FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number: 0-17919
SURGICAL LASER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1093148
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
147 Keystone Drive
Montgomeryville, PA 18936
----------------------------------------
(Address of principal executive offices)
(Zip Code)
(215) 619-3600
----------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days
Yes X No
--- ---
On November 12, 1996, the registrant had outstanding 9,881,543 shares of
Common Stock, $.01 par value.
Page 1
Exhibit Index is on Page 13
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION:
- ------- ----------------------
ITEM 1. Financial Statements:
a. Condensed Consolidated Balance Sheets,
September 29, 1996 (unaudited) and December 31, 1995 3
b. Condensed Consolidated Statements of Operations
(unaudited) for the quarters ended
September 29, 1996 and October 1, 1995 4
c. Condensed Consolidated Statements of Operations
(unaudited) for the nine months ended
September 29, 1996 and October 1, 1995 5
d. Condensed Consolidated Statements of Cash Flows
(unaudited) for the nine months ended
September 29, 1996 and October 1, 1995 6
e. Notes to Condensed Consolidated Financial
Statements (unaudited) 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings 12
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBITS 15
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
<TABLE>
<CAPTION>
Sep. 29, Dec. 31,
1996 1995
--------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ............................................................................. $ 5,526 $ 4,903
(including restricted amounts of $100)
Short-term investments ................................................................................ 1,216 3,244
Accounts receivable, net of allowance for doubtful
accounts of $116 and $118 ........................................................................... 2,438 3,225
Inventories ........................................................................................... 3,576 3,866
Other ................................................................................................. 182 194
------ ------
Total current assets ................................................................................. 12,938 15,432
Property and equipment, net ............................................................................ 7,486 8,250
Other assets ........................................................................................... 1,207 1,139
------ ------
Total Assets ......................................................................................... $21,631 $24,821
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ..................................................................... $ 222 $ 212
Accounts payable ...................................................................................... 851 467
Accrued liabilities ................................................................................... 2,991 2,163
------ ------
Total current liabilities ............................................................................ 4,064 2,842
------ ------
Long-term debt ......................................................................................... 5,995 6,289
Stockholders' equity:
Common stock, $.01 par value, 30,000 shares authorized,
9,882 shares and 9,851 shares issued and outstanding ................................................. 99 99
Additional paid-in capital ............................................................................ 32,713 32,588
Accumulated deficit ................................................................................... (21,240) (16,997)
------ ------
Total stockholders' equity ........................................................................... 11,572 15,690
------ ------
Total Liabilities and Stockholders' Equity ........................................................... $21,631 $24,821
====== ======
</TABLE>
The accompanying notes are an integral part of these statements
Page 3
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Quarter Ended:
-------------------------------
Sep. 29, Oct. 1,
1996 1995
------- --------
<S> <C> <C>
Net sales ............................................................................ $2,416 $3,082
Cost of sales ........................................................................ 840 1,333
------ ------
Gross profit ......................................................................... 1,576 1,749
------ ------
Operating expenses:
Selling, general and administrative ................................................. 2,048 2,179
Product development ................................................................. 344 417
Non-recurring charges ............................................................... 1,504 --
------ ------
3,896 2,596
------ ------
Operating income (loss) .............................................................. (2,320) (847)
Interest expense ..................................................................... 140 160
Interest income ...................................................................... (95) (19)
Other (income) expense ............................................................... 58 --
Equity in (earnings) loss of joint venture ........................................... 60 8
------ ------
Income (loss) before income taxes .................................................... (2,483) (996)
Provision for income taxes ........................................................... -- --
------ ------
Net income (loss) .................................................................... ($2,483) ($ 996)
====== ======
Net income (loss) per share .......................................................... ($ 0.25) ($ 0.10)
====== ======
Shares used in calculating net income (loss) per share ............................... 9,872 9,851
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Nine Months Ended:
--------------------------------
Sep. 29, Oct. 1,
1996 1995
-------- --------
<S> <C> <C>
Net sales .......................................................................... $7,965 $11,055
Cost of sales ...................................................................... 2,819 4,639
------ -------
Gross profit ....................................................................... 5,146 6,416
------ -------
Operating expenses:
Selling, general and administrative ............................................... 6,387 7,815
Product development ............................................................... 1,154 1,768
Non-recurring charges ............................................................. 1,504 390
------ -------
9,045 9,973
------ -------
Operating income (loss) ............................................................ (3,899) (3,557)
Interest expense ................................................................... 424 471
Interest income .................................................................... (286) (89)
Other (income) expense ............................................................. 43 --
Equity in (earnings) loss of joint venture ......................................... 164 2
------ -------
Income (loss) before income taxes .................................................. (4,244) (3,941)
Provision for income taxes ......................................................... -- --
------ -------
Net income (loss) .................................................................. ($4,244) ($3,941)
====== ======
Net income (loss) per share ........................................................ ($ 0.43) ($ 0.40)
====== ======
Shares used in calculating net income (loss) per share ............................. 9,861 9,851
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
Page 5
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended:
--------------------------------
Sep. 29, Oct. 1,
1996 1995
------ ------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income (loss) .................................................................... ($4,244) ($3,941)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Equity in (earnings) loss of joint venture ........................................ 164 2
Depreciation and amortization ..................................................... 696 1,385
Imputed interest .................................................................. (12) (16)
Non-recurring charges (credits) ................................................... 1,346 390
Decrease (increase) in assets:
Accounts receivable .............................................................. 527 1,377
Inventories ...................................................................... 326 (340)
Other current assets ............................................................. 12 (110)
Other assets ..................................................................... 7 (81)
Increase (decrease) in liabilities:
Accounts payable ................................................................. 385 379
Accrued liabilities .............................................................. 40 (349)
------ ------
Net cash used in operating activities ................................................ (753) (1,304)
------ ------
Cash Flows From Investing Activities:
Sale (purchase) short term investments ............................................... 2,028 --
Investment in joint venture ......................................................... (200) (150)
Sale (purchase) property and equipment ............................................... (236) (375)
Patent costs ........................................................................ (57) (506)
------ ------
Net cash provided by (used in) investing activities .................................. 1,535 (1,031)
------ ------
Cash Flows From Financing Activities:
Payments on long-term debt .......................................................... (159) (262)
------ ------
Net cash used in financing activities ................................................ (159) (262)
Net increase (decrease) in cash and cash equivalents ................................. 623 (2,597)
Cash and Cash Equivalents, Beginning of Period ....................................... 4,903 4,143
------ ------
Cash and Cash Equivalents, End of Period ............................................. $5,526 $1,546
====== ======
The accompanying notes are an integral part of these statements.
</TABLE>
Page 6
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Summary Financial Information and Results of Operations:
In the opinion of Surgical Laser Technologies, Inc. and Subsidiaries (the
"Company" ), the accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles and with the regulations of the Securities and Exchange Commission
and contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position as of September 29, 1996, the
results of operations for the quarters and nine months ended September 29, 1996
and October 1, 1995 and cash flows for the nine months ended September 29, 1996
and October 1, 1995.
Interim Financial Information:
While the Company believes that the disclosures presented are adequate to
prevent misleading information, it is suggested that the unaudited condensed
consolidated financial statements be read in conjunction with the audited
consolidated financial statements and notes included in the Company's Form 10-K
report for the fiscal year ended December 31, 1995, as filed with the Securities
and Exchange Commission. Interim results for the quarter and nine months ended
September 29, 1996 are not necessarily indicative of the results to be expected
for the full year.
2. Supplemental Cash Flow Information:
Income taxes paid for the nine months ended September 29, 1996 were $35,000,
primarily representing federal alternative minimum taxes. There were no income
taxes paid for the nine months ended October 1, 1995. Interest paid for the nine
months ended September 29, 1996 and October 1, 1995 was $423,000 and $470,000,
respectively.
The following noncash investing and financing activities took place:
In the third quarter of 1995, the Company issued a note of $442,000 which
replaced previous notes and incorporated additional patent litigation costs
incurred in the third quarter of 1995. This note, and others issued previously,
were completely repaid following the settlement in December 1995 of the patent
litigation with Sharplan Lasers, Inc. and its parent, Laser Industries Ltd. For
the nine months ended September 29, 1996 and October 1, 1995, $126,000 and
$50,000 respectively, of the 8% convertible subordinated notes were converted at
the request of the noteholders into common stock at a conversion price of $4.50
per share.
Page 7
<PAGE>
3. Net Loss Per Share:
Net loss per share has been computed using the weighted average number of common
shares outstanding during each period. Common share equivalents have not been
considered as they are anti-dilutive.
4. Bank Borrowings:
At September 29, 1996, the Company had a $2.75 million line of credit agreement
with a bank, which included a $750,000 sub-line for letters of credit. Under its
sub-line, the Company issued a letter of credit in the amount of $576,000 in
favor of the Montgomery County Industrial Development Corporation (MCIDC) under
the terms of the Mortgage and Security Agreement and one other minor trade
letter of credit. There were no other borrowings under the line at September 29,
1996. Borrowings on the line are secured by the Company's accounts receivable
and inventories and bear interest at the bank's prime rate plus 1/2%. The line
of credit expires on June 30, 1997. The Company's line of credit agreement
prohibits the declaration or payment of any dividends or distributions on any
capital stock at any time there are outstanding obligations to the bank without
the prior written consent of the bank. The line is subject to the Company
maintaining certain financial covenants, as defined.
5. Income Taxes:
No income tax provision was made for the first nine months of 1996 or 1995 due
to the losses incurred.
6. Segment and Geographic Data:
The Company is engaged in one business segment: the design, development,
manufacture and marketing of laser products for medical applications. The
Company's customers are primarily hospitals and medical centers. Foreign sales
represented 24% of sales in the first nine months of 1996, as compared to 22% in
the same period in 1995. Sales to the Company's joint venture (see Note 7) were
2% and 8% of net sales in the first nine months of 1996 and 1995, respectively.
Page 8
<PAGE>
7. Investment in MEDIQ PRN/SLT:
At September 29, 1996, the Company was a 50% owner of Mediq PRN/SLT, a joint
venture formed in the third quarter of 1993 to provide rentals of lasers and
related equipment to hospitals and other health care providers. The investment
in Mediq PRN/SLT is accounted for using the equity method and is included in
Other Assets. Sales to Mediq PRN/SLT are recorded at an arm's-length price.
Under the equity method, 50% of the gross profit from the sales to the joint
venture is deferred and amortized to income as the related asset is used by the
joint venture. The Company's sales to the joint venture were $131,000 and
$911,000 for the nine months ended September 29, 1996 and October 1, 1995,
respectively. Accounts receivable from sales to Mediq PRN/SLT at September 29,
1996 were $18,000. On September 30, 1996, the Company acquired the remaining 50%
interest in the joint venture from Mediq PRN. The acquisition will be accounted
for as a purchase and the results of operations and assets and liabilities
acquired will be reflected in the Company's fourth quarter 1996 results.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net sales for the quarter ended September 29, 1996 were $2,416,000.
Compared to the third quarter of 1995, net sales decreased $666,000, or 22%. For
the nine months ended September 29, 1996, net sales were $7,965,000 compared to
$11,055,000 for the first nine months of 1995, a decrease of $3,090,000, or 28%.
Net sales of Nd:YAG laser systems for the third quarter of 1996 were
substantially the same as the third quarter of 1995, while such net sales for
the nine months ended September 29, 1996 decreased 27% from the comparable
period in 1995. Net sales of delivery systems declined by 26% in the third
quarter of 1996 and 28% in the first nine months of 1996, from the respective
comparable period in 1995.
With the continuation of a weak market for capital purchases by hospitals,
the Company has taken actions aimed at positioning the Company for increased
sales of delivery systems and becoming more efficient in serving its existing
base of customers. In the third quarter of 1996, the domestic salesforce was
reorganized to focus on more effectively working with the Company's customers to
enhance utilization of their lasers and thereby create additional demand for the
Company's delivery systems. In addition, at the end of the third quarter of
1996, the Company acquired the remaining fifty percent interest in the Mediq
PRN/SLT joint venture rental company. Fourth quarter revenues will include sales
from the rental business that previously had been accounted for under the equity
method of accounting.
Page 9
<PAGE>
Principally due to the lower volumes of sales, gross profits for the
quarter ended September 29,1996 of $1,576,000 decreased $173,000, or 10%, from
the third quarter of 1995, while gross profits for the first nine months of 1996
of $5,146,000 decreased $1,270,000, or 20%, from the comparable nine month
period in 1995. As a percentage of net sales, gross profit increased to 65% from
58% in the comparable period of 1995, due primarily to cost reduction measures
taken in the second half of 1995 to reduce manufacturing overhead.
In the third quarter of 1996, the Company recorded a charge for severance
and related costs and for the write-off of certain leasehold improvements,
amounting to $1,504,000. The charge for severance and related costs was due
primarily to changes in and the elimination of executive level positions. The
write-off of certain leasehold improvements was a result of the consolidation
and relocation of the Company's manufacturing, research and warehouse operations
into the Company's newly leased office/research and manufacturing facility in
Montgomeryville, PA. In the second quarter of 1995, in response to the lower
level of sales that were being experienced during 1995 and expected to continue
into 1996, the Company reduced its workforce in an effort to bring expenditure
levels more in line with sales levels being experienced. The actions resulted in
a charge of $390,000 for severance and related costs.
Operating expenses, excluding the above-mentioned charges, were $2,392,000
for the third quarter of 1996 compared to $2,596,000 for the third quarter of
1995. For the first nine months of 1996, operating expenses, excluding the
above-mentioned charges, were $7,541,000 compared to $9,583,000 for the first
nine months of 1995.
Product development expenses of $344,000 for the third quarter of 1996 and
$1,154,000 for the first nine months of 1996 decreased by $73,000, or 18%, and
$614,000, or 35%, respectively, from the comparable periods in 1995. The
decrease was due mainly to lower consulting costs resulting from the expiration
in June 1995 of the one-year consulting arrangement with the principals of
Advanced Laser Systems Technology as well as to lower personnel-related charges
resulting from the reduction in-force at the end of the second quarter of 1995.
Excluding the above-mentioned charges, selling, general and administrative
expenses were $2,048,000 for the third quarter of 1996, a decrease of $131,000,
or 6%, from the comparable prior year period. For the first nine months of 1996,
selling, general and administrative expenses were $6,387,000, compared to
$7,815,000 in the first nine months of 1995, a decrease of $1,428,000, or 18%.
The above-mentioned cost reductions that were taken at the end of the second
quarter of 1995 accounted for the majority of the reduced spending levels in
both comparable periods. In addition, the first nine months of 1995 included a
charge of $200,000 incurred in connection with a proposed business combination
transaction for which there were no corresponding expenses in the comparable
1996 period.
Net interest expense was $45,000 in the third quarter of 1996 and $138,000
in the first nine months of 1996, a decrease of $96,000 and $244,000,
respectively, from the comparable periods in 1995. The reduction was primarily
attributable to higher interest income earned in the 1996 period due to the
substantially higher cash position.
Page 10
<PAGE>
Liquidity and Capital Resources
The Company had cash, cash equivalents and short-term investments of
$6,742,000 at September 29, 1996, of which $100,000 was restricted. In addition,
the Company currently has a $2.75 million credit facility with its bank. The
facility includes a sub-line for letters of credit of $750,000. Other than for
the letter of credit issued in the amount of $576,000 in favor of the Montgomery
County Industrial Development Corporation ("MCIDC") as a condition of the
Mortgage and Security Agreement with MCIDC and one other minor trade letter of
credit, there were no other borrowings outstanding under the line of credit.
Borrowings under the line are secured by the Company's accounts receivable and
inventories. The line is subject to the Company maintaining certain financial
covenants, as defined. The line of credit expires on June 30, 1997.
Net cash used in operating activities was $754,000 for the first nine
months of 1996 compared to net cash used in operating activities of $1,304,000
for the comparable period in 1995. The comparable decrease in net cash used in
operating activities was due mainly to the reduction in the net loss before
non-recurring charges coupled with a reduction in inventories. The third quarter
non-recurring charge of $1,504,000 included non-cash items of $1,346,000.
Net cash provided by investing activities was $1,535,000 for the first nine
months of 1996 compared to net cash used in investing activities of $1,031,000
for the first nine months of 1995. The increase was due principally to the
maturity of certain short-term investments during the first nine months of 1996,
amounting to $2,028,000.
Net cash used in financing activities was $159,000 and $262,000 for the
first nine months of 1996 and 1995, respectively.
Management anticipates capital expenditures of approximately $320,000 in
1996 of which $236,000 was spent in the first nine months. The capital
expenditures are primarily for manufacturing and research and development needs,
sales demonstration lasers and leasehold improvements. The Company is
contractually committed to spend approximately $75,000 of the balance of its
estimated capital expenditures on leasehold improvements in its new facility.
Management believes that its current cash position and cash provided by
operations will be sufficient for these expenditures.
Management believes that inflation has not had a material effect on
operations.
Page 11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
For information regarding certain pending lawsuits, reference is made to the
Company's Form 10-K, Item 3, for the fiscal year ended December 31, 1995, and to
the Company's Forms 10-Q, Item 1, for the quarters ended March 31, 1996 and June
30, 1996, as filed with the Securities and Exchange Commission, which are
incorporated herein by reference.
With regard to the patent infringement action brought by Trimedyne in the United
States District Court for the Central District of California, the Court of
Appeals for the Federal Circuit has granted Trimedyne's motion to extend until
November 25, 1996 the deadline by which Trimedyne must file a brief supporting
its appeal.
With regard to the suit against the Company which was brought by Mr. Norio
Daikuzono, the inventor of three of the Company's Contact Laser patents, for
breach of contract, among other counts, and which was transferred to the United
States District Court for the Eastern District of Pennsylvania, discovery is
proceeding and depositions are being scheduled for November and December 1996.
The Company's motion for summary judgment is still pending. The court has not
indicated when it will rule on that motion. No specific trial date has been set.
With regard to the action brought by the Company in the United States District
Court for the Eastern District of Pennsylvania against C. R. Bard, Inc. and the
Bard Urological Division for breach of contract, anticipatory repudiation of a
contract, negligent misrepresentation and unfair competition, discovery is
proceeding and depositions are being scheduled. The court has set a discovery
completion deadline of March 31, 1997.
Page 12
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
a. Exhibits: Exhibit 10.1 - Employment Agreement dated August 5, 1996,
between Registrant and W. Keith Stoneback.
Exhibit 10.2 - Severance Agreement dated August 11, 1996,
between Registrant and James R. Appleby, Jr.
Exhibit 10.3 - Severance Agreement dated November 5, 1996,
between Registrant and Terry A. Fuller.
Exhibit 10.4 - Property Agreement dated October 30, 1996,
among Registrant, Terry A. Fuller and Fuller
Research Corporation.
Exhibit 10.5 - Amendment to the Joint Venture and Other
Agreements dated September 30, 1996, among Registrant,
Mediq/PRN Life Support Services, Inc., and Mediq PRN/SLT.
Exhibit 10.6 - Non-Disturbance, Subordination and
Attornment Agreement dated August 1, 1996, among
Montgomery County Industrial Development Corporation;
SLT Properties, Inc.; Registrant; and
Suburban Cable TV Co. Inc.
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K: none
Page 13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SURGICAL LASER TECHNOLOGIES, INC.
Date: November 13, 1996 By /s/ Michael R. Stewart
--------------------------------
Michael R. Stewart
Vice President, Finance and
Chief Financial Officer
Signing on behalf of the registrant
and as principal financial officer
Page 14
<PAGE>
EXHIBIT INDEX
Exhibit Description of Exhibit
- ------- ----------------------
10.1 Employment Agreement dated August 5, 1996, between Registrant
and W. Keith Stoneback.
10.2 Severance Agreement dated August 11, 1996, between Registrant
and James R. Appleby, Jr.
10.3 Severance Agreement dated November 5, 1996, between Registrant
and Terry A. Fuller.
10.4 Property Agreement dated October 30, 1996, among Registrant,
Terry A. Fuller and Fuller Research Corporation.
10.5 Amendment to the Joint Venture and Other Agreements dated
September 30, 1996, among Registrant; Mediq/PRN Life Support
Services, Inc.; and Mediq PRN/SLT.
10.6 Non-Disturbance, Subordination and Attornment Agreement dated
August 1, 1996, among Montgomery County Industrial Development
Corporation; SLT Properties, Inc.; Registrant; and
Suburban Cable TV Co. Inc.
11 Computation of Earnings Per Share
27 Financial Data Schedule
Page 15
EXHIBIT 10.1
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement dated as of this 5th day of August, 1996 is
made by and between Surgical Laser Technologies, Inc., a Delaware corporation
with its principal offices located at 147 Keystone Drive, Montgomeryville, PA
18936 (the "Company") and W. Keith Stoneback, an individual residing at
301 Kelso Court, Cary, North Carolina 27511 (the "Executive").
WHEREAS, the parties hereto desire to set forth the terms and
conditions pursuant to which the Executive will serve as President and Chief
Executive Officer of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive as President
and Chief Executive Officer of the Company upon the terms and conditions set
forth in this Agreement, and the Executive hereby accepts such employment.
2. CAPACITY AND DUTIES.
2.1 Position. The Executive shall serve the Company as President and
Chief Executive Officer. Subject to the direction and control of the Board of
Directors (the "Board"), the Executive, as President and Chief Executive
Officer, shall perform such executive, managerial and administrative duties as
are from time to time assigned to him by the Board and which are consistent with
his position as President and Chief Executive Officer. The Executive shall be
assigned to the Company's principal executive offices which are presently
located in Montgomeryville, Pennsylvania.
2.2 Election or Appointment as Director. The Executive also agrees
to serve without additional compensation, if elected or appointed thereto, as a
director of the Company or any of its subsidiaries, and as a member of any
committee of the Board of Directors of the Company or any of its subsidiaries.
3. OBLIGATIONS OF EXECUTIVE.
3.1 Abiding by Rules. The Executive shall abide by the policies and
rules from time to time reasonably established in writing by the Company, shall
devote his full business time, attention and energies to the business of the
Company and shall not, during the term hereof, be engaged in any other business
activity, whether or not such business activity is pursued for gain, profit or
other pecuniary advantage, except as permitted by Section 3.2 or approved in
writing by the Board.
<PAGE>
3.2 Outside Investments. The terms of this Section 3 shall not
prevent the Executive from investing his assets in such form or manner as he
chooses; provided, however, that the Executive shall not have any personal
interest, direct or indirect, financial or otherwise, in any supplier to, buyer
from, or competitor of the Company, or in any transaction between the Company
and a supplier or buyer unless such interest is, or arises solely from ownership
of, less than one percent (1%) of the outstanding capital stock of such supplier
or buyer and such capital stock is available to the general public through
trading on any national, regional or over-the-counter securities market.
3.3 Outside Activities. The Executive shall not engage in any
activity or investment, whether or not permitted by this Section 3, if such
activity or investment substantially interferes with the performance of his
duties hereunder.
3.4 Securing New Employment. Anything herein to the contrary
notwithstanding, if the Company gives the Executive notice of termination of
this Agreement as of the end of its term or any renewal thereof in accordance
with the following Section 4, then during the last three (3) months of the
employment term the Company shall allow the Executive ample time within which to
locate and secure new employment although it is recognized that the Executive
shall continue to fulfill the obligations of his position with the Company as
best as possible to the extent that doing so does not conflict with his efforts
to secure new employment.
4. TERM OF AGREEMENT. Subject to the provisions of Section 11, the
initial term of this Agreement shall commence on the date hereof and expire on
December 31, 1999 (the "Initial Term"). Absent notice of termination given by
either party not later than three months prior to the expiration of the Initial
Term or any successor term, this Agreement shall automatically renew for
successive one-year terms. Each reference herein to "the term of this Agreement"
shall include the Initial Term and any successor term.
5. COMPENSATION.
5.1 Base Salary. Company agrees to pay, and Executive agrees to
accept, as base compensation for all services to be rendered by the Executive
hereunder the sum of Two Hundred Twenty-Five Thousand Dollars ($225,000) per
annum (less appropriate deductions) payable on a current basis in a manner
consistent with the method of payment to other of the Company's other senior
executive officers (but in any event no less often than biweekly). Such annual
rate of base compensation in effect at any time during the term of this
Agreement shall hereinafter be referred to as the "Base Salary."
5.2 Review of Base Salary. The Board shall review from time to time,
but in no case less than annually and promptly after the end of each fiscal
year, the Executive's Base Salary and shall make such adjustments, if any, as
the Board shall determine, in its sole discretion, provided, however, that no
adjustment shall reduce the Base Salary below Two Hundred Twenty-Five Thousand
Dollars ($225,000) per annum.
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6. INCENTIVE CASH BONUS. The Executive shall be entitled to receive an
incentive cash bonus from the Company in accordance with the terms and
provisions of a bonus program to be adopted by the Board (the "Executive Bonus
Program"), which program shall provide a bonus opportunity of 50% of base
salary, with the amount of such bonus to be based on objective criteria related
to the Company's results of operations. No termination of this Agreement, other
than upon a discharge for cause (as defined in Section 11.3) shall terminate the
Executive's right to receive the incentive cash bonus earned up to the time of
such termination. The incentive cash bonus that would otherwise be payable to
the Executive under this Section 6, assuming the Executive had remained employed
for the full calendar year in which the terminating event occurs, shall be
multiplied by a fraction, the denominator of which is twelve (12) and the
numerator of which is the number of full months of employment completed by the
Executive during the calendar year in which the terminating event occurs. Such
recalculated amount shall constitute the incentive cash bonus for the calendar
year in which such terminating event occurs, and no further incentive cash bonus
shall be paid hereunder for any subsequent calendar year.
7. ADDITIONAL BENEFITS. While this Agreement is in effect, the Company
shall provide the following additional benefits:
7.1 Vacation. The Executive shall receive such paid vacations during
each year as are made available to the Company's other senior executive
officers, but in no case less than four weeks each calendar year.
7.2 Automobile or Automobile Allowance. The Company shall provide
the Executive with an automobile allowance of $800 per month plus gas and oil
expenses.
7.3 Expense Reimbursement. Upon submission of proper vouchers, the
Company shall pay or reimburse the Executive for all necessary business and
entertainment expenses reasonably incurred by the Executive in connection with
the business of the Company.
7.4 Insurance Benefits. The Company shall provide the Executive with
medical, hospital and other insurance benefits equivalent to those provided to
the other senior executive officers of the Company.
7.5 Retirement Plan. The Executive shall be entitled to participate
in any profit sharing or pension plan made available to full-time employees of
the Company in accordance with the terms of such plans.
7.6 Disability Insurance. The Company shall provide the Executive
with an insured long-term disability benefit provided that the Executive is
insurable at standard rates on the date the Executive first applies for the
insurance. The amount of the benefit shall be no less than sixty percent (60%)
of the Executive's Base Salary during the period of
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disability; the benefit shall commence no later than one year after the
commencement of disability; and the benefit shall be payable at least as long as
the Executive is disabled and is under age 65. If the Executive cannot be
insured at standard rates, the Company will purchase the maximum amount of
coverage available for the amount which would have been paid if this benefit
could have been provided at standard rates. As used in this Section 7.6,
"disability" shall have the meaning provided in the policy. The Executive agrees
to submit to reasonable medical examinations and otherwise reasonably to
cooperate with the Company in connection with obtaining such insurance.
7.7 Relocation Expense Reimbursement. The Company will reimburse the
Executive for all expenses incurred in connection with relocating his family's
personal residence from Cary, North Carolina to the Philadelphia metropolitan
area, subject to reasonable documentation of such expenses and shall also pay
the Executive an amount equal to the customary real estate broker's commission
for the sale of his residence in North Carolina based on an independent
appraisal of the value of such residence, the cost of which shall also be
reimbursed to the Executive; provided, however, that the Company's obligations
under this Section 7.7 shall not exceed $60,000.
7.8 Other Benefits. Without limiting any of the foregoing benefits,
the Executive shall receive all benefits and participate in all benefit programs
generally made available to other senior executive officers of the Company.
8. LIFE INSURANCE. The Company will provide and maintain during the
term of this Agreement a life insurance policy on the life of the Executive in
the amount of $1,000,000 payable to Executive's designated beneficiary. The life
insurance policy shall be either a term policy or a whole life policy at the
discretion of the Company. The Executive agrees to submit to reasonable medical
examinations and otherwise reasonably to cooperate with the Company in
connection with obtaining such insurance.
9. STOCK OPTIONS. The Company shall cause to be granted to the
Executive a stock option for a total of 300,000 shares of the Company's Common
Stock, par value $.01 per share, subject to the terms and provisions of the
Company's Equity Incentive Plan (the "Plan"), which Plan is incorporated herein
by reference. The option shall be exercisable in three equal consecutive annual
installments commencing one year from the date hereof. The terms and conditions
of the option shall be as set forth in the agreement provided for by the terms
of the Plan.
10. DISABILITY.
10.1 Determination of Disability. In the event that the Executive
is unable fully to perform his duties and responsibilities hereunder by reason
of physical or mental illness, injury or incapacity for a continuous period of
more than six (6) months, or for an aggregate of more than six (6) months out of
any twelve (12) consecutive month period during the term of this Agreement, all
as determined in good faith by the Board, after consultation with a
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qualified physician selected by the Company, the Company may terminate the
Employment of the Executive hereunder and, if the Company shall so act, any and
all rights the Executive may have under this Agreement or otherwise as an
employee of the Company shall terminate, and the Company shall have no further
liability or obligation to the Executive for compensation hereunder; provided,
however, that the Executive will be entitled to receive the payments prescribed
under the Company's long-term disability benefit plan under which he was covered
during the period of his Employment by the Company and except that the Executive
shall be entitled to receive his Base Salary described in Section 5, his
incentive cash bonus described in Section 6, the insurance benefits described in
Section 7.4 and the life insurance coverage described in Section 8 for a period
of one year after the date of the termination by reason of disability. At the
end of this one year period, the Executive will be given the option to take over
the payments and ownership of the life insurance policy or policies described in
Section 8 then in effect to the extent permitted by the terms thereof. A
determination that the Executive is disabled under the insured long-term
disability plan described in Section 7.6 shall be deemed to be a determination
that the Executive is disabled for purposes of this Section 10.1.
Notwithstanding the foregoing, the Executive shall not be deemed terminated by
reason of disability unless and until the Executive has received a written
notice from the Company at least ninety (90) days prior to the Company's
intended date of termination stating (i) the Company's intent to terminate the
Executive by reason of disability; and (ii) the Company's intended date of such
termination.
10.2 Resumption of Duties. If the Executive shall resume his duties
within thirty (30) days after receipt of such a notice of termination and
continue to perform such duties for four (4) consecutive weeks thereafter, this
Agreement shall continue in full force and effect, without any reduction in Base
Salary or other benefits, and the notice of termination shall be considered null
and void and of no effect.
11. TERMINATION PRIOR TO END OF TERM.
11.1 Death. Except as hereinafter provided, the Executive's
employment hereunder and any and all rights under this Agreement or otherwise as
an employee of the Company shall terminate upon the death of the Executive and
thereafter the Company shall have no liability or obligation to the Executive's
estate or legal representatives hereunder, provided that the Executive shall be
entitled to the Base Salary, bonuses and other compensation earned by the
Executive prior to his death, but not paid.
11.2 Discharge Without Cause. Except as set forth in Section 11.4
hereof, in the event the Company terminates the Executive's employment without
cause during the term of his employment hereunder, which the Company shall be
entitled to do, the Executive shall receive from the Company (in lieu of any
rights or claims, other than the possible right to an incentive bonus for the
period prior to termination as set forth in Section 6 hereof, that the Executive
may have in respect to this Agreement, which rights or claims the Executive
hereby waives and releases in consideration for the severance payments provided
in this Section 11.2) as severance payments, and in consideration of the
Executive's compliance with the provisions
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of Section 13 during the Restricted Period (as hereinafter defined), payment of
the Executive's Base Salary and the insurance benefits described in Sections
7.4, 7.6 and 8 hereof, in each case for a period of one year beginning on the
date of termination of the Executive's employment. Payments of Base Salary shall
be made at the same times and in the same manner that such payments would have
been made to the Executive if his employment had not been terminated. At the end
of this one year period, the Executive will be given the option to take over the
payments and ownership of the disability insurance policy described in Section
7.6 hereof and the life insurance policy described in Section 8 hereof to the
extent the terms of such policies permit him to do so. In addition, if the
Company terminates the Executive's employment without cause pursuant to this
Section 11.2, the Executive shall be entitled to exercise the options referenced
in Section 9 hereof which are not then exercisable but which would have been
exercisable by the Executive on the next anniversary of this Agreement had the
termination without cause not occurred, subject to the terms and provisions of
the option agreement provided for by the terms of the Plan. If the Executive
shall die subsequent to the termination of his employment under this Section
11.2, such death shall be deemed to have occurred during the term of the
Executive's employment hereunder as if termination under this Section 11.2 had
not occurred and Section 11.1 shall thereupon apply.
11.3 Discharge for Cause. The Company may terminate this Agreement
and discharge the Executive for cause at any time. In such event, the Company's
obligation to pay compensation and other amounts payable hereunder, including
any incentive cash bonus (or portion thereof) to or for the benefit of the
Executive, shall terminate on the date of such discharge. As used herein, the
term "discharge for cause" shall mean a discharge resulting from a determination
by the Board that any of the following have occurred:
(a) chronic alcoholism;
(b) drug addiction;
(c) indictment by a grand jury for commission of a felony
unless such indictment is dismissed within sixty (60) days of its issuance;
(d) fraud or dishonesty resulting or intended to result
directly or indirectly in personal enrichment at the expense of the Company;
(e) regularly failing or refusing to follow policies or
directives reasonably established by the Board;
(f) willfully and persistently failing to attend to the
Executive's duties;
(g) committing acts amounting to gross negligence or willful
misconduct to the detriment of the Company or its affiliates; or
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(h) otherwise breaching any of the material terms or
provisions of this Agreement.
11.4 Termination Following Change in Control. In the event the
Executive's employment hereunder is terminated without cause at any time within
three months after a "Change in Control" (as hereinafter defined), which the
Company shall be entitled to do, the Executive shall receive from the Company
(in lieu of any rights or claims, other than the possible right to an incentive
bonus for the period prior to termination as set forth in Section 6 hereof, that
the Executive may have in respect of this Agreement, including without
limitation the provisions of Section 11.2 hereof, all of which rights or claims
the Executive hereby waives and releases in consideration for the severance
payments provided in this Section 11.4) as severance payments, and in
consideration of the Executive's compliance with the provisions of Section 13
hereof for so long as payments are being made pursuant to this Section 11.4,
payment of the Executive's Base Salary and the insurance benefits described in
Sections 7.4, 7.6 and 8 hereof, in each case for a period of eighteen months
beginning on the date of termination of the Executive's employment; provided,
however, that in the event the Executive receives any fees, salary or other
compensation of any kind in consideration for providing services as an employee,
agent, consultant, independent contractor or otherwise during the last six
months of the aforementioned 18-month period (such last six months being
hereinafter referred to as the "Mitigation Period"), then the Company shall be
obligated with respect to the Executive's Base Salary payments during the
Mitigation Period to pay only an amount equal to the excess, if any, of the
Executive's Base Salary otherwise payable during such Mitigation Period over the
amount of any such fees, salary or other compensation earned or received by the
Executive during such period. In addition, the Company's obligation to provide
the insurance benefits described in Sections 7.4, 7.6 or 8 hereof during the
Mitigation Period shall terminate as to any such insurance at such time as the
Executive becomes entitled to comparable insurance coverage from any other
employer or entity. Payments of Base Salary shall be made at the same times and
in the same manner that such payments would have been made to the Executive if
his employment had not been terminated. In addition, if the Executive's
employment hereunder is terminated without cause at any time within three months
after a Change in Control, the Executive shall be entitled to exercise all
options referenced in Section 9 hereof which are not then exercisable, subject
to the terms and provisions of the option agreement provided for by the terms of
the Plan. For purposes of this Section 11.4, a "Change in Control" shall mean
the sale of all or substantially all of the Company's assets to, or the
acquisition (by purchase, merger, reorganization or otherwise) of shares of the
Company's capital stock representing more than 50% of the votes which all
stockholders are entitled to cast by, any person or group of affiliated persons
not presently affiliated with the Company.
12. CONFIDENTIALITY; PUBLIC STATEMENTS.
12.1 Confidential Information. The Company may, pursuant to the
Executive's employment hereunder, provide to him and confide in him business
methods and systems, techniques and methods of operation developed at great
expense by the Company
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("Trade Secrets") and which the Executive recognizes to be unique assets of the
Company's business. The Executive shall not, during or at any time after the
term of employment hereunder, directly or indirectly, in any manner utilize or
disclose to any person, firm, corporation, association or other entity, except
to directors, consultants or employees of the Company in the course of his
duties and where required by law: (a) any such Trade Secrets, (b) any sales
prospects, customer lists, products, research or data of any kind, or (c) any
information relating to strategic plans, sales costs, profits or the financial
condition of the Company or any of its customers or prospective customers, which
are not generally known to the public or recognized as standard practice in the
industries in which the Company shall be engaged. The Executive further
covenants and agrees that he will promptly deliver to the Company all tangible
evidence of the knowledge and information described in (a), (b) and (c), above,
prior to or at the termination of the Executive's employment.
12.2 Prohibited Public Statements. The Executive shall not, either
during or at any time after the termination of his Employment, make any public
statement (including a private statement reasonably likely to be repeated
publicly) reflecting adversely on the Company or its business prospects, except
for such statements which during the Executive's employment he may be required
to make in the ordinary course of his service as President and Chief Executive
Officer.
13. NONCOMPETITION AND NONINTERFERENCE AGREEMENT.
13.1 Noncompetition. Subject to the geographic limitation of
Section 13.2, the Executive, for a period (the "Restricted Period") of one (1)
year following termination of employment in accordance with this Agreement,
shall not, directly or indirectly, on his behalf or on behalf of any other
person, firm, corporation, association or other entity, as an employee or
otherwise, engage in, or in any way be concerned with or negotiate for, or
acquire or maintain any ownership interest in any business or activity which is
the same as or competitive with that conducted by the Company at the termination
of his employment, or which was engaged in or developed by the Company at any
time during the term of employment for specific implementation in the immediate
future by the Company.
13.2 Geographic Limitation. The Executive acknowledges that the
Company is engaged in business throughout the United States and in many foreign
countries and that the Company intends to continue expanding the geographic
scope of its activities. Accordingly and in view of the nature of his position
and responsibilities, the Executive agrees that the provisions of Section 13.1
shall be applicable to each state and each foreign country, possession or
territory in which the Company may be engaged in business as of the termination
of the Agreement.
13.3 Noninterference. The Executive agrees that during the
Restricted Period, the Executive will not directly or indirectly, for himself or
on behalf of any third party at any time in any manner, request or cause any of
the Company's customers to cancel or terminate any existing or continuing
business relationship with the Company; solicit,
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entice, persuade, induce, request or otherwise cause any employee, officer or
agent of the Company to refrain from rendering services to the Company or to
terminate his or her relationship, contractual or otherwise, with the Company;
induce or attempt to influence any supplier to cease or refrain from doing
business or to decline to do business with the Company; divert or attempt to
divert any supplier from the Company; or induce or attempt to influence any
supplier to decline to do business with any businesses of the Company as such
businesses are constituted immediately prior to the termination of employment.
13.4 Nonsolicitation. The Executive agrees that during the
Restricted Period, the Executive will not directly or indirectly, for himself or
on behalf of any third party, solicit for business, accept any business from or
otherwise do, or contract to do, business with any person or entity who, at the
time of, or any time during the twelve (12) months preceding, such termination,
was an active customer or was actively solicited by the Company according to the
books and records of the Company and within the actual or constructive knowledge
of the Executive, provided, however, that nothing herein shall prohibit the
Executive from transacting business he solicits which is not competitive with
services or products offered, furnished or sold by the Company to such person or
entity.
14. EQUITABLE REMEDIES. The Executive acknowledges that his compliance
with the covenants in Section 12 or 13 of this Agreement is necessary to protect
the good will and other proprietary interests of the Company and that, in the
event of any violation by the Executive of the provisions of Section 12 or 13 of
this Agreement, the Company will sustain serious, irreparable and substantial
harm to its business, the extent of which will be difficult to determine and
impossible to remedy by an action at law for money damages. Accordingly, the
Executive agrees that, in the event of such violation or threatened violation by
the Executive, the Company shall be entitled to an injunction before trial from
any court of competent jurisdiction as a matter of course and upon the posting
of not more than a nominal bond in addition to all such other legal and
equitable remedies as may be available to the Company. The Executive further
agrees that, in the event any of the provisions of Sections 12 and 13 of this
Agreement are determined by a court of competent jurisdiction to be contrary to
any applicable statute, law or rule, or for any reason to be unenforceable as
written, such court may modify any of such provisions so as to permit
enforcement thereof as thus modified.
15. ENTIRE AGREEMENT. This Agreement constitutes the full and complete
understanding and agreement of the Executive and the Company respecting the
subject matter hereof, and supersedes all prior understandings and agreements,
oral or written, express or implied. This Agreement may not be modified or
amended orally, but only by an agreement in writing, signed by the party against
whom enforcement of any waiver, change, modification, extension or discharge is
sought.
16. HEADINGS. The section headings of this Agreement are for
convenience of reference only and are not to be considered in the interpretation
of the terms and conditions of this Agreement.
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17. DEFINITION OF COMPANY. The Company is governed by its Board and,
accordingly, all references in this Agreement to the actions and discretion of
the Company are meant and deemed to refer to the actions and discretion of the
Board.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when sent
by certified mail, postage prepaid, addressed as follows:
If to the Company:
Surgical Laser Technologies, Inc.
147 Keystone Drive
Montgomeryville, PA 18936
Attn: Chairman of the Board
with a copy given in the aforesaid manner to:
Thomas G. Spencer, Esquire
Duane, Morris & Heckscher
One Liberty Place
Philadelphia, PA 19103-7396
If to the Executive, at his personal residence as set forth above.
Any party may change the persons and address to which notices or
other communications are to be sent by giving written notice of such change to
the other party in the manner provided herein for giving notice.
19. WAIVER OF BREACH. No waiver by either party of any condition or of
the breach by the other of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition, or of the breach of any other term or covenant
set forth in this Agreement. Moreover, the failure of either party to exercise
any right hereunder shall not bar the later exercise thereof.
20. INURE AND BIND; NONALIENATION. This Agreement shall inure to the
benefit of and be binding on the parties and their respective successors in
interest. The Executive shall not pledge, hypothecate, anticipate or in any way
create a lien upon any amounts provided under this Agreement. This Agreement and
the benefits payable hereunder shall not be assignable by either party without
the prior written consent of the other; provided, however, that nothing in this
Section shall preclude the Executive from designating a beneficiary to receive
any benefit payable hereunder upon his death, or the executors,
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administrators or other legal representatives of the Executive or his estate
from assigning any rights hereunder to which they become entitled to the person
or persons entitled thereto.
21. GOVERNING LAW. This Agreement is entered into and shall be
construed in accordance with the laws of the Commonwealth of Pennsylvania.
22. CONTINUATION OF COVENANTS. The covenants and agreements of the
Executive set forth in Sections 12 and 13 shall survive termination of
employment, shall continue thereafter, and shall not expire unless and except as
may be expressly set forth in Sections 12 and 13.
23. INVALIDITY OR UNENFORCEABILITY. If any term or provision of this
Agreement is held to be invalid or unenforceable, for any reason, such
invalidity or unenforceability shall not affect any other term or provision
hereof and this Agreement shall continue in full force and effect as if such
invalid or unenforceable term or provision (to the extent of the invalidity or
unenforceability) had not been contained herein.
24. ARBITRATION. Except as provided in Section 14, any controversy or
claim arising out of or relating to this Agreement, or the breach hereof, shall
be settled by arbitration in Philadelphia, Pennsylvania, in accordance with the
laws of the Commonwealth of Pennsylvania by three arbitrators, one of whom shall
be appointed by the Company, one by the Executive and the third of whom shall be
appointed by the first two arbitrators. If either party fails to select an
arbitrator within 30 days after written notice of demand for arbitration from
the other, the other party may have such arbitrator appointed by the American
Arbitration Association. If the first two arbitrators cannot agree on the
appointment of a third arbitrator within 30 days after their selection, then the
third arbitrator shall be appointed by the American Arbitration Association. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association. Judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction hereof. In the event that it shall
be necessary or desirable for the Company and/or the Executive to retain legal
counsel and/or incur other costs and expenses in connection with the enforcement
of any or all of either party's rights under this Agreement, each party shall
bear its own costs and expenses in connection with the enforcement of its rights
(including the enforcement of any arbitration award in court), regardless of the
final outcome.
25. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written.
/s/ W. Keith Stoneback
-------------------------------
W. Keith Stoneback
Surgical Laser Technologies, Inc.
By: /s/ Richard J. Depiano
-------------------------------
Richard J. DePiano, Chairman
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EXHIBIT 10.2
<PAGE>
SEVERANCE AGREEMENT
This Severance Agreement is made as of this 11th day of August, 1996 by
and between James R. Appleby, Jr., an individual residing in Devon, Pennsylvania
(the "Employee") and Surgical Laser Technologies, Inc., a Delaware corporation
(the "Company").
WHEREAS, the Company and the Employee are currently parties to an
Employment Agreement dated May 11, 1990, as amended (the "Employment Agreement")
pursuant to which the Employee serves as President and Chief Executive Officer
of the Company; and
WHEREAS, pursuant to the Employment Agreement, the Employee's current
term of employment will expire on December 31, 1996 provided the Company gives
him notice of its intention not to renew the Employment Agreement on or before
September 30, 1996; and
WHEREAS, the Company and the Employee now desire to restructure their
relationship effective on the date hereof and to have the Company provide notice
of its intention to terminate the Employee's employment pursuant to the
Employment Agreement effective as of December 31, 1996, in accordance with the
terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Notice of Nonrenewal. The Company hereby notifies the Employee,
pursuant to Section 4 of the Employment Agreement, that it is terminating the
Employee's employment pursuant to the Employment Agreement effective as of the
expiration of the current term, which expires on December 31, 1996.
2. Change in Position for Employee. The Employee hereby resigns as
President, Chief Executive Officer and as a director of the Company, as a member
of the Executive and any other committee of the Company's Board of Directors on
which he may now serve, and as an officer and director of any subsidiary or
affiliate of the Company, effective immediately. The Company and the Employee
agree that the Employee shall remain an employee of the Company through December
31, 1996 and shall perform such advisory or executive level duties as are from
time to time reasonably assigned to him by the President and Chief Executive
Officer who shall succeed him, provided, however, that the Employee shall vacate
his current office on or before Monday, August 12, 1996 and shall hereafter be
entitled to such office, secretarial and other administrative support as is
reasonably necessary in connection with the performance of his duties as
requested by the President and Chief Executive Officer. The foregoing duties
shall include without limitation such duties as are necessary to assist in the
transition to the new President and Chief Executive Officer, traveling to meet
with various persons to assist in maintaining business relationships of the
Company and assisting in various ongoing litigation involving the Company. The
Employee
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shall make available his full business time, attention and energies, excluding
scheduled vacation for the week of August 12 and for transporting his children
to attend and to visit schools, to the performance of his duties as set forth in
this Section 2 up to and including September 30, 1996. After September 30, 1996,
Employee shall continue to fulfill his obligations hereunder as best as possible
to the extent that doing so does not conflict with his efforts to secure new
employment or consulting opportunities or the fact that he has secured new
employment or obtained consulting contracts; provided, however, that he will
make himself available for not less than 20 hours per week during such period.
3. Compensation.
a. From the date hereof through December 31, 1996, the
Employee shall continue to be compensated in an amount and in accordance with
the terms on which he was being compensated immediately prior to the date
hereof, which compensation shall include base salary and all fringe benefits as
contemplated by Sections 7-8 of the Employment Agreement to which the Employee
was entitled immediately prior to the date hereof.
b. From January 1, 1997 through December 31, 1997 (the
"Severance Period"), the Company shall continue to pay the Employee his base
salary of $225,000 per annum (less applicable deductions), at the same time and
in the same amounts as if the Employee had remained as an employee of the
Company. During the Severance Period, the Company shall also continue to provide
at no cost to the Employee the insurance benefits described in Sections 7.4 and
7.6 of the Employment Agreement and the life insurance described in Section 8 of
the Employment Agreement. Effective as of January 1, 1998, the Employee shall be
entitled, by notice given to the Company on or before December 1, 1997, to take
over the payments and ownership of the insurance policy or policies with respect
to his insurance benefits described in Sections 7.4, 7.6 and 8 of the Employment
Agreement to the extent that the then-existing terms of such policies permit or
do not prohibit him from doing so.
c. Set forth on Exhibit A attached hereto is a summary of
Employee's options to purchase shares of the Company's Common Stock. The Company
and the Employee hereby agree that the agreements pursuant to which such options
were granted are hereby amended such that, effective as of December 31, 1996,
the number of such options that shall be exercisable shall be as set forth on
Exhibit B attached hereto, and such options shall remain exercisable until
December 31, 1997.
d. In the event of the Employee's death prior to December 31,
1997, the payments of base salary, the provision of health insurance as
contemplated by Section 7.4 of the Employment Agreement and the exercisability
of the options as set forth in Exhibit B attached hereto shall remain unaffected
and shall be made or provided to his estate, heirs or family, as the case may
be.
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4. Consulting Arrangement. The Company and the Employee agree that,
from and after January 1, 1997 and subject to the Employee's availability, the
Employee shall provide consulting services to the Company at such times as the
Employee and the Company shall mutually agree, with the Employee to be
compensated for such services at the rate of $1,500 per day (for an 8-hour day)
plus normal and reasonable expenses.
5. Release.
a. In consideration of the execution of this Agreement by the
Employee and the Company, the Employee, on his behalf and all persons claiming
by, through and under him including, without limitation, each and every
dependent, heir, executor and administrator, together with his agents,
successors, assigns and legal representatives (collectively the "Employee
Parties"), hereby waive, remise, release, settle and forever discharge the
Company and its subsidiaries and joint venturers (the "Companies"), their
respective affiliates, parents, subsidiaries and divisions, and any current or
former director, officer, agent, employee or stockholder of the Companies,
together with their agents, successors, assigns and legal representatives
(collectively the "Company Parties") from any and all claims, sums of money,
fees, compensation, counterclaims, crossclaims, rights, demands, losses,
damages, trespasses, bonds, executions, liabilities, suits, actions and causes
of action against the Company Parties and each of them that any of the Employee
Parties, jointly or severally, ever had, now has or may have, in law or in
equity, of every nature or description, whether known or unknown, suspected or
unsuspected, foreseen or unforeseen, actual or potential, which exist as of the
date of this Agreement or arise in connection with the Employee's resignation as
President, Chief Executive Officer and as a director or the termination of his
employment as contemplated by this Agreement, in each case in whole or in part
as a result of any act or omission in connection with the Employee's employment
with any of the Companies and his resignation from such employment, including,
without limitation by reason of specification, Title VII of the Civil Rights Act
of 1964, as amended, the Pennsylvania Human Relations Act, the Age
Discrimination in Employment Act, the Employee Retirement Income Security Act,
as amended, the Fair Labor Standards Act, the Americans with Disabilities Act,
any other human relations or similar ordinance, any state statute or local
ordinance similar to the foregoing federal acts, Pennsylvania wage payment law
or other federal or state law, including any claim of alleged discrimination,
defamation, slander, libel, invasion of privacy, breach of employment contract,
breach of implied covenant of good faith and fair dealing, intentional or
negligent infliction of emotional distress or wrongful discharge, up to the date
of this Agreement.
b. In consideration of the execution of this Agreement by the
Employee and the Company, the Companies hereby waive, remise, release, settle
and forever discharge the Employee Parties from any and all claims, sums of
money, fees, compensation, counterclaims, crossclaims, rights, demands, losses,
damages, trespasses, bonds, executions, liabilities, suits, actions and causes
of action against the Employee Parties and each of them that any of the Company
Parties, jointly or severally, ever had, now has or may have, in law or in
equity, of every nature or description, whether known or unknown, suspected or
unsuspected,
- 3 -
<PAGE>
foreseen or unforeseen, actual or potential, which exist as of the date of this
Agreement or arise in connection with the Employee's resignation as President,
Chief Executive Officer and as a director or the termination of his employment
as contemplated by this Agreement, in each case in whole or in part as a result
of any act or omission in connection with the Employee's employment with any of
the Companies and his resignation from such employment.
c. The releases contained in Section 5(a)-(b) hereof shall not
apply to any claims that either party hereto may have against the other arising
out of such party's performance under this Agreement.
6. No Wrongdoing. Each party denies any wrongdoing or liability
whatsoever to the other party hereto, and the execution of this Agreement by
each party hereto does not constitute an admission of any liability whatsoever
to the other party hereto under statutory or common law.
7. Advice of Counsel. The Employee acknowledges that the Company
advised him to consult with an attorney prior to executing this Agreement and
that he has had the advice of counsel in reviewing and executing this Agreement.
The Employee further acknowledges that he has read this Agreement and
understands all of its terms and that his execution of this Agreement has not
been induced by any representations, statements, warranties or agreements other
than those expressed or referred to herein. The Employee acknowledges that he
has executed this Agreement knowingly and voluntarily, with full knowledge of
its significance.
8. Review Period. The Employee acknowledges that the Company has
advised him that he has 21 days from receipt of this Agreement to consider it.
In the event the Employee signs this Agreement before the expiration of the
twenty-one day review period, he explicitly agrees hereby to waive the
opportunity to use the full review period. The provisions of Sections 3(c), 4
and 5 of this Agreement shall become effective seven days following the date of
the Employee's signature unless the Company shall have actually received, within
such seven-day period, written notice from the Employee of his revocation of the
agreements set forth in such Section 3(c), 4 and 5.
9. Entire Agreement. This Agreement sets forth the entire agreement
between the Employee and the Company and, except as and to the extent
specifically referenced herein, supersedes all prior agreements or
understandings between the Employee and any of the Companies, including without
limitation, the Employment Agreement; provided, however, that the provisions of
Sections 12-14 shall survive the termination of the Employment Agreement in
accordance with the terms thereof and that, for purposes of this Agreement, the
references in Section 13 of the Employment Agreement to "a period of one (1)
year following termination of employment in accordance with this Agreement"
shall mean a period extending through December 31, 1997.
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<PAGE>
10. Unenforceability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein unless the deletion of such provision
or provisions would result in such a material change as to cause performance of
this Agreement to be unreasonable.
11. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
12. Successors and Assigns. This Agreement shall not be assignable by
either party without the prior written consent of the other party hereto, except
that the Company may assign its rights and obligations hereunder to any
successor in interest to all or substantially all of the Company's business and
that the Employee may assign his rights and obligations under Section 4 hereof
to any corporation, partnership or other entity controlled by the Employee. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the Company and the legal representatives, permitted
assigns and heirs of the Employee.
13. Arbitration. Except as provided in Section 14 of the Employment
Agreement which survives the execution of this Agreement as provided in Section
9 hereof, any controversy or claim arising out of or relating to this Agreement,
or the breach hereof, shall be settled by arbitration in Philadelphia,
Pennsylvania, in accordance with the laws of the Commonwealth of Pennsylvania by
three arbitrators, one of whom shall be appointed by the Company, one by the
Employee and the third of whom shall be appointed by the first two arbitrators.
If either party fails to select an arbitrator within 30 days after written
notice of demand for arbitration from the other, the other party may have such
arbitrator appointed by the American Arbitration Association. If the first two
arbitrators cannot agree on the appointment of a third arbitrator within 30 days
after their selection, then the third arbitrator shall be appointed by the
American Arbitration Association. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction hereof. In the event that it shall be necessary or desirable for
the Company and/or the Employee to retain legal counsel and/or incur other costs
and expenses in connection with the enforcement of any or all of either party's
rights under this Agreement, each party shall bear its own costs and expenses in
connection with the enforcement of its rights (including the enforcement of any
arbitration award in court), regardless of the final outcome.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Severance
Agreement as of the day and year first above written.
SURGICAL LASER TECHNOLOGIES, INC.
By: /s/ W. Keith Stoneback
-----------------------------
W. Keith Stoneback, President
/s/ James R. Appleby, Jr.
------------------------------
James R. Appleby, Jr.
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<PAGE>
EXHIBIT A
Number of
Grant Date Shares Number Vested Price
- ---------- ------ ------------- -----
4/23/90 127,500 127,500 8.666
10/15/91 15,000 15,000 6.50
1/4/91 200 200 15.00
10/28/91 30,000 24,000 5.50
1/18/93 40,000 24,000 5.75
1/18/94 150,000 100,000 2.50
1/13/95 30,000 6,000 2.625
3/4/96 50,000 0 1.875
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<PAGE>
EXHIBIT B
Number of Number Vested
Grant Date Shares As of 12/31/96 Price
- ---------- ------ --------------- -----
4/23/90 127,500 127,500 8.666
10/15/91 15,000 15,000 6.50
1/4/91 200 200 15.00
10/28/91 30,000 30,000 5.50
1/18/93 40,000 32,000 5.75
1/18/94 150,000 150,000 2.50
1/13/95 30,000 12,000 2.625
3/4/96 50,000 10,000 1.875
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<PAGE>
EXHIBIT 10.3
<PAGE>
SEVERANCE AGREEMENT
This Severance Agreement is made as of this 5th day of November, 1996
by and between Terry A. Fuller, Ph.D., an individual residing in Rydal,
Pennsylvania (the "Employee") and Surgical Laser Technologies, Inc., a Delaware
corporation (the "Company").
WHEREAS, the Employee currently serves as Executive Vice President and
Chief Operating Officer of the Company; and
WHEREAS, the Company and the Employee now desire to restructure their
relationship effective on the date hereof in accordance with the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the sufficiency and receipt of which consideration
the parties hereby acknowledge, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Resignation as Officer and Director. The Employee hereby resigns as
Executive Vice President, Chief Operating Officer and as a director of the
Company and as an officer and director of all subsidiaries and affiliates of the
Company, effective immediately, subject to the terms and conditions of this
Agreement.
2. Change in Position for Employee. The Company and the Employee agree
that the Employee shall remain an employee of the Company through January 10,
1997 and shall perform such advisory or executive level duties as are from time
to time reasonably assigned to him by the President and Chief Executive Officer,
provided, however, that the Employee shall vacate his current office on or
before November 5, 1996 and shall hereafter be entitled to such secretarial and
other administrative support as is reasonably necessary in connection with the
performance of his duties as requested by the President and Chief Executive
Officer. The Employee shall make available his full business time, attention and
energies, to the performance of his duties as set forth in this Section 2;
provided, however, that the Company shall allow the Employee ample time within
which to locate and secure new employment or consulting opportunities. Upon his
termination of employment, the Employee will be paid vacation earned but not
taken by December 31, 1996. The Employee has loaned and/or leased certain
equipment, supplies and materials to the Company. The Employee will be given
adequate access to the properties of the Company to locate such items and to
arrange for their removal subject to agreement with the Company.
3. Compensation.
a. From the date hereof through January 10, 1997, the Employee
shall continue to be compensated in an amount and in accordance with the terms
on which he was being compensated immediately prior to the date hereof, which
compensation shall include base salary and all fringe benefits to which the
Employee was entitled immediately prior to
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<PAGE>
the date hereof, including the $500,000 life insurance policy and the $500.00
per month car allowance (plus reimbursement for oil and fuel expenses).
b. From January 11, 1997 through January 10, 1998 (the
"Severance Period"), the Company shall continue to pay the Employee his base
salary of $192,102 per annum (less applicable deductions), at the same time and
in the same amounts as if the Employee had remained as an employee of the
Company. During the Severance Period, the Company shall also continue to
provide, at no cost to the Employee and to the extent permitted by law and the
terms of the applicable policies, the group medical, group dental and
supplemental $500,000 life insurance benefits to which the Employee was entitled
immediately prior to the date hereof unless and until the Employee becomes
entitled to comparable benefits from any new employer, at which time the
Company's obligations to provide the particular benefits as to which the
Employee has become entitled to comparable benefits shall cease. In the event of
the Employee's death prior to January 10, 1998, the payments of base salary and
the provision of health insurance as set forth above shall remain unaffected and
shall be made or provided to his estate, heirs or family, as the case may be.
4. Release.
a. In consideration of the execution of this Agreement by the
Employee and the Company, the Employee, on his behalf and all persons claiming
by, through and under him including, without limitation, each and every
dependent, heir, executor and administrator, together with his agents,
successors, assigns and legal representatives (collectively the "Employee
Parties"), hereby waive, remise, release, settle and forever discharge the
Company and its subsidiaries and joint venturers, their respective affiliates,
parents, subsidiaries and divisions (the "Companies"), and any current or former
director, officer, agent, employee or stockholder of the Companies, together
with their agents, successors, assigns and legal representatives (collectively
the "Company Parties") from any and all claims, sums of money, fees,
compensation, counterclaims, crossclaims, rights, demands, losses, damages,
trespasses, bonds, executions, liabilities, suits, actions and causes of action
against the Company Parties and each of them that any of the Employee Parties,
jointly or severally, ever had, now has or may have, in law or in equity, of
every nature or description, whether known or unknown, suspected or unsuspected,
foreseen or unforeseen, actual or potential, which exist as of the date of this
Agreement or arise in connection with the Employee's resignation as Executive
Vice President, Chief Operating Officer, and as a director of the Companies or
the termination of his employment as contemplated by this Agreement, in each
case in whole or in part as a result of any act or omission in connection with
the Employee's employment with any of the Companies and his termination from
such employment, including, without limitation by reason of specification, Title
VII of the Civil Rights Act of 1964, as amended, the Pennsylvania Human
Relations Act, the Age Discrimination in Employment Act, the Employee Retirement
Income Security Act, as amended, the Fair Labor Standards Act, the Americans
with Disabilities Act, any other human relations or similar ordinance, any state
statute or local ordinance similar to the foregoing federal acts, Pennsylvania
wage payment laws or other federal or state law, including any
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<PAGE>
claim of alleged discrimination, defamation, slander, libel, invasion of
privacy, breach of employment contract, breach of implied covenant of good faith
and fair dealing, intentional or negligent infliction of emotional distress or
wrongful discharge, up to the date of this Agreement.
b. In consideration of the execution of this Agreement by the
Employee and the Company, the Companies hereby waive, remise, release, settle
and forever discharge the Employee Parties from any and all claims, sums of
money, fees, compensation, counterclaims, crossclaims, rights, demands, losses,
damages, trespasses, bonds, executions, liabilities, suits, actions and causes
of action against the Employee Parties and each of them that any of the Company
Parties, jointly or severally, ever had, now has or may have, in law or in
equity, of every nature or description, whether known or unknown, suspected or
unsuspected, foreseen or unforeseen, actual or potential, which exist as of the
date of this Agreement or arise in connection with the Employee's resignation as
Executive Vice President, Chief Operating Officer, and as a director of the
Companies or the termination of his employment as contemplated by this
Agreement, in each case in whole or in part as a result of any act or omission
in connection with the Employee's employment with any of the Companies or the
resignation from such employment.
c. The releases contained in Section 4(a)-(b) hereof shall not
apply to any claims that either party hereto may have against the other arising
out of such party's performance under this Agreement.
5. No Wrongdoing. Each party denies any wrongdoing or liability
whatsoever to the other party hereto, and the execution of this Agreement by
each party hereto does not constitute an admission of any liability whatsoever
to the other party hereto under statutory or common law.
6. Advice of Counsel. The Employee acknowledges that the Company
advised him to consult with an attorney prior to executing this Agreement and
that he has had the advice of counsel in reviewing and executing this Agreement.
The Employee further acknowledges that he has read this Agreement and
understands all of its terms and that his execution of this Agreement has not
been induced by any representations, statements, warran ties or agreements other
than those expressed or referred to herein. The Employee acknowledges that he
has executed this Agreement knowingly and voluntarily, with full knowledge of
its significance.
7. Review Period. The Employee acknowledges that the Company has
advised him that he has 21 days from receipt of this Agreement to consider it.
In the event the Employee signs this Agreement before the expiration of the
twenty-one day review period, he explicitly agrees hereby to waive the
opportunity to use the full review period. The provisions of Sections 2, 3 and 4
of this Agreement shall become effective seven days following the date of the
Employee's signature unless the Company shall have actually received,
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<PAGE>
within such seven-day period, written notice from the Employee of his revocation
of the agreements set forth in such Sections 2, 3 and 4.
8. Entire Agreement. This Agreement and the Confidentiality and
Noncompetition Agreement between the Company and the Employee dated June 6,
1990, as amended on April 28, 1994 (the "Confidentiality Agreement")
collectively set forth the entire agreement between the Employee and the Company
with respect to the subject matter hereof and thereof, except as and to the
extent specifically referenced herein, supersede all prior agreements or
understandings, except those relating to stock options, between the Employee and
any of the Companies. The Company and the Employee agree that the
Confidentiality Agreement shall not be interpreted as precluding the Employee
from working for or with an entity that develops, manufactures, markets or sells
non-laser surgical products. The Company expressly acknowledges that the License
Agreement dated May 31, 1994 between the Company and Fuller Research Corporation
is neither an agreement between the Employee and the Company nor related to the
subject matter hereof or of the Confidentiality Agreement and, as such, shall
survive the execution of this Agreement in accordance with the terms thereof.
9. Unenforceability. In case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision or
provisions had never been contained herein unless the deletion of such provision
or provisions would result in such a material change as to cause performance of
this Agreement to be unreasonable.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
11. Successors and Assigns. This Agreement shall not be assignable by
either party without the prior written consent of the other party hereto, except
that the Company may assign its rights and obligations hereunder to any
successor in interest to all or substantially all of the Company's business.
This Agreement shall inure to the benefit of and be binding upon the successors
and permitted assigns of the Company and the legal representatives, permitted
assigns and heirs of the Employee.
12. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach hereof, shall be settled by arbitration in
Philadelphia, Pennsylvania, in accordance with the laws of the Commonwealth of
Pennsylvania by three arbitrators, one of whom shall be appointed by the
Company, one by the Employee and the third of whom shall be appointed by the
first two arbitrators. If either party fails to select an arbitrator within 30
days after written notice of demand for arbitration from the other, the other
party may have such arbitrator appointed by the American Arbitration
Association. If the first two arbitrators cannot agree on the appointment of a
third arbitrator within 30 days after their selection, then the third arbitrator
shall be appointed by the American Arbitration
- 4 -
<PAGE>
Association. The arbitration shall be conducted in accordance with the rules of
the American Arbitration Association. Judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction hereof. In the event
that it shall be necessary or desirable for the Company and/or the Employee to
retain legal counsel and/or incur other costs and expenses in connection with
the enforcement of any or all of either party's rights under this Agreement,
each party shall bear its own costs and expenses in connection with the
enforcement of its rights (including the enforcement of any arbitration award in
court), regardless of the final outcome.
IN WITNESS WHEREOF, the undersigned have executed this Severance
Agreement as of the day and year first above written.
SURGICAL LASER TECHNOLOGIES, INC.
By: /s/ W. Keith Stoneback
------------------------------
W. Keith Stoneback, President
/s/ Terry A. Fuller, Ph.D
------------------------------
Terry A. Fuller, Ph.D.
- 5 -
<PAGE>
Property Agreement
This Property Agreement ("Agreement") is made the 30th day of October, 1996
between Terry A. Fuller, Ph.D., for himself and his sole proprietorship Fuller
Research Laboratories (collectively called hereinafter "Fuller"), Fuller
Research Corporation, wholly-owned corporation of Fuller (called hereinafter
"FRC"), and Surgical Laser Technologies, Inc. (called hereinafter "SLT" or the
"Company").
Background Premises
Whereas Fuller has been an executive officer of SLT since June 1990. Fuller is
in process of leaving the employ of SLT.
Whereas in an agreement of lease dated March 29, 1991, Fuller through Fuller
Research Laboratories leased to SLT certain personal property. That initial
agreement expired on February 11, 1993. A subsequent Lease Agreement was entered
on February 12, 1993, and expired on February 11, 1995.
Whereas starting in February 1991, Fuller and FRC lent to SLT, for use in its
business and without charge, certain other equipment and supplies held by Fuller
and FRC.
Whereas FRC entered into a License Agreement dated May 31, 1994 with SLT for
rights under U.S. Patent No. 4,822,997. Certain minimum royalty payments are due
to FRC under the License Agreement; and
Whereas Fuller has had possession of certain equipment of SLT to use the same in
furtherance of the business of SLT.
Now therefore, in consideration of the premises set forth above and the promises
set forth below, Fuller, FRC and SLT, intending to be legally bound hereby, and
in order to effect an orderly restoration of the property of SLT, Fuller and FRC
and to settle any financial claims related to the use by a party hereto of the
other party's property, agree to the following:
Mutual Promises
1. Property on Lease from Fuller Research Laboratories.
a. Cessation of Rental of Equipment.
Although the Lease Agreement expired on February 11, 1995 and was not
formally renewed, SLT continued to use all but four (4) items of
equipment covered under the Lease Agreement, those four items being the
Nicolet Spectrometer, the Tektronix High Speed Oscilloscope, the Gould
Chart Recorder, and the Buehler Ecomet. SLT's continuing use of such
equipment shall be deemed terminated as of July 8, 1996. In discharge
of
<PAGE>
Fuller's claims for rent unpaid but accruing during or after the Lease
Agreement, SLT shall pay $12,115 to Fuller on the execution of this
Agreement.
b. Purchase of South Bend Drill Press and Vise
SLT has offered to purchase for $3,000 the South Bend drill press,
which had been on rent under the lease from Fuller, and to purchase for
$150 a vise which Fuller had lent to SLT and which SLT has used with
the drill press. Fuller has accepted the offers. SLT shall pay the
aggregate purchase price of $3,150 upon execution of this Agreement.
The drill press and vise are sold in an as-is condition.
c. Swap of Table Tops.
Fuller had rented the NRC Optical Table to SLT; the table measures
4'x 8' and has pneumatic cushion legs. SLT has an optical table that
measures 4'x 6' with wood veneer siding and that does not have
pneumatic cushion legs. The legs of the two tables are interchangeable.
Fuller and SLT are willing to exchange the 4'x 8' table top, but not
the legs, of the NRC table for the veneered 4'x 6' table top, but not
the legs, of the optical table owned by SLT. No cash shall pass from
either party to the other to balance the exchange.
d. Return of Other Property.
With the exception of the South Bend drill press, which SLT is
purchasing under Paragraph 1(b); the table top of the NRC Optical
Table, which is covered under Paragraph 1(c); and the Tektronix High
Speed Oscilloscope, the Zeiss Metalloscope and the Zeiss Stereo
Microscope, which have already been returned to Fuller, SLT shall
deliver, at its expense, the equipment covered under the Lease
Agreement dated February 12, 1993, to sites in the Greater Philadelphia
area which Fuller has designated. That equipment, the respective
delivery sites, are set forth in Exhibit A attached hereto. The
delivery sites include the basement of Fuller's residence on Morgan
Road, Rydal; 104 Park Drive, Montgomeryville; and Fuller's warehouse
space in South Jersey. Such delivery shall be made by the end of
November 1996. Terms relating to the Scanning Electron Microscope are
covered more specifically in Paragraph 1(e).
e. Scanning Electron Microscope (SEM).
It shall be incumbent upon SLT to establish, by means of trained
technicians, that the SEM is in normal functioning condition fit for
being covered by a service contract at prevailing rates for such a
device in such condition. SLT shall establish this condition at its
business site. If the device should be found, upon testing, not to be
in normal functioning condition, it shall be incumbent upon SLT, at its
<PAGE>
expense, to restore the device to such condition. Consistent with
Paragraph 1(d), the SEM shall be delivered to the Rydal destination by
the end of November 1996. It is understood that the device must not be
transported in assembled condition, but must be transported in
dismantled condition and reassembled to functioning condition at the
delivery site, all at SLT's expense.
2. Property on Loan from Fuller and FRC.
a. Replacing Missing Chairs.
FRC lent to SLT the use of eight (8) orange office chairs. Such chairs
are missing. To discharge FRC's claim for the eight chairs, SLT will
provide FRC with 8 wooden, yellow-upholstered chairs presently found at
104 Park Drive. Such replacement chairs will be delivered to FRC in
accordance with Paragraph 2(b).
b. Return of Property.
Property that Fuller and FRC lent to SLT for use in its business is
listed in Exhibit B (excepting the 8 chairs covered in Paragraph 2(a)).
SLT shall deliver at its expense the property listed in Exhibit B to
sites in the Greater Philadelphia area which Fuller has designated in
Exhibit B. Those sites include the basement of Fuller's residence on
Morgan Road, Rydal; 104 Park Drive, Montgomeryville; and Fuller's
warehouse space in South Jersey. Such delivery shall be made by the end
of November 1996. Marked on Exhibit B are those items of property that
have already been returned to Fuller or FRC, and certain items for
which SLT is searching.
c. Final Survey and Chance Discoveries.
Toward the end of November 1996, SLT and Fuller shall arrange to survey
together the locations at which SLT has property. SLT and Fuller shall
investigate for any property which was obviously lent, and not later
given or sold, by Fuller or FRC to SLT and which was overlooked due to
confusion arising from SLT's concurrent relocation and therefore not
included on Exhibit B. Should any such property be identified, it shall
be returned to Fuller by the end of November 1996. Similarly, if SLT
should by chance later discover any property which was obviously lent,
and not later given or sold, by Fuller or FRC to SLT and which did not
turn up in the latter survey, SLT shall so apprise Fuller and arrange
for the return of the same to him.
3. Payments due Under the License Agreement from FRC.
Pursuant to Section 3.2 and Schedule D of the License Agreement dated
May 31, 1994, the minimum monthly royalty was to increase from $2,000
to $3,000, starting in March 1996. SLT has inadvertently continued to
pay the monthly minimum royalty at $2,000 per month through October
1996.
<PAGE>
SLT shall pay the arrearage of $8,000, plus interest at 7% (amounting
to $212.88), on the execution of this Agreement. It is understood and
agreed that payment of this arrearage does not waive any other rights
of a party to the License Agreement.
4. Settlement of Other Property Matters.
a. Lap-top Computer.
SLT has offered to sell to Fuller, at a price equal to its net book
value, the Hewlett Packard lap-top computer that Fuller has used during
his employ. Fuller has declined such offer. Fuller shall be entitled to
use such lap-top computer until the end of his employ with SLT, at
which time he shall return it to the Company.
b. Car Phone.
Fuller has contracted with a third party for the use of a car phone;
SLT has reimbursed Fuller his payments made to the third party under
that contract. SLT hereby relinquishes in favor of Fuller any equity
that may have inured or may yet inure to it by virtue of its
reimbursements to Fuller. Upon presentation of the Company's standard
form for reimbursement of expenses, the Company shall reimburse Fuller
the monthly charge for use of the car phone through the end of his
employ, and not thereafter. Such remaining monthly charges shall be at
a level commensurate with such charges pre-dating this Agreement.
c. Gateway Computer.
SLT acknowledges that the Gateway P5 90 computer in Fuller's possession
is Fuller's own personal property, acquired on June 15, 1994 through an
exchange of property.
d. Return of Company Property.
Fuller undertakes to return to SLT the belt sander being used in
Fuller's basement at Morgan Road. Such delivery shall be effected at
Morgan Road, when SLT delivers the SEM pursuant to Paragraph 1(e) and
the Enco green belt sander. SLT hereby acknowledges that Fuller has
otherwise, to its satisfaction, restored to SLT any of its property
that Fuller was using in pursuance of Company business, excepting such
property as Fuller shall need to serve the balance of his employ. Among
such miscellaneous items already returned are a laser pointer, a
dictaphone, a slide projector and carousels, and the keys to Building
B; yet to be returned by execution of this Agreement is Fuller's Amex
credit card.
<PAGE>
e. Use of Space at Park Drive.
It is understood and agreed that SLT has assented to take off-lease,
effective October 28, 1996, ca. 250 square feet from its Lease
Agreement with CompuCraft Fabricators, Inc. for space at 104 Park
Drive. It shall be Fuller's responsibility to negotiate a lease for
such space directly with CompuCraft.
5. Entire Understanding and Release.
This Property Agreement represents the parties' entire agreement and
mutual release with respect to the subject matter hereof and claims
related thereto. This Agreement supersedes all prior understandings or
agreements, whether written or oral, including without limitation the
Lease Agreement from Fuller Research Laboratories.
In witness whereof, the parties hereto have set their hands to this document.
Surgical Laser Technologies, Inc.
By: W.Keith Stoneback
-----------------
Terry A. Fuller, Ph.D. for himself and Fuller Research Laboratories
Signature: Terry A. Fuller
---------------
Fuller Research Corporation
By: Terry A. Fuller, Predident & CEO
--------------------------------
<PAGE>
Exhibits A and B are not included in this submittal.
AMENDMENT TO THE JOINT VENTURE AND OTHER AGREEMENTS
This Amendment, effective as of the 30th day of September 1996, is made
to the Joint Venture Agreement dated as of August 11, 1993 (the "Agreement"), by
and between SLT Rentals, Inc. and MEDIQ Surgical Equipment Services, Inc., joint
venturers in the Joint Venture known as MEDIQ PRN/SLT. This Amendment modifies
also the Supply and Services Agreement between Surgical Laser Technologies, Inc.
("SLT") and MEDIQ PRN/SLT, and the Services Agreement between MEDIQ\PRN Life
Support Services, Inc. ("Mediq") and MEDIQ PRN/SLT.
WITNESSETH
WHEREAS SLT and Mediq, through their affiliates, SLT Rentals, Inc. and
MEDIQ Surgical Equipment Services, Inc. respectively, entered into a Joint
Venture, known as MEDIQ PRN/SLT, pursuant to a Joint Venture Agreement dated
August 11, 1993, in order to exploit the short-term rental market throughout the
United States for surgical lasers and other equipment, and
WHEREAS in furtherance of the Joint Venture Agreement SLT entered into
a Supply and Services Agreement with the Joint Venture and Mediq entered into a
Services Agreement, each as of August 11, 1993, and each supplemented by an
addendum of the same date; and
WHEREAS the joint venture partners, assisted by their affiliates SLT
and Mediq, have conducted such short-term rental business (including
per-procedure rentals), garnering customers in the course of that business,
incurring long-term obligations in favor of KCI Financial Services, Inc., a
leasing company, and sustaining financial losses, and
WHEREAS SLT Rentals, Inc. and SLT desire to continue in the short-term
rental business and to expand the same in geographic coverage and product
offerings, but MEDIQ Surgical Equipment Services, Inc., and Mediq desire to
withdraw from the short-term rental business conducted through the Joint
Venture, and
WHEREAS the joint venturers and their respective affiliates have
conferred and discussed how the desires of each joint venturer and its
affiliates may be achieved,
NOW THEREFORE, the parties hereto, intending to be legally bound, and
in consideration of the foregoing premises and the covenants set forth
hereafter, do hereby agree:
Section 1. Winding up, Liquidation and Dissolution. In accordance with
the provisions contained in Section 13 of the Agreement, the joint venturers
shall wind up the affairs of the Joint Venture as of September 30, 1996 in the
following manner:
<PAGE>
(i) As soon as possible, Mediq shall provide to SLT and the Joint
Venture audited financial statements for the Joint Venture for the
period ended September 30, 1996;
(ii) All debts and obligations assumed and incurred by the Joint
Venture in the ordinary course of business and owing from the Joint
Venture to third parties, including long-term obligations owing to KCI
Financial Services, Inc., shall be assumed by SLT Rentals, Inc., and
neither Mediq nor any of its affiliates shall have any liability
therefor;
(iii) All assets and properties, including the books and records, of
the Joint Venture shall be liquidated entirely in favor of SLT Rentals,
Inc. and nothing in favor of MEDIQ Surgical Equipment Services, Inc.,
and for such liquidation, SLT Rentals, Inc. shall have paid MEDIQ
Surgical Equipment Services, Inc. the sum of $1.00;
(iv) In pursuance of such liquidating distribution, MEDIQ Surgical
Equipment Services, Inc. shall cause the Joint Venture: to withdraw
from doing business in those States where it had qualified to do
business; to prepare and file the final partnership income, sales and
similar tax returns; to have the books of the Joint Venture audited by
its independent accountants for the period ended September 30, 1996;
(v) SLT Rentals, Inc. or its designee shall promptly effect the formal
dissolution of the partnership. Upon such dissolution, neither SLT
Rentals, Inc. nor any of its affiliates shall use the names "MEDIQ" or
"PRN" and shall no longer represent or advertise that the Joint Venture
exists; and
(vi) The Joint Venture, and the Joint Venture Agreement, shall be
deemed terminated under the provisions of Section 13.1(b) of the Joint
Venture Agreement.
Section 2. Guaranty and Indemnity. SLT Rentals, Inc. and SLT shall
guarantee to MEDIQ Surgical Equipment Services, Inc., MEDIQ Incorporated and
Mediq the satisfaction of all monetary debts and non-monetary obligations
assumed by SLT Rentals, Inc. pursuant to provisions contained herein or
otherwise and shall further indemnify MEDIQ Surgical Equipment Services, Inc.
and Mediq against any loss, damage, cost, expense, claim or liability, including
reasonable attorneys' fees, arising from a third party in connection with the
satisfaction of such monetary debts and non-monetary obligations.
Section 3. Services Agreement. Mediq shall continue to provide services
under the Services Agreement, with the following modifications in the terms of
that Agreement:
(i) Notwithstanding Paragraphs (i) and (iii) of Exhibit A of the
Services Agreement, SLT or SLT Rentals, Inc. shall be responsible for
<PAGE>
its customer billing, reporting and accounting as well as for its own
sales and marketing, and Mediq shall have no responsibility pursuant to
those Paragraphs; and
(ii) Pursuant to Paragraph (ii) of Exhibit A of the Services Agreement,
Mediq shall continue to provide centralized dispatch of delivery
services, but shall provide centralized collection of customer calls
only until SLT assumes this function, which SLT shall use its best
efforts to assume no later than December 31, 1996;
(iii) Pursuant to Paragraphs (iv) and (v) of Exhibit A of the Services
Agreement, Mediq shall continue to provide pre-delivery equipment
inspection, maintenance services (manpower only) and storage, it being
understood that the delivery of properly functioning laser systems on a
timely basis is fundamental to the on-going short-term rental business
of SLT Rentals, Inc. and SLT. The specifications for such inspection
and maintenance services shall be as set forth in Appendix A attached
hereto. Such services under Paragraphs (iv) and (v) shall be provided
only out of Mediq branches that are also regularly providing services
under Exhibit B of the Services Agreement;
(iv) Paragraph (vi) of Exhibit A, relating to the sharing of marketing
and other information, shall be voided.
(v) There shall be added to Exhibit A of the Services Agreement a new
Paragraph (vii), under which Mediq shall provide prompt support to SLT
or SLT Rentals, Inc. in expanding its geographic coverage and product
offerings for short-term rentals through Mediq branch locations
currently in use by the Joint Venture and locations not currently in
use by the Joint Venture;
(vi) Notwithstanding Paragraph (i) of Exhibit B of the Services
Agreement and Paragraph A of the Addendum thereto, each delivery or
pick-up made by Mediq of surgical equipment to or from a customer site
shall be at a charge to SLT or SLT Rentals, Inc. of fifty dollars
($50.00), and no further commission shall be payable under the Joint
Venture Agreement under Section 3.2(b) of the Joint Venture Agreement;
and
(vii) The Term under Section 4 of the Services Agreement shall be
extended to end on September 30, 1999, which the parties may extend by
mutual agreement, and in lieu of the Joint Venture as a party shall be
substituted SLT and SLT Rentals, Inc. as parties.
Section 4. Supply and Services Agreement. The Supply and Services
Agreement shall be deemed terminated as of September 30, 1996.
<PAGE>
Section 5. Personnel Matters. Prior to September 30, 1996, the general
manager of the joint venture shall see to the orderly winding up of the
personnel reporting to him. Those Clinical Laser Specialists whom SLT has chosen
to join its clinical support team will be notified of the same and will cease to
report to the Joint Venture; those Clinical Laser Specialists whom SLT has not
so chosen, will be terminated from SLT and will cease to report to the Joint
Venture. Notwithstanding Section 2 hereof, costs associated with this process
shall be borne equally by the SLT Rentals, Inc. and Mediq Surgical Equipment
Services, Inc.
Section 6. Public Notice. SLT and Mediq shall cooperate in notifying
customers of the discontinuance of the Joint Venture. Such notice shall not be
made before the execution of this Amendment, except in the event that SLT or
Mediq is obliged under the securities laws to disclose before the date of
execution the modification in their relationship, in which case either party
shall be free to do so upon prior notice to the other party.
IN WITNESS WHEREOF, the undersigned intending to be legally bound
hereby have executed this Amendment as of the day and year first written above.
MEDIQ/PRN LIFE SUPPORT SURGICAL LASER
SERVICES, INC. TECHNOLOGIES, INC.
By: Thomas Carroll By: W. Keith Stoneback
-------------- ------------------
Thomas Carroll W. Keith Stoneback
President President and CEO
MEDIQ PRN/SLT: By its Joint Venturers
MEDIQ SURGICAL EQUIPMENT SLT RENTALS, INC.
SERVICES, INC.
By: Thomas Carroll By: W. Keith Stoneback
-------------- ------------------
Thomas Carroll W. Keith Stoneback
President President
<PAGE>
The Appendix is not included with this submittal.
<PAGE>
NON-DISTURBANCE, SUBORDINATION AND
ATTORNMENT AGREEMENT
THIS NON-DISTURBANCE, SUBORDINATION AND ATTORNMENT AGREEMENT (this
"Agreement") dated August 1st, 1996 is by and among MONTGOMERY COUNTY INDUSTRIAL
DEVELOPMENT CORPORATION ("MCIDC"), SLT PROPERTIES, INC., a Delaware corporation
("Owner"), SURGICAL LASER TECHNOLOGIES, INC., a Delaware corporation
("Sublandlord") and SUBURBAN CABLE TV CO. INC., a Pennsylvania corporation
("Subtenant").
BACKGROUND
A. MCIDC is an industrial development agency, approved by the
Pennsylvania Industrial Development Authority ("PIDA") and pursuant to and in
accordance with the law governing PIDA and the rules and regulations issued by
PIDA pursuant thereto ("Rules"), MCIDC has taken title to and is the legal owner
and Owner is the equitable owner of certain premises commonly known as 200
Cresson Boulevard, Oaks, Pennsylvania ("Premises") under a certain Installment
Sale Agreement dated August 16, 1991 and recorded in Montgomery County,
Pennsylvania, in Book ___, Page ___ the ("Installment Sale Agreement"). MCIDC
holds legal title to the Premises as security for payment of the $2,000,000
purchase price (the "Purchase Price") which MCIDC is obligated to repay to PIDA
pursuant to certain mortgage financing secured by the Premises.
B. Owner and Sublandlord entered into a Lease Agreement dated August
16, 1991 ("Lease") pursuant to which Owner leased the Premises to Sublandlord.
C. Sublandlord and Subtenant have entered into a Sublease Agreement
dated March 21, 1996 ("Sublease"), pursuant to which Sublandlord has agreed to
sublease the Premises to Subtenant. The Sublease provides that Subtenant has the
right to terminate the Sublease if MCIDC does not execute this Agreement.
D. In accordance with Rules, MCIDC has made application to PIDA to
consent to the Sublease, which consent has been granted.
E. By the execution of this Agreement, the parties wish to provide for
the nondisturbance of Subtenant's possession of the Premises and the
subordination of the Subtenant's leasehold estate to the lien of the Purchase
Price under the Installment Sales Agreement.
NOW, THEREFORE, for good and valuable consideration and intending to be
legally bound, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Subtenant hereby acknowledges and agrees that its leasehold estate
created under the terms of the Sublease and all of its rights thereunder will be
<PAGE>
subject and subordinated to the rights and lien of MCIDC under the terms of the
Installment Sale Agreement and any modifications, replacements, renewals or
extensions thereof.
2. So long as Subtenant is not in default in performing its obligations
under the terms of the Sublease, MCIDC agrees, for itself and its successors and
assigns, that it will not disturb or interfere with the enjoyment by Subtenant
of Subtenant's leasehold estate in the Premises, including all rights granted by
the Sublease. However, in no event shall MCIDC, or any subsequent purchaser or
grantee: (a) be liable for any act or omission or Owner or Sublandlord; (b) be
subject to any offset or deficiency which Subtenant may have against Owner or
Sublandlord; or (c) have any obligation with respect to any security deposited
under the Sublease unless such security has been delivered to MCIDC.
3. If MCIDC succeeds to the Owner's interest as landlord or if MCIDC
remains as the legal owner pursuant to the Installment Sale Agreement, whether
as a result of any proceeding under the Installment Sale Agreement, foreclosure
or sale of the Premises to any purchaser or grantee, in which event the
Sublandlord will cease to be entitled to possession under the Lease, then under
either of said circumstances, the Subtenant agrees that it will attorn directly
to MCIDC; and, MCIDC will, in turn, accept the Subtenant's attornment and will
recognize the leasehold interest of Subtenant under the terms of the Sublease,
to the end that Subtenant may continue to peaceably and quietly have, hold and
enjoy the Premises, provided that Subtenant has then complied and continues to
comply with the terms of the Sublease.
4. Subtenant acknowledges that it has notice that the Lease and the
Sublease and the rent and all sums due thereunder have been assigned to the
MCIDC as part of the security for the Purchase Price owing under the Installment
Sales Agreement. If MCIDC notifies Subtenant of a default under the Installment
Sale Agreement, and demands that Subtenant pay its rent and all other sums due
under the Sublease to MCIDC, Subtenant agrees that it will honor such demand and
pay its rent and all other sums due under the Sublease directly to MCIDC.
5. Subtenant covenants and acknowledges that any purchase of the
Premises, or assignment of the Premises or portion thereof to the Subtenant
which would be under and subject to the PIDA Mortgage would have to satisfy the
law, rules and regulations which govern the Installment Sales Agreement, and
would require the prior written approval of PIDA and MCIDC. Any transaction
which includes the satisfaction of the PIDA Mortgage does not require the
approval of PIDA or MCIDC. Subtenant also covenants and acknowledges that MCIDC
has made no warranties, promises or representations whatsoever with respect to
the use of the Premises, compliance with zoning, habitability, fitness for any
purpose or possession, or any other promise, warranty or representation of any
nature or kind whatsoever.
6. Subtenant acknowledges that regardless of the circumstance giving
rise to a claim, (whether MCIDC is the legal owner and Owner is the equitable
owner, or if MCIDC succeeds to the Owner's interest as landlord or if a
purchaser or grantee succeeds to the Owner's interest as an Installment Sale
Purchaser), MCIDC's liability (if any) shall be enforceable only out of the real
estate and property which is the subject matter of the Installment Sale
Agreement as well as the within Agreement, and the rents, issues and profits
thereof, and there shall be no other recourse against MCIDC on any other
<PAGE>
property now or hereafter owned by it, and in the event of the entry of judgment
against MCIDC in favor of Owner, Sublandlord or Subtenant (SLT Properties, Inc.,
Surgical Laser Technologies, Inc. and Suburban Cable TV Co. Inc., respectively)
shall jointly and severally request the Prothonotary to mark the judgment index
satisfied, failing which, this provision shall be MCIDC's authorization, without
limitation, for MCIDC to so request and cause the Prothonotary to mark the
judgment index accordingly.
7. Subtenant will neither offer nor make prepayment of rent (for a
period in excess of one month) nor further change the terms, covenants,
conditions and agreements of the Sublease in any manner without the express
consent in writing of MCIDC, which consent shall not be unreasonably withheld.
8. The foregoing provisions shall be self-operative and effective
without the execution of any further instrument of any party hereto. However,
Subtenant agrees to execute and deliver to MCIDC or to any person to whom
Subtenant herein agrees to attorn, such other instruments as either shall
reasonably request, in order to effectuate the foregoing provisions.
9. No modification, amendment, waiver or release of any provision of
this Agreement shall be valid or binding unless in writing and duly executed by
the party against whom the same is sought to be asserted.
10. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that in the event of the assignments or transfer of the interest of
MCIDC, all obligations and liabilities of MCIDC under this Agreement shall
terminate and all such obligations and liabilities shall be the responsibility
of the party to whom MCIDC's interests is assigned or transferred; and provided
further that the interest of Subtenant under this Agreement may not be assigned
or transferred without the written consent of MCIDC.
11. This Agreement shall be construed in accordance with the laws of
the Commonwealth of Pennsylvania.
12. This Agreement may be executed in multiple counterparts, all of
which, taken together, shall constitute an original.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
ATTEST OR WITNESS: MONTGOMERY COUNTY INDUSTRIAL
DEVELOPMENT CORPORATION
Mitchell W. Miller By: Carmen S. Italia, Jr.
- ------------------ ---------------------
SLT PROPERTIES, INC.
Davis Woodward By: Michael R. Stewart
- -------------- ------------------
SURGICAL LASER
TECHNOLOGIES, INC.
Davis Woodward By: Michael R. Stewart
- -------------- ------------------
SUBURBAN CABLE TV CO. INC.
Mark H. Fisher By: Harry F. Brooks
- -------------- ---------------
EXHIBIT 11
SURGICAL LASER TECHNOLOGIES, INC.
AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Quarter Ended: For the Nine Months Ended:
---------------------- --------------------------
Sep. 29, Oct. 1, Sep. 29, Oct. 1,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Primary Earnings (Loss) Per
Common Share:
Net income (loss) ($2,483) ($ 996) ($4,244) ($3,941)
-------- -------- -------- --------
Weighted average number of shares
of Common Stock outstanding during
the period 9,872 9,851 9,861 9,851
Additional shares assuming excercise
of stock options and warrants
utilizing the treasury stock method -- -- -- --
-------- -------- -------- --------
Weighted average Common Stock and Common
Stock equivalents outstanding 9,872 9,851 9,861 9,851
-------- -------- -------- --------
Primary earnings (loss) per share ($ 0.25) ($ 0.10) ($ 0.43) ($ 0.40)
======== ======== ======== ========
Fully Diluted Earnings (Loss) Per
Common Share:
Net income (loss) ($2,483) ($ 996) ($4,244) ($3,941)
-------- -------- -------- --------
Weighted average number of shares
of Common Stock outstanding during
the period 9,872 9,851 9,861 9,851
Additional shares assuming excercise
of stock options and warrants
utilizing the treasury stock method -- -- -- --
Additional shares assuming conversion
of convertible subordinated notes -- -- -- --
-------- -------- -------- --------
Weighted average Common Stock and Common
Stock equivalents outstanding 9,872 9,851 9,861 9,851
-------- -------- -------- --------
Fully diluted earnings (loss) per share ($ 0.25) ($ 0.10) ($ 0.43) ($ 0.40)
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,526
<SECURITIES> 1,216
<RECEIVABLES> 2,554
<ALLOWANCES> (116)
<INVENTORY> 3,576
<CURRENT-ASSETS> 12,938
<PP&E> 14,278
<DEPRECIATION> (6,792)
<TOTAL-ASSETS> 21,631
<CURRENT-LIABILITIES> 4,064
<BONDS> 0
0
0
<COMMON> 99
<OTHER-SE> 11,473
<TOTAL-LIABILITY-AND-EQUITY> 21,631
<SALES> 7,965
<TOTAL-REVENUES> 7,965
<CGS> 2,819
<TOTAL-COSTS> 2,819
<OTHER-EXPENSES> 9,045
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 424
<INCOME-PRETAX> (4,244)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,244)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,244)
<EPS-PRIMARY> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
