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
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"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,
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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;
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(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").
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(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
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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
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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
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M. Lee Hibbs, President
Accepted and Agreed:
/s/ Patricia L. Murphy
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Patricia L. Murphy
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