SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PLC SYSTEMS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PLC SYSTEMS INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/_/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
/_/ $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, Schedule or Registration No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
PLC SYSTEMS INC.
10 FORGE PARK
FRANKLIN, MASSACHUSETTS 02038
----------------------------
NOTICE OF ANNUAL GENERAL
MEETING OF STOCKHOLDERS
----------------------------
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that an Annual General Meeting (the "Meeting")
of Members ("Stockholders") of PLC SYSTEMS INC. (the "Corporation"), a British
Columbia corporation, will be held on Monday, June 30, 1997, at 10:00 a.m. at
the Bank of Boston Auditorium, 100 Federal Street, Boston, Massachusetts 02110
for the following purposes:
1. To elect two members to the Board of Directors for a three
year term of office.
2. To appoint Ernst & Young LLP as auditors for the current
fiscal year ending December 31, 1997 and to authorize the
directors to fix the remuneration to be paid to the auditors.
3. To receive and consider the report of the directors to the
Stockholders and the consolidated financial statements of the
Corporation together with the auditor's report thereon for the
fiscal year ended December 31, 1996.
4. To consider and act upon any matters incidental to the
foregoing and any other matters that may properly come before
the Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on May 23, 1997,
as the record date for the determination of Stockholders entitled to notice of
and to vote at the Meeting and any adjournment or adjournments thereof.
We hope that all Stockholders will be able to attend the Meeting in
person. In order to assure that a quorum is present at the Meeting, please date,
sign and promptly return the enclosed proxy whether or not you expect to attend
the Meeting. A postage-prepaid envelope, addressed to U.S. Stock Transfer
Corporation, the Corporation's transfer agent, has been enclosed for your
convenience. If you attend the Meeting, your proxy, at your request, will be
returned to you and you may vote your shares in person.
By Order of the Board of Directors
NEIL H. ARONSON
Secretary
Franklin, Massachusetts
May 29, 1997
PLC SYSTEMS INC.
10 FORGE PARK
FRANKLIN, MASSACHUSETTS 02038
-------------------
PROXY STATEMENT
-------------------
May 29, 1997
THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND
MANAGEMENT OF PLC SYSTEMS INC. (THE "CORPORATION") FOR USE AT THE ANNUAL GENERAL
MEETING (THE "MEETING") OF MEMBERS (THE "STOCKHOLDERS") TO BE HELD ON MONDAY,
JUNE 30, 1997, AT 10:00 A.M. AT THE BANK OF BOSTON AUDITORIUM, 100 FEDERAL
STREET, BOSTON, MASSACHUSETTS 02110, AND AT ANY ADJOURNMENT OR ADJOURNMENTS
THEREOF.
Stockholders of record at the close of business on May 23, 1997 will be
entitled to vote at the Meeting or any adjournment or adjournments thereof. On
that date, 16,627,537 shares of Common Stock, no par value per share, of the
Corporation ("Common Stock" or "Voting Securities") were issued and outstanding.
Each share of Common Stock entitles the holder to one vote with respect to all
matters submitted to Stockholders at the Meeting. No other voting securities of
the Corporation are authorized.
A quorum for the Meeting is two Stockholders or proxyholders
representing two Stockholders or one Stockholder and a proxyholder representing
one Stockholder holding shares representing at least ten percent (10%) of the
shares outstanding present at the Meeting. Each proposal to be voted upon by the
Stockholders of the Corporation requires the votes of a majority of shares of
Common Stock present at the Meeting for passage. Abstentions are counted for
purposes of determining the presence or absence of a quorum at the Meeting but
are not counted in tabulation of the votes cast on proposals presented to
Stockholders. British Columbia law does not recognize broker non-votes (which,
under U.S. law, result when a broker holding shares for a beneficial holder has
not received timely voting instructions on certain matters from such beneficial
holder and the broker does not have discretionary voting power on such matters).
However, under the provisions of the British Columbia Company Act, a broker has
the right to vote on all matters submitted for Stockholder vote if the broker
(i) provides to the beneficial holder a copy of all Meeting-related materials,
and (ii) provides to the beneficial holder a request for voting instructions,
stating that if voting instructions are not received from the beneficial holder
at least twenty-four (24) hours prior to the time at which all proxies must be
submitted for tabulation, then the broker may in his or her discretion vote the
beneficial holder's shares or appoint a proxyholder to vote the shares at the
Meeting.
-1-
The directors and officers of the Corporation as a group own or may be
deemed to control approximately 7.7% of the outstanding shares of Common Stock
of the Corporation. Each of the directors and officers has indicated his or her
intent to vote all shares of Common Stock owned or controlled by him or her in
favor of each item set forth herein.
Execution of a proxy will not in any way affect a Stockholder's right
to attend the Meeting and vote in person. The proxy may be revoked at any time
before it is exercised by written notice to the Secretary prior to the Meeting,
or by giving to the Secretary a duly executed proxy bearing a later date than
the proxy being revoked at any time before such proxy is voted, or by appearing
at the Meeting and voting in person. The shares represented by all properly
executed proxies received in time for the Meeting will be voted as specified
therein. In the absence of a special choice, shares will be voted in favor of
the election of directors of those persons named in this Proxy Statement and in
favor of all other items set forth herein.
The persons named in the enclosed proxy for the Meeting are officers
and/or directors of the Corporation. STOCKHOLDERS HAVE THE RIGHT TO APPOINT SOME
OTHER PERSON, WHO NEED NOT BE A STOCKHOLDER, TO REPRESENT THE STOCKHOLDERS AT
THE MEETING BY STRIKING OUT THE NAMES OF THE PERSONS DESIGNATED IN THE
ACCOMPANYING PROXY AND BY INSERTING THAT OTHER PERSON'S NAME IN THE BLANK SPACE
PROVIDED OR BY EXECUTING A PROXY SIMILAR TO THE ENCLOSED FORM.
Shares represented by properly executed and deposited proxies will be
voted for or against or withheld from voting in accordance with the instructions
of the Stockholders on any ballot that may be called for and, if the
Stockholders specify a choice with respect to any matter to be acted upon at the
Meeting, shares represented by such proxies will be voted accordingly. IF A
STOCKHOLDER APPOINTS ONE OF THE PERSONS DESIGNATED IN THE ACCOMPANYING PROXY AS
HIS PROXYHOLDER AND DOES NOT MAKE A CHOICE TO DIRECT THE SAID PROXYHOLDER TO
VOTE FOR OR AGAINST OR TO WITHHOLD FROM VOTING ON A MATTER OR MATTERS WITH
RESPECT TO WHICH AN OPPORTUNITY TO SPECIFY HOW THE SHARES REGISTERED IN THE NAME
OF SUCH STOCKHOLDER SHALL BE VOTED, THE PROXY SHALL BE VOTED IN ACCORDANCE WITH
THE JUDGMENT OF THE PERSONS NAMED AS ATTORNEYS IN THE PROXIES. THE ENCLOSED
PROXY CONFERS DISCRETIONARY AUTHORITY UPON THE PERSONS NAMED THEREIN WITH
RESPECT TO AMENDMENTS OR VARIATIONS TO MATTERS IDENTIFIED IN THE NOTICE OF THE
MEETING AND WITH RESPECT TO OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE
MEETING.
The Board of Directors knows of no other matter to be presented at the
Meeting. If any other matter should be presented at the Meeting upon which a
vote may be taken, such shares represented by all proxies received by the Board
of Directors will be voted with respect thereto in accordance with the judgment
of the persons named as proxyholder in the proxies. The Board of Directors knows
of no matter to be acted upon at the Meeting that would give rise to appraisal
rights for dissenting security-holders.
An annual report containing financial statements for the fiscal years
ended December 31, 1996, 1995 and 1994 is being mailed herewith to all
Stockholders entitled to vote. This Proxy Statement and the accompanying proxy
were first mailed to Stockholders on or about May 29, 1997.
-2-
Advance notice of the Meeting was published in The Province newspaper
in Vancouver, British Columbia, on May 5, 1997 and delivered to the British
Columbia Superintendent of Brokers in accordance with Section 135 of the Company
Act (British Columbia).
ITEM NO. 1
ELECTION OF DIRECTORS
The Corporation's Articles, as amended, provide that directors may be
elected for a term of office of one or more years as may be specified in the
resolution by which the directors are elected. At the Corporation's 1995 Annual
Meeting, it was resolved that the members of the Board of Directors shall be
classified and elected as nearly as possible into three classes, each with
approximately one-third of the members of the Board of Directors. The classified
board is designed to assure continuity and stability in the Board of Director's
leadership and policies. Dr. Rudko and Mr. Pendergast are classified as Class I
directors and were elected to serve a three year term, expiring at the 1998
Annual Meeting, Mr. Pulkonik and Ms. Murphy are classified as Class II directors
and are being nominated to serve as directors at this Meeting until the 2000
Annual Meeting, and Drs. Norton and Smith and Mr. Capozzi are classified as
Class III directors and were elected to serve until the 1999 Annual Meeting. The
Company Act (British Columbia) requires that the Corporation's President serve
on the Board of Directors. Since Dr. Rudko will become the Interim Acting
President of the Corporation effective June 30, 1997, this requirement will be
satisfied. However, as a result of Mr. Hibbs' resignation as a director
effective June 30, 1997, there will be a vacancy on the Board. In order to fill
this vacancy, Ms. Murphy is being nominated to serve as a member of the Board of
Directors. In order to continue to satisfy the Company Act requirement, Ms.
Murphy has agreed with the Corporation to resign as a director effective
immediately upon the Corporation hiring a new President and Chief Executive
Officer, and Dr. Rudko will resign as Interim Acting President. The new
President and Chief Executive Officer will then be appointed by the Board of
Directors to fill Ms. Murphy's vacancy and serve the remainder of such term. The
successors to the class of directors whose terms expire at that meeting would be
elected for a term of office to expire at the third succeeding annual meeting
after their election and until their successors have been duly elected by the
Stockholders. Directors chosen to fill vacancies on a classified board shall
hold office until the next election of the class for which directors shall have
been chosen, and until their successors are duly elected by the Stockholders.
Officers are appointed by and serve at the discretion of the Board of Directors,
subject to their employment contracts.
Shares represented by all proxies received by the Board of Directors
and not so marked as to withhold authority to vote for an individual director,
or for all directors, will be voted (unless one or more nominees are unable or
unwilling to serve) FOR the election of Mr. Pulkonik and Ms. Murphy as Class II
directors, each to serve until the 2000 Annual Meeting. The Board of Directors
knows of no reason why such nominees should be unwilling to serve, but if such
should be the case, proxies will be voted for the election of some other person
or for fixing the number of directors within Class II at a lesser number.
-3-
The following table sets forth the ages of and positions and offices
presently held by the nominee directors and the directors of the Corporation, as
well as the date each individual was first elected a director. For information
about ownership of the Corporation's Voting Securities by each director and the
nominees, see "Beneficial Ownership of Common Stock."
<TABLE>
<CAPTION>
DATE CLASS TO
FIRST WHICH THE
BECAME A NOMINEE
NAME AGE DIRECTOR POSITION BELONGS
- ---- --- -------- -------- -------
<S> <C> <C> <C> <C>
Robert I. Rudko, Ph.D. 55 4/14/92 Chairman of the Board I
of Directors, Interim Acting
President (effective June
30, 1997) and Chief
Scientist
M. Lee Hibbs 50 6/10/94 President, Chief Executive II
Officer and Director
Edward H. Pendergast 63 9/24/92 Lead Outside Director I
Harold P. Capozzi 72 4/15/91 Director III
Patricia L. Murphy* 46 N/A Chief Financial Officer, II
Treasurer and Nominee
Director
H.B. Brent Norton, M.D. 36 6/10/94 Director III
Kenneth J. Pulkonik* 56 9/14/92 Director II
Roberts A. Smith, Ph.D. 68 1/22/93 Director III
</TABLE>
- ----------------
*Nominees for election at this Meeting.
The Corporation has agreed for five years from September 1992 to
nominate and use its best efforts to cause the election of a designee of H.J.
Meyers & Co., the Corporation's representative (the "Representative") in its
September 17, 1992 public offering, reasonably acceptable to the Corporation for
election to its Board of Directors. The Representative selected Dr. Smith as its
designee.
-4-
Under British Columbia corporate law, a majority of the Corporation's
directors must be residents of Canada and one director must be a resident of
British Columbia. As a result, Stockholders may be limited in the persons they
can nominate and elect as directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires executive officers and directors, and persons who beneficially own more
than ten percent (10%) of the Corporation's stock to file initial reports of
ownership on Form 3, reports of changes in ownership on Form 4 and annual
statements of changes in beneficial ownership on Form 5 with the Securities and
Exchange Commission ("SEC") and any national securities exchange on which the
Corporation's securities are registered. Executive officers, directors and
greater than ten percent (10%) beneficial owners are required by SEC regulations
to furnish the Corporation with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Corporation and written representations from its executive officers and
directors, the Corporation believes that all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than ten percent
(10%) beneficial owners were complied with for the fiscal year ended December
31, 1996 ("Fiscal 1996), except for two Form 4's representing the sale of an
aggregate of 4,250 shares by Harold P. Capozzi.
COMMITTEES
The Board of Directors established an Audit Committee, a Compensation
Committee, and a Nominating Committee in January 1993.
Messrs. Pulkonik and Pendergast serve as members of the Audit
Committee. The Audit Committee is concerned primarily with recommending the
selection of, and reviewing the effectiveness of, the Corporation's independent
auditors and reviewing the effectiveness of the Corporation's accounting
policies and practices, financial reporting and internal controls. The Audit
Committee reviews any transactions which involve a potential conflict of
interest and the scope of independent audit coverages, the fees charged by the
independent auditors, and internal control systems. The Audit Committee met two
times and held one telephonic meeting in Fiscal 1996.
Dr. Smith and Mr. Pendergast serve on the Compensation Committee. The
Compensation Committee is responsible for setting and administering the policies
which govern annual compensation for the Corporation's executives. The
Compensation Committee negotiates and proposes to the Board of Directors
compensation arrangements for officers, other key employees, certain consultants
and directors of the Corporation. Following review and approval by the
Compensation Committee of the compensation policies, all issues pertaining to
executive compensation are submitted to the Board of Directors for approval. The
Compensation Committee met formally one time and had one telephonic meeting in
Fiscal 1996.
-5-
Dr. Rudko and Mr. Capozzi serve on the Nominating Committee, which was
established for the purpose of nominating potential new directors. The
Nominating Committee will consider nominees recommended by Stockholders. A
Stockholder wishing to nominate a candidate should forward the candidate's name
and a detailed background of the candidate's qualifications to the Secretary of
the Corporation. The Nominating Committee did not meet in Fiscal 1996.
The Board of Directors held five meetings during Fiscal 1996. All of
the Corporation's directors attended all of the meetings of the Board of
Directors and of those committees of which they were members that were held
during Fiscal 1996.
No director or executive officer is related to any other director or
executive officer by blood or marriage.
BACKGROUND
The following is a brief account of the business experience of the
nominee directors and each director:
ROBERT I. RUDKO, PH.D. Dr. Rudko has served as Chairman of the
Corporation since April 1992, President of the Corporation from April 1992 until
October 1993, Chief Scientist of the Corporation since October 1993 and
President of Laser Engineering, Inc. (now known as PLC Medical Systems, Inc.
"PLC Medical"), a wholly owned subsidiary of the Corporation, since 1981.
Effective June 30, 1997, Dr. Rudko will be the Interim Acting President of the
Corporation. Dr. Rudko has 27 years of experience in the analysis, design,
development, and manufacture of lasers and surgical laser systems. Prior to
founding PLC Medical in 1981, Dr. Rudko was employed by the Research Division of
Raytheon Company, a publicly traded defense contractor, from 1967 to 1981, first
as a Senior Research Scientist and then as Principal Research Scientist. Dr.
Rudko received his Ph.D. degree in electrical engineering from Cornell
University.
M. LEE HIBBS. Mr. Hibbs has served as a director of the Corporation
since June 1994 and President and Chief Executive Officer of the Corporation
since October 1993. On April 18, 1997, Mr. Hibbs and the Corporation entered
into a severance agreement and release (the "Agreement"). Pursuant to the terms
of the Agreement, Mr. Hibbs has agreed to resign as the President and board
member of the Corporation effective June 30, 1997 and as the Chief Executive
Officer of the Corporation effective July 31, 1997. From 1991 to September 1993,
Mr. Hibbs was the President and Chief Operating Officer for Electro-Catheter
Corp., a publicly traded, New Jersey manufacturer of cardiac catheters. From
1987 to 1991, Mr. Hibbs was the General Manager of the Interventional Cardiology
Division for Mallinckrodt Medical, Inc., a division of publicly traded
Mallinckrodt Group, a company that manufactures medical products and animal
products. From 1985 to 1987, Mr. Hibbs was the Business Development and
Marketing Manager, and from 1983 to 1985, Mr. Hibbs was a Product Manager, for
the USCI International Division of C.R. Bard Inc., a publicly traded
manufacturer of medical products. Prior to 1983, Mr. Hibbs held various sales
and sales
-6-
management positions in the surgical instruments, life support systems
equipment, medical disposables and pharmaceuticals industries.
EDWARD H. PENDERGAST. Mr. Pendergast was a director of PLC Medical from
its incorporation in 1981 until 1992. Mr. Pendergast has served as a director of
the Corporation since September 1992 and as its Lead Outside Director since
March 1995. Mr. Pendergast is the President of Pendergast & Company, a privately
held management consulting firm. Mr. Pendergast also serves as acting Chief
Executive Officer of Symbus Technology, Inc., a privately held software company.
From 1984 to 1989, Mr. Pendergast served as the Chairman of Kennedy & Lehan, a
public accounting firm. Mr. Pendergast also serves as a member of the Board of
Directors of several private companies. Mr. Pendergast is a Certified Public
Accountant and the former President of the Massachusetts Society of Certified
Public Accountants.
HAROLD P. CAPOZZI. Mr. Capozzi has served as a director of the
Corporation since 1991. For approximately the last 25 years through the present,
Mr. Capozzi has worked on a part-time basis in various managerial and
operational capacities for several family-owned businesses. These businesses,
Capozzi Enterprises, Ltd., Pasadena Investments, Ltd. and Catalina Properties
Ltd., operate primarily in the real estate and real estate leasing markets and
are privately held. From 1986 to 1990, Mr. Capozzi served as the President of
International Phoenix, a publicly traded mining development company. From 1987
to 1991, Mr. Capozzi was a director for Pineridge Capital Group Inc., a publicly
traded venture capital company. From 1989 to 1991, Mr. Capozzi served as a
director for International Pastel Food Corporation, a publicly traded food
franchise company. He also served as a director for Consolidated General Western
Industries Inc., a publicly traded holding company, from 1989 to 1991. From 1990
to 1991, Mr. Capozzi served as the President of Unilens Optical Corp., a
publicly traded contact lens manufacturing company. From 1990 to 1993, Mr.
Capozzi was a director of Aegis Resources Ltd., a publicly traded mining
company. He has also served as a director for Comac Food Group Inc., from 1991
to 1993. He has been a director of Richland Mines Inc., a publicly traded
company, since 1993. He has been a director of Dynamic Associates, Inc., a
publicly traded medical company, since 1996.
PATRICIA L. MURPHY. Ms. Murphy has served as the Corporation's Chief
Financial Officer and Treasurer since May 1992 and as the Corporate Controller
of PLC Medical since December 1991. Prior to joining the Corporation, from 1989
to December 1991, she was Assistant Controller of Town & Country Corporation, a
publicly traded jewelry manufacturer, and Corporate Controller at Bytex
Corporation, a publicly traded manufacturer of computer network switching
devices, from 1983 to 1989. Ms. Murphy has also worked in public accounting at
Coopers & Lybrand LLP and is a Certified Public Accountant.
KENNETH J. PULKONIK. Mr. Pulkonik has served as a director of the
Corporation since 1992. Mr. Pulkonik has served as President and Chairman of the
Board of Rush Electronics Ltd. of Ontario, Canada, a privately held business,
since 1983. Mr. Pulkonik has also served as the Chairman of the Board for Rush
Corporation, the United States subsidiary of Rush Electronics Ltd.,
-7-
a privately held company, since 1987. In 1971, Mr. Pulkonik co-founded Rush
Industries, Inc., a privately held industrial distributor to the electronics
industry in the New England area.
ROBERTS A. SMITH, PH.D. Dr. Smith has served as a director of the
Corporation since January 1993. From 1980 to 1986 and from 1988 to the present,
Dr. Smith has been the President of Viratek, Inc., a pharmaceutical development
company. He was the Vice President of SPI Pharmaceuticals, a pharmaceutical
marketing company from 1990 to 1992, and from 1985 to 1988, Dr. Smith was the
Vice President and a director of the Nucleic Acid Research Institute. Dr. Smith
has been the Vice Chairman since 1992 and a founding director since 1959 of ICN
Pharmaceuticals, Inc., the parent company of Viratek, Inc., a publicly traded
company, and SPI Pharmaceuticals. From 1958 to 1987, Dr. Smith was a full
Professor and from 1987 to the present, Dr. Smith has been a Professor Emeritus,
at the University of California, Los Angeles where he instructs in biochemistry.
H. B. BRENT NORTON, M.D. Dr. Norton has served as a director of the
Corporation since June 1994. He has served since 1991 as the President of IMI
Diagnatech Inc., a privately held biotechnology commercialization company.
Additionally, since 1990, he has owned and been the President of the Ontario
Workers Health Clinic, a privately held health assessment company. From 1990 to
1993, Dr. Norton was an associate at the Institute for Sport Medicine and Human
Performance, a privately held provider of medical care to athletes. From 1989 to
1990, Dr. Norton served as the Medical Director of Mueller Medical International
Inc., a publicly traded biotechnology company. Dr. Norton received his degree as
a Doctor of Medicine from McGill University and a Master of Business
Administration degree from the University of Western Ontario.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers and significant employees of the Corporation,
their ages and positions in the Corporation are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert I. Rudko, Ph.D. 55 Chairman of the Board of Directors, Interim Acting
President (effective June 30, 1997) and Chief Scientist
M. Lee Hibbs 50 President, Chief Executive Officer and Director
Patricia L. Murphy 46 Chief Financial Officer and Treasurer
Stephen J. Linhares 40 Vice President of Research and Development and
Clinical Trials - PLC Medical Systems, Inc.
John R. Serino 49 Vice President of Sales and Marketing - PLC Medical
Systems, Inc.
</TABLE>
-8-
The following is a brief account of the business experience of each
officer and key employee of the Corporation, other than Dr. Rudko, Mr. Hibbs and
Ms. Murphy, whose backgrounds are summarized above:
STEPHEN J. LINHARES. Mr. Linhares has served as PLC Medical's Vice
President of Research and Development and Clinical Trials since January 1996.
Mr. Linhares was PLC Medical's Director of Engineering from 1987 to 1995. He
joined PLC Medical in 1983 as an engineer and was subsequently appointed
Operations Manager in 1985 and Director of Engineering in 1987. His
responsibilities currently include managing all aspects of PLC Medical's product
research and development as well as clinical affairs. Prior to joining PLC
Medical, he was employed in the Research Division of Raytheon Company, a
publicly traded defense contractor, as an Associate Scientist from 1979 to 1983.
JOHN R. SERINO. Mr. Serino has served as PLC Medical's Vice President
of Sales and Marketing since December 1995. From 1994 to 1995, Mr. Serino was
the President of Paradigm Medical, Inc., a medical consulting company. From 1989
to 1994, Mr. Serino served in various capacities at Medtronic Cardiopulmonary, a
manufacturer of instruments used in open heart surgery. From 1976 to 1989, Mr.
Serino held various positions at Shiley, Inc., a division of Pfizer Hospital,
which manufactures and markets specialty medical products for use in
cardiovascular and respiratory care.
CERTAIN TRANSACTIONS
In February 1992, in connection with the acquisition of PLC Medical,
several of PLC Medical's officers and directors issued non-recourse promissory
notes (the "Notes") to PLC Medical to exercise their PLC Medical options, which
options if not exercised would otherwise have been cancelled. As of December 31,
1995, $119,000 of the Notes were outstanding from the following individuals: Ms.
Murphy, the Corporation's Chief Financial Officer ($60,000), Mr. Linhares, PLC
Medical's Vice President of Research and Development and Clinical Trials
($50,000) and a third party who is not an officer or director ($9,000). All of
the Notes were paid during Fiscal 1996.
On April 18, 1997, Mr. Hibbs and the Corporation entered into a
severance agreement and release (the "Agreement"). Pursuant to the terms of the
Agreement, Mr. Hibbs has agreed to resign as the President and board member of
the Corporation effective June 30, 1997 and as the Chief Executive Officer of
the Corporation effective July 31, 1997. In addition, Mr. Hibbs shall receive
his current annual base salary of $215,000 through December 31, 1997 as an
employee of the Corporation. From January 1, 1998 through April 18, 1998, he
shall receive severance pay at the rate of $215,000 per annum. Mr. Hibbs shall
be entitled to receive in accordance with the terms of his employment agreement,
the sum of $43,000, payable in twelve (12) equal monthly installments commencing
August 1, 1997.
-9-
During Fiscal 1991, the Corporation loaned Corhart Management Group,
Inc. ("Corhart") the sum of $126,061 on a demand basis. Corhart provided office
and administration services for the Corporation's Vancouver office. Corhart then
loaned a portion of the $126,061 to Dr. Rudko, the Corporation's Chairman of the
Board and Chief Scientist. The balance of this loan plus accrued interest is
approximately $78,000. The loan currently bears interest at prime (8.25% at
December 31, 1996) plus 0.4%.
No insider or proposed nominee for election as a director of the
Corporation and no associate or affiliate of the foregoing persons has or has
had any material interest, direct or indirect, in any transaction since the
commencement of Fiscal 1996 or in any proposed transaction which in either such
case has materially affected or will materially affect the Corporation, except
as described above.
The Corporation believes that the aforementioned transactions were on
terms as favorable as could have been obtained from independent third parties,
and that any future transaction by the Corporation with its officers, directors
or principal stockholders will be on terms no less favorable than could be
obtained from independent third parties and will be subject to approval by a
majority of the independent directors.
-10-
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of May 23, 1997, certain information
concerning stock ownership of the Corporation by (i) each person who is known by
the Corporation to own of record or beneficially more than five percent (5%) of
the Corporation's Common Stock, (ii) each of the Corporation's directors and
(iii) all directors and executive officers as a group. Except as otherwise
indicated, the Stockholders listed in the table have sole voting and investment
powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
NAME OF BENEFICIALLY PERCENTAGE
BENEFICIAL OWNER(1) OWNED(2) OF CLASS
- ------------------- -------- --------
<S> <C> <C>
Robert I. Rudko, Ph.D.(3) ........................................ 1,269,013 7.6%
M. Lee Hibbs(4)................................................... 316,667 1.9%
Edward H. Pendergast(5)(6)(7)(8).................................. 98,892 *
Harold P. Capozzi(6)(9)(10)....................................... 42,850 *
Kenneth J. Pulkonik(5)(6)(9)...................................... 65,000 *
Roberts A. Smith, Ph.D.(6)(9)(11)................................. 45,000 *
H.B. Brent Norton, M.D.(9)(12).................................... 37,000 *
Arab Banking Corporation.......................................... 747,100 4.5%
All directors and officers
as a group (11 persons)(3)(4)(5)(6)
(7)(8)(9)(10)(11)(12)(13)(14)(15)................................. 2,080,804 12.5%
</TABLE>
- ------------------
* Less than 1%.
(1) Each of such persons, with the exception of Arab Banking Corporation,
may be reached through the Corporation at 10 Forge Park, Franklin,
Massachusetts 02038. The address for Arab Banking Corporation is c/o
Hughes Hubbard & Reed, One Battery Park Plaza, New York, New York
10004.
-11-
(2) Pursuant to the rules of the Securities and Exchange Commission, shares
of Common Stock which an individual or group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purpose of computing the percentage
ownership of such individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person shown in the table.
(3) The figures presented in the table include 100,000 shares of an option
to purchase up to 300,000 shares of Common Stock through December 31,
1999 at a price of $4.00 per share, which option fully vests at
December 31, 1999 or earlier upon receipt of pre-market approval
("PMA") of the Corporation's patented laser system known as THE HEART
LASER(TM) (the "Heart Laser") from the FDA, 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. The figures in this table also include 39,567 shares of an
option granted on March 3, 1995 to purchase up to 72,900 shares of
Common Stock at an exercise price of $3.69 per share which fully vests
on December 2, 1997 and terminates on March 2, 2005. Also includes
94,762 shares of Common Stock held by Dr. Rudko's wife, but as to which
Dr. Rudko disclaims any beneficial interest. Excludes 13,750 shares of
Common Stock held by Dr. Rudko's adult children, as to which he
disclaims any beneficial interest.
(4) Includes 66,667 shares of Common Stock owned by M. Lee Hibbs, the
Corporation's Chief Executive Officer and President. The figures
presented in the table also include 250,000 shares of an option granted
on September 23, 1993 to purchase up to 350,000 shares of Common Stock
at an exercise price of $4.25 per share which fully vests on October
12, 1998 or earlier upon receipt of PMA of the Heart Laser from the
FDA, 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. Pursuant to the Agreement
with Mr. Hibbs and the terms of Mr. Hibbs' option letter, if PMA is not
received by July 31, 1997, the options will not vest and will be
cancelled. The options expire five years from the date on which the
options vest in full. The figures presented in the table exclude (i) an
option granted on March 3, 1995 to purchase up to 33,333 shares of
Common Stock at an exercise price of $3.69 per share which vests in
full on December 2, 1997 and which option terminates on March 2, 2005
and (ii) an option to purchase up to 25,000 shares of Common Stock
granted on July 17, 1996 at an exercise price of $14.88 per share,
which vests on the earlier of January 1, 2001 or when the PMA is
received from the FDA and terminates on July 16, 2006. All non-vested
stock options in (i) above shall be cancelled effective December 31,
1997 if not vested in accordance with the Agreement. All non-vested
stock options in (ii) above shall be cancelled effective July 31, 1997
if not vested in accordance with the Agreement. See "CERTAIN
TRANSACTIONS."
(5) Includes an option granted on September 16, 1993 to purchase up to
30,000 shares of Common Stock at an exercise price of $4.00 per share
through September 15, 2003, which is fully vested.
-12-
(6) Includes an option granted on June 19, 1995 to purchase up to 10,000
shares of Common Stock at an exercise price of $10.44 per share through
June 18, 2005 which is fully vested.
(7) Includes an option granted on August 4, 1995 to purchase up to 10,000
shares of Common Stock at an exercise price of $12.56 per share through
August 3, 2005, which is fully vested. Excludes 1,000 shares of Common
Stock owned by a trust established for the benefit of a child of Mr.
Pendergast over which shares Mr. Pendergast has no control, and of
which he disclaims any beneficial ownership.
(8) Includes an option granted on June 17, 1996 to purchase up to 20,000
shares of Common Stock at an exercise price of $24.50 per share through
June 16, 2006, which is fully vested.
(9) Includes an option granted on June 17, 1996 to purchase up to 10,000
shares of Common Stock at an exercise price of $24.50 per share through
June 16, 2006, which is fully vested.
(10) Includes an option granted on September 16, 1993 to purchase up to
5,662 shares of Common Stock at an exercise price of $4.00 per share
through September 15, 2003, which is fully vested.
(11) Includes an option granted on September 16, 1993 to purchase up to
25,000 shares of Common Stock at an exercise price of $4.00 per share
through September 15, 2003, which is fully vested.
(12) Includes an option granted on June 9, 1994 to purchase up to 27,000
shares of Common Stock at an exercise price of $4.63 per share through
June 9, 2004, which is fully vested.
(13) Includes an aggregate of 115,715 shares owned by Patricia L. Murphy,
the Corporation's Chief Financial Officer, consisting of (i) 50,293
shares of Common Stock, (ii) 13,571 shares of an option granted on July
28, 1994 at an exercise price of $3.97 per share, which is fully vested
and terminates on January 5, 2004; (iii) 13,333 shares of an option
granted on July 28, 1994 at an exercise price of $3.97 per share, which
option vests on July 28, 1997 and terminates on July 27, 2004; (iv)
35,184 shares of an option granted on March 3, 1995 to purchase up to
53,517 shares of Common Stock at an exercise price of $3.69 per share,
which fully vests on December 2, 1997 and terminates on March 2, 2005;
and (v) 3,334 shares of an option granted on January 2, 1996 to
purchase up to 10,000 shares of Common Stock at an exercise price of
$16.31 per share, which vests in equal installments over three years
beginning January 2, 1997 and terminates on January 1, 2006.
(14) Includes an aggregate of 74,000 shares of Common Stock owned by Stephen
J. Linhares, the Vice President of Research and Development and
Clinical Trials of PLC Medical consisting of (i) 64,040 shares of
Common Stock; (ii) 2,460 shares of an option granted on July 28, 1994
at an exercise price of $3.97 per share, such option vests on December
31, 1996 and terminates on December 31, 2003; (iii) 5,000 shares of an
option to purchase up to 15,000
-13-
shares of Common Stock granted on August 4, 1995 at an exercise price
of $12.56 per share, such option vests in equal installments over three
years beginning on August 4, 1996 and terminates on August 3, 2005; and
(iv) 2,500 shares of an option to purchase up to 5,000 shares of Common
Stock granted on July 17, 1996 at an exercise price of $14.88 which
vests on the earlier of August 1, 2001 or one half upon filing of the
Corporation's PMA application with the FDA and one half upon receipt of
the PMA letter of approval from the FDA. Such option terminates on July
16, 2006.
(15) Includes 16,667 shares of an option to purchase up to 50,000 shares of
Common Stock granted to Mr. Serino on January 2, 1996 at an exercise
price of $16.31 per share, such option vests in equal installments over
three years beginning on January 2, 1997 and terminates on January 1,
2006.
-14-
COMPENSATION OF OFFICERS AND DIRECTORS
EXECUTIVE OFFICERS COMPENSATION
During Fiscal 1996, the aggregate cash compensation paid or payable to
the Corporation's executive officers was approximately $999,415.
The following table sets forth the compensation paid to Dr. Rudko, the
Corporation's Chairman, Interim Acting President (effective June 30, 1997) and
Chief Scientist, Mr. M. Lee Hibbs, the Corporation's President and Chief
Executive Officer, Patricia L. Murphy, the Corporation's Chief Financial
Officer, John R. Serino, PLC Medical System's Vice President of Sales and
Marketing and William F. Franks, Jr., PLC Medical System's Former Vice President
of Operations with respect to services rendered to the Corporation during Fiscal
1996 and the fiscal years ended December 31, 1995 ("Fiscal 1995") and December
31, 1994 ("Fiscal 1994").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
- ------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (g) (i)
Securities
Name and Underlying
Principal Other Annual Options All Other
Position Year Salary(1) Bonus Compensation(3) (#) Compensation
- ------------ ---- --------- ----- --------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert I. Rudko, Ph.D. 1996 $192,500 $ 38,500(1) $28,875 0 $ 0
Chairman of the 1995 $175,000 $ 84,000(1) $26,250 100,000 $ 0
Board and 1994 $132,692 $ 0 $12,193 0 $ 3,893(4)
Chief Scientist
M. Lee Hibbs 1996 $215,000 $ 43,000(1) $32,250 25,000 $ 23,540(5)
President, 1995 $195,000 $113,600(1) $29,250 100,000 $ 13,170(5)
Chief Executive Officer 1994 $171,665 $ 45,000(2) $ 6,000 0 $ 5,790(5)
and Director
Patricia L. Murphy 1996 $115,000 $ 23,000 $17,250 10,000 $ 0
Chief Financial 1995 $100,000 $ 15,000 $15,000 55,000 $ 0
Officer 1994 $ 83,335 $ 15,000 $ 6,000 30,714 $ 0
John R. Serino 1996 $125,000 $ 31,250 $ 6,000 50,000 $ 10,390(5)
Vice President of 1995(6) $ 4,800 $ 0 $ 0 0 $ 0
Sales and Marketing 1996(6) N/A N/A N/A N/A N/A
William F. Franks, Jr. 1996 $ 87,500 $ 11,375 $ 6,000 50,000 $ 0
Vice President of 1995(6) N/A N/A N/A N/A N/A
Operations 1994(6) N/A N/A N/A N/A N/A
</TABLE>
-15-
(1) Amounts shown indicate annual cash compensation earned and received by
Dr. Rudko, Mr. Hibbs, Ms. Murphy, Mr. Serino and Mr. Franks. Executive
officers, including Dr. Rudko, Ms. Murphy, Mr. Serino and Mr. Franks
participate in the Corporation's group life, health and long-term
disability insurance, at generally the same benefit levels as are
available to all of the Corporation's full time employees. Effective in
September 1994, the Compensation Committee recommended and the Board of
Directors approved new employment agreements which provided for
increases in the base salaries of Dr. Rudko and Mr. Hibbs from $100,000
and $160,000 to $175,000 and $195,000, respectively and benefits, to be
selected by the executive, equal to 15% of his base salary. Their new
agreements, which expire on December 31, 1997, provides for an annual
review of salary increases and bonus plans by the Board of Directors
for each fiscal year beginning January 1, 1996. Effective January 1,
1996, the base salaries of Dr. Rudko and Mr. Hibbs increased from
$175,000 and $195,000 to $192,500 and $215,000, respectively. The
agreements also provide that each of Mr. Hibbs and Dr. Rudko may
receive a bonus, commencing with Fiscal 1995, on a sliding scale based
upon the Corporation achieving a certain percentage of its annual plan
for sales and placements of the Heart Laser, provided that the
Corporation must achieve at least 70% of plan for the bonus to be paid.
If the Corporation achieves at least 70% of its plan, the executive
will receive 28% of his base salary as a bonus. If the Corporation
achieves 100% of its plan the officer will receive 40% of his base
salary. The bonus available provides for linear increases such that the
maximum bonus the officer may receive is 120% of base salary if the
Corporation achieves 190% of its plan. In addition, Mr. Hibbs was
entitled to receive a bonus of $10,000 for each $1,000,000 in net
earnings before tax earned in Fiscal 1995, up to a maximum bonus of
$50,000. Pursuant to the terms of these agreements, bonuses in the
amounts of $39,000 and $84,000, were paid to Dr. Rudko and $43,000 and
$113,600 were paid to Mr. Hibbs for Fiscal 1996 and 1995, respectively.
On April 18, 1997, Mr. Hibbs and the Corporation entered into a
severance agreement and release (the "Agreement"). Pursuant to the
terms of the Agreement, Mr. Hibbs has agreed to resign as the President
and board member of the Corporation effective June 30, 1997 and as the
Chief Executive Officer of the Corporation effective July 31, 1997. In
addition, Mr. Hibbs shall receive his current annual base salary of
$215,000 through December 31, 1997 as an employee of the Corporation.
From January 1, 1998 through April 18, 1998, he shall receive severance
pay at the rate of $215,000 per annum. Furthermore, pursuant to the
terms of the Agreement and Mr. Hibbs' employment agreement, he is
entitled to receive the sum of $43,000, payable in twelve (12) equal
monthly installments commencing August 1, 1997. See "CERTAIN
TRANSACTIONS."
(2) During Fiscal 1994, Mr. Hibbs was entitled to receive incentive
compensation of $5,000 for each Heart Laser that the Corporation sold
over the first five, to a maximum payment of $50,000. In Fiscal 1994,
Mr. Hibbs received $35,000 as a result of such incentive compensation
and an additional $10,000 as a result of other incentive compensation.
-16-
(3) In Fiscal 1995, the Compensation Committee approved a benefit allowance
of up to 15% of base salary for Dr. Rudko and Mr. Hibbs. The
determination of such benefits is up to the individual. Ms. Murphy was
also given the same benefit allowance commencing in Fiscal 1995. In
Fiscal 1994, the Corporation made monthly compensatory automobile and
insurance payments of approximately $1,016 for an automobile for Dr.
Rudko, and Mr. Hibbs and Ms. Murphy each received a $500 per month
compensatory automobile allowance. In Fiscal 1996, Mr. Serino and Mr.
Franks each received a $500 per month compensatory automobile
allowance.
(4) In Fiscal 1994, the Corporation paid on behalf of Dr. Rudko his share
of premiums under a $1,000,000 reverse split-dollar key person life
insurance policy, of which Dr. Rudko is a partial beneficiary.
(5) Represents payment of $23,540 in Fiscal 1996, $13,170 in Fiscal 1995
and $5,790 in Fiscal 1994 of a $42,500 moving allowance paid to Mr.
Hibbs in connection with moving expenses. In Fiscal 1996, $10,390 was
paid to Mr. Serino in connection with moving expense reimbursement.
(6) Mr. Serino joined the Corporation in mid December 1995 and Mr. Franks
joined the Company in January 1996. Effective in May 1997, Mr. Franks
is no longer employed by the Corporation.
Except for the Agreement with Mr. Hibbs, the Corporation has no plans
other than as set out herein pursuant to which cash or non-cash compensation was
paid or distributed to the executive officers during Fiscal 1996 or is proposed
to be paid or distributed in a subsequent year. See "CERTAIN TRANSACTIONS." No
other compensation was paid by the Corporation to the executive officers during
Fiscal 1996, including personal benefits and securities or property paid or
distributed other than pursuant to a formal plan which compensation is not
offered on the same terms to all full time employees, except as noted above.
-17-
The following table sets forth the options granted to the named
executive officers in Fiscal 1996.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants For Option Term (5)
- --------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
- ------------------------ --------------- ------------ ----------- ------------- ---------- ---------
% of Total
Number of Options
Securities Granted to
Underlying Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted (#) Year (3) ($/Sh) Date(4) 5% 10%
- ------------------------ --------------- ------------ ----------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
M. Lee Hibbs............. 25,000(1) 5% $14.88 07/16/2006 $226,000 $ 573,000
Patricia L. Murphy ...... 10,000(2) 2% $16.31 01/01/2006 $102,600 $ 260,000
John R. Serino........... 50,000(2) 10% $16.31 01/01/2006 $513,000 $ 1,300,000
William F. Franks, Jr. 50,000(2) 10% $16.31 01/01/2006 $513,000 $ 1,300,000
</TABLE>
- ----------
(1) These options were granted on July 17, 1996 and vest on the earlier of
January 1, 2001 or when the PMA is received from the FDA.
(2) These options were granted on January 2, 1996 and vest in equal
installments over a three year period beginning January 2, 1997.
(3) In Fiscal 1996, options to purchase 482,250 shares of Common Stock were
granted to Company employees, including executive officers.
(4) The options are subject to earlier termination upon certain events
related to termination of employment. Pursuant to the terms of the
Agreement, Mr. Hibbs is an employee of the Corporation until December
31, 1997. Effective in May 1997, Mr. Franks is no longer an employee of
the Corporation.
(5) Amounts for the named executives shown in these columns have been
derived by multiplying (i) the difference between (a) the product of
the per share market price at the time of the grant and the sum of 1
plus the adjusted stock price appreciation rate (the assumed rate of
appreciation compounded annually over the term of the option) and (b)
the per share exercise price of the option; and (ii) the number of
securities underlying the option. The dollar gains under these columns
result from calculations assuming hypothetical growth rates as set by
the Securities and Exchange Commission and are not intended to forecast
possible future price appreciation, if any, of the Corporation's Common
Stock.
-18-
The following table indicates the options that were exercised in Fiscal
1996 and sets forth the value of outstanding options held by executive officers,
directors and other employees of the Corporation as of December 31, 1996.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996
AND FY-END OPTION VALUES
------------------------
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
Shares at FY-End at FY-End
Acquired Exercisable/ Exercisable/
Name on Exercise Value Realize ($) Unexercisable Unexercisable(1)(2)
---- ----------- ----------------- ------------- -------------------
<S> <C> <C> <C> <C>
Robert I. Rudko, Ph.D. 27,100 $303,249(3) 139,567/233,333 $2,550,990/$4,254,660
M. Lee Hibbs 25,000 $693,750(3) 341,667/158,333 $6,166,840/$2,593,410
Patricia L. Murphy 25,293 $276,362(3) 55,422/ 34,999 $1,019,640/$ 519,415
John R. Serino 0 0 0/ 50,000 $ 0/$ 294,000
William F. Franks, Jr.(4) 0 0 0/ 50,000 $ 0/$ 294,000
</TABLE>
- ----------
(1) In-the-Money options are those options for which the fair market value
of the underlying Common Stock is greater than the exercise prices of
the option.
(2) The value of unexercised options is determined by multiplying the
number of options held by the difference between the fair market value
of the Common Stock underlying the options at the end of Fiscal 1996
($22.19 per share as determined by the average of the high and low sale
prices of the Common Stock as reported by the American Stock Exchange
on December 31, 1996) and the exercise price of the options granted.
Since the fair market value at the end of Fiscal 1996 was greater than
or equal to the exercise price of the options held, all of the options
included in this table are In-the-Money.
(3) The value realized is calculated by determining the difference between
the fair market value of the Common Stock acquired at exercise and the
exercise price.
(4) Effective in May 1997, Mr. Franks is no longer an employee of the
Corporation.
-19-
COMPENSATION OF DIRECTORS
Each of the directors other than Dr. Rudko and Mr. Hibbs receives a fee
of $650 for each meeting of the Board of Directors or a fee of $600 for each
committee meeting of the Board of Directors plus reimbursement for related
travel expenses and an additional $2,000 per quarter. In the event the director
participates at such meeting via the telephone, he receives 50% of the
applicable fee. Eligible directors also receive stock options pursuant to the
Corporation's 1994 Formula Stock Option Plan. See "Beneficial Ownership of
Common Stock." In March 1995, Mr. Pendergast agreed to serve as the Lead Outside
Director of the Corporation and effective January 17, 1997, he receives $4,000
per quarter for his services as Lead Outside Director in addition to the fees
and expenses referenced above. Mr. Pendergast may also receive $1,000 per day
for other consulting activities provided to the Corporation on a pre-approved
basis by the Board of Directors. Mr. Pendergast was also granted an option on
August 4, 1995 to purchase up to 10,000 shares of Common Stock at an exercise
price of $12.56 per share through August 3, 2005, subject to certain
requirements and his continued service as Lead Outside Director for the
Corporation. See "Beneficial Ownership of Common Stock." The Corporation has no
arrangements, pursuant to which directors were compensated for their services in
their capacity as directors during Fiscal 1996 or thereafter, except as
described above.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Corporation has arrangements with respect to compensation received
or that may be received by the named executive officers to compensate such
officers in the event of termination of employment (resignation, retirement,
change in control) or in the event of a change in responsibilities following a
change in control. An employment agreement was entered into in May 1992 between
Dr. Rudko and the Corporation and an employment agreement was entered into in
October 1993 between Mr. Hibbs and the Corporation each providing for payment of
24 months' base salary and prior bonus to Dr. Rudko and 12 months' base salary
to Mr. Hibbs. Dr. Rudko's agreement was amended in September 1994 to provide
that in addition to the severance benefits discussed above, in the event of a
sale or change of control in the Corporation, and if Dr. Rudko's employment is
terminated without cause, or if Dr. Rudko is transferred outside of Eastern
Massachusetts or if he has a significant reduction in responsibility with the
Corporation, then he shall be entitled to receive 299% of his prior year's
compensation (as determined by Section 280G of the Internal Revenue Code of
1986, as amended). In addition, Dr. Rudko's employment agreement, as modified,
provides that if he remains with the Corporation for one year after a sale or
change of control in the Corporation, then he shall receive as a bonus an amount
equal to 18 months of his then current base salary. Mr. Hibbs' employment
agreement has been superseded by the Agreement. As a result, he no longer
receives such protection in the event of a sale or change of control in the
Corporation. See "CERTAIN TRANSACTIONS."
In addition, the Corporation entered into an agreement with each of Ms.
Murphy and Mr. Linhares in April 1996 that provides for a severance payment
equal to twelve months' base salary if either Ms. Murphy or Mr. Linhares is
terminated without cause. The agreements also provide that
-20-
in the event of a sale or change of control in the Corporation, and if Ms.
Murphy's or Mr. Linhares' employment is terminated without cause, or their base
salary or Corporation-paid benefits are reduced, or if they are transferred
outside of Eastern Massachusetts or if they have a significant reduction in
responsibility with the Corporation, then they shall be entitled to receive 100%
of their prior year's compensation.
MANAGEMENT CONTRACTS
No management functions of the Corporation are performed to any
substantial degree by a person other than the directors or executive officers of
the Corporation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Dr. Smith and Mr. Pendergast are members of the Compensation Committee,
which was established on January 22, 1993. None of the executive officers of the
Corporation has served on the Board of Directors or compensation committee of
any other entity that has had any of such entity's officers serve either on the
Corporation's Board of Directors or Compensation Committee.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, composed of Dr. Smith and Mr. Pendergast, is
responsible for setting and administering the policies which govern annual
compensation for the Corporation's executives. Following review and approval by
the Compensation Committee of the compensation policies, all issues pertaining
to executive compensation will be submitted to the Board of Directors for
approval.
This report is provided as part of the Corporation's annual report to
its Stockholders and is not considered to be proxy soliciting material. This
report is not incorporated by reference in prior Securities Act of 1933 and
Securities Exchange Act of 1934 filings made by the Corporation that might have
incorporated future filings in their entirety, except to the extent that the
Corporation specifically incorporates this information by reference, and should
not be otherwise deemed filed under such Acts.
The Compensation Committee believes that the primary objectives of the
Corporation's compensation policies are to attract and retain a management team
that can effectively implement and execute the Corporation's strategic business
plan. These compensation policies include (i) an overall management compensation
program that is competitive with management compensation programs at companies
of similar size; (ii) short-term bonus incentives for management to meet the
Corporation's performance goals; and (iii) long-term incentive compensation in
the form of stock options and other long-term equity compensation which will
encourage management to continue to focus on shareholder return.
-21-
The Compensation Committee's goal is to use compensation policies to
closely align the interests of the Corporation with the interests of
shareholders in that the Corporation's management has incentives to achieve
short-term performance goals while building long-term value for the
Corporation's shareholders. The Compensation Committee will review its
compensation policies from time to time in order to determine the reasonableness
of the Corporation's compensation programs and to take into account factors
which are unique to the Corporation.
As discussed in our previous reports, in 1994, the Corporation retained
a consulting firm to review the Corporation's existing compensation programs for
its executive officers and to help develop the overall philosophy for the
Corporation's compensation policy as described above, as well as to make
specific recommendations on programs and plans. This new program established a
new base salary for each executive with annual cash incentives to be paid based
on attainment of defined performance goals.
For Fiscal 1996, the Board authorized increases in annual base salaries
for Mr. Hibbs and Dr. Rudko to $215,000 and $192,500, respectively, subject to
annual review. The Compensation Committee considers such base salaries to be
competitive in the markets in which the Corporation competes for its most senior
personnel. In addition, consistent with compensation in prior years, each of Mr.
Hibbs and Dr. Rudko received benefits at 15% of base salary, with such benefits
being issued as selected by the executive.
Following the recommendation of the compensation consultant, the Board
of Directors also authorized a bonus plan for Mr. Hibbs and Dr. Rudko calculated
on sales and placements of the Heart Laser. The plan provided for a bonus of 40%
of base salary based on the Corporation achieving its annual plan for sales and
placements of Heart Lasers. The bonus plan allows for an increase in bonus if
the Corporation sells or places lasers in excess of the plan as well as a
smaller bonus if the Corporation sells or places lasers below plan, except that
no bonus is payable if the Corporation fails to achieve sales or placements
below 70% of plan. Pursuant to the terms of the bonus plan, bonuses in the
amounts of $43,000 and $38,500 were paid to Mr. Hibbs and Dr. Rudko,
respectively, for Fiscal 1996.
As part of the Corporation's longer-term incentive compensation program,
officers are also eligible for awards under the Corporation's stock option
plans. As the options provide value to the owner only when the price of the
Corporation's stock increases above the grant price of the options, senior
management attains a perspective of a shareholder with regard to the
Corporation's financial position. The Compensation Committee also recognizes
that stock options are considered a standard component of competitive
compensation packages throughout the industry.
Senior management also participates in company-wide employee benefit
plans, including the Corporation's 401(k) Plan. Benefits under these plans are
not dependent upon individual performance.
-22-
The Compensation Committee is currently reviewing the Corporation's
compensation policy and the compensation programs for its executive officers for
fiscal 1997. As a result, the Corporation's compensation policy and programs may
be modified.
COMPENSATION COMMITTEE
Edward H. Pendergast
Dr. Roberts A. Smith
May 29, 1997
-23-
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
(assuming reinvestment of dividends) from investing $100 on March 3, 1992 (the
day the Corporation's Common Stock began trading on the over-the-counter market
through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), and plotted at the end of each fiscal year thereafter as well
as at May 2, 1997, in each of PLC Systems Inc.'s Common Stock, the American
Stock Exchange Market Index of companies, and an index of 275 medical instrument
and supply companies (including Cooper Companies, Summit Technology, Inc., and a
number of other laser manufacturers) compiled by Media General Financial
Services, Inc. The Corporation's Common Stock traded on NASDAQ from March 3,
1992 to September 16, 1992 and then commenced trading on the American Stock
Exchange ("AMEX") on September 17, 1992.
<TABLE>
<CAPTION>
03/03/92 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 05/02/97
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PLC Systems
Inc. $100.00 $103.13 $ 67.19 $ 61.72 $207.81 $281.25 $204.69
AMEX Market
Index $100.00 $ 97.97 $116.40 $102.82 $132.53 $139.85 $135.24
Medical
Instruments
and Supplies
Group $100.00 $ 97.32 $ 82.39 $ 90.56 $146.13 $153.32 $148.06
</TABLE>
-24-
PRICE RANGE OF COMMON STOCK
Since September 17, 1992, the Corporation's Common Stock has traded on
the AMEX under the symbol "PLC." From March 3, 1992 through September 16, 1992,
the Corporation's Common Stock was traded on the over-the-counter market through
the NASDAQ. On May 23, 1997 the closing sale price of the Corporation's Common
Stock as reported by the AMEX was $18 per share.
As of May 23, 1997, the Corporation had 596 holders of record of its
Common Stock. Management believes that there are approximately 15,000 beneficial
owners of its Common Stock.
For the periods indicated, the following table sets forth the range of
high and low sales prices for the Common Stock as reported by AMEX from January
1, 1995.
<TABLE>
<CAPTION>
SALES
-----
HIGH LOW
---- ---
1995
----
<S> <C> <C>
First Quarter ........................................................... $6.25 $3.63
Second Quarter........................................................... $11.88 $5.63
Third Quarter............................................................ $20.63 $9.94
Fourth Quarter........................................................... $20.38 $15.00
1996
----
First Quarter............................................................ $34.88 $16.63
Second Quarter .......................................................... $33.88 $20.38
Third Quarter............................................................ $28.63 $13.25
Fourth Quarter........................................................... $27.25 $19.63
1997
----
First Quarter............................................................ $27.63 $16.63
Second Quarter (through May 23, 1997).................................... $19.38 $12.38
</TABLE>
DIVIDENDS
The Corporation has never paid cash dividends. The Corporation
currently intends to retain all future earnings, if any, for use in its business
and does not anticipate paying any cash dividends in the foreseeable future.
-25-
ITEM NO. 2
ACCOUNTING MATTERS AND RATIFICATION OF AUDITORS
Unless otherwise directed by the Stockholders, the persons named in the
enclosed proxy will vote to appoint Ernst & Young LLP as auditors for the
current fiscal year ending December 31, 1997 at a remuneration to be fixed by
the directors. Ernst & Young LLP have been auditors for the Corporation since
July 1995. A representative of Ernst & Young LLP is expected to be present at
the Meeting, and will have the opportunity to make a statement and answer
questions from Stockholders if he or she so desires.
Prior to the engagement of Ernst & Young LLP, the Corporation had
retained Coopers & Lybrand as its independent accountants. In July 1995, the
Company requested that Coopers & Lybrand resign from the engagement. The
resignation of Coopers & Lybrand as the Corporation's independent accountants
was approved by the Corporation's Board of Directors based on a recommendation
from the Audit Committee. Coopers & Lybrand complied with the resignation
request.
There were no disagreements between the Corporation and its former
independent accountants regarding any matters of accounting principles or
practices, financial statement disclosure or auditing scope or procedures in
connection with the audit of each of the Corporation's fiscal years in the
period January 1, 1991 through December 31, 1994 or at any time subsequent
thereto and prior to such dismissal, which would have caused Coopers & Lybrand
to make reference to the subject matter of such disagreement in connection with
its report. There had been no "reportable events" (as defined by Regulation S-K
Item 304(a) (1)(v)) during the period from January 1, 1991 through December 31,
1994 and during the period since December 31, 1994. In addition, the Corporation
had not consulted another accountant regarding the application of accounting
principles to a specified transaction.
The report of such independent accountants upon the Corporation's
financial statements for each of the Corporation's fiscal years in the period
January 1, 1991 through December 31, 1994 contained neither an adverse opinion
nor a disclaimer of opinion nor was such report qualified or modified as to
uncertainty, audit scope or accounting principles.
-26-
VOTING AT MEETING
The Board of Directors has fixed May 23, 1997 as the record date for
the determination of stockholders entitled to vote at this Meeting. At the close
of business on that date, there were outstanding and entitled to vote 16,627,537
Shares of Common Stock.
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Corporation.
In addition to the solicitation of proxies by mail, officers and employees of
the Corporation may solicit in person or by telephone. The Corporation may
reimburse brokers or persons holding stock in their names, or in the names of
their nominees, for their expenses in sending proxies and proxy material to
beneficial owners.
REVOCATION OF PROXY
Subject to the terms and conditions set forth herein, all proxies
received by the Corporation will be effective, notwithstanding any transfer of
the shares to which such proxies relate, unless prior to the Meeting the
Corporation receives a written notice of revocation signed by the person who, as
of the record date, was the registered holder of such shares. The Notice of
Revocation must indicate the certificate number or numbers of the shares to
which such revocation relates and the aggregate number of shares represented by
such certificate(s).
STOCKHOLDER PROPOSALS
In order to be included in proxy material for the 1998 Annual Meeting,
tentatively scheduled to be held on June 12, 1998, Stockholders' proposed
resolutions must be received by the Corporation on or before January 29, 1998.
It is suggested that proponents submit their proposals by certified mail, return
receipt requested, addressed to the Secretary of the Corporation.
ANNUAL REPORT ON FORM 10-K
THE CORPORATION IS PROVIDING WITH THIS PROXY STATEMENT TO EACH
STOCKHOLDER, WITHOUT CHARGE, A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM
10-K, INCLUDING THE AUDITED FINANCIAL STATEMENTS AND RELATED SCHEDULE FOR THE
CORPORATION'S MOST RECENT FISCAL YEAR ENDED DECEMBER 31, 1996.
-27-
MISCELLANEOUS
The management does not know of any other matters which may come before
this Meeting. However, if any other matters are properly presented to the
Meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
By Order of the Board of Directors
NEIL H. ARONSON
Secretary
Franklin, Massachusetts
May 29, 1997
THE MANAGEMENT HOPES THAT STOCKHOLDERS WILL ATTEND THIS MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN, AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
-28-
PLC SYSTEMS INC.
PROXY FOR ANNUAL AND EXTRAORDINARY GENERAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MANAGEMENT
THE UNDERSIGNED hereby appoints Dr. Robert I. Rudko, or failing him,
Patricia L. Murphy, or alternately, the following designated individual (the
"Proxyholder"):____________________________, with full power of substitution to
each, to vote for and on behalf of the undersigned at the Annual General Meeting
of Stockholders of PLC SYSTEMS INC., to be held on Friday, June 30, 1997 at
10:00 a.m. at the Bank of Boston Auditorium, 100 Federal Street, Boston,
Massachusetts 02110, and at any adjournment or adjournments thereof, upon and
with respect to all shares of the Common Stock of the Corporation to which the
undersigned would be entitled to vote and act if personally present. The
undersigned hereby directs the said Proxyholder to vote in accordance with his
or her judgment on any matters which may properly come before the Meeting, all
as indicated in the Notice of the Meeting, receipt of which is hereby
acknowledged, and to act on the following matters set forth in such Notice as
specified by the undersigned:
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ELECTION OF DIRECTORS AND
FOR PROPOSAL 2.
(1) To elect the following persons as Directors of the Corporation for a three
year term of office:
CLASS II
Kenneth J. Pulkonik FOR [ ] WITHHOLD VOTE [ ] AGAINST [ ]
Patricia L. Murphy FOR [ ] WITHHOLD VOTE [ ] AGAINST [ ]
(2) To appoint Ernst & Young LLP as auditors of the Corporation for the current
fiscal year ending December 31, 1997 and to authorize the Board of Directors
to fix the remuneration to be paid to the auditors.
FOR [ ] WITHHOLD VOTE [ ] AGAINST [ ]
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 1 and 2.
(3) IN THEIR DISCRETION TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT OR ADJOURNMENTS THEREOF.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR AND IN FAVOR OF THE
ITEMS SET FORTH ABOVE UNLESS A CONTRARY SPECIFICATION IS MADE.
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as the name appears below.
Dated:
----------------------------
-----------------------------------
Signature
-----------------------------------
Signature if held jointly
-----------------------------------
Printed Name
-----------------------------------
Address
NOTE: When shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
the person named on the stock
certificate has died, please submit
evidence of your authority. If a
corporation, please sign in full
corporate name by the President or
authorized officer and indicate the
signer's office.
PLC SYSTEMS INC.
(the "Corporation")
To: Registered and Non-Registered Stockholders
Canadian National Policy 41, promulgated by the Canadian Provincial
securities administrators, provides Stockholders with the opportunity to elect
annually to have their name added to the Corporation's supplemental mailing list
in order to receive quarterly financial statements of the Corporation. If you
wish to receive such statements, please complete and return this form to:
Patricia L. Murphy
Chief Financial Officer
PLC Systems Inc.
10 Forge Park
Franklin, Massachusetts 02038
---------------------------------------------
Print Name of Stockholder
---------------------------------------------
Mailing Address
---------------------------------------------
City/Town
---------------------------------------------
Province/State Postal Code/Zip Code
BY SIGNING BELOW THE UNDERSIGNED HEREBY CERTIFIES TO BE A STOCKHOLDER OF THE
CORPORATION.
Date:
---------------------------
--------------------------------
Signature of Stockholder
