Document:

EXHIBIT
10.15

 

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUED
UPON ITS

EXERCISE ARE SUBJECT TO THE RESTRICTIONS ON

TRANSFER SET FORTH IN SECTION 4 OF THIS WARRANT

 

	
  Warrant No. 1

  	
   

  	
  Number of Shares: 100,000

  (subject to adjustment)

  

 

Effective Date of Issuance: 
January 9, 2001

 

PLC
SYSTEMS INC.

 

Common
Stock Purchase Warrant

 

PLC Systems Inc.,
a Yukon Territory corporation (the “Company”), for value received, hereby
certifies that Prudential Vector Healthcare Group, a unit of Prudential
Securities Incorporated, or its registered assigns (the “Registered Holder”),
is entitled, subject to the terms and conditions set forth below, to purchase
from the Company, at any time or from time to time on or after the Vesting Date
(as defined in Section 8 hereof) and on or before 5:00 p.m. (Boston time)
on January 9, 2006, One Hundred Thousand (100,000) shares of Common Stock, no
par value per share, of the Company, at a purchase price of $1.00 per
share.  The shares purchasable upon
exercise of this Warrant, and the purchase price per share, each as adjusted
from time to time pursuant to the provisions of this Warrant, are hereinafter
referred to as the “Warrant Shares” and the “Purchase Price,” respectively.

 

1.             Exercise.

 

(a)           This Warrant may be exercised by the
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase form appended hereto as Exhibit I duly executed by the
Registered Holder or by the Registered Holder’s duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full, in lawful money of the
United States, of the Purchase Price payable in respect of the number of
Warrant Shares purchased upon such exercise.

 

(b)           The Registered Holder may, at its option,
elect to pay some or all of the Purchase Price payable upon an exercise of this
Warrant by cancelling a portion of this Warrant exercisable for such number of
Warrant Shares as is determined by dividing (i) the total Purchase Price payable
in respect of the number of Warrant Shares being purchased upon such exercise
by (ii) the excess of the Fair Market Value per share of Common Stock (as
defined below) as of the Exercise Date (as defined in subsection 1(c) below)
over the Purchase Price per share.  If
the Registered Holder wishes to exercise this Warrant pursuant to this method
of payment with respect to the maximum number of Warrant Shares purchasable
pursuant to this method, then the number of Warrant Shares so purchasable shall
be equal to the total number of Warrant Shares, minus the product obtained by
multiplying (x) the total number of Warrant Shares by (y) a fraction,
the numerator of which shall be the Purchase Price per share and the
denominator of

 

 

which
shall be the Fair Market Value per share of Common Stock as of the Exercise
Date.  The Fair Market Value per share
of Common Stock shall be determined as follows:

 

(i)            If the Common Stock is listed on a national securities
exchange, the Nasdaq National Market or another nationally recognized trading
system as of the Exercise Date, the Fair Market Value per share of Common Stock
shall be deemed to be the average of the high and low reported sale prices per
share of Common Stock thereon on the trading day immediately preceding the
Exercise Date (provided that if no such price is reported on such day, the Fair
Market Value per share of Common Stock shall be determined pursuant to clause
(ii)).

 

(ii)           If the Common Stock is not listed on a national
securities exchange, the Nasdaq National Market or another nationally
recognized trading system as of the Exercise Date, the Fair Market Value per
share of Common Stock shall be deemed to be the amount most recently determined
by the Board of Directors to represent the fair market value per share of the
Common Stock (including without limitation a determination for purposes of
granting Common Stock options or issuing Common Stock under an employee benefit
plan of the Company); and, upon request of the Registered Holder, the Board of Directors
(or a representative thereof) shall promptly notify the Registered Holder of
the Fair Market Value per share of Common Stock.  Notwithstanding the foregoing, if the Board of Directors has not
made such a determination within the three-month period prior to the Exercise
Date, then (A) the Board of Directors shall make a determination of the
Fair Market Value per share of the Common Stock within 15 days of a request by
the Registered Holder that it do so, and (B) the exercise of this Warrant
pursuant to this subsection 1(b) shall be delayed until such determination is
made.

 

(c)           Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
day on which this Warrant shall have been surrendered to the Company as
provided in subsection 1(a) above (the “Exercise Date”).  At such time, the person or persons in whose
name or names any certificates for Warrant Shares shall be issuable upon such
exercise as provided in subsection 1(d) below shall be deemed to have become
the holder or holders of record of the Warrant Shares represented by such
certificates.

 

(d)           As soon as practicable after the exercise
of this Warrant in full or in part, and in any event within 10 days thereafter,
the Company, at its expense, will cause to be issued in the name of, and
delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:

 

(i)            a certificate or certificates for the number of full
Warrant Shares to which the Registered Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which the Registered Holder
would otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and

 

(ii)           in case such exercise is in part only, a new warrant
or warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of Warrant Shares equal (without
giving effect to any adjustment therein) to the number of such shares called
for on the face of this Warrant minus the sum of (a) the number of such
shares purchased by the Registered Holder upon such exercise plus (b) the
number of Warrant

 

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Shares (if any) covered
by the portion of this Warrant cancelled in payment of the Purchase Price
payable upon such exercise pursuant to subsection 1(b) above.

 

(e)           All Warrant Shares issuable upon the exercise of this
Warrant pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable and free of any preemptive rights.  The Company shall pay all taxes and other governmental charges
that may be imposed with respect to the issuance or delivery thereof.  The Company shall not be required, however,
to pay any tax or other charge imposed in connection with any transfer involved
in the issue of any certificate for Warrant Shares issuable upon exercise of
this Warrant in any name other than that of the Registered Holder, and in such
case the Company shall not be required to issue or deliver any share
certificate until such tax or other charge has been paid or it has been
established to the reasonable satisfaction of the Company that no such tax or
other charge is due.

 

2.             Adjustments.

 

(a)           Diluting Issuances.

 

(i)            Definitions.  For purposes
of this Section 2, the following definitions shall apply:

 

(A)          “Option” shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.

 

(B)           “Original Issue Date” shall mean the effective
date of issue of this Warrant.

 

(C)           “Convertible Securities” shall mean any
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock, but excluding Options.

 

(D)          “Additional Shares of Common Stock” shall mean
all shares of Common Stock issued (or, pursuant to subsection 2(a)(iii)
below, deemed to be issued) by the Company after the Original Issue Date, other
than:

 

(I)            shares of Common Stock issued or issuable upon
conversion or exchange of any Convertible Securities or exercise of any Options
outstanding on the Original Issue Date;

 

(II)           shares of Common Stock issued or issuable by reason of
a dividend, stock split, split-up or other distribution on shares of Common
Stock that are covered by subsections 2(b) or 2(c) below; or

 

(III)         shares of Common Stock (or Options with respect
thereto) issued or issuable to employees or directors of, or consultants to,
the Company pursuant to a plan or

 

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arrangement approved by the Board of Directors of the
Company or a committee thereof.

 

(ii)           No Adjustment of Purchase Price. 
No adjustments to the Purchase Price shall be made unless the
consideration per share (determined pursuant to subsection 2(a)(v)) for an
Additional Share of Common Stock issued or deemed to be issued by the Company
is less than the Purchase Price in effect immediately prior to the issue of
such Additional Shares.

 

(iii)          Issue of Securities Deemed Issue of Additional Shares
of Common Stock.  If the Company at any time or from time to
time after the Original Issue Date shall issue any Options (excluding Options
covered by subsection 2(a)(i)(D)(III) above) or Convertible Securities or
shall fix a record date for the determination of holders of any class of
securities entitled to receive any such Options or Convertible Securities, then
the maximum number of shares of Common Stock (as set forth in the instrument
relating thereto without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of the close of business on
such record date, provided that Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to subsection 2(a)(v) hereof) of such Additional Shares of Common
Stock would be less than the Purchase Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and provided
further that in any such case in which Additional Shares of Common Stock are
deemed to be issued:

 

(A)          No further adjustment in the Purchase Price shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;

 

(B)           If such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Company, then upon the exercise,
conversion or exchange thereof, the Purchase Price computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange
under such Convertible Securities;

 

(C)           Upon the expiration or termination of any such unexercised
Option, the Purchase Price shall not be readjusted, but the Additional Shares
of Common Stock deemed issued as the result of the original issue of such
Option shall not be deemed issued for the purposes of any subsequent adjustment
of the Purchase Price;

 

(D)          In the event of any change in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of any such
Option or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Purchase Price then in
effect shall forthwith be readjusted to such

 

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Purchase Price as would
have obtained had the adjustment which was made upon the issuance of such
Option or Convertible Security not exercised, converted or exchanged prior to
such change been made upon the basis of such change; and

 

(E)           No readjustment pursuant to clause (B) or (D)
above shall have the effect of increasing the Purchase Price to an amount which
exceeds the lower of (i) the Purchase Price on the original adjustment
date, or (ii) the Purchase Price that would have resulted from any
issuances of Additional Shares of Common Stock between the original adjustment
date and such readjustment date.

 

In the event the
Company, after the Original Issue Date, amends the terms of any such Options or
Convertible Securities (whether such Options or Convertible Securities were
outstanding on the Original Issue Date or were issued after the Original Issue
Date), then such Options or Convertible Securities, as so amended, shall be
deemed to have been issued after the Original Issue Date and the provisions of
this subsection 2(a)(iii) shall apply.

 

(iv)          Adjustment of Purchase Price Upon Issuance of
Additional Shares of Common Stock.

 

(A)          In the event the Company shall at any time after the
Original Issue Date issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to
subsection 2(a)(iii)), without consideration or for a consideration per
share less than the Purchase Price in effect immediately prior to such issue,
then and in such event, such Purchase Price shall be reduced, concurrently with
such issue, to a price (calculated to the nearest cent) determined by multiplying
such Purchase Price by a fraction, (A) the numerator of which shall be
(1) the number of shares of Common Stock outstanding immediately prior to
such issue plus (2) the number of shares of Common Stock which the aggregate
consideration received or to be received by the Company for the total number of
Additional Shares of Common Stock so issued would purchase at such Purchase
Price; and (B) the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of
such Additional Shares of Common Stock so issued; provided  that, (i) for the purpose of this
subsection 2(a)(iv), all shares of Common Stock issuable upon exercise,
conversion or exchange of Options or Convertible Securities outstanding immediately
prior to such issue shall be deemed to be outstanding, and (ii) the number
of shares of Common Stock deemed issuable upon exercise, conversion or exchange
of such outstanding Options or Convertible Securities shall not give effect to
any adjustments to the exercise, conversion or exchange price or exercise,
conversion or exchange rate of such Options or Convertible Securities resulting
from the issuance of Additional Shares of Common Stock that is the subject of
this calculation.

 

(B)           Notwithstanding the foregoing, the applicable Purchase
Price shall not be so reduced at such time if the amount of such reduction
would be an amount less than $.05, but any such amount shall be carried forward
and reduction with respect thereto shall be made at the time of and together
with any subsequent reduction which, together with such amount and any other
amount or amounts so carried forward, shall aggregate $.05 or more.

 

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(v)           Determination of Consideration. 
For purposes of this subsection 2(a), the consideration received by
the Company for the issue of any Additional Shares of Common Stock shall be
computed as follows:

 

(A)          Cash and Property:  Such
consideration shall:

 

(I)            insofar as it consists of cash, be computed at the
aggregate of cash received by the Company, excluding amounts paid or payable
for accrued interest;

 

(II)           insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and

 

(III)         in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the Company
for consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (I) and (II) above, as
determined in good faith by the Board of Directors.

 

(B)           Options and Convertible Securities. 
The consideration per share received by the Company for Additional
Shares of Common Stock deemed to have been issued pursuant to
subsection 2(a)(iii), relating to Options and Convertible Securities,
shall be determined by dividing

 

(x)            the
total amount, if any, received or receivable by the Company as consideration
for the issue of such Options or Convertible Securities, plus the minimum
aggregate amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the Company upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities, or in the case of Options for Convertible Securities, the exercise
of such Options for Convertible Securities and the conversion or exchange of
such Convertible Securities, by

 

(y)           the
maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.

 

(vi)          Multiple Closing Dates.  In the event
the Company shall issue on more than one date Additional Shares of Common Stock
which are comprised of shares of the same series or class of Preferred Stock,
and such issuance dates occur within a period of no more than 120 days, then,
upon the final such issuance, the Purchase Price shall be readjusted to give
effect to all such issuances as if they occurred on the date of the final such
issuance (and without giving effect to any adjustments as a result of such
prior issuances within such period).

 

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(b)           Adjustment for Stock Splits and
Combinations.  If the Company shall at any time or from
time to time after the Original Issue Date effect a subdivision of the
outstanding Common Stock, the Purchase Price then in effect immediately before
that subdivision shall be proportionately decreased.  If the Company shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock, the
Purchase Price then in effect immediately before the combination shall be
proportionately increased.  Any
adjustment under this paragraph shall become effective at the close of business
on the date the subdivision or combination becomes effective.

 

(c)           Adjustment for Certain Dividends and
Distributions.  In the event the Company at any time, or
from time to time after the Original Issue Date shall make or issue, or fix a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of
Common Stock, then and in each such event the Purchase Price then in effect
immediately before such event shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of the
close of business on such record date, by multiplying the Purchase Price then
in effect by a fraction:

 

(1)           the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and

 

(2)           the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution;

 

provided, however,
if such record date shall have been fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor, the
Purchase Price shall be recomputed accordingly as of the close of business on
such record date and thereafter the Purchase Price shall be adjusted pursuant
to this paragraph as of the time of actual payment of such dividends or
distributions.

 

(d)           Adjustment in Number of Warrant Shares. 
When any adjustment is required to be made in the Purchase Price
pursuant to subsections 2(a), 2(b) or 2(c), the number of Warrant Shares
purchasable upon the exercise of this Warrant shall be changed to the number
determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such
adjustment, multiplied by the Purchase Price in effect immediately prior to
such adjustment, by (ii) the Purchase Price in effect immediately after
such adjustment.

 

(e)           Adjustments for Other Dividends and
Distributions.  In the event the Company at any time or from
time to time after the Original Issue Date shall make or issue, or fix a record
date for the determination of holders of Common Stock entitled to receive, a
dividend or other distribution payable in securities of the Company (other than
shares of Common Stock) or in cash or other property (other than cash out of
earnings or earned surplus, determined in accordance with generally accepted
accounting principles), then and in each such event provision shall be made so
that the Registered Holder shall receive upon exercise hereof, in

 

7

 

addition
to the number of shares of Common Stock issuable hereunder, the kind and amount
of securities of the Company and/or cash and other property which the
Registered Holder would have been entitled to receive had this Warrant been
exercised into Common Stock on the date of such event and had the Registered
Holder thereafter, during the period from the date of such event to and
including the Exercise Date, retained any such securities receivable, giving
application to all adjustments called for during such period under this Section
2 with respect to the rights of the Registered Holder.

 

(f)            Adjustment for Mergers or
Reorganizations, etc.  If there shall occur any
reorganization, recapitalization, consolidation or merger involving the Company
in which the Common Stock is converted into or exchanged for securities, cash
or other property (other than a transaction covered by subsections 2(b),
2(c) or 2(e)), then, following any such reorganization, recapitalization,
consolidation or merger, the Registered Holder shall receive upon exercise
hereof the kind and amount of securities, cash or other property which the
Registered Holder would have been entitled to receive if, immediately prior to
such reorganization, recapitalization, consolidation or merger, the Registered
Holder had held the number of shares of Common Stock subject to this Warrant.
In any such case, appropriate adjustment (as determined in good faith by the
Board of Directors of the Company) shall be made in the application of the
provisions set forth herein with respect to the rights and interests thereafter
of the Registered Holder, to the end that the provisions set forth in this
Section 2 (including provisions with respect to changes in and other
adjustments of the Purchase Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities, cash or other property
thereafter deliverable upon the exercise of this Warrant.

 

(g)           Certificate as to Adjustments. 
Upon the occurrence of each adjustment or readjustment of the Purchase
Price pursuant to this Section 2, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to the Registered Holder a certificate setting forth such
adjustment or readjustment (including the kind and amount of securities, cash
or other property for which this Warrant shall be exercisable and the Purchase
Price) and showing in detail the facts upon which such adjustment or
readjustment is based.  The Company
shall, upon the written request at any time of the Registered Holder, furnish
or cause to be furnished to the Registered Holder a certificate setting forth
(i) the Purchase Price then in effect and (ii) the number of shares
of Common Stock and the amount, if any, of other securities, cash or property
which then would be received upon the exercise of this Warrant.

 

3.             Fractional Shares.  The Company
shall not be required upon the exercise of this Warrant to issue any fractional
shares, but shall make an adjustment therefor in cash on the basis of the Fair
Market Value per share of Common Stock, as determined pursuant to subsection
1(b) above.

 

4.             Requirements for Transfer.

 

(a)           This Warrant and the Warrant Shares shall
not be sold or transferred unless either (i) they first shall have been
registered under the Securities Act of 1933, as amended (the “Act”), or
(ii) the Company first shall have been furnished with an opinion of legal

 

8

 

counsel,
reasonably satisfactory to the Company, to the effect that such sale or
transfer is exempt from the registration requirements of the Act.

 

(b)           Notwithstanding the foregoing, no
registration or opinion of counsel shall be required for (i) a transfer by
a Registered Holder which is a corporation to a wholly owned subsidiary of such
corporation, a transfer by a Registered Holder which is a partnership to a
partner of such partnership or a retired partner of such partnership or to the
estate of any such partner or retired partner, or a transfer by a Registered
Holder which is a limited liability company to a member of such limited
liability company or a retired member or to the estate of any such member or
retired member, provided that the transferee in each case agrees in writing to
be subject to the terms of this Section 4, or (ii) a transfer made in
accordance with Rule 144 under the Act.

 

(c)           Each certificate representing Warrant
Shares shall bear a legend substantially in the following form:

 

“The securities represented by this certificate have
not been registered under the Securities Act of 1933, as amended, and may not
be offered, sold or otherwise transferred, pledged or hypothecated unless and
until such securities are registered under such Act or an opinion of counsel
satisfactory to the Company is obtained to the effect that such registration is
not required.”

 

The foregoing
legend shall be removed from the certificates representing any Warrant Shares,
at the request of the holder thereof, at such time as they become eligible for
resale pursuant to Rule 144(k) under the Act.

 

5.             No Impairment.  The Company
will not, by amendment of its charter or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights
of the holder of this Warrant against impairment.

 

6.             Notices of Record Date, etc. 
In the event:

 

(a)           the Company shall take a record of the
holders of its Common Stock (or other stock or securities at the time
deliverable upon the exercise of this Warrant) for the purpose of entitling or
enabling them to receive any dividend or other distribution, or to receive any
right to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other right; or

 

(b)           of any capital reorganization of the
Company, any reclassification of the Common Stock of the Company, any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the surviving entity and
its Common Stock is not converted into or exchanged for any other securities or
property), or any transfer of all or substantially all of the assets of the
Company; or

 

9

 

(c)           of the voluntary or involuntary
dissolution, liquidation or winding-up of the Company,

 

then,
and in each such case, the Company will mail or cause to be mailed to the
Registered Holder a notice specifying, as the case may be, (i) the record date
for such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be
fixed, as of which the holders of record of Common Stock (or such other stock
or securities at the time deliverable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up.  Such notice
shall be mailed at least ten days prior to the record date or effective date
for the event specified in such notice.

 

7.             Reservation and Listing of Stock.

 

(a)           The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other securities, cash and/or property, as
from time to time shall be issuable upon the exercise of this Warrant.

 

(b)           The Company shall prepare and file with the American
Stock Exchange (or such other securities exchange or automated quotation system
on which the Common Stock of the Company is then listed) (the “Applicable Stock
Exchange”) an application (the “Listing Application”) to list the Warrant
Shares on the Applicable Stock Exchange. 
The Company shall promptly notify the Registered Holder of the approval
of the Listing Application.

 

8.             Vesting Date.  As used herein, the term “Vesting Date”
shall mean the earliest to occur of (i) the date of approval of the Listing
Application by the Applicable Stock Exchange; (ii) the date on which the
Company’s Common Stock ceases to be listed on the American Stock Exchange or
listed or quoted on another securities exchange or automated quotation system
which requires that the Company list the Warrant Shares; and (iii) the date of
any reorganization, recapitalization, consolidation or merger involving the
Company in which the Common Stock is converted into or exchanged for
securities, cash or other property (other than a transaction covered by subsections
2(b), 2(c) or 2(e)).

 

9.             Exchange of Warrants.  Upon the
surrender by the Registered Holder, properly endorsed, to the Company at the
principal office of the Company, the Company will, subject to the provisions of
Section 4 hereof, issue and deliver to or upon the order of such Holder, at the
Company’s expense, a new Warrant or Warrants of like tenor, in the name of the
Registered Holder or as the Registered Holder (upon payment by the Registered
Holder of any applicable transfer taxes) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock (or other
securities, cash and/or property) then issuable upon exercise of this Warrant.

 

10

 

10.           Replacement of Warrants.  Upon receipt
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and (in the case of loss, theft or
destruction) upon delivery of an indemnity agreement (with surety if reasonably
required) in an amount reasonably satisfactory to the Company, or (in the case
of mutilation) upon surrender and cancellation of this Warrant, the Company
will issue, in lieu thereof, a new Warrant of like tenor.

 

11.           Transfers, etc.

 

(a)           The Company will maintain a register
containing the name and address of the Registered Holder of this Warrant.  The Registered Holder may change its or his
address as shown on the warrant register by written notice to the Company requesting
such change.

 

(b)           Subject to the provisions of Section 4
hereof, this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of this Warrant with a properly executed assignment (in
the form of Exhibit II hereto) at the principal office of the
Company.

 

(c)           Until any transfer of this Warrant is
made in the warrant register, the Company may treat the Registered Holder as
the absolute owner hereof for all purposes; provided, however,
that if and when this Warrant is properly assigned in blank, the Company may (but
shall not be obligated to) treat the bearer hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.

 

12.           Representations
of the Registered Holder.  The Registered Holder of this
Warrant represents and warrants to the Company as follows:

 

(a)           Investment. 
The Registered Holder is acquiring this Warrant and the Warrant Shares
issuable upon the exercise of this Warrant, for its own account for investment
and not with a view to, or for sale in connection with, any distribution
thereof, nor with any present intention of distributing or selling the same,
except as otherwise may be permitted under applicable securities laws.

 

(b)           Authority. 
The Registered Holder has full power and authority to enter into and to
perform this Warrant in accordance with its terms.  The Registered Holder has not been organized, reorganized or
recapitalized specifically for the purpose of investing in the Company.

 

(c)           Experience. 
The Registered Holder has made detailed inquiry concerning the Company,
its business and its personnel; the officers of the Company have made available
to the Registered Holder the opportunity to ask questions and receive answers
concerning the terms and conditions of this Warrant and the Warrant Shares and
to obtain any additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
of information provided by the Company to the Registered Holder; and the
Registered Holder has adequate net worth and means of providing for his or its
current needs and personal contingencies to sustain a complete loss of his or
its investment in the Company; the Registered Holder’s overall commitment to
investments which are not readily marketable is not disproportionate to his or
its net worth and the Registered Holder’s investment

 

11

 

in
this Warrant and the Warrant Shares issuable upon exercise of this Warrant will
not cause such overall commitment to become excessive.

 

(d)           Accredited Investor. 
The Registered Holder is an Accredited Investor within the definition
set forth in Rule 501(a) promulgated under the Securities Act.

 

13.           Mailing of Notices, etc.  All notices
and other communications from the Company to the Registered Holder shall be
mailed by first-class certified or registered mail, postage prepaid, to the
address last furnished to the Company in writing by the Registered Holder.  All notices and other communications from
the Registered Holder or in connection herewith to the Company shall be mailed
by first-class certified or registered mail, postage prepaid, to the Company at
its principal office set forth below. 
If the Company should at any time change the location of its principal
office to a place other than as set forth below, it shall give prompt written
notice to the Registered Holder and thereafter all references in this Warrant
to the location of its principal office at the particular time shall be as so
specified in such notice.

 

14.           No Rights as Stockholder. 
Until the exercise of this Warrant, the Registered Holder shall not have
or exercise any rights by virtue hereof as a stockholder of the Company.  Notwithstanding the foregoing, in the event
(i) the Company effects a split of the Common Stock by means of a stock
dividend and the Purchase Price of and the number of Warrant Shares are
adjusted as of the date of the distribution of the dividend (rather than as of
the record date for such dividend), and (ii) the Registered Holder exercises
this Warrant between the record date and the distribution date for such stock
dividend, the Registered Holder shall be entitled to receive, on the
distribution date, the stock dividend with respect to the shares of Common
Stock acquired upon such exercise, notwithstanding the fact that such shares
were not outstanding as of the close of business on the record date for such
stock dividend.

 

15.           Change or Waiver.  Any term of
this Warrant may be changed or waived only by an instrument in writing signed by
the party against which enforcement of the change or waiver is sought.

 

16.           Section Headings.  The section
headings in this Warrant are for the convenience of the parties and in no way
alter, modify, amend, limit or restrict the contractual obligations of the
parties.

 

17.           Governing Law.  This Warrant
will be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts (without reference to the conflicts of law
provisions thereof).

 

18.           Supplying Information.  The Company
shall cooperate with each Registered Holder of a Warrant in supplying such
information as may be reasonably necessary for such Holder to complete and file
any information reporting forms presently or hereafter required by the
Securities and Exchange Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Warrant.

 

19.           Limitation of Liability.  No provision
hereof, in the absence of affirmative action by the Holder to purchase Warrant
Shares, and no enumeration herein of the rights or privileges of the Registered
Holder hereof, shall give rise to any liability of such Registered Holder for
the

 

12

 

purchase
price of any Warrant Shares or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.

 

20.           Remedies.  Each
Registered Holder of the Warrant and Warrant Shares, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights hereunder.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of the Warrant and hereby agrees to waive the defense
in any action for specific performance that a remedy at law would be adequate.

 

21.           Successors and Assigns.  Subject to
the provisions of Sections 11(c), this Warrant and rights evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company
and the successors and assigns of the Registered Holder.  The provisions of this Warrant are intended
to be for the benefit of all the Registered Holders from time to time of this
Warrant and shall be enforceable by any such Holder.

 

22.           Amendment.  This Warrant
and all other Warrants may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Registered Holder.

 

23.           Severability.  Whenever
possible, each provision of this Warrant shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Warrant is held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Warrant.

 

EXECUTED effective
as of the date of issuance indicated above.

 

	
   

  	
  PLC SYSTEMS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ James G. Thomasch

  	
   

  
	
   

  	
  Title:

  	
  Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Michelle Cannata

  	
   

  	
   

  	
   

  
						

 

13

 

EXHIBIT
I

 

PURCHASE
FORM

 

	
  To:                               

  	
   

  	
  Dated:                               

  

 

The undersigned,
pursuant to the provisions set forth in the attached Warrant
(No.       ), hereby irrevocably elects to
purchase (check applicable box):

 

o                         
shares of the Common Stock covered by such Warrant; or

 

o            the
maximum number of shares of Common Stock covered by such Warrant pursuant to
the cashless exercise procedure set forth in Section 1(b).

 

The undersigned
herewith makes payment of the full purchase price for such shares at the price
per share provided for in such Warrant, which is
$             .  Such payment takes the form of (check applicable box or boxes):

 

o            $             
in lawful money of the United States; and/or

 

o            the
cancellation of such portion of the attached Warrant as is exercisable for a
total of
             
Warrant Shares (using a Fair Market Value of
$             
per share for purposes of this calculation); and/or

 

o            the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in Section 1(b), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in Section 1(b).

 

	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
						

 

14

 

EXHIBIT
II

 

ASSIGNMENT
FORM

 

FOR VALUE
RECEIVED,
                                                                               
hereby sells, assigns and transfers all of the rights of the undersigned under
the attached Warrant (No.
          ) with respect to
the number of shares of Common Stock covered thereby set forth below, unto:

 

	
  Name of Assignee

  	
   

  	
  Address

  	
   

  	
  No. of
  Shares

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Dated:

  	
   

  	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Signature Guaranteed:

  
	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
   

  
	
  The signature
  should be guaranteed by an

  	
   

  	
   

  
	
  eligible
  guarantor institution (banks,

  	
   

  	
   

  
	
  stockbrokers,
  savings and loan associations

  	
   

  	
   

  
	
  and credit
  unions with membership in an

  	
   

  	
   

  
	
  approved
  signature guarantee medallion

  	
   

  	
   

  
	
  program)
  pursuant to Rule 17Ad-15 under

  	
   

  	
   

  
	
  the Securities
  Exchange Act of 1934.

  	
   

  	
   

  
							

 

 

15EXHIBIT 10.16

 

October 28, 2003

 

By Hand Delivery

 

Dr. Robert I.
Rudko

PLC Medical Systems, Inc.

10 Forge Park

Franklin, MA 02038

 

Dear Bob:

 

Following our
negotiations with you and your attorney, this letter agreement contains the
terms, as of October 28, 2003, of your continued employment with PLC Medical
Systems, Inc., a subsidiary of PLC Systems, Inc., (the “Company”).

 

1.             Title and Position.  You shall
continue to serve on a full-time basis as Chief Technical Officer of the
Company, reporting to the Company’s Chief Executive Officer.  If you request to serve on a less than
full-time basis or to take a leave of absence, the Company reserves the right
within its sole discretion to determine whether to permit such an arrangement,
and, if so, to determine the conditions of such an arrangement.

 

2.             Base Salary.  Your base
salary will continue to be at the rate of $7,403.85  per
bi-weekly pay period (annualized rate of $192,500), and shall be subject
to any and all applicable taxes and withholdings.  Such
base salary may be adjusted from time to time in accordance with regular
business practices and in the sole discretion of the Company; provided,
however, that such base salary shall not be adjusted downward unless the base
salaries of a majority of the Company’s Key Executives (for purposes of this
letter agreement, the term “Key Executives” means the Company’s Vice
Presidents, Senior Vice Presidents and its Chief Executive Officer) are
adjusted downward contemporaneously, in which case any such downward adjustment
shall be in the same proportion as the downward adjustments of such other Key
Executives.

 

3.             Bonuses.

 

(a)  Retention Bonus.  The Company will pay you a retention bonus
of $150,000, less all applicable taxes and withholdings (the “Retention
Bonus”), in three equal installments on each of October 1, 2004, October 1,
2005, and October 1, 2006; provided, however, that you will only be eligible to
receive any scheduled installment of the Retention Bonus if you are actively
employed by the Company on the scheduled date of payment.  Within ten days of your receipt of each
Retention Bonus installment from the Company, you shall repay the Company a
portion of the loans originally made to you in October 1991 and March 1992
(total original principal balance of $55,070; balance as of June 30, 2003,
$92,832, including principal and interest) (the “Loan”), as follows: (1) within
ten days of receiving the first Retention Bonus installment, you shall repay

 

 

the Company for
one-third of the then outstanding Loan balance, including principal and
interest; (2) within ten days of receiving the second Retention Bonus
installment, you shall repay the Company for one-half of the then outstanding
Loan balance, including principal and interest; and (3) within ten days of receiving
the third Retention Bonus installment, you shall repay the Company for the full
remaining outstanding Loan balance, including principal and interest.

 

(b)  Discretionary Bonus.  From time to time, beginning in calendar
year 2004, you may be eligible for an additional bonus pursuant to the terms of
any discretionary bonus programs that the Company may establish and make
available to Company Vice Presidents (provided, however, that the term “Company
Vice Presidents,” as used in this paragraph 3(b), does not include any of the
Company’s Senior Vice Presidents).  The
amount and timing of such bonus, if any, shall be determined by the Company in
its sole discretion.  If the Company
awards any discretionary bonus to Company Vice Presidents for calendar year
2003, you will be eligible to receive one-sixth of the full amount of any
discretionary bonus you would have received had you been employed under the
terms of this letter agreement for the full calendar year 2003.

 

4.             Fringe Benefits.  You will be
eligible to receive such benefits as are generally provided to other employees
in accordance with Company policy as then in effect from time to time.  The Company retains the right to change, add
or cease a particular benefit at any time; provided, however, that the Company
shall not change or cease your benefits unless the benefits of a majority of
the Company’s Key Executives are changed or ceased contemporaneously, except if
any change or cessation to a particular benefit(s) is due to a change in your
eligibility for such benefit(s). 
Present benefits include five weeks of paid flexible time off, accrued
on a monthly basis (to be taken at mutually satisfactory times), medical,
dental, short and long term disability and life insurance benefits,
participation in the Company’s 401(k) plan, and the car allowance available to
Company Vice Presidents.

 

5.             Stock Options.  In
connection with your continued employment, subject to approval of the Company’s
Board of Directors at the first Board meeting following your execution of this
letter agreement, you will be granted an option to purchase 45,000 shares of
Company Common Stock.  The option will
vest at the rate of one-third of the total number on each of the three
anniversary dates following the date of the grant.  This grant is conditioned upon your execution of this letter
agreement and will be subject to your execution and compliance with all terms
of the Company’s standard incentive stock option agreement and to all terms of
the Company’s 1995 Stock Option Plan. 
The purchase price of each option share shall be the fair market value
on the date of the grant.

 

6.             No Guarantee of
Employment / Employment at Will. 
Nothing in this letter agreement, including without limitation the
provisions of paragraph 3(a) above relating to the Retention Bonus, shall be
construed as an agreement, either express or implied, to employ you for any
stated term, and shall in no way alter the Company’s policy of employment at
will, under which both you and the Company remain free to end the employment
relationship, for any reason, at any time, with or without cause or
notice.  Similarly, except as explicitly
set forth herein, nothing in this letter agreement shall be construed as an
agreement, either express or implied, to pay you any compensation or grant you
any benefit beyond the end of your employment with the Company.

 

 

7.             Severance Benefits.

 

(a)           For each of the forty-eight months following your
execution of this letter agreement that you remain employed by the Company on a
full-time basis, the Company will allocate $8,020, less all applicable taxes
and withholdings, towards the total potential severance pay (the “Potential
Severance Pay”) for which you will be eligible, subject to and in accordance
with the provisions of paragraph 7(b) hereof, upon the termination of your
employment with the Company for any reason other than by the Company for Cause
(as defined below), provided that, following your termination from employment
with the Company, you have timely signed a severance agreement and release of
claims drafted by the Company.  If you
work for the Company on a less than full-time basis at any time during your
employment, or if you take a leave of absence from the Company for any reason,
but the Company continues to pay your base salary as if you continued to work
on a full-time basis during such period, the Company’s allocation towards the
Potential Severance Pay will be reduced proportionally to account for your
reduced work schedule or absence. 
Further, if you work for the Company on a less than full time basis at
any time during your employment, or if you take a leave of absence from the
Company for any reason, and the Company reduces your base salary in proportion
to your reduced schedule during such period, the Company will allocate towards
the Potential Severance Pay the amount it would have allocated had you worked
full-time during such period.

 

(b)           If your employment is terminated by you or the Company
for any reason other than by the Company for Cause on or after the date four
years following your execution of this letter agreement (the “Fourth
Anniversary Date”), you will receive as severance pay the gross amount
previously allocated by the Company towards the Potential Severance Pay.  If your employment is terminated prior to
the Fourth Anniversary Date, either by the Company without Cause or by you for
Good Reason (as defined below), you will receive as severance pay all amounts
previously allocated by the Company towards the Potential Severance Pay, plus
the amount that would have been allocated between the date your employment is
terminated and the Fourth Anniversary Date had you remained employed by the
Company during such period.  If you
choose to terminate your employment prior to the Fourth Anniversary Date for
any reason other than Good Reason, you will receive as severance pay only the
amount previously allocated by the Company towards the Potential Severance
Pay.  You will not be eligible to
receive any severance pay if your employment is terminated at any time by the
Company for Cause.

 

(c)           Should the Company terminate your employment on or
before October 1, 2006 other than for Cause, and provided that: (i) you
immediately resign from any Company offices or directorships you may hold at
the time of termination; (ii) you have fulfilled all of your obligations under
paragraph 3(a) above; and (iii) following your termination from employment with
the Company, you have timely signed a severance agreement and release of claims
drafted by the Company, the Company shall, in addition to any Potential
Severance Pay for which you may be eligible under paragraph 7(b) hereof, pay
you an extra severance payment according to the following schedule: $150,000 if
you are terminated prior to October 1, 2004; $100,000 if you are terminated
between October 2, 2004 and October 1, 2005; or $50,000 if you are terminated
between October 2, 2005 and October 1, 2006.

 

(d)           Any severance pay described in this paragraph 7 shall
be subject to all applicable

 

 

taxes and
withholdings, and shall never exceed $385,000 gross plus the applicable amount
contemplated by paragraph 7(c) hereof. 
Any severance pay that you may receive shall be paid in equal monthly
installments over the twenty-four month period following the termination of
your employment.  The Company shall have
the right to set off against any severance pay that you may become eligible to
receive under this paragraph 7 any amounts you borrowed from or may otherwise
owe to the Company.

 

8.             Definitions.  As used in
this letter agreement:

 

(a)           “Cause” means (i) a good faith finding by the Company
that (x) you have failed to perform your reasonably assigned duties for the
Company and have failed to remedy such failure within ten (10) days following
written notice from the Company to you notifying you of such failure; and/or
(y) you have engaged in dishonesty, gross negligence or misconduct; or (ii)
your conviction of, or the entry of a pleading of guilty or nolo contendere by you to, any crime
involving moral turpitude or any felony.

 

(b)           “Good Reason” means, following a “Change of Control”
(as defined below), (i) a material diminution in your position, authority or
responsibilities; (ii) a material reduction in your salary or benefits; or
(iii) the relocation of your place of work such that the distance from your
residence to your place of work is increased by more than one hundred (100)
miles.

 

(c)           “Change of Control” means (i) the acquisition by a
person, party or group of 50% or more of the outstanding capital stock of the
Company, excluding acquisitions from the Company, (ii) the acquisition of the
Company by means of a reorganization, merger, consolidation, recapitalization
or asset sale, unless the owners of the capital stock of the Company before
such transaction continue to own more than 50% of the capital stock of the
acquiring or succeeding entity in substantially the same proportions, or (iii)
a change, without Board approval, of a majority of the Board (whether occurring
on one date or over time).

 

9.             Confidentiality, Inventions and Non-Competition. 
As a condition of your continued employment, you will be required to
execute, together with this letter agreement, the Noncompetition, Proprietary
Information and Inventions Agreement enclosed herewith (the “Noncompetition
Agreement”).

 

10.           Successors and Assigns.  This letter
agreement is binding upon and shall inure to the benefit of the parties and
their respective agents, assigns, heirs, executors, successors and
administrators.

 

11.           Entire Agreement, Acknowledgements and Governing Law. 
This letter agreement, together with the Noncompetition Agreement,
constitutes the entire agreement regarding the terms and conditions of your
continued employment with the Company. 
You acknowledge that this letter agreement, together with the
Noncompetition Agreement, supersedes any and all prior understandings, whether
written or oral, relating to the terms of your employment, including without
limitation the Amended Key Employee Agreement between you and PLC Systems, Inc.
dated as of September 8, 1994 and amended as of August 1, 1996 (the “Amended
Key Employee Agreement”), which the Company and you acknowledge is hereby
terminated by mutual agreement.  You
further acknowledge that no “Change in Control,” as that term is defined in

 

 

Exhibit A to the
Amended Key Employee Agreement, occurred at any time, and that you are not
entitled to receive any payment or benefit under the Amended Key Employee
Agreement.  Notwithstanding any of the
foregoing, however, you acknowledge and represent that nothing in this letter
agreement is to be construed as releasing you from your obligation to repay, or
modifying in any respect any term of, the Loan.  You represent and further acknowledge that, as of the date you
execute this letter agreement, you have no claims of any kind or nature against
the Company and/or any of its current or former officers, directors and/or
employees arising out of or relating to your employment with the Company.  You further agree that any action, demand, claim
or counterclaim concerning any aspect of your employment with or separation
from the Company shall be governed by the laws of the Commonwealth of
Massachusetts, without regard to conflicts of law principles.  This letter agreement shall be binding upon
the parties and may not be abandoned, supplemented, changed or modified in any
manner, orally or otherwise, except by an instrument in writing of concurrent
or subsequent date signed by a duly authorized representative of the parties
hereto.

 

If
the terms of this letter agreement are acceptable to you, please sign and
return the copy of this letter agreement enclosed for that purpose, as well as
the enclosed Noncompetition Agreement, no later than October 28, 2003.  If you do not return both signed documents
by October 28, 2003, the offer of continued employment under the terms set
forth in this letter agreement will expire.

 

Sincerely,

 

PLC
Medical Systems, Inc.

 

	
   

  	
  By:

  	
   /s/ Edward
  H. Pendergast

  	
   

  
	
   

  	
  Title:

  	
   Chairman

  	
   

  

 

The foregoing
correctly sets forth the terms of my continued employment with PLC Medical
Systems, Inc.  I am not relying on any
representations other than as set out in the letter agreement above.  I have been given a reasonable amount of
time to consider this letter agreement and to consult an attorney and/or
advisor of my choosing.  I have
carefully read this letter agreement, understand the contents herein, freely
and voluntarily assent to all of the terms and conditions hereof, and sign my
name of my own free act.

 

	
   

  	
   /s/ Robert
  I. Rudko

  	
   

  	
  Date:  October 28, 2003

  
	
   

  	
   Dr. Robert
  I. Rudko

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