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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarter ended March 31, 1996.
Commission file number 1-11388
PLC SYSTEMS INC.
(Exact name of registrant as specified in its charter)
BRITISH COLUMBIA, CANADA 04-3153858
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
113 CEDAR STREET, SUITE S-2, MILFORD, MASSACHUSETTS 01757
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 478-5991
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 .
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practical date.
Class Outstanding at May 14, 1996
Common Stock, no par value 16,436,281
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PLC SYSTEMS INC.
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information:
<S> <C>
Item 1.
Consolidated Balance Sheets.................................................................3
Consolidated Statements of Operations.......................................................4
Consolidated Statements of Cash Flows.......................................................5
Notes to Consolidated Financial Statements..................................................6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.....................................7-9
Part II. Other Information:
Item 1. Legal Proceedings.....................................................................10
Item 2. Changes in Securities.................................................................10
Item 3. Defaults by the Company Upon its Senior Securities....................................10
Item 4. Submission of Matters to a Vote of Security Holders...................................10
Item 5. Other Information.....................................................................10
Item 6. Exhibits and Reports on Form 8-K..................................................... 10
</TABLE>
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ITEM 1. FINANCIAL STATEMENTS
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PLC SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 4,183 $ 704
Short-term investments............................................. 11,496 6,500
Accounts receivable, net........................................... 1,811 6,749
Inventories, net .................................................. 1,961 1,789
Prepaid expenses and other current assets.......................... 778 488
-------- -------
Total current assets........................................... 20,229 16,230
Equipment, furniture and leasehold improvements, net ................. 1,722 1,692
Other assets........................................................... 312 368
------- -------
Total assets.................................................... $22,263 $18,290
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 972 $ 546
Accrued clinical costs............................................. 1,178 854
Accrued compensation............................................... 260 777
Deferred revenue................................................... 118 166
Other accrued liabilities.......................................... 377 346
-------- --------
Total current liabilities....................................... 2,905 2,689
Deferred revenue....................................................... 278 61
Capital lease obligations ............................................. 29 32
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 25,000 shares authorized, 16,419
and 15,944 shares issued and outstanding in 1996 and 1995,
respectively.................................................... 53,675 51,411
Accumulated deficit.................................................... (34,312) (35,589)
Foreign currency translation........................................... (312) (314)
--------- ----------
19,051 15,508
-------- --------
Total liabilities and stockholders' equity............................. $22,263 $18,290
======= =======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PLC SYSTEMS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Revenues:
Product sales..................................................... $ 4,197 $2,714
Placement and service fees........................................ 632 154
-------- --------
Total revenues................................................. 4,829 2,868
Cost of revenues:
Product sales....................................................... 1,086 1,064
Placement and service fees.......................................... 304 26
-------- ---------
Total cost of revenues......................................... 1,390 1,090
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Gross profit........................................................... 3,439 1,778
Operating expenses:
Selling, general and administrative................................. 1,451 1,017
Research and development............................................ 759 755
-------- --------
Total operating expenses......................................... 2,210 1,772
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Income from operations................................................. 1,229 6
Other income:
Interest income, net............................................... 138 157
Gain (loss) from foreign currency, net............................. (71) -
-------- ---------
67 157
-------- ---------
Income before income taxes............................................. 1,296 163
Provision for income taxes............................................. 19 -
--------- ---------
Net income............................................................. $1,277 $ 163
====== ======
Net income per share................................................... $.07 $.01
Shares used to compute net income per share............................ 17,030 17,501
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PLC SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Month Ended
March 31,
1996 1995
<S> <C> <C>
Operating activities:
Net income ......................................................... $ 1,277 $ 163
Adjustments to reconcile net income to net cash provided (used)
for operating activities:
Depreciation and amortization.................................... 236 78
Change in assets and liabilities:
Decrease (increase) in accounts receivable.................... 4,923 (2,160)
Increase in inventory......................................... (194) (197)
(Increase) decrease in prepaid expenses and other assets ..... (275) 29
Increase in accounts payable.................................. 431 251
Increase (decrease) in deferred revenue....................... 171 (17)
(Decrease) increase in accrued liabilities.................... (163) 710
--------- --------
Net cash provided (used) for operating activities...................... 6,406 (1,143)
Investing activities:
Purchase of short-term investments ................................. (11,496) (300)
Maturities of short-term investments................................ 6,500 -
Purchase of fixed assets............................................ (271) (65)
--------- --------
Net cash used for investing activities................................. (5,267) (365)
Financing activities:
Net proceeds from sales of shares................................... 2,184 -
Repayment of stockholder notes...................................... 79 56
Principal payments on capital lease obligations..................... (2) (2)
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Net cash provided by financing activities.............................. 2,261 54
Effect of exchange rate changes on cash and cash equivalents.......... 79 21
----------- ---------
Net (decrease) increase in cash and cash equivalents................... 3,479 (1,433)
Cash and cash equivalents at beginning of period....................... 704 3,699
---------- -------
Cash and cash equivalents at end of period............................. $ 4,183 $2,266
======== ======
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
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PLC SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The balance sheet as of March 31, 1996 and the statement of operations
and cash flows for the three months ended March 31, 1996 and 1995 are unaudited
and in the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been recorded. Such adjustments
consisted only of normal recurring items.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The year-end balance sheet data was
derived from audited financial statements, but does not include disclosures
required by generally accepted accounting principles. It is suggested that these
interim financial statements be read in conjunction with the Company's most
recent Form 10-K and Annual Report as of December 31, 1995.
2. NET INCOME PER SHARE
Net income per share is calculated using the weighted average number of
shares and share equivalents outstanding during the period. Share equivalents
consist of stock options and stock warrants.
3. INVENTORY
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . $1,053 $ 644
Work in process . . . . . . . . . . . . . . . . . . . . 337 56
Finished goods . . . . . . . . . . . . . . . . . . . . . 571 1,089
-------- -------
$1,961 $1,789
====== ======
</TABLE>
4. STOCK WARRANTS
On March 8, 1996, the Company's Form S-3 to register the common stock
underlying the warrants issued to the Company's 1992 underwriters and 1994
placement agent was declared effective by the Securities and Exchange
Commission. The warrant issued to the underwriters provided for the purchase of
145,000 shares at $6.00 per share and 72,500 shares at $4.80 per share. The
warrant issued to the placement agent provided for the purchase of 150,000
shares at $3.94 per share. At March 31, 1996, all of the placement agents shares
and all but 16,770 of the underwriters shares had been purchased generating
approximately $1,660,000 in proceeds.
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ITEM 2.
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PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company has two marketing strategies for selling the Heart Laser and
its related components and sterile kits; placement and sales. In countries where
health care is reimbursed by the government or by private insurers, the
Company's strategy is to be reimbursed for the use of the Heart Laser on a per
procedure basis under a contractual agreement whereby the customer commits to a
minimum number of procedures on a yearly basis. These contracts typically run
for a minimum of three years and allow for the customer to exceed the
contractual minimums. These contracts, referred to as placement contracts, are
preferred to the sale strategy as the Company believes that the potential
revenue stream is greater and more profitable. Sterile handpieces and other
disposables are included in the per procedure fee.
In countries where health care is not reimbursed by the government or
insurance, or where credit risk is high, the Heart Laser is sold as capital
equipment and the related sterile handpieces and other disposables are sold
separately for each procedure. The Company sells Heart Lasers directly and
through distributors. These sales are classified as product sales.
RESULTS OF OPERATIONS
Total revenues of $4,829,000 for the quarter ended March 31, 1996
increased $1,961,000 or 68% when compared to total revenues of $2,868,000 for
the quarter ended March 31, 1995. For the quarter ended March 31, 1996, product
sales of $4,197,000 increased $1,483,000 or 54% when compared to product sales
of $2,714,000 for the quarter ended March 31, 1995. This increase was the result
of the sale of six Heart Lasers for the quarter ended March 31, 1996 when
compared to four Heart Lasers sold for the quarter ended March 31, 1995.
Placement and service revenue of $632,000 for the quarter ended March
31, 1996 increased $478,000 over placement and service revenue of $154,000 for
the quarter ended March 31, 1995. This increase reflects the twelve placement
contracts in effect as of March 31, 1996 as compared to the two placement
contracts in effect as of March 31, 1995. The Company shipped one Heart Laser
under a placement contract in the quarter ended March 31, 1996. In addition,
there were $25,000 of service fees in the quarter ended March 31, 1996 as
compared to $9,500 for the quarter ended March 31, 1995.
Total gross profit increased to $3,439,000 or 71% of revenues for the
quarter ended March 31, 1996 as compared with $1,778,000 or 62% of revenues for
the quarter ended March 31, 1995. This improvement is the result of six Heart
Lasers being sold directly to customers by the Company's European subsidiary in
the quarter ended March 31, 1996 as compared with four Heart
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PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Lasers; two of which were sold directly and two of which were sold through
distributors in the quarter ended March 31, 1995. Heart Lasers sold directly to
customers typically carry a higher gross profit than those sold through
distributors.
Selling, general and administrative expenses of $1,451,000 for the
quarter ended March 31, 1996 increased $434,000 or 43% when compared with
$1,017,000 for the quarter ended March 31, 1995. The majority of this increase
is the direct result of the Company's expanded international sales operations in
Europe and Asia Pacific which accounted for approximately $168,000 or 39% of the
increase coupled with increased salary expense related to expanded staffing
domestically, increased commissions associated with higher sales volume and
increased consulting expenses.
Research and development expenditures of $759,000 increased $4,000 or
less than 1% for the quarter ended March 31, 1996 when compared with $755,000
for the quarter ended March 31, 1995. This small increase is the net result of
the offset between increased salary expense for expanded staffing offset by a
small decrease in spending for scientific subsidies.
Other income of $67,000 for the quarter ended March 31, 1996 decreased
$90,000 or 57% when compared to $157,000 for the quarter ended March 31, 1995.
This decrease is the result of lower interest income due to lower interest rates
throughout the quarter ended March 31, 1996 as compared to the quarter ended
March 31, 1995 coupled with a $71,000 foreign currency loss related to the
Company's European subsidiary.
Although the Company has sufficient net operating loss carryforwards to
offset income taxes for the quarter ended March 31, 1996, the provision for
income taxes represents the tax liability under the alternative minimum tax
regulations which cannot be offset by net operating loss carryforwards. There
was no provision for income tax for the quarter ended March 31, 1995.
Net income of $1,277,000 and net income per share of $.07 for the
quarter ended March 31, 1996 reflect the positive impact of the number of Heart
Lasers sold directly by the Company's European subsidiary when compared to net
income of $163,000 and net income per share of $.01 for the quarter ended March
31, 1995. The Company believes that the number and mix of Heart Lasers sold
versus shipped under placement contracts will vary from quarter to quarter. This
will impact the Company's results of operations prior to receipt of major
regulatory approvals. The Company prefers to use the placement contract strategy
whenever possible as it believes that the potential long term revenue stream is
greater and more profitable. International health care reimbursement does not
always make this placement strategy practicable outside the United States.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had cash and cash equivalents of
$4,183,000 and short-term
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PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
investments of $11,496,000. At April 30, 1996, the Company had cash and cash
equivalents of $3,136,000 and short-term investments of $11,451,000.
During the quarter ended March 31, 1996, the Company received
approximately $1,660,000 in proceeds from the exercise of stock warrants coupled
with $524,000 in proceeds from the exercise of stock options and $79,000 from
the repayment of shareholder loans. Cash provided by operations approximated
$6,400,000 principally from the collection of the $5,700,000 receivable from the
IMATRON Japan Contract and the quarterly profit of $1,277,000. As a result, the
Company invested an additional $5,000,000 in short term investments.
Approximately $271,000 was used to acquire capital equipment, principally
related to an investment in the placement laser shipped to Spain.
The Company believes that existing cash balances are sufficient to meet
working capital and capital expenditure requirements through fiscal 1997.
However, unanticipated decreases in operating revenues or increases in expenses
may adversely impact the Company's cash position. In the future, the Company may
seek additional financing through issuance and sale of debt or equity
securities, bank financing, joint ventures or other means. The availability of
such financing and the reasonableness of any related terms in comparison to
market conditions cannot be assured.
The Company believes that periodic operating losses are possible until
such time as the Company receives its PMA from the FDA for the Heart Laser. The
Company submitted its PMA application in April 1995. Although the Heart Laser
has been granted "expedited review" status by the Food and Drug Administration
("FDA"), given the current uncertainties of the time required by the FDA to
approve a Premarket Approval ("PMA") application, the Company cannot project
when, if at all, such approval would be granted. Until PMA approval, continued
profitability will likely be determined by the number of international shipments
and the related mix of sales and placements. In addition, the Company must also
successfully obtain approval from the FDA for sale of the Heart Laser in the
United States, obtain regulatory approval from and market the Heart Laser in
certain additional foreign markets, and convince health care professionals,
third party payors and the general public of the medical and economic benefits
of the Heart Laser. No assurance can be given that the Company will be
successful in marketing the Heart Laser or that the Company will be able to
operate profitably on a consistent quarterly basis.
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PLC SYSTEMS INC.
Part II Other Information
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a.) The following exhibits are filed herewith:
Exhibit
No. Title
10a Employee Agreement by and between the Company and Patricia L.
Murphy.
10b 1993 Formula Stock Option Plan, as amended.
11 Statement re Computation of Income Per Share.
27 Financial Data Schedule.
b.) Reports on Form 8-K. The Company filed a Current Report on Form
8-K on March 1, 1996, reporting information contained in the
Company's press release with respect to its financial results
for the fourth quarter and year ended December 31, 1995.
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PLC SYSTEMS INC.
Part II Other Information
(Continued)
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.
PLC SYSTEMS INC.
Registrant
Date: May 15, 1996 /s/ M. Lee Hibbs
------------------- -------------------
M. Lee Hibbs
(President and Chief Executive Officer)
Date: May 15, 1996 /s/ Patricia L. Murphy
-------------------- -------------------------
Patricia L. Murphy
(Chief Financial Officer)
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EMPLOYEE AGREEMENT
To: Ms. Patricia L. Murphy As of April 26, 1996
The undersigned, PLC Systems Inc., a British Columbia corporation,
which together with its wholly-owned subsidiary, PLC Medical Systems, Inc., a
Delaware corporation, as well as its successors and assigns (hereinafter
collectively referred to as the "Company"), hereby agree with you as follows:
l. Employment Following Change in Control.
1.1 Your employment with the Company may be terminated at any
time, except that in the event of a "Change of Control" as defined herein, you
will have the right to the payments described herein.
1.2 For purposes of this Agreement, the term "Cause" shall
mean (a) gross negligence in the performance of assigned duties; (b) refusal to
perform or discharge the duties or responsibilities assigned by the Board of
Directors of PLC Systems Inc. or PLC Medical Systems, Inc. provided the same are
not illegal, unethical or inconsistent with the position of Chief Financial
Officer of a corporation and the failure to correct such refusal and perform
such duties or responsibilities within two weeks (14 calendar days) after
written notice of such failure; (c) conviction of a felony involving moral
turpitude; (d) willful or prolonged absence from work not excused by disability;
and (e) falseness of any warranty or representation by you herein or the breach
of your obligations under this Agreement to the material detriment of the
Company.
1.3 In the event of the Involuntary Termination of your
employment with the Company during the one-year period, the Company hereby
agrees to make payments to you as described in Section 2. In this regard, the
phrase "Involuntary Termination" shall mean any termination of your employment
by the Company other than for "Cause" following a "Change of Control," as
defined in Section 2, or any termination of your employment following a "Change
in Control" by you following a "Change in Control" as defined in Section 2 due
to any of the following circumstances: (a) a reduction in your Base Salary or
Company-paid benefits, (b) a reduction in your eligibility for any Company bonus
or other benefit program, (c) a material or substantial change in your title,
position, authority or duties, or (d) a change of your principal place of
employment from Milford, Massachusetts to another location beyond 25 miles of
Milford, Massachusetts.
1.4 At any time prior to a Change in Control, upon not less
than seven (7) calendar days written notice, your employment with the Company
may be terminated without
-1-
"Cause", provided that the Company shall be obligated to pay you, as severance
pay, an amount equal to twelve (12) months of your then current annual base
salary plus any sums then due to you, less (i) applicable taxes and other
required withholdings, and (ii) any amount you may owe to the Company. Subject
to Section 2, payments under this Section 1.4 shall not be due or payable if you
are terminated at any time for "Cause" or if you voluntarily resign from your
employment. It is also understood and agreed that the severance amount will be
paid to you in accordance with the standard Company payroll procedures and that
should you obtain employment from another source prior to the receipt of the
entire severance amount, the unpaid amount shall be forfeited by you.
2. Change in Control.
(a) For purposes of this Agreement, "Change in Control" means and shall
be deemed to occur if any of the following occurs:
(i) The acquisition, after September 30, 1994, by an
individual, entity or group [within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act")] of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 25% or more of either (A)
the outstanding shares of common stock, no par value per share, of the
Company (the "Common Stock"), or (B) the combined voting power of the
voting securities of the Company entitled to vote generally in the
election of directors (the "Voting Securities"); or (ii) Individuals
who, on September 30, 1994, constituted the Board of Directors of the
Company (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board of Directors of the Company; provided,
however, that any individual becoming a director subsequent to
September 30, 1994 whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of the directors then serving and comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents; or (iii) Approval by
the Board of Directors or the shareholders of the Company of a (A)
tender offer to acquire any of the Common Stock or Voting Securities,
(B) reorganization, (C) merger or (D) consolidation, other than a
reorganization, merger or consolidation with respect to which all or
substantially all of the individuals and entities who were the
beneficial owners, immediately prior to such reorganization, merger or
consolidation, of the Common Stock and Voting Securities beneficially
own, directly or indirectly, immediately after such reorganization,
merger or consolidation, more than 80% of the then outstanding common
stock and Voting Securities (entitled to vote generally in the election
of directors) of the Company resulting from such reorganization, merger
or consolidation in substantially the same proportions as their
respective ownership, immediately prior to such reorganization,
-2-
merger or consolidation, of the Common Stock and the Voting Securities;
or (iv) Approval by the Board of Directors or the shareholders of the
Company of (A) a complete or substantial liquidation or dissolution of
the Company, or (B) the sale or other disposition of all or
substantially all of the assets of the Company, excluding a
reorganization of the Corporation under the corporate laws of a state
or province other than British Columbia.
(b) In the event of your actual termination of employment
contemporaneous with or during the one-year period following a Change in
Control, except (x) because of your death, (y) by the Company for Cause or
Disability (as hereinafter defined) or (z) by you other than for Good Reason (as
hereinafter defined): (i) you shall be entitled to receive an amount equal to
100% of your current fiscal year's total compensation (base salary, benefits and
any bonuses paid to you during the preceding twelve (12) months) to be paid in
accordance with the terms of this Agreement; and (ii) the following additional
provisions shall apply (which provisions shall supersede any other provisions of
the Agreement, including but not limited to Section 1 of the Agreement, to the
extent such provisions are inconsistent with the following provisions):
(1) Disability. For purposes of this Section 2(b), termination
by the Company of your employment based on "Disability" shall mean termination
because of your absence from your duties with the Company for one hundred eighty
(180) consecutive days as a result of your incapacity and inability to perform
the essential functions of your position with reasonable accommodation, unless
within thirty (30) days after Notice of Termination (as hereinafter defined) is
given to you following such absence, you shall have returned to the performance
of the essential functions of your position with reasonable accommodation.
(2) Cause. For purposes of this Section 2, termination by the
Company of your employment for "Cause" shall mean termination for "Cause" as
defined in Section 1.2.
(3) Good Reason. Termination by you of your employment for
"Good Reason" shall mean termination based on:
(A) a determination by you, in your reasonable
judgment, that there has been a material adverse change in your status or
position(s) as an executive officer of the Company as in effect immediately
prior to the Change in Control, including, without limitation, a material
adverse change in your status or position as a result of a diminution in your
duties or responsibilities (other than, if applicable, any such change directly
attributable to the fact that the Company is no longer publicly owned) or the
assignment to you of any duties or responsibilities which are inconsistent with
such status or position(s), or any removal of you from, or any failure to
reappoint or reelect you to, such position(s) (except in connection with the
termination of your employment for Cause or Disability or as a result of your
death or by you other than for Good Reason);
(B) a reduction by the Company in your Base Salary as
in effect immediately prior to the Change in Control;
-3-
(C) the failure by the Company to continue in effect
any Plan (as hereinafter defined) in which you are participating at the time of
the Change in Control of the Company (or Plans providing you with at least
substantially similar benefits) other than as a result of the normal expiration
of any such Plan in accordance with its terms as in effect at the time of the
Change in Control, or the taking of any action, or the failure to act, by the
Company which would adversely affect your continued participation in any of such
Plans on at least as favorable a basis to you as is the case on the date of the
Change in Control or which would materially reduce your benefits in the future
under any of such Plans or deprive you of any material benefit enjoyed by you at
the time of the Change in Control;
(D) the failure by the Company to provide and credit
you with the number of paid vacation days to which you are then entitled in
accordance with the Company's normal vacation policy as in effect immediately
prior to the Change in Control;
(E) the Company's requiring you to be based at any
office that is greater than twenty-five miles from where your office is located
immediately prior to the Change in Control except for required travel on the
Company's business to an extent substantially consistent with the business
travel obligations which you undertook on behalf of the Company prior to the
Change in Control;
(F) the failure by the Company to obtain from any
Successor (as hereinafter defined) the assent to this Agreement contemplated by
Section 2(b)(7) hereof;
(G) any purported termination by the Company of your
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 2(b)(4) below (and, if applicable, Section 2(b)(2)
above); and for purposes of this Agreement, no such purported termination shall
be effective; or
(H) any refusal by the Company to continue to allow
you to attend to matters or engage in activities not directly related to the
business of the Company which, prior to the Change in Control, you were
permitted by the Board to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan
or any employee benefit plan such as a thrift, pension, profit sharing, medical,
disability, accident, life insurance plan or a relocation plan or policy or any
other plan, program or policy of the Company intended to benefit employees.
(4) Notice of Termination. Any purported termination by the
Company or by you following a Change in Control shall be communicated by written
notice to the other party hereto which indicates the specific termination
provision in this Agreement relied upon (the "Notice of Termination").
-4-
(5) Date of Termination. "Date of Termination" following a
Change in Control shall mean (A) if your employment is to be terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that
you shall not have returned to the performance of the essential functions of
your position with reasonable accommodation during such thirty (30) day period),
(B) if your employment is to be terminated by the Company for any reason other
than death or Disability or by you pursuant to Sections 2(b)(3)(F) or 2(b)(7)
hereof or for any other Good Reason, the date specified in the Notice of
Termination, or (C) if your employment is terminated on account of your death,
the day after your death. In the case of termination of your employment by the
Company for Cause pursuant to Subsection 2(b)(2) hereof, if you have not
previously expressly agreed in writing to the termination, then within thirty
(30) days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Company that a dispute exists concerning the
Termination, in which event the Date of Termination shall be the date set either
by mutual written agreement of the parties or by such court having the matter
before it. During the pendency of any such dispute, the Company will continue to
pay you your full compensation in effect just prior to the time the Notice of
Termination is given and until the dispute is resolved. However, if such court
issues a final and non-appealable order finding that the Company had Cause to
terminate you, then you must return all compensation paid to you after the Date
of Termination specified in the Notice of Termination previously received by
you.
(6) Compensation Upon Termination or During Disability; Other Agreements.
(A) During any period following a Change in Control of the
Company that you fail to perform your duties as a result of incapacity due to
physical or mental illness, you shall continue to receive your Base Salary at
the rate then in effect and any benefits or awards under any Plan shall continue
to accrue during such period, to the extent not inconsistent with such Plans,
until and unless your employment is terminated pursuant to and in accordance
with this Section 2(b). Thereafter, your benefits shall be determined in
accordance with the Plans then in effect.
(B) If your employment is terminated for Cause following a
Change in Control of the Company, the Company shall pay to you your Base Salary
through the Date of Termination at the rate in effect just prior to the time a
Notice of Termination is given plus any benefits or awards (including both the
cash and stock components) which pursuant to the terms of any Plans have been
earned or become payable, but which have not yet been paid to you. Thereupon the
Company shall have no further obligations to you under this Agreement.
(7) Successors, Binding Agreement.
(A) The Company will seek, by written request at least five
(5) business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person, by agreement in form and substance satisfactory
to you, assent to the fulfillment of the Company's obligations under this
Agreement. Failure of such Person to furnish such assent by the later of (i)
three (3) business days prior to the time such Person becomes a Successor or
(ii) two (2) business days after such Person receives a written request to so
assent shall constitute Good Reason for termination by
-5-
you of your employment if a Change in Control of the Company occurs or has
occurred. For purposes of this Agreement, "Successor" shall mean any person that
succeeds to, or has the practical ability to control (either immediately or with
the passage of time), the Company's business directly, by merger or
consolidation, or indirectly, by purchase of the Company's securities eligible
to vote for the election of directors, or otherwise.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder if you had continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if no such designee exists, to your estate.
(C) For purposes of this Section 2, the "Company" shall
include any subsidiaries of the Company and any corporation or other entity
which is the surviving or continuing entity in respect of any merger,
consolidation or form of business combination in which the Company ceases to
exist; provided, however, for purposes of determining whether a Change in
Control has occurred herein, the term "Company" shall refer to PLC Systems Inc.
or its Successor(s).
(8) Fees and Expenses; Mitigation.
(A) The Company shall reimburse you, on a current
basis, for all reasonable legal fees and related expenses incurred by you in
connection with the Agreement following a Change in Control of the Company,
including without limitation, (i) all such fees and expenses, if any, incurred
in contesting or disputing any termination of your employment or (ii) your
seeking to obtain or enforce any right or benefit provided by this Agreement, in
each case, regardless of whether or not your claim is upheld by a court of
competent jurisdiction; provided, however, you shall be required to repay any
such amounts to the Company to the extent that a court issues a final and
non-appealable order setting forth the determination that the position taken by
you was frivolous or advanced by you in bad faith.
(B) You shall not be required to mitigate the amount
of any payment the Company becomes obligated to make to you in connection with
this Agreement, by seeking other employment or otherwise.
(9) Taxes. All payments to be made to you under this Agreement
will be subject to required withholding of federal, state and local income and
employment taxes.
(d) Notwithstanding any other provision of this Agreement, in the event
that any payment of benefit received or to be received by you as a result of or
in connection with a Change in Control, whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company (all such
payment and benefits being hereinafter called the "Total Payments") would
subject you to the excise tax (the "Excise Tax") imposed under Section 4999 of
the Internal Revenue
-6-
Code of 1986, as amended (the "Code"), then, to the extent necessary to
eliminate any such imposition of the Excise Tax (after taking into account any
reduction in the Total Payments in accordance with the provisions of any other
plan, arrangement or agreement, if any), (a) any non-cash severance payments
otherwise payable to you shall first be reduced (if necessary, to zero), and (b)
any cash severance payment otherwise payable to you shall next be reduced. For
purposes of the immediately preceding sentence, (i) no portion of the Total
Payments, the receipt or enjoyment of which you shall have effectively waived in
writing, shall be taken into account, (ii) no portion of the Total Payment shall
be taken into account which in the opinion of nationally-recognized tax counsel
or certified public accountants (in each case as selected by you) does not
constitute a "parachute payment" within the meaning of Section 280G of the Code,
including, without limitation, by reason of Section 280G(b)(2) or (b)(4)(A) of
the Code, (iii) any payments to you shall be reduced only to the extent
necessary so that the Total Payments [other than those referred to in clauses
(i) and (ii)] in their entirety constitute reasonable compensation for services
actually rendered within the meaning of section 280G(4)(B) of the Code or are
otherwise not subject to disallowance as deductions, in the opinion of the tax
counsel or the accountants referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by such accountants in accordance with the
requirements of section 280G(d)(3) and (4) of the Code (and such determination
shall be reviewed by such tax counsel).
3. Post-Employment Activities.
3.1 For a period of one (1) year after the termination or
expiration, for any reason, of your employment with the Company hereunder,
absent the Company's prior written approval, you will not directly or indirectly
engage in activities similar or reasonably related to those in which you shall
have engaged hereunder during the two years immediately preceding termination or
expiration for, nor render services similar or reasonably related to those which
you shall have rendered hereunder during such two years to, any person or entity
whether now existing or hereafter established which directly competes with (or
proposes or plans to directly compete with) the Company ("Direct Competitor") in
any line of business engaged in or under development by the Company. Nor shall
you entice, induce or encourage any of the Company's other employees to engage
in any activity which, were it done by you, would violate any provision of this
Section 3. As used in this Section 3.1, the term "any line of business engaged
in or under development by the Company" shall be applied as at the date of
termination of your employment, or, if later, as at the date of termination of
any post-employment consultation.
3.2 For a period of one (1) year after the termination of your
employment with the Company, the provisions of Section 3.1 shall be applicable
to you and you shall comply there with. As applied to such one (1) year
post-employment period, the term "any other line of business engaged in or under
development by the Company," as used in Section 3.1, shall be applied as at the
date of termination of your employment with the Company or, if later, as at the
date of termination of any post-employment consultation with the Company.
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3.3 No provision of this Agreement shall be construed to
preclude you from performing the same services which the Company hereby retains
you to perform for any person or entity which is not a Direct Competitor of the
Company upon the expiration or termination of your employment (or any
post-employment consultation) so long as you do not thereby violate any term of
the Proprietary Information and Inventions Agreement.
4. Remedies. Your obligations under the provisions of Section 3 of this
Agreement (as modified by Section 6, if applicable) shall survive the expiration
or termination of your employment (whether through your resignation or
otherwise) with the Company. You acknowledge that a remedy at law for any breach
or threatened breach by you of the provisions of Section 3 would be inadequate
and you therefore agree that the Company shall be entitled to such injunctive
relief in case of any such breach or threatened breach.
5. Assignment. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation and any
assignee of all or substantially all of its business and properties, but, except
as to any such successor or assignee of the Company, neither this Agreement nor
any rights or benefits hereunder may be assigned by the Company or by you,
except by operation of law.
6. Interpretation. IT IS THE INTENT OF THE PARTIES THAT in case any one
or more of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. MOREOVER, IT IS THE
INTENT OF THE PARTIES THAT if any one or more of the provisions contained in
this Agreement is or becomes or is deemed invalid, illegal or unenforceable or
in case any provision shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, such provision shall be
construed by amending, limiting and/or reducing it to conform to applicable laws
so as to be valid and enforceable or, if it cannot be so amended without
materially altering the intention of the parties, it shall be stricken and the
remainder of this Agreement shall remain in full force and effect.
7. Notices. Any notice which the Company is required to or may desire
to give you shall be given by personal delivery or registered or certified mail,
return receipt requested, addressed to you at your address of record with the
Company, or at such other place as you may from time to time designate in
writing. Any notice which you are required or may desire to give to the Company
hereunder shall be given by personal delivery or by registered or certified
mail, return receipt requested, addressed to the Company at its principal
office, or at such other office as the Company may from time to time designate
in writing. The date of personal delivery or the date of mailing any notice
under this Section 7 shall be deemed to be the date of delivery thereof.
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8. Waivers. If either party should waive any breach of any provision of
this Agreement, such party shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
9. Complete Agreement; Amendments. The foregoing is the entire
agreement of the parties with respect to the subject matter hereof, superseding
any previous oral or written communications, representations, understandings, or
agreements with the Company or any officer or representative thereof. Any
amendment to this Agreement or waiver by the Company of any right hereunder
shall be effective only if evidenced by a written instrument executed by the
parties hereto, upon authorization of the Company's Board of Directors. Unless
in direct contradiction with the provisions of this Agreement, all
confidentiality and intellectual property agreements between the Company and you
are hereby ratified and confirmed in all respects.
10. Headings. The headings of the Sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning of this Agreement.
11. Counterparts. This Agreement may be signed in two counterparts,
each of which shall be deemed an original and both of which shall together
constitute one agreement.
12. Governing Law. This Agreement shall be governed by and construed
under Massachusetts law.
13. Arbitration of Disputes. Subject to the rights of the parties to
seek injunctive relief as described herein, any controversy or claim arising out
of, or relating to, any provision of this Agreement shall be settled by binding
arbitration in accordance with the laws of the Commonwealth of Massachusetts by
three arbitrators, one of whom shall be appointed by the Company, one of whom
shall be appointed by you, and the third arbitrator who shall be appointed by
the first two arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator shall be appointed
by the American Arbitration Association in the City of Boston. Such arbitration
shall be conducted in the City of Boston in accordance with the rules of the
American Arbitration Association, except with respect to the selection of
arbitrators, which shall be as provided in this Section. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof and shall not be appealable. The prevailing party in such arbitration
proceeding shall be entitled to reimbursement by the other party of all
reasonable legal fees and other costs incurred by the prevailing party in
connection with such proceeding, including any legal fees and costs incurred in
connection with the enforcement of any award.
14. Advice of Separate Counsel. The Company's counsel, O'Connor, Broude
& Aronson, has prepared this document on behalf of the Company. You acknowledge
that you have been advised to review this Agreement with your own legal counsel
and other advisors of your choosing and that prior to entering into this
Agreement, you have had the opportunity to review this Agreement with your
attorney and other advisors and have not asked (or relied upon) O'Connor, Broude
& Aronson to represent you in this matter.
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If you are in agreement with the foregoing, please sign your name
below, whereupon this Agreement shall become binding in accordance with its
terms. Please then return this Agreement to the Company. (You may retain for
your records the accompanying counterpart of this Agreement enclosed herewith).
Very truly yours,
PLC SYSTEMS INC.
By: /s/ M. Lee Hibbs
------------------------------
M. Lee Hibbs, President
Accepted and Agreed:
/s/ Patricia L. Murphy
- - ----------------------------------
Patricia L. Murphy
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PLC SYSTEMS INC.
1993 FORMULA STOCK OPTION PLAN
ARTICLE I
PURPOSE OF THE PLAN
The purpose of this Plan is to encourage and enable non-employee
Directors who are in a position to make significant contributions to the success
of PLC SYSTEMS INC. and of its affiliated corporations upon whose judgment,
initiative and efforts the Corporation depends for the successful conduct of its
business, to acquire a closer identification of their interests with those of
the Corporation by providing them with opportunities to purchase stock in the
Corporation pursuant to options granted hereunder, thereby stimulating their
efforts on behalf of the Corporation and strengthening their desire to remain
involved with the Corporation. Any non-employee Director designated to
participate in the Plan is referred to as a "Participant."
ARTICLE II
DEFINITIONS
2.1 "Affiliated Corporation" means any stock corporation of which a
majority of the voting common or capital stock is owned directly or indirectly
by the Corporation.
2.2 "Award" means an Option granted under Article V.
2.3 "Board" means the Board of Directors of the Corporation or, if one
or more has been appointed, a Committee of the Board of Directors of the
Corporation.
2.4 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.5 "Committee" means a Committee of not less than two members of the
Board appointed by the Board to administer the Plan.
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2.6 "Corporation" means PLC SYSTEMS INC. a British Columbia corporation
and any successor corporation thereto.
2.7 "Non-Employee" means any person who is not a regular full-time or
part-time employee of the Corporation or an Affiliated Corporation on or after
September 16, 1993.
2.8 "Non-Qualified Option" means any option not intended to qualify as
an Incentive Stock Option.
2.9 "Option" means a Non-Qualified Option granted by the Board under
Article V of this Plan in the form of a right to purchase Stock evidenced by an
instrument containing such provisions as the Board may establish.
2.10 "Participant" means a person who is to receive an award under the
Plan.
2.11 "Plan" means this 1993 Formula Stock Option Plan.
2.12 "Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
2.13 "Restricted Period" means the period of time selected by the
Committee during which an award may be forfeited by the person.
2.14 "Stock" means the Common Stock, no par value, of the Corporation
or any successor, including any adjustments in the event of changes in capital
structure of the type described in Article IX.
ARTICLE III
ADMINISTRATION OF THE PLAN
3.1 Administration by Board. This Plan may be administered by the Board
of Directors or by a committee of the Board of Directors of the Corporation. If
a committee administers this
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Plan, the Board may, from time to time, increase the size of the Committee or
committees and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee or committees and
thereafter directly administer the Plan. No member of the Board or a committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any options granted hereunder.
3.2 Powers. The Board of Directors and/or any committee appointed by
the Board shall have full and final authority to operate, manage and administer
the Plan on behalf of the Corporation.
This authority includes, but is not limited to:
(a) The power to grant Awards conditionally or unconditionally,
(b) The power to prescribe the form or forms of any instruments
evidencing Awards granted under this Plan,
(c) The power to interpret the Plan,
(d) The power to delegate responsibility for Plan operation,
management and administration on such terms, consistent with
the Plan, as the Board may establish,
(e) The power to delegate to other persons the responsibility of
performing ministerial acts in furtherance of the Plan's
purpose, and
(f) The power to engage the services of persons, companies, or
organizations in furtherance of the Plan's purpose, including
but not limited to, banks, insurance companies, brokerage
firms and consultants.
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ARTICLE IV
ELIGIBILITY
4.1 Eligible Persons. All non-employee Directors are eligible to be
granted Non-Qualified Option Awards under this Plan provided the person has not
irrevocably elected to be ineligible to participate in the Plan.
ARTICLE V
STOCK OPTION AWARDS
5.1 Number of Shares. Subject to the provisions of Article IX of this
Plan, the aggregate number of shares of Stock for which Options may be granted
under this Plan shall not exceed Two Hundred and Fifty Thousand (250,000)
shares. Options shall be granted under this Plan, without approval or discretion
on the part of the Board, to non-employee Directors as follows: beginning on
September 16, 1993, and annually thereafter on the date immediately following
the Corporation's annual meeting of shareholders, the Corporation shall grant,
to each of its non-employee Directors, options to purchase a total of 10,000
shares of Stock. The options shall be granted to a non-employee Director only if
the Director is a Director on the date of the grant and has attended, during the
Corporation's fiscal year immediately preceding the grant, at least 75% of
meetings of the Board of Directors and the Committees on which the Director has
served. The exercise price of options granted to non-employee Directors shall be
the fair market value as defined herein, of the shares of Stock and said options
shall vest and be exercisable in equal quarterly installments commencing on the
date such option is granted and thereafter at the beginning of each calendar
quarter subsequent to September 30, subject to the Director's continued service
on such dates.
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Notwithstanding the foregoing, for individuals who currently serve as
non-employee Directors of the Corporation, all prior options issued to such
Directors pursuant to the Corporation's 1992 Stock Option Plan shall terminate
as of the date of this Plan and each such Director shall receive as of the date
of this Plan an option to purchase 30,000 shares of the Corporation's Common
Stock which shares shall vest as follows: 10,000 shares immediately, 10,000
shares if the individual is a Director of the Corporation on January 1, 1994 and
10,000 shares if the individual serves as a Director of the Corporation on
January 1, 1995, except that all such options shall vest immediately in the
event of a sale or acquisition of all or substantially all of the assets of the
Corporation or the sale of all or substantially all of the Corporation's stock
to an acquiring party. In addition, such Directors shall not be eligible to
receive options as described in the preceding paragraph until June 1, 1995.
Each non-employee Director who becomes a Director after September 16,
1993 will receive, on the date he or she first becomes a Director, options to
purchase a total of 30,000 shares of Stock. Notwithstanding the first paragraph
of this Section 5.1, each non-employee director shall not be entitled to receive
such 10,000 additional options until the annual meeting next following the
complete vesting of the initial 30,000 options granted hereunder. The exercise
price of such options will be the fair market value of the shares of Stock, as
defined herein, and said options shall vest and be exercisable in equal
one-third amounts over a period of three years, commencing on the date such
option is granted, subject to the Director's continued service on such dates.
The shares to be delivered upon exercise of Options under this Plan
shall be made available, at the discretion of the Board, either from authorized
but unissued shares or from previously issued
-5-
and reacquired shares of Stock held by the Corporation as treasury shares,
including shares purchased in the open market.
Stock issuable upon exercise of an option granted under the Plan may be
subject to such restrictions on transfer or repurchase rights as shall be
determined by the Board of Directors.
5.2 Effect of Expiration, Termination or Surrender. If an Option under
this Plan shall expire or terminate unexercised as to any shares covered
thereby, or shall cease for any reason to be exercisable in whole or in part, or
if the Company shall reacquire any unvested shares issued pursuant to Options
under the Plan, such shares shall thereafter be available for the granting of
other Options under this Plan.
5.3 Term of Options. Each Option granted hereunder shall be for a term
of ten (10) years from the date of granting thereof. Each Option shall be
subject to earlier termination as provided in Sections 6.3 and 6.4.
5.4 Fair Market Value. If, at the time an Option is granted under the
Plan, the Corporation's Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such Option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Stock on the principal national securities exchange on which the Stock is
traded, if the Stock is then traded on a national securities exchange; or (ii)
the last reported sale price (on that date) of the Stock on the NASDAQ National
Market List, if the Stock is not then traded on a national securities exchange;
or (iii) the closing bid price (or average of bid prices) last quoted (on that
date) by an established quotation service for over-the-counter securities, if
the Stock is not reported on the NASDAQ National Market List. However, if the
Stock is not publicly traded at the time an Option is granted
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under the Plan, "fair market value" shall be deemed to be the fair value of the
Stock as determined by the Board after taking into consideration all factors
which it deems appropriate, including, without limitation, recent sale and offer
prices of the Stock in private transactions negotiated at arm's length.
5.5 Non-Transferability of Options. No Option granted under this Plan
shall be transferable by the grantee otherwise than by will or the laws of
descent and distribution, and such Option may be exercised during the grantee's
lifetime only by the grantee.
5.6 Foreign Nationals. Awards may be granted to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
ARTICLE VI
EXERCISE OF OPTION
6.1 Exercise. Each Option granted under this Plan shall be exercisable
on such date or dates and during such period and for such number of shares as
shall be determined pursuant to the provisions of the instrument evidencing such
Option. The Board shall have the right to accelerate the date of exercise of any
option.
6.2 Notice of Exercise. A person electing to exercise an Option shall
give written notice to the Corporation of such election and of the number of
shares he or she has elected to purchase and shall at the time of exercise
tender the full purchase price of the shares he or she has elected to purchase.
The purchase price can be paid partly or completely in shares of the
Corporation's stock valued at Fair Market Value as defined in Section 5.4
hereof, or by any such other lawful
-7-
consideration as the Board may determine. Until such person has been issued a
certificate or certificates for the shares so purchased and has fully paid the
purchase price for such shares, he or she shall possess no rights of a record
holder with respect to any of such shares. If the Corporation elects to receive
payment for such shares by means of a promissory note, such note, if issued to
an officer, director or holder of 5% or more of the Company's outstanding Common
Stock, shall provide for payment of interest at a rate no less than the interest
rate then payable by the Company to its principal commercial lender, or if the
Company has no loan outstanding to a commercial lender, then the interest rate
payable shall equal the prevailing prime rate of interest then charged by
commercial banks headquartered in Massachusetts (as determined by the Board of
Directors in its reasonable discretion) plus two percent.
6.3 Option Unaffected by Certain Changes. A Director's term shall be
considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written approval of
the Board shall not be considered an interruption of service under the Plan.
If the optionee shall cease to be a Director for any reason other than
death, such Option shall thereafter be exercisable only to the extent of the
purchase rights, if any, which have accrued as of the date of such cessation;
provided that upon any such cessation of service, such remaining rights to
purchase shall in any event terminate upon the the expiration of the original
term of the Option.
6.4 Death of Optionee. Should an optionee die while in possession of
the legal right to exercise an Option or Options under this Plan, such persons
as shall have acquired, by will or by the
-8-
laws of descent and distribution, the right to exercise any Options theretofore
granted, may, unless otherwise provided by the Board in any instrument
evidencing any Option, exercise such Options until the expiration of the
original term of the Options, provided, further, that any such exercise shall be
limited to the purchase rights that have accrued as of the date when the
optionee ceased to be a Director whether by death or otherwise.
ARTICLE VII
REPORTING PERSON LIMITATIONS
To the extent required to qualify for the exemption provided by Rule
16b-3 under the Securities Exchange Act of 1934, and any successor provision, at
least six months must elapse from the date of acquisition of an Option by a
Reporting Person to the date of disposition of such Option (other than upon
exercise) or its underlying Common Stock.
ARTICLE VIII
TERMS AND CONDITIONS OF OPTIONS
Options shall be evidenced by instruments (which need not be identical)
in such forms as the Board may from time to time approve. Such instruments shall
conform to the terms and conditions set forth in Articles V and VI hereof and
may contain such other provisions as the Board deems advisable that are not
inconsistent with the Plan, including restrictions applicable to shares of Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Board may specify that such Non-Qualified Option shall be subject to such other
termination and cancellation provisions as the Board may determine. The Board
may from time to time confer authority and responsibility on one or more of its
own members and/or one or more officers of the Corporation to execute and
deliver such instruments. The proper officers of the Corporation are authorized
and
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directed to take any and all action necessary or advisable from time to time to
carry out the terms of such instruments.
ARTICLE IX
BENEFIT PLANS
Awards under the Plan are not discretionary. Awards may not be used in
determining the amount of compensation for any purpose under the benefit plans
of the Corporation, or an Affiliated Corporation, except as the Board may from
time to time expressly provide. Neither the Plan, an Option or any instrument
evidencing an Option confers upon any Participant any right to continue as a
Director of, or consultant or advisor to, the Company or an Affiliated
Corporation. Except as specifically provided by the Board in any particular
case, the loss of existing or potential profits granted under this Plan shall
not constitute an element of damages in the event of termination of the
relationship of a Participant even if the termination is in violation of an
obligation of the Corporation to the Participant by contract or otherwise.
ARTICLE X
AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Board may suspend the Plan or any part thereof at any time or may
terminate the Plan in its entirety. Awards shall not be granted after Plan
termination. The Plan may not be amended more than once every six months, unless
such changes are necessary to comport with changes in the Code, the Employee
Retirement Income Security Act, or the Rules thereunder. Subject to the
foregoing, the Board may also amend the Plan from time to time, except that
amendments that affect the following subjects must be approved by stockholders
of the Corporation:
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(a) Except as provided in Article XI relative to capital changes,
the number of shares as to which Options may be granted
pursuant to Article V;
(b) The maximum term of Options granted;
(c) The minimum price at which Options may be granted;
(d) The term of the Plan; and
(e) The requirements as to eligibility for participation in the
Plan.
Awards granted prior to suspension or termination of the Plan may not
be cancelled solely because of such suspension or termination, except with the
consent of the grantee of the Award.
ARTICLE XI
CHANGES IN CAPITAL STRUCTURE
The instruments evidencing Options granted hereunder shall be subject
to adjustment in the event of changes in the outstanding Stock of the
Corporation by reason of stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, combinations, exchanges or other
relevant changes in capitalization occurring after the date of an Award to the
same extent as would affect an actual share of Stock issued and outstanding on
the effective date of such change. Such adjustment to outstanding Options shall
be made without change in the total price applicable to the unexercised portion
of such options, and a corresponding adjustment in the applicable option price
per share shall be made. In the event of any such change, the aggregate number
and classes of shares for which Options may thereafter be granted under Section
5.1 of this Plan may be appropriately adjusted as determined by the Board so as
to reflect such change.
-11-
In the event of the proposed dissolution or liquidation of the
Corporation, each Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such other conditions
as the Board shall determine.
Except as expressly provided herein, no issuance by the Corporation of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.
No fractional shares shall be issued under the Plan and the optionee
shall receive from the Corporation cash in lieu of such fractional shares.
ARTICLE XII
EFFECTIVE DATE AND TERM OF THE PLAN
The Plan shall become effective on September 16, 1993. The Plan shall
continue until such time as it may be terminated by action of the Board or the
Committee; provided, however, that no Options may be granted under this Plan on
or after the tenth anniversary of the effective date hereof.
ARTICLE XIII
APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of shares
pursuant to Options granted under the Plan shall be used for general corporate
purposes.
-12-
ARTICLE XIV
GOVERNMENTAL REGULATION
The Corporation's obligation to sell and deliver shares of Stock under
this Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
ARTICLE XV
WITHHOLDING OF ADDITIONAL INCOME TAXES
Upon the exercise of a Non-Qualified Option the Corporation, in
accordance with Section 3402(a) of the Code, may require the optionee to pay
additional withholding taxes in respect of the amount that is considered
compensation includible in such person's gross income. The Board in its
discretion may condition the exercise of an Option on the payment of such
additional withholding taxes.
ARTICLE XVI
GOVERNING LAW; CONSTRUCTION
The validity and construction of the Plan and the instruments
evidencing Options shall be governed by the internal laws of the Commonwealth of
Massachusetts (without regard to the conflict of law principles thereof). In
construing this Plan, the singular shall include the plural and the masculine
gender shall include the feminine and neuter, unless the context otherwise
requires.
-13-
PLC SYSTEMS INC.
CALCULATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Weighted average number of
common shares outstanding 16,051,000 15,845,000
Common stock equivalents 979,000 1,656,000
------- ---------
Shares used to compute net income per share 17,030,000 17,501,000
Net income $1,277,000 $163,000
Net income per share $0.07 $0.01
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,183,000
<SECURITIES> 11,496,000
<RECEIVABLES> 1,840,000
<ALLOWANCES> (29,000)
<INVENTORY> 1,961,000
<CURRENT-ASSETS> 20,229,000
<PP&E> 3,605,000
<DEPRECIATION> (1,883,000)
<TOTAL-ASSETS> 22,263,000
<CURRENT-LIABILITIES> 2,905,000
<BONDS> 0
0
0
<COMMON> 53,675,000
<OTHER-SE> (34,624,000)
<TOTAL-LIABILITY-AND-EQUITY> 22,263,000
<SALES> 4,197,000
<TOTAL-REVENUES> 4,829,000
<CGS> 1,390,000
<TOTAL-COSTS> 2,210,000
<OTHER-EXPENSES> 71,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (138,000)
<INCOME-PRETAX> 1,296,000
<INCOME-TAX> 19,000
<INCOME-CONTINUING> 1,277,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,277,000
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
