EXHIBIT 10.11
PHOTOELECTRON CORPORATION
SUBSCRIPTION AGREEMENT
----------------------
TO: Photoelectron Corporation
▇▇▇-▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
You have advised the undersigned, Toshiba Medical Systems Co., Ltd. ("the
Investor") that Photoelectron Corporation, a Massachusetts corporation (the
"Company"), is offering for sale up to 1,777,778 shares (subject to the
Overallotment Right) of its Series C Convertible Preferred Stock, $.0l par value
(the "Series C Preferred Stock"), at a price of $4.50 per share, which offering
is more fully set forth and described in the Confidential Private Placement
Memorandum dated as of July 1, 1995 (the "Memorandum"), which has been
furnished to the Investor.
1. Subscription
------------
a. Subject to the terms and conditions of this Agreement, the Investor
hereby agrees to subscribe for and purchase from the Company and hereby tenders
this Subscription for that number of shares of Series C Preferred Stock as is
set forth beneath its name and address on the signature page of this
Subscription Agreement (the "Shares") together with payment of the subscription
price therefor. The subscription price is hereinafter referred to as the
"Funds."
b. Tender of the Funds shall be made by wire transfer to the following
account, together with executed copies of this Subscription Agreement and the
Investor Questionnaire:
BayBank Boston (011001742)
BayFunds Portfolio Account
Swift Code (BayBus 33)
Money Market Account No.371-53931
For further credit to Photoelectron Corporation
Account No.386-21955
c. The Company may accept subscriptions for less than all of the Series C
Preferred Stock offered pursuant to the Memorandum.
2. Acceptance of Agreement
-----------------------
Subject to the terms and conditions of this Agreement, the Company hereby
accepts this Subscription for the Shares together with payment of the Funds. The
Investor and the Company will execute two complete copies of this Agreement.
3. Representations and Warranties
------------------------------
a. The Investor hereby represents and warrants to the Company as follows:
(1) The Investor is not a U.S. Person (as defined in Rule 230.903 of
Regulation S ("Regulation S") of the Securities Act of 1933, as amended (the
"Securities Act")), and is not acquiring the Shares for the account or benefit
of any U.S. person and that it will resell such Shares only in accordance with
the provisions of Regulation S pursuant to registration under the Securities Act
or pursuant to an available exemption from registration.
(2) THE INVESTOR HAS READ CAREFULLY AND UNDERSTANDS THE MEMORANDUM AND
THIS AGREEMENT AND HAS CONSULTED THE INVESTOR'S OWN ATTORNEY, ACCOUNTANT OR
INVESTMENT ADVISER WITH RESPECT TO THE INVESTMENT CONTEMPLATED HEREBY AND ITS
SUITABILITY FOR THE INVESTOR. THE INVESTOR HAS HAD AN OPPORTUNITY TO ASK
QUESTIONS OF AND RECEIVED ANSWERS FROM THE COMPANY, OR A PERSON OR PERSONS
ACTING ON THE COMPANY'S BEHALF, CONCERNING THE TERMS AND CONDITIONS OF THIS
INVESTMENT AND THE BUSINESS OF THE COMPANY, AND HAS RECEIVED AND REVIEWED ALL
ADDITIONAL DOCUMENTATION REGARDING THE BUSINESS AND OPERATIONS OF THE COMPANY
THAT IT HAS REASONABLY REQUESTED. THE INVESTOR HAS READ CAREFULLY AND
UNDERSTANDS THE SECTION OF THE MEMORANDUM ENTITLED "RISK FACTORS."
(3) The Investor (i) has no need for liquidity in the investment in the
Shares, (ii) is able to bear the substantial economic risks of an investment in
the Shares for an indefinite period, and (iii) at the present time, could afford
the complete loss of such investment in the Shares.
(4) The Investor has received and read and is familiar with the Memorandum
and this Agreement and confirms that all documents, records and books pertaining
to the investment in the Company and requested by the Investor have been made
available to the Investor.
(5) The Investor understands that the Shares have not been registered
under the Securities Act, nor pursuant to the provisions of the securities laws
or other laws of any other applicable jurisdictions, in reliance on exemptions
for private offerings or off-shore offerings contained in the Securities Act and
in the laws of such jurisdictions. The Investor is fully aware that the Shares
subscribed to by it are to be sold in reliance upon such exemptions based upon
its representations, warranties and agreements set forth herein. The Investor is
fully aware that it
2
must bear the economic risk of its investment in the Company for an indefinite
period of time because the Shares have not been registered under the Securities
Act, and therefore, cannot be offered or sold unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. The Investor further understands that the Company has no intention
and is under no obligation to register its Shares under the Securities Act
(except to the extent set forth in the Registration Rights Agreement to be
executed at the closing) or to comply with the requirements for any exemption
that might otherwise be available, or to supply it with any information
necessary to enable it to make routine sales of the Shares under Rule l44 under
the Securities Act (which it understands is not now, and will not likely be,
available) or any rule of the Securities and Exchange Commission or any
successor thereto.
(6) The Investor understands that the certificate(s) representing the
Shares will bear the following legends restricting their transfer and that a
notation restricting such transfer will be made on the stock transfer books of
the Company:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. These shares have been
acquired for investment and not with a view to distribution or resale
and may not be sold, mortgaged, pledged, hypothecated or otherwise
transferred without an effective registration statement for such sales
under the Securities Act of 1933, or an opinion of counsel for the
corporation that registration is not required under such Act.
"The shares represented by this certificate may not be transferred
except in accordance with Regulation S of the Securities Act of 1933,
as amended."
As required by Regulation S, the Company hereby agrees that it will not and the
Investor acknowledges that the Company can not register any transfer of the
Shares not in compliance with Regulation S.
(7) The Shares for which the Investor hereby subscribes are being acquired
solely for the Investor's own account, for investment and are not being
purchased with a view to or for the resale, distribution, subdivision or
fractionalization thereof; and the Investor has no present plans to enter into
any contract, undertaking, agreement or arrangement relating thereto.
(8) The Investor acknowledges and is aware of the following:
(i) that the Series C Preferred Stock is a speculative investment
and involves a high degree of risk of loss by the Investor of the Investor's
entire investment in the Company;
(ii) that there is no guarantee that the Investor will realize any
gain from its investment in the Company and that it may lose its entire
investment;
(iii) that the Company has no current plan or intention to issue
dividends;
3
(iv) that there has never been any representation, guarantee or
warranty made to the Investor by any broker, the Company, its agents or
employees or any other person, expressly or by implication, as to:
(A) the approximate or exact length of time that the Investor
will be required to remain as owner of the Shares; or
(B) the past performance or experience on the part of the
officers or directors of the Company, or of any other person, that
will in any way indicate the predictable results of the ownership of
the Shares or any such other securities, or of the overall business
of the Company;
(v) that the Company may in the future issue additional shares of
capital stock in the Company, and that the Investor's interest in the Company
may thereby become diluted.
b. The Company hereby represents and warrants to the Investor as follows:
(1) The Company is a corporation duly organized and existing under the
laws of The Commonwealth of Massachusetts and has the corporate power to own its
property and to carry out its business as now being conducted by it.
(2) The Company has obtained all consents, approvals and authorizations
under the Articles of Organization of the Company, the laws and regulations of
The Commonwealth of Massachusetts and of the United States of America that are
necessary for the Company to issue the Shares and perform its obligations under
this Agreement.
(3) Assuming that the Funds are duly tendered by the Investor in
accordance with Section I hereof, the Shares will be issued to the Investor
which entitles the Investor to all the rights and privileges that are described
in Exhibit B of the Memorandum.
(4) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, an independent public accounting firm authorized
to do business in The Commonwealth of Massachusetts, submitted to the Company as
of January 20, 1995 its report contained on Page F-1 of the Memorandum.
(5) The information contained in the Memorandum was true and correct in
all material respects as of the date thereof.
(6) To the best information and belief of the Company, there have been no
material changes in the financial conditions of the Company since the date of
the Memorandum.
c. The foregoing representations and warranties are true and accurate as
of the date hereof and shall be true and accurate as of the date of delivery of
the Funds to the Company and shall survive such delivery. If in any respect the
representations and warranties of either party hereto shall not be true and
accurate prior to acceptance of this Agreement pursuant to Section 2
4
hereof, such party shall give written notice of such fact to the other party,
specifying which representations and warranties are not true and accurate and
the reasons therefor.
4. Right of First Refusal The Company hereby grants to the Investor the
right of first refusal to purchase a pro rata share of New Securities (as
defined in this Section 4) which the Company may, from time to time, propose to
sell and issue. The Investor's pro rata share, for purposes of this right of
first refusal, is the ratio of the number of shares of Common Stock of the
Company into which the Investor's Series C Preferred Stock is convertible
immediately prior to the issuance of New Securities, to the total number of
shares of Common Stock outstanding immediately prior to the issuance of New
Securities (assuming for purposes of this calculation that all of the Company's
outstanding convertible preferred stock, currently exercisable warrants and
options and convertible debentures were converted into shares of Common Stock of
the Company immediately prior to the issuance of New Securities). This right of
first refusal shall be subject to the following provisions:
a. "New Securities" shall mean any capital stock (including common stock
and/or preferred stock) of the Company whether now authorized or not, and
rights, options or warrants to purchase such capital stock, provided that the
term "New Securities" does not include (i) securities purchased in the current
offering of Series C Preferred Stock described in the Memorandum;
(ii) securities issued upon conversion of any Series C Preferred Stock purchased
in the current offering described in the Memorandum; (iii) securities issued in
connection with the acquisition by the Company of all or part of another
business entity; (iv) securities issued to directors, officers, employees or
consultants of the Company pursuant to any stock option, stock purchase or stock
bonus plan, agreement or arrangement approved by the Board of Directors of the
Company; (v) securities issued in a public offering pursuant to a registration
under the Securities Act with an aggregate offering price to the public of at
least $5,000,000; (vi) securities issued in connection with any stock split,
stock dividend or other recapitalization of the Company; and (vii) any right,
option or warrant to acquire any security convertible into the securities
excluded from the definition of New Securities pursuant to subsections (i)
through (vii) above.
b. In the event the Company proposes to undertake an issuance of New
Securities, it shall give the Investor written notice of its intention,
describing the type of New Securities, their price and the general terms upon
which the Company proposes to issue the same. The Investor shall have thirty
(30) days after any such notice is received to agree to purchase the Investor's
pro rata share of such New Securities for the price and upon the terms specified
in the notice by giving written notice to the Company of the quantity of New
Securities the Investor intends to purchase.
c. In the event the Investor fails to exercise fully the right of first
refusal within said thirty (30) day period, the Company shall have one hundred
twenty (120) days thereafter to sell or enter into an agreement (pursuant to
which the sale of New Securities covered thereby shall be closed, if at all,
within one hundred twenty (120) days from the date of said agreement) to sell
the New Securities respecting which the Investor's right of first refusal option
set forth in this
5
Section 4 was not exercised, at a price and upon terms no more favorable to the
purchasers thereof than specified in the Company's notice to the Investor
pursuant to Section 4b. In the event the Company has not sold within said 120-
day period or entered into an agreement to sell the New Securities in accordance
with the foregoing within one hundred twenty (120) days from the date of said
agreement, the Company shall not thereafter issue or sell any New Securities,
without first again offering such securities to the Investor in the manner
provided in Section 4b above.
d. The right of first refusal granted under this Section 4 shall expire
upon, and shall not be applicable to, the first sale of Common Stock of the
Company to the public effected pursuant to a registration statement filed with,
and declared effective by, the U.S. Securities and Exchange Commission (the
"Commission") under the Securities Act, with proceeds of more than $5,000,000.
e. The right of first refusal set forth in this Section 4 may not be
assigned or transferred, except that such right is assignable by the Investor to
any wholly owned subsidiary or parent of; or to any corporation or entity that
is controlling, controlled by or under common control with, the Investor.
5. Indemnification The Investor acknowledges that it understands the
---------------
meaning and legal consequences of the representations and warranties contained
in Section 3 hereof, and hereby agrees to indemnify and hold harmless the
Company and each officer, director, promoter and agent thereof and any person or
entity controlling the Company from and against any and all loss, cost, damage
or liability (including reasonable attorneys' fees) due to or arising out of a
breach of any representation or warranty of the Investor contained in this
Agreement.
6. Restrictions on Transfer
------------------------
a. The Investor covenants and agrees that the Investor shall not transfer
any of the Shares except as expressly permitted by this Agreement. For purposes
of this Agreement, "transfer" shall be construed as broadly as the law shall
allow, and shall include any change of legal or beneficial ownership with
respect to the Shares or the creation of a security interest by any means. Any
transfer made in connection with the foreclosure of a security interest shall
constitute a separate transfer.
b. In the event the Investor desires to transfer any Shares, the Shares
shall first be offered to the Company in accordance with the following terms and
conditions:
(i) The Investor shall deliver a written notice ("Notice") to the
Company stating (A) that the Investor has received a bona fide offer from a
third party to purchase all or part of the Shares and that the Investor intends
to accept such offer, (B) the number of Shares to be sold or transferred, (C)
the price for which the Investor intends to sell or transfer the Shares, and (D)
the name of the intended purchaser or transferee.
6
(ii) Within thirty (30) days after receipt of the Notice, the
Company or its assignee may elect to purchase any or all of the Shares to which
the Notice refers, at the price per share specified in the Notice.
(iii) If all of the Shares to which the Notice refers are not elected
to be purchased as provided in subsection 6(b)(ii) hereof; and if the Board of
Directors of the Company approves of the proposed purchaser (which approval
shall not be unreasonably withheld), the Investor may sell the remaining Shares
as provided in the Notice, within thirty (30) days of the Board's decision, and
only upon the terms set forth in the Notice. If such sale is not consummated
within said thirty (30) days, the Investor shall again comply with this
Section 6. Any such purchaser shall receive and hold such Shares subject to the
provisions of this Agreement and there shall be no further transfer of such
shares except in accordance herewith. No such purchaser shall receive the Shares
and no such Shares will be transferred of record to any such purchaser until
such purchaser becomes a party to this Agreement and such purchaser shall be
bound by this Agreement to the same extent that the original Investor is so
bound.
c. The Company shall not be required (i) to transfer on its books any
Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement, or (ii) to treat as owner of Shares or
to accord the right to vote as such owner or to pay dividends to any purchaser
or transferee to whom such Shares shall have been so transferred or sold.
d. The provisions of this Section 6 shall terminate upon the effective
date of an initial public offering of shares of the Common Stock, $.01 par
value, of the Company at a price of at least $5.00 per share of Common Stock
with gross proceeds to the Company of at least $5,000,000. The Board of
Directors of the Company shall also have the power to terminate or waive the
provisions of this Section 6.
7. No Waiver Notwithstanding any of the representations, warranties,
---------
acknowledgments or agreements made herein by the Investor, the Investor does not
thereby or in any other manner waive any rights granted to it under federal and
state securities law.
8. Transferability The Investor agrees not to transfer or assign this
---------------
Agreement, or any of the Investor's interest herein, and further agrees that any
assignment or transfer of the Shares shall be made only in accordance with
applicable securities laws and that an appropriate legend(s) with respect
thereto may be placed by the Company on any certificate evidencing such Shares.
9. Revocation The Investor agrees that it shall not cancel, terminate or
----------
revoke this Agreement or any agreement of the Investor made hereunder.
10. Termination of Agreement. If any representation or warranty of the
------------------------
Investor or the Company contained in Section 3 hereof shall not be true prior to
acceptance of this Agreement pursuant to Section 2 hereof, and written notice of
such fact has been given by the
7
party whose representation or warranty is untrue to the other party, then and in
any such event this Agreement shall be null and void and of no further force and
effect, and neither party shall have any rights against any other party
hereunder, and the Company shall promptly return to the Investor the Funds,
together with interest thereon, and all agreements executed by the Investor.
11. Miscellaneous
-------------
a. All notices or other communications given or made hereunder shall be
in writing and shall be delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, to the Investor at its address set
forth below and to the Company at its address set forth at the outset of this
Agreement.
b. Failure of the Company to exercise any right or remedy under this
Subscription Agreement or any other agreement between the Company and the
Investor, or otherwise, or delay by the Company in exercising the same, will not
operate as a waiver thereof. No waiver by the Company will be effective unless
and until it is in writing and signed on behalf of the Company.
c. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Massachusetts (without giving effect to
provisions regarding the conflict of laws).
d. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and may be amended only by a
writing executed by all parties.
IN WITNESS WHEREOF, the Investor has executed this Agreement as an
instrument under seal as of the date set forth below.
[INITIALS APPEAR HERE]
TOSHIBA MEDICAL SYSTEMS CO., LTD.
By:/s/ [SIGNATURE APPEARS HERE]
------------------------------
Title: President
---------------------------
Date: Dec. 22, 1995
---------------------------
Address: ▇▇-▇,▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇-▇▇ ▇▇▇▇▇, ▇ 1 3 Japan
Aggregate Number of Shares: 444,000
-------
Total Amount Enclosed: $l,998,000
----------
8
Accepted and Agreed to:
PHOTOELECTRON CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------
Title: President & CEO
---------------------------
Date: Dec. 26, 1995
----------------------------
9