its customers to
obtain a competitive  advantage over  competitors who do not have access to such
trade  secrets,  proprietary  information,  or other  data or  information.  All
originals  and copies of any of the  foregoing,  relating to the business of the
Company,  however  and  whenever  produced,  shall be the sole  property  of the
Company,  not to be removed from the premises or custody of the Company  without
in each  instance  first  obtaining  written  consent  or  authorization  of the
Company. Upon the termination of Executive's employment in any manner or for any
reason,  Executive shall promptly  surrender to the Company all copies of any of
the foregoing,  together with any other documents,  materials, data, information
and  equipment  belonging  to or relating to the  Company's  business and in his
possession,  custody or control,  and Executive  shall not thereafter  retain or
deliver to any other person,  any of the foregoing or any sunnnary or memorandum
thereof.

         Section 15. Restriction. The Company has invested and may in the future
be required to invest  substantial  sums of money,  directly or  indirectly,  to
continue and expand the business  heretofore  conducted by it and in  connection
therewith,  and as Executive  recognizes that the Company would be substantially
injured by Executive  disclosing  to others,  or by Executive  using for his own
benefit,  any  Intellectual  Property or any of the other  types of  information
referred to in Section 15 as  Confidential  Information,  Executive  agrees that
during the period of his  employment  hereunder  and for a period  ending twelve
(12) months after the term of this Agreement:

         (a) He will not,  directly  or  indirectly,  for his own  account or as
employee, officer, director, partner, joint venturer or otherwise, engage within
the United  States or Canada,  in any phase of the  business  of  manufacturing,
distributing or selling of lasers for use in medical or cosmetic procedures.

         (b) Executive shall not solicit,  induce,  attempt to hire, or hire any
employee of the Company (or any other  person who may have been  employed by the
Company during the term of his employment  with the Company),  or assist in such
hiring by any other person or business  entity or encourage any such employee to
terminate his or her employment with the Company.

         Executive  and the  Company  are of the belief that the period of time,
the geographic  area and the range of activities  limited by this Section 16 are
reasonable,  in view of the  nature  of the  business  in which the  Company  is
engaged  and  proposes  to  engage,  the state of its  product  development  and
Executive's  knowledge of this business.  However,  if such period,  or range of
activities area should be adjudged unreasonable in any judicial proceeding, then
the period of time shall be reduced by such number of months, such area shall be
reduced  by  elimination  of such  portion of such  area,  and/or  such range of
activities  shall be reduced by  elimination of such  activities,  as are deemed
unreasonable, so that this covenant may be enforced in such area and during such
period of time as is adjudged to be reasonable.

         Section 16.  Notices.  All notices and other  communications  hereunder
shall be in writing  and shall be deemed to have been given  when  delivered  or
three (3) days after mailing if mailed by  first-class,  registered or certified
mail, postage prepaid,  addressed (a) if to Executive,  at the address set forth
below his name on the  signature  page  hereof,  or to such other  person(s)  or
addresses) as Executive shall have furnished to the Company in writing;  and (b)
if to the Company, at 82 Cambridge Street, Burlington, MA 01803, Attn: Mr. Louis
P. Valente, with a copy to General Counsel, Palomar Medical Technologies,  Inc.,
82  Cambridge  Street,  Burlington,  MA 01803,  or to such  other  person(s)  or
addresses) as the Company shall have furnished to Executive in writing.

         Section  17.  Assignability.  In the event  that the  Company  shall be
merged with, or consolidated into, any other  corporation,  or in the event that
it  shall  sell  and  transfer  substantially  all  of  its  assets  to  another
corporation,  the terms of this Agreement  shall inure to the benefit of, and be
assumed by, the corporation  resulting from such merger or consolidation,  or to
which the Company's assets shall be sold and  transferred.  This Agreement shall
not be assignable by Executive, but it shall be binding upon, and shall inure to
the benefit of, his heirs, executors, administrators and legal representatives.

         Section  18.  Entire  Agreement.  This  Agreement  contains  the entire
agreement  between the Company and Executive  with respect to the subject matter
hereof and there have been no oral or other agreements of any kind whatsoever as
a  condition  precedent  or  inducement  to the  signing  of this  Agreement  or
otherwise concerning this Agreement or the subject matter hereof. This Agreement
supersedes the Amended and Restated Employment  Agreement dated June 30, 1999 by
and between the Executive and the Company.

         Section 19. Expenses. Each party shall pay its own expenses incident to
the  performance  or  enforcement  of this  Agreement,  including  all  fees and
expenses of its counsel for all activities of such counsel  undertaken  pursuant
to this Agreement, except as otherwise herein specifically provided.

         Section 20. Equitable Relief.  Executive recognizes and agrees that the
Company's  remedy at law for any breach of the  provisions of Sections 14, 15 or
16 hereof would be inadequate, and he agrees that for breach of such provisions,
the Company shall,  in addition to such other remedies as may be available to it
at law or in equity or as provided in this Agreement,  be entitled to injunctive
relief and to enforce its rights by an action for  specific  performance  to the
extent permitted by law.

         Section 21. Waivers and Further Agreements.  Any waiver of any terms or
conditions of this  Agreement  shall not operate as a waiver of any other breach
of such  terms or  conditions  or any  other  term or  condition,  nor shall any
failure to enforce any provision hereof operate as a waiver of such provision or
of any other provision hereof;  provided,  however, that no such written waiver,
unless it, by its own  terms,  explicitly  provides  to the  contrary,  shall be
construed to effect a  continuing  waiver of the  provision  being waived and no
such waiver in any instance  shall  constitute a waiver in any other instance or
for any other  purpose or impair the right of the party against whom such waiver
is claimed in all other  instances  or for all other  purposes  to require  full
compliance with such provision. Each of the parties hereto agrees to execute all
such further  instruments  and documents and to take all such further  action as
the other  party may  reasonably  require in order to  effectuate  the terms and
purposes of this Agreement.

         Section 22.  Amendments.  This Agreement may not be amended,  nor shall
any waiver, change, modification,  consent or discharge be effected except by an
instrument  in  writing  executed  by or on  behalf of the  party  against  whom
enforcement of any waiver, change, modification, consent or discharge is sought.

         Section 23.  Severability.  If any provision of this Agreement shall be
held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable
as applied to any particular case in any  jurisdiction or  jurisdictions,  or in
all  jurisdictions or in all cases,  because of the conflicting of any provision
with any  constitution  or  statute  or rule of  public  policy or for any other
reason,  such circumstance  shall not have the effect of rendering the provision
or provisions in question,  invalid,  inoperative or  unenforceable in any other
jurisdiction  or in any other case or  circumstance  or of  rendering  any other
provision or provisions herein contained  invalid,  inoperative or unenforceable
to the extent that such other provisions are not themselves actually in conflict
with such  constitution,  statute or rule of public  policy,  but this Agreement
shall be reformed  and  construed  in any such  jurisdiction  or case as if such
invalid,  inoperative or unenforceable provision had never been contained herein
and such provision reformed so that it would be valid, operative and enforceable
to the maximum extent permitted in such jurisdiction or in such case.

         Section 24. Counterparts. This Agreement may be executed in two or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together  shall  constitute  one and the same  instrument,  and in  pleading  or
proving any  provision of this  Agreement,  it shall not be necessary to produce
more than one of such counterparts.

         Section 25. Section Headings.  The headings contained in this Agreement
are for  reference  purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

         Section 26.  General Provisions.

         (a) Executive further agrees that his obligations under Sections 14, 15
and 16 of this Agreement shall be binding upon him  irrespective of the duration
of his  employment  by  the  Company,  the  reasons  for  any  cessation  of his
employment by the Company,  or the amount of his  compensation and shall survive
the termination of this Agreement  (whether such  termination is by the Company,
by Executive, upon expiration of this Agreement or otherwise).

         (b) Executive represents and warrants to the Company that he is not now
under any  obligations  to any  person,  firm or  corporation,  and has no other
interest  which is  inconsistent  or in conflict with this  Agreement,  or which
would prevent, limit or impair, in any way, the performance by him of any of the
covenants or his duties in his said employment.

         Section 27.  Gender.  Whenever used herein,  the singular  number shall
include the plural,  the plural shall include the  singular,  and the use of any
gender shall include all genders.

         Section 28.  Governing  Law.  This  Agreement  shall be governed by and
construed and enforced in accordance  with the law (other than the law governing
conflict of law questions) of the Commonwealth of Massachusetts.

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

                                             PALOMAR MEDICAL TECHNOLOGIES, INC.

                                             By:/S/ LOUIS P. VALENTE
                                                ------------------------------
                                             Name:LOUIS P. VALENTE
                                             Title:PRESIDENT

         BY PLACING MY SIGNATURE  HEREUNDER,  I ACKNOWLEDGE THAT I HAVE READ ALL
THE PROVISIONS OF THIS AGREEMENT AND THAT I AGREE TO ALL OF ITS TERMS.

                                             EXECUTIVE:

                                             JOSEPH P. CARUSO
                                             ----------------------------------

                                             Notice Address:
                                             82 CAMBRIDGE STREET
                                             BURLINGTON, MA 01803

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