EXHIBIT 10.2

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                               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,

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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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         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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         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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                                    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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                                    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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