Document:

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                                                                   EXHIBIT 10.25

               ADDENDUM TO NOTE FOR BUSINESS AND COMMERCIAL LOANS
                                   LIBOR RATE

Addendum to Note for Business and Commercial Loans dated March 26, 2003, in the
principal amount of $1,400,000.00.

As used herein, "LIBOR Reserve Requirements" means the maximum reserves (whether
basic. supplemental. marginal, emergency, or otherwise) prescribed by the Board
of Governors of the Federal Reserve System (or any successor) with respect to
liabilities or assets consisting of or including "Eurocurrency liabilities" (as
defined in Regulation D of the Board of Governors of the Federal Reserve
System). If there is any change in LIBOR Reserve Requirements, then Borrower
shall, from time to time upon demand by Holder, pay to Holder such additional
amounts as Holder may deem necessary to compensate Holder for any increased
costs resulting from such change. Borrower agrees that Holder's determination of
such additional amounts and increased costs will be made in Holder's sole
discretion and shall be conclusive, if, because of the introduction of or any
change in, or because of any judicial, administrative, or other governmental

                                     Page 1

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interpretation of any applicable law or regulation, there shall be any increase
in the cost to Holder of making, funding, maintaining, or allocating capital to
any amount outstanding under the Loan bearing interest at a rate based on the
LIBOR Rate, then Borrower shall, from time to time upon demand by Holder, pay to
Holder additional amounts sufficient to compensate Holder for such increased
costs.

If, because of the introduction of or any change in, or because of any judicial,
administrative, or other governmental interpretation of, any applicable law or
regulation, it becomes unlawful for Holder to make, fund, or maintain any
advance or balance at a rate based on the LIBOR Rate, then Holder's obligation
to make, fund, or maintain any such advance or balance shall terminate and any
such affected outstanding advance or balance shall bear interest at a rate equal
to the prime rate of the Bank in effect from time to time as designated by the
Bank (the `Prime Rate") plus 0%, with changes in such interest rate to take
effect as the Prime Rate changes. The Prime Rate is merely a reference rate and
is not necessarily the best or lowest rate offered by the Bank.

Signed for identification:

ATTEST:                                     SURGICAL LASER TECHNOLOGIES. INC.

                                     Page 2

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By: /s/ Davis Woodward   (SEAL)             By:  /s/ Jeffrey F. O'Donnell (SEAL)
    ------------------                           ------------------------
    Davis Woodward                               Jeffrey F. O'Donnell

Its:  Corporate Counsel                     Its: President and CEO

By: /s/ Davis Woodward   (SEAL)             By:  /s/ Dennis McGrath       (SEAL)
    ------------------                           ------------------
    Davis Woodward                               Dennis McGrath

Its:  Corporate Counsel                     Its: VP of Finance and CFO

                                     Page 3<PAGE>

                                                                   EXHIBIT 10.26

AmSouth
SECURITY AGREEMENT (Accounts, Inventory and General Intangibles)

     THIS AGREEMENT is executed on May 31, 2000 by Surgical Laser Technologies,
Inc., a corporation, as debtor (the "Borrower"), in favor of AmSouth Bank, as
secured party (the "Lender").

RECITAL
The Borrower and the Lender have agreed that the Borrower shall grant a security
interest and other rights in and to the Collateral (as hereinafter defined) to
the Lender in order to secure the Liabilities described herein.

AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower and the Lender hereby agree as hollows:

I.   DEFINITIONS

     As used in this Agreement the following terms shall have the respective
meanings assigned to them as follows: (a) "Accounts" shall mean all Accounts
Receivable, Contract Rights, Chattel Paper, Instruments and Documents. "Chattel
Paper", "Instruments" and "Documents" shall have the meanings attributed to
those terms under the Alabama Uniform Commercial Code. (b) "Account Receivable"
shall mean a right to payment for goods sold or leased or for services rendered
by the Borrower, whether or not evidenced by an Instrument or Chattel Paper, and
shall include a right to payment which has been earned under a Contract Right.
(c) "Contract Right" shall mean any right to payment under a contract not yet
earned by performance, whether or not evidenced by an Instrument or Chattel
Paper. (d) "General lntangibles" shall mean all general intangibles as defined
in the Alabama Uniform Commercial Code and all choses in action, causes of
action and other intangible personal property of the Borrower of every kind and
nature (other than Accounts) including, without limitation, corporate or other
business records, inventions, designs, patents, patent applications, trademarks,
trade names, trade secrets, good will, copyrights, registrations, licenses,
franchises, tax refund claims and any security now or hereafter held by or
granted to tmre Borrower to secure payment of any of the Accounts. (e)
"Inventory" shall mean goods, merchandise and other personal property now or
hereafter held by the Borrower for, sale or lease or furnished or to be
furnished under contracts of service or otherwise, raw materials, parts,
finished goods, work-in-process and supplies and materials used or consumed, or
to be used or consumed, in the Borrower's present or any future business, and
all such property the sale, lease or other disposition of which has given rise
to Accounts and which has been returned to or repossessed or stopped in transit
by the Borrower. (g) "Liability" or "Liabilities' shall include all
indebtedness, obligations (including obligations of performance) and liabilities
of the Borrower to the Lender of every kind and description whatsoever, direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, contracted or arising, or acquired by the Lender from any
source, joint or several, liquidated or unliquidated, regardless of how they
arise or by what agreement or instrument they may be evidenced or whether they
are evidenced by any agreement or instrument, and whether incurred as maker,
endorser, surety, guarantor or otherwise, including without limitation
obligations incurred in connection with the issuance of a letter of credit, and
any and all extensions and renewals of any of the same. (g) "Purchaser" shall
include any buyer or lessee of Inventory from the Borrower, any customer for
whom services have been rendered or materials furnished by the Borrower and any
other person or organization that is now or may become obligated to the Borrower
on an Account.

II.  Security Agreement

     SECTION 2.01. Granting Clause. To secure all of the Liabilities and the
compliance by the Borrower with the Borrower's obligations under this agreement,
the Borrower hereby grants to the Lender security title to and a continuing
security interest in, and assigns, transfers, conveys, pledges and sets over to
the Lender all of the Borrower's right, title and interest in and to the
following (hereinafter collectively called the "Collateral"): (1) all of the
Accounts, Inventory and General Intangibles of the Borrower, now existing and
acquired, created or arising from time to time hereafter, whether in transit or
in the constructive, actual or exclusive possession of the Borrower or of the
Lender or held by the Borrower or others for the Lender's account and wherever
the same may be located,

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including, without limiting the generality of the foregoing, all Inventory which
may be located on the premises of the Borrower or upon the premises of any
carriers, forwarding agents, warehousemen, vendors, selling agents, processors
or other third parties; (2) all goods represented by Accounts, Inventory and
General Intangibles: (3) all such goods that may be reclaimed or repossessed
from or returned by Purchasers; (4) all of the Borrower's rights as an unpaid
vendor or lienor, including stoppage in transit, replevin, detinue and
reclamation; (5) any other property of the Borrower now or hereafter held by the
Lender or by others for the Lender's account: (6) all proceeds and products of,
and additions and accessions to, any of the items described in (1) through (5)
of this Section 2.01; and (7) all books, documents and records related to any of
the items described in (1) through (6) of this Section 2.01. No submission by
the Borrower to the Lender of a schedule or other particular identification of
Collateral shall be necessary to vest in the Lender security title to and a
security interest in each and every item of Collateral of the Borrower now
existing or hereafter created and acquired, but rather such title and security
interest shall vest in the Lender immediately upon the creation or acquisition
of any item of Collateral hereafter created or acquired, without the necessity
for any other or further action by the Borrower or the Lender.

     SECTION 2.02. Collection of Accounts; Segregation of Proceeds; etc. The
Borrower covenants and agrees that until the occurrence of an Event of Default
hereunder, or until such earlier time as the Lender shall exercise any of its
rights to the contrary under this Section 2.02 or Section 2.03 hereof, the
Borrower will, at the Borrower's sole expense, collect from the Purchaser on
each Account all amounts due thereon as and when the same shall become due, and
in the event of any default by any Purchaser justifying such action, the
Borrower shall have the authority, at the Borrower's sole expense, to repossess
any merchandise covered by any such Account in accordance with the terms thereof
and any applicable law and to take such other action with respect to any such
Account or the merchandise covered thereby as the Borrower, in the absence of
instructions from the Lender, may deem advisable. Upon demand by the Lender, all
checks and other forms of remittance received by the Borrower as proceeds of
Collateral shall be (a) held in trust for the Lender separate and apart from and
not commingled with any property of the Borrower, (b) kept capable of
identification as the property of the Lender, and if delivered not less often
than daily (or at such other intervals as may be mutually agreed upon in
writing) to the Lender in the identical form received, with appropriate
endorsements, and accompanied by a report prepared by the Borrower in such form
as the Lender shall require. Promptly upon the Lender's demand. the Borrower
shall do any or all of the following: (a) give written notice of the Lender's
security interest in the Accounts to the Purchasers in such form and at such
times as the Lender may require: (b) open and maintain at the Borrower's expense
a lock box with the Lender for the receipt of all remittances with respect to
Collateral and execute an agreement with the Lender in form and substance
satisfactory to the Lender governing such lock box: and/or (c) notify the
Purchasers to make payments on the Accounts directly to the Lender or to said
lock box. All such items received by the Lender shall be, at the option of the
Lender, credited to the Liabilities in such order and in such proportions as the
Lender may deem advisable or deposited and held until finally collected in a
collateral reserve account established with the Lender. Funds in the collateral
reserve account shall not be subject to withdrawal by the Borrower, but at all
times shall be subject to the control of the Lender, and may be applied against
the Liabilities from time to time at the sole discretion of the Lender.

     SECTION 2.03. Attorney-In-Fact. The Borrower hereby constitutes and
appoints the Lender, or any other person whom the Lender may designate, as the
Borrower's attorney-in-fact, at the Borrower's sole cost and expense, to
exercise (1) at any time (without notice to the Borrower and irrespective of
whether any Event of Default shall have occurred hereunder) all or any of the
following powers, and (2) at any time after the occurrence of an Event of
Default hereunder, all of the powers set forth in Section 5.03, all of which
powers, being coupled with an interest, shall be irrevocable until the Lender's
security interest shall have been terminated in writing as set forth in Section
6.07 of this Agreement: (a) to receive, take, endorse, assign and deliver in the
Lender's name or in the name of the Borrower any and all checks, notes, drafts
and other instruments relating to Accounts, (b) to receive, open and dispose of
all mail addressed to the Borrower and to notify postal authorities to change
the address for the delivery thereof to such address as the Lender may
designate; (c) to transmit to Purchasers notice of the Lender's interest in the
Accounts and to demand and receive from such Purchasers at any time, in the name
of the Lender or of the Borrower or of the designee of the Lender, information
concerning the Accounts and the amounts owing thereon; (d) to notify Purchasers
to make payments on the Accounts directly to the Lender or to a lock box
designated by Lender; and (e) to take or to bring, in the name of the Lender or
in the name of the Borrower, all steps, action, suits or proceedings deemed by
the Lender necessary or desirable to effect collection of the Accounts. All acts
of such attorney-in-fact or designee taken pursuant to this Section or Section
5.03 are hereby ratified and approved by the

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Borrower, and said attorney or designee shall not be liable for any acts or
omissions nor for any error of judgment or mistake of fact or law.

     SECTION 2.04. Collection Methods. It is distinctly understood and agreed
that no court action or other legal proceedings for garnishment, attachment,
repossession of property, detinue or any attempt to repossess any merchandise
covered by any Account otherwise than through legal proceedings, shall be done
or attempted to be done by the Borrower except by or under the direction of
competent legal counsel. The Borrower agrees to indemnify and hold the Lender
harmless from any loss or liability of any kind or character which may be
asserted or sought to be asserted against the Lender by virtue of any suit
filed, process issued or any repossession or attempted repossession done or
attempted by the Borrower or at the Borrower's direction or any endeavors which
the Borrower may make to collect or enforce any Accounts or repossess any goods
covered by any Account.

     SECTION 2.05. Borrower's General Covenants and Agreements Pertaining to the
Collateral. The Borrower covenants and agrees that: (a) The Borrower has good,
indefeasible and merchantable title to the Collateral, free and clear of all
liens, claims, security interests and encumbrances; and until all the
Liabilities are paid in full or otherwise discharged, the Borrower will not
assign, transfer, pledge or grant to others a security interest in any
Collateral (except that Inventory may be sold, leased or otherwise disposed of
on normal terms and at normal prices in the ordinary course of the Borrower's
business), nor permit any lien, encumbrance or security interest (except that of
the Lender) to attach to any Collateral, or any levy to be made thereon or
financing statement (except that of the Lender) to be on file in any public
office with respect to any Collateral. (b)The Borrower will hold in the
Borrower's principal place of business, or other location approved by the
Lender, and make available to the Lender as requested, all of the Borrower's
records containing any entries as to Collateral. Upon request of the Lender such
records will be segregated and marked by the Borrower with the Lender's name in
a manner satisfactory to the Lender. (c) The addresses of the Borrower's
principal place of business (or chief executive office if more than one), the
office where the Borrower keeps and will keep the Borrower's records concerning
all of the Borrower's Accounts and the place or places at which all of the
Borrower's Inventory is and will be located are correctly set forth below
Borrower's signature at the end of this Agreement; and the Borrower shall
immediately advise the Lender in writing of any change in any of said addresses.
The Borrower is the owner of all of the real estate on which said addresses are
located; or, if not, the Borrower shall promptly on Lender's request obtain from
each owner of said real estate a written waiver in form and substance acceptable
to the Lender of any landlord's or other lien that said owner might have with
respect to any of the Collateral. (d) The Borrower shall keep the inventory
insured for the benefit of the Lender (to whom loss shall be payable and to whom
30 days notice of termination of the policy shall be given) in such amounts,
with such companies and against such risks as may be satisfactory to the Lender,
pay the cost of all such insurance and deliver certificates evidencing such
insurance to the Lender. The Borrower hereby assigns to the Lender all rights to
receive the proceeds and returned premiums of such insurance. (e) The Borrower
shall pay when due all taxes, assessments and other charges levied or assessed
upon the Collateral. If such taxes or other assessments shall not be paid when
due, or if any lien shall be claimed which in the opinion of the Lender might
possibly have priority over the Lender's rights in the Collateral, the Lender
may (but shall not be required to), without notice to the Borrower, pay such
taxes, assessments, charges or claims, and the amounts thereof shall be added to
the Liabilities hereby secured and shall bear interest at a rate of interest
equal to the highest rate of interest which any of the Liabilities then bear.
(f) The Borrower shall diligently perform all of the Borrower's obligations
under each and every contract or purchase order in connection with which
Accounts are created or exist strictly in accordance with the terms thereof and
will not commit or permit any breach on the Borrower's part in connection with
any such contract or purchase order. (g) Promptly after the Borrower's learning
thereof, the Borrower shall inform Lender in writing of any material adverse
change in any of the Borrower's representations and warranties under his
Agreement.

     SECTION 2.06. Account Representations and Warranties. The Borrower makes
the following warranties and representations to the Lender as to each and every
Account, whether now existing or acquired, created or arising from time to time
hereafter, unless otherwise disclosed in writing by the Borrower to the Lender:
(a) the Account is an original, genuine, bona tide and legally binding
obligation, enforceable in accordance with its terms, (b) the Account is not
subject to any material, unreserved claim of reduction, counterclaim, set-off,
recoupment, or any claim for credits, allowances or adjustments by the Purchaser
because of returned, inferior or damaged goods and services, or for any other
reason, and the same has not been disputed or dishonored by the Purchaser;
(c) the aggregate amount shown as the balance due on the Account on the
Borrower's books and in any Schedule of

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Accounts (as hereinafter defined), invoices or other documents delivered to the
Lender with respect to the Account is validly and legally owing under the
Account and is not contingent for any reason, and, to the best of the Borrower's
knowledge, there are no facts, events or occurrences which in any way impair the
validity or collectibility thereof; (d) all statements made in any Schedule of
Accounts or other documents executed or delivered to the Lender in connection
with the Account are true and correct, and all laws and regulations applicable
to the transaction giving rise to the Account have been fully complied with; (e)
the Account does not arise out of a contract with, or order from, a Purchaser
that by its terms forbids the assignment of that Account to the Lender or makes
such assignment void or unenforceable; (f) the Account arose in the ordinary
course of the Borrower's business from a bona fide outright sale of goods, or
from the performance of services, by the Borrower under an enforceable contract
and if representing a sale, the goods have been shipped or delivered (or the
contract has otherwise been consummated) in accordance with the contract of
sale, and if representing services, the services have been performed for the
Purchaser in accordance with the contract for services; (g) any merchandise sold
or services rendered giving rise to the Account are as represented to the
Purchaser thereof, and no warranties have been made with respect to any
merchandise or services covered by the Account except such as appear on any
written document executed and delivered in connection with said Account; (h) no
notice as to any material, unreserved claim (or potential claim) has been
received with respect to any Purchaser of anything which reflects adversely on
the general creditworthiness and financial condition of the Purchaser; (i) the
Account is not evidenced by a judgment and is not evidenced or secured by an
Instrument, Document or Chattel Paper unless the original thereof (or each of
them if more than one) has been endorsed and/or assigned and delivered to the
Lender to the Lender's reasonable satisfaction.

     SECTION 2.07. Inventory Representations and Warranties. The Borrower makes
the following warranties and representation to the Lender as to each and every
item of Inventory, whether now existing or hereafter created or acquired, unless
otherwise disclosed in writing by the Borrower to the Lender: (a) all statements
or representations made by the Borrower in any Schedule of Inventory (as
hereinafter defined) or other documents furnished to the Lender by the Borrower
with respect to such Inventory are true and correct; (b) all Inventory is
located on premises referred to in Section 2.05(c) of the Agreement or is
Inventory which is in transit and is so identified on the relevant Schedule of
Inventory; and (c) no Inventory is now, nor at any time hereafter shall be,
stored with a bailee, warehouseman or similar party without the Lender's prior
written consent.

     SECTION 2.08. Records, Schedules and Assignments of Accounts. The Borrower
shall keep accurate and complete records of the Borrower's Accounts and shall
promptly deliver to the Lender on demand (a) a detailed aged trial balance, in
form and substance acceptable to the Lender, of all then-existing Accounts
("Schedule of Accounts"), (b) the original copy of all Documents evidencing or
relating to the Accounts so scheduled, (c) such other information relating to
the then-existing Accounts as the Lender shall reasonably request, and (d)
formal assignments or schedules specifically describing the Accounts and
confirming the Lender's security interest therein.

     SECTION 2.09. Records and Schedules of Inventory. The Borrower shall keep
accurate and complete records of the Inventory, and shall promptly furnish on
demand (a) a current Schedule of Inventory ("Schedule of Inventory"), in form
and substance satisfactory to the Lender, based upon such inventory accounting
practices as are satisfactory to the Lender, and (b) the original copy of all
Documents related to such Inventory.

III. GENERAL COVENANTS

     SECTION 3.01. Visitation. The Borrower shall permit representatives of the
Lender from time to time to visit and inspect the Collateral, all records
related thereto, the premises upon which any of the Collateral is located, and
any of the other offices and properties of the Borrower; to examine the assets
and books of account of the Borrower; to discuss the affairs, finances and
accounts of the Borrower with and be advised as to the same by the officers
thereof, if a corporation, or if not by other responsible persons; and to verify
the amount, quantity, value and condition of, or any other matter relating to,
the Collateral, all at such reasonable times and intervals as the Lender may
desire.

     SECTION 3.02. Further Assurances. At the Borrower's cost and expense, upon
request of the Lender, the Borrower shall duly execute and deliver, or cause to
be duly executed and delivered, to the Lender such further

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instruments and do and cause to be done such further acts as may be reasonably
necessary or proper in the opinion of the Lender or its counsel to carry out
more effectively the provisions and purposes of this Agreement.

IV.  EVENTS OF DEFAULT

     As used in this Agreement, the term "Event of Default" shall mean the
occurrence or happening of any one or more of the following events,
circumstances or conditions: (a) violation of, or default in the observance or
performance of, any term, agreement, covenant, condition or stipulation
contained or referred to in this Agreement or in any document executed in
connection with this Agreement or in any note, endorsement, guaranty or other
document evidencing or securing any of the Liabilities; or (b) default in the
due payment of the principal of or interest on any of the Liabilities, or any
part thereof, as and when due and payable; or (c) any warranty, representation,
financial statement, report, schedule, certificate, statement or other document
heretofore, now or hereafter made or furnished to the Lender by or on behalf of
the Borrower shall prove to be false or misleading in any material respect; or
(d) the occurrence of any event which will or could result in the acceleration
of the maturity of any indebtedness of the Borrower other than the Liabilities
or any such indebtedness shall not be paid when due; or (e) the loss, theft,
damage, sale, destruction or encumbrance of any uninsured material portion of
the Collateral, or the sale or encumbrance or the issuance of any execution or
the making of any levy, seizure or attachment thereof or thereon; or (f) the
insolvency, dissolution, liquidation, suspension of business or death of the
Borrower or of any endorser, surety or guarantor of any of the Liabilities
(severally, an "Obligor"), or of any of the Borrower's or such Obligor's
principal officers if a corporation, or of any of the Borrower's general
partners if a partnership; or (g) the Borrower or any Obligor shall (i) fail or
admit in writing the inability of the Borrower or any Obligor to pay the
Borrower's or such Obligor's debts generally as they become due, (ii) make a
general assignment for the benefit of creditors or have an order for relief
entered against the Borrower or any Obligor in any proceeding under the Federal
bankruptcy code, or (iii) file a voluntary petition in bankruptcy, or a petition
or an answer seeking reorganization or an arrangement with creditors or take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against the Borrower or such Obligor in any
proceeding under any such law, or if corporate or partnership action should be
taken by the Borrower or any Obligor for the purpose of effecting any of the
foregoing; or (h) the appointment of a receiver, trustee, liquidator or
custodian of the Borrower or any Obligor or of any of their respective
properties or assets; or (i) the filing of a petition without the application,
approval or consent of the Borrower or any Obligor in any court of competent
jurisdiction, seeking the bankruptcy or reorganization of the Borrower or of any
Obligor or of all or a substantial part of their respective properties or
assets, or seeking an arrangement with the creditors of either of them, and such
petition shall not be dismissed within 30 days after the filing thereof; or (j)
the issuance of a writ of execution, attachment or garnishment against the
Borrower or any Obligor; or (k) final judgment or judgments for the payment of
money in excess of an aggregate of $200,000 shall be rendered against the
Borrower or any Obligor and the same shall remain undischarged for a period of
30 days during which execution shall not be effectively stayed; or (l) any
guarantor shall terminate the obligations of such guarantor under any guaranty
agreement pertaining to any of the Liabilities; or (m) the Lender shall deem
itself insecure for any reason whatsoever.

IV.  REMEDIES

     SECTION 5.01 Acceleration of Liabilities. Upon the occurrence of an Event
of Default, the Lender shall have the right without further notice to the
Borrower to declare the entire unpaid balance of the Liabilities, with accrued
interest thereon, immediately due and payable.

     SECTION 5.02. Secured Party's Rights After Default. Upon the occurrence of
an Event of Default under this Agreement, the Lender shall have, in addition to
any other rights under this Agreement or under applicable law, the right without
notice to the Borrower (or with notice to the Borrower if notice is required and
cannot be waived under applicable law) to take any or all of the following
actions at the same or different times: (a) to collect all Accounts in the
Lender's or the Borrower's name and take control of any cash or non-cash
proceeds of Collateral; (b) to enforce payment of any Accounts, to prosecute any
action or proceeding with respect to Accounts, to extend the time of payment of
any and all Accounts, to make allowances and adjustments with respect thereto
and to issue credits in the name of the Lender or the Borrower; (c) to settle,
compromise, extend, renew, release, terminate or discharge, in whole or in part,
any Account or deal with the same as the Lender may deem advisable; (d) to
require

<PAGE>

the Borrower to open all mail only in the presence of a representative of the
Lender, who may take therefrom any remittance on Collateral; (e) to enter upon
the premises of Borrower or any other place or places where the Collateral is
located and kept, and through self-help and without judicial process, without
first obtaining a final judgment or giving the Borrower notice and opportunity
for a hearing on the validity of the Lender's claim, without any pre-seizure
hearing as a condition to repossession through court action and without any
obligation to pay rent to the Borrower, to remove the Collateral therefrom to
the premises of the Lender or of any agent of the Lender, for such time as the
Lender may desire, in order effectively to collect or liquidate the Collateral;
(f) to require the Borrower, upon demand of the Lender, to assemble the
Inventory and any other property included in the Collateral and make it
available to the Lender at places which the Lender shall select, whether at the
Borrower's premises or elsewhere, and to make available to the Lender all of the
Borrower's premises and facilities for the purpose of the Lender's taking
possession of, removing or putting the inventory and such other goods in salable
form; (g) without notice or advertisement, to sell, assign and deliver the
Collateral or any other property held by the Lender or by the Borrower for the
account of the Lender, at public or private sale, for cash, upon credit or
otherwise, at the sole option and discretion of the Lender and to bid or become
purchaser at any such sale; (h) to use, and to permit any purchaser of any of
the Collateral from the Lender to use, without charge, the Borrower's labels,
General Intangibles and advertising matter or any property of a similar nature,
as it pertains to, or is included in, any of the Collateral, in advertising for
sale, preparing for sale and selling any Collateral, and finishing the
manufacture, processing, fabrication, packaging and delivery of the Inventory,
and the Borrower's rights under all licenses and all franchise agreements shall
inure to the Lender's benefit; and (i) to exercise, in addition to all other
rights which it has under this Agreement or other applicable law, all of the
rights and remedies of a secured party upon default under the Uniform Commercial
Code. The net cash proceeds resulting from the exercise of any of the foregoing
rights, after deducting all charges, expenses, costs and attorneys' fees
relating thereto, including any and all costs and expenses incurred in securing
the possession of Collateral, moving, storing, repairing or finishing the
manufacture of Collateral, and preparing the same for sale, shall be applied by
the Lender to the payment of the Liabilities, whether due or to become due, in
such order and in such proportions as the Lender may elect; and the Borrower
shall remain liable to the Lender for any deficiency; provided, however, that
such attorneys' tees shall be limited to 15% of the unpaid balance of the
Liabilities after default and referral to an attorney who is not a salaried
employee of the Lender, if this transaction is subject to Section 5-19-10 of the
Code of Alabama 1975, and no such attorneys' fees shall be collectible if the
original principal amount financed is $300 or less.

     SECTION 5.03. Attorney-in-Fact After Default. At any time after the
occurrence of an Event of Default, the Lender or any other person serving as the
Borrower's attorney-in-fact under Section 2.03 of this agreement, shall have all
or any of the following powers: (a) to exercise all of the Borrower's rights and
remedies with respect to the collection of the Accounts; (b) to settle, adjust,
compromise, extend, renew, discharge, terminate or release the Accounts in whole
or in part; (c) to sell or assign the Accounts upon such terms, for such amounts
and at such time or times as the Lender deems advisable; (d) to take control, in
any manner, of any item of payment on, or proceeds of, Collateral; (e) to use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Collateral to which the Borrower
has access; (f) to enter into contracts or agreements for the processing,
fabrication, packaging and delivery of Inventory as said attorney-in-fact,
attorney-in-fact designee, or the Lender may from lime to time deem appropriate
and charge the Borrower's account for any reasonable costs thereby incurred; and
(g) to do all acts and things necessary, in the Lender's sole judgment. to carry
out the purposes of this agreement.

VI.  MISCELLANEOUS

     SECTION 6.01. Notice. Any requests, demands or notices provided in this
agreement to be given by either party hereto to the other shall be conclusively
deemed to have been given when the same shall have been deposited in the United
States mail, certified postage prepaid, addressed to the party to whom such
request, demand or notice is directed at the following address: (a) if to the
Borrower, at the address set forth for the Borrower's principal place of
business or chief executive office following the Borrower's signature below; and
(b) if to the Bank, at P. 0. Box 11007, Birmingham, Alabama 35288, Attention:
President. Five days written notice mailed to the Borrower at the Borrower's
address set out below shall constitute reasonable notification to the Borrower
where notification is required by law.

     SECTION 6.02. Heirs, Successors and Assigns. Whenever in this agreement any
party hereto is referred to, such

<PAGE>

reference shall be deemed to include the heirs, successors and assigns of such
party, except that the Borrower may not assign or transfer this agreement
without the prior written consent of the Lender, such consent not to be
unreasonably withheld or delayed, and all covenants, promises and agreements by
or on behalf or the Borrower which are contained in this agreement shall bind
the Borrower's heirs, successors and assigns and shall inure to the benefit of
the successors and assigns of the Lender.

     SECTION 6.03. Costs. The Borrower shall promptly reimburse the Lender for
any and all costs and expenses, including but not limited to, the reasonable
fees and disbursements of counsel to the Lender, which the Lender may incur in
connection with (a) the enforcement of the rights of the Lender in connection
with the Liabilities, (b) the protection or perfection of the Lender's rights
and interests hereunder, (c) the exercise by or for the Lender of any of the
rights or powers herein conferred upon the Lender, and (d) the prosecution or
defense of any action or proceeding by or against the Lender or the Borrower,
and Obligor, Purchaser, or any of them, concerning any matter arising out of,
connected with or related to this agreement, or any of the Collateral, or any of
the Liabilities; provided, however, that attorneys' fees shall be subject to the
limitations set forth in Section 5.02 hereof if this agreement is subject to ss.
5-19-10 of the Code of Alabama 1975.

     SECTION 6.04. Governing Law. This agreement shall be construed in
accordance with and governed by the laws of the State of Alabama.

     SECTION 6.05. Non-Waiver; Modification; etc. Neither any failure nor any
delay on the part of the Lender in exercising any right, power or privilege
under this agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise or the exercise
of any other right, power or privilege. No modification, amendment or waiver of
any provision of this agreement, and no consent to any departure by the Borrower
therefrom, shall be effective unless the same shall be in writing and signed by
the Lender, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand on
the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in the same, similar or other circumstances.

     SECTION 6.06. Severability. Any provision of this agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

     SECTION 6.07. Termination of Security Interest. The Lender's security
interest under this agreement in the Collateral will not be terminated until one
of the Lender's officers signs a written termination agreement. Even if the
Borrower should pay all of the Liabilities owing to the Lender at any one time,
the Lender's security interest will continue to secure any sum the Borrower
should later owe the Lender until the written termination agreement referred to
above has been executed by the Lender.

<PAGE>

     IN WITNESS WHEREOF, the undersigned has executed this agreement on the day
and year first above written.

CAUTION - IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT BEFORE YOU SIGN
IT.

Attest:                             Surgical Laser Technologies, Inc. (Borrower)
/s/ Davis Woodward                  By: /s/ Michael R. Stewart
Its: Secretary                      Its: President & CEO

Addresses of Borrower:
(a) Principal place of business (chief executive office if more than one):
147 Keystone Drive, Montgomeryville, PA 18936

(b) Place where records are kept concerning Accounts (if different from above):

(c) Place where Inventory is kept (if different from above):

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