<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 21, 1996
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PHOTOELECTRON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 3845 04-3035323
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION) CLASSIFICATION CODE
NUMBER)
5 FORBES ROAD
LEXINGTON, MASSACHUSETTS 02173
(617) 861-2069
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
PETER E. OETTINGER, PH.D.
VICE PRESIDENT AND CHIEF OPERATING OFFICER
PHOTOELECTRON CORPORATION
5 FORBES ROAD
LEXINGTON, MASSACHUSETTS 02173
(617) 861-2069
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES OF COMMUNICATIONS TO:
LESTER J. FAGEN, ESQUIRE EDWIN L. MILLER JR., ESQUIRE
DANIEL R. AVERY, ESQUIRE TESTA, HURWITZ & THIBEAULT, LLP
GOULSTON & STORRS, P.C. HIGH STREET TOWER
400 ATLANTIC AVENUE 125 HIGH STREET
BOSTON, MASSACHUSETTS 02110 BOSTON, MASSACHUSETTS 02110
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF SECURITIES AGGREGATE OFFERING PRICE AMOUNT OF
TO BE REGISTERED (1) REGISTRATION FEE (1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.01 par value.... $29,900,000 $10,310
</TABLE>
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- -------------------------------------------------------------------------------
(1) Calculated pursuant to Rule 457(o).
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 21, 1996
PROSPECTUS
2,000,000 Shares
LOGO
Common Stock
-----------
All of the 2,000,000 shares of Common Stock offered hereby are being sold by
Photoelectron Corporation ("Photoelectron" or the "Company"). Prior to this
offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price will be
between $11.00 and $13.00 per share. See "Underwriting" for a discussion of
factors to be considered in determining the initial public offering price. The
Company has applied for quotation of the Common Stock on the Nasdaq Stock
Market's National Market under the symbol "PECX".
-----------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $ $ $
- --------------------------------------------------------------------------------
Total (3).............................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(2) Before deducting estimated expenses of $855,000 payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover over-
allotments, if any. If the Underwriters exercise such option in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively. See
"Underwriting."
-----------
The shares of Common Stock offered by this Prospectus are being offered by
the several Underwriters named herein, subject to prior sale, when, as and if
delivered to and accepted by them and subject to the right of the Underwriters
to reject orders in whole or in part. It is expected that delivery of the
shares of Common Stock offered hereby will be made in New York, New York on or
about , 1996.
-----------
Needham & Company, Inc.____________________________________________Dain Bosworth
Incorporated
The date of this Prospectus is , 1996.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
DESCRIPTION OF FRONT COVER PAGE GRAPHICS:
The graphics on the front cover page consist of one drawing, with
corresponding description, located within the top half of the page, and a
series of four smaller drawings, each with description, located within the
bottom half of the page.
A caption at the top of the page reads as follows: "The Photon Radiosurgery
System (PRS). A Therapeutic X-Ray System for Treating".
The drawing within the top half of the page measures approximately 4 inches
(width) by 4 inches (length) (based on an 8 1/2 inch by 11 inch page) and is
centered roughly within the left-hand side of the page. The drawing shows a
partially cross-sectioned view of a human head, with the PRS probe directed
downward, at approximately a 45 degree angle, into the brain. The cross-
sectioned portion of the head shows the tip of the probe inserted into a
representation of a cancerous mass. An italicized description directly below
the drawing reads "Brain Tumors. The tip of the PRS's x-ray probe is guided
stereotactically to the center of the tumor. The tumor is then treated from
the inside out with the radiation substantially confined to the cancerous
tissue."
The four drawings within the bottom half of the page each represent a
spherical tumor, of approximately 1 1/4 inches in diameter, in a series
running roughly horizontally across the page. The series of drawings show the
stages of destruction of the tumor, the second drawing in the series shows the
insertion of the PRS probe into the tumor. A general caption is located above
and to the right of the series of drawings, and reads, in italics, as follows:
"Irradiation and destruction of a tumor using the Photon Radiosurgery System."
The four drawings in the series have the following four non-italicized
captions: (i) "Before treatment" (this drawing also sets forth labels showing
the "healthy tissue," and the "tumor," respectively; (ii) "Low energy x-rays
are absorbed by the tumor in a single-dose treatment typically lasting less
than 30 minutes;" (iii) "Tumor destruction proceeds from center;" and (iv)
"Zone of destruction matched to tumor."
The phrase "(continued on inside back cover)" is located at the bottom of
the page.
- -------------------------------------------------------------------------------
PHOTOELECTRON'S PHOTON RADIOSURGERY SYSTEM IS UNDER DEVELOPMENT AND HAS NOT
BEEN APPROVED OR CLEARED FOR COMMERCIAL SALE OR USE IN THE U.S. OR IN ANY
FOREIGN COUNTRY. REGULATORY APPROVAL COULD TAKE SEVERAL YEARS AND THERE CAN BE
NO ASSURANCE THAT SUCH APPROVAL WILL EVER BE OBTAINED OR, IF OBTAINED, THAT
THE COMPANY'S PHOTON RADIOSURGERY SYSTEM WILL ACHIEVE MARKET ACCEPTANCE. SEE
"RISK FACTORS--PRODUCT DEVELOPMENT RISKS; UNCERTAINTIES RELATING TO CLINICAL
TRIALS" AND "--ABSENCE OF REGULATORY CLEARANCES; UNCERTAINTY OF OBTAINING
SECTION 510(K) CLEARANCE."
ALL TRADENAMES AND TRADEMARKS APPEARING IN THIS PROSPECTUS ARE THE PROPERTY
OF THEIR RESPECTIVE HOLDERS.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Except as otherwise specified, the information contained in
this Prospectus has been adjusted to give effect to a one-for-two reverse stock
split of the Common Stock to be effective prior to the closing of this offering
and the conversion of each outstanding share of Preferred Stock into Common
Stock upon such closing. Unless otherwise specified, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option. As
used herein, unless the context requires otherwise, the term "Company" includes
Photoelectron Corporation and its subsidiary, Photoelectron (Europe) Ltd. The
Common Stock offered hereby involves a high degree of risk. Prospective
investors should carefully consider the risks set forth under the heading "Risk
Factors."
THE COMPANY
The Company is engaged in the design, development and commercialization of
the Photon Radiosurgery System ("PRS"), a proprietary, therapeutic device for
the treatment of cancerous tumors through the application of x-ray radiation
directly to the tumor site. The PRS delivers in a single treatment a high dose
of radiation through a thin, minimally invasive, needle-like probe, which emits
from its tip precisely controlled low energy x-rays that irradiate the tumor
from the inside out. The limited penetration of low energy x-rays in tissue
substantially confines the radiation to the tumor site.
The Company believes that the PRS offers a number of advantages over
conventional radiation therapies by allowing higher radiation doses with
shorter patient treatment times. Substantial confinement of the radiation to
the tumor boundaries significantly reduces the risk of radiation exposure to
the surrounding healthy tissue and important organs or critical structures.
Cancerous tumors are expected to account for 90% of the approximately 1.3
million new U.S. cancer cases anticipated in 1996. Such tumors are most often
treated through invasive surgery, the destruction of cancerous cells by
exposure to radiation, or a combination of the two.
The most common form of treatment of cancerous tumors is by invasive surgery.
The Company believes that the PRS provides an attractive, minimally invasive
alternative to surgery, resulting in significantly less patient trauma, shorter
hospital stays and lower treatment costs than surgery. The PRS can be applied
after performing a biopsy and when desirable, use of the PRS can be coupled
with surgical procedures.
Next to surgery, radiation therapy is the most common modality of treating
cancer. Approximately 50% of all cancer patients in the U.S. receive radiation
therapy at some point during the course of their disease. Radiation can be
administered to a tumor by external beams or interstitially by inserting a
radiative source into the patient. With external beams, radiation must pass
through, and may potentially damage, healthy tissue before reaching the tumor,
whereas the PRS delivers radiation directly to the tumor site.
An established form of treatment, called brachytherapy, delivers radiation
directly to a tumor site by the insertion of radioactive isotopes. In
comparison to this form of treatment, the Company believes that the PRS offers
a greater ability to control and localize low energy radiation doses, and
avoids the costs and risks associated with the storage, handling and disposal
of radioactive materials. The Company believes that the PRS also offers
significant advantages over other forms of therapy, such as the destruction of
cancerous cells by heating, cooling or the use of laser light.
To date, the Company has focused its clinical efforts primarily on the
treatment of metastatic brain tumors. However, the PRS is being developed for a
variety of applications, including the treatment of primary brain tumors as
well as breast, prostate, bladder, skin and other cancers. The method of
treatment will depend on the
3
<PAGE>
application. The Company expects that the three basic PRS treatment methods
will be: (i) the "interstitial" irradiation of localized tumors from the inside
out; (ii) the "intracavitary" irradiation of body cavities; and (iii) the
"intraoperative" irradiation of tumors during surgery or of the beds of
surgically removed tumors in order to destroy remaining cancerous cells.
Because of the particularly sensitive nature of the brain and its surrounding
organs and critical structures, such as the optic nerves, damage from external
radiation and surgical procedures can severely harm the patient. Accordingly,
aggressive treatment of brain cancers has historically been limited. The PRS,
however, has been used to treat metastatic brain tumors in 57 patients in its
clinical trials. Although the studies are not yet complete, in the Company's
opinion, the PRS has destroyed all cancerous tissue which has been targeted
with an adequate dose of radiation. Based on these results, the Company
believes that the PRS can be applied to treat primary brain tumors and other
cancerous tumors throughout the body, with reduced risk of damage to
surrounding tissue. Phase II clinical trials for the treatment of metastatic
brain tumors are currently ongoing with respect to this application. The
Company intends to submit an application under Section 510(k) of the Federal
Food, Drug and Cosmetic Act, as amended (the "FDC Act") to the U.S. Food and
Drug Administration ("FDA") before the end of 1996 seeking clearance to
commercialize the PRS for treatment of metastatic brain tumors. Locally
approved clinical trials for the treatment of brain tumors are also being
performed at sites in Europe and Japan. The Company currently anticipates that
the first clinical trials to determine the safety of the PRS for treatment of
breast cancer will begin in early 1997. A protocol for human clinical trials of
the PRS to treat prostate tumors has been approved by the ethics committee of a
London hospital and animal trials relating to the use of the PRS in treating
bladder tumors are currently underway in the U.S. The Company will consider the
use of the PRS for other potential applications on an ongoing basis.
The Company's strategy is to (i) utilize its core technology for the
treatment of metastatic brain tumors and additional applications, (ii) build
relationships with medical professionals and institutions, (iii) obtain
regulatory clearance of the PRS in the U.S. and internationally, initially for
treatment of metastatic brain tumors and subsequently for other forms of
cancer, (iv) pursue commercial acceptance of the PRS in the U.S. and
internationally by relying on internal resources and collaborative
relationships to create sales and distribution capabilities, and (v) protect
its intellectual property rights.
The Company and Toshiba Medical Systems Company, Ltd. ("Toshiba") have
entered into agreements relating to performance of clinical trials, and to
future product distribution arrangements in Japan.
The Company holds nine U.S. patents and four U.S. patent applications
relating to the PRS or its constituent or ancillary components. The Company has
also obtained or filed patent applications in other selected foreign countries.
The Company was formed in 1989 as a joint venture between Thermo Electron
Corporation ("Thermo Electron") and an investment entity organized by Peter M.
Nomikos, the Company's President and Chief Executive Officer. Mr. Nomikos co-
founded Thermo Electron with George N. Hatsopoulos, Ph.D., a director of the
Company.
The Company was incorporated in Massachusetts in 1989. The Company's
principal executive offices are located at 5 Forbes Road, Lexington,
Massachusetts 02173, and its telephone number is (617) 861-2069.
4
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company................ 2,000,000 shares (1)
Common Stock to be outstanding after the offering.. 6,483,417 shares (2)
Use of proceeds.................................... To fund research and
development and clinical
trials and for working
capital and other general
corporate purposes. See
"Use of Proceeds"
Proposed Nasdaq National Market Symbol............. PECX
</TABLE>
- --------
(1) Assumes that the Underwriters' over-allotment option is not exercised.
(2) Based upon the number of shares outstanding at June 29, 1996. Excludes
1,417,334 shares of Common Stock issuable upon exercise of warrants
outstanding at July 31, 1996 with an exercise price of $3.00 per share and
877,904 shares of Common Stock issuable upon conversion of the Company's 8%
convertible debt outstanding at June 29, 1996. Also excludes 817,475 shares
of Common Stock issuable upon exercise of options outstanding at July 31,
1996 with a weighted average exercise price of $4.72 per share. See Notes
6, 7, 8 and 9 of Notes to Consolidated Financial Statements, "Description
of Capital Stock," "Management--Officers and Directors," and "--Executive
Compensation" and "Certain Transactions."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED (1)
------------------------------------------------------------ --------------------
DECEMBER 28, JANUARY 2, JANUARY 1, DECEMBER 31, DECEMBER 30, JULY 1, JUNE 29,
1991 1993 1994 1994 1995 1995 1996
------------ ---------- ---------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Research and development
expenses............... $ 784 $ 1,227 $ 1,727 $ 2,086 $ 3,226 $ 1,062 $ 1,406
General and
administrative
expenses............... 116 192 251 505 866 400 708
Net loss................ $ (974) $ (1,586) $ (2,267) $ (2,672) $ (4,117) $ (1,504) $ (1,997)
Pro forma net loss per
share (2).............. $ -- $ -- $ -- $ -- $ -- $ -- $ (0.44)
Pro forma weighted
average common and
common equivalent
shares outstanding
(2).................... -- -- -- -- -- -- 4,502
</TABLE>
<TABLE>
<CAPTION>
JUNE 29, 1996 (1)
-----------------------------
PRO FORMA (2) AS ADJUSTED (3)
------------- ---------------
<S> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash
equivalents............ $ 5,456 $ 26,921
Total assets............ 7,350 28,815
Total long term debt,
including current
portion................ 2,000 2,000
Deficit accumulated
during development
stage.................. (14,421) (14,421)
Total shareholders'
equity................. 5,098 26,563
</TABLE>
- --------
(1) Derived from unaudited financial statements.
(2) Gives effect to the conversion of the outstanding Preferred Stock into
2,892,313 shares of Common Stock, which will automatically occur on the
closing of this offering. See Notes 6, 7, 8 and 9 of Notes to Consolidated
Financial Statements, "Description of Capital Stock," "Management--Officers
and Directors," "--Executive Compensation" and "Certain Transactions."
(3) Adjusted to give effect to the sale of the 2,000,000 shares of Common Stock
offered hereby, at an assumed initial public offering price of $12.00 per
share after deducting the estimated underwriting discounts and commissions
and offering expenses payable by the Company. See "Use of Proceeds" and
"Capitalization."
This Prospectus contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all forward-looking statements wherever
they appear in this Prospectus. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include those discussed in "Risk Factors," as well as those
discussed elsewhere in this Prospectus.
6
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock being offered hereby involves a
high degree of risk. In addition to the other information in this Prospectus,
the following factors should be considered carefully in evaluating an
investment in the shares.
EARLY STAGE OF THE COMPANY AND ITS PRODUCTS
The Company's principal product, the PRS, is still in development and no
revenues have been generated from product sales of the PRS to date, nor has
the PRS been approved for commercial use in the U.S. or elsewhere. No
assurance can be given that the Company's development efforts will be
successfully completed, that required regulatory approvals will be obtained,
or that the PRS, if introduced to the commercial market, will be marketed
successfully. See "Business--Clinical Trials," "--Products and Product
Development" and "--Marketing and Sales; Collaborative Relationships."
HISTORY OF OPERATING LOSSES; EXPECTATION OF FUTURE LOSSES
The Company has experienced significant operating losses in each year since
its inception, due primarily to substantial research and development
expenditures, and as of June 29, 1996 the Company had an accumulated deficit
of approximately $14.4 million. The continued development and
commercialization of the PRS will likely result in substantial losses through
at least the middle of 1998. There can be no assurance that the PRS will ever
gain commercial acceptance, or that the Company will ever generate revenues or
achieve profitability. The Company's ability to achieve profitable operations
will be dependent in large part on whether it can successfully develop and
commercialize the PRS and/or any other products and make the transition to a
manufacturing and marketing company. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
PRODUCT DEVELOPMENT RISKS; UNCERTAINTIES RELATING TO CLINICAL TRIALS
The PRS is new and, accordingly, its safety and efficacy have not yet been
fully established, and further development will be required to use the PRS in
the full range of intended applications. The PRS is still in the clinical
testing stage and such clinical testing has focused on only one application of
the PRS, the treatment of metastatic brain tumors.
Results from Phase I trials of the PRS as a treatment for metastatic brain
tumors may not be predictive of results obtained in subsequent clinical trials
or of results obtained in clinical trials for other specific applications. It
is not uncommon for medical device companies to suffer significant setbacks in
Phase II or other clinical trials, even after obtaining promising results in
Phase I or other prior trials. In addition, clinical trials of the PRS are
likely to be conducted with patients in advanced stages of cancer. These
patients could die or suffer adverse effects for reasons unrelated to the PRS,
but such events could nevertheless negatively impact clinical trial results or
regulatory approvals.
The Company has relied and will continue to rely on unaffiliated medical
institutions to perform its clinical trials in accordance with the approval
process of the FDA. There can be no assurances that the work carried out at
the institutions currently performing Phase I or II clinical trials, or that
the work carried out at any institutions performing clinical trials in the
future, will be satisfactory, or that those institutions will not cancel,
suspend or delay such trials.
Clinical trials may be delayed for a variety of reasons, including the
inability to ensure sufficient numbers of enrolled patients to meet the
clinical trial protocols. This inability can be influenced or caused by, among
other things, the rigidity of the protocols, the size of the overall patient
population, and the locations of clinical sites. The number of patients that
have completed the Company's clinical trials has been limited by a number of
factors, including the reluctance of patients or physicians to participate in
experimental clinical trials. In addition, the Company's collection of
randomized data has been made difficult by the defection from the clinical
trials of patients that wanted to receive the PRS treatment but were assigned
to the trials' non-PRS control groups. Any delays in or termination of the
Company's clinical trials could have a material adverse effect on the
Company's business, financial condition and results of operations. There can
be no assurance that clinical trials will be
7
<PAGE>
successful, that clinical trials will not be delayed, or that the PRS or any
other product will be safe or effective or capable of being successfully
developed for all intended applications. See "Business--Clinical Trials," "--
Products and Product Development" and "--Government Regulation."
ABSENCE OF REGULATORY CLEARANCES; UNCERTAINTY OF OBTAINING SECTION 510(K)
CLEARANCE
The PRS has not been approved or cleared for commercial use in the U.S. or
in any foreign country. The PRS is subject to extensive regulation in the U.S.
by the FDA and, in many instances, by comparable agencies in foreign countries
where the PRS is to be manufactured or distributed. Under the FDC Act and the
Safe Medical Devices Act of 1990 (the "SMDA"), manufacturers of medical
devices must comply with applicable provisions of the FDC Act and the SMDA and
certain associated regulations governing the safety, design, testing,
manufacturing, labeling, marketing and distribution of medical devices and the
reporting of certain information regarding the safety of medical devices. Both
the FDC Act and the SMDA require certain clearances from the FDA before
medical devices, such as the PRS, can be marketed.
Sales of medical devices outside the U.S. are subject to regulatory
requirements that vary widely from country to country. The length of time
needed to obtain approval for the sale of a particular medical device in a
foreign country may be longer, and the requirements may be more burdensome or
expensive, than that required for FDA approval. Furthermore, the export of
products manufactured by the Company will be subject to receipt of export
licenses from the U.S. Government. Such licenses are required for equipment
use in foreign clinical trials. The Company has requested and been granted
export licenses and corresponding foreign import licenses for clinical trials
in England, Japan, Australia and Germany.
The Company anticipates that it will file an application under Section
510(k) of the FDC Act with respect to the PRS for the treatment of metastatic
brain tumors by the end of 1996. If the FDA determines that Section 510(k)
procedures are not available to the Company and the application is denied, the
Company would be required to seek FDA approval of the PRS through the
submission of a Premarket Approval ("PMA"). In addition, even if the Company
were to obtain Section 510(k) clearance with respect to the use of the PRS in
the treatment of metastatic brain tumors, there can be no assurances that the
Section 510(k) procedures would be applicable to any other treatment modality.
The PMA process can be expensive, lengthy and uncertain, often requiring
several years of effort. Moreover, there can be no assurances that the Company
would be successful in obtaining FDA approval through the PMA process. The
inability of the Company to obtain clearance under Section 510(k) with respect
to any particular treatment modality would have a material adverse effect on
the Company's business, financial condition and results of operations.
There can be no assurances that regulatory clearances will be granted for
the PRS or any other future products, that the length of time for clearance
will not be extensive, or that the cost of attempting to obtain any such
clearances will not be prohibitive. Failure to obtain or maintain requisite
governmental approvals could delay or preclude the Company from further
developing and marketing the PRS and other products. Such delays could impair
the Company's ability to generate funds from operations, which in turn would
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business--Government Regulation."
ONGOING GOVERNMENT REGULATION
Even if regulatory clearances are obtained, such clearances may include
significant limitations on particular uses, and the FDA strictly prohibits the
marketing or sale of approved medical devices for unapproved uses. In
addition, there can be no assurance that the FDA will not impose strict
labeling requirements that limit the use of the PRS, burdensome training
requirements or other requirements as a condition of its Section 510(k)
clearance or PMA, under the FDC Act, any of which could limit the Company's
ability to market the PRS. Further, in order to change or modify a product
following FDA clearance, additional clearances may be required from the FDA.
In addition, any FDA clearances may be withdrawn or limited for non-compliance
with regulatory standards or the occurrence of unforeseen problems following
the initial clearance, either of which could result in restrictions, including
withdrawal of the product from the market or sanctions or fines being imposed
on the Company, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
8
<PAGE>
Manufacturers of medical devices are subject to strict federal regulations
regarding quality of manufacturing, including periodic FDA inspections of
manufacturing facilities to determine compliance with Good Manufacturing
Practice ("GMP") regulations, but the Company has not to date undergone such
an inspection. These regulations include design, testing, production, control,
documentation and other requirements. The FDA has publicly stated that recent
proposed changes to the GMP regulations are intended to reduce potential
design-related problems with medical devices. In addition, in order to obtain
a Communaute Europeenne Mark (a "CE Mark") for the PRS, which is required to
market the PRS within the European Union, the Company will need to comply with
standards administered by the International Standards Organization ("ISO").
There can be no assurance that the Company will be able to attain or maintain
compliance with GMP or ISO standards, or that the Company will be able to
identify and retain manufacturers on commercially acceptable terms, or at all,
or that such manufacturers, if identified, will be adequate for the Company's
long-term needs, or that they will be able to meet all relevant regulatory
requirements. Moreover, changes in methods of manufacture may require the
performance of new clinical studies under certain circumstances. Failure of
the Company to comply with, and maintain continuing compliance with, these
regulations could result in restrictions, including withdrawal of any given
product from the market or sanctions or fines being imposed on the Company,
any of which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Government
Regulation."
TECHNOLOGICAL CHANGE AND COMPETITION
The medical device industry is subject to rapid, unpredictable and
significant technological change. The Company is subject to competition in the
U.S. and abroad from a variety of sources, including universities, research
institutions and medical device, chemical and biotechnology companies, many of
which have substantially greater technical, financial, and regulatory
resources than the Company and are better equipped to develop, manufacture and
market their products. These companies may develop and introduce products and
processes competitive with or superior to those of the Company. See
"Business--Background," "--Specific Applications of the PRS" and "--
Competitive Technologies."
DEPENDENCE ON ONE PRODUCT
The Company expects to derive substantially all of its future revenues from
the PRS. The PRS and its related accessories and components are currently the
Company's only products. The PRS and any other products will require further
development, study and regulatory approvals before they can be marketed in the
U.S. or internationally. The Company has never commercially sold any products,
and there can be no assurance that the Company's efforts will be successful or
that the PRS and its related accessories or any other product developed by the
Company will be safe or effective, approved by regulatory authorities, capable
of being manufactured in commercial quantities at acceptable costs, or
successfully introduced to the marketplace. Although the Company expects to
use its core technology to develop products in addition to the PRS and its
related accessories and components, all of such additional products are in
early stages of development, and there can be no assurance that the Company
will be able to continue as a going concern if it is forced to rely on sales
of such other additional products as its primary source of revenues. See
"Business--Specific Applications of the PRS," "--Competitive Technologies,"
"--Products and Product Development," "--Clinical Trials" and "--Government
Regulation."
EFFECT OF PATIENT LIFE EXPECTANCIES ON MARKETS FOR SPECIFIC PRODUCT
APPLICATIONS
To date, the Company has focused its efforts on one specific application of
the PRS, the treatment of metastatic brain tumors. Patients with metastatic
brain tumors already suffer from primary cancer which is separate from the
metastatic brain tumors themselves. The average life expectancy of patients
with metastatic brain tumors is very short. Although the PRS has been designed
to provide either curative or palliative cancer treatment, health care
providers and third party payors may be reluctant to undertake or authorize,
or provide reimbursement for, PRS treatment of patients whose anticipated life
expectancies are below certain levels. While the Company believes that the PRS
can be used for a variety of other applications, such as breast, prostate,
9
<PAGE>
bladder or skin cancer, where patient life expectancies are higher than those
for patients with metastatic brain tumors, the Company has not yet begun human
clinical trials for any of those other applications. See "Business--Clinical
Trials".
PATENTS AND PROPRIETARY TECHNOLOGY
The Company's ability to compete effectively in the marketplace will depend,
in part, on its ability to maintain the proprietary nature of its technology.
The Company will rely on patents, trade secrets and know-how to establish and
maintain a competitive position in the marketplace. The Company has been
issued nine U.S. patents covering the PRS and ancillary test and calibration
devices and holds four U.S. patent applications. The Company has filed foreign
patent applications in selected foreign countries which correspond to certain
of its U.S. patent applications. There can be no assurance, however, that any
applications will result in issued patents, or that once issued, the U.S.
Patent and Trademark Office or a court would resolve issues relating to the
validity and scope of the patents in a manner favorable to the Company. Also,
there can be no assurance that any current or future patents, trade secrets or
know-how will afford protection against competitors with similar technologies
or processes or that any patents issued to the Company will not be infringed
upon or designed around by others, nor can there be any assurance that others
will not independently develop proprietary technologies or processes which are
the same as or substantially equivalent to those of the Company. In addition,
there can be no assurance that the Company will not become subject to patent
infringement claims or litigation initiated by third parties. The defense and
prosecution of intellectual property suits, and related legal and
administrative proceedings, are very costly and time-consuming, and any such
litigation or proceeding would result in substantial expense to the Company
and a significant diversion of effort by the Company's technical and
management personnel. Further, any adverse determination in such litigation or
proceeding could subject the Company to significant liabilities to the third
party claimants and could prevent the Company from manufacturing or marketing
its products. See "Business--Patents and Proprietary Rights."
The Company has been notified that an individual and his employer believe
that they have certain rights with regard to their understanding of the
Company's planned use of the PRS for treatment of tumors in body cavities. See
"Business--Legal Proceedings".
REIMBURSEMENT BY THIRD PARTY PAYORS
The extent to which reimbursement levels for the cost of the Company's
products and related treatment are obtained from third party payors will have
a significant impact on the Company's ability to commercialize its products.
These third party payors include private insurance companies, self-insured
employers, health maintenance organizations, federal and state sources of
payment under the Medicare and Medicaid programs, and other sources. There is
no uniform policy on reimbursement among third party payors, nor are there any
assurances that the PRS or any other Company product will qualify for
reimbursement from third party payors. Foreign countries also have their own
health care reimbursement systems, and there can be no assurance that third
party reimbursement will be made available with respect to the Company's
products under any foreign reimbursement system.
In addition, the Company's business, financial condition and results of
operations could be adversely affected by the continuing efforts of many third
party payors to reduce the costs of health care by decreasing reimbursement
rates, or limiting or prohibiting reimbursement for certain services or
devices or through other means. Furthermore, legislative proposals to reform
government health care insurance programs, including the Medicare and Medicaid
programs, could significantly impact the purchase of health care services and
products and could result in lower prices and reduced demand for the Company's
products. The Company is unable to predict whether such proposals will be
enacted, whether other health care legislation or regulation affecting the
Company's business, financial condition and results of operations may be
proposed or enacted in the future, or
10
<PAGE>
what effect any such legislation or regulation would have on the Company's
business, financial condition and results of operations. See "Business--Third
Party Reimbursement."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company has expended and will continue to expend substantial funds to
continue the research and development of the PRS and other potential products,
conduct clinical trials, pursue regulatory approvals, establish commercial
scale manufacturing in its own facilities or in the facilities of others, and
market the PRS or other products.
The Company's future capital requirements will depend on a variety of
factors, including the time and costs involved in obtaining FDA and other
regulatory approvals, the results of the Company's ongoing clinical trials,
the market acceptance of the PRS and any other Company products, the expense
and results of the Company's continued scientific research and development
programs, the time and costs expended in filing, prosecuting and enforcing
patent claims, and the development of competing technologies. No assurance can
be given that the necessary funds will be available to the Company on
acceptable terms, if at all. Insufficient funds may cause the Company to
delay, scale back or eliminate some or all of its research and development,
clinical marketing and manufacturing programs or to cease operations entirely.
In addition, any additional equity financings may be dilutive to the Company's
stockholders, including investors in this offering. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
LIMITED MANUFACTURING EXPERIENCE
To achieve profitability, the Company's product or products must be
manufactured in commercial quantities, in compliance with all applicable
regulatory requirements, and at acceptable costs. Production of the PRS or
other products in commercial quantities may create technical challenges for
the Company. The Company does not have and has no immediate plans to construct
a commercial scale manufacturing facility. In order to manufacture its
products in commercial quantities, the Company would have to build or gain
access to adequate facilities or would be required to enter into agreements
with other manufacturers at significant cost. The Company intends to continue
its practice of sub-contracting the fabrication of most of its electrical and
mechanical components, while maintaining internal responsibility for unit
assembly and for manufacture of certain proprietary components. To date, the
Company's manufacturing activities have consisted only of manufacturing
investigational devices and prototype devices for use in clinical trials. As a
result, the Company has no experience manufacturing its products in the
volumes that will be necessary for the Company to achieve significant
commercial sales, and there can be no assurance that reliable, high-volume
manufacturing can be established or maintained at commercially reasonable
costs, or that the Company will be able to make the transition to commercial
production successfully. See "Business--Manufacturing."
LIMITED MARKETING EXPERIENCE
The Company currently has no marketing or sales staff, and significant
additional expenditures, management resources and time would be required to
develop such a sales staff, or to make arrangements for sale or lease of the
Company's products through third parties. As a result, the Company's current
marketing and sales strategy will rely substantially on unaffiliated third
parties to effect the sales of its products. There can be no assurance that
the Company will be able to establish a sales force or make adequate third
party arrangements for product leasing or sales or that the Company will not
have to incur significant additional expenditures, which may include the
employment of sales personnel, in order to effect the sales of its products.
See "Business--Marketing and Sales; Collaborative Relationships."
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on its scientific personnel and senior
management. The loss of any key personnel could significantly and adversely
impact the Company's research and development efforts or
11
<PAGE>
strategic objectives. Competition among medical device companies for highly
skilled scientific and management personnel is increasingly intense. In order
to achieve and maintain the Company's commercialization of the PRS, the
Company will need to attract and retain additional key personnel, and there
can be no assurance that the Company will be able to do so. See "Business--
Employees" and "Management".
POTENTIAL COMPONENT SHORTAGES; DEPENDENCE ON SOLE SOURCES OF SUPPLY
The Company expects that it will manufacture its products based on
anticipated product orders. The different lead times for the supply and
delivery of materials and components ordered by the Company for its products
can vary significantly, and the relative availability and cost of those
materials and components can fluctuate. The Company has built up and maintains
an inventory of certain components for the PRS, and seeks, where feasible, to
identify multiple suppliers of materials and components. However, if
forecasted product orders prove to be different than actual product orders,
the Company may have excess or inadequate inventory. In addition, there can be
no assurance that alternative suppliers for components can be found on a
timely basis, or at all, in the event that such alternative suppliers are
needed. Any significant delay or interruption in the Company's ability to
acquire product components and materials could have a material adverse effect
on the Company's ability to manufacture its products and therefore on its
business, financial condition and results of operations. See "Business--
Manufacturing."
PRODUCT LIABILITY EXPOSURE
Use of the PRS or other products, whether for commercial applications or
during clinical trials, exposes the Company to risk of medical product
liability claims in the event that such products cause injury or result in
adverse effects. There can be no assurance that the Company would have
sufficient resources to satisfy any liability resulting from these claims.
Although the Company has obtained medical product liability insurance with
respect to the clinical testing of the PRS, there can be no assurance that the
level or breadth of such insurance coverage will be sufficient to fully cover
potential claims. Such insurance is expensive, and there can be no assurance
that it will continue to be available at an acceptable cost, if at all, or
that a medical product liability claim would not adversely affect the
financial condition of the Company. Prior to commercial sale of its products,
the Company will be required to obtain product liability insurance covering
the commercial use of its products, however, there can be no assurance that
the Company will be able to obtain commercially reasonable product liability
insurance for the commercial sale or use of any product.
AUTHORIZATION OF PREFERRED STOCK
The Board of Directors of the Company is authorized, subject to certain
limitations, to cause the Company to issue one or more series of Preferred
Stock and, to the extent permitted by Massachusetts law, to designate
variations in the relative rights and preferences between different series. In
the event of issuance, the Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change of
control of the Company. The Company has no current plans to issue any shares
of Preferred Stock; however, there can be no assurance that the Company's
Board of Directors will not do so at some time in the future. See "Description
of Capital Stock."
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering there has been no public market for the Company's
Common Stock, and there can be no assurance that a regular trading market will
develop and continue after this offering. The initial public offering price
will be determined through negotiations between the Company and the
Underwriters, and may not be indicative of the market price of the Common
Stock following this offering. The market price of the Common Stock following
this offering may be highly volatile. Factors such as variations in the
Company's financial performance, announcements of technological innovations by
the Company, its competitors or providers of alternative products, and changes
in the economy generally, the financial markets or the health care industry,
could cause the market price of the Common Stock to fluctuate substantially.
In addition, the stock markets have experienced price and volume fluctuations
that have particularly affected medical device companies, resulting in
12
<PAGE>
changes in the market prices of the stocks of many companies which may not
have been directly related to the operating performance of those companies.
Such broad market fluctuations may adversely affect the market price of the
Common Stock following this offering. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market following
the offering made hereby could have an adverse effect on the price of the
Common Stock. Beginning 180 days after the date of this Prospectus, 4,194,860
shares of Common Stock will be eligible for sale in the public market upon the
expiration of lock-up agreements between the Company's stockholders and the
Underwriters, subject in some cases to the volume and other restrictions of
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act").
Additionally, 817,475 shares of Common Stock were subject to outstanding
options, 1,417,334 shares of Common Stock were subject to outstanding
warrants, 877,904 shares of Common Stock were issuable upon conversion of
outstanding convertible debt and an additional 175,025 shares of Common Stock
were reserved for issuance under the Company's stock option plan.
Approximately 180 days after the date of this Prospectus, the Company intends
to register the shares subject to outstanding options and reserved for
issuance under the Company's stock plan, which shares would then be eligible
for sale in the public market, although all of these shares and all shares
acquired under employee benefit plans by employees are subject to agreements
not to sell until 180 days after the date of this Prospectus. Holders of
1,610,308 shares of Common Stock have the right, under certain conditions, to
participate in future Company registrations. See "Shares Eligible for Future
Sale."
DILUTION
Purchasers of the Common Stock offered hereby will suffer an immediate and
substantial dilution of the net tangible book value of the Common Stock from
the initial public offering price and present shareholders will receive a
substantial increase in the book value of their shares of Common Stock. In
addition, purchasers in this offering will incur additional dilution to the
extent outstanding stock options and warrants are exercised or convertible
notes are converted into capital stock. See "Dilution."
CONTROL BY EXISTING STOCKHOLDERS
After completion of this offering, the Company's principal stockholders and
certain of their affiliates will beneficially own in the aggregate
approximately 65% of the outstanding shares of Common Stock. Certain principal
stockholders serve as directors or have representatives who serve as directors
of the Company. As a result of such ownership of Common Stock and these
positions held within the Company, these principal stockholders will have the
ability to significantly influence all matters requiring approval by the
stockholders of the Company, including the election of all directors and any
acquisition or sale of all or substantially all of the Company's stock or
assets. See "Management" and "Securities Ownership of Management and Certain
Beneficial Owners."
13
<PAGE>
USE OF PROCEEDS
The Company estimates that the net proceeds to be received by the Company
from the sale of Common Stock pursuant to this offering are approximately
$21.5 million ($24.8 million if the Underwriters' over-allotment option is
exercised in full) after deducting estimated underwriting discounts and
commissions and offering expenses. This estimate assumes a public offering
price of $12.00 per share.
The net proceeds of this offering, together with the Company's existing
funds and any cash generated from its operations, are expected to be used to:
(i) increase the Company's research and development efforts in a number of
cancer treatment applications; (ii) continue to expand clinical trials for the
PRS; (iii) obtain regulatory approvals for the PRS; (iv) enhance manufacturing
and marketing capabilities; and (v) provide working capital, as well as for
general corporate purposes. Pending such uses, the Company plans to invest
such proceeds in interest-bearing investment grade instruments.
The Company believes that proceeds of this offering, together with its cash
and cash equivalents, will be sufficient to meet the capital requirements of
its existing business for at least the next two years. The Company anticipates
that additional financing will be required after the net proceeds of this
offering have been expended. There can be no assurance that such additional
financing will be available when needed or on terms acceptable to the Company,
and the Company currently has no commitments to obtain any such financing. See
"Risk Factors--Future Capital Needs; Uncertainty of Additional Funding" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
DIVIDEND POLICY
The Company has never paid any dividends on its capital stock, including its
Common Stock. The current policy of the Company's Board of Directors is to
retain any earnings to finance the operation of the Company's business, and,
accordingly, it is anticipated that no cash dividends will be paid to the
holders of the Common Stock for the foreseeable future.
14
<PAGE>
CAPITALIZATION
The following table sets forth the pro forma capitalization of the Company
to reflect the conversion of all Preferred Stock into Common Stock as of June
29, 1996, and such capitalization as adjusted to reflect receipt of the
estimated net proceeds from the sale of 2,000,000 shares of Common Stock
offered hereby at an assumed public offering price of $12.00 per share. This
capitalization table should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
JUNE 29, 1996 (1) (3)
----------------------
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt..................... $ 300 $ 300
======== ========
Long-term debt, net of current portion................ $ 1,700 $ 1,700
Shareholders' equity:
Common stock, $0.01 par value, 15,000,000 shares
authorized (2),
4,483,417 shares pro forma and 6,483,417 shares as
adjusted (3)........................................ 45 65
Capital in excess of par value--common stock......... 19,547 40,992
Subscriptions receivable............................. (73) (73)
Deficit accumulated during development stage......... (14,421) (14,421)
-------- --------
Total shareholders' equity.......................... 5,098 26,563
-------- --------
Total capitalization.............................. $ 7,098 $ 28,563
======== ========
</TABLE>
- --------
(1) Derived from unaudited financial statements.
(2) Reflects increase in authorized shares to be effected prior to the closing
of the offering. See "Description of Capital Stock."
(3) Excludes 1,417,334 shares of Common Stock issuable upon exercise of
warrants outstanding at July 31, 1996 with an exercise price of $3.00 per
share and 877,904 shares of Common Stock issuable upon conversion of the
Company's 8% convertible debt outstanding at June 29, 1996. Also excludes
817,475 shares of Common Stock issuable upon exercise of options
outstanding at July 31, 1996 with a weighted average exercise price of
$4.72 per share. See Notes 6, 7, 8 and 9 of Notes to Consolidated
Financial Statements, "Description of Capital Stock," "Management--
Officers and Directors," "--Executive Compensation," "Certain
Transactions" and "Use of Proceeds."
15
<PAGE>
DILUTION
The net tangible book value of the Company at June 29, 1996 was $5.1 million
or $1.14 per share of Common Stock on a pro forma basis. Pro forma net
tangible book value represents the amount of total tangible assets of the
Company less total liabilities, divided by the number of shares of Common
Stock outstanding on a pro forma basis. After giving effect to the sale of
Common Stock offered hereby (after deducting estimated underwriting discounts
and commissions and offering expenses), assuming the sale of 2,000,000 shares
of Common Stock at an assumed initial public offering price of $12.00 per
share, the adjusted net tangible book value of the Company at June 29, 1996
would have been $26.6 million, or $4.10 per share. This represents an
immediate increase in net tangible book value of $2.96 per share to existing
stockholders and an immediate dilution of $7.90 per share to new investors
purchasing shares in this offering. Dilution to new investors is determined by
subtracting the net tangible book value per share after the sale of Common
Stock offered hereby from the initial public offering price per share. The
following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed public offering price per share (1)................... $12.00
Pro forma net tangible book value per share as of June 29,
1996....................................................... $1.14
Increase per share attributable to the offering............. 2.96
-----
Adjusted net tangible book value per share after the offering
(2).......................................................... 4.10
------
Dilution per share to new investors (2)....................... $ 7.90
======
</TABLE>
- --------
(1) Assumed initial public offering price before deduction of estimated
underwriting discounts and commissions and expenses of the offering to be
paid by the Company.
(2) If the Underwriters' over-allotment option were exercised in full, the
adjusted net tangible book value per share after the offering would be
$4.41, resulting in an immediate dilution of $7.59 per share to investors
purchasing shares in this offering.
The following table sets forth, as of June 29, 1996, on the pro forma basis
described above, the number of shares of Common Stock purchased from the
Company and the total cash consideration paid and the average price per share
paid by existing stockholders of the Company, and by investors in this
offering, based upon an assumed initial public offering price of $12.00 per
share:
<TABLE>
<CAPTION>
SHARES PURCHASED (1) TOTAL CONSIDERATION AVERAGE
----------------------- ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------ ---------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders... 4,483,417 69.2% $19,593,239 44.9% $ 4.37
New Investors........... 2,000,000 30.8 24,000,000 55.1 $12.00
------------ -------- ----------- -----
Total................. 6,483,417 100.0% $43,593,239 100.0%
============ ======== =========== =====
</TABLE>
- --------
(1) Gives effect to the conversion of the outstanding Preferred Stock into
2,892,313 shares of Common Stock, which will automatically occur on the
closing of this offering. See Note 7 of Notes to Consolidated Financial
Statements, "Description of Capital Stock" and "Certain Transactions."
The foregoing tables do not assume the exercise of outstanding options or
warrants, or the conversion of convertible debt. At July 31, 1996, warrants to
purchase 1,417,334 shares of Common Stock were outstanding, at an exercise
price of $3.00 per share. As of June 29, 1996, there was a total of $1,983,177
of convertible debt outstanding, with a weighted average conversion price of
$2.26 per share. At July 31, 1996, there were 817,475 shares of Common Stock
issuable upon exercise of all outstanding options; of these, 423,100 shares
were then exercisable. The weighted average exercise price of all outstanding
options at July 31, 1996 was $4.72. To the extent that these options or
warrants are exercised, or this convertible debt is converted into Common
Stock, there will be further dilution to new investors. See "Management--
Executive Officers and Directors," "--Executive Compensation," "Description of
Capital Stock" and Notes 6, 7, 8 and 9 of Notes to Consolidated Financial
Statements.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated statement of operations data and consolidated
balance sheet data presented below as of December 31, 1994, December 30, 1995,
and the consolidated statement of operations data presented below as of
January 1, 1994, are derived from the Company's Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus, which have
been audited by Arthur Andersen LLP, independent public accountants. The
selected consolidated statement of operations data and consolidated balance
sheet data presented below as of December 28, 1991, January 2, 1993, and the
consolidated balance sheet data presented below as of January 1, 1994, are
derived from the Company's Consolidated Financial Statements and Notes thereto
not included in this Prospectus, which have been audited by Arthur Andersen
LLP, independent public accountants. The selected consolidated financial data
for the six-month periods ended July 1, 1995 and June 29, 1996 are derived
from the Company's unaudited Consolidated Financial Statements. The financial
data for the six-month periods ended July 1, 1995 and June 29, 1996 include
all adjustments, consisting of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for those periods. Operating results for the six months
ended June 29, 1996 are not necessarily indicative of the results that may be
expected for the entire year ended December 31, 1996. The selected
consolidated financial data set forth below should be read in conjunction with
the Consolidated Financial Statements and Notes thereto, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
other financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
-------------------------------------------------------------------------- -----------------------
DECEMBER 28, JANUARY 2, JANUARY 1, DECEMBER 31, DECEMBER 30, JULY 1, JUNE 29,
CONSOLIDATED STATEMENT OF 1991 1993 1994 1994 1995 1995 1996
OPERATIONS DATA: ------------ ------------ ------------ ------------- ------------ -------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating expenses:
Research and development
expenses............... $ 784 $ 1,227 $ 1,727 $ 2,086 $ 3,226 $ 1,062 $ 1,406
General and
administrative
expenses............... 116 192 251 505 866 400 708
------- ------------ ------------ ------------ -------- -------- --------
Total operating
expenses............... 900 1,419 1,978 2,591 4,092 1,462 2,114
------- ------------ ------------ ------------ -------- -------- --------
Operating loss........... (900) (1,419) (1,978) (2,591) (4,092) (1,462) (2,114)
Other income............. -- -- -- -- -- -- 36
Interest income
(expense), net.......... (74) (167) (289) (81) (25) (42) 81
------- ------------ ------------ ------------ -------- -------- --------
Net loss................. $ (974) $ (1,586) $ (2,267) $ (2,672) $ (4,117) $ (1,504) $ (1,997)
======= ============ ============ ============ ======== ======== ========
Net loss per share....... $ (0.90) $ (1.25) $ (1.55) $ (1.60) $ (2.85) $ (1.04) $ (1.04)
======= ============ ============ ============ ======== ======== ========
Pro forma net loss per
share (1)............... -- -- -- -- -- -- $ (0.44)
========
Weighted average common
and common equivalent
shares outstanding...... 1,087 1,266 1,466 1,669 1,447 1,445 1,919
Pro forma weighted
average common and
common equivalent shares
outstanding (1)......... -- -- -- -- -- -- 4,502
<CAPTION>
JUNE 29, JUNE 29,
DECEMBER 28, JANUARY 2, JANUARY 1, DECEMBER 31, DECEMBER 30, 1996 1996
CONSOLIDATED BALANCE 1991 1993 1994 1994 1995 ACTUAL PRO FORMA (1)
SHEET DATA: ------------ ------------ ------------ ------------- ------------ -------- -------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............. $ 22 $ 210 $ 68 $ 1,778 $ 7,191 $ 5,456 $ 5,456
Total assets............. 133 425 526 2,949 8,703 7,350 7,350
Total long-term debt,
including current
portion................. 1,417 3,133 1,296 2,115 1,940 2,000 2,000
Deficit accumulated
during development
stage................... (1,782) (3,368) (5,636) (8,307) (12,425) (14,421) (14,421)
Total shareholders'
equity.................. (1,483) (2,798) (1,054) 575 6,493 5,098 5,098
</TABLE>
- --------
(1) Gives effect to conversion of all outstanding Preferred Stock into Common
Stock, which will occur simultaneously with the closing of this offering.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is engaged in the design, development and commercialization of
the PRS, a proprietary, therapeutic device for the treatment of cancerous
tumors through the application of radiation directly into a tumor. To date,
the Company has not received any significant revenue from the sale of its
products and does not anticipate receiving any significant revenue at least
until the middle of 1998. The Company has an accumulated deficit totaling
approximately $14.4 million since its inception and expects to continue to
incur losses until such time as its commercialization efforts yield offsetting
revenues. The Company anticipates that its research and development, general
and administrative and manufacturing expenses will significantly increase
during the balance of 1996 and 1997 as it pursues the commercialization of the
PRS.
Before medical devices such as the PRS can be marketed in the U.S., FDA
approval is required. Phase II clinical trials for the treatment of metastatic
brain tumors are currently being performed. Based on the results obtained to
date in these ongoing Phase II trials, the Company intends to submit a Section
510(k) application to the FDA seeking clearance to commercialize the PRS for
treatment of metastatic brain tumors. Locally approved clinical trials for the
treatment of brain tumors are also being performed at sites in Europe and
Japan. The Company currently anticipates that clinical trials to determine the
safety of the PRS for treatment of breast cancer will begin in the U.K. in
early 1997. Based upon those trials, the Company will submit an application to
the FDA to begin human clinical trials in the U.S. The possibility of treating
topical tumors of the skin and mouth with the PRS is also being explored. A
program has begun at a U.S. hospital which the Company expects to lead to
human clinical trials with the PRS in treating Karposi's sarcomas and other
skin malignancies. Upon obtaining all necessary regulatory approvals, the
Company intends to begin commercial sales of the PRS. The Company will
consider the use of the PRS for other potential applications on an ongoing
basis. In order to support such commercialization, the Company will experience
significant working capital and other financing needs.
If the Company receives such Section 510(k) clearance, it intends to market
and distribute its products through a combination of collaborative
relationships and in-house sales and marketing resources. The Company has
developed and will continue to develop strategic alliances with companies that
have established distribution channels in domestic and international markets.
As part of the manufacturing process, the Company intends to sub-contract the
fabrication of most of its electrical and mechanical components. The Company
is actively pursuing full functional compliance with ISO 9001 and the FDA's
GMP standards that govern quality assurance, personnel training, process
control, customer service, design control, supply management and facility and
equipment maintenance.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 29, 1996 AND JULY 1, 1995
Research and development expenses. Research and development expenses
increased by $344,523 from $1.1 million in the first six months of 1995 to
$1.4 million in the first six months of 1996. These changes reflect
significant increases in activity in the Company's clinical trial efforts and
bladder and breast cancer research and development programs. A portion of the
increase in research and development expenses is attributable to pre-clinical
animal trials for the bladder application in 1996. The principal costs in
research and development were the Phase II clinical trials. Other factors
contributing to the increase in research and development expenses were as a
result of discussions with physicians in the U.K. to initiate clinical trials
in breast tumors. Costs were incurred in formulating the breast cancer
research and trial protocol and developing accessory equipment for the trials.
General and administrative expenses. General and administrative expenses
increased by $307,507 from $400,742 in the first six months of 1995 to
$708,249 in the first six months of 1996. The increase is attributable to a
growth in personnel from 16 to 24 employees and related costs. Additional
increases related to legal and professional fees related to general corporate
representation and the protection of intellectual property rights.
Interest income. Interest income increased by $124,085 from $17,745 in the
first six months of 1995 to $141,830 in the first six months of 1996. The
change resulted from investing the proceeds of a private placement in the
fourth quarter of 1995.
FISCAL YEAR ENDED DECEMBER 30, 1995 AND DECEMBER 31, 1994
Research and development expenses. Research and development expenses
increased by $1.1 million from $2.1 million in 1994 to $3.2 million in 1995.
In 1995, the Company extended the term of 100,000 stock options
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from seven to twelve years. This extension resulted in the Company recording
$860,000 of compensation expense. This compensation expense was allocated
between research and development expenses and general and administrative
expenses. In 1995, the Company began to increase the number of clinical sites
which were conducting Phase II clinical trials. The Company also expanded its
activities outside the U.S. to a second European site in Germany and a new
site in Japan.
General and administrative expenses. General and administrative expenses
increased by $361,672 from $505,061 in 1994 to $866,733 in 1995. The increase
is attributable to a growth in personnel from 13 in 1994 to 21 in 1995 and
related costs. The additional increases in 1995 are a function of the
allocation of the compensation expense from the stock option extension and
legal and professional fees related to general corporate representation and
the protection of intellectual property rights.
Interest income (expense). Interest expense decreased by $33,016 from
$143,661 in 1994 to $110,645 in 1995. This decrease is attributable to the
prior period conversion of debt. Interest income increased by $22,277 from
$63,473 in 1994 to $85,750 in 1995. This increase is attributable to the
receipt of offering proceeds from a private placement in the fourth quarter of
1995.
FISCAL YEAR ENDED DECEMBER 31, 1994 AND JANUARY 1, 1994
Research and development expenses. Research and development expenses
increased by $359,490 from $1.7 million in 1993 to $2.1 million in 1994. This
change is attributable to the submission to the FDA for Phase II clinical
trials. The Company also expanded its efforts to complete a new model of the
PRS by increasing acquisitions of raw materials. In addition, the Company
began installing the PRS at hospitals in the U.S. to begin the process of
qualifying the device for clinical trials.
General and administrative expenses. General and administrative expenses
increased by $254,296 from $250,765 in 1993 to $505,061 in 1994. The increase
is attributable to a growth in personnel from nine in 1993 to thirteen in 1994
and related costs. Part of the personnel increase was to start developing
manufacturing operations. Additional increases in 1994 were due to legal and
professional fees relating to general corporate representation and the
protection of intellectual property rights, and patent expenses for foreign
coverage of issued patents.
Interest income (expense). Interest expense decreased by $149,353 from
$293,014 in 1993 to $143,661 in 1994 due to the conversion of approximately
$3.6 million principal amount of convertible notes into equity on December 31,
1993. Interest income increased by $60,245 from $3,228 in 1993 to $63,473 in
1994 resulting from the investment of the net proceeds from a private
placement.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations through the
issuance of convertible debt and Preferred and Common Stock in a series of
private placements. Consolidated working capital was $5.7 million at June 29,
1996, compared with $7.6 million at December 30, 1995. Included in working
capital are cash and cash equivalents of $5.5 million at June 29, 1996,
compared with $7.2 million at December 30, 1995. During the first six months
of 1996, $2.0 million of cash was used for operating activities. Prepaid
expenses increased in 1996 due to costs associated with the Company"s proposed
initial public offering.
The Company used $307,902 of cash in the first six months of 1996 for fixed
assets and leasehold improvements associated with its move to a new facility.
The Company received $600,000 of cash in the first six months of 1996 from
the sale of Preferred Stock.
The Company's capital requirements may change depending upon the progress of
the Company's research and development activities, progress of the clinical
trials, progress on new applications for treatment with the PRS and costs
involved with procuring and defending patents. The Company believes that
proceeds from this offering, together with its current cash and cash
equivalents, will be sufficient to meet the capital requirements of its
existing business for at least the next 24 months.
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BUSINESS
The Company is engaged in the design, development and commercialization of
the Photon Radiosurgery System ("PRS"), a proprietary, therapeutic device for
the treatment of cancerous tumors through the application of x-ray radiation
directly to the tumor site. The PRS delivers in a single treatment a high dose
of radiation through a thin, minimally invasive, needle-like probe, which
emits from its tip precisely controlled low energy x-rays that irradiate the
tumor from the inside out. The limited penetration of low energy x-rays in
tissue substantially confines the radiation to the tumor site.
The Company believes that the PRS offers a number of advantages over
conventional radiation therapies by allowing higher radiation doses with
shorter patient treatment times. Substantial confinement of the radiation to
the tumor boundaries significantly reduces the risk of radiation exposure to
surrounding healthy tissue and important organs or critical structures.
The most common form of treatment of cancerous tumors is by invasive
surgery. The Company believes that the PRS provides an attractive, minimally
invasive alternative to surgery, resulting in significantly less patient
trauma, shorter hospital stays and lower treatment costs than surgery. The PRS
can be applied after performing a biopsy and when desirable, use of the PRS
can be coupled with surgical procedures.
Next to surgery, radiation therapy is the most common modality of treating
cancer. Approximately 50% of all cancer patients in the U.S. receive radiation
therapy at some point during the course of their disease. Radiation can be
administered to a tumor by external beams or interstitially by inserting a
radiative source into the patient. With external beams, radiation must pass
through, and may potentially damage, healthy tissue before reaching the tumor,
whereas the PRS delivers radiation directly to the tumor site.
An established form of treatment, called brachytherapy, delivers radiation
directly to a tumor site by the insertion of radioactive isotopes. In
comparison to this form of treatment, the Company believes that the PRS offers
a greater ability to control and localize low energy radiation doses, and
avoids the costs and risks associated with the storage, handling and disposal
of radioactive materials. The Company believes that the PRS also offers
significant advantages over other forms of therapy, such as the destruction of
cancerous cells by heating, cooling or the use of laser light.
To date, the Company has focused its clinical efforts primarily on the
treatment of metastatic brain tumors. However, the PRS is being developed for
a variety of applications, including the treatment of primary brain tumors as
well as breast, prostate, bladder, skin and other cancers. The method of
treatment will depend on the application. The Company expects that the three
basic PRS treatment methods will be (i) the "interstitial" irradiation of
localized tumors from the inside out; (ii) the "intracavitary" irradiation of
body cavities; and (iii) the "intraoperative" irradiation of tumors or of the
beds of surgically removed tumors in order to destroy remaining cancerous
cells.
The Company and Toshiba Medical Systems Company, Ltd. ("Toshiba") have
entered into agreements relating to performance of clinical trials, and to
future product distribution arrangements in Japan.
The Company holds nine U.S. patents and four U.S. patent applications
relating to the PRS or its constituent or ancillary components. The Company
has also obtained or filed patent applications in other selected foreign
countries.
The Company was formed in 1989 as a joint venture between Thermo Electron
Corporation ("Thermo Electron") and an investment entity organized by Peter M.
Nomikos, the Company's President and Chief Executive Officer. Mr. Nomikos co-
founded Thermo Electron with George N. Hatsopoulos, Ph.D., a director of the
Company.
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BACKGROUND
CANCER OVERVIEW
According to the American Cancer Society, the direct medical costs incurred
in the delivery of cancer care in the U.S. will be approximately $35 billion
in 1996. Cancer care expenditures have been increasing as the number of new
cancer cases in the U.S. has increased from 782,000 in 1980 to an estimated
1,350,000 in 1996. In 1990, 22.4% of deaths in the U.S. were due to cancer,
ranking it the second leading cause of death. The incidence rate is growing at
1.8% per year. Men have a one in two lifetime risk of developing cancer and
for women the risk is one in three. The increase in cancer cases is
attributable to a number of factors, including an aging population and
additional exposure to carcinogens. According to the National Cancer
Institute, people over age 65 are 10 times more likely to develop cancer than
those under age 65. In addition, environmental factors, such as tobacco use
and exposure to industrial carcinogens, continue to increase the incidence of
cancer. Approximately 554,740 deaths annually, or over 1,500 deaths daily, are
currently attributable to cancer, and approximately one out of every four
deaths in the U.S. is cancer-related.
Changing technology, earlier diagnosis, and better treatment have increased
the five-year survival rate of cancer patients from approximately 33% in 1960,
to approximately 53% in 1994. This improvement in survival rates has also
increased the demand for cancer-related products and services.
Treatment of cancer is expensive, with an annual cost per case, including
diagnosis, hospital treatment and other facility stays, usually in excess of
$10,000. Cancer patients accounted in 1993 (the latest available reporting
period) for 6% of the total days of hospital care with an average length of
stay of approximately eight days. The delivery of cancer care, as in the
healthcare market in general, has been the subject of significant cost-
containment pressures from HMOs and other third party payors. These pressures
have driven the development of lower cost providers and have also driven the
search for better, more cost-effective cancer treatment tools and protocols.
MAJOR CANCER TREATMENT METHODS
Surgery, radiation and chemotherapy are the traditional means of treating
cancer. While surgery and radiation focus on localized solid tumors,
chemotherapy can provide adjunctive therapy as well as address disseminated
systemic diseases, such as leukemia. Solid tumor cancers are expected to
account for greater than 90% of new cancer cases in 1996.
SURGERY
Surgical excision of tumors has historically been the preferred method of
tumor treatment. However, surgery involves highly invasive and traumatic
procedures for patients. Surgery is not an optimal or practical option in a
number of cases, including cases where tumors are difficult or impossible to
access, where a patient's medical condition does not allow for a highly
invasive procedure to be performed, or in cancer of the breast or other
locations where cosmetic factors are of concern to the patient. In addition,
the procedure of removing tissue mass surgically may either leave some
malignant cells behind or disperse them through healthy tissue.
RADIATION
Next to surgery, radiation is the dominant method of treating cancer.
Approximately 50% of all cancer patients in the U.S. receive radiation therapy
at some point during the course of their disease. An important advantage of
radiation therapy is that the radiation acts with some selectivity on cancer
cells. The absorption of radiation by a cell affects its genetic composition
and inhibits the replication of the cell, leading to its gradual death.
Cancerous cells are fast replicating and thereby are disproportionately
damaged by the radiation absorbed.
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Conventional external radiation requires the radiation to have sufficient
energy to reach the targeted tissue. Therefore, radiation originating from a
source outside the body must pass through, and may potentially damage, healthy
tissue.
Currently, the most common type of radiotherapy uses x-rays delivered by
external beams and is administered using linear accelerators ("LINACS").
LINACS are conventionally used for multiple, or "fractionated," treatments of
a tumor in up to 30 radiation sessions, or, as used more recently in the
brain, to deliver a single high dose of radiation in a procedure referred to
as stereotactic radiosurgery ("SRS"). Single-fraction LINAC treatments of
brain tumors involve a risk of overradiating a critical structure, such as the
optic nerves within the beam's path, a factor which, the Company believes, has
restricted their medical acceptance. In spite of technological refinements,
external beam radiation therapy still requires that radiation pass through
surrounding healthy tissue, resulting in the risk of damage to that tissue.
Less common methods of external radiation therapy involve the use of focused
radiation from radioactive cobalt sources and the irradiation of tumors with
proton beams. Focused cobalt radiation is generated by the Gamma Knife
manufactured by Elekta Instrument AB of Sweden. As is the case with
traditional external beam radiation, the x-rays from this device must pass
through healthy tissue prior to reaching the tumor. The Company understands
that the Gamma Knife currently costs in excess of $3 million dollars and that
its cobalt source must be replaced periodically. Proton beam treatments, in
which protons, accelerated to high speeds in a cyclotron and focused into a
variable-sized beam, have been clinically evaluated for therapy at only a few
sites. These machines cost appreciably more than the Gamma Knife, and the
Company believes that it is doubtful that many cyclotrons will be built or be
widely accessible.
In addition to external radiation therapy, radioactive seeds, probes, wires
or ribbons are sometimes inserted into a tumor ("interstitially") or into a
body cavity ("intracavitary"). This modality, known as "brachytherapy," does
not require the radiation to pass through surrounding healthy tissue, with
radiation administered slowly at lower dose rates than those used in external
beam radiation. However, the radioactive material utilized in brachytherapy
begins to decay after being implanted in the body, and is difficult to
localize or control. In addition, various state and federal laws and
regulations exist relating to the handling, storage and disposal of the
radioactive materials used in brachytherapy which require the use of shielded
containers and facilities to store and handle the materials and protect
personnel.
OTHER TREATMENTS
One cancer treatment method involves the killing of cells by significantly
changing their temperature, either upward or downward. However, this method
does not selectively differentiate between cancerous and non-cancerous cells
and is difficult to control because blood vessels exacerbate the flow of heat
away from or toward the targeted lesion. These difficulties are compounded by
the need to keep surrounding healthy tissue either sufficiently cool or warm,
depending on the method used, in order to prevent that tissue from being
destroyed. In contrast, the x-ray penetration provided by the PRS is
unaffected by blood flow, and the dose received by cells can be more
accurately defined.
Other treatments include tumor targeting and destruction by genetically
engineered drugs, the use of laser light to initiate chemical reactions that
destroy cancer cells (photodynamic therapy or "PDT"), particle beam
bombardment of malignant tumors, and the use of a device which magnetically
steers a tiny, heated metallic pellet inside the lesion to kill the diseased
cells. PDT requires the introduction of a light-sensitive drug into the
patient which is intended to preferentially concentrate in the tumor.
Irradiation of the tumor by laser light chemically destroys the cells. In
contrast to x-rays, the penetration depth of laser beams into tissue is very
limited, thereby restricting the technology to treatment of near-surface
tumors intraoperatively. Moreover, there are certain side effects associated
with the PDT drugs, with some patients remaining very sensitive to light after
the procedure. None of these treatments has yet proven more reliable than
surgery and/or radiation treatments.
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THE PRS SOLUTION
The Company believes that the PRS offers therapeutic, operational and
economic advantages over current conventional treatments.
THERAPEUTIC ADVANTAGES
Unlike external radiation sources, such as the LINAC or the Gamma Knife,
which, in order to deliver x-rays to a tumor site, require that the x-ray
beams pass through a patient's healthy tissue, the PRS's x-ray source can
inject low energy photons directly into the tumor. In this manner, radiation
can be substantially confined within the tumor boundaries thereby
significantly reducing the exposure of surrounding healthy tissue and
important organs. Interstitial delivery allows higher doses of x-rays to be
delivered to the tumor, thereby shortening aggregate treatment time to
typically less than 30 minutes, shorter than that normally required for
external therapies. With the PRS, a stronger single dose of radiation, rather
than multiple fractionated doses as prescribed with conventional external beam
therapies, can be applied. Moreover, the interstitial x-ray source of the PRS
delivers a higher dose to the tumor's central core than to its periphery.
Since, generally, a tumor's hypoxic (radiation resistant) cells occupy this
inner region, the dose distribution of the PRS is appropriate for maximum cell
destruction. Furthermore, the x-ray output of the PRS can be maintained at a
constant level, unlike, for example, radioactive isotopic seeds, which decay
after being implanted into the body. The localization of PRS radiation can
also facilitate radiation therapy for children whose cells are more actively
replicating and who are more likely to suffer side effects from external
radiation.
The Company believes that in contrast to surgery, the PRS is minimally
invasive and, due to its needle-like probe, can allow access to tumors
otherwise difficult or impossible to access surgically. The Company believes
that the minimally invasive nature of the PRS will offer advantages when
patient condition or cosmetic considerations do not allow highly invasive or
traumatic surgical interventions. For example, the Company believes that the
PRS can be used to irradiate breast cancer tumors, immediately after biopsy
confirmation of breast cancer, thereby reducing treatment delays and offering
an alternative to lumpectomy. In addition to its use on a stand-alone basis,
the Company believes that the PRS can be used in conjunction with current
therapies, for example to irradiate the "bed" of a surgically removed tumor
and to destroy remaining cancerous cells. Although the Company anticipates
that the primary applications for the PRS will involve the treatment of solid
tumors, the PRS has also been designed for treatment of certain diffuse
tumors, such as those within the lining of the bladder or other body cavities.
OPERATIONAL ADVANTAGES
The Company believes that the design of the PRS will make it portable and
easier to use than conventional external beam radiation therapy equipment.
Because the PRS treatment focuses on the tumor and the immediately surrounding
tissue, the Company anticipates that treatment planning will be shorter and
simpler than with conventional radiation treatments. In addition, unlike
conventional brachytherapy or the Gamma Knife, the PRS's low photon energy x-
ray source contains no radioactive material, thereby eliminating problems
associated with the storage, handling and disposal of radioactive materials
and the need to shield personnel and facilities. The PRS has been designed for
use immediately after confirmatory biopsies. When used in neurosurgical
applications, such as the treatment of brain tumors, the PRS probe can be
affixed to the stereotactic frame used to position the biopsy needle and then
inserted through the track left by the biopsy needle. Finally, the PRS is
being developed for use in a variety of different applications, and the
various probes being developed by the Company for these different applications
are expected to be interchangeable components of the PRS.
ECONOMIC ADVANTAGES
The Company believes that the price of the PRS to the hospital, surgical
center or other purchaser will be significantly below that of the equipment
used for conventional external radiation therapy methods currently available.
The Company believes that the combination of a biopsy with a short, one-time
treatment with the PRS, and an anticipated hospital stay of, generally, no
more than one day, will provide an appealing, minimally
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invasive and economically feasible choice of therapy for the patient. It is
anticipated that the cost of treatment with the PRS will be substantially less
than surgery, and less than or comparable to, other inpatient therapies.
The Company believes that the anticipated lower acquisition costs of the PRS
will make it potentially attractive not only to major urban teaching
hospitals, but also to smaller, regional health care providers, which
otherwise may not have adequate capital resources to purchase alternative
equipment.
SPECIFIC APPLICATIONS OF THE PRS
The Company has to date focused its clinical efforts on the treatment of
metastatic brain tumors. In addition to metastatic brain tumors, the Company
currently intends to seek clearance to conduct clinical trials to determine
the safety and efficacy of the PRS in treating primary brain tumors and tumors
in the breast, prostate, bladder and skin. Depending on the nature and
location of the cancerous tumor, these additional treatment applications may
require the use of separate components or accessories in connection with the
PRS, but the Company believes that the basic core technology of the PRS will
not need to be significantly modified. The Company will consider the use of
the PRS for other potential applications on an ongoing basis. See "--Clinical
Trials."
BRAIN TUMORS
Primary brain and central nervous system tumors will account for 17,900 new
cases of cancer in 1996. Metastatic brain tumors, or secondary tumors formed
in the brain from malignant cells dispersed from distant primary tumor sites
in the body, have a much higher incidence rate. In fact, the brain is the
leading site for metastases to form; one in three cancer patients will develop
one or more such tumors prior to dying. Estimates place the figure in the
range of 150,000 to 400,000 patients annually. Due to their advanced age or
stage of their primary disease most of these patients will not benefit
sufficiently from treatment. However, about 35,000 of these patients are
thought by the Company to be candidates for therapy. While the Company to date
has focused its development and clinical efforts on the treatment of
metastatic brain tumors, it intends to explore the possibility, from a market
and regulatory standpoint, of utilizing the PRS for treatment of primary brain
tumors as well.
Aggressive treatment of metastatic brain tumors traditionally has been
limited. Patients with these tumors typically have received a fractionated
series of external beam whole brain radiation, which, because of the
cumulative effect on healthy tissue through which it passes, cannot be used to
treat subsequent tumors which frequently reoccur. Because of the particularly
sensitive nature of the brain and its surrounding critical organs and
structures, such as the optic nerves, damage from external radiation can
severely harm the patient. The PRS is particularly well-suited for this
application because of its targeted, low-energy approach. In addition,
although external beam radiotherapy is not recommended for young children
whose brains are still developing, highly confined interstitial irradiation
with the PRS may reduce the risk of radiotherapy to maturing brains. Phase I
clinical trials for the use of the PRS in treating metastatic brain tumors
have been completed, and Phase II clinical trials are currently being
performed. See "--Clinical Trials."
BREAST TUMORS
Breast cancer is the second leading cause of cancer deaths in women in the
U.S. In 1996, 184,300 new invasive cases of breast cancer are expected to be
diagnosed among women in the U.S., with an estimated 44,300 deaths. Current
conventional treatment methods for breast cancer include lumpectomies,
mastectomies, radiation, chemotherapy and hormone therapies or, as often is
the case, a combination of several of these.
The Company believes that the PRS could provide treatment for breast cancer
both interstitially (directly into the tumor) and as a post-surgical "boost"
to the tumor bed after the tumor has been removed surgically, with the goal of
destroying any malignant cells remaining in the tumor bed. The Company
currently anticipates that two clinical trials to ascertain the safety of the
PRS for treatment of breast cancer will begin in early 1997 in England. In one
trial the PRS will be tested to irradiate tumors interstitially immediately
after their diagnoses by stereotactic biopsies. In the other trial the PRS
will be tested to irradiate the tumor bed immediately after surgical excision
of the tumor. The Company is developing, for this intraoperative study,
treatment accessories and fixturing. See "--Clinical Trials."
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PROSTATE TUMORS
Prostate cancer is the second leading cause of cancer deaths in men in the
U.S. In 1996, 317,100 new cases of prostate cancer are expected to be
diagnosed in the U.S. with an estimated 41,400 deaths. Treatment is presently
implemented by surgery and radiation; hormones and chemotherapy are other
options.
According to the latest data available, in 1993, 250,000 transurethral and
53,000 radical prostectomies were performed. In 1992 the hospital stay for a
patient with prostate cancer was on average approximately six days with an
overall cost of $12,226.
A protocol for human prostate trials involving ultrasound-guided
transperineal insertion of the PRS into the prostate (using a longer PRS probe
developed for treating bladder cancer) to irradiate prostate lesions has been
approved by the ethics committee of a London hospital. The Company is
currently reviewing the efficacy of combining the PRS with external beam
therapy for this application. The former would treat the focal lesions of the
prostate, and the latter would provide treatment for the microscopic (isolated
tumor cell) disease. See "--Clinical Trials."
BLADDER TUMORS
In 1996, an estimated 52,900 new cases of bladder cancer are expected to
occur, with 11,700 deaths predicted. In 1992, hospitalization for a patient
with bladder cancer was on average approximately six days with an overall cost
of $12,936.
For bladder cancers, surgery alone or in combination with other treatments
is used in over 90% of cases. External beam irradiation is limited in
usefulness due to its damaging effects on the healthy tissue surrounding the
bladder. The Company has developed a means of delivering with the PRS
radiation only to the bladder lining by a noninvasive, transurethral method.
Although designed to treat diffuse malignancies extending over the entire
lining of the bladder, the apparatus is designed to be sufficiently versatile
to allow irradiation of localized bladder tumors as well. Initial animal
trials with this procedure are currently being conducted. If those trials are
successful, the Company will request, by the first half of 1997, FDA approval
of an Investigational Device Exemption ("IDE") to begin Phase I human trials.
See "--Clinical Trials."
SKIN TUMORS
In 1996, there are expected to be over 800,000 new cases of skin cancers.
Melanomas are expected to be diagnosed in 38,300 individuals. An additional
17,000 invasive nonmelanomas, mostly sarcomas such as Karposi's sarcoma (a
malignant skin tumor often suffered by AIDS patients), will occur. Currently
there are four primary methods of treatment utilized for skin cancers. Surgery
is the primary modality and used in 90% of cases. The others are radiation
therapy, electrodessication, in which tissue is destroyed by heat,
cryosurgery, in which tissue is destroyed by freezing, and laser therapy for
early skin cancer. The Company believes a significant number of cases of skin
cancers are amenable to treatment with the PRS either as an alternative to
present radiation therapies or as an adjunct to surgery.
For non-interstitial treatments, the Company has developed an x-ray
"shielding cone," which is intended, when fitted onto the PRS's probe tip, to
restrict the area of x-ray exposure to the region of the tumor being treated.
The Company has established a research site at a New York City hospital, and
intends to submit an application to the FDA to begin human clinical trials for
Karposi's sarcoma and possibly other types of skin tumors in late 1997.
OTHER POTENTIAL APPLICATIONS
Application of the PRS to the treatment of various types of tumors is not
necessarily limited to those described above. For example, the Company is
considering the applicability of the PRS for intraoperative treatment of
gynecological tumors (cervical and uterine malignancies), as well as for
minimally invasive therapy for lung, colon, rectal, liver, pancreatic and
nasopharyngeal cancers. For these other cancers, fixturing devices will need
to be developed, or existing fixturing devices will need to be modified, for
compatibility with the PRS.
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The Company intends to design its own devices, as well as pursue relationships
with fixture device manufacturers in order to develop or modify their devices,
as it has with respect to stereotactic systems used in treating brain and
breast tumors. For applications where a direct path to the tumor site is not
possible, the Company is exploring a flexible version of the probe which will
permit indirect access to the tumor site.
BUSINESS STRATEGY
The Company's goal is to establish the PRS as the preferred means for the
treatment of cancerous tumors by utilizing its therapeutic, operational and
economic advantages over competing cancer treatment methods. In order to
achieve its objectives, the Company intends to pursue the following business
strategy:
UTILIZE CORE TECHNOLOGY FOR THE TREATMENT OF METASTATIC BRAIN TUMORS AND
ADDITIONAL APPLICATIONS. The PRS has been used to treat metastatic brain
tumors in 57 patients, and Phase II clinical trials for the treatment of these
brain tumors are currently ongoing. While the Company has focused its efforts
to date on the development of the PRS to treat metastatic brain tumors, the
Company intends to utilize and further develop its core PRS technology for
multiple applications based on specific market opportunities. The Company
expects these applications to include the treatment of primary brain tumors as
well as breast, prostate, bladder, skin and other cancers.
BUILD RELATIONSHIPS WITH MEDICAL PROFESSIONALS AND INSTITUTIONS. The
Company has developed strong relationships with prominent medical
professionals and institutions worldwide who have been involved in the
clinical testing of the PRS. The Company believes that the medical community's
acceptance of the PRS as a viable cancer treatment tool will significantly
impact the Company's ability to market the PRS. Therefore, the Company intends
to continue to foster and expand these important relationships, and to
leverage the relationships to gain market acceptance of the PRS. In addition,
the Company has established a Medical Advisory Board, which will advise and
consult with the Company's Board of Directors and senior management.
OBTAIN REGULATORY CLEARANCE OF THE PRS IN THE U.S. AND INTERNATIONALLY. The
Company intends to seek regulatory clearances for the PRS in the U.S. and
abroad. In the U.S., the Company intends to submit a Section 510(k)
application to the FDA in late 1996, on the basis of results of its ongoing
human clinical trials, which will seek limited clearance from the FDA to
commercialize the PRS for treatment of metastatic brain tumors. In addition,
the Company has initiated, and intends to continue, the process of seeking a
CE Mark for the PRS. The Company intends to pursue regulatory clearance in
other countries as needed, and expects that it will initially introduce the
PRS in selected foreign countries where governmental regulatory approval
procedures are less burdensome and expensive than in the U.S. In addition, the
Company intends to initiate human clinical trials for applications other than
brain tumor treatment such as breast, prostate and bladder tumor treatments,
and to seek regulatory approvals for the commercialization of those
applications if the results of the underlying clinical trials so warrant.
PURSUE COMMERCIAL ACCEPTANCE OF THE PRS IN THE U.S. AND INTERNATIONALLY.
The Company intends to pursue the rapid commercialization of the PRS in the
U.S. and abroad. The Company anticipates that it will continue to pursue
collaborative relationships with companies that have established distribution
channels in various domestic and international market segments, as it has with
Toshiba. The Company also intends to continue its practice of developing
strategic relationships with licensors or manufacturers of equipment or
technology which can be used in connection with the PRS, such as treatment
planning software and stereotactic frames, breast biopsy tables or other
fixturing devices.
PROTECT INTELLECTUAL PROPERTY RIGHTS. The Company holds nine U.S. patents
and four U.S. patent applications relating to the PRS or its constituent or
ancillary components. The Company has also obtained two patents in Australia,
and has filed patent applications in other selected foreign countries. The
Company intends to continue to pursue its patent filing strategy and to
vigorously protect its intellectual property rights against infringement. See
"Risk Factors--Patents and Proprietary Technology."
26
<PAGE>
CLINICAL TRIALS
Before medical devices such as the PRS can be marketed in the U.S.,
successful completion of clinical trials, along with FDA approval, is
required. Phase I clinical trials for the use of the PRS in treating
metastatic brain tumors have been completed, and Phase II clinical trials are
currently being performed with respect to this application. Based on the
results obtained to date in these ongoing Phase II trials, the Company intends
to submit a Section 510(k) application to the FDA seeking clearance to
commercialize the PRS for treatment of metastatic brain tumors. Locally
approved clinical trials for the treatment of brain tumors are also being
performed at sites in Europe and Japan. The Company currently anticipates that
clinical trials to determine the safety of the PRS for treatment of breast
cancer will begin in the U.K. in early 1997. Based upon those trials, the
Company will submit an application to the FDA to begin Phase I human clinical
trials. The possibility of curing topical tumors of the skin and mouth with
the PRS is also being explored. A program has begun at a U.S. hospital which
the Company expects to lead to human clinical trials with the PRS in treating
Karposi's sarcomas and other skin malignancies. The Company will consider the
use of the PRS for other potential applications on an ongoing basis.
The following table summarizes by treatment application the status of
clinical trials in the U.S., Europe and Japan:
<TABLE>
<CAPTION>
APPLICATION STATUS
----------- ------
<S> <C> <C>
Brain tumors U.S.: Phase II in process
(interstitial and as Europe: Phase II and local trials in process
post-surgery Japan: Local trials in process
radiation "boost")
Breast tumors U.S.: Trial sites under investigation*
(interstitial and as Europe: Human clinical trials planned to commence
post-surgery in early 1997*
radiation "boost")
Japan: Potential trial sites under evaluation*
Bladder tumors U.S.: Animal trials in process; human clinical
trials expected to commence mid-1997*
Prostate tumors Europe: Protocols for trials approved in London;
clinical trials expected to commence mid-
1997*
Skin tumors (contact U.S.: Clinical trials expected to begin in late
therapy) 1997*
</TABLE>
- --------
* FDA or local approvals are needed before commencing clinical trials.
Research studies for medical devices such as the PRS are often conducted in
a phased approach. Before any commercial sales in the U.S. of the PRS can
commence, successful completion of these clinical trials, along with FDA
approval, is required.
Phase I trials are used to demonstrate feasibility, to delineate an initial
safety profile and to identify technical, procedural and clinical factors
which may be material to the successful use of the device. Phase II clinical
trials normally are conducted on a larger population group in order to
identify possible adverse health and safety risks and to begin gathering
efficacy data. Each of the clinical trials is to be conducted pursuant to
certain standards under protocols setting forth the objectives of the study,
the parameters to be used to monitor safety during the trials, and the
efficacy criteria which are to be evaluated. In turn, each protocol must be
submitted to the FDA. The data obtained from these trials are then used to
support a Section 510(k) or other application to the FDA requesting
commercialization approval.
27
<PAGE>
In 1992, the FDA granted an IDE to the Company to perform a limited number
of human clinical trials on brain tumors. Between December 1992 and April
1993, the Company completed a ten-patient Phase I clinical trial at a major
Boston teaching hospital. The results of these trials indicated that the PRS
was capable of destroying cancerous tissue in a focally defined area. Based on
these results, that hospital asked the Company to seek FDA approval to conduct
an additional series of trials in order to treat more patients while awaiting
approval of a Phase II study. As a result, four more patients were treated
with similar results.
Based on the Phase I results, the Company sought permission from the FDA to
begin Phase II trials to treat brain tumors, and such permission was granted
in March 1994. These trials are required to establish the efficacy of the PRS
relative to currently acceptable treatment methods. The Company is performing
Phase II clinical trials on the PRS at certain institutions and their
affiliated medical facilities in Boston and London. In addition, locally
approved clinical trials are being performed in Germany, London and Tokyo.
These trials enable the treatment of patients who are not eligible for the
current Phase II trials and allow the use of treatment methods and evaluation
techniques which are different than those defined in the FDA-approved IDE
protocol for this application.
To date, 57 patients have been treated with the PRS at various hospitals.
Although the studies are not yet complete, in the Company's opinion, the PRS
has destroyed all cancerous tissue which has been targeted with an adequate
dose of radiation. Pathological evidence from the only two patients autopsied
to date with multiple brain tumors indicated that the PRS-treated tumors were
entirely dead while other tumors which had undergone external beam radiation
contained viable cancer cells. While MRIs can be utilized, with certain
limitations, for determining whether tumors have been destroyed, tissue
analyses from autopsies or surgical excisions provide the most accurate means
of detecting the extent of malignant cell destruction. However, both the
hospital costs and the reluctance of the patients' relatives to provide
consent limit the number of autopsies performed. Complications that have
occurred to date, such as edema, have generally been of the type experienced
by patients undergoing brain biopsies without PRS treatment. Edema may result
from mechanical, radiative or other trauma to tissue and is generally
controllable using steroids or other conventional methods. While the Company
has been encouraged by the results of the brain tumor trials so far, these
results may not be predictive of future results in these or any other clinical
trials or of results obtained in clinical trials for other specific
applications.
Based on the results of the Phase II trials to date, the Company intends to
submit certain data from these trials in support of an application to the FDA
under Section 510(k). The Company expects that this Section 510(k) application
would seek clearance from the FDA to commercialize the PRS for similar
treatments of patients with metastatic brain tumors. See "--Government
Regulation." The Company expects to submit such a Section 510(k) application
before the end of 1996. If clearance is received from the FDA, the Company
would begin such commercialization of the PRS in the U.S. If such clearance is
not obtained, the Company would have to seek approval by submission of a PMA
application in order to market the product. The PMA process is significantly
more complex, expensive and time consuming than the Section 510(k) application
process. The PMA process typically spans several years and may never result in
approval. See "Risk Factors--Absence of Regulatory Clearances; Uncertainty of
Obtaining Section 510(k) Clearance."
With respect to other potential PRS applications, the Company anticipates
that human clinical trials to ascertain the safety of the PRS for treatment of
breast cancer will begin in early 1997. A protocol for human prostate trials
involving ultrasound-guided transperineal insertion of the PRS into the
prostate (using a longer PRS probe developed for treating bladder cancer) to
treat prostate lesions has been approved by the ethics committee of a hospital
in London. The Company is currently reviewing the efficacy of combining the
PRS with external beam therapy for this application. Initial animal trials for
use of the PRS in treatment of bladder cancer are currently being conducted.
If those trials are successful, the Company will request FDA approval of an
IDE to begin Phase I human trials for diffuse, superficial bladder wall
cancers, although any such approval is not likely to be requested earlier than
the first half of 1997. The Company has established a research site in New
York City, and expects to submit an application to the FDA to begin human
clinical trials for use of the PRS to treat Karposi's sarcoma and other skin
malignancies by late 1997.
28
<PAGE>
PRODUCTS AND PRODUCT DEVELOPMENT
A complete PRS consists of (i) equipment for clinical use in treating
patients, principally consisting of the x-ray emitting probe, its electronic
control box and a standard computer-based treatment system, (ii) clinical
quality assurance equipment for use in the operating room to verify the
accuracy of the treatment, and (iii) custom equipment for use in the
laboratory to calibrate the output of the probe.
The PRS is intended to be a turn-key system. However, the Company believes
that certain PRS components or accessories will have other uses for which they
may be marketed separately. For example, the Company believes that the CCD-
microdensitometer, which is part of the PRS and which allows for testing of
radiation dosage and distribution prior to patient exposure, could be used
with conventional x-ray sources as well as with the PRS. Several prototype
units are under evaluation in the U.S. and Europe and the Company may seek
clearance to market it on a separate basis. In addition, the Company has also
designed, in support of its proprietary x-ray technology, an automated
dosimetry water tank, which provides a rapid computer-based means of measuring
the spatially distributed x-ray dose around the probe tip. While the tank was
originally designed by the Company to facilitate periodic calibration of PRS
units by hospitals, the tank can also be used to measure the dose delivered by
radioactive seeds, and the Company intends to explore further the market
potential for sales of tanks for this purpose.
The Company believes that masking the outside of the tip of the PRS probe
with a sculpted thin layer of an appropriate metal can vary the dose
distribution to conform the radiative field to more closely match the
configuration of a nonspherical tumor. The Company is investigating the
development of a "library" of masks that can be slipped over the tip of the
probe, with each mask tailored to produce a differently shaped dose
distribution. The Company is also currently considering the feasibility (from
a design, cost and market standpoint) of a PRS x-ray source which would rely
on a flexible probe in order to address endoscopically approachable body
tumors, or those "hidden" behind critical structures.
MARKETING AND SALES; COLLABORATIVE RELATIONSHIPS
The Company believes that the acceptance of the PRS by health care providers
as a viable, cost-effective alternative to conventional cancer treatment
methods will be critical to the successful commercialization of the PRS. The
Company intends to target such health care providers as hospitals, out-patient
providers, women's health centers, and small regional facilities, both within
the U.S. and abroad, as potential customers. The Company intends to market and
distribute its products through a combination of collaborative relationships
and in-house sales and marketing resources. The Company has heavily relied,
and intends to continue to heavily rely, on the pursuit of strategic alliances
with companies that have established distribution channels in domestic and
international markets.
The Company and Toshiba have entered into agreements relating to the conduct
of clinical trials in Japan, and to future product distribution arrangements
in that country. Those agreements provide that Toshiba will conduct and pay a
portion of the cost of the PRS clinical trial program in Japan, be responsible
for obtaining approval under Japan's Pharmaceutical Affairs Law to import,
market, sell and use the PRS and, once regulatory approvals are obtained,
serve as exclusive distributor for the PRS in Japan. Toshiba is purchasing
from the Company at a discounted price two PRS units for use in the clinical
trials. The Company has agreed to upgrade those units at no additional cost to
Toshiba once approvals are obtained to sell the PRS in Japan. Toshiba is one
of the leading medical device manufacturers and distributors in the world, and
the Company believes that Toshiba's support for the PRS will be a significant
factor in gaining acceptance for the device in the medical marketplace in
Japan. Upon entering into the clinical trial and distribution arrangement,
Toshiba purchased an equity interest in the Company which represents 4.9% of
the issued and outstanding capital stock of the Company before the
consummation of this offering.
The Company also has entered into, and plans to continue entering into,
strategic relationships with manufacturers or designers of components and
accessories relating to, or to be used in conjunction with, the PRS. The
Company believes that such relationships will enable the Company to focus its
development efforts and devote its economic resources to its core
technologies, while simultaneously providing access to those parties'
29
<PAGE>
customers and distribution channels. For example, two manufacturers of
stereotactic frames, Radionics Incorporated ("Radionics") and Medical High
Tech GmbH, have adapted their frames to be compatible with the PRS, and a
third frame manufacturer has submitted designs to the Company indicating a
similar intention. In addition, a Radionics subsidiary, Radionics Software
Applications ("RSA"), has developed a version of its three-dimensional patient
treatment planning program specifically tailored for use with the PRS in
conjunction with its stereotactic frame. The Company hopes to leverage its
relationships with these third parties in order to increase market
opportunities. See "Risk Factors--Limited Marketing Experience."
MEDICAL ADVISORY BOARD
The Company has recently formed a Medical Advisory Board, which will advise
and consult with the Company's Board of Directors and senior management at
such times as the Board of Directors shall request. This advice and
consultation will relate generally to the Company's business and products,
including the PRS, as the Board of Directors deems appropriate. The Medical
Advisory Board members may be employed on a full-time basis by employers other
than the Company, and these members may have commitments to, or consulting,
advisory or other contractual relationships with, other third parties. These
third party commitments and relationships may limit the availability of the
Medical Advisory Board members to the Company, and may potentially result in
conflicts of interest. The Board of Directors has not yet convened a meeting
of the Medical Advisory Board. The following individuals have agreed to serve
as members of the Medical Advisory Board:
<TABLE>
<CAPTION>
NAME POSITION
- ---- --------
<S> <C>
Nicholas T. Zervas, M.D. (Chair- Higgins Professor of Neurosurgery and Chief
man)............................. of the Neurosurgical Service at The
Massachusetts General Hospital, Boston,
Massachusetts.
Michael Baum, ChM. FRCS........... Professor of Surgery, Department of
Surgery, at The Institute of Surgical
Studies, University College London Medical
School, London, England.
Basil S. Hilaris, M.D., FACR...... Professor and Chairman of the Department of
Radiation Medicine at Our Lady of Mercy
Medical Center, New York Medical College,
New York City.
Christoph B. Ostertag, M.D........ Professor and Director of Department of
Stereotactic Neurosurgery at the
Neurosurgical University Clinic, Albert-
Ludwigs University, Freiburg, Germany.
Kintomo Takakura, M.D., Ph.D...... Director of Neurological Institute and
Professor and Chairman of Department of
Neurosurgery at Tokyo Women's Medical
College, Tokyo, Japan.
</TABLE>
The Company is proposing that each member of the Medical Advisory Board,
with the exception of Dr. Zervas, be issued options to purchase 1,000 shares
of the Company's Common Stock for each full year that such member serves on
the Medical Advisory Board. The exercise price per share for the options
issued with respect to the member's first year of service on the Medical
Advisory Board is to be equal to the initial public offering price hereunder,
and the exercise price per share for the options issued with respect to any
subsequent year of service on the Medical Advisory Board is to be the fair
market value of such share (as determined by the Company's Board of Directors)
on the first day of such year of service. Each member would also receive a fee
of $1,000 per regular or special Medical Advisory Board meeting attended in
person (together with reimbursement of reasonable travel expenses), and a fee
of $500 per each such Medical Advisory Board meeting participated in by means
of conference telephone arrangements. The Company is proposing to pay Dr.
Zervas, the current Chairman of the Medical Advisory Board, a stipend of
$10,000 for each year that he serves on the Medical Advisory Board.
30
<PAGE>
PATENTS AND PROPRIETARY RIGHTS
A U.S. patent directed to the base PRS technology was issued to the Company
in October 1992. Two patents were issued to the Company in 1996 directed to
shaped radiation patterns and electron beam steering, respectively. In 1994
and 1995, three U.S. patents directed to use of the PRS to treat brain tumors
were issued to the Company. A U.S. patent, directed to a flexible probe PRS
for endoscopic purposes, was also issued to the Company in 1995. Another U.S.
patent was issued to the Company in 1996 for an apparatus for use in x-ray
dosimetry for the PRS. One U.S. patent, issued in 1996, and two pending U.S.
patent applications are directed to use of the PRS to deliver x-rays to
internal surfaces and adjoining regions of body cavities, such as the bladder,
esophagus, anal region, nasal orifice and gynecological area. One pending
application has been allowed by the Patent Office and grant of patent is
expected shortly in that application. The Company owns two other pending
patent applications relating to use of the PRS, and to the Company's CCD
microdensitometer. The Company has foreign patent applications in selected
foreign countries which correspond to certain of its U.S. patent applications.
To date, two patents corresponding to the Company's initial patent have issued
in Australia; the other foreign applications are pending. See "Risk Factors--
Patents and Proprietary Technology" and "--Technological Change and
Competition."
MANUFACTURING
The Company intends to continue its practice of sub-contracting the
fabrication of most of its electrical and mechanical components while
maintaining in-house responsibility for unit assembly and for manufacture of
certain proprietary components. The Company believes that this strategy can
serve to reduce administrative costs, facilitate supplier partnership, and
reduce inventory requirements. In general, the Company's procurement strategy
is to keep the number of its suppliers low while identifying as many multiple
sources as possible.
The Company intends to implement the necessary operational systems to
support the successful commercial production of the PRS and any other
products. Specifically, the Company intends to continue to pursue full
functional compliance with ISO 9001 and the FDA's GMP standards that govern,
among other things, quality assurance, personnel training, process control,
customer service, design control, supply management and facility and equipment
maintenance. See "Risk Factors--Limited Manufacturing Experience" and "--
Potential Component Shortages; Dependence on Sole Sources of Supply."
COMPETITION
The medical device industry is highly competitive. The Company believes that
there are numerous universities, research institutions and medical device,
chemical and biotechnology companies that are engaged in the development of
cancer treatment therapies. Many of these entities have substantially greater
technical, financial and regulatory resources than the Company and may be
better equipped to develop, manufacture, and market their products.
The Company believes that its ability to compete in the marketplace will
depend on its technological advantages and the strength of its patent
position, its ability to complete clinical trials and to obtain regulatory
approvals for its products in a timely fashion, its competence in developing
and maintaining collaborative relationships, its transition to commercial
manufacturing and marketing, and its ability to achieve and maintain a
superior cost structure relative to other competitive treatments. See "Risk
Factors--Technological Change and Competition."
GOVERNMENT REGULATION
U.S.
The PRS is subject to regulation in the U.S. by the FDA and, in many
instances, by comparable agencies in foreign countries where the PRS is to be
manufactured or distributed. Under the FDC Act and the SMDA, manufacturers of
medical devices must comply with applicable provisions of the FDC Act and the
SMDA and
31
<PAGE>
certain associated regulations governing the safety, design testing,
manufacturing, labeling, marketing and distribution of medical devices and the
reporting of certain information regarding the safety of medical devices. Both
the FDC Act and the SMDA require certain clearances from the FDA before
medical devices, such as the PRS, can be marketed. The Company intends to
pursue a strategy intended to result in marketing clearance of as many PRS
components as possible as quickly as possible in order to maximize flexibility
in the marketing of the PRS and its components.
FDA permission to distribute a new device can be obtained in either of two
ways. The first process (which is the more comprehensive of the two) applies
to a new device that is not substantially equivalent to an existing, legally
marketed product, and requires generally that the Company establish the safety
and effectiveness of the device through specific procedures. A PMA application
must be submitted to the FDA that contains, among other things, the results of
clinical trials performed pursuant to FDA-approved protocols. The PMA
application also contains other information required under the FDC Act such as
a full description of the device and its components, a full description of the
methods, facilities and controls used for manufacturing and proposed labeling.
Finally, the manufacturing site for the device subject to the PMA must pass an
FDA preapproval inspection. The PMA process can be expensive, uncertain and
lengthy, often requiring several years to complete.
The second of the two FDA processes is available for a new or significantly
modified device which is "substantially equivalent" to an existing legally
marketed device. Such a new device may be commercially introduced when, after
submission of a premarket notification to the FDA under Section 510(k), the
FDA issues an order permitting commercial distribution. The FDA has recently
been requiring a more rigorous demonstration of substantial equivalence than
in the past. As between the two sets of procedures (the PMA approval procedure
and the Section 510(k) clearance procedure), the PMA procedures are normally
more complex and time consuming than Section 510(k) procedures, since the PMA
procedures are for products that are not comparable to any other product in
the market. However, even the Section 510(k) procedures are time-consuming and
expensive.
The Company anticipates that it will file a Section 510(k) application with
respect to the PRS for the treatment of metastatic brain tumors by the end of
1996. Under the Section 510(k) procedures, the Company will be required to
prove that the PRS is substantially equivalent to legally marketed products.
The Company will contend in its Section 510(k) application that for purposes
of Section 510(k), the PRS may be considered "substantially equivalent" to, as
a predicate device, a specific isotope after-loader used in brachytherapy, the
interstitial insertion of radioactive seeds, probes, wires or ribbons into a
tumor or body cavity. The product acceptance period for a Section 510(k)
application is normally about four to twelve months from the date the
application is deemed complete by the FDA, although there can be no assurance
that the review period will not extend beyond such period.
If the Company is unable to avail itself of the Section 510(k) procedures
(whether because it is unable to prove that the PRS is substantially
equivalent to existing products as described above or otherwise), it will need
to seek FDA approval under the PMA procedure. As discussed above, the
preparation of a PMA application is significantly more complex, expensive and
time consuming than the Section 510(k) procedure. Even if the Company were
able to proceed to seek PMA approval, it would need to do so based on
additional clinical tests conforming to FDA approved protocols, and such
approval would likely not be obtained, if at all, until at least 1999.
The Section 510(k) application to be filed by the Company will include all
PRS treatment components and associated laboratory equipment for calibration
and dose verification. Treatment planning software developed by a third party
manufacturer, which has not been used in clinical PRS treatments to date, will
require separate FDA clearance or approval prior to marketing in the U.S.
In addition to the clearance and approval procedures described above, the
FDA also imposes various requirements on manufacturers and sellers of medical
devices under its jurisdiction, such as labeling, manufacturing practices,
record keeping and reporting requirements. The FDA may also require the
ongoing monitoring of products which have been cleared for commercialization
under the those procedures.
32
<PAGE>
The PRS has not been cleared or approved for commercial use in the U.S. or
in any foreign country. There can be no assurances that the Company's clinical
trials of the PRS will be successful, or that clearances will be granted for
the PRS or any other future products, if any, or that the length of time for
clearance will not be extensive, that the cost of attempting to obtain any
such clearances will not be prohibitive, or that the Company will have
sufficient funds to pursue such clearance. Failure to obtain or maintain
requisite governmental approvals could delay or preclude the Company from
further developing and marketing the PRS and other products. Such delays could
impair the Company's ability to generate funds from operations, which in turn
would have a material adverse effect on the Company's business, financial
condition and results of operations, even after regulatory clearance is
obtained.
Even if regulatory approvals are obtained, such approvals may include
significant limitations on particular uses. In addition, those approvals may
be withdrawn or limited for non-compliance with regulatory standards or the
occurrence of unforeseen problems following the initial approval (either of
which could result in restrictions, including withdrawal of the product from
the market or sanctions or fines being imposed on the Company).
In addition, the export of products manufactured by the Company will be
subject to receipt of export licenses from the U.S. Government. Such licenses
are required for equipment use in foreign clinical trials. The Company has
requested and been granted export licenses and corresponding foreign import
licenses for clinical trials in England, Japan, Australia and Germany. See
"Risk Factors--Absence of Regulatory Approvals" and "--Ongoing Governmental
Regulation."
FOREIGN COUNTRIES
The regulatory climate relating to the marketing of medical devices within
the European Union is currently in transition while the European Union's
Medical Device Directive is being implemented. The Medical Device Directive
(June 1993) stipulates the regulatory requirements adopted by the European
Union, pursuant to which "National Competent Authorities" approve European
commercialization of new medical products through a procedure whereby both the
products and the manufacturing facilities must conform to well defined
specifications.
The transition period for the Medical Device Directive will end in June
1998; after the expiration of this transition period, all medical devices to
be marketed in any European Union country must first obtain a CE Mark. The CE
Mark is an international symbol of adherence to quality assurance standards.
Obtaining a CE Mark with respect to a particular medical device requires the
submission of information that is similar in certain respects to that which is
submitted to the FDA in connection with a Section 510(k) notification. In
order for the Company to sell its products in Europe, it must comply with
European Union directives relating to manufacturing and quality assurance
documentation under the ISO 9000 series standards and to the performance,
safety, and manufacture (and quality assurance) of the particular device.
In order to have the capacity to examine a large number of new products, the
National Competent Authorities have mandated Notified Bodies (nongovernmental
organizations) to act as their agents and qualify equipment in accordance with
EC standards. In October 1995, the Company engaged TUV-Essen, one of these
Notified Bodies, to act as its agent in qualifying the equipment to obtain a
CE Mark. TUV-Essen is in the process of performing a design review of the
equipment and will, after the appropriate modifications are made, test for
final approval of the system.
33
<PAGE>
Sales of medical devices within other jurisdictions outside the U.S. and
Europe are subject to regulatory requirements that vary widely from country to
country. The time required to obtain approval for sale in a foreign country
may be longer or shorter than that required for FDA approval, and the
requirements may differ. There can be no assurance that the Company will be
able to obtain the necessary regulatory approvals or clearance in any given
country on a timely basis or at all, and delays in receipt of or failure to
receive such approvals could have a material adverse effect upon the Company's
business, financial condition and results of operations. See "Risk Factors--
Absence of Regulatory Approvals" and "--Ongoing Governmental Regulation."
THIRD PARTY REIMBURSEMENT
If regulatory approvals are obtained for commercial use of the PRS, the
potential revenues derived from marketing of the PRS will depend in large part
upon whether the PRS will qualify for reimbursement from third party payors,
including private insurance companies, self-insured employers, health
maintenance organizations and federal and state sources of payment under the
Medicare and Medicaid programs, and other sources. As a general matter, each
third party payor has developed independent criteria for determining whether a
particular device or treatment modality should be reimbursable and the Company
cannot predict whether or to what extent the PRS will gain acceptance for
reimbursement with any third party payors. However, the Company believes that
the reduced capital and operation costs of the PRS when compared to competing
modalities, together with the expected lower hospitalization costs, will
encourage third party payors to provide reimbursement for PRS-based
procedures.
In addition, many third party payors in the U.S., including the federal
Medicare program and many state Medicaid programs, are planning to shift or
have shifted to partially or fully capitated systems. Under such systems
providers receive either a fixed payment amount per diagnosis or general
treatment approach regardless of the specific treatment modality, or a fixed
payment amount to provide for all the care needs of a patient over time
regardless of illness. To the extent that the PRS is comparatively more cost
effective than existing treatment modalities, providers subject to partial or
fully capitated systems will have an incentive to utilize the PRS.
The levels of revenues and profitability of sales of medical devices may be
affected by the continuing efforts of governmental and third party payors to
contain or reduce the costs of health care through various means and the
initiatives of third party payors with respect to the availability of
reimbursement. For example, in the U.S. there have been, and the Company
expects that there will continue to be, a number of federal and state
proposals to subject pricing or profitability of medical devices to
governmental control. Although the Company cannot predict what legislative
reforms may be proposed or adopted or what actions federal, state or private
payors for health care products may take in response to any health care reform
proposals or legislation, the existence and pendency of such proposals could
have a material adverse effect on the Company in general.
With respect to health care reimbursement in the European Union (the "EU"),
there are presently no EU-wide reimbursement procedures; the majority of the
EU member nations each have a dominant national health service with distinct
and unique reimbursement policies and procedures. In addition, private
insurers within the EU offer a great variety of benefits. It is anticipated
that by June 1998, when the Medical Devices Directive becomes mandatory in the
EU, the principal prerequisite for reimbursing a procedure involving new
medical equipment will be obtaining a CE Mark as described in more detail
above. See "Business--Government Regulation."
34
<PAGE>
Other foreign countries also have their own health care reimbursement
systems, and there can be no assurance that third party reimbursement will be
made available to the Company under any foreign reimbursement system. See
"Risk Factors--Effect of Life Expectancies on Markets for Specific Product
Applications" and "--Reimbursement by Third Party Payors."
EMPLOYEES
The Company presently has 25 employees, including a Director of Clinical
Research and Regulatory Affairs, and Production and Engineering Managers. None
of the Company's employees is covered by a collective bargaining agreement,
and the Company believes that its relationship with its employees is good. See
"Risk Factors--Dependence on Key Personnel."
PROPERTIES
The Company currently occupies approximately 15,000 square feet of space in
a building located in Lexington, Massachusetts under a lease expiring in 2002,
and is negotiating for an additional 2,600 square feet of space in the same
building. This facility is suitable for research and development, corporate
administration and assembly of the PRS, and the Company believes that it will
be adequate to meet its foreseeable requirements through at least 1999. The
Company has an option commencing in 1999 to lease additional space in the same
building.
LEGAL PROCEEDINGS
The Company has been notified that an individual and his employer believe
that they have certain rights with regard to their understanding of the
Company's planned use of the PRS for treatment of tumors in body cavities. No
formal legal proceedings have been initiated and the Company is in discussions
with such parties. In the opinion of management, the resolution of this matter
will not have a material adverse effect upon the Company's business, financial
condition or results of operations.
There can be no assurance that future claims against the Company will not
have a material adverse effect on the Company's business, financial condition
and results of operations.
35
<PAGE>
MANAGEMENT
OFFICERS AND DIRECTORS
The officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Peter M. Nomikos................. 64 Chairman of the Board, President,
Chief Executive Officer and Treasurer
Peter E. Oettinger, Ph.D. (1).... 59 Vice President, Chief Operating Officer
and Director
John J. Crowley.................. 40 Director of Finance and Controller
William O. Flannery.............. 50 Clerk
George N. Hatsopoulos, Ph.D.
(1)............................. 69 Director
Roger D. Wellington (1).......... 69 Director
</TABLE>
- --------
(1) Members of the Audit Committee
PETER M. NOMIKOS has served as Chairman of the Board, President, Chief
Executive Officer and Treasurer of the Company since its founding in 1989. Mr.
Nomikos was a co-founder of Thermo Electron Corporation ("Thermo Electron")
where he was a director until 1976. For the past 30 years, Mr. Nomikos has
resided in London and has been involved in maritime shipping as Managing
Director of Nomikos (London) Ltd. He devotes a majority of his time to
directing the overall business activities of the Company in the U.S. and
abroad.
PETER E. OETTINGER, PH.D. has served as Vice President, Chief Operating
Officer and a Director of the Company since its founding in 1989. From 1978 to
1988, Dr. Oettinger was Manager of Research and Development of Thermo
Electron's Direct Energy Conversion Operation, and Thermo Electron's Laser
Laboratory. Dr. Oettinger has a B.S. from Cornell University, an M.S. from the
California Institute of Technology and a Ph.D. from Stanford University.
JOHN J. CROWLEY has served as the Controller of the Company since 1991.
Prior to joining the Company, Mr. Crowley was the Controller of Applications
Systems Corporation, a software company. Mr. Crowley has a B.S. in accounting
from Bentley College.
GEORGE N. HATSOPOULOS, PH.D., has served as a Director of the Company since
its founding in 1989. Dr. Hatsopoulos has been Chairman of the Board and Chief
Executive Officer of Thermo Electron and has served as a Director of Thermo
Electron since 1956. Dr. Hatsopoulos is also a Director of BBN Corporation,
Thermedics Inc., Thermo Ecotek Corporation, Thermo Fibertek Inc., Thermo
Instrument Systems Inc., Thermo Optek Inc., ThermoQuest Corporation and
ThermoTrex Corporation.
ROGER D. WELLINGTON has served as a Director of the Company since its
founding in 1989. Mr. Wellington serves as President and Chief Executive
Officer of Wellington Consultants, Inc. and Wellington Associates, Inc.,
international business consulting firms he founded in 1994 and 1989,
respectively. Prior to 1989, Mr. Wellington served for more than five years as
Chairman of the Board of Augat Inc., a manufacturer of electromechanical
components. Prior to 1988, he also held the positions of President and Chief
Executive Officer of Augat Inc. Mr. Wellington is also a Director of BBN
Corporation and Thermo Electron.
WILLIAM O. FLANNERY has served as the Clerk and General Counsel of the
Company since 1992. Mr. Flannery is engaged in the private practice of law in
Framingham, Massachusetts and serves Of Counsel to the law firm of Goulston &
Storrs, P.C., Boston, Massachusetts. Mr. Flannery served as General Counsel
for Thermo Electron from 1985 to 1992 and as its Corporate Vice President for
Administration from 1989 to 1992.
The Company intends to expand its Board of Directors by adding two or three
outside directors. The Company also intends to seek to hire a new employee, or
promote an existing employee, to serve as the Company's Chief Financial
Officer and to hire a new employee to oversee the Company's marketing efforts.
36
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS; COMPENSATION OF DIRECTORS
The Board of Directors has appointed an Audit Committee, which has general
responsibility for supervision of financial controls as well as accounting and
audit activities of the Company. The Audit Committee has the responsibility to
annually review the qualifications of the Company's independent certified
public accountants, make recommendations to the Board of Directors concerning
the selection of the accountants and review the planning, fees and results of
the accountants' audit. The current members of the Audit Committee are Messrs.
Hatsopoulos, Oettinger and Wellington.
Outside Directors of the Company currently receive an annual stipend of
$2,000, a fee of $1,000 per regular or special Directors meeting attended in
person (together with reimbursement of reasonable travel expenses), a fee of
$500 per each such Directors meeting participated in by means of conference
telephone arrangements and a fee of $500 per any regular or special meeting of
any Committee of the Board of Directors, whether attended in person or
participated in by conference telephone arrangements (together, in the event
not coincident with a Directors meeting, with reimbursement of reasonable
travel expenses). Directors who are employees of the Company receive no
compensation as members of the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning the
compensation paid by the Company to Mr. Nomikos, the Company's Chairman of the
Board, President, Chief Executive Officer and Treasurer, and Dr. Oettinger,
the Company's Vice President and Chief Operating Officer, for the fiscal year
ended December 30, 1995. No other officers or employees of the Company
received salary and bonus in excess of $100,000 for all services rendered to
the Company during the year then ended.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------------
OTHER
NAME AND PRINCIPAL ANNUAL LONG-TERM ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION COMPENSATION
- ------------------ ---- -------- ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Nomikos
Chairman of the Board,
President, Chief
Executive Officer
and Treasurer (1)..... 1995 -- -- -- -- $50,000 (2)
Peter E. Oettinger,
Ph.D.
Vice President, Chief
Operating Officer and
a Director............ 1995 $110,134 -- -- -- --
</TABLE>
- --------
(1) Although Mr. Nomikos devotes substantial time to the business of the
Company, he is also engaged in other business activities through a London-
based company.
(2) Mr. Nomikos' compensation was awarded prior to this offering in shares of
Common Stock based upon the fair market value of the Common Stock at the
beginning of the fiscal year. For fiscal 1995, Mr. Nomikos received 6,250
shares of Common Stock at an $8.00 per share value.
37
<PAGE>
The following table sets forth certain information relating to grants of
stock options made during the fiscal year ended December 30, 1995 to each of
Mr. Nomikos and Dr. Oettinger.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ------------------------
NAME GRANTED YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ---------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Nomikos........ 0 -- -- -- -- --
Peter E. Oettinger,
Ph.D................... 0 -- -- -- -- --
</TABLE>
Each of Mr. Nomikos and Dr. Oettinger received, as of December 28, 1994,
12,500 options. If the foregoing table were applied to those option grants,
(assuming the grants of options occurred in 1995) the information for Mr.
Nomikos and Dr. Oettinger would be 12,500, 9.16%, $8.00, 2002, $11.26 and
$15.59, respectively. In 1995, the term of a number of options, including
75,000 options held by Dr. Oettinger, was extended to be a total of 12 years.
The following table sets forth certain information regarding stock option
exercises during the fiscal year ended December 30, 1995 and stock options
held at such year end by Mr. Nomikos and Dr. Oettinger.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END YEAR END (1)
------------------------- -----------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE RECEIVED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE (1)
- ---- --------------- -------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Peter M. Nomikos........ 0 -- 19,000 16,000 $ 191,000 $ 94,000
Peter E. Oettinger,
Ph.D. ................. 0 -- 125,000 22,500 1,372,500 152,500
</TABLE>
- --------
(1) Based on the assumed initial public offering price of the Common Stock
($12.00 per share), less the option exercise price.
COMPENSATION AND INSIDER PARTICIPATION
The entire Board of Directors was responsible for determining the
compensation of executive officers during fiscal 1995. Mr. Nomikos and Dr.
Oettinger, the Company's President and Chief Executive Officer, and Vice
President and Chief Operating Officer, respectively, are Directors and,
although they did not participate in deliberations relating to their own
compensation, each participated in deliberations relating to the compensation
of the other.
STOCK PLANS
1989 STOCK OPTION PLAN
The Company, effective January 20, 1989, adopted a non-qualified stock
option plan (the "Stock Option Plan") for persons selected by the Board of
Directors of the Company, including key employees, officers, directors and
consultants of the Company and its affiliates. The Stock Option Plan is
administered by the Company's Board of Directors, which determines the terms
of options granted under the plan, including the number of shares subject to
each option and the option price. In general, options which have been granted
under the plan expire no later than seven, ten or twelve years after the date
of grant and vest over a period of 45 months
38
<PAGE>
or five or seven years from the date of grant. When an optionee ceases to be a
director, employee or consultant of the Company or a subsidiary, an option
terminates either upon or shortly after termination.
Shares purchased upon the exercise of an option are subject to transfer
restrictions, which in general preclude the holder from transferring them
without the Company's consent, except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order. These
transfer restrictions are to lapse 90 days after the initial public offering
of Common Stock by the Company.
The Company's Board of Directors voted on July 17, 1996 to terminate the
Stock Option Plan, and no further options may be issued under the plan after
that date. The Company has outstanding under the Stock Option Plan non-
qualified stock options to purchase a total of 725,725 shares of Common Stock
at exercise prices ranging from $0.40 to $9.00 per share.
EMPLOYEE STOCK PURCHASE PLAN
An Employee Stock Purchase Plan (the "Stock Purchase Plan") was adopted by
the Board of Directors on March 18, 1994. In 1994, the Company issued 121,000
shares of Common Stock to employees of the Company pursuant to the Stock
Purchase Plan at a price of $3.00 per share. A total of 85,500 of these shares
are fully paid and non-assessable. Consideration for the remaining 35,500
shares was in the form of promissory notes executed by the employees in favor
of the Company. These promissory notes, with an aggregate face amount of
$106,500, are being repaid by the employees through automatic bi-weekly
payroll deductions. As of June 29, 1996 $73,409 was owed under the notes,
which are scheduled to be repaid in full by April 2, 1999.
The Company's Board of Directors voted on July 17, 1996 to terminate the
Stock Purchase Plan, and no further shares may be issued under the plan after
that date.
1996 EQUITY INCENTIVE PLAN
On July 17, 1996, the Board of Directors of the Company adopted the 1996
Equity Incentive Plan (the "1996 Plan") for employees, officers, directors and
consultants of the Company and its subsidiaries, and recommended approval of
the plan by the stockholders. The 1996 Plan provides for grants of incentive
stock options to employees (including officers) of the Company, and for grants
of non-qualified stock options to such employees as well as to directors and
consultants of the Company and its subsidiaries. In addition, persons eligible
to receive non-qualified stock options can be awarded shares of Common Stock
and given the opportunity to purchase shares of Common Stock. A total of
266,775 shares of Common Stock may be issued under the 1996 Plan. To date,
91,750 stock options have been granted under the 1996 Plan.
The 1996 Plan is administered by the Board of Directors of the Company,
which may delegate any or all of its responsibilities to a Committee of two or
more Board members who, if the Company registers any class of any equity
security pursuant to Section 12 of the Securities Exchange Act of 1934 (the
"Exchange Act"), must qualify as non-employee directors within the meaning of
Rule 16b-3 adopted pursuant to the Exchange Act. The plan administrator
determines the recipients and terms of all stock rights granted under the
plan, including in the case of all options, the option price. Except in the
case of some incentive stock options, as described below, the term of all
options granted under the plan may not exceed ten years.
Special rules apply to incentive stock options. The exercise price of all
incentive stock options granted under the 1996 Plan must be at least equal to
the fair market value of the Common Stock of the Company on the date of grant.
If an incentive stock option is granted to an optionee who owns stock
representing more than 10% of the voting power of the Company's outstanding
capital stock, the exercise price of the option must equal at least 110% of
the fair market value of the Common Stock on the date of grant and the maximum
term of the option cannot exceed five years. No incentive stock option may be
transferred by the optionee other than by will or the laws of descent and
distribution, and should the holder of an incentive stock option cease to be
employed by the Company and any of its subsidiaries, he or she (or his or her
estate, personal representative or beneficiary in the event of death) will no
longer be able to exercise the option to the extent of the shares not
exercisable upon termination of employment, and will have a limited period of
time after termination of employment within which to exercise the option (in
general, three months in the case of termination other than by reason of
disability or death, one year in the event of disability, and 180 days in the
event of death, unless the option expires earlier by its terms).
39
<PAGE>
At the request of an optionee, the plan administrator can take whatever
action is necessary to convert such optionee's incentive stock options into
non-qualified options. Also, an optionee's rights with respect to options and
other rights granted under the 1996 Plan are to be appropriately adjusted when
certain events occur, such as a stock dividend or split, a recapitalization,
or a merger or sale of assets.
The Board of Directors of the Company has the authority to amend or
terminate the 1996 Plan provided that, in general, no amendment may alter or
impair the rights of a grantee under any option previously granted without
that grantee's consent and shareholder approval must be obtained within 12
months before or after the Board adopts a resolution authorizing certain
actions, including the extension of the expiration date of the 1996 Plan or
the increase in the number of shares reserved for issuance under the 1996
Plan. Unless sooner terminated, the 1996 Plan will terminate on July 16, 2006.
401(K) PLAN
On April 1, 1995, the Company terminated its Simplified Employee Pension
Plan and adopted the Photoelectron Corporation 401(k) Retirement Plan, a
standardized prototype plan which is intended to qualify under Sections 401(a)
and 501 of the Code (the "401(k) Plan"). All employees who have completed
three months of service with the Company and who have attained age 21 are
eligible to participate in the 401(k) Plan, except that all employees on the
effective date of the 401(k) Plan immediately became eligible to participate.
The 401(k) Plan provides that each participant may contribute from 2% up to
15% of his or her compensation. The Company may also make discretionary
matching contributions equal to no more than 6% of each participant's
compensation. The 401(k) Plan is intended to qualify under Section 401(a) of
the Code so that contributions to the Plan, and income earned on Plan
contributions, are not taxable to participants until withdrawn from the 401(k)
Plan, and so that any contributions by the Company will be deductible by the
Company when made. Discretionary Company contributions and the investment
earnings thereon vest at the rate of 20% a year after one year of service and
become fully vested in any event at normal retirement age (age 65).
40
<PAGE>
CERTAIN TRANSACTIONS
On January 4, 1989, the Company entered into a corporate services agreement
with Thermo Electron. Under this agreement, Thermo Electron provided certain
administrative services, including legal advice and services, certain employee
benefit administration, tax advice and preparation, space allocation and
utilities. This agreement terminated on December 31, 1989. The Company has
continued to utilize Thermo Electron's resources since that date on an as-
needed basis without a formal contract and is charged at actual cost for such
services. The Company paid $3,120, $7,715 and $4,322 in 1993, 1994 and 1995,
respectively, for these services. George N. Hatsopoulos, Ph.D., a director of
the Company, is Chairman of the Board and Chief Executive Officer of Thermo
Electron.
The Company is provided with certain services by Thermo Power Corporation, a
majority-owned subsidiary of Thermo Electron. These services include data
processing services, administrative services and machine shop services, which
are charged to the Company at actual cost. The Company paid $36,734, $267,582
and $313,942 in 1993, 1994 and 1995, respectively, for these services. As of
December 31, 1994 and December 30, 1995, $42,460 and $19,113, respectively,
was payable to Thermo Power Corporation and was included in accounts payable
in the accompanying consolidated balance sheets.
The Company entered into a Convertible Note and Warrant Purchase Agreement
dated as of May 13, 1992, as amended (the "1992 Debt Agreement"), pursuant to
which the Company sold a $4,252,000 8% Convertible Demand Note (the "1992
Note") to Peter M. Nomikos, Chairman of the Board, President, Chief Executive
Officer and Treasurer of the Company. The principal amount of the 1992 Note,
and all interest accrued thereon, is due and payable on demand. The principal
amount of the 1992 Note is convertible into Common Stock at $3.00 per share.
Currently, the aggregate principal amount outstanding under the 1992 Note is
$705,000.
In 1993, 1,282,005 shares of Common Stock were issued upon the conversion of
$3,846,015 of principal and accrued interest under the 1992 Notes. On March
18, 1994, the Company's Board of Directors approved the issuance of 2,564,010
shares of Series A Convertible Preferred Stock to Mr. Nomikos in exchange for
these shares of Common Stock. The Series A Convertible Preferred Stock will be
converted into Common Stock on a two-for-one basis upon the closing of this
offering.
The warrant purchase rights under the 1992 Debt Agreement entitle Mr.
Nomikos to acquire warrants for $0.20, pursuant to which he may purchase
shares of Common Stock at $3.00 per share. Mr. Nomikos (or his assignee)
acquired warrants to purchase 575,000 shares of Common Stock in 1993, and
warrants to purchase 235,000 shares in 1995. Mr. Nomikos did not acquire any
such warrants in 1994. At July 31, 1996, warrants to purchase an aggregate of
1,417,334 shares of Common Stock were outstanding. All warrants issued to date
are now held by PYC Corporation.
In 1994, the Company sold an aggregate of 121,000 shares of Common Stock to
Dr. Peter Oettinger, John Crowley and other employees of the Company for $3.00
per share pursuant to the Company's Employee Stock Purchase Plan. Dr.
Oettinger, a director and officer of the Company, purchased 50,000 shares, all
of which are fully paid and nonassessable. Mr. Crowley, Controller of the
Company, purchased 10,000 shares, 5,000 of which are fully paid and non-
assessable and 5,000 of which are being paid for through bi-weekly payroll
deductions, in accordance with the terms of the Employee Stock Purchase Plan.
In 1994, the Company completed the issuance of 1,000,000 shares of Series B
Convertible Preferred Stock to Thermo Electron, Petronome Corporation and
other private investors at a purchase price of $4.00 per share. Thermo
Electron, a holder of more than 5% of the Company's Common Stock, purchased
87,500 shares. Petronome Corporation ("Petronome"), a corporation in which
Peter M. Nomikos has investment and voting power, purchased 110,500 shares.
The Series B Convertible Preferred Stock will be converted into Common Stock
on a two-for-one basis upon the closing of this offering.
41
<PAGE>
In 1996, the Company issued 2,220,615 shares of Series C Convertible
Preferred Stock to Petronome and other private investors. The purchase price
for 54,346 of the shares acquired by Petronome and 1,327,887 of the shares
acquired by such other private investors was $4.50 per share, and the purchase
price for 196,444 of the shares acquired by Petronome and 641,938 of the
shares acquired by such other investors was $4.05 per share. The latter
discounted price was paid by those stockholders that had acquired the right to
such discount in connection with their purchase of Series B Preferred Stock.
The Series C Convertible Preferred Stock will be converted into Common Stock
on a two-for-one basis upon the closing of this offering.
42
<PAGE>
SECURITIES OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as September 16, 1996 and as adjusted
to reflect the sale by the Company of the shares of Common Stock offered
hereby (assuming no exercise of the Underwriters over-allotment option), by
(i) each person (or group of affiliated persons) known by the Company to be
the beneficial owner of more than 5% of the outstanding Common Stock (assuming
conversion of all outstanding warrants and convertible debt, and conversion of
all Preferred Stock), (ii) each of the Company's directors, (iii) each of the
Company's executive officers who received salary and bonus in excess of
$100,000 for all services rendered during the fiscal year ended December 30,
1995, and (iv) all of the Company's executive officers and directors as a
group. Except as otherwise indicated in the footnotes to this table, the
Company believes that the persons named in this table have voting and
investment power with respect to all the shares of Common Stock indicated. The
following table also includes shares of Common Stock that the following
persons have the right to acquire within sixty (60) days.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PERCENT OF
PRIOR TO OFFERING (1) COMMON STOCK
------------------------- ------------------------------
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS NUMBER BEFORE OFFERING AFTER OFFERING
- --------------------------------------- ------------------------- --------------- --------------
<S> <C> <C> <C>
Peter M. Nomikos....................... 4,453,530 (2) 67.2% 51.6%
Peter E. Oettinger, Ph.D. ............. 175,000 (3) 3.8 2.7
George N. Hatsopoulos, Ph.D. .......... 14,500 (4) * *
Roger D. Wellington.................... 14,500 (5) * *
Sociedad Internacional De Finanzas SA.. 371,597 8.3 5.7
Montevideo, Uruguay
Thermo Electron Corporation............ 833,057 (6) 17.9 12.5
81 Wyman Street
Waltham, Massachusetts 02254
PYC Corporation........................ 3,479,984 (7) 59.0 44.0
c/o Aegeus Shipping Co., Ltd.
TANPY Building
17-19 Akti Miaouli
Piraeus 185 35 Greece
All directors and executive officers as
a group (5 persons)................... 4,674,630 68.8 53.2
</TABLE>
- --------
* Less than 1%.
(1) Includes the number of shares and percentage ownership represented by such
shares determined to be beneficially owned by a person in accordance with
the rules of the Securities and Exchange Commission. Such shares, however,
are not deemed outstanding for the purposes of computing the percentage
ownership of each other person. The number of shares beneficially owned by
a person includes shares of Common Stock subject to options held by that
person that are currently exercisable or exercisable within 60 days of
September 16, 1996. Such exercisable options are shown in the footnotes to
this table for each such person. The persons named in this table have
voting and investment power with respect to all shares of Common Stock
shown as owned by them, subject to community property laws where
applicable and except as indicated in the other footnotes to this table.
(2) Includes 19,000 shares subject to vested options granted by the Company,
and 710,796 shares issuable upon conversion of convertible debt. Also
includes 1,417,334 shares issuable upon exercise of outstanding warrants
owned by PYC Corporation, of which Mr. Nomikos is the President. Mr.
Nomikos has been granted investment power and the authority to vote such
shares by PYC Corporation.
(3) Includes 125,000 shares subject to options granted by the Company.
(4) Includes 14,500 shares subject to options granted by the Company. Does not
include any shares owned by Thermo Electron, as to which Dr. Hatsopoulos
disclaims beneficial ownership.
(5) Includes 14,500 shares subject to options granted by the Company.
(6) Includes 170,453 shares issuable upon conversion of convertible debt owned
by Thermo Electron.
(7) Includes 1,417,334 shares issuable upon exercise of outstanding warrants.
43
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is restating its Articles of Organization (as so restated, the
"Articles") and By-Laws (as so restated, the "By-Laws") to be effective prior
to the consummation of this offering. Upon such restatement, the authorized
capital stock of the Company will consist of 15,000,000 shares of Common
Stock, $0.0l par value, and 7,500,000 shares of Preferred Stock, $0.0l par
value.
COMMON STOCK
As of June 29, 1996, there were 4,483,417 shares of Common Stock issued and
outstanding and held of record by 37 stockholders, after giving effect to the
conversion of all outstanding shares of Preferred Stock which will occur upon
the consummation of the offering. The holders of the Company's Common Stock
are entitled to receive ratably such dividends as may be declared by the Board
of Directors out of funds legally available therefor, subject to the prior
rights of holders of Preferred Stock of the Company. Upon any liquidation of
the Company, after payment of all indebtedness, the assets of the Company will
be distributed pro rata to the holders of the Common Stock subject to such
rights as may have been granted to the holders of any outstanding Preferred
Stock. Holders of the Common Stock have no preemptive, subscription,
redemption or conversion rights and are entitled to one vote for each share
held of record on each matter submitted to a vote of stockholders. All but
35,500 of the outstanding shares of Common Stock are, and the shares of Common
Stock being sold in this offering will be, upon payment of the full
consideration therefor, fully paid and nonassessable. The remaining 35,500
shares were issued in 1994 to employees pursuant to the Employee Stock
Purchase Plan and are being paid for in installments.
PREFERRED STOCK
Upon the consummation of this offering, the Board of Directors will be
authorized, subject to certain limitations, to cause the Company to issue
Preferred Stock. The Preferred Stock is so-called "blank check" preferred
stock, which authorizes the Board of Directors of the Company from time to
time to establish one or more series of Preferred Stock and, to the extent
permitted by Massachusetts law, to designate variations in the relative rights
and preferences between different series, including (i) the number of shares
to constitute each series and the distinguishing designations thereof, (ii)
the dividend rate on the shares of each series and the preferences, if any,
and the special and relative rights of the shares of each series as to
dividends, (iii) whether the shares of each series shall be redeemable and, if
redeemable, the price, terms and manner of redemption, (iv) the preferences,
if any, and the special and relative rights of the shares of each series upon
liquidation of the Company, (v) whether the shares of each series shall be
convertible into shares of any other class or series of capital stock of the
Company and, if so, the conversion price or ratio and other conversion rights,
(vi) the conditions under which the shares of each series shall have separate
voting rights or no voting rights and (vii) such other designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of each series to the full extent
permitted by the laws of Massachusetts. The Company has no present plans to
issue any shares of Preferred Stock.
All Preferred Stock issued and outstanding prior to the closing of this
offering will be converted to Common Stock upon such closing.
CONVERTIBLE DEBT AND WARRANTS
The Company entered into a Subordinated Convertible Note Purchase Agreement
dated as of May 22, 1990, as amended (the "1990 Debt Agreement"), pursuant to
which the Company sold $300,000 of its 8% Subordinated Notes (the "1990
Notes"). The principal amount of the 1990 Notes, and all interest accrued
thereon, are due and payable on May 31, 1997. Upon maturity, the principal
amount of the 1990 Notes is convertible into Common Stock at $0.80 per share.
The Company entered into a Subordinated Convertible Note Purchase Agreement
dated as of July 11, 1991, as amended (the "1991 Debt Agreement"), pursuant to
which the Company sold $500,000 of its 8% Convertible
44
<PAGE>
Notes (the "1991 Notes"). The principal amount of the 1991 Notes, and all
interest accrued thereon, are due and payable on July 31, 1998. Upon maturity,
the principal amount of the 1991 Notes is convertible into Common Stock at
$3.00 per share.
The Company entered into a $4,500,000 Convertible Note and Warrant Purchase
Agreement dated as of May 13, 1992, as amended (the "1992 Debt Agreement"),
pursuant to which the Company sold a $4,252,000 8% Convertible Demand Note
(the "1992 Note"). As of June 29, 1996, a principal balance of $705,000
remains outstanding under the 1992 Note. The principal amount of the 1992
Note, and all interest accrued thereon, is due and payable on demand. The
principal amount of the 1992 Note is convertible into Common Stock at $3.00
per share.
The debt evidenced by the 1990, 1991 and 1992 Notes is subordinated to
certain senior debt, which includes all indebtedness of the Company for
borrowed money, which is not by its terms subordinate and junior to or on a
parity with the 1990, 1991 and 1992 Notes. The conversion price applicable to
the principal amount of the debt is subject to weighted average anti-dilution
protection in the event of the issuance or sale of Common Stock or other
securities of the Company at a price per share less than the applicable
conversion value under such note(s). Pursuant to the 1990, 1991 and 1992 Debt
Agreements (the "Debt Agreements"), accrued and unpaid interest is convertible
into Common Stock at a conversion value equal to the fair market value of the
Company's Common Stock on the first day of the fiscal quarter in which the
interest accrued. Prior to the effective date of this offering, fair market
value is determined based upon the most recent sale price of capital stock.
After the effective date of the offering, fair market value is based upon the
average market price over the first ten trading days of the quarter in which
the interest accrues. All accrued and unpaid interest under any of the Debt
Agreements is convertible at the option of the holder at any time, and is
automatically converted upon the conversion of any outstanding principal.
As of June 29, 1996, outstanding principal and accrued interest on the 1990,
1991 and 1992 Notes were convertible to 877,904 shares of Common Stock.
CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company's Articles and By-Laws contain certain provisions that are
intended to enhance the likelihood of continuity and stability in the
composition of the Company's Board of Directors and in the policies formulated
by the Board and to delay or prevent a change in control of the Company if the
Board determines that such a change in control is not in the best interest of
the Company and its stockholders. These provisions could have the effect of
discouraging certain attempts to acquire the Company or remove incumbent
management even if some or a majority of the Company's stockholders deem such
an attempt to be in the Company's best interest.
Consistent with Massachusetts law, the By-Laws provide that stockholders may
take action without a meeting only if all shareholders entitled to vote on the
action consent to the action in writing. The written consents must be filed
with the records of the meetings of stockholders. This provision may
discourage any other person from making a tender offer for Common Stock,
because such person or entity, even if it acquired a majority of the
outstanding voting securities of the Company, would be able to take action as
a stockholder (such as electing new directors or approving a merger) only at a
duly called stockholders meeting and not by written consent.
The Board of Directors is permitted pursuant to the Articles to consider
special factors, such as employee welfare and the future prospects of the
Company, in determining what the Directors reasonably believe to be in the
best interests of the Company when evaluating proposed tender or exchange
offers or business combinations.
The Articles provide that no director of the Company shall be liable to the
Company or its stockholders for monetary damages for any breach of fiduciary
duty, except to the extent such exculpation from liability is not permitted
under Massachusetts law. This provision does not prevent stockholders from
obtaining injunctive or other equitable relief against directors nor does it
shield directors from liability under federal or state securities laws. The
By-Laws provide that the Company shall indemnify its directors and officers to
the full extent permitted by law.
45
<PAGE>
The Articles provide that a majority vote of each class of stock entitled to
vote will be required for amendments to the Articles or a merger or
consolidation of the Company.
MASSACHUSETTS ANTI-TAKEOVER LAWS
The Company will be covered by the provisions of Chapter 110F of the
Massachusetts General Laws, the Business Combination Statute. Under Chapter
110F, a Massachusetts corporation with more than 200 stockholders may not
engage in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless (i) the interested stockholder
obtains the approval of the Board of Directors for the proposed business
combination prior to becoming an interested stockholder, (ii) the interested
stockholder acquires 90% of the outstanding voting stock of the corporation
(excluding shares held by certain affiliates of the corporation) at the time
it becomes an interested stockholder or (iii) the business combination is
approved at the time it is proposed by both the Board of Directors and the
holders of two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder). An "interested
stockholder" is a person who, together with affiliates and associates, owns
(or at anytime within the prior three years did own) 5% or more of the
outstanding voting stock of the corporation. A "business combination" includes
a merger, a stock or asset sale, and other transactions resulting in a
financial benefit to the interested stockholder.
The By-Laws provide that the provisions of Chapter 110D of the Massachusetts
General Laws, the Control Share Statute, will not apply to the Company. The
Control Share Statute, however, provides that the Company may in the future
become prospectively subject to the statute by vote of its Board of Directors.
In general, if this statute were applicable, it would provide that any person
or entity that acquired 20% or more of the Company's outstanding voting stock
could not vote such stock unless the other stockholders of the Company were to
so authorize.
Chapter 156B, Section 50A, of the Massachusetts General Laws, states that a
publicly-held Massachusetts corporation must, unless electing not to be
covered by the statute, have a classified board of directors consisting of
three classes as nearly equal in size as possible, unless the corporation
elects not to be covered by Section 50A. In addition, under this statute,
directors can be removed only for cause (as defined in the statute) by the
affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company generally entitled to vote in the election of
directors. The Company has elected not to have the provisions of this statute
apply to it.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 6,484,667 shares of
Common Stock outstanding (assuming no exercise or conversion of outstanding
options, warrants or convertible debt after July 31, 1996). Of these shares,
the 2,000,000 shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), except that any shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144")
under the Securities Act ("Affiliates"), may generally only be sold in
compliance with the limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining 4,484,667 shares of Common Stock are deemed "Restricted
Shares" under Rule 144. 2,877,955 Restricted Shares will be eligible for sale
in the public market in accordance with Rule 144 under the Act beginning 90
days after the date of this Prospectus (subject to compliance with the volume
and other limitations of Rule 144 described below); substantially all of these
shares are subject to the Lock-up Agreements described below. The remaining
1,606,712 outstanding Restricted Shares will not be eligible for resale under
Rule 144 until after the expiration of a two-year holding period from the date
such Restricted Shares were acquired from the Company or an Affiliate, and may
be resold in the public market only in compliance with the registration
requirements of the Act or pursuant to a valid exemption therefrom;
substantially all of these shares are subject to Lock-up Agreements. In
addition, certain securityholders have the right to have their Restricted
Shares registered by the Company under the Securities Act as described below.
The Company, its executive officers and certain other securityholders of the
Company have agreed pursuant to certain agreements (the "Lock-up Agreements")
that they will not without the prior written consent of the underwriters,
offer, sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable or exerciseable for any shares of
Common Stock for a period of 180 days from the date of this Prospectus.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially
owned Restricted Shares for at least two years is entitled to sell, within any
three-month period, a number of such shares that does not exceed the greater
of (i) one percent of the then outstanding shares of Common Stock
(approximately 64,800 shares immediately after this offering) or (ii) the
average weekly trading volume in the Common Stock in the over-the-counter
market during the four calendar weeks preceding the date on which notice of
such sale is filed. In addition, under Rule 144(k), a person who is not an
Affiliate and has not been an Affiliate for at least three months prior to the
sale and who has beneficially owned Restricted Shares for at least three years
may resell such shares without compliance with the foregoing requirements. In
meeting the two and three year holding periods described above, a holder of
Restricted Shares can include the holding periods of a prior owner who was not
an Affiliate.
The Securities and Exchange Commission has recently proposed amendments to
Rule 144 and Rule 144(k) that would permit resales of Restricted Shares under
Rule 144 after a one-year, rather than a two-year holding period, subject to
compliance with the other provisions of Rule 144, and would permit resale of
Restricted Shares by non-Affiliates under Rule 144(k) after a two-year, rather
than a three-year holding period. Assuming adoption of such amendments,
approximately 472,000 Restricted Shares will be eligible for sale in the
public market immediately after this offering pursuant to Rule 144(k),
substantially all of which shares are subject to the Lock-up Agreements, and
approximately 2,887,955 Restricted Shares will become eligible for sale in the
public market pursuant to Rule 144 beginning 90 days after the date of this
Prospectus (subject to compliance with the volume and other limitations of
Rule 144), substantially all of which shares are subject to the Lock-up
Agreements. Additional Restricted Shares will become eligible for sale under
Rule 144 from time to time.
The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register up to 1,000,000 shares of Common Stock
subject to outstanding stock options and Common Stock issued or issuable
pursuant to the Company's stock option plans and stock purchase plan. The
Company plans to file
47
<PAGE>
these registration statements within 180 days following the closing of this
offering, and such registration statements are expected to become effective
upon filing. Shares covered by these registration statements will thereupon be
eligible for sale in the public markets, subject to the Lock-up Agreements, to
the extent applicable.
OPTIONS
As of July 31, 1996, options to purchase a total of 817,475 shares of Common
Stock were outstanding; 525,250 of the shares issuable pursuant to such
options are subject to Lock-up Agreements. An additional 175,025 shares of
Common Stock are available for future grants under the Company's stock option
plan. See "Management--Stock Plans."
WARRANTS
As of June 29, 1996, warrants to purchase 1,417,334 shares of Common Stock
were outstanding, at an exercise price of $3.00 per share; all of the shares
issuable pursuant to such warrants are subject to Lock-up Agreements.
CONVERTIBLE DEBT
As of June 29, 1996, there was $1,983,177 of convertible debt outstanding.
This debt is convertible into 877,904 shares of Common Stock with a weighted
average conversion price of $2.26 per share. All such shares issuable pursuant
to the conversion of such debt are eligible for sale pursuant to Rule 144
beginning 90 days after the date of this Prospectus (subject to compliance
with the volume and other limitations of Rule 144). All of such shares are
subject to Lock-up Agreements.
REGISTRATION RIGHTS
In the event the Company proposes to register any of its securities under
the Securities Act after the completion of this offering, certain
securityholders of the Company (the "Rightsholders") will, subject to certain
exceptions, be entitled to include shares of Common Stock held by them in such
registration. However, the managing underwriter of any such offering may
exclude for marketing reasons some or all of such Registrable Shares from such
registration. The Company is generally required to bear the expenses of all
such registrations, except underwriting discounts and commissions.
48
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement,
the Underwriters named below, for whom Needham & Company, Inc. and Dain
Bosworth Incorporated are acting as representatives (the "Representatives"),
have severally agreed to purchase from the Company, and the Company has agreed
to sell to each Underwriter, the aggregate number of shares of Common Stock
set forth opposite their respective names below. The Underwriting Agreement
provides that the obligations of the Underwriters to pay for and accept
delivery of the shares of Common Stock are subject to certain conditions
precedent, and that the Underwriters are committed to purchase and pay for all
of such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Needham & Company, Inc. .............................................
Dain Bosworth Incorporated...........................................
---------
Total............................................................ 2,000,000
=========
</TABLE>
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After the public
offering, the public offering price, concession and reallowance to dealers may
be reduced by the Representatives. No such reduction shall change the amount
of proceeds to be received by the Company as set forth on the cover page of
this Prospectus. The Representatives have advised the Company that the
Underwriters do not intend to confirm sales of shares of the Common Stock to
any accounts over which they exercise discretionary authority.
The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the initial public offering price, less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of Common Stock
to be purchased by it shown in the above table represents as a percentage of
the 2,000,000 shares offered hereby. If purchased, such additional shares will
be sold by the Underwriters on the same terms as those on which the 2,000,000
shares are being sold.
The Underwriting Agreement contains covenants of indemnity between the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act.
The Company has agreed not to offer, sell or otherwise dispose of any shares
of Common Stock for a period of 180 days after the date of this Prospectus
without the prior written consent of Needham & Company, Inc., except for the
shares of Common Stock offered hereby and except that the Company may issue
securities pursuant to the Company's stock option plans and upon the exercise
of outstanding options. The Company's officers and certain other
securityholders have agreed that they will not, directly or indirectly, offer
to sell, sell, or otherwise dispose of shares of Common Stock or any
securities convertible or exchangeable therefor, for a
49
<PAGE>
period of 180 days after the date of this Prospectus, without the prior
written consent of Needham & Company, Inc. Needham & Company, Inc. may, in its
sole discretion and at any time without notice, release all or any portion of
the securities subject to the lock-up agreements. See "Shares Eligible for
Future Sale."
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the
right to reject any order for the purchase of shares in whole or in part.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be
determined by negotiations between the Company and the Representatives. Among
the factors to be considered in determining the initial public offering price
were prevailing market and economic conditions, market valuations of other
companies engaged in activities similar to the Company, estimates of the
business potential and prospects of the Company, the present state of the
Company's business operations, the Company's management and other factors
deemed relevant. See "Risk Factors--No Prior Public Market; Potential
Volatility of Stock Price."
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Goulston & Storrs, P.C., Boston, Massachusetts. Certain legal
matters will be passed upon for the Underwriters by Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The financial statements included in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549 (the "Commission"), a Registration Statement on Form S-
1 under the Securities Act of 1933, as amended, with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in that Registration Statement and the exhibits and schedules
thereto. For further information with respect to the Company and such Common
Stock, reference is hereby made to the Registration Statement including the
exhibits and the schedules thereto. Statements contained in this Prospectus
and the description of any contract or other document referred to herein are
not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. The Registration Statement and the exhibits thereto may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
located at Seven World Trade Center, 13th Floor, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission
also maintains a Web site that contains reports, proxy statements and
information statements and other information regarding registrants that file
electronically with the Commission, including the Company. The address of such
Web site is http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements certified by its independent
auditors and quarterly reports for the first three quarters of each fiscal
year containing unaudited consolidated financial information.
50
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants, Arthur Andersen LLP ..... F-2
Consolidated Balance Sheets as of June 29, 1996, December 30, 1995
and December 31, 1994............................................. F-3
Consolidated Statements of Operations for the years ended December
30, 1995, December 31, 1994 and January 1, 1994, the six months
ended June 29, 1996 and July 1, 1995 and from inception to June
29, 1996.......................................................... F-4
Consolidated Statements of Cash Flows for the years ended December
30, 1995, December 31, 1994 and January 1, 1994, the six months
ended June 29, 1996 and July 1, 1995 and from inception to June
29, 1996.......................................................... F-5
Consolidated Statements of Shareholders' (Deficit) Equity at June
29, 1996, December 30, 1995, December 31, 1994, January 1, 1994,
January 2, 1993, December 28, 1991, December 29, 1990, December
28, 1989 and at initial issuance.................................. F-6
Notes to Consolidated Financial Statements......................... F-7 to F-12
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of Photoelectron Corporation and
Subsidiary:
We have audited the accompanying consolidated balance sheets of
Photoelectron Corporation and subsidiary (a Massachusetts corporation in the
development stage) as of December 31, 1994 and December 30, 1995, and the
related consolidated statements of operations, shareholders' (deficit) equity
and cash flows for each of the three years ended December 30, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Photoelectron Corporation and subsidiary as of December 31, 1994 and December
30, 1995, and the results of their operations and their cash flows for each of
the three years ended December 30, 1995, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Boston, Massachusetts
March 20, 1996(except with respect to the matters discussed in Note 9 as to
which the date is October 11, 1996)
F-2
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30, JUNE 29, PRO FORMA
1994 1995 1996 JUNE 29, 1996
------------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equiva-
lents................. $ 1,778,181 $ 7,191,268 $ 5,455,614 $ 5,455,614
Inventories............ 625,520 495,590 437,478 437,478
Prepaid expenses....... 68,649 121,936 205,273 205,273
Other current assets... 4,040 70,274 171,464 171,464
----------- ------------ ------------ ------------
Total current assets.. 2,476,390 7,879,068 6,269,829 6,269,829
----------- ------------ ------------ ------------
PROPERTY AND EQUIPMENT:
Computer equipment..... 211,442 255,091 276,505 276,505
Lab and production
equipment............. 196,702 288,181 373,795 373,795
Clinical site equip-
ment.................. 169,531 611,813 606,800 606,800
Furniture and fix-
tures................. 59,910 65,333 90,487 90,487
Leasehold improve-
ments................. 119,048 175,203 355,936 355,936
----------- ------------ ------------ ------------
756,633 1,395,621 1,703,523 1,703,523
Less--Accumulated de-
preciation and amorti-
zation................ 283,772 572,188 623,133 623,133
----------- ------------ ------------ ------------
472,861 823,433 1,080,390 1,080,390
----------- ------------ ------------ ------------
Total assets.......... $ 2,949,251 $ 8,702,501 7,350,219 7,350,219
=========== ============ ============ ============
LIABILITIES AND
SHAREHOLDERS'
(DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable....... $ 151,747 $ 204,023 $ 143,482 $ 143,482
Accrued expenses....... 81,844 51,085 45,394 45,394
Accrued payroll and
benefits.............. 25,358 14,524 62,510 62,510
Current portion of con-
vertible subordinated
notes................. 181,000 -- 300,000 300,000
Current portion of ob-
ligation under capital
leases................ 9,208 -- -- --
----------- ------------ ------------ ------------
Total current liabili-
ties................. 449,157 269,632 551,386 551,386
----------- ------------ ------------ ------------
LONG-TERM DEBT:
Convertible subordi-
nated notes and other
advances, net of cur-
rent portion.......... 1,925,169 1,940,230 1,700,467 1,700,467
----------- ------------ ------------ ------------
SHAREHOLDERS' EQUITY
(NOTES 2, 3 AND 8):
Preferred stock, $0.01
par value--
Authorized--7,500,000
shares
Issued and outstand-
ing--3,564,010,
5,762,402, 5,784,624
and none at December
31, 1994, December 30,
1995, June 29, 1996
and pro forma, respec-
tively................ 35,640 57,624 57,846 --
Common stock, $0.01 par
value--
Authorized--15,000,000
shares
Issued and outstand-
ing--1,105,950,
1,583,554, 1,591,104
and 4,483,417 at De-
cember 31, 1994, De-
cember 30, 1995, June
29, 1996 and pro
forma, respectively... 11,059 15,837 15,912 44,834
Capital in excess of
par value--common
stock................. 1,184,394 2,343,018 2,345,941 19,548,405
Capital in excess of
par value--preferred
stock................. 7,746,146 17,073,762 17,173,540 --
Subscription receiv-
able.................. (94,874) (573,004) (73,409) (73,409)
Deficit accumulated
during development
stage................. (8,307,440) (12,424,598) (14,421,464) (14,421,464)
----------- ------------ ------------ ------------
Total shareholders'
equity............... 574,925 6,492,639 5,098,366 5,098,366
----------- ------------ ------------ ------------
Total liabilities and
shareholders' equi-
ty................... $ 2,949,251 $ 8,702,501 7,350,219 7,350,219
=========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
--------------------------------------- ------------------------
PERIOD FROM
INCEPTION
JANUARY 1, DECEMBER 31, DECEMBER 30, JULY 1, JUNE 29, (JANUARY 4, 1989)
1994 1994 1995 1995 1996 TO JUNE 29, 1996
----------- ------------ ------------ ----------- ----------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating Expenses:
Research and
development expenses.. $ 1,726,909 $ 2,086,399 $ 3,225,530 $ 1,061,646 $ 1,406,169 $ 11,079,836
General and
administrative
expenses.............. 250,765 505,061 866,733 400,742 708,249 2,819,310
----------- ----------- ----------- ----------- ----------- ------------
Total operating ex-
penses................ 1,977,674 2,591,460 4,092,263 1,462,388 2,114,418 13,899,146
----------- ----------- ----------- ----------- ----------- ------------
Operating loss......... (1,977,674) (2,591,460) (4,092,263) (1,462,388) (2,114,418) (13,899,146)
----------- ----------- ----------- ----------- ----------- ------------
Other income............ -- -- -- -- 35,959 35,959
Interest income......... 3,228 63,473 85,750 17,745 141,830 339,426
Interest expense........ (293,014) (143,661) (110,645) (59,004) (60,237) (897,703)
----------- ----------- ----------- ----------- ----------- ------------
Interest (expense)
income, net........... (289,786) (80,188) (24,895) (41,259) 117,552 (558,277)
----------- ----------- ----------- ----------- ----------- ------------
Net loss............... $(2,267,460) $(2,671,648) $(4,117,158) $(1,503,647) $(1,996,866) $(14,421,464)
=========== =========== =========== =========== =========== ============
Net loss per common and
common equivalent
share................. $ (1.55) $ (1.60) $ (2.85) $ (1.04) $ (1.04)
=========== =========== =========== =========== ===========
Weighted average common
and common equivalent
shares outstanding..... 1,466,323 1,668,815 1,447,133 1,444,514 1,919,052
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL YEAR ENDED SIX MONTHS ENDED INCEPTION
--------------------------------------- ------------------------ (JANUARY 4, 1989)
JANUARY 1, DECEMBER 31, DECEMBER 30, JULY 1, JUNE 29, TO JUNE 29,
1994 1994 1995 1995 1996 1996
----------- ------------ ------------ ----------- ----------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERAT-
ING ACTIVITIES:
Net loss............... $(2,267,460) $(2,671,648) $(4,117,158) $(1,503,647) $(1,996,866) $(14,421,464)
Adjustments to recon-
cile net loss to net
cash used in operating
activities--
Depreciation and amor-
tization.............. 71,773 146,806 288,416 116,379 50,945 631,724
Noncash interest con-
verted to subordinated
notes................. 283,710 130,853 109,331 213,074 59,830 827,278
Noncash salary con-
verted to common
stock................. 50,000 50,000 50,000 -- -- 200,000
Noncash research and
development expense
converted to subordi-
nated notes........... -- 9,000 -- -- -- 9,000
Noncash salary stock
options extension..... -- -- 860,000 -- -- 860,000
Changes in current ac-
counts--
Inventories............ (171,372) (454,148) 129,930 (377) 58,112 (437,208)
Prepaid expenses....... 19,565 (38,804) (53,287) (184,500) (83,337) (205,273)
Other current assets... (17,542) 14,920 (66,234) (1,842) (101,190) (171,464)
Accounts payable....... 31,984 52,380 52,276 96,364 (60,541) 143,482
Accrued expenses....... 162,747 (77,590) (43,341) 25,187 42,295 215,156
----------- ----------- ----------- ----------- ----------- ------------
Net cash used in oper-
ating activities...... (1,836,595) (2,838,231) (2,790,067) (1,239,362) (2,030,752) (12,348,769)
----------- ----------- ----------- ----------- ----------- ------------
CASH FLOWS FROM INVEST-
ING ACTIVITIES:
Purchases of equipment
and leasehold
improvements.......... (133,141) (389,600) (638,988) (349,574) (307,902) (1,678,677)
Proceeds from sale of
equipment and
leasehold
improvements.......... -- 9,845 -- -- -- 9,845
----------- ----------- ----------- ----------- ----------- ------------
Net cash used in in-
vesting activities.... (133,141) (379,755) (638,988) (349,574) (307,902) (1,668,832)
----------- ----------- ----------- ----------- ----------- ------------
CASH FLOWS FROM FINANC-
ING ACTIVITIES:
Proceeds from issuance
of common stock....... -- 268,127 -- -- 3,000 570,127
Proceeds from issuance
of preferred stock.... -- 3,935,771 8,849,600 -- 600,000 13,385,370
Proceeds from issuance
of subordinated
convertible notes..... 1,725,000 737,000 -- -- -- 5,322,000
Proceeds from issuance
of warrants........... 115,000 -- -- -- -- 236,453
Payments under capital
lease obligations..... (11,528) (13,120) (7,458) (5,227) -- (40,735)
----------- ----------- ----------- ----------- ----------- ------------
Net cash provided by
(used in) financing
activities............ 1,828,472 4,927,778 8,842,142 (5,227) 603,000 19,473,215
----------- ----------- ----------- ----------- ----------- ------------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............ (141,264) 1,709,792 5,413,087 (1,594,163) (1,735,654) 5,455,614
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD.............. 209,653 68,389 1,778,181 1,778,181 7,191,268 --
----------- ----------- ----------- ----------- ----------- ------------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD................. $ 68,389 $ 1,778,181 $ 7,191,268 $ 184,018 $ 5,455,614 $ 5,455,614
=========== =========== =========== =========== =========== ============
CASH PAID FOR:
Interest............... $ -- $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== =========== ============
CASH FLOWS FROM NONCASH
FINANCING ACTIVITIES:
Conversion of salary
expense to common
stock................. $ 50,000 $ 50,000 $ 50,000 $ -- $ -- $ 250,000
=========== =========== =========== =========== =========== ============
Conversion of
convertible
subordinated notes to
common stock.......... $ 3,846,015 $ -- $ 253,402 $ -- $ -- $ 4,027,015
=========== =========== =========== =========== =========== ============
Conversion of common
stock to preferred
stock................. $ -- $ 3,846,015 $ -- $ -- -- 3,846,015
=========== =========== =========== =========== =========== ============
Capital lease obliga-
tion incurred for
equipment............. $ 11,661 $ -- $ -- $ -- $ -- $ 40,783
=========== =========== =========== =========== =========== ============
Conversion of
convertible
subordinated notes to
warrants.............. $ -- $ 47,000 $ -- $ -- $ -- $ 47,000
=========== =========== =========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' (DEFICIT) EQUITY
<TABLE>
<CAPTION>
COMMON PREFERRED DEFICIT
STOCK STOCK ACCUMULATED
PREFERRED COMMON CAPITAL IN CAPITAL IN DURING
STOCK, $0.01 STOCK, $0.01 EXCESS OF EXCESS SUBSCRIPTION DEVELOPMENT
PAR VALUE PAR VALUE PAR VALUE OF PAR VALUE RECEIVABLE STAGE
------------ ------------ ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INITIAL ISSUANCE OF
COMMON STOCK........... $ -- $ 7,475 $ 291,525 $ -- $ -- $ --
Net loss............... -- -- -- -- -- (414,045)
------- -------- ---------- ----------- -------- ------------
BALANCE, DECEMBER 28,
1989................... -- 7,475 291,525 -- -- (414,045)
Net loss............... -- -- -- -- -- (394,275)
------- -------- ---------- ----------- -------- ------------
BALANCE, DECEMBER 29,
1990................... -- 7,475 291,525 -- -- (808,320)
Net loss............... -- -- -- -- -- (973,773)
------- -------- ---------- ----------- -------- ------------
BALANCE, DECEMBER 28,
1991................... -- 7,475 291,525 -- -- (1,782,093)
Issuance of common
stock................. -- 2,042 147,958 -- -- --
Issuance of warrants... -- -- 121,453 -- -- --
Net loss............... -- -- -- -- -- (1,586,239)
------- -------- ---------- ----------- -------- ------------
BALANCE, JANUARY 2,
1993................... -- 9,517 560,936 -- -- (3,368,332)
Issuance of common
stock................. -- 12,986 3,883,028 -- -- --
Issuance of warrants... -- -- 115,000 -- -- --
Net loss............... -- -- -- -- -- (2,267,460)
------- -------- ---------- ----------- -------- ------------
BALANCE, JANUARY 1,
1994................... -- 22,503 4,558,964 -- -- (5,635,792)
Issuance of common
stock................. -- 1,376 411,625 -- (94,874) --
Issuance of preferred
stock, Series A....... 25,640 (12,820) (3,833,195) 3,820,375 -- --
Issuance of preferred
stock, Series B....... 10,000 -- -- 3,925,771 -- --
Issuance of warrants... -- -- 47,000 -- -- --
Net loss............... -- -- -- -- -- (2,671,648)
------- -------- ---------- ----------- -------- ------------
BALANCE, DECEMBER 31,
1994................... 35,640 11,059 1,184,394 7,746,146 (94,874) (8,307,440)
Issuance of common
stock................. -- 4,778 298,624 -- 21,870 --
Issuance of preferred
stock, Series C....... 21,984 -- -- 9,327,616 (500,000) --
Extension of stock op-
tions................. -- -- 860,000 -- -- --
Net loss............... -- -- -- -- -- (4,117,158)
------- -------- ---------- ----------- -------- ------------
BALANCE, DECEMBER 30,
1995................... 57,624 15,837 2,343,018 17,074,088 (573,004) (12,424,598)
------- -------- ---------- ----------- -------- ------------
Issuance of Common
Stock................. -- 75 2,923 -- 499,595 --
Proceeds from issuance
of preferred stock.... 222 -- -- 99,778 -- --
Series C............... -- -- -- -- --
Net loss............... -- -- -- -- -- (1,996,866)
------- -------- ---------- ----------- -------- ------------
BALANCE JUNE 29, 1996... $57,846 $ 15,912 $2,345,941 $17,173,540 $(73,409) $(14,421,464)
======= ======== ========== =========== ======== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations and Relationship to Principal Shareholders
On January 4, 1989, Photoelectron Corporation (the "Company") was founded as
a joint financing by PYC Corporation ("PYC") and Thermo Electron Corporation
("Thermo Electron"). Since inception, the majority of the Company's time and
effort has been focused on the design, development and commercialization of
the Photon Radiosurgery System ("PRS"), a proprietary, therapeutic device for
the treatment of cancerous tumors through the application of radiation
directly into a tumor. The PRS delivers radiation through a thin, minimally
invasive, needle-like probe, which emits from its tip precisely regulated x-
ray photons.
The Company is in the development stage and has yet to generate any revenues
and has no assurance of future revenues. To management's knowledge, no company
has yet marketed a salable product using technology similar to the PRS that
has been developed by the Company. Even if marketing efforts are successful,
substantial time will pass before significant revenues will be realized, and
the Company may require additional funds during this period, which may not be
available to it.
The Company completed its 14-patient Investigative Device Exemption ("IDE")
Phase I trials as required by the U.S. Food and Drug Administration ("FDA")
and received approval for the next phase of FDA review. The Company began
conducting Phase II clinical trials at U.S. hospitals in December 1994 and
enrolling Phase II clinical trial patients during 1994 and 1995. Based on the
results of the Phase II trials to date, the Company intends to submit certain
data from these trials in support of a Section 510(k) application to the FDA.
The Company expects that this Section 510(k) application would seek clearance
from the FDA to commercialize the PRS for similar treatments of patients with
metastatic brain tumors. The Company expects to submit such a Section 510(k)
application before the end of 1996. If clearance is received from the FDA, the
Company would begin such commercialization of the PRS in the U.S. If such
clearance is not obtained, the Company would have to seek approval by
submission of a Premarket Approval ("PMA") application in order to market the
product. The PMA process is significantly more complex, expensive and time
consuming than the Section 510(k) application process. The PMA process
typically spans several years and may never result in approval. Upon clearance
by the FDA of the Company's Section 510(k) or PMA application, the Company
will begin to manufacture and market the device on a commercial basis in the
U.S. Simultaneously, the Company is pursuing a CE Mark for the device, which
will allow commercialization in Europe.
On December 13, 1995, the Company and Toshiba Medical Systems Co. Ltd.
("Toshiba") entered into an agreement pursuant to which Toshiba will help to
develop and then support the clinical trials of the PRS in Japan. The
agreement also provides that Toshiba will purchase two complete systems of the
PRS for use in the clinical trials. Once regulatory approvals for the PRS are
obtained, Toshiba will serve as its exclusive distributor in Japan. Toshiba
has also invested approximately $2 million in the Company's Series C Preferred
Stock offering (See Note 7).
Mr. Peter M. Nomikos was a co-founder of Thermo Electron in 1956. His family
maintains a beneficial ownership in Thermo Electron and its subsidiaries. As
of December 30, 1995, Mr. Peter M. Nomikos is the majority beneficial owner of
the Company. Thermo Electron and PYC are the only shareholders holding in
excess of 10% of the Company's outstanding stock. The remainder is being held
by company employees and outside investors.
Fiscal Years
The Company has adopted a fiscal year ending on the Saturday nearest
December 31. References to 1995, 1994 and 1993 are for the fiscal years ended
December 30, 1995, December 31, 1994 and January 1, 1994, respectively.
F-7
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Inventory
Inventories are stated at the lower of cost (first-in, first-out basis) or
market and include materials, labor and overhead. The Company has parts,
supplies and manufactured parts in inventory which are intended to be used and
capitalized as part of the Company's PRS that will be used in the Phase II
clinical trials.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of expenses and income during the
reporting period. Actual results could differ from those estimates.
Property and Equipment
The cost of additions and improvements are capitalized while maintenance and
repairs are charged to expense as incurred. The Company provides for
depreciation and amortization on the straight-line method over the estimated
useful lives of the property as follows:
<TABLE>
<CAPTION>
ASSET CLASSIFICATION ESTIMATED USEFUL LIFE
-------------------- ---------------------
<S> <C>
Machinery and equip-
ment................... 5 Years
Clinical site equip-
ment................... The shorter of three years or the life of agreement
Furniture and fixtures.. 3-5 Years
Leasehold improvements.. The shorter of the term of the lease or the life of the asset
</TABLE>
Cash and Cash Equivalents
Cash and cash equivalents include the Company's operating accounts and
holdings of a money market mutual fund.
Income Taxes
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109, Accounting for Income Taxes, as of the beginning of 1989. Under SFAS No.
109, deferred tax assets and liabilities are recognized for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. The amount of deferred tax asset or liability is
based on the difference between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to be reflected in the tax return.
Research and Development Expenses
Costs classified as research and development expenses in the accompanying
consolidated statements of operations are costs incurred in connection with
programs funded by the initial investment of Thermo Electron and PYC in
addition to monthly funding by Mr. Nomikos and the private placements that
occurred in 1994 and 1995. Research and development expenses include the
portion of indirect costs allocable to research and development efforts based
on actual labor hours incurred.
F-8
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the Phase II FDA clinical trials, as well as the efforts
to obtain the CE Mark, PRS units have been provided to certain hospitals to
conduct the clinical trials. The cost of these units and the related
accumulated depreciation is included in property and equipment in the
accompanying consolidated balance sheets. The cost of the units is charged to
research and development expenses over the term of the agreements with the
hospitals.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Photoelectron (Europe) Ltd. All
material intercompany accounts and transactions have been eliminated.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiary are
translated at year-end exchange rates, and revenues and expenses are
translated at average exchange rates for the year in accordance with SFAS No.
52, Foreign Currency Translation. Resulting translation adjustments are
reflected as a separate component of shareholders' deficit titled Cumulative
Translation Adjustment. Foreign currency transaction gains and losses included
in the accompanying consolidated statements of operations are not material for
the three years presented.
Fair Value of Financial Instruments
The fair value of the Company's cash and cash equivalents approximates the
recorded amounts. The fair value of the Company's convertible subordinated
notes is primarily determined by the ability to convert those notes into
common stock. The fair value of the convertible subordinated notes is
approximately $10,600,000 and approximately $7,800,000 at December 31, 1994
and 1995.
Unaudited Interim Financial Period
The consolidated financial statements for the six months ended June 29, 1996
are unaudited. The statements have been prepared by the Company on the same
basis as the audited statements and include all adjustments which are, in the
opinion of management, of a normal and recurring nature and necessary for the
fair presentation of the results of operations and cash flows pursuant to the
rules and regulations of the Securities and Exchange Commission. Results of
interim periods are not necessarily indicative of results for the entire year.
(2) INCOME TAXES
The components of the deferred tax asset at December 31, 1994 and December
30, 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Deferred tax asset--
Federal tax loss carryforwards........................ $ 2,484 $ 3,349
Federal tax credit carryforwards...................... 435 612
State tax loss carryforwards.......................... 660 944
State tax credit carryforwards........................ 410 573
Other, net............................................ 152 304
------- -------
4,141 5,782
Valuation allowance................................... (4,141) (5,782)
------- -------
Deferred tax asset.................................. $ -- $ --
======= =======
</TABLE>
F-9
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 30, 1995, the Company had federal net operating loss
carryforwards of approximately $9,800,000, state net operating loss
carryforwards of approximately $9,500,000, federal tax credit carryforwards of
approximately $612,000, and state tax credit carryforwards of approximately
$573,000. Due to the fact that the Company has sustained cumulative losses,
the potential future benefit of these attributes, which expire in the years
2004 through 2010, is fully reserved by means of a valuation allowance because
their realization is uncertain.
Certain stock transactions may result in a change of control under Sections
382 and 383 of the Internal Revenue Code of 1986, as amended; and as a result,
the net operating loss and tax credit carryforwards available to be utilized
in any given year may be limited, and certain amounts of the net operating
loss carryforwards may expire unutilized due to such limitations.
(3) EMPLOYEE BENEFIT PLAN
In April 1995, the Company terminated its Simplified Employee Pension Plan
and adopted a 401(k) Plan. The Company contributes 25% up to the first 6% of
annual earnings for each employee with at least three months of service.
During 1995, the Company contributed approximately $9,000.
(4) RELATED PARTY TRANSACTIONS
Thermo Electron Corporation
On January 4, 1989, the Company entered into a corporate service agreement
with Thermo Electron. Under this agreement, Thermo Electron provided certain
administrative services, including legal advice and services, certain employee
benefit administration, tax advice and preparation, space allocation and
utilities. This agreement terminated on December 31, 1989. The Company has
continued to utilize Thermo Electron's resources since that date on an as-
needed basis without a formal contract and is charged at actual cost for such
services. The Company paid $3,120, $7,715, and $4,322 in 1993, 1994 and 1995,
respectively, for these services.
Thermo Power Corporation
The Company is provided with certain services by Thermo Power Corporation, a
60%-owned subsidiary of Thermo Electron. These services include data
processing services, administrative services and machine shop services, which
are charged to the Company at actual cost. The Company paid $36,734, $267,582
and $313,942 in 1993, 1994 and 1995, respectively, for these services. As of
December 31, 1994 and December 30, 1995, $42,460 and $19,113, respectively,
was payable to Thermo Power Corporation and was included in accounts payable
in the accompanying consolidated balance sheets.
Management believes that the fees charged by Thermo Electron and Thermo
Power Corporation are reasonable and such fees are representative of the
expenses the Company would have incurred on a stand-alone basis.
(5) COMMITMENTS AND CONTINGENCIES
Litigation
The Company is party to legal matters which arise in the normal course of
business. Management, after reviewing these matters with legal counsel, is of
the opinion that the resolution of these matters will not have a material
effect on the financial condition or results of operations.
F-10
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Leases
The Company subleases office and research facilities under an agreement that
expires on April 1, 1990. The accompanying consolidated statements of
operations include expenses for this operating lease of $79,170, $81,028 and
$162,867 for 1993, 1994 and 1995, respectively. Future minimum payments due
under this lease are $174,183 in 1996 and $43,546 in 1997.
(6) CONVERTIBLE SUBORDINATED NOTES
On January 4, 1989, the Company issued and sold $181,000 of 8% subordinated
convertible debenture to Thermo Electron, due in 1995. The debentures are
convertible into shares of the Company's Common Stock at a conversion price of
$0.30. On December 30, 1995, Thermo Electron elected to convert its $181,000
subordinated convertible debenture and accrued interest into 628,472 shares of
Common Stock. On May 22, 1990, the Company issued and sold $125,000 and
$175,000 principal amounts of 8% subordinated convertible debentures to Thermo
Electron and Mr. Peter M. Nomikos, respectively, due in 1997. The debentures
are convertible into shares of the Company's Common Stock at a conversion
price of $0.80 Also in 1990, the Company issued and sold $52,000 principal
amount of 8% subordinated convertible debentures to Mr. Peter M. Nomikos, due
in 1997. The note is convertible into shares of the Company's Common Stock at
a conversion price of $3.00. In 1991, the Company issued and sold $448,000
principal amount of 8% subordinated convertible debentures to Mr. Peter M.
Nomikos. The debentures are convertible into shares of the Company's Common
Stock at a conversion price of $3.00. All of these debentures provide for the
conversion of accrued interest into Common Stock at the option of the holder.
The accrued interest is convertible into Common Stock at a conversion price
equal to the fair market value of the Company's common stock on the first day
of the fiscal quarter in which the interest to be converted accrued.
On May 13, 1992, the Company entered into a $4,500,000 8% convertible
subordinated demand note and warrant purchase agreement with Mr. Peter M.
Nomikos. These notes are convertible into Common Stock at a conversion price
of $3.00 at the option of the holder, which expires seven years from the dates
of issuance. The Company has borrowed $4,252,000 in the form of a demand loan
with detachable warrant purchase rights under this agreement. The warrant
purchase rights entitle the holder to purchase warrants for $0.20. Each
warrant is exercisable upon issuance and allows the holder to purchase one
share of Common Stock at $3.00. At December 31, 1995, warrants to purchase
1,417,334 shares of the Company's Common Stock were outstanding. These
warrants expire seven years from the issuance date. All warrants purchased by
Mr. Nomikos have been accounted for as Common Stock capital in excess of par
value. All earned but unpaid interest on the subordinated convertible
debentures and demand loans are convertible into Common Stock at a conversion
price equal to the fair market value of the Company's Common Stock on the
first day of the fiscal quarter in which the interest to be converted accrued.
In 1993, 1,282,005 shares of Common Stock were issued upon the conversion of
$3,547,000 principal amount of subordinated convertible debentures and
$299,015 of related accrued interest. In 1994, these shares of Common Stock
were converted into Series A Convertible Preferred Stock (See Note 7).
(7) COMMON AND PREFERRED STOCK
On January 4, 1989, the Company authorized 6,000,000 shares of $0.01 par
value Common Stock and issued 147,488 shares to Thermo Electron and 600,000
shares to PIC at $0.40 per share. The Company authorized an additional
9,000,000 shares of Common Stock in 1994 to accommodate possible stock
issuance as a result of stock splits, note conversions and options issued
under the stock option plan and potential future stock offerings. In 1992, Mr.
Peter M. Nomikos was granted stock in lieu of compensation expense for 1990,
1991 and 1992 in the cumulative amount of 204,167 common shares. In 1993, 1994
and 1995, Mr. Peter M. Nomikos
F-11
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
was granted stock in lieu of compensation expense in the amount of 16,667,
16,667 and 6,250 shares of Common Stock, respectively. In fiscal 1993,
1,709,340 shares of Common Stock were issued upon the conversion of $3,846,015
of subordinated convertible debentures and accrued interest (See Note 6).
The Company has authorized 7,500,000 shares of $0.01 par value preferred. On
March 18, 1994, the Board of Directors approved the conversion of 1,282,005
shares of Common Stock held by Mr. Peter M. Nomikos into Series A Convertible
Preferred Stock on a three for two basis (See Note 9). The Series A
Convertible Preferred Stock has a liquidation preference of $1.50 per share
(See Note 6).
The Company sold 1,000,000 shares of Series B Convertible Preferred Stock at
$4.00 per share in 1994. These shares enable the holder to convert his or her
holdings into Common Stock on a one for two basis (See Note 9). The Series B
Convertible Preferred Stock has a liquidation preference of $4.00 per share,
which is senior to the Company's Common Stock and junior to the Series A
Convertible Preferred Stock. The purchase of the Series B shares also entitled
the purchaser to rights to participate in the Company's next offering of
preferred stock at a 10% discount. The rights entitle the purchaser to this
discount on an amount of shares equal to the purchaser's pro rata
participation in the Series B offering.
The Company sold 1,382,233 shares of Series C Convertible Preferred Stock at
$4.50 per share in 1995. The Company also sold 838,382 additional shares of
Series C Convertible Preferred Stock in exchange for $4.05 per share. This
latter, discounted price was paid by those stockholders who acquired such
right in the Series B offering as described above. These shares enable the
holder to convert his or her holdings into Common Stock on a one for two basis
(See Note 9). The Series C Convertible Preferred Stock has a liquidation
preference of $4.50 per share, which is senior to the Company's Common Stock
and junior to the Series A and B Convertible Preferred Stock.
In 1994, the Company sold 121,000 shares of Common Stock to employees of the
Company for $3.00 per share pursuant to a one-time employee stock purchase
offering. A total of 85,500 of those shares were paid for at the time of the
offering. Consideration for the remaining 35,500 shares was in the form of
promissory notes executed by employees in favor of the Company. These notes
were in an initial aggregate amount of $106,500.
(8) STOCK OPTION PLAN
The Company has a nonqualified stock option plan for key employees,
directors and consultants, which was adopted in 1989. The stock option plan
requires that options may be granted at any price determined by the Board of
Directors. Options granted under the plan expire seven to twelve years after
the date of grant and in general vest at 20% per year. When an optionee ceases
to be an employee, director or consultant of the Company, their options
terminate either upon or shortly after termination of employment. In 1994, the
Board of Directors reserved 1,250,000 common shares for employee stock
options.
F-12
<PAGE>
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE PER SHARE
--------- ---------------
<S> <C> <C>
Outstanding, January 2, 1993....................... 352,750 $0.40-$3.00
Granted.......................................... 122,000 $3.00
------- -----------
Outstanding, January 1, 1994....................... 474,750 $0.40-$3.00
Granted.......................................... 121,750 $3.00-$8.00
------- -----------
Outstanding, December 31, 1994..................... 596,500 $0.40-$8.00
Granted.......................................... 21,000 $8.00-$9.00
------- -----------
Outstanding, December 30, 1995..................... 617,500 $0.40-$9.00
Exercisable, December 30, 1995..................... 399,250 $0.40-$8.00
======= ===========
</TABLE>
The Company accounts for stock options under Accounting Principles Board
Opinion No. 25 (APB No. 25). All stock options granted to date have been at an
exercise price equal to or greater than the fair value of the Company's Common
Stock on the date of grant. In 1995, the Company extended the term of 100,000
options from seven to twelve years. This extension resulted in a new
measurement date under APB No. 25, and accordingly, the Company recorded
$860,000 of compensation expense. Upon exercise of options, net proceeds,
including the tax benefit realized, are credited to equity.
(9) SUBSEQUENT EVENT
In 1996, the Company entered into a new operating lease for its office and
research facilities expiring in 2002.
On October 11, 1996, the Board of Directors approved a one-for-two reverse
stock split of the Company's Common Stock. All share and per share information
have been retroactively stated to reflect this reverse stock split. Also
during the period from December 30, 1995 to October 11, 1996, options to
purchase 207,475 shares of Common Stock were granted at exercise prices
ranging from $9.00 to $12.00.
F-13
<PAGE>
DESCRIPTION OF BACK COVER PAGE GRAPHICS:
The back cover page graphics consist of one photograph and two drawings,
each with a descriptive caption. The single photograph is located in the upper
left-hand corner of the page and measures approximately 2 3/4 inches (length)
by 3 3/4 inches (width) (based on a 8 1/2 inch by 11 inch page). The
photograph shows two surgeons, one of whom is holding the PRS. The patient to
which the surgeons are adjacent is shielded and not visible within the
photograph. To the right of the photograph is the italicized caption:
"Neurosurgeons preparing to treat a brain tumor."
Directly below the photograph is the italicized caption "And In Development
to Treat".
The first of the two drawings is centered approximately halfway down the
length of the page along the right hand side of the page. The drawing, which
is approximately 5 inches (length) by 1 inch (width) shows the PRS with its
probe directed upwards and parallel to the margin of the page. Approximately
80% of the length of the probe is shown to lie through a tube labeled
"Urethra," with the tip of the probe within a cross sectional view of the
bladder. The various layers of the bladder representation are labeled "Bladder
Wall Cancer," "Muscle," and "Mucosa," and the cavity-conforming device shown
within the bladder is labeled as such. An italicized caption directly below
the drawing reads: "Treatment of bladder wall cancer." Directly to the left of
the drawing is the italicized "bullet" caption "Bladder Tumors."
The second of the two drawings is located within the lower left-hand corner
of the page and measures approximately 3 1/2 inches (width) by 5 inches
(length). The drawing shows the upper torso of a woman lying horizontally on a
table, with the PRS probe, attached to a fixturing device located beneath the
table, directed towards her breast. The drawing also shows the arms of an
operator adjusting the fixturing device. To the right of the drawing, near the
lower right hand corner of the picture, is the following italicized caption:
"Treatment of a breast tumor following biopsy." Directly above the drawing is
the italicized "bullet" caption "Breast Tumors."
- -------------------------------------------------------------------------------
PHOTOELECTRON'S PHOTON RADIOSURGERY SYSTEM IS UNDER DEVELOPMENT AND HAS NOT
BEEN APPROVED OR CLEARED FOR COMMERCIAL SALE OR USE IN THE U.S. OR IN ANY
FOREIGN COUNTRY. REGULATORY APPROVAL COULD TAKE SEVERAL YEARS AND THERE CAN BE
NO ASSURANCE THAT SUCH APPROVAL WILL EVER BE OBTAINED OR, IF OBTAINED, THAT
THE COMPANY'S PHOTON RADIOSURGERY SYSTEM WILL ACHIEVE MARKET ACCEPTANCE. SEE
"RISK FACTORS--PRODUCT DEVELOPMENT RISKS; UNCERTAINTIES RELATING TO CLINICAL
TRIALS" AND "--ABSENCE OF REGULATORY CLEARANCES; UNCERTAINTY OF OBTAINING
SECTION 510(K) CLEARANCE."
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Consolidated Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 20
Management............................................................... 36
Certain Transactions..................................................... 41
Securities Ownership of Management and Certain Beneficial Owners......... 43
Description of Capital Stock............................................. 44
Shares Eligible for Future Sale.......................................... 47
Underwriting............................................................. 49
Legal Matters............................................................ 50
Experts.................................................................. 50
Additional Information................................................... 50
Index to Consolidated Financial Statements............................... F-1
</TABLE>
----------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PARTIC-
IPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,000,000 Shares
Photoelectron Corporation
Common Stock
----------------
PROSPECTUS
----------------
Needham & Company, Inc.
Dain Bosworth
Incorporated
----------------
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated fees and expenses incurred in connection with the offering
will be borne by the Company and are estimated to be as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 10,310
NASD filing fee.................................................... 3,490
Nasdaq National Market listing fee................................. 50,000
Printing and engraving............................................. 175,000
Legal fees and expenses (other than Blue Sky fees and expenses).... 325,000
Accounting fees and expenses....................................... 110,000
Transfer Agent and Registrar fee................................... 3,500
Blue Sky fees and expenses......................................... 15,000
Miscellaneous...................................................... 162,700
--------
Total............................................................ $855,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Articles of Organization provide that the Company's
Directors shall not be liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent that exculpation from liabilities is not permitted under the
Massachusetts Business Corporation Law as in effect at the time such liability
is determined. The By-laws provide that the Registrant shall indemnify its
directors and officers to the full extent permitted by the laws of The
Commonwealth of Massachusetts.
The Underwriting Agreement (a form of which appears as Exhibit 1.1 hereto)
provides for indemnification of the Registrant's directors and officers in
certain circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth in chronological order is information regarding the number of
shares of capital stock sold, the number of options granted by the Company,
and the amount of debt securities issued by the Company since July, 1993, the
consideration received by the Company for such shares, options and debt
instruments and information relating to the section of the Securities Act of
1933, as amended (the "Securities Act"), or rule of the Securities and
Exchange Commission under which exemption from registration is claimed. None
of these securities were registered under the Act. No sale of securities
involved the use of an underwriter and no commissions were paid in connection
with the sales of any securities.
1. On December 31, 1993, the Company issued 1,282,005 shares of Common
Stock to Peter M. Nomikos in exchange for the cancellation by Mr. Nomikos
of obligations of the Company totaling $3,846,015, which amount represented
the principal amount of advances previously made by Mr. Nomikos and accrued
interest on such advances as of such date. On March 18, 1994, all 1,282,005
shares were converted by Mr. Nomikos into 2,564,010 shares of Series A
Convertible Preferred Stock. These preferred shares are convertible into
1,282,005 shares of Common Stock. The Company claims exemption from
registration for these transactions under Section 4(2) of the Securities
Act.
2. In 1994, the Company issued 121,000 shares of Common Stock to
employees of the Company for $3.00 per share pursuant to a one-time
employee stock purchase offering. A total of 85,500 of those shares are
fully paid and non-assessable. Consideration for the remaining 35,500
shares was in the form of promissory notes executed by employees in favor
of the Company, in an aggregate amount of $106,500. As of June 29, 1996
$73,409 was owed under those notes. The notes are scheduled to be repaid in
full by April 2, 1999 through automatic bi-weekly deductions. The
securities were sold pursuant to Regulation D under the Securities Act.
II-1
<PAGE>
3. In June, 1994, the Company completed the issuance of 1,000,000 shares
of Series B Convertible Preferred Stock to private investors at a purchase
price of $4.00 per share. These shares are convertible into 500,000 shares
of Common Stock under certain circumstances. The securities were sold
pursuant to Regulation D under the Securities Act.
4. As of June 29, 1996, the Company issued 2,220,615 shares of Series C
Convertible Preferred Stock to private investors. These shares are
convertible into 1,110,308 shares of Common Stock. The purchase price for
1,382,233 of these shares was $4.50 per share, and the purchase price for
838,382 of these shares was $4.05 per share. The latter, discounted price
was paid by certain stockholders that had acquired the right to such
discount in connection with their purchase of Series B Preferred Stock. The
securities were sold pursuant to Regulation D and Regulation S under the
Securities Act.
5. During the past three years, pursuant to the terms of a Convertible
Note and Warrant Purchase Agreement dated as of May 13, 1992, the Company
sold to Peter M. Nomikos the following Warrants to purchase Common Stock.
The purchase price for each warrant was $0.20 per share. The exercise price
for each warrant is $3.00 per share:
<TABLE>
<CAPTION>
DATE ISSUED SHARES
----------- -------
<S> <C>
September 29, 1993 575,000
January 27, 1995 235,000
</TABLE>
Exemption from registration for these transactions is claimed under Section
4(2) of the Securities Act.
6. During the past three years, the Company has granted the following
aggregate number of options to purchase Common Stock to employees,
directors and consultants of the Company pursuant to the Company's 1989
Stock Option Plan, or, with respect to the issuance on July 17, 1996, under
the Company's 1996 Equity Incentive Plan:
<TABLE>
<CAPTION>
GRANT DATE SHARES EXERCISE PRICE
---------- ------ --------------
<S> <C> <C>
December 1, 1993 82,500 $3.00 per share
March 18, 1994 2,500 $3.00 per share
March 21, 1994 2,500 $3.00 per share
October 25, 1994 1,250 $8.00 per share
December 28, 1994 115,500 $8.00 per share
April 28, 1995 10,000 $8.00 per share
May 26, 1995 2,000 $8.00 per share
June 1, 1995 1,500 $8.00 per share
November 27, 1995 7,500 $9.00 per share
March 18, 1996 115,725 $9.00 per share
July 17, 1996 91,750 $9.00-12.00 per share
</TABLE>
Exemption from registration for these transactions is claimed under Section
4(2) of the Securities Act.
7. During the past three years the Company has issued the following
shares of Common Stock to Peter M. Nomikos in payment of salary for such
years:
<TABLE>
<CAPTION>
DATE ISSUED SHARES YEAR CONSIDERATION RECEIVED BY COMPANY
----------- ------ ---- ---------------------------------
<S> <C> <C> <C>
January 7, 1994 16,667 1993 $50,000
January 27, 1995 16,667 1994 $50,000
October 31, 1995 6,250 1995 $50,000
</TABLE>
Exemption from registration for these transactions is claimed under Section
4(2) of the Securities Act.
8. On July 17, 1996, the Company issued Reza Esfandiari 2,500 shares of
Series C Preferred Stock, convertible into 1,250 shares of Common Stock in
exchange for consulting services valued at $11,250.
Exemption from registration for this transaction is claimed under Section
4(2) of the Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See the Exhibit Index included immediately preceding the exhibits to
this Registration Statement.
(b) Financial Data Schedule is included as Exhibit 27 to this Registration
Statement. All other schedules are not required under the instructions
relating to the applicable accounting regulations of the Securities and
Exchange Commission or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closings specified in the Underwriting Agreement
certificates in such denominations and registered in such names as are
required by the Underwriters to permit delivery to each purchaser.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN LEXINGTON, MASSACHUSETTS ON OCTOBER
21, 1996.
Photoelectron Corporation
Peter M. Nomikos
By: _________________________________
PETER M. NOMIKOS, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT EACH INDIVIDUAL WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS PETER M. NOMIKOS, PETER E. OETTINGER AND JOHN
J. CROWLEY, AND EACH OF THEM, AS HIS TRUE AND LAWFUL ATTORNEYS-IN-FACT AND
AGENTS FOR THE UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION, FOR AND IN THE
NAME, PLACE AND STEAD OF THE UNDERSIGNED, TO SIGN AND FILE WITH THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), ANY REGISTRATION STATEMENT RELATED TO THIS OFFERING THAT IS
TO BE EFFECTIVE UPON FILING PURSUANT TO RULE 462(B) UNDER THE SECURITIES ACT
(A "462(B) REGISTRATION STATEMENT"), ANY AND ALL AMENDMENTS AND EXHIBITS TO
THIS REGISTRATION STATEMENT OR ANY 462(B) REGISTRATION STATEMENT, AND ANY AND
ALL APPLICATIONS AND OTHER DOCUMENTS TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PERTAINING TO THE REGISTRATION OF THE SECURITIES COVERED
HEREBY OR THEREBY, WITH FULL POWER AND AUTHORITY TO DO AND PERFORM ANY AND ALL
ACTS AND THINGS WHATSOEVER REQUISITE AND NECESSARY OR DESIRABLE.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Peter M. Nomikos Director, President, October
- ------------------------------------- Treasurer and Chief 21, 1996
PETER M. NOMIKOS Executive Officer
(Principal
Executive Officer)
Peter E. Oettinger Director, Vice- October
- ------------------------------------- President, and 21, 1996
PETER E. OETTINGER Chief Operating
Officer
John J. Crowley Controller October
- ------------------------------------- (Principal 21, 1996
JOHN J. CROWLEY Financial Officer)
George N. Hatsopoulos Director October
- ------------------------------------- 21, 1996
GEORGE N. HATSOPOULOS
Roger D. Wellington Director October
- ------------------------------------- 21, 1996
ROGER D. WELLINGTON
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
**1.1 --Form of Underwriting Agreement.
*3.1 --Articles of Organization of Registrant, as amended.
**3.2 --Forms of Articles of Amendment of Registrant.
*3.3 --By-Laws of Registrant, as amended.
**3.4 --Form of By-Laws of Registrant.
**4.1 --Specimen Certificate representing the Registrant's Common
Stock.
*4.2 --Subordinated Convertible Note Purchase Agreement among
Registrant, Thermo Electron Corporation and Photoelectron
Investments Corporation of Liberia dated as of May 22,
1990, and Exhibits thereto.
*4.3 --Amendment and Waiver of Subordinated Convertible Note
Purchase Agreement among Registrant, Thermo Electron
Corporation and Photoelectron Investments Corporation of
Liberia dated as of August 1, 1996, and Exhibits thereto.
*4.4 --Amended and Restated 8% Subordinated Note Due 1997 from
Registrant to Thermo Electron Corporation in the principal
amount of $125,000 dated as of August 1, 1996.
*4.5 --Amended and Restated 8% Subordinated Note Due 1997 from
Registrant to Peter M. Nomikos in the principal amount of
$175,000 dated as of August 1, 1996.
*4.6 --Amended and Restated Convertible Note Purchase Agreement
originally dated as of July 11, 1991, among Registrant,
PYC Corporation (formerly known as Photoelectron
Investments Corporation of Liberia) and Peter M. Nomikos,
and Exhibits thereto.
*4.7 --8% Subordinated Convertible Note Due 1998 from Registrant
to Peter M. Nomikos in the principal amount of $500,000
dated as of August 8, 1996.
*4.8 --Convertible Note and Warrant Purchase Agreement between
Registrant and Peter Nomikos dated as of May 13, 1992, and
Exhibits thereto.
*4.9 --Amendment and Waiver of Convertible Note and Warrant
Purchase Agreement dated as of May 13, 1992 between
Registrant and Peter M. Nomikos, dated as of August 1,
1996 and Exhibits thereto.
*4.10 --Amended and Restated 8% Subordinated Convertible Note Due
on Demand from Registrant to Peter M. Nomikos in the
principal amount of $705,000 dated as of August 1, 1996.
**5.1 --Opinion of Goulston & Storrs--A Professional Corporation.
*10.1 --Lease Agreement dated June 12, 1996 between Lexington
Development Company Trust and Registrant.
*10.2 --Cash or Deferred Profit Sharing Plan and Trust dated
April 1, 1995, as amended, of Registrant.
*10.3 --Employee Stock Purchase Plan of Registrant and form of
Subscription Agreement.
*10.4 --1989 Employee Stock Option Plan of Registrant and forms
of Stock Option Agreements.
*10.5 --1996 Equity Incentive Plan of Registrant.
*10.6 --Form of Stock Purchase Warrant issued to certain security
holders of Registrant and Schedule of Substantially
Identical Documents from Exhibits.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
*10.7 --Stock Option Agreements variously dated between certain
directors and officers of the Registrant and the
Registrant.
*10.8 --Form of Subscription Agreement between Registrant and
purchasers of Series B Preferred Stock.
*10.9 --Form of Subscription Agreement between Registrant and
purchasers of Series C Preferred Stock.
*10.10 --Series B Subscription Agreement dated 1994 between
Registrant and Thermo Electron Corporation.
*10.11 --Series C Subscription Agreement dated December 16, 1995
between Registrant and Toshiba Medical Systems Co., Ltd.
*10.12 --Form of Registration Rights Agreement between Registrant
and holders of Series C Preferred Stock.
*10.13 --Registration Rights Agreement dated December 22, 1995
between Registrant and Toshiba Medical Systems Co., Ltd.
*10.14 --Technology Cross License Agreement dated as of January 4,
1989 between Registrant and Thermo Electron Corporation.
*10.15 --International Distributor Sales and Service Agreement
dated December 13, 1995, as amended, between Registrant
and Toshiba Medical Systems Co., Ltd.
[*]*10.16 --Agreement dated as of February 1, 1991, as amended,
between Registrant and [xxxxxx].
[*]*10.17 --Clinical Trial Agreement dated as of August 1, 1992, as
amended, between [xxxxxx], [xxxxxx], M.D. and Registrant.
[*]*10.18 --Investigational Treatment Agreement dated as of September
1, 1994 between [xxxxxx], [xxxxxx], M.D. and Registrant.
[*]*10.19 --Clinical Research Agreement dated as of April 1, 1995
between the [xxxxxx], [xxxxxx], M.D. and Registrant.
[*]*10.20 --Clinical Trial Agreement dated as of January 1, 1995
between [xxxxxx], [xxxxxx], M.D. and Registrant.
[*]*10.21 --Clinical Trial Agreement dated December 13, 1995, as
amended, between Registrant and Toshiba Medical Systems
Co., Ltd.
[*]*10.22 --Clinical Research Agreement dated as of November 1, 1995
between [xxxxxx], [xxxxxx], M.D. and Registrant.
*10.23 --Form of Lock-Up Letter with certain security holders of
Registrant.
*10.24 --Forms of Medical Advisory Board Agreements between
Registrant and members of its Medical Advisory Board.
*11.1 --Computation of net loss per share.
*21.1 --Subsidiaries of Registrant.
*23.1 --Consent of Arthur Andersen LLP.
**23.2 --Consent of Goulston & Storrs--A Professional Corporation,
counsel to Registrant (included in Exhibit 5).
*24.1 --Power of Attorney (included in signature page to this
Registration Statement).
*27.1 --Financial Data Schedule
</TABLE>
- --------
* Filed herewith
** To be filed by amendment
[*] Confidential Treatment Requested
<PAGE>
EXHIBIT 3.1
T.D.
- -------- The Commonwealth of Massachusetts
Examiner
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF ORGANIZATION
(Under G.L. Ch. 156B)
ARTICLE I
The name of the corporation is:
Photoelectron Corporation
ARTICLE II
The purpose of the corporation is to engage
in the following business activities:
Research and development of multi-electron beam lithography
technology, development of the applications and products for and
from that technology and any other business, operation or
activity which may be lawfully carried on by a corporation
organized under the provisions of the Business Corporation Law
of the Commonwealth of Massachusetts.
[INITIALS
APPEAR
HERE]
- --------
Name
Approved
C [_]
P [x]
M [_]
R.A.[_]
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11
sheets of paper leaving a left hand margin of at least 1 inch.
6 Additions to more than one article may be continued on a single sheet
- ----- so long as each article requiring each such addition is clearly
indicated.
<PAGE>
ARTICLE III
The type and classes of stock and the total number of shares and par value, if
any, of each type and class of stock which the corporation is authorized to
issue is as follows;
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ---------------------------------- -------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ---------------------------------- -------------------------------------------
COMMON: COMMON:
NONE 300,000 $.01
- ---------------------------------- -------------------------------------------
PREFERRED: PREFERRED:
NONE NONE
- ---------------------------------- -------------------------------------------
ARTICLE IV
If more than one type, class or series is authorized, a description of each
with, if any, the preferences, voting powers, qualifications, special or
relative rights or privileges as to each type and class thereof and any series
now established.
NONE
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock or any class are as follows:
NONE
ARTICLE VI
Other lawful provisions, if any, for the conduct and regulation of business and
affairs of the corporation, for its voluntary dissolution, or for limiting,
defining, or regulating the powers of the corporation or of its directors or
stockholders, or of any class of stockholders; (if there are no provisions state
"None".)
See Continuation sheets 6A and 6B
Note: The preceding six (6) articles are considered to be permanent and may ONLY
be changed by filing appropriate Articles of Amendment.
<PAGE>
Continuation Sheet 6A
---------------------
(a) The corporation may be a partner in any business enterprise which the
corporation has power to conduct by itself.
(b) Meetings of stockholders may be held anywhere in the United States as
shall be determined from time to time by the directors or as shall be stated in
the call of the meeting.
(c) The By-laws may provide that the directors may make, amend or repeal
the By-laws, in whole or in part, except with respect to any provision thereof
which by law, by the Articles of Organization or by the By-laws requires action
by the stockholders.
(d) The By-laws may provide for the indemnification, to the extent legally
permissible, of directors, officers, employees or other agents of the
corporation, and persons who serve at the corporation's request as directors,
officers, employees or other agents of another organization of which the
corporation is a stockholder, in which the corporation otherwise holds an
ownership interest or of which the corporation is a creditor.
(e) The requisite vote to effect an amendment of the Articles of
Organization shall be a majority of each class of stock outstanding and entitled
to vote thereon, at a meeting duly called for the purpose; provided, only, that
any provision added to or changes made in the Articles of Organization by such
amendment could have been included in, and any provision deleted thereby could
have been omitted from, original articles of organization filed at the time of
such meeting.
(f) The requisite vote for the approval by the corporation of any
agreement of consolidation or merger with any other corporation or corporations
shall be a majority of each class of stock of the corporation outstanding and
entitled to vote thereon.
(g) The By-laws may provide that the corporation may enter into contracts
and otherwise transact business as a vendor, purchaser, partner, joint venturer
or otherwise with any director, officer, or stockholder of the corporation, and
with any corporation, joint stock company, business trust,
<PAGE>
Continuation Sheet 6B
---------------------
partnership or other entity in which any director, officer or stockholder of
this corporation is or may be or become a director, officer, stockholder, joint
venturer, partner, trustee or beneficiary, or in which he may otherwise be or
become a party or may have an interest, pecuniary or otherwise; and that no such
contract or transaction shall, in the absence of fraud, be affected, invalidated
or avoided, and no such director, officer or stockholder shall be held liable to
account to the corporation or to any creditor or stockholder of the corporation
for any profit or benefit realized by such person through any such contract or
transaction, by reason of such adverse interest or by reason or any fiduciary
relationship[ of such director, officer or stockholder to the corporation
arising out of such office or stock ownership.
(h) No director of this corporation shall be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director notwithstanding any statutory provision or other law imposing
such liability, provided, however, that nothing in this clause (h) shall
eliminate or limit the liability of a director to the extent provided by
applicable law (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 61 or 62 or successor provisions of Chapter 156B of the Massachusetts
General Laws or (iv) for any transaction from which the director derived an
improper personal benefit. The foregoing provisions of this clause (h) shall not
eliminate the liability of a director for any act or omission occurring prior to
the date this clause (h) becomes effective. No amendment to or repeal of this
clause (h) shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
<PAGE>
ARTICLE VII
The effective date of organization of the corporation shall be the date approved
and filed by the Secretary of the Commonwealth. If a later effective date is
desired, specify such date which shall not be more than thirty days after the
date of filing.
The information contained in ARTICLE VIII is NOT a PERMANENT part of the
Articles of Organization and may be changed ONLY by filing the appropriate form
provided therefor.
ARTICLE VIII
a. The post office address of the corporation IN MASSACHUSETTS is:
101 First Avenue
P.O. Box 9046
Waltham, MA 02254-9046
b. The name, residence and post office address (if different) of the directors
and officers of the corporation are as follows:
<TABLE>
<CAPTION>
NAME RESIDENCE POST OFFICE ADDRESS
<S> <C> <C> <C>
President: Peter M. Nomikos 90 Eaton Square 105/9 Bishopsgate
London SWIW 9AG London EC2M 3UQ, England
England
Treasurer: Peter M. Nomikos 90 Eaton Square 105/9 Bishopsgate
London SWIW 9AG London EC2M 3UQ, England
England
Clerk: Paul F. Ferrari 62 Burley Street 101 First Ave, P.O. Box 9046
Danvers, MA 01923 Waltham, MA 02254-9046
Directors: George N. Hatsopoulos 233 Tower Road 101 First Ave, P.O. Box 9046
Lincoln, MA 01773 Waltham, MA 02254-9046
Peter M. Nomikos 90 Eaton Square 105/9 Bishopsgate
London SWIW 9AG London EC2M 3UQ, England
England
Roger D. Wellington 25 Hillside Road 87 Forbes Boulevard
Cumberland, RI 02864 Mansfield, MA 02048
</TABLE>
c. The fiscal year (i.e., tax year) of the corporation shall end on the last day
of the month of: December
d. The name and BUSINESS address of the RESIDENT AGENT of the corporation, if
any, is: NONE
ARTICLE IX
By-laws of the corporation have been duly adopted and the president, treasurer,
clerk and directors whose names are set forth above, have been duly elected.
IN WITNESS WHEREOF and under the pains and penalties of perjury, I/WE, whose
signature(s) appear below as incorporator(s) and whose names and business or
residential address(es) ARE CLEARLY TYPED OR PRINTED beneath each signature do
hereby associate with the intention of forming this corporation under the
provisions of General Laws Chapter 156B and do hereby sign these Articles of
Organization as incorporator(s) this 30th day of December, 1988
/s/ Shella Lieberman
- --------------------------------------------------------------------------------
Shella Lieberman
- --------------------------------------------------------------------------------
101 First Avenue
P.O. Box 9046
- --------------------------------------------------------------------------------
Waltham, MA 02254-9046
NOTE: If an already-existing corporation is acting as incorporator, type in the
exact name of the corporation, the state or other jurisdiction where it
was incorporated, the name of the person signing on behalf of said
corporation and the title he/she holds or other authority by which each
action is taken.
<PAGE>
RECEIVED
JAN 4-1989
SECRETARY OF STATE
CORPORATION DIVISION
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF ORGANIZATION
GENERAL LAWS, CHAPTER 156B, SECTION 12
==========================================
I hereby certify that, upon an examination
of these articles of organization, duly submitted
to me, it appears that the provisions of the
General Laws relative to the organization of
corporations have been complied with, and I
hereby approve said articles; and the filing
fee in the amount of $300 having been paid, said
articles are deemed to have been filed with me
this 4th day of January 1989.
Effective date
/s/ Michael J. Connolly
MICHAEL J. CONNOLLY
Secretary of State
FILING FEE: 1/20 of 1% of the total amount of
the authorized capital stock with par value,
and one cent a share for all authorized shares
without par value, but not less than $150
General Laws, Chapter 156B. Shares of stock
with a par value less than one dollar shall
be deemed to have par value of one dollar per
share.
PHOTOCOPY OF ARTICLES OF ORGANIZATION TO BE SENT
C T CORPORATION SYSTEM
------------------------------------------
2 Oliver Street
------------------------------------------
Boston, Massachusetts 02109
------------------------------------------
Telephone: (617) 482-4420
--------------------------------
<PAGE>
- -------------
Examiner
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
FEDERAL IDENTIFICATION
NO. 04-3035323
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
This certificate must be submitted to the Secretary of the
Commonwealth within sixty days after the date of the vote of
stockholders adopting the amendment. The fee for filing this
certificate is prescribed by General Laws, Chapter 156B, Section
114. Make check, payable to the Commonwealth of Massachusetts.
---------------
We, Peter M. Nomikos, President, and
Sandra L. Lambert, Clerk of
Photoelectron Corporation
-----------------------------------------------------------------
(Name of Corporation)
located at 101 First Avenue, Waltham, MA 02254-9046
------------------------------------------------------
- ------------- do hereby certify that the following amendment to the articles
Name of organization of the corporation was duly adopted* on May 17,
Approved 1991, by vote of
299,000 shares of common stock out of 299,000 shares
------------- ---------------- --------
(Class of Stock)
outstanding,
shares of out of shares
------------- ---------------- --------
(Class of Stock)
outstanding, and
shares of out of
------------- ---------------- ------------
(Class of Stock)
shares outstanding,
being at least a majority of each class outstanding and entitled
to vote thereon.
CROSS OUT
INAPPLICABLE
CLAUSE
*by written action of the stockholders in lieu of a meeting dated
C [_] VOTED: that the Corporation is hereby authorized to increase the
P [_] number of authorized shares of Common Stock from 300,000
M [_] to 6,000,000, and that the Corporation is authorized to
R.A. [_] file Articles of Amendment to its Articles of
Organization in order to effect such increase in the
number of authorized shares of its Common Stock.
/1/For amendments adopted pursuant to Chapter 156B, Section 70
/2/For amendments adopted pursuant to Chapter 156B, Section 71
- ------------ Note: If the space provided under any Amendment or item this form
P.C. is insufficient, addition shall be set forth on separate
8-1/2 x 11 sheets of paper leaving a left hand margin of at least
1 inch for binding. Additions to more than one Amendment may be
continued on a single sheet so long as each Amendment requiring
each such addition is clearly indicated.
<PAGE>
TO CHANGE the number of shares and the par value, if any, of each class of stock
within the corporation fill in the following:
The total presently authorized is:
--------------------------------------------------------------------------
NO PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
--------------------------------------------------------------------------
COMMON 300,000 $.01
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
PREFERRED
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
CHANGE the total to:
--------------------------------------------------------------------------
NO PAR VALUE WITH PAR VALUE PAR
KIND OF STOCK NUMBER OF SHARES NUMBER OF SHARES VALUE
--------------------------------------------------------------------------
COMMON 6,000,000 $.01
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
PREFERRED
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<PAGE>
The foregoing amendment will become effective when these articles of
amendment are filed in accordance with Chapter 156B, Section 6 of The General
Laws unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date nor more than thirty days after such filing,
in which event the amendment will become effective on such later date.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 21st day of May, in the year 1991.
/s/ Peter M. Nomikos President
Peter M. Nomikos
/s/ Sandra L. Lambert Clerk
Sandra L. Lambert
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
I hereby approve the within articles of amendment
and, the filing fee in the amount of $5,700.00
having been paid, said articles are deemed to have
been filed with me this 31st day of May , 1991.
/s/ Michael J. Connolly
MICHAEL JOSEPH CONNOLLY
SECRETARY OF STATE
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT
TO:
C T CORPORATION SYSTEM
................................................
2 Oliver Street
................................................
Boston, MA 02109
................................................
617 482-4420
Telephone .....................................
Copy Mailed
<PAGE>
The Commonwealth of Massachusetts
- -------------------
Examiner OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNELLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT
General Laws, Chapter 156B, Section 72
FEDERAL IDENTIFICATION
NO. 04-3035323
-----------
We Peter E. Oettinger Vice President, and
William O. Flannery Clerk
Photoelectron Corporation
------------------------------------------------------
(EXACT Name of Corporation)
located at: 400-1 Totten Pond Road, Waltham, MA 02154
---------------------------------------------
(MASSACHUSETTS Address of Corporation)
do herby certify that these ARTICLES OF AMENDMENT
- ------------------- affecting Articles NUMBERED
Name ----------------------------
Approved III and IV
-------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5 and/or 6
being amended hereby)
of the Articles of Organization were duly adopted*
March 18, 1994, by vote of:
--------
4,500,677 shares of Common Stock
------------- -----------------------------
(type, class & series (if any)
out of 4,500,677 shares outstanding,
-------------
shares of
------------- ------------------------------
(type, class & series (if any)
out of shares outstanding, and
-------------
shares of
------------- ------------------------------
(type, class & series (if any)
out of shares outstanding,
-------------
CROSS OUT being at least a majority of each type,
INAPPLI- class or series outstanding and entitled
CABLE to vote thereon:
CLAUSE
* by written consent of the stockholders in lieu of a
C [_] meeting dated
P [_] /1/ For amendments adopted pursuant to Chapter 156B,
M [_] Section 70.
R.A. [_] /2/ For amendments adopted pursuant to Chapter 156B,
Section 71.
Note: If the space provided under any Amendment or item
on this form is insufficient, additions shall be set
forth on separate 8 1/2 x 11 sheets of paper leaving a
left-hand margin of at least 1 inch for binding.
Additions to more than one Amendment may be continued on
7 a single sheet so long as each Amendment requiring each
- ---------------- such addition is clearly indicated.
P.C.
<PAGE>
To CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ---------------------------------- -------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ---------------------------------- -------------------------------------------
COMMON: COMMON: 6,000,000 $.01
.................................. ..........................................
.................................. ..........................................
- ---------------------------------- -------------------------------------------
PREFERRED: PREFERRED:
.................................. ..........................................
.................................. ..........................................
- ---------------------------------- -------------------------------------------
CHANGE the total authorized to:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- ---------------------------------- -------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ---------------------------------- -------------------------------------------
COMMON: COMMON: 15,000,000 $.01
.................................. ..........................................
.................................. ..........................................
- ---------------------------------- -------------------------------------------
PREFERRED: PREFERRED: 5,000,000 $.01
.................................. ..........................................
.................................. ..........................................
- ---------------------------------- -------------------------------------------
See Attachment
<PAGE>
ATTACHMENT TO ARTICLES OF AMENDMENT OF
PHOTOELECTRON CORPORATION
DATED MARCH 28, 1994
VOTED, that Articles III and IV of the Articles of Organization of the
Corporation be amended to read in their entirety as follows:
"III. The total number of shares which the Corporation is
authorized to issue is 20,000,000 shares, 15,000,000 of which
are classified and designated as Common Stock, $.01 par value
per share, and 5,000,000 of which are designated as Preferred
Stock, $.01 par value per share.
IV. A description of the voting, dividend, liquidation and
conversion rights of the different classes of the Corporation's
stock is set forth below:
A. Common Stock.
-------------
1. General. The dividend and liquidation rights of
--------
the holders of Common Stock are subject to and
qualified by the rights of the holders of the
Preferred Stock or any series thereof as may be
designated by the Board of Directors.
2. Voting. The holders of the Common Stock are
-------
entitled to one vote for each share held at all
meetings of stockholders (and written actions in lieu
of meetings). There shall be no cumulative voting.
3. Dividends. Dividends may be declared and paid on
----------
the Common Stock from the funds lawfully available
therefor as and when determined by the Board of
Directors and subject to any preferential dividend
rights of any then outstanding Preferred Stock.
<PAGE>
2
B. Preferred Stock.
---------------
1. The Preferred Stock may consist of one or more
series. The Board of Directors may, from time to
time, establish and designate the different series
and designate variations in the relative rights
and preferences between the different series as
provided below, but in all other respects all
shares of the Preferred Stock shall be identical.
In the event that at any time the Board of
Directors shall have established and designated
one or more series of Preferred Stock consisting
of a number of shares less than all of the
authorized number of shares of Preferred Stock,
the remaining authorized shares of Preferred Stock
shall be deemed to be shares of an undesignated
series of Preferred Stock until designated by the
Board of Directors as being a part of a series
previously established or a new series then being
established by the Board of Directors.
2. Subject to the provisions hereof, and to any
specific rights and preferences of any series of
Preferred Stock established as provided herein,
the Board of Directors is authorized to establish
one or more series of Preferred Stock and, to the
extent now or hereafter permitted by the laws of
the Commonwealth of Massachusetts, to fix and
determine the preferences, voting powers,
qualifications and special or relative rights or
privileges of each series including, but not
limited to:
(a) the number of shares to constitute such
series and the distinguishing designation
thereof;
(b) the dividend rate on the shares of such
series and the preferences, if any, and the
special and relative rights of such shares
of such series as to dividends;
(c) whether or not the shares of such series
shall be redeemable, and, the price, terms
and manner of redemption;
<PAGE>
3
(d) the preferences, if any, and the special and
relative rights of the shares of such series
upon liquidation of the Corporation;
(e) whether or not the shares of such series
shall be convertible into shares of any
other class or of any other series of the
same or any other class of stock of the
Corporation and, if so, the conversion price
or ratio and other conversion rights;
(f) the conditions under which the shares of such
series shall have separate voting rights or
no voting rights; and
(g) such other designations, preferences and
relative, participating, optional or other
special rights and qualifications,
limitations or restrictions of such series
to the full extent now or hereafter permitted
by the laws of the Commonwealth of
Massachusetts.
Notwithstanding the fixing of the number of shares
constituting a particular series, the Board of Directors
may at any time authorize the issuance of additonal
shares of the same series."
<PAGE>
The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 156B, Section 6 of The General Laws unless
these articles specify, in accordance with the vote adopting the amendment, a
later effective date not more than thirty days after such filing, in which event
the amendment will become effective on such later date. EFFECTIVE DATE Upon
---------
Filing
- ----------
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this 28th day of March, in the year 1994.
/s/ Peter E. Oettinger Vice President
- ---------------------------------------------------------------
Peter E. Oettinger
/s/ William O. Flannery Clerk
- ---------------------------------------------------------------
William O. Flannery
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
===================================================
I hereby approve the within articles of
amendment and, the filing fee in the amount of
$14,100 having been paid, said articles are deemed
to have been filed with me this 31st day of March 1994.
/s/ Michael Joseph Connolly
MICHAEL J. CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF ARTICLES OF AMENDMENT TO BE SENT
TO:
William O. Flannery, Clerk
---------------------------------------------------
Photoelectron Corporation
---------------------------------------------------
c/o 722 Grove Street
---------------------------------------------------
Framinghan, MA 01701
---------------------------------------------------
Telephone: 508-877-0889
---------------------------------------------------
<PAGE>
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON MASS. 02108
FEDERAL IDENTIFICATION
NO. 04-3035323
-------------------
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OF A CLASS OF STOCK
General Laws, Chapter 156B, Section 26
------------
We, Peter E. Oettinger Vice President, and
William O. Flannery , Clerk of
Photoelectron Corporation
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 400-1 Totten Pond Road, Waltham, MA 02154
----------------------------------------------------------------------
do hereby certify that at a meeting of the directors of the corporation held on
March 18, 1994, the following vote establishing and designating a series of a
class of stock and determining the relative rights and preferences thereof was
duly adopted:
See Continuation Sheets 2A - 2 C
NOTE: Notes for which the space provided is not sufficient should be set out on
continuation sheets to be numbered 2A, 2B, etc. Continuation sheets must
have a left-hand margin 1 inch wide for binding and shall be 8 1/2" x 11".
=============
Only one side should be used.
<PAGE>
ATTACHMENT 2-A
PHOTOELECTRON CORPORATION
VOTED: That Articles 3 and 4 of the Articles of Organization of the Corporation
be amended so that, as amended, said Articles 3 and 4 shall be and read
as set forth in the Articles of Amendment presented to this meeting (and
inserted in the corporation's minute book after the minutes hereof) and
that such Articles of Amendment be recommended to the stockholders for
approval as being advisable and in the best interest of the Corporation.
VOTED: That, subject to stockholder approval of the Articles of Amendment
approved in the foregoing resolution, the officers of the Corporation,
be, and each of them hereby is, authorized and empowered to file the
Articles of Amendment with the Secretary of State of the Commonwealth of
Massachusetts.
VOTED: That, subject to stockholder approval of the Articles of Amendment, and
pursuant to the authority conferred by Article 4 of the Corporation's
Articles of Organization, 2,564,010 shares of the Corporation's
Preferred Stock, $.01 par value per share, is hereby designated as the
"Series A Convertible Preferred Stock" of the Corporation.
VOTED: That the voting powers, preferences and relative participating, optional
or other rights, and the qualifications, limitations and restrictions
relating to the Series A Convertible Preferred Stock described in the
foregoing resolution shall be as set forth in the document presented to
this meeting (and inserted in the Corporation's minute book after the
minutes hereof).
1293/1
<PAGE>
ATTACHMENT 2-B
PHOTOELECTRON CORPORATION
SERIES A CONVERTIBLE PREFERRED STOCK TERMS
Dividend Rights: The holders of the Series A Convertible Preferred
---------------
Stock ("Series A Preferred") will be entitled to receive dividends, when, as and
if declared by the Board of Directors.
Liquidation Preference: In the event of the liquidation or winding up
----------------------
of the Company, the holders of Series A Preferred, in preference to the holders
of Common Stock, will be entitled to receive an amount equal to $1.50 per share
of Series A Preferred, plus accrued and unpaid dividends, if any. Any remaining
assets will be distributed on a pro rata basis to the holders of the Series A
Preferred and the Common Stock on an as converted basis.
Conversion: Each holder of the Series A Preferred will have the right
-----------
to convert the Series A Preferred, at the option of the holder, at any time,
into such number of shares of Common Stock as is obtained by multiplying the
number of shares of Series A Preferred to be converted by the Series A
conversion rate then in effect. The Series A conversion rate shall be the
quotient obtained by dividing $1.50 by the Series A conversion value then in
effect. The Series A conversion value shall initially by $1.50 and shall be
subject to adjustment as provided in the section entitled "Antidilution," below.
Voting Rights: Except as otherwise required by law, the holders of the
-------------
Series A Preferred shall vote together with all other classes and series of
stock of the Company as a single class on all actions to be presented to the
stockholders of the Company. Each share of Series A Preferred shall entitle the
holder to that number of votes as equals the number of shares of Common Stock
issuable upon conversion of the Series A Preferred on the record date for any
meeting at which such share will be voted. There shall be no cumulative voting.
Antidilution: The Series A conversion value is subject to adjustment
------------
if, after the original issuance date of the Series A Preferred, (a) the Company
sells any shares of Common Stock at a price less that the Series A conversion
value in effect immediately prior to the sale of such Common Stock or (b) the
Company issues or sells any options for the purchase of Common Stock or any
securities convertible into or exchangeable for Common Stock at a price less
than the Series A conversion value
<PAGE>
ATTACHMENT 2-C
in effect immediately prior to such issuance or sale, or (c) the Company engages
in a stock split, recombination, reorganization or reclassification of its
capital stock. Concurrently with any issuance, stock split, recombination,
reorganization or reclassification described in the preceding sentence (a
"Dilutive Event"), the Series A conversion value in effect immediately prior to
such Dilutive Event shall be reduced to a price (calculated to the nearest cent)
determined by multiplying such Series A conversion value by a fraction, (i) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Dilutive Event, plus the number of shares of Common
Stock which the aggregate consideration received by the Company for the total
number of additional shares of Common Stock so issued in connection with such
Dilutive Event would purchase at such Series A conversion value and (ii) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such Dilutive Event plus the number of additional shares of
Common Stock so issued in connection with such Dilutive Event, provided that the
Series A conversion value shall not be reduced at any time to an amount less
than $.01.
<PAGE>
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 5th day of August in the year 1994
/s/ Peter E. Oettinger
- -------------------------------------------------------------, Vice President
/s/ William O. Flannery
- -------------------------------------------------------------, Clerk
<PAGE>
473198
THE COMMONWEALTH OF MASSACHUSETTS
Certificate of Vote of Directors Establishing
A Series of a Class of Stock
(General Laws, Chapter 156B, Section 26)
I hereby approve the within certificate and, the
filing fee in the amount of $100 having been paid,
said certificate is hereby filed this 10th day of
August, 1994.
/s/ Michael J. Connolly
MICHAEL JOSEPH CONNOLLY
SECRETARY OF STATE
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT
TO:
Jeanne deKoning
Goulston & Storrs, P.C.
................................................
400 Atlantic Avenue
................................................
Boston, MA 02110-3333
................................................
(617) 482-1776
Telephone .....................................
Copy Mailed
<PAGE>
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON MASS. 02108
FEDERAL IDENTIFICATION
NO. 04-3035323
-------------------
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OF A CLASS OF STOCK
General Laws, Chapter 156B, Section 26
------------
We, Peter E. Oettinger Vice President, and
William O. Flannery , Clerk of
Photoelectron Corporation
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 400-1 Totten Pond Road, Waltham, MA 02154
----------------------------------------------------------------------
do hereby certify that at a meeting of the directors of the corporation held on
March 18, 1994, the following vote establishing and designating a series of a
class of stock and determining the relative rights and preferences thereof was
duly adopted:
See Continuation Sheets 2A - 2 C
NOTE: Notes for which the space provided is not sufficient should be set out on
continuation sheets to be numbered 2A, 2B, etc. Continuation sheets must
have a lefthand margin 1 inch wide for binding and shall be 8 1/2" x 11".
=============
Only one side should be used.
<PAGE>
ATTACHMENT 2-A
PHOTOELECTRON CORPORATION
VOTED: That Articles 3 and 4 of the Articles of Organization of the
Corporation be amended so that, as amended, said Articles 3 and 4
shall be and read as set forth in the Articles of Amendment presented
to this meeting (and inserted in the corporation's minute book after
the minutes hereof) and that such Articles of Amendment be recommended
to the stockholders for approval as being advisable and in the best
interest of the Corporation.
VOTED: That, subject to stockholder approval of the Articles of Amendment
approved in the foregoing resolution, the officers of the Corporation,
be, and each of them hereby is, authorized and empowered to file the
Articles of Amendment with the Secretary of State of the Commonwealth
of Massachusetts.
VOTED: That, subject to stockholder approval of the Articles of Amendment,
and pursuant to the authority conferred by Article 4 of the
Corporation's Articles of Organization, 1,000,000 shares of the
Corporation's Preferred Stock, $.01 par value per share, is hereby
designated as the "Series B Convertible Preferred Stock" of the
Corporation.
VOTED: That the voting powers, preferences and relative participating,
optional or other rights, and the qualifications, limitations and
restrictions relating to the Series B Convertible Preferred Stock
shall be as set forth in the document presented to this meeting (and
inserted in the corporation's minute book after the minutes hereof.)
<PAGE>
ATTACHMENT 2-B
PHOTOELECTRON CORPORATION
SERIES B CONVERTIBLE PREFERRED STOCK TERMS
Dividend Rights: The holders of the Series B Convertible Preferred
---------------
Stock ("Series B Preferred") will be entitled to receive dividends, when, as and
if declared by the Board of Directors, pari passu with the holders of the
----------
Series A Preferred.
Liquidation Preference: In the event of the liquidation or winding up
----------------------
of the Company, after payment by the Company to the holders of its Series A
Convertible Preferred Stock of the liquidation preference to which such holders
are entitled, but in preference to the holders of the Company's Common Stock,
the holders of the Series B Preferred will be entitled to receive an amount
equal to $4.00 per share of Series B Preferred, plus accrued and unpaid
dividends, if any. Any remaining assets will be distributed on a pro rata basis
to the holders of the Series A Preferred, the Series B Preferred and the Common
Stock on an as converted basis.
Conversion: The holders of the Series B Preferred will have the right
-----------
to convert the Series B Preferred, at the option of the holder, at any time,
into such number of shares of Common Stock as is obtained by multiplying the
number of shares of Series B Preferred to be converted by the Series B
conversion rate then in effect. The Series B conversion Rate shall be the
quotient obtained by dividing $4.00 by the Series B conversion value then in
effect. The Series B conversion value shall initially by $4.00 and shall be
subject to adjustment as provided in the section entitled "Antidilution," below.
The Series B Preferred will be automatically converted into Common Stock, at the
then applicable conversion rate of the Series B Preferred, in the event of an
initial public offering by the Company of shares of its Common Stock involving
gross proceeds of not less then $5,000,000 and a price per share of Common Stock
of not less than $5.00.
Voting Rights: Except as otherwise required by law, the holders of the
-------------
Series B Preferred shall vote together with all other classes and series of
stock of the Company as a single class on all actions to be presented to the
stockholders of the Company. Each share of Series B Preferred shall entitle the
holder to that number of votes as equals the number of shares of Common Stock
issuable upon conversion of the Series B Preferred on the record date for any
meeting at which such share will be voted. There shall be no cumulative voting.
<PAGE>
ATTACHMENT 2-C
Antidilution: The Series B conversion value is subject to adjustment if
------------
after the original issuance date of the Series B Preferred, (a) the Company
sells any shares of Common Stock at a price less that the Series B conversion
value in effect immediately prior to the sale of such Common Stock or (b) the
Company issues or sells any options for the purchase of Common Stock or any
securities convertible into or exchangeable for Common Stock at a price less
than the Series B conversion value in effect immediately prior to such issuance
or sale, or (c) the Company engages in a stock split, recombination,
reorganization or reclassification of its capital stock. Concurrently with any
issuance, stock split, recombination, reorganization or reclassification
described in the preceding sentence (a "Dilutive Event"), the Series B
conversion value in effect immediately prior to such Dilutive Event shall be
reduced to a price (calculated to the nearest cent) determined by multiplying
such Series B conversion value by a fraction, (i) the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
Dilutive Event, plus the number of shares Common Stock which the aggregate
consideration received by the Company for the total number of additional shares
of Common Stock so issued in connection with such Dilutive Event would purchase
at such Series B conversion value and (ii) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such Dilutive
Event plus the number of additional shares of Common Stock so issued in
connection with such Dilutive Event, provided that the Series B conversion value
shall not be reduced at any time to an amount less than $.01.
<PAGE>
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 5th day of August in the year 1994
/s/ Peter E. Oettinger
- -------------------------------------------------------------, Vice President
/s/ William O. Flannery
- -------------------------------------------------------------, Clerk
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Certificate of Vote of Directors Establishing
A Series of a Class of Stock
(General Laws, Chapter 156B, Section 26)
I hereby approve the within certificate and, the
filing fee in the amount of $100 having been paid,
said certificate is hereby filed this 10th day of
August, 1994.
/s/ Michael J. Connolly
MICHAEL JOSEPH CONNOLLY
SECRETARY OF STATE
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT
TO:
Jeanne deKoning
Goulston & Storrs, P.C.
................................................
400 Atlantic Avenue
................................................
Boston, MA 02110-3333
................................................
(617) 482-1776
Telephone .....................................
Copy Mailed
<PAGE>
The Commonwealth of Massachusetts
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL JOSEPH CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON MASS. 02108
FEDERAL IDENTIFICATION
NO. 04-3035323
-------------------
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OF A CLASS OF STOCK
General Laws, Chapter 156B, Section 26
------------
We, Peter E. Oettinger Vice President, and
William O. Flannery , Clerk of
Photoelectron Corporation
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 400-1 Totten Pond Road, Waltham, MA 02154
----------------------------------------------------------------------
do hereby certify that by unanimous written consent of the directors of the
corporation dated July 5, 1994, the following vote establishing and
------------
designating a series of a class of stock and determining the relative rights and
preferences thereof was duly adopted:
See Continuation Sheets 2A - 2 C
NOTE: Votes for which the space provided is not sufficient should be set out on
continuation sheets to be numbered 2A, 2B, etc. Continuation sheets must
have a left-hand margin 1 inch wide for binding and shall be
8 1/2" x 11".
=============
Only one side should be used.
<PAGE>
ATTACHMENT 2-A
VOTED: That, pursuant to the authority conferred by Article 4 of the
Corporation's Articles of Organization, an additional 500,000 shares
of the Corporation's Preferred Stock, $.01 par value per share, is
hereby designated as Series B convertible Preferred Stock, so that the
total amount of Series B Convertible Preferred Stock of the
Corporation authorized to date shall equal 1,500,000 shares.
VOTED: That the voting powers, preferences and relative participation,
optional or other rights, and the qualifications, limitations and
restrictions relating to such additional 500,000 shares of Series B
Convertible Preferred Stock be identical to those of the Series B
Convertible Preferred Stock previously authorized by the Corporation's
directors.
<PAGE>
ATTACHMENT 2-B
PHOTOELECTRON CORPORATION
SERIES B CONVERTIBLE PREFERRED STOCK TERMS
Dividend Rights: The holders of the Series B Convertible Preferred
---------------
Stock ("Series B Preferred") will be entitled to receive dividends, when, as and
if declared by the Board of Directors, pari passu with the holders of the
----------
Series A Preferred.
Liquidation Preference: In the event of the liquidation or winding up
----------------------
of the Company, after payment by the Company to the holders of its Series A
Convertible Preferred Stock of the liquidation preference to which such holders
are entitled, but in preference to the holders of the Company's Common Stock,
the holders of the Series B Preferred will be entitled to receive an amount
equal to $4.00 per share of Series B Preferred, plus accrued and unpaid
dividends, if any. Any remaining assets will be distributed on a pro rata basis
to the holders of the Series A Preferred, the Series B Preferred and the Common
Stock on an as converted basis.
Conversion: The holders of the Series B Preferred will have the right
-----------
to convert the Series B Preferred, at the option of the holder, at any time,
into such number of shares of Common Stock as is obtained by multiplying the
number of shares of Series B Preferred to be converted by the Series B
conversion rate then in effect. The Series B conversion Rate shall be the
quotient obtained by dividing $4.00 by the Series B conversion value then in
effect. The Series B conversion value shall initially by $4.00 and shall be
subject to adjustment as provided in the section entitled "Antidilution," below.
The Series B Preferred will be automatically converted into Common Stock, at the
then applicable conversion rate of the Series B Preferred, in the event of an
initial public offering by the Company of shares of its Common Stock involving
gross proceeds of not less then $5,000,000 and a price per share of Common Stock
of not less than $5.00.
Voting Rights: Except as otherwise required by law, the holders of the
-------------
Series B Preferred shall vote together with all other classes and series of
stock of the Company as a single class on all actions to be presented to the
stockholders of the Company. Each share of Series B Preferred shall entitle the
holder to that number of votes as equals the number of shares of Common Stock
issuable upon conversion of the Series B Preferred on the record date for any
meeting at which such share will be voted. There shall be no cumulative voting.
<PAGE>
ATTACHMENT 2-C
Antidilution: The Series B conversion value is subject to adjustment if
------------
after the original issuance date of the Series B Preferred, (a) the Company
sells any shares of Common Stock at a price less that the Series B conversion
value in effect immediately prior to the sale of such Common Stock or (b) the
Company issues or sells any options for the purchase of Common Stock or any
securities convertible into or exchangeable for Common Stock at a price less
than the Series B conversion value in effect immediately prior to such issuance
or sale, or (c) the Company engages in a stock split, recombination,
reorganization or reclassification of its capital stock. Concurrently with any
issuance, stock split, recombination, reorganization or reclassification
described in the preceding sentence (a "Dilutive Event"), the Series B
conversion value in effect immediately prior to such Dilutive Event shall be
reduced to a price (calculated to the nearest cent) determined by multiplying
such Series B conversion value by a fraction, (i) the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
Dilutive Event, plus the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of additional shares
of Common Stock so issued in connection with such Dilutive Event would purchase
at such Series B conversion value and (ii) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such Dilutive
Event plus the number of additional shares of Common Stock so issued in
connection with such Dilutive Event, provided that the Series B conversion value
shall not be reduced at any time to an amount less than $.01.
<PAGE>
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 5th day of August in the year 1994
/s/ Peter E. Oettinger
- -------------------------------------------------------------, Vice President
/s/ William O. Flannery
- -------------------------------------------------------------, Clerk
<PAGE>
473200
THE COMMONWEALTH OF MASSACHUSETTS
Certificate of Vote of Directors Establishing
A Series of a Class of Stock
(General Laws, Chapter 156B, Section 26)
I hereby approve the within certificate and, the
filing fee in the amount of $100 having been paid,
said certificate is hereby filed this 10th day of
AUGUST 1994.
/s/ Michael J. Connolly
MICHAEL JOSEPH CONNOLLY
SECRETARY OF STATE
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF AMENDMENT TO BE SENT
TO:
Jeanne deKoning
Goulston & Storrs, P.C.
................................................
400 Atlantic Avenue
................................................
Boston, MA 02110-3333
................................................
(617) 482-1776
Telephone .....................................
Copy Mailed
<PAGE>
<PAGE> FEDERAL IDENTIFICATION
NO. 04-3035323
[Initials
Appear
Here] The Commonwealth of Massachusetts
- ------------- William Francis Galvin
Examiner
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
/s/ P D
- -------------
Name
Approved
We, Peter E. Oettinger, Vice President,
------------------------------------------------------------
and William O. Flannery, *Clerk
------------------------------------------------------------
of Photoelectron Corporation
------------------------------------------------------------
(Exact name of corporation)
located at: 400-1 Totten Pond Road, Waltham, MA 02154
----------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles
numbered:
III
----------------------------------------------------------------
(Number those articles 1,2,3,4,5, and/or 6 being amended)
Of the Articles of Organization were duly adopted at a meeting
held on August 1, 1995 , by vote of:
--------- -----
1,861,000 shares of Common Stock of 2,211,900
--------- ------------------------------ ---------
(type, class & series, if any)
shares outstanding,
2,899,507 shares of Preferred Stock of 3,564,010
--------- ------------------------------ ---------
(type, class & series, if any)
shares outstanding, and
shares of of
--------- ------------------------------ ---------
(type, class & series, if any)
shares outstanding,
C [_] /1/**being at least a majority of each type, class or series
P [_] outstanding and entitled to vote thereon:
M [_]
R.A. [_]
*Delete the inapplicable word. **Delete the inapplicable clause.
/1/For amendments adopted pursuant to Chapter 156B, Section 70.
/2/For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this
form is insufficient, additions shall be set forth on one side
only of separate, 8 1/2 X11 sheets of paper with a left margin
of at least 1 inch. Additions to more that one article may be
/s/ S made on a single sheet so long as each article requiring each
- ------------- addition is clearly indicated.
P.C.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
COMMON: COMMON: 15,000,000 $.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED: PREFERRED: 5,000,000 $.01
- --------------------------------------------------------------------------------
(2,564,010 Shares Series A)
(1,500,000 Shares Series B)
- --------------------------------------------------------------------------------
Change the total authorized to:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
COMMON: COMMON: 15,000,000 $.01
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PREFERRED: PREFERRED: 7,500,000 $.01
- --------------------------------------------------------------------------------
(2,564,010 Shares Series A)
(1,500,000 Shares Series B)
- --------------------------------------------------------------------------------
SEE ATTACHMENT
<PAGE>
ATTACHMENT TO ARTICLES OF AMENDMENT
PHOTOELECTRON CORPORATION
DATED FEBRUARY 1, 1996
VOTED, that Article III of the Articles of Organization of the Corporation
be amended to read in its entirety as follows:
"III. The total number of shares which the Corporation is authorized
to issue is 22,500,000 shares, 15,000,000 of which are classified and
designated as Common Stock, $.01 par value per share, and 7,500,000
of which are designated as Preferred Stock, $.01 par value per
share."
<PAGE>
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section
6 unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such
filing, in which event the amendment will become effective on such later date.
Later effective date: N/A.
SIGNED UNDER THE PENALTIES OF PERJURY, this 1st day of February, 1996,
/s/ Peter E. Oettinger , *Vice President,
- -----------------------------------------------------------
Peter E. Oettinger
/s/ William O. Flannery , *Clerk
- -----------------------------------------------------------
William O. Flannery
*Delete the inapplicable words.
<PAGE>
RECEIVED THE COMMONWEALTH OF MASSACHUSETTS
FEB 07 1996
SECRETARY OF THE COMMONWEALTH ARTICLES OF AMENDMENT
CORPORATIONS DIVISION (General Laws, Chapter 156B, Section 72)
==========================================================
I hereby approve the within Articles of Amendment and, the
filing fee in the amount of $ 2,500 having been paid, said
articles are deemed to have been filed with me this 8th day
of February, 1996.
Effective date:
-------------------------------------------
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
William O. Flannery, Clerk
----------------------------------------------------------
Photoelectron Corporation
----------------------------------------------------------
c/o 722 Grove Street, Framington, MA 01701
----------------------------------------------------------
<PAGE>
FEDERAL IDENTIFICATION
NO. 04-3035323
FORM CD-26-5M-8-83 -----------
The Commonwealth of Massachusetts
- ----------
Examiner William Francis Galvin
Secretary of the Commonwealth
ONE ASHBURTON PLACE, BOSTON, MASS. 02108
CERTIFICATE OF VOTE OF DIRECTORS ESTABLISHING
A SERIES OF A CLASS OF STOCK
General Laws, Chapter 156B, Section 26
----------
We, Peter E. Oettinger Vice President and
William O. Flannery Clerk
Photoelectron Corporation
--------------------------------------------------------------------
(Name of Corporation)
located at 400-1 Totten Pond Road, Waltham, Massachusetts 02154
-----------------------------------------------------
do hereby certify that * on June 29
- -------- -----------,
Name 1995, the following vote establishing and designating a series of a
Approved class of stock and determining the relative rights and preferences
thereof was duly adopted.
See Continuation Sheets 2A-2C
C [_] * by unanimous written consent of the directors of the Corporation
P [_] dated as of
M [_] NOTE: Notes for which the space provided above is not sufficient
R.A. [_] should be set out on continuation sheets to be numbered 2A,
2B, etc. Continuation sheets must have a left-hand margin 1
inch wide for binding and shall be 8-1/2" x 11". Only one side
===========
should be used.
6
- --------
P.C.
<PAGE>
ATTACHMENT 2-A
PHOTOELECTRON CORPORATION
VOTED,
pursuant to the authority conferred by Article 4 of
the Corporation's Articles of Organization, 2,222,222 shares of
the Corporation's Preferred Stock, $.01 par value per share, is
hereby designated as the "Series C Convertible Preferred Stock"
of the Corporation.
VOTED, That the voting powers, preferences and relative participating,
optional or other rights, and the qualifications, limitations
and restrictions relating to the Series C Convertible Preferred
Stock shall be as set forth in the Certificate of Vote of
Directors Establishing a Series of a Class of Stock attached
hereto as Attachment 2-B and 2-C.
<PAGE>
ATTACHMENT 2-B
PHOTOELECTRON CORPORATION
SERIES C CONVERTIBLE PREFERRED STOCK TERMS
Dividend Rights: The holders of the Series C Convertible Preferred Stock
---------------
("Series C Preferred") will be entitled to receive dividends, when, as and if
declared by the Board of Directors.
Liquidation Preference: In the event of the liquidation or winding up of
----------------------
the Company, the holders of the Series C Preferred, after payment by the
Corporation to the holders of its Series A Convertible Preferred Stock ("Series
A Preferred") and its Series B Convertible Preferred Stock ("Series B
Preferred") of the liquidation preference to which such holders are entitled,
but in preference to the holders of the Corporation's Common Stock, will be
entitled to receive an amount equal to $4.50 per share of Series C Preferred,
plus accrued and unpaid dividends, if any. Any remaining assets will be
distributed on a pro rata basis to the holders of the Common Stock and to
holders of the Series A Preferred, the Series B Preferred and the Series C
Preferred on an as converted basis.
Conversion: The holders of the Series C Preferred will have the right to
----------
convert the Series C Preferred, at the option of the holder, at any time, into
such number of shares of Common Stock as is obtained by multiplying the number
of shares of Series C Preferred to be converted by $4.50 and dividing the result
by the conversion price of $4.50 per share or, in case an adjustment of such
price has taken place as provided in the section entitled "Antidilution," below,
at the conversion price in effect on the date such shares of Series C Preferred
are surrendered for conversion. The Series C Preferred will be automatically
converted into Common Stock, at the then applicable conversion rate of the
Series C Preferred, in the event of an initial public offering by the Company
of its Common Stock involving gross proceeds of not less than $5,000,000 and a
price per share of Common Stock of not less than $5.00.
Voting Rights: Except as otherwise required by law, the holders of the
-------------
Series C Preferred shall vote together with all other classes and series of
Stock of the Company as a single class on all actions to be presented to the
stockholders of the Company. Each share of Series C Preferred shall entitle the
holder to that number of votes as equals the number of shares of Common Stock
issuable upon conversion of the Series C Preferred on the record date for any
meeting at which such share will be voted. There shall be no cumulative voting.
Antidilution: The conversion price of the Series C Preferred is subject to
------------
adjustment if after the original issuance date of the Series C Preferred, (a)
the Company sells any shares of Common Stock at a price less than the conversion
price in effect immediately prior to the sale of such Common Stock (which con-
version price shall initially be $4.50), or (b) the Company issues or sells any
options for the purchase of Common Stock or any securities convertible into or
<PAGE>
ATTACHMENT 2-C
exchangeable for Common Stock at a price less than the conversion price in
effect immediately prior to such issuance or sale, or (c) the Company engages in
a stock split, recombination, reorganization or reclassification of its capital
stock. Concurrently with any issuance, stock split, recombination,
reorganization or reclassification described in the preceding sentence (a
"Dilutive Event"), the conversion price in effect immediately prior to such
Dilutive Event shall be reduced to a price (calculated to the nearest cent)
determined by multiplying such conversion price by a fraction, (i) the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such Dilutive Event, plus the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total number of
additional shares of Common Stock so issued in connection with such Dilutive
Event would purchase at such conversion price, and (ii) the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such Dilutive Event, plus the number of additional shares of Common stock so
issued in connection with such Dilutive Event, provided that the conversion
price shall not be reduced at any time to an amount less than $.01.
<PAGE>
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 1st day of February in the year 1996
/s/ Peter E. Oettinger
- -------------------------------------------------------------, Vice President
Peter E. Oettinger
/s/ William O. Flannery
- -------------------------------------------------------------, Clerk
William O. Flannery
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
Certificate of Vote of Directors Establishing
A Series of a Class of Stock
(General Laws, Chapter 156B, Section 26)
I hereby approve the within certificate and, the
filing fee in the amount of $100.00 having been paid,
said certificate is hereby filed this 8th day of February 1996.
/s/ William Francis Galvin
William Francis Galvin
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF CERTIFICATE TO BE SENT
TO:
William O. Flannery, Clerk
................................................
Photoelectron Corporation
................................................
c/o 722 Grove Street, Framingham, Massachusetts 01701
................................................
(508) 877-6521
Telephone .....................................
Copy Mailed
<PAGE>
EXHIBIT 3.3
PHOTOELECTRON CORPORATION
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Title Page
<S> <C> <C>
Article I - General.......................................................... 1
Section 1.1. Offices.................................................. 1
Section 1.2. Seal..................................................... 1
Section 1.3. Fiscal Year.............................................. 1
Article II - Stockholders.................................................... 1
Section 2.1. Place of Meeting......................................... 1
Section 2.2. Annual Meetings.......................................... 1
Section 2.3. Special Meetings......................................... 2
Section 2.4. Notice of Meetings....................................... 2
Section 2.5. Quorum................................................... 2
Section 2.6. Voting................................................... 3
Section 2.7. Inspectors of Election................................... 4
Section 2.8. Action Without Meeting................................... 4
Section 2.9 Business at Stockholder
Meetings................................................. 4
Article III - Directors...................................................... 5
Section 3.1. Powers................................................... 5
Section 3.2. Number, Election and Term of Office...................... 5
Section 3.3. Place of Meetings........................................ 6
Section 3.4. Annual Meetings.......................................... 6
Section 3.5. Regular Meetings......................................... 6
Section 3.6. Special Meetings......................................... 6
Section 3.7. Notice of Meetings....................................... 6
Section 3.8. Quorum................................................... 7
Section 3.9. Voting................................................... 7
Section 3.10. Action Without Meeting................................... 7
Section 3.11. Meetings by Telephone Conference Calls................... 7
Section 3.12. Resignations............................................. 7
Section 3.13. Removal.................................................. 7
Section 3.14. Vacancies................................................ 8
Section 3.15. Compensation of Directors................................ 8
Section 3.16. Committees............................................... 8
Section 3.17. Issuance of Stock........................................ 8
</TABLE>
<PAGE>
-2-
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Title Page
<S> <C> <C>
Article IV - Officers....................................................... 9
Section 4.1. Officers................................................ 9
Section 4.2. Election and Term of Office............................. 9
Section 4.3. President............................................... 9
Section 4.4. Vice Presidents......................................... 9
Section 4.5. Treasurer and Assistant Treasurer....................... 10
Section 4.6. Clerk and Assistant Clerk............................... 10
Section 4.7. Secretary and Assistant Secretary....................... 10
Section 4.8. Resignation............................................. 11
Section 4.9. Removal................................................. 11
Section 4.10. Vacancies............................................... 11
Section 4.11. Subordinate Officers.................................... 11
Section 4.12. Compensation............................................ 11
Article V - Stock........................................................... 11
Section 5.1. Stock Certificates...................................... 11
Section 5.2. Transfer of Stock....................................... 12
Section 5.3. Fixing Date for Determination of Stockholders' Rights... 12
Section 5.4. Lost, Mutilated or Destroyed Certificates............... 13
Article VI - Miscellaneous Management Provisions............................ 13
Section 6.1. Execution of Instruments................................ 13
Section 6.2. Corporate Records....................................... 14
Section 6.3. Voting of Securities owned by this Corporation.......... 14
Section 6.4. Conflict of Interest.................................... 14
Section 6.5. Indemnification......................................... 15
Article VII - Amendments.................................................... 16
Section 7.1. General................................................. 16
Section 7.2. Date of Annual Meeting of Stockholders.................. 16
Article VIII - [Reserved]................................................... 16
</TABLE>
<PAGE>
-3-
TABLE OF CONTENTS
(continued)
Title Page
Article IX - Control Share Acquisitions..................................... 16
<PAGE>
PHOTOELECTRON CORPORATION
B Y - L A W S
-------------
Article I - General
-------------------
Section 1.1. Offices. The principal office of the corporation shall be in
------- --- -------
Lexington, Massachusetts. The corporation may also have offices at such other
place or places within or without Massachusetts as the Board of Directors may
from time to time determine or the business of the corporation may require.
Section 1.2. Seal. The seal of the corporation shall be in the form of a
------- --- ----
circle inscribed with the name of the corporation, the year of its incorporation
and the word "Massachusetts". When authorized by the Board of Directors and to
the extent not prohibited by law, a facsimile of the corporate seal may be
affixed or reproduced.
Section 1.3. Fiscal Year. The fiscal year of the corporation shall be the
------- --- ------ ----
twelve months ending the Saturday nearest December 31 in each year.
Article II - Stockholders,
-------------------------
Section 2.1. Place of Meeting. Meetings of stockholders shall be held at
------- --- ----- -- -------
the principal office of the corporation or, to the extent permitted by the
Articles of Organization, at such other place within the United States as the
Board of Directors may from time to time designate.
Section 2.2. Annual Meetings. The annual meetings of stockholders shall be
----------- ------ --------
held at 10:00 a.m., or at such other hour as may from time to time be designated
by the Board of Directors, on the third Wednesday in May of each year, beginning
in 1989, or, if a legal holiday, on the next succeeding full business day, for
the purpose of electing a Board of Directors and transacting such other business
as may properly be brought before such meeting. At the annual meeting any
business may be transacted whether or not the notice of such meeting shall have
contained a reference thereto, except where such a reference is required by law,
the Articles of Organization or these By-laws. If the annual meeting is not
held on the date determined in accordance with this Section, a special meeting
in lieu of
<PAGE>
-2-
the annual meeting may be held with all the force and effect of an annual
meeting.
Section 2.3. Special Meetings. Special meetings of stockholders may be
------- --- ------- --------
called by the President or by the Board of Directors, and shall be called by the
Clerk or, in case of death, absence, incapacity or refusal of the Clerk, by any
other officer, upon written application of one or more stockholders who hold at
least 40% in interest of the capital stock entitled to vote at the meeting.
Application to a court pursuant to Section 34(b) of Chapter 156B of the
Massachusetts General Laws requesting the call of a special meeting of
stockholders because none of the officers is able and willing to call such
meeting may be made only by stockholders who hold at least 40% in interest of
the capital stock entitled to vote thereat. Each call of a meeting shall state
the place, date, hour and purpose of the meeting.
Section 2.4. Notice of Meetings. Written or printed notice of each meeting
------- --- ------ -- --------
of stockholders, stating the place, date and hour and the purposes of the
meeting shall be given by the Clerk or other officer calling the meeting at
least seven days, but not more than sixty days, before the meeting to each
stockholder entitled to vote at the meeting or entitled to such notice by
leaving such notice with him at his residence or usual place of business or by
mailing it, postage prepaid, and addressed to the stockholder at his address as
it appears in the records of the corporation. No notice need be given to any
stockholder if he, or his authorized attorney, waives such notice by a writing
executed before or after the meeting and filed with the records of the meeting
or by his presence, in person or by proxy, at the meeting. Any person
authorized to give notice of any such meeting may make affidavit of such notice,
which, as to the facts therein stated, shall be conclusive. It shall be the
duty of every stockholder to furnish to the Clerk of the corporation or to the
transfer agent, if any, of the class of stock owned by him, his current post
office address.
Section 2.5. Quorum. At all meetings of stockholders the holders of a
------- --- ------
majority in interest of all capital stock entitled to vote at such meeting or,
if two or more classes of stock are issued, outstanding and entitled to vote as
separate classes, a majority in interest of each class, present in person or
represented by proxy, shall constitute a quorum, except when a larger quorum is
required by law, by the Articles of Organization or by these By-laws. The
<PAGE>
-3-
announcement of a quorum by the officer presiding at the meeting shall
constitute a conclusive determination that a quorum is present. The absence of
such an announcement shall have no significance. Shares of its own stock held
by the corporation or held for its use and benefit shall not be counted in
determining the total number of shares outstanding at any particular time. If a
quorum is not present or represented, the stockholders present or represented
and entitled to vote at such meeting, by a majority vote, may adjourn the
meeting from, time to time, without notice other than announcement at the
meeting until a quorum is present or represented. At any adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted if the meeting had been held as originally
called. The stockholders present at a duly organized meeting may continue to
transact business until adjournment notwithstanding the withdrawal of one or
more stockholders so as to leave less than a quorum.
Section 2.6. Voting. Except as otherwise provided by law or the Articles of
------- --- ------
Organization, at all meetings of stockholders each stockholder shall have one
vote for each share of stock entitled to vote and registered in his name and a
proportionate vote for a fractional share. Any stockholder may vote in person
or by proxy dated not more than six months prior to the meeting and filed with
the Clerk of the meeting. Every proxy shall be in writing, subscribed by a
stockholder or his authorized attorney-in-fact, and dated. A proxy with respect
to stock held in the name of two or more persons shall be valid if executed by
any one of them unless at or prior to exercise of the proxy the corporation
receives a specific written notice to the contrary from any one of them. No
proxy shall be valid after the final adjournment of the meeting. Voting on all
matters, including the election of directors, shall be by voice vote unless
voting by ballot is requested by any stockholder. At all meetings of
stockholders, any matter put to a vote of stockholders shall be determined by a
vote of a majority of the shares voting on such matter, or, if two or more
classes of stock are entitled to vote as separate classes on such matter, a vote
of a majority of the shares voting of each class, present in person or
represented by proxy, except (i) where a larger vote is required by law, the
Articles of Organization or these By-laws or (ii) in the case of elections of
directors by stockholders, which shall be decided by a vote of a plurality of
shares so voting. The corporation shall not, directly or indirectly vote shares
of its own stock.
<PAGE>
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Section 2.7. Inspectors of Election. Two inspectors may be appointed by the
----------- ---------- -- --------
Board of Directors before or at each meeting of stockholders, or, if no such
appointment shall have been made, the presiding officer may make such
appointment at the meeting. At the meeting for which they are appointed, such
inspectors shall open and close the polls, receive and take charge of the
proxies and ballots, and decide all questions touching on the qualifications of
voters, the validity of proxies and the acceptance and rejection of votes. If
any inspector previously-appointed shall fail to attend or refuse or be unable
to serve, the presiding officer shall appoint an inspector in his place.
Section 2.8. Action Without Meeting. Any action which may be taken by
------- --- ------ ------- -------
stockholders may be taken without a meeting if all stockholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meetings of stockholders. Such consents shall be
treated for all purposes as a vote at a meeting.
Section 2.9. Business at Stockholder Meetings. Unless otherwise determined
------- ---- -------- -- ----------- --------
by the Board of Directors prior to a meeting of the stockholders, the officer
presiding at such meeting, determined in accordance with these By-laws, shall
determine the order of business and shall have the authority in his discretion
to regulate and conduct of such meeting, including, without limitation, to
impose restrictions on the persons (other than stockholders of the corporation
or their duly appointed proxies) who may attend such meeting, to regulate and
restrict the making of statements or asking of questions at such meeting and to
cause the removal from such meeting of any person who has disrupted or appears
likely to disrupt the proceedings at such meeting. At a meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before a meeting of
stockholders, business must be (a) specified in the notice (or any supplement
thereto) given as provided in these By-laws, (b) otherwise properly brought
before the meeting by or at the direction of a majority of the Board of
Directors then in office or (c) otherwise properly brought before the meeting by
a stockholder. For business to be properly brought before a meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Clerk of the corporation and the stockholder must be a stockholder of record
at the time such notice is given. Except as may otherwise be required by law,
to be timely, a stockholder's
<PAGE>
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notice must be delivered to or mailed and received at the principal executive
offices of the corporation, not fewer than 60 days nor more than 90 days prior
to the meeting; provided, however, that in the event that the date of the
-------- -------
meeting is not publicly announced by the corporation by mail, press release or
otherwise more than 70 days prior to the meeting, notice by the stockholder to
be timely must be delivered to the Clerk of the corporation not later than the
close of business on the tenth day following the day on which such announcement
of the date of the meeting was made. A stockholder's notice to the Clerk shall
set forth as to each matter such stockholder purposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, (b) the
name and address, as they appear on the corporation's books, of such stockholder
proposing such business, (c) the class and number of shares of the corporation
which are beneficially owned by such stockholder and (d) any material financial
interest of the stockholder in such business. Notwithstanding anything in the
By-laws to the contrary, no business shall be conducted at any meeting except in
accordance with the procedures set forth in this Section. The chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that
business was not properly brought before the meeting and in accordance with the
provisions of this Section, and if he should so determine, he shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted. Notwithstanding the foregoing provisions of this
Section, a stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section.
Article III - Directors
-----------------------
Section 3.1. Powers. Except as otherwise provided by law, the Articles of
------- --- ------
Organization or these By-laws, the business of the corporation shall be managed
by a Board of Directors who may exercise all the powers of the corporation.
Section 3.2. Number, Election and Term of Office. The Board of Directors
------- --- ------- -------- ------------------
shall consist of not less than one nor more than seven directors. Within the
limits specified, the number of directors shall be determined (a) by a vote of
the stockholders at the annual meeting, or (b) by a vote of the stockholders at
a special meeting called for the purpose by
<PAGE>
-6-
the Board of Directors, or (c) by vote of the Board of Directors. Except for the
initial directors and except as provided in Section 3.14, the directors shall be
elected at the annual meeting of the stockholders or at a special meeting. All
directors shall hold office until the following annual meeting or special
meeting in lieu of the annual meeting and until their successors are chosen and
qualified.
Section 3.3. Place of Meetings. Meetings of the Board of Directors may be
------- --- ----- -- --------
held at any place within or without the Commonwealth of Massachusetts.
Section 3.4. Annual Meetings. A meeting of the Board of Directors for the
----------- ---------------
election of officers and the transaction of general business shall be held each
year beginning in 1988, at the place of and immediately after the final
adjournment of the annual meeting of stockholders or the special meeting in lieu
of the annual meeting. No notice of such annual meeting need be given.
Section 3.5. Regular Meetings. Regular meetings of the Board of Directors
------- --- ------- --------
may be held, without notice, at such time and place as the Board of Directors
may determine. Any director not present at the time of the determination shall
be advised, in writing, of any such determination.
Section 3.6. Special Meetings. Special meetings of the Board of Directors,
----------- ------- --------
including meetings in lieu of the annual or regular meetings, may be held upon
notice at any time upon the call of the President and shall be called by the
President or the clerk or, in case of the death, absence, incapacity or refusal
of the Clerk, by any other officer, upon written application, signed by any two
directors, stating the purpose of the meeting.
Section 3.7. Notice of Meetings. Wherever notice of any meetings of the
------- --- ------ -- --------
Board of Directors is required by these By-laws or by vote of the Board of
Directors, such notice shall state the place, date and hour of the meeting and
shall be given to each director by the President, Clerk or other officer calling
the meeting at least two days prior to such meeting if given in person by
telephone or by telecopy or at least four days prior to meeting if given by
mail. Notice shall be deemed to have been duly given, if by mail, by depositing
the notice in the post office as a first class letter, postage prepaid, or, if
by telecopy, by completing the telecopier transmission and receiving an answer
back, the letter or telecopy being addressed to the director at
<PAGE>
-7-
his last known mailing address as it appears on the books of the corporation. No
notice need be given to any director who by a writing executed before or after
the meeting and filed with the records of the meeting or by his attendance at
the meeting without protesting at or before the commencement of the meeting the
lack of notice to him. No notice of adjourned meetings of the Board of Directors
need be given.
Section 3.8. Quorum. At all meetings of the Board of Directors, a majority
------- --- -------
of the directors then in office shall constitute a quorum. If a quorum is not
present, those present may adjourn the meeting from time to time until a quorum
is obtained. At any adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted if the meeting had
been held as originally called.
Section 3.9. Voting. At any meeting of the Board of Directors, the vote of
------- --- -----
a majority of those present shall decide any matter except as otherwise provided
by law, the Articles of Organization or these By-laws.
Section 3.10. Action Without Meeting. Any action which may be taken at any
------- ---- ----------------------
meeting of the Board of Directors may be taken without a meeting if all the
directors consent to the action in writing and the written consents are filed
with the records of the meetings of the Board of Directors. Such consents shall
be treated for all purposes as a vote at a meeting.
Section 3.11. Meetings by Telephone Conference Calls. Directors or members
------- ---- -------- -- --------- ---------- -----
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting.
Section 3.12. Resignations. Any director may resign by giving written
------- ---- ------------
notice to the President or Clerk. Such resignation shall take effect at the
time or upon the event specified therein, or, if none is specified, upon
receipt. Unless otherwise specified in the resignation, its acceptance shall
not be necessary to make it effective.
Section 3.13. Removal. A director may be removed from office with or
------- ---- -------
without cause by vote of the holders of
<PAGE>
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a majority interest of the stock entitled to vote in the election of such
director and may be removed from office with cause by a vote of a majority of
the directors then in office. A director may be removed for cause only after
reasonable notice and opportunity to be heard before the body proposing to
remove him.
Section 3.14. Vacancies. In the event of a vacancy in the Board of
------- ---- ---------
Directors, by reason of an enlargement of the Board of Directors or otherwise,
the remaining directors, by majority vote, may elect a director to fill such
vacancy and may exercise the powers of the full Board of Directors until the
vacancy is filled.
Section 3.15. Compensation of Directors. Directors may be paid such
------------ ------------ -- ---------
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Section 3.16. Committees. The Board of Directors may, by vote of a
------- ---- ----------
majority of the directors then in office, appoint from their number one or more
committees and delegate to such committees some or all of their powers to the
extent permitted by law, the Articles of Organization or these By-laws. Except
as the Board of Directors may otherwise determine, any such committee shall be
governed in the conduct of its business by the rules governing the conduct of
the business of the Board of Directors contained in these By-laws and may, by
majority vote of the entire committee, make other rules for the conduct of its
business. The Board of Directors shall have power at any time to fill vacancies
in any such committees, to change its membership or to discharge the committee.
Section 3.17. Issuance of Stock. The Board of Directors shall have power to
------- ---- ----------- -----
issue and sell or otherwise dispose of such shares of the corporation's
authorized but unissued capital stock to such persons and at such times and for
such consideration, cash, property, services, expenses, or otherwise, and upon
such terms as it shall determine from time to time.
<PAGE>
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Article IV - Officers
---------------------
Section 4.1. Officers. The officers of the corporation shall consist of a
------- --- --------
President, a Treasurer, a Clerk, and such other officers with such other titles
as the Board of Directors may determine including a Chairman of the Board
of Directors, more Vice Presidents, Assistant Treasurers and Assistant Clerks,
and Assistant Secretaries. Any number of offices may be held by the same
person. Any officer may be required to give a bond for the faithful
performance of his duties in such form and with such sureties as the Board of
Directors may determine.
Section 4.2. Election and Term of Office. Except for the initial officers
------- --- -------- --- ---- -- ------
and except as provided in Section 4.10, the President, Treasurer and Clerk
shall be elected by the Board of Directors at its annual meeting or at the
special meeting held in lieu of the annual meeting and shall hold office until
the following annual meeting of the Board of Directors or the special meeting
in lieu of said annual meeting and until their successors are chosen and
qualified. Other officers may be chosen by the Board of Directors at the annual
meeting or any other meeting and shall hold office for such period as the Board
of Directors may prescribe.
Section 4.3. President. Unless the Board of Directors otherwise
------- --- ---------
determines, the President shall be the chief executive officer of the
corporation. He shall have the general control and management of the
corporation's business and affairs. He need not be a director. Unless there is
a Chairman of the Board, the President shall preside at all meetings of the
Board of Directors and of the stockholders.
Section 4.4. Vice Presidents. The Vice President, or if there be more than
----------- ---------------
one, the Vice Presidents, shall perform such of the duties of the President on
behalf of the corporation as may be respectively assigned to him or them from
time to time by the Board of Directors or the President. The Board of Directors
may designate a Vice President as the Executive Vice President, and in the
absence or inability of the President to act, such Executive Vice President
shall have and possess all of the powers and discharge all of the duties of the
President, subject to the control of the Board of Directors.
<PAGE>
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Section 4.5. Treasurer and Assistant Treasurer. The Treasurer shall be the
------- --- --------- --- --------- ---------
principal financial officer of the corporation. He shall have custody and
control over all funds and securities of the corporation, maintain full and
adequate accounts of all moneys received and paid by him on account of the
corporation and, subject to the control of the Board of Directors, discharge all
duties incident to the office of Treasurer. Any Assistant Treasurer shall
perform such of the duties of the Treasurer and such other duties as the Board
of Directors, the President or the Treasurer may designate. The Treasurer shall
have authority, in connection with the normal business of the corporation, to
sign contracts, bids, bonds, powers of attorney and other documents when
required.
Section 4.6. Clerk and Assistant Clerk. The Clerk shall be the principal
----------- -------------------------
recording officer of the corporation. He shall record all proceedings of the
stockholders and discharge all duties incident to the office of Clerk. Unless a
Secretary is appointed by the Board of Directors to perform such duties, the
Clerk shall record all proceedings of the Board of Directors and of any
committees appointed by the Board of Directors. Any Assistant Clerk shall
perform such of the duties of the Clerk and such other duties as the Board of
Directors, the President or the Clerk may designate. In the absence of the
Clerk or any Assistant Clerk from any meeting of stockholders, the Board of
Directors or any committee appointed by the Board of Directors, a Temporary
Clerk designated by the person presiding at the meeting shall perform the duties
of the Clerk. The Clerk shall be a resident of the Commonwealth of
Massachusetts unless a resident agent has been appointed by the corporation
pursuant to law to accept service of process.
Section 4.7. Secretary and Assistant Secretary. If appointed by the Board of
----------- --------- --- --------- ---------
Directors, the Secretary shall record all proceedings of the Board of Directors
and discharge all duties incident to the office of Secretary. Any Assistant
Secretary shall perform such of the duties of the Secretary and such other
duties as the Board of Directors, President or Secretary may designate. The
Board of Directors and any committee appointed by the Board of Directors may
appoint a Secretary and one or more Assistant Secretaries to perform the
functions of the Secretary and Assistant Secretary for such committee.
<PAGE>
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Section 4.8. Resignation. Any officer may resign by giving written notice
------- --- -----------
to the President or Clerk. Such resignation shall take effect at the time or
upon the event specified therein, or, if none is specified, upon receipt. Unless
otherwise specified in the resignation, its acceptance shall not be necessary to
make it effective.
Section 4.9. Removal. An officer may be removed from office with cause,
----------- -------
after reasonable notice and opportunity to be heard, or without cause, in either
case, by vote of a majority of the directors then in office.
Section 4.10. Vacancies. The Board of Directors may fill any vacancy
------- ---- ---------
occurring in any office for any reason and may, in its discretion, leave
unfilled for such period as it may determine any offices other than those of
President, Treasurer and Clerk.
Section 4.11. Subordinate Officers. The Board of Directors may, from time
------------ --------------------
to time, authorize any officer to appoint and remove subordinate officers and to
prescribe their powers and duties. The term "subordinate officers" shall in no
event include the President, Treasurer and Clerk.
Section 4.12. Compensation. The Board of Directors may fix the compensation
------------ ------------
of all officers of the corporation and may authorize any officer upon whom the
power of appointing subordinate officers may have been conferred to fix the
compensation of such subordinate officers.
Article V - Stock
-----------------
Section 5.1. Stock Certificates. Each stockholder shall be entitled to a
------- --- ----- ------------
certificate or certificates of stock of the corporation in such form as the
Board of Directors may from time to time prescribe. Each certificate shall be
duly numbered and entered in the books of the corporation as it is issued, shall
state the holder's name and the number and the class and the designation of the
series, if any, of his shares, shall be signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer and may, but need not,
be sealed with the seal of the corporation. If any stock certificate is signed
by a transfer agent, or by a registrar, other than a director, officer or
employee of the corporation, the signatures thereon of the officers may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed on any certificate shall have ceased to be such
<PAGE>
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officer before such certificate is issued it may nevertheless be issued by the
corporation and delivered with the same effect as if he were such officer at the
time of its issue. Every certificate of stock which is subject to any
restriction on transfer pursuant to the Articles of Organization, the By-laws or
any agreement to which the corporation is a party, shall have the restrictions
noted conspicuously on the certificate and shall also set forth on the face or
back of the certificate either (i) the full text of the restriction, or (ii) a
statement of the existence of such restriction and a statement that the
corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge. Every certificate issued at a time when the
corporation is authorized to issue more than one class or series of stock shall
set forth upon the face or back of the certificate either (i) the full text of
the preferences, voting powers, qualifications and special and relative rights
of the shares of each class and series, if any, authorized to be issued, as set
forth in the Articles of organization or (ii) a statement of the existence of
such preferences, powers, qualifications and rights, and a statement that the
corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge.
Section 5.2. Transfer of Stock. Subject to any transfer restrictions then
------- --- -----------------
in force, the shares of stock of the corporation shall be transferable only upon
its books by the holders thereof in person or by their duly authorized attorneys
or legal representatives. Such transfer shall be effected by delivery of the
old certificate, together with a duly executed assignment and power to transfer
endorsed thereon or attached thereto and with such proof of the authenticity of
the signature and such proof of authority to make the transfer as the
corporation or its agents may reasonably require, to the person in charge of the
stock and transfer books and ledgers or to such other person as the Board of
Directors may designate, who shall thereupon cancel the old certificate and
issue a new certificate. The corporation may treat the holder of record of any
share or shares of stock as the owner of such stock, and shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have notice thereof, express or
otherwise.
Section 5.3. Fixing Date for Determination of Stockholders' Rights. The
------- --- ------ ---- --- ------------- -- ------------- ------
Board of Directors may fix in advance a time, not exceeding sixty days preceding
the date
<PAGE>
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of any meeting of stockholders, or the date for the payment of any dividend or
the making of any distribution to stockholders, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, or the last date on which the consent or dissent of
stockholders may be effectively expressed for any purpose, as the record date
for determining the stockholders entitled to notice of, and to vote at, such
meeting and any adjournment thereof, to receive such dividend or distribution,
to receive such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to express such consent
or dissent. In such case only stockholders of record on the date so fixed shall
have such right, notwithstanding any transfer of stock on the books of the
corporation after the record date. In lieu of fixing such record date, the Board
of Directors may close the stock transfer books for all or any part of such
period. In any case in which the Board of Directors does not fix a record date
or provide for the closing of the transfer books, the record date shall be the
thirtieth day next preceding the date of such meeting, the dividend payment or
distribution date, the date for allotment of rights, the date for exercising of
rights in respect of any such change, conversion or exchange of capital stock,
or the date for expressing such consent or dissent, as the case may be.
Section 5.4. Lost, Mutilated or Destroyed Certificates. No certificates
------- --- ---- --------- -- --------- ------------
for shares of stock of the corporation shall be issued in place of any
certificate alleged to have been lost, mutilated or destroyed, except upon
production of such evidence of the loss, mutilation or destruction and upon
indemnification of the corporation and its agents to such extent and in such
manner as the Board of Directors may prescribe and as required by law.
Article VI - Miscellaneous Management Provisions
------------------------------------------------
Section 6.1. Execution of Instruments. Except as otherwise provided in
------- --- --------- -- -----------
these By-laws or as the Board of Directors may generally or in particular cases
authorize the execution thereof in some other manner, all instruments,
documents, deeds, leases, transfers, contracts, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the corporation shall be signed
by the President or a Vice President, or by the Treasurer or an Assistant
Treasurer, or by the Clerk. Facsimile signatures may be used in the manner and
to the extent authorized generally or in particular cases by the Board of
Directors.
<PAGE>
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Section 6.2. Corporate Records. The original, or attested copies, of the
------- --- --------- -------
Articles of Organization, By-laws, and records of all meetings of incorporators
and stockholders, and the stock and transfer records, which shall contain the
names of all stockholders and the record address and the amount of stock held by
each, shall be kept in the Commonwealth of Massachusetts at the principal office
of the corporation, or at an office of its Clerk, its resident agent or its
transfer agent. The copies and records need not all be kept in the same office.
They shall be available at all reasonable times for inspection by any
stockholder for any proper purpose. They shall not be available for inspection
to secure a list of stockholders or other information for the purpose of selling
such list or information or copies thereof or of using the same for a purpose
other than in the interest of the applicant, as a stockholder, relative to the
affairs of the corporation.
Section 6.3. Voting of Securities owned by this Corporation. Subject
----------- ------ -- ---------- ----- -- ---- -----------
always to the specific directions of the Board of Directors, (a) any shares or
other securities issued by any other corporation and owned or controlled by this
corporation may be voted in person at any meeting of security holders of such
other corporation by the President of this corporation if he is present at such
meeting, or in his absence by the Treasurer of this corporation if he is present
at such meeting, and (b) whenever, in the judgment of the President, it is
desirable for this corporation to execute a proxy or written consent in respect
to any shares or other securities issued by any other corporation and owned by
this corporation, such proxy or consent shall be executed in the name of this
corporation by the President, without the necessity of any authorization by the
Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer, provided that if the President is unable to
execute such proxy or consent by reason of sickness, absence from the United
States or other similar cause, the Treasurer may execute such proxy or consent.
Any person or persons designated in the manner above stated as the proxy or
proxies of this corporation shall have full right, power and authority to vote
the shares or other securities issued by such other corporation and owned by
this corporation the same as such shares or other securities might be voted by
this corporation.
Section 6.4. Conflict of Interest. No contract or other transaction of
------- --- -------- -- --------
the corporation shall, in the absence
<PAGE>
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of fraud, be affected or invalidated by the fact that any stockholder, director
or officer of the corporation or any corporation, firm or association of which
he may be a director, officer, stockholder or member may be a party to or may
have an interest, pecuniary or otherwise, in, any such contract or other
transaction, provided that the nature and extent of his interest was disclosed
to, or known by, the entire Board of Directors before acting on such contract or
other transaction. Except in the case of any contract or other transaction
between the corporation and any other corporation controlling, controlled by or
under common control with the corporation, any director of the corporation who
is also a director, officer, stockholder or member of any corporation, firm or
association with which the corporation proposes to contract or transact any
business, or who has an interest, pecuniary or otherwise, in any such contract
or other transaction, may not be counted in determining the existence of a
quorum at any meeting of the Board of Directors which shall authorize any such
contract or such transaction, and such director shall not participate in the
vote to authorize any such contract or transaction. Any such contract or
transaction may be authorized or approved by a majority of the directors then in
office and not disqualified by this Section 6.4 to vote on such matters, even
though the disinterested directors do not constitute a quorum.
Section 6.5. Indemnification. The corporation shall indemnify each
------- --- ---------------
director and officer against all judgments, fines, settlement payments and
expenses, including reasonable attorneys' fees, paid or incurred in connection
with any claim, action, suit or proceeding, civil or criminal, to which he may
be made a party or with which he may be threatened by reason of his being or
having been a director or officer of the corporation, or, at its request, a
director, officer, stockholder or member of any other corporation, firm or
association of which the corporation is a stockholder or creditor and by which
he is not so indemnified, or by reason of any action or omission by him in such
capacity, whether or not he continues to be a director or officer at the time of
incurring such expenses or at the time the indemnification is made. No
indemnification shall be made hereunder (a) with respect to payments and
expenses incurred in relation to matters as to which he shall be finally
adjudged in such action, suit or proceeding not to have acted in good faith and
in the reasonable belief that his action was in the best interests of the
corporation, or (b) otherwise prohibited by law. The
<PAGE>
-16-
foregoing right of indemnification shall not be exclusive of other rights to
which any director or officer may otherwise be entitled and shall inure to the
benefit of the executor or administrator of such director or officer.
Article VII - Amendments
------------------------
Section 7.1. General. These By-laws may be amended, added to or repealed,
------- --- -------
in whole or in part, (a) by vote of the stockholders at a meeting, where the
substance of the proposed amendment is stated in the notice of the meeting, or
(b) by vote of a majority of the directors then in office, except that no
amendment may be made by the Board of Directors on matters reserved to the
stockholders by law or the Articles of Organization or which changes the
provisions of these By-laws relating to meetings of stockholders, to the removal
of directors or to the requirements for amendment of these By-laws. Notice of
any amendment, addition or repeal of any By-law by the Board of Directors
stating the substance of such action shall be given to all stockholders not
later than the time when notice is given of the meeting of stockholders next
following such action by the Board of Directors. Any By-law adopted by the
Board of Directors may be amended or repealed by the stockholders.
Section 7.2. Date of Annual Meeting of Stockholders. No amendment of these
------- --- --------------------------------------
By-laws changing the date of the annual meeting of stockholders may be made
within sixty days before the date fixed in these By-laws for such meeting.
Notice of such change shall be given to all stockholders at least twenty days
before the new date fixed for the meeting.
Article VIII - [Reserved]
-------------------------
Article IX - Control Share Acquisitions
---------------------------------------
The provisions of Chapter 110D of the Massachusetts General Laws shall
not apply to control share acquisitions (as defined in such Chapter) of the
corporation.
<PAGE>
EXHIBIT 4.2
PHOTOELECTRON CORPORATION
SUBORDINATED CONVERTIBLE NOTE
PURCHASE AGREEMENT
Dated as of May 22, 1990
<PAGE>
This Agreement is dated as of the 22nd day of May, 1990, by and among
Thermo Electron Corporation ("Thermo"), Photoelectron Investments Corporation of
Liberia, a Liberian corporation ("PIC"), and Photoelectron Corporation, a
Massachusetts corporation (the "Company").
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.01 The Securities. The Company has authorized the issuance and sale of
---------------
the Company's $300,000 principal amount 8% Subordinated Convertible Notes due
1997, (the "Notes"). The Notes shall be in the principal amount set forth in the
preceding sentence and shall otherwise be substantially in the form set forth in
Exhibit 1.01 hereto. The terms "Note" or "Notes" shall also include any note or
- ------- ----
notes delivered in exchange or replacement for the Notes. Any shares of Common
Stock issuable upon conversion of the Notes, and such shares when issued, are
herein referred to as the "Conversion Shares."
1.02 The Closing.
------------
The Company agrees to issue and sell to Thermo and PIC, and, subject to and
in reliance upon the terms and conditions of this Agreement, Thermo and PIC each
agrees to purchase the principal amount of the Notes, at par, set forth opposite
their names on Exhibit 1.02 hereto.
------- ----
Such transactions shall take place at a closing (the "Closing") to be held
at the offices of Thermo, on May 22, 1990, or on such other date and at such
time as may be mutually agreed upon. At the Closing, the Company will issue and
deliver the Notes, payable to the order of Thermo and PIC, respectively, against
delivery of checks payable to the order of the Company or wire transfer of funds
to an account specified by the Company.
1.03 Redemption of Notes. On or before May 31, 1997, the Company will
--------------------
redeem, without premium, the initial principal amount of the Notes, or such
lesser amount as may be then outstanding, together with all accrued and unpaid
interest then due thereon. On the stated or accelerated maturity of the Notes,
the Company will pay the principal amount of the Notes outstanding, together
with all accrued and unpaid interest then due thereon.
<PAGE>
-2-
1.04 Transfer and Exchange of Notes. The registered holder of any Note or
------------------------------
Notes may, prior to maturity or prepayment thereof, surrender such Note at the
principal office of the Company for transfer or exchange to any assignee. Within
a reasonable time after notice to the Company from a registered holder of its
intention to make sure exchange and without expense (other than transfer taxes,
if any) to such registered holder, the Company shall issue in exchange therefor
another Note for the same aggregate principal amount as the unpaid principal
amount of the Note so surrendered (or in such multiples thereof as may be
requested by the registered holder) and having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Note so surrendered. Each new Note shall be made payable to
such Person or Persons, or registered assigns, as the registered holder of such
surrendered Note may designate, and such transfer or exchange shall be made in
such a manner that no gain or loss of principal or interest shall result
therefrom.
1.05 Replacement of Notes. Upon receipt of evidence satisfactory to the
--------------------
Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; provided, however, if any Note of which Thermo or
-------- -------
PIC, their nominees or any of their subsidiaries or parents is the registered
holder is lost, stolen or destroyed, the affidavit of the president, treasurer
or assistant treasurer of the registered holder, including a representation to
the effect that such Note has not been negotiated and setting forth the
circumstances with respect to such loss, theft or destruction, shall be accepted
as satisfactory evidence thereof, and no indemnity bond or other security shall
be required as a condition to the execution and delivery by the Company of a
new Note in replacement of such lost, stolen or destroyed Note other than the
registered holder's written agreement to indemnify the Company.
1.06 Subordination. The Company, for itself, its successors and assigns,
-------------
covenants and agrees, and Thermo, PIC and each successor holder of the Notes by
his or its acceptance thereof likewise covenants and agrees, that
notwithstanding any other provision of this Agreement or the Note, the payment
of the principal of and interest on each and all of the Notes shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all Senior Debt (as hereinafter
defined) at any time outstanding.
<PAGE>
-3-
(a) Payment of Senior Debt. In the event of any insolvency or
----------------------
bankruptcy proceedings, or any proceedings in connection therewith, relative to
the Company or to its property, or, in the event of any proceedings for the
Company of distribution or marshalling of its assets or any composition with
creditors of the Company, whether or not involving insolvency or bankruptcy,
then and in any such event all Senior Debt shall be paid in full before any
payment or distribution of any character, whether in cash, securities or other
property, shall be made on account of the Notes; and any such payment or
distribution, except securities that are subordinated and junior in right of
payment to the payment of all Senior Debt then outstanding in terms of
substantially the same tenor as this Section 1.06, which would, but for the
provisions hereof, be payable or deliverable with respect to the Notes shall be
paid or delivered directly to the holders of Senior Debt (or their duly
authorized representatives), in the proportions in which they hold the same,
until all Senior Debt shall have been paid in full, and every holder of the
Notes by becoming a holder thereof shall have designated and appointed the
holder or holders of Senior Debt (and their duly authorized representatives) as
his or its agents and attorneys-in-fact to demand, sue for, collect and receive
such Senior Debt holder's ratable share of all such payments and distributions
and to file any necessary proof of claim therefor and to take all other action
(including the right to vote such Senior Debt holder's ratable share of the
Notes), in the name of the holders (or their authorized representatives), that
such Senior Debt holder may determine to be necessary or appropriate for the
enforcement of this Section 1.06. Thermo and each successor holder of the Note
by its or his acceptance thereof agrees to execute, at the request of the
Company, a separate agreement with any holder of Senior Debt on the terms set
forth in this Section 1.06.
(b) No Payment on Note Under Certain Conditions.
-------------------------------------------
In the event that:
(i) any default occurs in the payment of principal of or
interest on any Senior Debt and during the continuance of such default, or
(if a shorter period) until such payment has been made or such default has
been cured or waived in writing by such holder of Senior Debt; or
(ii) the maturity of any Senior Debt is accelerated by any holder
thereof because of a default with respect thereto and until such
acceleration has been rescinded or said Senior Debt has been paid;
<PAGE>
-4-
then and during the continuance of any of such events no payment shall be made
by the Company, directly or indirectly, on account of the principal of or
interest on the Notes.
(c) Payments Held in Trust. In case any payment or distribution shall
-----------------------
be paid or delivered to any holder of the Notes in violation or contravention of
the terms of this subordination, before all Senior Debt shall have been paid in
full, such payment or distribution shall be held in trust for and paid and
delivered to the holders of Senior Debt (or their duly authorized
representatives) until all Senior Debt shall have been paid in full.
(d) Subrogation. Subject to the payment in full of all Senior Debt and
------------
until the Notes shall be paid in full, the holders of the Notes shall be
subrogated to the rights of the holders of the Senior Debt (to the extent of
payments or distributions previously made to such holders of Senior Debt
pursuant to the provisions of subsections (a) and (c) of this Section 1.06) to
receive payments or distributions of assets of the Company applicable to the
Senior Debt. No such payments or distributions applicable to the Senior Debt
shall, as between the Company and its creditors, other than the holders of
Senior Debt and the holders of the Notes, be deemed to be a payment by the
Company to or on account of the Notes; and for the purposes of such subrogation,
no payments or distributions to the holders of Senior Debt to which the holders
of the Notes would be entitled except for the provisions of this Section 1.06
shall, as between the Company and its creditors, other than the holders of
Senior Debt and the holders of the Notes, be deemed to be a payment by the
Company to or on account of the Senior Debt.
(e) Scope of Section. The provisions of this Section 1.6 are intended
-----------------
solely for the purpose of defining the relative rights of the holders of the
Notes, on the one hand, and the holders of the Senior Debt, on the other hand.
Nothing contained in this Section 1.06 or elsewhere in this Agreement or the
Notes is intended to or shall impair, as between the Company and its creditors,
other than the holders of Senior Debt, and the holders of the Notes, the
obligation of the Company, which is unconditional and absolute, to pay to the
holders of the Notes the principal of and interest on the Notes as and when the
same shall become due and payable in accordance with the terms thereof, or to
affect the relative rights of the holders of the Senior Debt, nor shall anything
herein or therein prevent the holder of any Note from accepting any payment with
respect to such Note or exercising all remedies otherwise permitted by
applicable law upon default under such Note, subject to the rights, if any,
under this Section 1.06 of the holders of Senior Debt in respect of cash,
property or notes of the Company received by the holders of the Notes.
<PAGE>
-5-
(f) Survival of Rights. The right of any present or future
-------------------
holder of Senior Debt to enforce subordination of the Notes pursuant to the
provisions of this Section 1.06 shall not at any time be prejudiced or impaired
by any act or failure to act on the part of the Company or any such holder of
Senior Debt, including without limitation, any forbearance, waiver, consent,
compromise, amendment, extension, renewal or taking or release of security of or
in respect of any Senior Debt or by noncompliance by the Company with the terms
of such subordination regardless of any knowledge thereof such holder may have
or otherwise been charged with.
(g) Amendment or Waiver. The provisions of this Section
--------------------
1.06 may not be amended or waived in any manner that is detrimental to any
Senior Debt without the consent of the holders of all then existing Senior Debt.
(h) Senior Debt Defined. The term "Senior Debt" shall mean
--------------------
(i) all Indebtedness of the Company (which is not convertible into equity
securities of the Company and is not issued in conjunction with equity
securities of the Company or options or warrants to purchase equity securities
of the Company) for money borrowed, including any extension or renewals thereof,
whether outstanding on the date hereof or thereafter created or incurred, which
is not by its terms subordinate and junior to or on a parity with the Notes, and
(ii) all other indebtedness to which the obligations of the Notes shall be
expressly subordinated by the holders of the Notes in writing, citing this
Section 1.06.
(i) Proof of Subordination. Thermo agrees that it will
-----------------------
execute and deliver any other documents evidencing the subordination of the
Notes to Senior Debt that may be reasonably requested by the Company or the
holders of Senior Debt so long as none of the provisions contained in such
documents diminish the rights of Thermo in any manner.
1.07 Representations by Thermo and PIC. Each of Thermo and PIC
----------------------------------
represents that it is its present intention to acquire the Notes for its own
account and that the Notes are being and will be acquired for the purpose of
investment and not with a view to distribution or resale thereof. The
acquisition by each of Thermo and PIC of the Notes shall constitute a
confirmation by it of this representation.
<PAGE>
-6-
ARTICLE II
COVENANTS OF THE COMPANY
2.01 Affirmative Covenants of the Company Other Than Reporting
---------------------------------------------------------
Requirements. Without limiting any other covenants and provisions hereof,
- --------------
the Company covenants and agrees that, so long as any of the Notes are
outstanding, it will perform and observe the following covenants and
provisions:
(a) Punctual Payment. Pay the principal of and interest on each of
-----------------
the Notes at the times and place and in the manner provided in the Notes and
herein.
(b) Preservation of Corporate Existence. Preserve and maintain
------------------------------------
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified, as a foreign corporation
in each jurisdiction in which such qualification is necessary or desirable in
view of its business and operations or the ownership of its properties; and
preserve and maintain all material licenses and other rights to use patents,
processes, licenses, trademarks, trade names, inventions, intellectual property
rights or copyrights owned or possessed by it and necessary to the conduct of
its business.
(c) Compliance with Laws. Comply, in all material respects with
---------------------
all applicable laws, rules, regulations and orders of any governmental
authority, noncompliance with which could materially adversely affect its
business or condition, financial or otherwise.
(d) Keeping of Records and Books of Account. Keep adequate records
----------------------------------------
and books of account in which complete entries will be made in accordance with
generally accepted accounting principles consistently applied, reflecting all
financial transactions of the Company and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection within its business shall be made.
(e) Budgets and Board Approval. Prior to the commencement
---------------------------
of each fiscal year, prepare and submit to, and obtain the approval of a
majority of, the Board of Directors of a budget for the upcoming fiscal year,
including projections of research and development expenditures, capital and
operating expenses, cash flow and profits and losses, all itemized in reasonable
detail.
(f) Financings. Promptly, fully and in detail, inform the Board
----------
of Directors in advance of any commitments or contracts relating to financing of
any nature for the Company or pledge of corporate assets.
<PAGE>
-7-
(g) Board of Directors; Indemnification. The Board of Directors shall
------------------------------------
not consist of more than four (4) directors. The By-laws of the Company shall at
all times provide for the indemnification of the Board of Directors to the full
extent provided by the law of jurisdiction in which the Company is organized.
The Company shall maintain directors and officers insurance with coverage and
premium levels consistent with policies carried by companies of similar size
engaged in similar businesses.
2.02 Negative Covenants of the Company. Without limiting any other
----------------------------------
covenants and provisions hereof, the Company covenants and agrees that, so long
as the Conversion Shares issuable upon conversion of the Notes and the shares
issued by the Company on January 4, 1989 or issuable upon conversion of the 8%
Subordinated Convertible Note issued by the Company on January 4, 1989, in the
aggregate, are greater than 50% of the total outstanding voting securities of
the Company, without the consent of both Thermo and PIC, the Company will not:
(a) Mergers, Sale of Assets, etc. Merge or consolidate with, or sell,
-----------------------------
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) a material portion
of its assets (whether now owned or hereafter acquired) to, any Person, except
for sales or other dispositions of assets in the ordinary course of business.
(b) Dealings with Affiliates and Others. From and after the date of
------------------------------------
this Agreement, enter into any transaction, including, without limitation, any
loans or extensions of credit or royalty agreements, with any officer or
director of the Company or holder of any class of capital stock of the Company,
or any member of their respective immediate families or any corporation or other
entity directly or indirectly controlled by one or more of such officers,
directors or stockholders or members of their immediate families.
(c) Change in Nature of Business. Make any material change in the
-----------------------------
nature of its business as carried on as of the date hereof.
(d) Dividends. Declare or pay any dividends on any class of the
----------
Company's capital stock now or hereafter outstanding or purchase, redeem or
otherwise acquire or retire any of the Company's capital stock of any class now
or hereafter outstanding or otherwise return capital or make distributions of
assets to stockholders as such, except the repurchase of capital stock pursuant
to a certain Stockholders' Agreement of January 4, 1989 among the parties
hereto.
<PAGE>
-8-
2.03 Reporting Requirements. The Company will furnish the following to
-----------------------
each holder who owns of record or beneficially or has the right to acquire from
the Company any Conversion Shares, to each holder of the Notes and to each
holder of 15% or more of the Company's Common Stock:
(a) As soon as available and in any event within thirty (30) days
after the end of each fiscal quarter of the Company, a balance sheet of the
Company as of the end of such quarter and a statement of income and retained
earnings and of changes in financial position of the Company for the period
ending with such quarter, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief financial officer of the Company as
having been prepared in accordance with the accounting principles applied in the
prior annual audited financial statements of the Company, and such financial
statements shall set forth in comparative form the corresponding figures for the
corresponding period of the prior fiscal year.
(b) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, a balance sheet of the Company
as of the end of such fiscal year and statements of income and retained earnings
and of changes in financial position of the Company for such fiscal year,
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, and, if audited, all such statements in audited form and
duly certified by a nationally recognized independent public accountant;
(c) Any written report submitted to the Company by independent
public accountants in connection with any annual or interim audit of the books
of the Company made by such accountants;
(d) Promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, materially
affecting the Company when considered as a whole that are not fully covered by
insurance; and
(e) At least thirty (30) days prior to the commencement of each
fiscal year of the Company, a copy of the operating plan and budget.
<PAGE>
-9-
ARTICLE III
CONVERSION OF THE NOTE
3.01 Conversion Right. Subject to and in compliance with the provisions
-----------------
of this Article III all or any part of the principal amount outstanding of any
Note and, at the option of the holder, all accrued and unpaid interest may be
converted at any time or from time to time into fully paid and non-assessable
shares of Common Stock.
3.02 Applicable Conversion Value. The price at which the outstanding
----------------------------
principal of any Note may be converted into Common Stock (the "Applicable
Conversion Value") shall, subject to adjustment as hereinafter provided, be two
dollars ($2).
3.03 Adjustments for Sale of Common Stock at Less Than Applicable
------------------------------------------------------------
Conversion Value. Except for the issuance of up to 120,000 shares of the
- -----------------
Company's Common Stock to employees, directors or consultants of the Company
pursuant to an option plan or plans approved by the Company's Board of Directors
(the "Reserved Employee Shares"), if the Company shall, while there are any
Notes outstanding, issue or sell shares of its Common Stock without
consideration or at a price per share less than the Applicable Conversion Value
in effect immediately prior to such issuance or sale, then in each such case
such Applicable Conversion Value upon each such issuance or sale, except as
hereinafter provided, shall be lowered so as to be equal to an amount determined
by multiplying the Applicable Conversion Value by a fraction:
(1) the numerator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock, plus (b) the number of shares of
Common Stock that the net aggregate consideration if any, received by the
Company for the total number of such additional shares of Common Stock so
issued would purchase at the Applicable Conversion Value in effect
immediately prior to such issuance; and
(2) the denominator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock plus (b) the number of such additional
shares of Common Stock so issued.
For purposes of computation of the Applicable Conversion Value, if part or all
of the consideration to be received by the Company in connection with the
issuance of shares of Common Stock or any of the other securities described in
this Article III consists of property other than cash, such consideration
<PAGE>
-10-
shall be deemed to have a fair market value that is reasonably determined in
good faith by the Board of Directors.
3.04 Warrants, Options, etc. for Common Stock. For the purposes of this
-----------------------------------------
Article III, the issuance after the date of this Agreement of any warrants,
options (other than the Reserved Employee Shares), subscriptions or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share (as hereinafter determined) that may be
received by the Company for such Common Stock shall be less than the Applicable
Conversion Value at the time of such issuance. Any obligation, agreement or
undertaking to issue warrants, options, subscriptions or purchase rights at any
time in the future shall be deemed to be an issuance at the time such
obligation, agreement or undertaking is made or arises. No adjustment of the
Applicable Conversion Value shall be made upon the issuance of any shares of
Common Stock that are issued pursuant to the exercise of any conversion or
exchange rights in any convertible securities if any adjustment shall previously
have been made upon the issuance of any such warrants, options or subscriptions
or purchase rights or upon the issuance of any convertible securities (or upon
the issuance of any warrants, options or any rights therefor) as provided above.
Any adjustment of the Applicable Conversion Value that relates to warrants,
options, subscriptions or purchase rights with respect to shares of Common Stock
shall be disregarded if, as and when all of such warrants, options,
subscriptions or purchase rights expire or are cancelled without being
exercised, so that the Applicable Conversion Value effective immediately upon
such cancellation or expiration shall be equal to the Applicable Conversion
Value in effect immediately prior to the issuance of the expired or cancelled
warrants, options, subscriptions or purchase rights, with such additional
adjustments as would have been made to that Applicable Conversion Value had the
expired or cancelled warrants, options subscriptions or purchase rights not been
issued. For purposes of this Article III, the "Net Consideration Per Share"
that may be received by the Company shall be determined as follows:
(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company for the
issuance of such warrants, options, subscriptions or other purchaser rights
or convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock that
would
<PAGE>
-11-
be issued if all such warrants, options, subscriptions or other purchase
rights or convertible or exchangeable securities were exercised, exchanged or
converted.
(B) The "Net Consideration Per Share" that may be received
by the Company shall be determined in each instance as of the date of
issuance of warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities without giving effect to any
possible future price adjustments or value adjustment that may be
applicable with respect to such warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities.
(C) If a part or all of the consideration received by the
company in connection with the issuance of shares of the Common Stock or
the issuance of any of the securities described in this Section 3.04
consists of property other than cash, and the Board of Directors of the
Company is unable to arrive at any valuation of such property, the
Company at its expense will promptly cause independent accountants of
recognized standing selected by the Company to value such property,
whereupon such value shall be given to such consideration and shall be
recorded on the books of the Company with respect to receipt of such
property.
3.05 Dilution in Case of Other Securities. In case any Other
-------------------------------------
Securities shall be issued or sold, or shall become subject to issue upon the
conversion or exchange of any stock (or Other Securities) of the Company (or any
other issuer of Other Securities or any other Person referred to in Section
3.08) or to subscription, purchase or other acquisition pursuant to any rights
or options granted by the Company (or such other issuer or Person), for a
consideration per share so as to dilute the conversion rights evidenced by the
Notes, the computations, adjustments and readjustments provided for in Section
3.03 with respect to the Applicable Conversion Value shall be made as nearly as
possible in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable on the conversion of the Notes, so as to
protect the holders of the Notes against the effect of such dilution.
3.06 Extraordinary Events. If the Company shall after the date of
--------------------
this Agreement (i) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock or (iii) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Applicable Conversion Value shall, simultaneously with the happening
of such event, be
<PAGE>
-12-
adjusted by multiplying the then Applicable Conversion Value by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Applicable Conversion value then in
effect. The Applicable Conversion Value, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive event or events described
herein in this Section 3.06.
3.07 Adjustment for Dividends in Other Stock, Property, etc.;
--------------------------------------------------------
Reclassification, etc. In case at any time or from time to time after the date
- ----------------------
of this Agreement the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend, or
(b) any cash, or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock split (adjustments in respect of which are provided
for in Section 3.06) and normal cash dividends,
then and in each such case each holder of a Note, on the conversion thereof as
provided in this Article III, shall be entitled to receive the amount of stock
and other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3.07) that such holder would hold on
the date of such conversion if on the date thereof it had been the holder of
record of the number of shares of Common Stock that it would have received had
its Note been converted into Common Stock immediately before the date of such
event to and including the Conversion Date (as that term is defined in Section
3.11), and had thereafter, during the period from the date hereof to and
including the date of such conversion, retained such shares and all such other
or additional stock and other securities and property (including cash in the
cases referred to in subdivisions (b) and (c) of this Section 3.07) receivable
by it as aforesaid during such period, giving effect to all adjustments called
for during such period under this Article III.
<PAGE>
-13-
3.08 Adjustment for Reorganization, Consolidation, Merger, etc.
----------------------------------------------------------
If at any time or from time to time the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other Person or (c)
transfer all or substantially all of its properties or assets to any other
Person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, each holder of a Note, on the conversion
thereof as provided in this Article III at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
converted its Note immediately prior thereto, all subject to further adjustment
thereafter as provided under this Article III.
(i) Dissolution. In the event of any dissolution of
------------
the Company following the transfer of all or substantially all of its properties
or assets, the Company, prior to such dissolution, shall at its expense deliver
or cause to be delivered the stock and other securities and property (including
cash, if applicable) receivable by the holders of the Notes after the effective
date of such dissolution pursuant to this Section 3.08 to a bank or trust
company having its principal office in Boston, Massachusetts, as trustee for
the holder or holders of the Notes, which shall establish procedures for the
exchange of such property for the Notes.
(ii) Continuation of Terms. Upon any reorganization,
----------------------
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3.08, each Note shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the conversion of any Note after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of the Note as provided in Section 3.09.
3.09 No Dilution or 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
<PAGE>
-14-
seek to avoid the observance or performance of any of the terms of the Notes,
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 holders of shares of Common Stock issuable upon
conversion of the Notes against dilution or other impairment.
3.10 Certificate as to Adjustments. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on the
conversion of the Notes, the Company at its expense will promptly provide each
holder of the Notes, at the election of such holder, a certificate of the
president and of the chief financial officer of the Company setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding and (c) the Applicable Conversion Value
in effect immediately prior to such issue or sale and as adjusted and readjusted
on account hereof.
3.11 Exercise of Conversion Privilege. To exercise its conversion
--------------------------------
privilege, a holder of a Note shall surrender the Note being converted to the
Company at the Company's principal office, and shall give written notice to the
Company at that office that such holder elects to convert such Note, or a
portion thereof. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The Note surrendered for
conversion shall be accompanied by proper assignment thereof to the Company or
in blank. The date when such written notice is received by the Company, together
with the Note being converted, shall be the "Conversion Date." As promptly as
practicable, but in any event within 15 days after the Conversion Date, the
Company shall issue and shall deliver to the holder of the Note being converted,
or on its written order, such certificate or certificates as it may request for
the number of whole shares of Common Stock issuable upon the conversion of such
Note in accordance with the provisions of this Article III, cash in the amount
of all accrued and unpaid interest on such Note up to and including the
Conversion Date, any property or securities issuable upon conversion as provided
in Section 3.07 and cash, as provided in Section 3.12, in respect of any
fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the Conversion Date, and at such time the rights of the holder as
<PAGE>
-15-
holder of a Note shall cease and the Person or Persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares of Common Stock represented thereby.
3.12 Cash in Lieu of Fractional Shares. No fractional shares of Common
---------------------------------
Stock shall be issued upon the conversion of a Note. Instead of any fractional
shares of Common Stock that would otherwise be issuable upon conversion of a
Note, the Company shall pay to the holder of the Note that was converted a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the market price per share of the Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors) at the close of business
on the Conversion Date.
3.13 Partial Conversion. In the event some but not all of the principal
------------------
amount represented by a Note surrendered by a holder is converted, the Company
shall execute and deliver to or on the order of the holder, at the expense of
the Company, a new Note representing the principal amount that was not
converted.
3.14 Reservation of Common Stock. The Company shall at all times reserve
---------------------------
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Notes, sufficient
shares of Common Stock to effect the conversion of all outstanding Notes, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding Notes, the
Company shall take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to a number of shares that shall
be sufficient for that purpose.
3.15 Notice of Record Date. In the event of
---------------------
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof that are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any merger or
consolidation of the Company or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
<PAGE>
-16-
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Company, then and in each such event the Company shall mail or cause
to be mailed to each holder of a Note a notice specifying (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective and (iii) the time, if any, that is to be fixed, as to when
the holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for securities or
other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up. Such notice shall be mailed at least 30 days prior to the date
specified in such notice on which such action is to be taken.
ARTICLE IV
RIGHT OF FIRST REFUSAL
4.01 Right of First Refusal. Except for the Reserved Employee shares, the
-----------------------
Company shall not issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, (i) any shares of Common
Stock, (ii) any other equity security of the Company, including, without
limitation, shares of preferred stock, (iii) any option, warrant or other right
to subscribe for, purchase or otherwise acquire any equity security of the
Company or (iv) any Debt Security, unless in each such case the Company shall
have first received an unconditional bona fide offer from a third party to
purchase such securities (the "Offered Securities") and shall have offered to
sell such Offered Securities to Thermo and PIC as follows: The Company shall
offer to sell to each of Thermo and PIC a portion of the Offered Securities so
that the aggregate number of shares of Common Stock and Conversion Shares then
held by or issuable to each of Thermo and PIC equals forty percent (40%) of the
total number shares of Common Stock to be outstanding after the proposed
issuance by the Company (assuming the conversion of the Notes and exercise of
all options held by employees of the Company and the issuance and exercise of
all options reserved for issuance to employees of the Company by the Board of
Directors pursuant to any option plan approved by the Directors and
shareholders of the Company), at a price and on the other terms specified by the
Company in writing delivered to Thermo and PIC (the "Offer"), and the Offer by
its terms shall remain
<PAGE>
-17-
open and irrevocable for a period of twenty (20) days, unless waived by Thermo
and PIC.
4.02 Notice of Acceptance. Notice of Thermo's or PIC's intention to
--------------------
accept, in whole or in part, an Offer made pursuant to Section 4.01 shall be
evidenced by a writing signed by Thermo or PIC, as the case may be, and
delivered to the Company prior to the end of the twenty (20) day period of the
Offer, setting forth the portion of the Offered Securities that such office
elects to purchase. If either Thermo or PIC elects not to purchase all such
portion of Offered Securities, then any such securities not elected to be
purchased shall be then offered to whichever of Thermo or PIC elected to
purchase all of its portion of the offer, in the same manner as set forth in
Section 4.01. Such secondary offer shall be open for 10 days.
4.03 Conditions to Acceptance and Purchase.
-------------------------------------
(a) Permitted Sales of Refused Securities. If Notices of Acceptance
-------------------------------------
are not given by Thermo and PIC in respect of all the Offered Securities
pursuant to Sections 4.01 and 4.02, the Company shall have sixty (60) days from
the expiration of the 10-day period set forth in Section 4.02 to sell all or any
part of such Offered Securities as to which a Notice of Acceptance has not been
given by Thermo or PIC and all of the Offered Securities not subject to the
option of Thermo or PIC pursuant to this Article IV (the "Refused Securities")
to the Person or Persons specified in the Offer, but only for cash and otherwise
in all respects upon terms and conditions, including, without limitation, unit
price and interest rates, which are not more favorable, in the aggregate, to
such other Person or Persons or less favorable to the Company than those set
forth in the Offer.
(b) Reduction in Amount of Offered Securities. In the event the
-----------------------------------------
Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 4.03(a) above),
then Thermo and PIC shall reduce the number of, or other units of, the Offered
Securities specified in their respective Notices of Acceptance to an amount that
shall be not less than the amount of the Offered Securities that each of Thermo
and PIC elected to purchase pursuant to Section 4.02 multiplied by a fraction,
(i) the numerator of which shall be the amount of Offered Securities the Company
actually proposes to sell, and (ii) the denominator of which shall be the amount
of all Offered Securities. In such event, the Company may not sell or otherwise
dispose of more than the reduced amount of the Offered Securities until such
securities have again been offered to Thermo and PIC in accordance with Section
4.01.
<PAGE>
-18-
(c) Closing. Upon the closing, which shall include full payment to
-------
the Company, of the sale to such other Person or Persons of all or less than
all the Refused Securities, Thermo and PIC shall purchase from the Company, and
the Company shall sell to Thermo and PIC, the number of Offered Securities
specified in their respective Notices of Acceptance, as reduced pursuant to
Section 4.03(b), upon the terms and conditions specified in the Offer. The
purchase by Thermo and PIC of any Offered Securities is subject in all cases to
the preparation, execution and delivery by the Company, Thermo and PIC of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to Thermo, PIC and their counsel.
4.04 Further Sale. In each case, Offered Securities not purchased by
------------
Thermo, PIC or other Person or Persons in accordance with Section 4.03 may not
be sold or otherwise disposed of until they are again offered to Thermo under
the procedures specified in Sections 4.01, 4.02 and 4.03.
4.05 Exceptions. The rights of Thermo under this Article IV shall not
----------
apply to:
(a) Common stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common Stock, or
(b) up to 120,000 shares of Common Stock, or options exercisable
therefore, including options outstanding on the date of this Agreement (such
number to be equitably adjusted in the event of any stock split, combination,
reclassification or other similar event occurring on or after the date of this
Agreement) issuable to current and future officers, employees, directors or
consultants of the Company pursuant to any stock option plan or stock purchase
plan approved by a vote of not less than a majority of the Board of Directors of
the Company.
ARTICLE V
EVENTS OF DEFAULT
5.01 Events of Default. If any of the following events ("Events of
-----------------
Default") shall occur and be continuing seven days after delivery of notice (as
described below) to the Company:
(a) The Company shall fail to pay any installment of principal of
any of the Notes when due; or
(b) The Company shall fail to pay any interest on any of the Notes
when due or shall default in the performance of any covenant contained in
Section 2.02 and such failure or default shall continue for seven (7) business
days; or
<PAGE>
-19-
(c) The Company shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or the Note on its part to be
performed or observed and any such failure remains unremedied for thirty (30)
days after written notice thereof shall have been given to the Company by any
registered holder of the Notes; or
(d) The Company shall fail to pay any Indebtedness for borrowed
money (other than as evidenced by the Notes) owing by the Company or any
interest or premium thereon, when due (or, if permitted by the terms of the
relevant document, within any applicable grace period), whether such
Indebtedness shall become due by scheduled maturity, by required prepayment, by
acceleration, by demand or otherwise, or shall fail to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or the Note) evidencing or securing or
relating to any Indebtedness owing by the Company when required to be performed
(or, if permitted by the terms of the relevant document, within any applicable
grace period), if the effect of such failure to pay or perform is to accelerate,
or to permit the holder or holders of such Indebtedness, or the trustee or
trustees under any such agreement or instrument, to accelerate, the maturity of
such Indebtedness, unless such failure to pay or perform shall be waived by the
holder or holders of such Indebtedness or such trustee or trustees; or
(e) The Company shall be involved in financial difficulties as
evidenced (i) by its admitting in writing its inability to pay its debts
generally as they become due (ii) by its commencement of a voluntary case under
Title 11 of the United States Code as from time to time in effect, or by its
authorizing, by appropriate proceedings of its Board of Directors or other
governing body, the commencement of such a voluntary case, (iii) by its filing
an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of any
such petition, (iv) by the entry of an order for relief in any involuntary case
commenced under said Title 11, (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief,
(vi) by the entry of an order by a court of competent jurisdiction (a) finding
it to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors
or (c) assuming custody of, or appointing a receiver or other
<PAGE>
-20-
custodian for, all or a substantial part of its property or (vii) by its making
an assignment for the benefit of, or entering into a composition with, its
creditors, or appointing or consenting to the appointment of a receiver or other
custodian for all or a Substantial part of its property; or
(f) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Company and such judgment, writ or similar process shall not be released,
vacated or fully bonded within ninety (90) days after its issue or levy; then,
and in any such event, Thermo or any other holder of the Notes may, by notice to
the Company, declare the entire unpaid principal amount of the Notes, all
interest accrued and unpaid thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Notes, all such accrued
interest and all such amounts shall become and be forthwith due and payable
(unless there shall have occurred an Event of Default under subsection 5.01(e)
in which case all such amounts shall automatically become due and payable),
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Company.
ARTICLE VI
DEFINITIONS AND ACCOUNTING TERMS
6.01 Certain Defined Terms. As used in this Agreement, the following
----------------------
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Debt Security" means and includes (i) any debt security of the Company
that by its terms is convertible into or exchangeable for any equity security of
the Company, (ii) any security of the Company that is a combination of debt and
equity or (iii) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any such debt security of the Company.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles consistently
applied, be classified upon the obligor's balance sheet as liabilities,
excluding any liabilities in respect of deferred federal or state income taxes,
but in any event including, without limitation, liabilities secured by any
mortgage on property owned or acquired subject to such mortgage, whether or not
the liability secured thereby shall have been assumed, and also including,
without limitation, (i) all guaranties, endorsements and other
<PAGE>
-21-
contingent obligations, in respect of Indebtedness of others, whether or not the
same are or should be so reflected in said balance sheet, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and (ii) the present value of
any lease payments due under leases required to be capitalized in accordance
with applicable Statements of Financial Accounting Standards, determined by
discounting all such payment at the interest rate determined in accordance with
applicable Statements of Financial Accounting Standards.
"Other securities" shall mean any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) that the
holders of the Note at any time shall be entitled to receive, or shall have
received, on the conversion of the Note, in lieu of or in addition to Common
Stock, or that at any time may be issuable or shall have been issued in exchange
for or in replacement of Common Stock or Other Securities pursuant to Article
III.
"Permitted Assignee" shall mean with respect to either Thermo or PIC any
person or entity directly or indirectly controlling, controlled by or under
common control with such assigning person. For the purposes of this definition,
"Control" shall mean the power and authority to direct the affairs of the entity
in question through the direct or indirect ownership or control over not less
than 50.1% of the such entities voting securities or equity.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or of any other federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at the time.
ARTICLE VII
MISCELLANEOUS
7.01 No Waiver; Cumulative Remedies. No failure or delay on the part
-------------------------------
Thermo or PIC, or any other holder of the Notes, in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
<PAGE>
-22-
7.02 Amendments, Waivers and Consents. Any provision in this Agreement to
--------------------------------
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only upon the prior written consent of PIC and Thermo. Any
provision of this Agreement or the Note notwithstanding, changes in or additions
to the Note may be made, and compliance with any provision of the Note or this
Agreement relating to the Note may be omitted or waived, only upon the prior
written consent of holders of greater than 50% of the principal amount of the
Notes; provided, however, that no such consent shall be effective to reduce or
-------- -------
to postpone the date fixed for the payment of the principal (including any
required redemption) or interest payable on any Note, without the consent of the
holder thereof, or to reduce the percentage of the Notes the consent of the
holders of which is required under this Section. Any waiver or consent may be
given subject to satisfaction of conditions stated therein and any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
7.03 Address for Notices, etc. All notices, requests, demands and other
------------------------
communications provided for hereunder shall be in writing and mailed by means of
certified mail (or other form of registered mail) or telegraphed or delivered to
the applicable party at the addresses indicated below:
If to the Company:
Photoelectron Corporation
580 Winter Street
Waltham, MA 02254
If to Thermo or PIC: at the address set forth opposite their respective
names as set forth on Exhibit 1.02.
------------
If to any other holder of the Notes: at such holder's address for notice as
set forth in the register maintained by the Company, or, as to each of the
foregoing, at such other address as shall be designated by such Person in a
written notice to the other party complying as to delivery with the terms of
this Section.
7.04 Binding Effect; Assignment. This Agreement shall be binding upon and
--------------------------
inure to the benefit of the Company, PIC and Thermo and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of Thermo and PIC obtained in accordance with Section 7.02 hereof and
the rights and interests of Thermo and PIC, respectively, including any shares
of Common Stock, Conversion
<PAGE>
-23-
Shares or Notes shall be assignable without the consent of the Company to any
Permitted Assignee.
7.05 Prior Agreements. This Agreement constitutes the entire agreement
-----------------
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
7.06 Severability. The invalidity or unenforceability of any provision
-------------
hereof shall in no way affect the validity or enforceability of any other
provision.
7.07 Governing Law. This Agreement and the Notes shall be governed by,
--------------
and construed in accordance with, the laws of the Commonwealth of Massachusetts.
7.08 Headings. Article, Section and subsection headings in this
---------
agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
7.09 Sealed Instrument. This Agreement is deemed to be executed as an
------------------
instrument under seal.
7.10 Counterparts. This Agreement may be executed in any number of
-------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
PHOTOELECTRON CORPORATION
By: /s/ Peter M. Nomikos
------------------------------
THERMO ELECTRON CORPORATION
By: /s/ George N. Hatsopoulos
-------------------------------
Its: PRESIDENT
PHOTOELECTRON INVESTMENTS CORPORATION OF
LIBERIA
By: /s/ Peter M. Nomikos
------------------------------
Peter M. Nomikos, President
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
8% Subordinated Note Due 1997
No. -1 Waltham, Massachusetts
May __, 1990
For value received, PHOTOELECTRON CORPORATION, a Massachusetts corporation
(the "Company"), hereby promises to pay to ______________________ (hereinafter
referred to as the "Payee"), or registered assigns, on May __, 1997, as
described below, the principal sum of _________________ ($________) or such part
thereof as then remains unpaid, to pay interest from the date hereof on the
whole amount of said principal sum remaining from time to time unpaid at the
rate of eight percent (8%) per annum, such interest to be payable on each
November __ and May __, the first such payment to be due and payable on November
__, 1990, until the whole amount of the principal hereof remaining unpaid shall
become due and payable, and to pay interest on all overdue principal (including
any overdue required redemption) and interest at a rate per annum equal to the
prime or base lending rate of the First National Bank of Boston plus three
----
percent (3%). Principal and all accrued but unpaid interest shall be repaid on
May __, 1997. Principal and interest shall be payable in lawful money of the
United States of America, in immediately available funds, at the principal
office of the Payee or at such other place as the legal holder may designate
from time to time in writing to the Company. Interest shall be computed on the
basis of a 360-day year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note Purchase Agreement dated as of May __,
1990, between the Company, Thermo Electron Corporation and Photoelectron
Investments Corporation
<PAGE>
of Liberia identified therein (as the same may be amended from time to time, the
"Agreement"), and each holder of this Note, by its acceptance hereof, agrees to
be bound by the provisions of the Agreement, a copy of which may be inspected by
the legal holder hereof at the principal office of the Company. As provided in
the Agreement, (i) this Note is subject to prepayment as specified in the
Agreement, (ii) the principal of and interest on this Note is subordinated to
Senior Debt, as defined in the Agreement, and (iii) this Note is convertible
into Common Stock of the Company in the manner set forth in the Agreement.
As further provided in the Agreement, upon surrender of this Note for
transfer or exchange, a new Note or new Notes of the same tenor dated the date
to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due, the
Company further promises to pay all cost of collection, including all reasonable
attorney's fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and shall have the effect of a sealed
instrument.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:
-----------------------------
Title:
--------------------------
Attest:
- ---------------------------------
<PAGE>
Exhibit 1.02
------------
Principal Amount of
Purchaser Notes Purchased
- --------- -------------------
Thermo Electron Corporation $125,000
101 First Avenue
Waltham, MA 02254
Photoelectron Investments
Corporation of Liberia $175,000
c/o Mr. Gordon Greer, Esq.
Bingham, Dana & Gould
150 Federal Street
Boston, MA. 12110
<PAGE>
EXHIBIT 4.3
AMENDMENT AND WAIVER OF
SUBORDINATED CONVERTIBLE NOTE
PURCHASE AGREEMENT DATED AS OF MAY 22, 1990
This Agreement, dated as of August 1, 1996, is made and entered into
by and between Photoelectron Corporation, a Massachusetts corporation
("Company"), Thermo Electron Corporation, a Delaware corporation ("Thermo"), PYC
Corporation, formerly known as Photoelectron Investments Corporation of Liberia,
a Liberian corporation ("PYC") and Peter M. Nomikos ("Nomikos").
The following sets forth the factual background to this Agreement:
A. The Company and Photoelectron Investments Corporation of Liberia
("PIC") entered into a certain Subordinated Convertible Note Purchase Agreement,
dated as of May 22, 1990 (the "1990 Agreement"), a copy of which is attached
hereto as Exhibit A. Pursuant to the 1990 Agreement, the Company issued 8%
Subordinated Notes Due 1997 to Thermo and PIC in principal amounts of $125,000
and $175,000, respectively (collectively, the "1990 Notes").
B. On or about July 11, 1991, the parties orally amended certain
provisions of the 1990 Agreement, and desire to confirm in writing the terms of
that amendment.
C. On or about July 30, 1991, PIC assigned all of its rights, title
and interest in the 1990 Agreement, and any and all Notes issued thereunder, to
Nomikos.
D. The parties desire to amend additional provisions of the 1990
Agreement, which amendments would be effective in the event of the Company's
Initial Public Offering (as defined below).
E. The parties desire to set forth in writing waivers of the rights
of Thermo and Nomikos regarding the Company's non-compliance with certain
provisions of the 1990 Agreement.
F. The parties acknowledge that the amendments and waivers set forth
in this Agreement are in the best interests of the Company and of Thermo and
Nomikos as stockholders of the Company.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. The parties agree that, effective July 11, 1991, the 1990
Agreement was amended by deleting Sections 7.02 and 7.04 in their entirety and
replacing those sections with the language set forth below. The parties hereby
confirm and ratify said amendment.
<PAGE>
"7.02 Amendments, Waivers and Consents. Any provision in this Agreement
---------------------------------
to the contrary notwithstanding, changes in or additions to this Agreement
may be made, and compliance with any covenant or provision herein set forth
may be omitted or waived, only with the consent of the PIC and Thermo. Any
provision of this Agreement or the Note notwithstanding, changes in or
additions to the Note may be made, and compliance with any provision of the
Note or this Agreement relating to the Note may be omitted or waived, only
with the consent of holders of greater than 50% of the principal amount of
the Notes; provided, however, that no such consent shall be effective to
reduce or to postpone the date fixed for the payment of the principal
(including any required redemption) or interest payable on any Note,
without the consent of the holder thereof, or to reduce the percentage of
the Notes the consent of the holders of which is required under this
Section. Any waiver or consent may be given subject to satisfaction of the
conditions stated therein and any waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
* * *
7.04 Binding Effect; Assignment. This Agreement shall be binding upon
---------------------------
and inure to the benefit of the Company, PIC and Thermo and their
respective successors and assigns, except that the Company shall not have
the right to assign its rights hereunder or any interest herein without the
consent of Thermo and PIC obtained in accordance with Section 7.02 hereof
and the rights and interests of Thermo and PIC, respectively, including any
shares of Common Stock, Conversion Shares or Notes shall be assignable
without the consent of the Company to any Permitted Assignee."
2. The parties agree that, effective July 11, 1991, the 1990 Agreement
was amended by deleting Sections 3.01 through 3.15 in their entirety and
replacing those sections with the language set forth below. The parties hereby
confirm and ratify said amendment.
"3.01 Conversion Rights. (a) Principal: Subject to and in compliance
------------------
with the provisions of this Article III, at the option of the holder, all
or any part of the principal amount outstanding on any Note issued pursuant
to this Agreement may be converted at any time at the Applicable Principal
Conversion Value (as defined below) into fully paid and non-assessable
shares of Common Stock in accordance with the provisions of Sections 3.02
to 3.15. (b) Interest: Subject to and in compliance with the provisions
of this Article III, at the option of the holder, all of the accrued and
unpaid interest on any Note issued pursuant to this Agreement may be
converted at any time at the Applicable Interest Conversion Value (as
defined below) into fully paid and non-assessable shares of Common Stock in
accordance with the provisions of Sections 3.02 and 3.06 to 3.15; provided,
however, that upon conversion of all or any part of the principal amount of
any
-2-
<PAGE>
Note pursuant to clause (a) of this Section, all accrued and unpaid
interest on such Note up to and including the Conversion Date (as defined
below) shall be converted at the Applicable Interest Conversion Value into
fully paid and non-assessable shares of Common Stock.
3.02 Conversion Values. (a) Applicable Principal Conversion Value: The
------------------
price at which the outstanding principal of any Note issued under this
Agreement may be converted into Common Stock (the "Applicable Principal
Conversion Value") shall, subject to adjustment as provided in Sections
3.03 through 3.15, be forty cents ($.40). (b) Applicable Interest
Conversion Value: The price at which accrued and unpaid interest on the
outstanding principal balance of any Note issued under this Agreement may
be converted into Common Stock (the "Applicable Interest Conversion Value")
shall, subject to adjustment as provided in Sections 3.06 through 3.15, be
equal to the fair market value of the Common Stock on the first day of the
fiscal quarter in which the interest to be converted accrued. Prior to the
time that the Common Stock is traded over-the-counter, on the New York or
American stock exchanges or on the National Association of Securities
Dealers Automated Quotation National Market System ("NASDAQ"), the fair
market value shall be the price at which the Company most recently issued
any stock, Common or Preferred, in a private placement of securities. From
and after the date upon which the Common Stock is traded over-the-counter,
on the New York or American stock exchanges or on NASDAQ, the fair market
value of the Common Stock shall be the Market Price of such stock on the
date upon which the interest accrued as determined in accordance with the
provisions of clause (d) of this Section. (c) Applicable Conversion Value:
For the purposes of Section 3.06, the Applicable Principal Conversion Value
and the Applicable Interest Conversion Value are collectively referred to
as the "Applicable Conversion Value." (d) Market Price: The term "Market
Price" shall mean the average of the per share daily closing prices of
Common Stock for the 10 consecutive business days beginning with the first
day of the fiscal quarter in which the interest to be converted accrued.
The closing price for each day shall be (i) the last reported sales price
or, in case no such reported sale takes place on such day, the average of
the reported closing bid and ask prices, in either case on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, on NASDAQ, (ii) if the Common
Stock is not listed or admitted to trading on any national securities
exchange or quoted on NASDAQ, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm reasonably selected from time to time by the Company
for that purpose, or (iii) if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on NASDAQ and the
average price cannot be determined as contemplated by clause (ii), the fair
market value as reasonably determined in good faith by the Company's Board
of Directors or in any manner reasonably prescribed by the Company's Board
of Directors. For the purposes of this Section
-3-
<PAGE>
3.02, the term "business day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday, other than any day on which securities are not traded
on such exchange or in such market.
3.03 Adjustments for Sale of Common Stock at Less Than Applicable
------------------------------------------------------------
Principal Conversion Value. Except for the issuance of up to 120,000
--------------------------
shares of the Company's Common Stock to employees, directors or consultants
of the Company pursuant to an option plan or plans approved by the
Company's Board of Directors (the "Reserved Employee Shares"), if the
Company shall, while there are any Notes outstanding, issue or sell shares
of its Common Stock without consideration or at a price per share less than
the Applicable Principal Conversion Value in effect immediately prior to
such issuance or sale, then in each such case such Applicable Principal
Conversion Value upon each such issuance or sale, except as hereinafter
provided, shall be lowered so as to be equal to an amount determined by
multiplying the Applicable Principal Conversion Value by a fraction:
(1) the numerator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock, plus (b) the number of shares of
Common Stock that the net aggregate consideration if any, received by
the Company for the total number of such additional shares of Common
Stock so issued would purchase at the Applicable Principal Conversion
Value in effect immediately prior to such issuance; and
(2) the denominator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock plus (b) the number of such
additional shares of Common Stock so issued.
For purposes of computation of the Applicable Principal Conversion Value,
if part or all of the consideration to be received by the Company in
connection with the issuance of shares of Common Stock or any of the other
securities described in this Article III consists of property other than
cash, such consideration shall be deemed to have a fair market value that
is reasonably determined in good faith by the Board of Directors.
3.04 Warrants, Options, Etc., for Common Stock. For the purposes of this
-------------------------------------------
Article III, the issuance after the date of this Agreement of any warrants,
options (other than the Reserved Employee Shares), subscriptions or
purchase rights with respect to shares of Common Stock and the issuance of
any securities convertible into or exchangeable for shares of Common Stock
(or the issuance of any warrants, options or any rights with respect to
such convertible or exchangeable securities) shall be deemed an issuance at
such time of such Common Stock if the Net Consideration Per Share (as
hereinafter determined) that may be received by
-4-
<PAGE>
the Company for such Common Stock shall be less than the Applicable
Principal Conversion Value at the time of such issuance. Any obligation,
agreement or undertaking to issue warrants, options, subscriptions or
purchase rights at any time in the future shall be deemed to be an issuance
at the time such obligation, agreement or undertaking is made or arises. No
adjustment of the Applicable Principal Conversion Value shall be made upon
the issuance of any shares of Common Stock that are issued pursuant to the
exercise of any conversion or exchange rights in any convertible securities
to the extent a corresponding adjustment shall previously have been made
upon the issuance of any such warrants, options or subscriptions or
purchase rights or upon the issuance of any convertible securities (or upon
the issuance of any warrants, options or any rights therefor) as provided
above. Any adjustment of the Applicable Principal Conversion Value that
relates to warrants, options, subscriptions or purchase rights with respect
to shares of Common Stock shall be disregarded if, as and when all of such
warrants, options, subscriptions or purchase rights expire or are canceled
without being exercised, so that the Applicable Principal Conversion Value
effective immediately upon such cancellation or expiration shall be equal
to the Applicable Principal Conversion Value in effect immediately prior to
the issuance of the expired or canceled warrants, options, subscriptions or
purchase rights, with such additional adjustments as would have been made
to that Applicable Principal Conversion Value had the expired or canceled
warrants, options, subscriptions or purchase rights not been issued. For
purposes of this Article III, the "Net Consideration Per Share" that may be
received by the Company shall be determined as follows:
(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company
for the issuance of such warrants, options, subscriptions or other
purchaser rights or convertible or exchangeable securities, plus the
minimum amount of consideration, if any, payable to the Company upon
exercise or conversion thereof, divided by the aggregate number of
shares of Common Stock that would be issued if all such warrants,
options, subscriptions or other purchase rights or convertible or
exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" that may be received by the
Company shall be determined in each instance as of the date of
issuance of warrants, options, subscriptions or other purchase rights
or convertible or exchangeable securities without giving effect to
any possible future price adjustments or value adjustment that may be
applicable with respect to such warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities.
(C) If a part or all of the consideration received by the Company in
connection with the issuance of shares of the Common Stock or the
-5-
<PAGE>
issuance of any of the securities described in this Section 3.04
consists of property other than cash, and the Board of Directors of
the Company is unable to arrive at any valuation of such property,
the Company at its expense will promptly cause independent
accountants of recognized standing selected by the Company to value
such property, whereupon such value shall be given to such
consideration and shall be recorded on the books of the Company with
respect to receipt of such property.
3.05 Dilution in Case of Other Securities. In case any Other Securities
-------------------------------------
shall be issued or sold, or shall become subject to issue upon the
conversion or exchange of any stock (or Other Securities) of the Company
(or any other issuer of Other Securities or any other Person referred to in
Section 3.08) or to subscription, purchase or other acquisition pursuant to
any rights or options granted by the Company (or such other issuer or
Person), for a consideration per share so as to dilute the conversion
rights evidenced by the Note, the computations, adjustments and
readjustments provided for in Sections 3.03 and 3.04 with respect to the
Applicable Principal Conversion Value shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable on the conversion of the Note, so
as to protect the holders of the Note against the effect of such dilution.
3.06 Extraordinary Events. If the Company shall after the date of this
---------------------
Agreement (i) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide its
outstanding shares of Common Stock or (iii) combine its outstanding shares
of the Common stock into a smaller number of shares of the Common Stock,
then, in each such event, the Applicable Conversion Value shall,
simultaneously with the happening of such event, be adjusted by multiplying
the then Applicable Conversion Value by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior
to such event and the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Applicable Conversion Value then in
effect. The Applicable Conversion Value, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 3.06.
3.07 Adjustment for Dividends in Other Stock, Property, Etc.;
--------------------------------------------------------
Reclassification, Etc. In case at any time or from time to time after the
----------------------
date of this Agreement the holders of Common Stock (or Other Securities)
shall have received, or (on or after the record date fixed for the
determination of shareholders eligible to receive) shall have become
entitled to receive, without payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
-6-
<PAGE>
(b) any cash, or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement, other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock split
(adjustments in respect of which are provided for in Section 3.06)
and normal cash dividends,
then and in each such case each holder of a Note, on the conversion thereof
as provided in this Article III, shall be entitled to receive the amount of
stock and other securities and property (including cash in the cases
referred to in clauses (b) and (c) of this Section 3.07) that such holder
would hold on the date of such conversion if on the date thereof it had
been the holder of record of the number of shares of Common Stock that it
would have received had its Note been converted into Common Stock
immediately before the date of such event to and including the Conversion
Date (as that term is defined in Section 3.11), and had thereafter, during
the period from the date hereof to and including the date of such
conversion, retained such shares and all such other or additional stock and
other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3.07) receivable by it as aforesaid
during such period, giving effect to all adjustments called for during such
period under this Article III.
3.08 Adjustment for Reorganization, Consolidation, Merger, Etc. (a)
----------------------------------------------------------
Generally: If at any time or from time to time the Company shall (i)
effect a reorganization, (ii) consolidate with or merge into any other
Person or (iii) transfer all or substantially all of its properties or
assets to any other Person under any plan or arrangement contemplating the
dissolution of the Company, then, in each such case, each holder of a Note,
on the conversion thereof as provided in this Article III at any time after
the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in
lieu of the Common Stock (or Other Securities) issuable on such exercise
prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have
been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so converted its Note
immediately prior thereto, all subject to further adjustment thereafter as
provided under this Article III.
(b) Dissolution: In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause
to be delivered the stock and other securities and property (including
cash, if applicable) receivable by the holders of the Note after the
effective date of such dissolution pursuant to this Section 3.08 to a bank
or trust company having its principal office in Boston,
-7-
<PAGE>
Massachusetts, as trustee for the holder or holders of the Note, which
shall establish procedures for the exchange of such property for the Note.
(c) Continuation of Terms: Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in
this Section 3.08, each Note shall continue in full force and effect and
the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the conversion of any Note after the
consummation of such reorganization, consolidation or merger or the
effective date of dissolution following any such transfer, as the case may
be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the
Company, whether or not such person shall have expressly assumed the terms
of the Note as provided in Section 3.09.
3.09 No Dilution or 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 the Note, 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 holders
of shares of Common Stock issuable upon conversion of the Note against
dilution or other impairment.
3.10 Certificate as to Adjustments. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on
the conversion of the Note, the Company at its expense will promptly provide
each holder of the Note, at the election of such holder, a certificate of
the president and of the chief financial officer of the Company setting
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based, including a statement of (a)
the consideration received or receivable by the Company for any additional
shares of Common Stock (or Other Securities) issued or sold or deemed to
have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities) outstanding or deemed to be outstanding and (c) the Applicable
Principal Conversion Value in effect immediately prior to such issue or sale
and as adjusted and readjusted on account hereof.
3.11 Exercise of Conversion Privilege. (a) Principal: To exercise its
---------------------------------
principal conversion privilege, a holder of a Note shall surrender the Note
being converted to the Company at the Company's principal office, and shall
give written notice to the Company at that office that such holder elects
to convert the outstanding principal balance of such Note, or a portion
thereof. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common
Stock issuable upon such conversion shall be
-8-
<PAGE>
issued. The Note surrendered for conversion shall be accompanied by proper
assignment thereof to the Company or in blank. For purposes of this clause
(a), the date when such written notice is received by the Company, together
with the Note being converted, shall be the "Conversion Date." As promptly
as practicable, but in any event within 15 days after the Conversion Date,
the Company shall issue and shall deliver to the holder of the Note being
converted, or on its written order, such certificate or certificates as it
may request for the number of whole shares of Common Stock issuable upon
the conversion of such Note in accordance with the provisions of this
Article III, the number of whole shares of Common Stock issuable upon the
conversion of all accrued and unpaid interest on such Note up to and
including the Conversion Date, any property or securities issuable upon
conversion as provided in Section 3.07 and cash, as provided in Section
3.12, in respect of any fraction of a share of Common Stock issuable upon
such conversion. Such conversion shall be deemed to have been made
immediately prior to the close of business on the Conversion Date, and at
such time the rights of the holder as holder of a Note shall cease and the
Person or Persons in whose name or names any certificate or certificates
for shares of Common Stock shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the shares of
Common Stock represented thereby. (b) Interest: To exercise its interest
conversion privilege, a holder of a Note shall give written notice to the
Company at the Company's principal office that such holder elects to
convert all accrued and unpaid interest on such Note. Such notice shall
also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock issuable upon such
conversion shall be issued. For purposes of this clause (b), the date when
such written notice is received by the Company shall be the "Conversion
Date." As promptly as practicable, but in any event within 15 days after
the Conversion Date, the Company shall issue and shall deliver to the
holder of the Note, or on its written order, such certificate or
certificates as it may request for the number of whole shares of Common
Stock issuable upon the conversion of the interest and cash, as provided in
Section 3.12, in respect of any fraction of a share of Common Stock
issuable upon such conversion.
3.12 Cash in Lieu of Fractional Shares. No fractional shares of Common
----------------------------------
Stock shall be issued upon the conversion of principal and/or interest with
respect to any Note. Instead of any fractional shares of Common Stock that
would otherwise be issuable upon such conversion, the Company shall pay to
the holder of the Note a cash adjustment in respect of such fractional
shares in an amount equal to the same fraction of the Applicable Principal
Conversion Value (in a case of conversion of principal) or the Applicable
Interest Conversion Value (in a case of conversion of interest).
3.13 Partial Conversion. In the event some but not all of the principal
------------------
amount represented by a Note surrendered by a holder is converted, the
Company shall
-9-
<PAGE>
execute and deliver to or on the order of the holder, at the expense of the
Company, a new Note representing the principal amount that was not
converted.
3.14 Reservation of Common Stock. The Company shall at all times reserve
----------------------------
and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the Note,
sufficient shares of Common Stock to effect the conversion of all
outstanding Notes, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of
all then outstanding Notes, the Company shall take such corporate action as
may be necessary to increase its authorized but unissued shares of Common
Stock to a number of shares that shall be sufficient for that purpose.
3.15 Notice of Record Date. In the event of:
---------------------
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof that are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company or any transfer of all or substantially all of
the assets of the Company to any other corporation, or any other entity or
person, or
(c) any voluntary or involuntary dissolution, liquidation or winding up of
the Company, then and in each such event the Company shall mail or cause to
be mailed to each holder of a Note a notice specifying (i) the date on
which any such record is to be taken for the purpose of such dividend,
distribution or right and a description of such dividend, distribution or
right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding up is expected to become effective and (iii) the time, if any,
that is to be fixed, as to when the holders of record of Common Stock (or
Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up. Such notice
shall be mailed at least 30 days prior to the date specified in such notice
on which such action is to be taken."
3. The parties hereby amend the 1990 Agreement by deleting all references
to Photoelectron Investments Corporation of Liberia, or PIC, and inserting in
their place references to Peter M. Nomikos and Nomikos, respectively.
-10-
<PAGE>
4. To effectuate the amendments set forth in Paragraphs 1 and 2 above,
the Company will issue to Thermo and Nomikos, and Thermo and Nomikos will
accept, Amended and Restated 8% Subordinated Notes in the forms attached hereto
as Exhibits B and C, respectively, as replacements for the Notes originally
issued under the 1990 Agreement. The parties agree that, upon issuance of the
replacement Notes, the Notes originally issued under the 1990 Agreement shall be
deemed cancelled and of no further force and effect.
5. Effective upon the consummation of an Initial Public Offering (as
defined below), the parties hereto agree that the 1990 Agreement shall be
amended as follows:
(a) by deleting the first sentence of Section 2.01(g);
(b) by deleting Section 2.02 entitled Negative Covenants Of The
-------------------------
Company in its entirety;
-------
(c) by deleting Section 2.03 entitled Reporting Requirements in its
----------------------
entirety; and
(d) by deleting Article IV entitled RIGHT OF FIRST REFUSAL
in its entirety.
6. Thermo and Nomikos also waive any rights that they may have under the
1990 Agreement arising from the Company's non-compliance with the terms of
Article IV in connection with the Initial Public Offering and all prior
issuances approved by the Board of Directors of the Company of capital stock,
debt instruments, options and warrants of the Company.
7. "Initial Public Offering" means effectiveness of the Company's
Registration Statement on Form S-1 under the Securities Act of 1933, as amended,
in connection with an initial public offering of the Company's Common Stock
which yields at least $7,500,000 in gross proceeds to the Company.
8. Thermo and Nomikos hereby waive any and all defaults which may have
occurred under the following provisions of the 1990 Agreement prior to the date
hereof:
(i) the obligation to pay interest on each of the Notes issued under the
1990 Agreement at the times and place and in the manner provided in
the Notes and in the 1990 Agreement in compliance with Section 2.01(a)
(it being understood, however, that such interest has continued to
accrue and is payable in the manner set forth in the Amended and
Restated 8% Subordinated Notes Due 1997 attached hereto as Exhibits B
and C);
-11-
<PAGE>
(ii) the obligation to prepare, submit to, and obtain approval from a
majority of the Company's Board of Directors, of a budget for the
upcoming year in compliance with Section 2.01(e);
(iii)the obligation to maintain directors and officers insurance in
compliance with the last sentence of Section 2.01(g);
(iv) the negative covenant restricting affiliated transactions as set forth
in Section 2.02(b) as applied to transactions with Nomikos, or
affiliates of Nomikos, that were approved by the Board of Directors of
the Company and pursuant to which Nomikos or his affiliates loaned
money to or acquired capital stock, warrants or other securities in
the Company;
(v) the negative covenant restricting change in the nature of the business
of the Company as set forth in Section 2.02(c) as applied to the
change in the Company's business from the photocathode business in
which the Company was engaged at the time of its organization to the
medical devices business in which it is now engaged; and
(vi) the reporting requirements set forth in Section 2.03.
9. Except as herein waived or amended, the 1990 Agreement is hereby
confirmed in its entirety.
10. This Agreement shall be binding upon and inure to the benefit of the
respective parties hereto, and their successors and assigns, and shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Massachusetts without regard to its law relating to conflicts of law.
11. This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart.
This Agreement is effective as a sealed instrument, except where
specifically stated otherwise, as of the date first set forth above.
THERMO ELECTRON CORPORATION, a Delaware
corporation
By: /s/ Jonathan Painter
--------------------------------
Name: Jonathan Painter
Its: Treasurer
-12-
<PAGE>
/s/ Peter M. Nomikos
--------------------------------
Peter M. Nomikos
PHOTOELECTRON CORPORATION, a
Massachusetts corporation
By: /s/ Peter E. Oettinger
--------------------------------
Name: Peter E. Oettinger
Its: Vice President and
Chief Operating Officer
PYC Corporation, formerly known as Photoelectron Investments Corporation of
Liberia, hereby acknowledges and confirms the accuracy of the factual
recitations set forth in paragraphs A through D above.
PHOTOELECTRON INVESTMENTS
CORPORATION OF LIBERIA
By:/s/ Peter M. Nomikos
-----------------------------
Name: Peter M. Nomikos
Title: President
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<PAGE>
PHOTOELECTRON CORPORATION
SUBORDINATED CONVERTIBLE NOTE
PURCHASE AGREEMENT
Dated as of May 22, 1990
<PAGE>
This Agreement is dated as of the 22nd day of May, 1990, by and among
Thermo Electron Corporation ("Thermo"), Photoelectron Investments Corporation of
Liberia, a Liberian corporation ("PIC"), and Photoelectron Corporation, a
Massachusetts corporation (the "Company").
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.01 The Securities. The Company has authorized the issuance and sale of
---------------
the Company's $300,000 principal amount 8% Subordinated Convertible Notes Due
1997, (the "Notes"). The Notes shall be in the principal amount set forth in the
preceding sentence and shall otherwise be substantially in the form set forth in
Exhibit 1.01 hereto. The terms "Note" or "Notes" shall also include any note or
- ------- ----
notes delivered in exchange or replacement for the Notes. Any shares of Common
Stock issuable upon conversion of the Notes, and such shares when issued, are
herein referred to as the "Conversion Shares."
1.02 The Closing.
------------
The Company agrees to issue and sell to Thermo and PIC, and, subject to and
in reliance upon the terms and conditions of this Agreement, Thermo and PIC each
agrees to purchase the principal amount of the Notes, at par, set forth opposite
their names on Exhibit 1.02 hereto.
------- ----
Such transactions shall take place at a closing (the "Closing") to be held
at the offices of Thermo, on May 22, 1990, or on such other date and at such
time as may be mutually agreed upon. At the Closing, the Company will issue and
deliver the Notes, payable to the order of Thermo and PIC, respectively, against
delivery of checks payable to the order of the Company or wire transfer of funds
to an account specified by the Company.
1.03 Redemption of Notes. On or before May 31, 1997, the Company will
--------------------
redeem, without premium, the initial principal amount of the Notes, or such
lesser amount as may be then outstanding, together with all accrued and unpaid
interest then due thereon. On the stated or accelerated maturity of the Notes,
the Company will pay the principal amount of the Notes outstanding, together
with all accrued and unpaid interest then due thereon.
<PAGE>
-2-
1.04 Transfer and Exchange of Notes. The registered holder of any Note or
-------------------------------
Notes may, prior to maturity or prepayment thereof, surrender such Note at the
principal office of the Company for transfer or exchange to any assignee. Within
a reasonable time after notice to the Company from a registered holder of its
intention to make sure exchange and without expense (other than transfer taxes,
if any) to such registered holder, the Company shall issue in exchange therefor
another Note for the same aggregate principal amount as the unpaid principal
amount of the Note so surrendered (or in such multiples thereof as may be
requested by the registered holder) and having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Note so surrendered. Each new Note shall be made payable to
such Person or Persons, or registered assigns, as the registered holder of such
surrendered Note may designate, and such transfer or exchange shall be made in
such a manner that no gain or loss of principal or interest shall result
therefrom.
1.05 Replacement of Notes. Upon receipt of evidence satisfactory to the
---------------------
Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; provided, however, if any Note of which Thermo or
-------- -------
PIC, their nominees or any of their subsidiaries or parents is the registered
holder is lost, stolen or destroyed, the affidavit of the president, treasurer
or assistant treasurer of the registered holder, including a representation to
the effect that such Note has not been negotiated and setting forth the
circumstances with respect to such loss, theft or destruction, shall be accepted
as satisfactory evidence thereof, and no indemnity bond or other security shall
be required as a condition to the execution and delivery by the Company of a
new Note in replacement of such lost, stolen or destroyed Note other than the
registered holder's written agreement to indemnify the Company.
1.06 Subordination. The Company, for itself, its successors and assigns,
--------------
covenants and agrees, and Thermo, PIC and each successor holder of the Notes by
his or its acceptance thereof likewise covenants and agrees, that
notwithstanding any other provision of this Agreement or the Note, the payment
of the principal of and interest on each and all of the Notes shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all Senior Debt (as hereinafter
defined) at any time outstanding.
<PAGE>
-3-
(a) Payment of Senior Debt. In the event of any insolvency or
-----------------------
bankruptcy proceedings, or any proceedings in connection therewith, relative to
the Company or to its property, or, in the event of any proceedings for the
Company of distribution or marshalling of its assets or any composition with
creditors of the Company, whether or not involving insolvency or bankruptcy,
then and in any such event all Senior Debt shall be paid in full before any
payment or distribution of any character, whether in cash, securities or other
property, shall be made on account of the Notes; and any such payment or
distribution, except securities that are subordinated and junior in right of
payment to the payment of all Senior Debt then outstanding in terms of
substantially the same tenor as this Section 1.06, which would, but for the
provisions hereof, be payable or deliverable with respect to the Notes shall be
paid or delivered directly to the holders of Senior Debt (or their duly
authorized representatives), in the proportions in which they hold the same,
until all Senior Debt shall have been paid in full, and every holder of the
Notes by becoming a holder thereof shall have designated and appointed the
holder or holders of Senior Debt (and their duly authorized representatives) as
his or its agents and attorneys-in-fact to demand, sue for, collect and receive
such Senior Debt holder's ratable share of all such payments and distributions
and to file any necessary proof of claim therefor and to take all other action
(including the right to vote such Senior Debt holder's ratable share of the
Notes), in the name of the holders (or their authorized representatives), that
such Senior Debt holder may determine to be necessary or appropriate for the
enforcement of this Section 1.06. Thermo and each successor holder of the Note
by its or his acceptance thereof agrees to execute, at the request of the
Company, a separate agreement with any holder of Senior Debt on the terms set
forth in this Section 1.06.
(b) No Payment on Note Under Certain Conditions.
--------------------------------------------
In the event that:
(i) any default occurs in the payment of principal of or
interest on any Senior Debt and during the continuance of such default, or
(if a shorter period) until such payment has been made or such default has
been cured or waived in writing by such holder of Senior Debt; or
(ii) the maturity of any Senior Debt is accelerated by any holder
thereof because of a default with respect thereto and until such
acceleration has been rescinded or said Senior Debt has been paid;
<PAGE>
-4-
then and during the continuance of any of such events no payment shall be made
by the Company, directly or indirectly, on account of the principal of or
interest on the Notes.
(c) Payments Held in Trust. In case any payment or distribution
-----------------------
shall be paid or delivered to any holder of the Notes in violation or
contravention of the terms of this subordination, before all Senior Debt shall
have been paid in full, such payment or distribution shall be held in trust for
and paid and delivered to the holders of Senior Debt (or their duly authorized
representatives) until all Senior Debt shall have been paid in full.
(d) Subrogation. Subject to the payment in full of all Senior Debt
------------
and until the Notes shall be paid in full, the holders of the Notes shall be
subrogated to the rights of the holders of the Senior Debt (to the extent of
payments or distributions previously made to such holders of Senior Debt
pursuant to the provisions of subsections (a) and (c) of this Section 1.06) to
receive payments or distributions of assets of the Company applicable to the
Senior Debt. No such payments or distributions applicable to the Senior Debt
shall, as between the Company and its creditors, other than the holders of
Senior Debt and the holders of the Notes, be deemed to be a payment by the
Company to or on account of the Notes; and for the purposes of such subrogation,
no payments or distributions to the holders of Senior Debt to which the holders
of the Notes would be entitled except for the provisions of this Section 1.06
shall, as between the Company and its creditors, other than the holders of
Senior Debt and the holders of the Notes, be deemed to be a payment by the
Company to or on account of the Senior Debt.
(e) Scope of Section. The provisions of this Section 1.06 are
-----------------
intended solely for the purpose of defining the relative rights of the holders
of the Notes, on the one hand, and the holders of the Senior Debt, on the other
hand. Nothing contained in this Section 1.06 or elsewhere in this Agreement or
the Notes is intended to or shall impair, as between the Company and its
creditors, other than the holders of Senior Debt, and the holders of the Notes,
the obligation of the Company, which is unconditional and absolute, to pay to
the holders of the Notes the principal of and interest on the Notes as and when
the same shall become due and payable in accordance with the terms thereof, or
to affect the relative rights of the holders of the Senior Debt, nor shall
anything herein or therein prevent the holder of any Note from accepting any
payment with respect to such Note or exercising all remedies otherwise permitted
by applicable law upon default under such Note, subject to the rights, if any,
under this Section 1.06 of the holders of Senior Debt in respect of cash,
property or notes of the Company received by the holders of the Notes .
<PAGE>
-5-
(f) Survival of Rights. The right of any present or future
-------------------
holder of Senior Debt to enforce subordination of the Notes pursuant to the
provisions of this Section 1.06 shall not at any time be prejudiced or impaired
by any act or failure to act on the part of the Company or any such holder of
Senior Debt, including without limitation, any forbearance, waiver, consent,
compromise, amendment, extension, renewal or taking or release of security of or
in respect of any Senior Debt or by noncompliance by the Company with the terms
of such subordination regardless of any knowledge thereof such holder may have
or otherwise been charged with.
(g) Amendment or Waiver. The provisions of this Section
--------------------
1.06 may not be amended or waived in any manner that is detrimental to any
Senior Debt without the consent of the holders of all then existing Senior Debt.
(h) Senior Debt Defined. The term "Senior Debt" shall mean
--------------------
(i) all Indebtedness of the Company (which is not convertible into equity
securities of the Company and is not issued in conjunction with equity
securities of the Company or options or warrants to purchase equity securities
of the Company) for money borrowed, including any extension or renewals thereof,
whether outstanding on the date hereof or thereafter created or incurred, which
is not by its terms subordinate and junior to or on a parity with the Notes, and
(ii) all other indebtedness to which the obligations of the Notes shall be
expressly subordinated by the holders of the Notes in writing, citing this
Section 1.06.
(i) Proof of Subordination. Thermo agrees that it will
-----------------------
execute and deliver any other documents evidencing the subordination of the
Notes to Senior Debt that may be reasonably requested by the Company or the
holders of Senior Debt so long as none of the provisions contained in such
documents diminish the rights of Thermo in any manner.
1.07 Representations by Thermo and PIC. Each of Thermo and PIC
----------------------------------
represents that it is its present intention to acquire the Notes for its own
account and that the Notes are being and will be acquired for the purpose of
investment and not with a view to distribution or resale thereof. The
acquisition by each of Thermo and PIC of the Notes shall constitute a
confirmation by it of this representation.
<PAGE>
-6-
ARTICLE II
COVENANTS OF THE COMPANY
2.01 Affirmative Covenants of the Company Other Than Reporting
---------------------------------------------------------
Requirements. Without limiting any other covenants and provisions hereof,
- -------------
the Company covenants and agrees that, so long as any of the Notes are
outstanding, it will perform and observe the following covenants and
provisions:
(a) Punctual Payment. Pay the principal of and interest on each
-----------------
of the Notes at the times and place and in the manner provided in the Notes and
herein.
(b) Preservation of Corporate Existence. Preserve and maintain
------------------------------------
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified, as a foreign corporation
in each jurisdiction in which such qualification is necessary or desirable in
view of its business and operations or the ownership of its properties; and
preserve and maintain all material licenses and other rights to use patents,
processes, licenses, trademarks, trade names, inventions, intellectual property
rights or copyrights owned or possessed by it and necessary to the conduct of
its business.
(c) Compliance with Laws. Comply, in all material respects with
---------------------
all applicable laws, rules, regulations and orders of any governmental
authority, noncompliance with which could materially adversely affect its
business or condition, financial or otherwise.
(d) Keeping of Records and Books of Account. Keep adequate
----------------------------------------
records and books of account in which complete entries will be made in
accordance with generally accepted accounting principles consistently applied,
reflecting all financial transactions of the Company and in which, for each
fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection within its
business shall be made.
(e) Budgets and Board Approval. Prior to the commencement
---------------------------
of each fiscal year, prepare and submit to, and obtain the approval of a
majority of, the Board of Directors of a budget for the upcoming fiscal year,
including projections of research and development expenditures, capital and
operating expenses, cash flow and profits and losses, all itemized in reasonable
detail.
(f) Financing. Promptly, fully and in detail, inform the Board
---------
of Directors in advance of any commitments or contracts relating to financing of
any nature for the Company or pledge of corporate assets.
<PAGE>
-7-
(g) Board of Directors; Indemnification. The Board of Directors shall
------------------------------------
not consist of more than four (4) directors. The By-laws of the Company shall at
all times provide for the indemnification of the Board of Directors to the full
extent provided by the law of jurisdiction in which the Company is organized.
The Company shall maintain directors and officers insurance with coverage and
premium levels consistent with policies carried by companies of similar size
engaged in similar businesses.
2.02 Negative Covenants of the Company. Without limiting any other
----------------------------------
covenants and provisions hereof, the Company covenants and agrees that, so long
as the Conversion Shares issuable upon conversion of the Notes and the shares
issued by the Company on January 4, 1989 or issuable upon conversion of the 8%
Subordinated Convertible Note issued by the Company on January 4, 1989, in the
aggregate, are greater than 50% of the total outstanding voting securities of
the Company, without the consent of both Thermo and PIC, the Company will not:
(a) Mergers, Sale of Assets, etc. Merge or consolidate with, or sell,
-----------------------------
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) a material portion
of its assets (whether now owned or hereafter acquired) to, any Person, except
for sales or other dispositions of assets in the ordinary course of business.
(b) Dealings with Affiliates and Others. From and after the date of
------------------------------------
this Agreement, enter into any transaction, including, without limitation, any
loans or extensions of credit or royalty agreements, with any officer or
director of the Company or holder of any class of capital stock of the Company,
or any member of their respective immediate families or any corporation or other
entity directly or indirectly controlled by one or more of such officers,
directors or stockholders or members of their immediate families.
(c) Change in Nature of Business. Make any material change in the
-----------------------------
nature of its business as carried on as of the date hereof.
(d) Dividends. Declare or pay any dividends on any class of the
----------
Company's capital stock now or hereafter outstanding or purchase, redeem or
otherwise acquire or retire any of the Company's capital stock of any class now
or hereafter outstanding or otherwise return capital or make distributions of
assets to stockholders as such, except the repurchase of capital stock pursuant
to a certain Stockholders' Agreement of January 4, 1989 among the parties
hereto.
<PAGE>
-8-
2.03 Reporting Requirements. The Company will furnish the following to
-----------------------
each holder who owns of record or beneficially or has the right to acquire from
the Company any Conversion Shares, to each holder of the Notes and to each
holder of 15% or more of the Company's Common Stock:
(a) As soon as available and in any event within thirty (30) days
after the end of each fiscal quarter of the Company, a balance sheet of the
Company as of the end of such quarter and a statement of income and retained
earnings and of changes in financial position of the Company for the period
ending with such quarter, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief financial officer of the Company as
having been prepared in accordance with the accounting principles applied in the
prior annual audited financial statements of the Company, and such financial
statements shall set forth in comparative form the corresponding figures for the
corresponding period of the prior fiscal year.
(b) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, a balance sheet of the Company
as of the end of such fiscal year and statements of income and retained earnings
and of changes in financial position of the Company for such fiscal year,
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, and, if audited, all such statements in audited form and
duly certified by a nationally recognized independent public accountant;
(c) Any written report submitted to the Company by independent
public accountants in connection with any annual or interim audit of the books
of the Company made by such accountants;
(d) Promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, materially
affecting the Company when considered as a whole that are not fully covered by
insurance; and
(e) At least thirty (30) days prior to the commencement of each
fiscal year of the Company, a copy of the operating plan and budget.
<PAGE>
-9-
ARTICLE III
CONVERSION OF THE NOTE
3.01 Conversion Right. Subject to and in compliance with the provisions
-----------------
of this Article III all or any part of the principal amount outstanding of any
Note and, at the option of the holder, all accrued and unpaid interest may be
converted at any time or from time to time into fully paid and non-assessable
shares of Common Stock.
3.02 Applicable Conversion Value. The price at which the outstanding
----------------------------
principal of any Note may be converted into Common Stock (the "Applicable
Conversion Value") shall, subject to adjustment as hereinafter provided, be two
dollars ($2).
3.03 Adjustments for Sale of Common Stock at Less Than Applicable
------------------------------------------------------------
Conversion Value. Except for the issuance of up to 120,000 shares of the
- -----------------
Company's Common Stock to employees, directors or consultants of the Company
pursuant to an option plan or plans approved by the Company's Board of Directors
(the "Reserved Employee Shares"), if the Company shall, while there are any
Notes outstanding, issue or sell shares of its Common Stock without
consideration or at a price per share less than the Applicable Conversion Value
in effect immediately prior to such issuance or sale, then in each such case
such Applicable Conversion Value upon each such issuance or sale, except as
hereinafter provided, shall be lowered so as to be equal to an amount determined
by multiplying the Applicable Conversion Value by a fraction:
(1) the numerator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock, plus (b) the number of shares of
Common Stock that the net aggregate consideration if any, received by the
Company for the total number of such additional shares of Common Stock so
issued would purchase at the Applicable Conversion Value in effect
immediately prior to such issuance; and
(2) the denominator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock plus (b) the number of such additional
shares of Common Stock so issued.
For purposes of computation of the Applicable Conversion Value, if part or all
of the consideration to be received by the Company in connection with the
issuance of shares of Common Stock or any of the other securities described in
this Article III consists of property other than cash, such consideration
<PAGE>
-10-
shall be deemed to have a fair market value that is reasonably determined in
good faith by the Board of Directors.
3.04 Warrants, Options, etc. for Common Stock. For the purposes of this
-----------------------------------------
Article III, the issuance after the date of this Agreement of any warrants,
options (other than the Reserved Employee Shares), subscriptions or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share (as hereinafter determined) that may be
received by the Company for such Common Stock shall be less than the Applicable
Conversion Value at the time of such issuance. Any obligation, agreement or
undertaking to issue warrants, options, subscriptions or purchase rights at any
time in the future shall be deemed to be an issuance at the time such
obligation, agreement or undertaking is made or arises. No adjustment of the
Applicable Conversion Value shall be made upon the issuance of any shares of
Common Stock that are issued pursuant to the exercise of any conversion or
exchange rights in any convertible securities if any adjustment shall previously
have been made upon the issuance of any such warrants, options or subscriptions
or purchase rights or upon the issuance of any convertible securities (or upon
the issuance of any warrants, options or any rights therefor) as provided above.
Any adjustment of the Applicable Conversion Value that relates to warrants,
options, subscriptions or purchase rights with respect to shares of Common Stock
shall be disregarded if, as and when all of such warrants, options,
subscriptions or purchase rights expire or are cancelled without being
exercised, so that the Applicable Conversion Value effective immediately upon
such cancellation or expiration shall be equal to the Applicable Conversion
Value in effect immediately prior to the issuance of the expired or cancelled
warrants, options, subscriptions or purchase rights, with such additional
adjustments as would have been made to that Applicable Conversion Value had the
expired or cancelled warrants, options subscriptions or purchase rights not been
issued. For purposes of this Article III, the "Net Consideration Per Share"
that may be received by the Company shall be determined as follows:
(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company for the
issuance of such warrants, options, subscriptions or other purchaser rights
or convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock that
would
<PAGE>
-11-
be issued if all such warrants, options, subscriptions or other purchase
rights or convertible or exchangeable securities were exercised, exchanged or
converted.
(B) The "Net Consideration Per Share" that may be received
by the Company shall be determined in each instance as of the date of
issuance of warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities without giving effect to any
possible future price adjustments or value adjustment that may be
applicable with respect to such warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities.
(C) If a part or all of the consideration received by the
Company in connection with the issuance of shares of the Common Stock or
the issuance of any of the securities described in this Section 3.04
consists of property other than cash, and the Board of Directors of the
Company is unable to arrive at any valuation of such property, the
Company at its expense will promptly cause independent accountants of
recognized standing selected by the Company to value such property,
whereupon such value shall be given to such consideration and shall be
recorded on the books of the Company with respect to receipt of such
property.
3.05 Dilution in Case of Other Securities. In case any Other
------------------------------------
Securities shall be issued or sold, or shall become subject to issue upon the
conversion or exchange of any stock (or Other Securities) of the Company (or any
other issuer of Other Securities or any other Person referred to in Section
3.08) or to subscription, purchase or other acquisition pursuant to any rights
or options granted by the Company (or such other issuer or Person), for a
consideration per share so as to dilute the conversion rights evidenced by the
Notes, the computations, adjustments and readjustments provided for in Section
3.03 with respect to the Applicable Conversion Value shall be made as nearly as
possible in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable on the conversion of the Notes, so as to
protect the holders of the Notes against the effect of such dilution.
3.06 Extraordinary Events. If the Company shall after the date of
--------------------
this Agreement (i) issue additional shares of the Common Stock as a dividend or
other distribution on outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock or (iii) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Applicable Conversion Value shall, simultaneously with the happening
of such event, be
<PAGE>
-12-
adjusted by multiplying the then Applicable Conversion Value by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Applicable Conversion value then in
effect. The Applicable Conversion Value, as so adjusted, shall be readjusted in
the same manner upon the happening of any successive event or events described
herein in this Section 3.06.
3.07 Adjustment for Dividends in Other Stock, Property, etc.;
--------------------------------------------------------
Reclassification, etc. In case at any time or from time to time after the date
- ----------------------
of this Agreement the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend, or
(b) any cash, or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock split (adjustments in respect of which are provided
for in Section 3.06) and normal cash dividends,
then and in each such case each holder of a Note, on the conversion thereof as
provided in this Article III, shall be entitled to receive the amount of stock
and other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3.07) that such holder would hold on
the date of such conversion if on the date thereof it had been the holder of
record of the number of shares of Common Stock that it would have received had
its Note been converted into Common Stock immediately before the date of such
event to and including the Conversion Date (as that term is defined in Section
3.11), and had thereafter, during the period from the date hereof to and
including the date of such conversion, retained such shares and all such other
or additional stock and other securities and property (including cash in the
cases referred to in subdivisions (b) and (c) of this Section 3.07) receivable
by it as aforesaid during such period, giving effect to all adjustments called
for during such period under this Article III.
<PAGE>
-13-
3.08 Adjustment for Reorganization, Consolidation, Merger, etc.
---------------------------------------------------------
If at any time or from time to time the Company shall (a) effect a
reorganization, (b) consolidate with or merge into any other Person or (c)
transfer all or substantially all of its properties or assets to any other
Person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, each holder of a Note, on the conversion
thereof as provided in this Article III at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
converted its Note immediately prior thereto, all subject to further adjustment
thereafter as provided under this Article III.
(i) Dissolution. In the event of any dissolution of
-----------
the Company following the transfer of all or substantially all of its properties
or assets, the Company, prior to such dissolution, shall at its expense deliver
or cause to be delivered the stock and other securities and property (including
cash, if applicable) receivable by the holders of the Notes after the effective
date of such dissolution pursuant to this Section 3.08 to a bank or trust
company having its principal office in Boston, Massachusetts, as trustee for
the holder or holders of the Notes, which shall establish procedures for the
exchange of such property for the Notes.
(ii) Continuation of Terms. Upon any reorganization,
---------------------
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3.08, each Note shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the conversion of any Note after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of the Note as provided in Section 3.09.
3.09 No Dilution or 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
<PAGE>
-14-
seek to avoid the observance or performance of any of the terms of the Notes,
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 holders of shares of Common Stock issuable upon
conversion of the Notes against dilution or other impairment.
3.10 Certificate as to Adjustments. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on the
conversion of the Notes, the Company at its expense will promptly provide each
holder of the Notes, at the election of such holder, a certificate of the
president and of the chief financial officer of the Company setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding and (c) the Applicable Conversion Value
in effect immediately prior to such issue or sale and as adjusted and readjusted
on account hereof.
3.11 Exercise of Conversion Privilege. To exercise its conversion
--------------------------------
privilege, a holder of a Note shall surrender the Note being converted to the
Company at the Company's principal office, and shall give written notice to the
Company at that office that such holder elects to convert such Note, or a
portion thereof. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The Note surrendered for
conversion shall be accompanied by proper assignment thereof to the Company or
in blank. The date when such written notice is received by the Company, together
with the Note being converted, shall be the "Conversion Date." As promptly as
practicable, but in any event within 15 days after the Conversion Date, the
Company shall issue and shall deliver to the holder of the Note being converted,
or on its written order, such certificate or certificates as it may request for
the number of whole shares of Common Stock issuable upon the conversion of such
Note in accordance with the provisions of this Article III, cash in the amount
of all accrued and unpaid interest on such Note up to and including the
Conversion Date, any property or securities issuable upon conversion as provided
in Section 3.07 and cash, as provided in Section 3.12, in respect of any
fraction of a share of Common Stock issuable upon such conversion. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the Conversion Date, and at such time the rights of the holder as
<PAGE>
-15-
holder of a Note shall cease and the Person or Persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares of Common Stock represented thereby.
3.12 Cash in Lieu of Fractional Shares. No fractional shares of Common
---------------------------------
Stock shall be issued upon the conversion of a Note. Instead of any fractional
shares of Common Stock that would otherwise be issuable upon conversion of a
Note, the Company shall pay to the holder of the Note that was converted a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the market price per share of the Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors) at the close of business
on the Conversion Date.
3.13 Partial Conversion. In the event some but not all of the principal
------------------
amount represented by a Note surrendered by a holder is converted, the Company
shall execute and deliver to or on the order of the holder, at the expense of
the Company, a new Note representing the principal amount that was not
converted.
3.14 Reservation of Common Stock. The Company shall at all times reserve
---------------------------
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Notes, sufficient
shares of Common Stock to effect the conversion of all outstanding Notes, and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding Notes, the
Company shall take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to a number of shares that shall
be sufficient for that purpose.
3.15 Notice of Record Date. In the event of
---------------------
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof that are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any merger or
consolidation of the Company or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
<PAGE>
-16-
(c) any voluntary or involuntary dissolution, liquidation or winding
up of the Company, then and in each such event the Company shall mail or cause
to be mailed to each holder of a Note a notice specifying (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective and (iii) the time, if any, that is to be fixed, as to when
the holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for securities or
other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up. Such notice shall be mailed at least 30 days prior to the date
specified in such notice on which such action is to be taken.
ARTICLE IV
RIGHT OF FIRST REFUSAL
4.01 Right of First Refusal. Except for the Reserved Employee shares, the
-----------------------
Company shall not issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, (i) any shares of Common
Stock, (ii) any other equity security of the Company, including, without
limitation, shares of preferred stock, (iii) any option, warrant or other right
to subscribe for, purchase or otherwise acquire any equity security of the
Company or (iv) any Debt Security, unless in each such case the Company shall
have first received an unconditional bona fide offer from a third party to
purchase such securities (the "Offered Securities") and shall have offered to
sell such Offered Securities to Thermo and PIC as follows: The Company shall
offer to sell to each of Thermo and PIC a portion of the Offered Securities so
that the aggregate number of shares of Common Stock and Conversion Shares then
held by or issuable to each of Thermo and PIC equals forty percent (40%) of the
total number shares of Common Stock to be outstanding after the proposed
issuance by the Company (assuming the conversion of the Notes and exercise of
all options held by employees of the Company and the issuance and exercise of
all options reserved for issuance to employees of the Company by the Board of
Directors pursuant to any option plan approved by the Directors and
shareholders of the Company), at a price and on the other terms specified by the
Company in writing delivered to Thermo and PIC (the "Offer"), and the Offer by
its terms shall remain
<PAGE>
-17-
open and irrevocable for a period of twenty (20) days, unless waived by Thermo
and PIC.
4.02 Notice of Acceptance. Notice of Thermo's or PIC's intention to
--------------------
accept, in whole or in part, an Offer made pursuant to Section 4.01 shall be
evidenced by a writing signed by Thermo or PIC, as the case may be, and
delivered to the Company prior to the end of the twenty (20) day period of the
Offer, setting forth the portion of the Offered Securities that such office
elects to purchase. If either Thermo or PIC elects not to purchase all such
portion of Offered Securities, then any such securities not elected to be
purchased shall be then offered to whichever of Thermo or PIC elected to
purchase all of its portion of the offer, in the same manner as set forth in
Section 4.01. Such secondary offer shall be open for 10 days.
4.03 Conditions to Acceptance and Purchase.
-------------------------------------
(a) Permitted Sales of Refused Securities. If Notices of Acceptance
-------------------------------------
are not given by Thermo and PIC in respect of all the Offered Securities
pursuant to Sections 4.01 and 4.02, the Company shall have sixty (60) days from
the expiration of the 10-day period set forth in Section 4.02 to sell all or any
part of such Offered Securities as to which a Notice of Acceptance has not been
given by Thermo or PIC and all of the Offered Securities not subject to the
option of Thermo or PIC pursuant to this Article IV (the "Refused Securities")
to the Person or Persons specified in the Offer, but only for cash and otherwise
in all respects upon terms and conditions, including, without limitation, unit
price and interest rates, which are not more favorable, in the aggregate, to
such other Person or Persons or less favorable to the Company than those set
forth in the Offer.
(b) Reduction in Amount of Offered Securities. In the event the
-----------------------------------------
Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 4.03(a) above),
then Thermo and PIC shall reduce the number of, or other units of, the Offered
Securities specified in their respective Notices of Acceptance to an amount that
shall be not less than the amount of the Offered Securities that each of Thermo
and PIC elected to purchase pursuant to Section 4.02 multiplied by a fraction,
(i) the numerator of which shall be the amount of Offered Securities the Company
actually proposes to sell, and (ii) the denominator of which shall be the amount
of all Offered Securities. In such event, the Company may not sell or otherwise
dispose of more than the reduced amount of the Offered Securities until such
securities have again been offered to Thermo and PIC in accordance with Section
4.01.
<PAGE>
-18-
(c) Closing. Upon the closing, which shall include full payment to
--------
the Company, of the sale to such other Person or Persons of all or less than
all the Refused Securities, Thermo and PIC shall purchase from the Company, and
the Company shall sell to Thermo and PIC, the number of Offered Securities
specified in their respective Notices of Acceptance, as reduced pursuant to
Section 4.03(b), upon the terms and conditions specified in the Offer. The
purchase by Thermo and PIC of any Offered Securities is subject in all cases to
the preparation, execution and delivery by the Company, Thermo and PIC of a
purchase agreement relating to such Offered Securities reasonably satisfactory
in form and substance to Thermo, PIC and their counsel.
4.04 Further Sale. In each case, Offered Securities not purchased by
-------------
Thermo, PIC or other Person or Persons in accordance with Section 4.03 may not
be sold or otherwise disposed of until they are again offered to Thermo under
the procedures specified in Sections 4.01, 4.02 and 4.03.
4.05 Exceptions. The rights of Thermo under this Article IV shall not
-----------
apply to:
(a) Common stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common Stock, or
(b) up to 120,000 shares of Common Stock, or options exercisable
therefor, including options outstanding on the date of this Agreement (such
number to be equitably adjusted in the event of any stock split, combination,
reclassification or other similar event occurring on or after the date of this
Agreement) issuable to current and future officers, employees, directors or
consultants of the Company pursuant to any stock option plan or stock purchase
plan approved by a vote of not less than a majority of the Board of Directors of
the Company.
ARTICLE V
EVENTS OF DEFAULT
5.01 Events of Default. If any of the following events ("Events of
------------------
Default") shall occur and be continuing seven days after delivery of notice (as
described below) to the Company:
(a) The Company shall fail to pay any installment of principal of
any of the Notes when due; or
(b) The Company shall fail to pay any interest on any of the Notes
when due or shall default in the performance of any covenant contained in
Section 2.02 and such failure or default shall continue for seven (7) business
days; or
<PAGE>
-19-
(c) The Company shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or the Note on its part to be
performed or observed and any such failure remains unremedied for thirty (30)
days after written notice thereof shall have been given to the Company by any
registered holder of the Notes; or
(d) The Company shall fail to pay any Indebtedness for borrowed
money (other than as evidenced by the Notes) owing by the Company or any
interest or premium thereon, when due (or, if permitted by the terms of the
relevant document, within any applicable grace period), whether such
Indebtedness shall become due by scheduled maturity, by required prepayment, by
acceleration, by demand or otherwise, or shall fail to perform any term,
covenant or agreement on its part to be performed under any agreement or
instrument (other than this Agreement or the Note) evidencing or securing or
relating to any Indebtedness owing by the Company when required to be performed
(or, if permitted by the terms of the relevant document, within any applicable
grace period), if the effect of such failure to pay or perform is to accelerate,
or to permit the holder or holders of such Indebtedness, or the trustee or
trustees under any such agreement or instrument, to accelerate, the maturity of
such Indebtedness, unless such failure to pay or perform shall be waived by the
holder or holders of such Indebtedness or such trustee or trustees; or
(e) The Company shall be involved in financial difficulties as
evidenced (i) by its admitting in writing its inability to pay its debts
generally as they become due (ii) by its commencement of a voluntary case under
Title 11 of the United States Code as from time to time in effect, or by its
authorizing, by appropriate proceedings of its Board of Directors or other
governing body, the commencement of such a voluntary case, (iii) by its filing
an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of any
such petition, (iv) by the entry of an order for relief in any involuntary case
commenced under said Title 11, (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief,
(vi) by the entry of an order by a court of competent jurisdiction (a) finding
it to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors
or (c) assuming custody of, or appointing a receiver or other
<PAGE>
-20-
custodian for, all or a substantial part of its property or (vii) by its making
an assignment for the benefit of, or entering into a composition with, its
creditors, or appointing or consenting to the appointment of a receiver or other
custodian for all or a substantial part of its property; or
(f) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Company and such judgment, writ or similar process shall not be released,
vacated or fully bonded within ninety (90) days after its issue or levy; then,
and in any such event, Thermo or any other holder of the Notes may, by notice to
the Company, declare the entire unpaid principal amount of the Notes, all
interest accrued and unpaid thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Notes, all such accrued
interest and all such amounts shall become and be forthwith due and payable
(unless there shall have occurred an Event of Default under subsection 5.01(e)
in which case all such amounts shall automatically become due and payable),
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Company.
ARTICLE VI
DEFINITIONS AND ACCOUNTING TERMS
6.01 Certain Defined Terms. As used in this Agreement, the following
----------------------
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Debt Security" means and includes (i) any debt security of the Company
that by its terms is convertible into or exchangeable for any equity security of
the Company, (ii) any security of the Company that is a combination of debt and
equity or (iii) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any such debt security of the Company.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles consistently
applied, be classified upon the obligor's balance sheet as liabilities,
excluding any liabilities in respect of deferred federal or state income taxes,
but in any event including, without limitation, liabilities secured by any
mortgage on property owned or acquired subject to such mortgage, whether or not
the liability secured thereby shall have been assumed, and also including,
without limitation, (i) all guaranties, endorsements and other
<PAGE>
-21-
contingent obligations, in respect of Indebtedness of others, whether or not the
same are or should be so reflected in said balance sheet, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and (ii) the present value of
any lease payments due under leases required to be capitalized in accordance
with applicable Statements of Financial Accounting Standards, determined by
discounting all such payment at the interest rate determined in accordance with
applicable Statements of Financial Accounting Standards.
"Other Securities" shall mean any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) that the
holders of the Note at any time shall be entitled to receive, or shall have
received, on the conversion of the Note, in lieu of or in addition to Common
Stock, or that at any time may be issuable or shall have been issued in exchange
for or in replacement of Common Stock or Other Securities pursuant to Article
III.
"Permitted Assignee" shall mean with respect to either Thermo or PIC any
person or entity directly or indirectly controlling, controlled by or under
common control with such assigning person. For the purposes of this definition,
"Control" shall mean the power and authority to direct the affairs of the entity
in question through the direct or indirect ownership or control over not less
than 50.1% of the such entities voting securities or equity.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or of any other federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at the time.
ARTICLE VII
MISCELLANEOUS
7.01 No Waiver; Cumulative Remedies. No failure or delay on the part of
-------------------------------
Thermo or PIC, or any other holder of the Notes, in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
<PAGE>
-22-
7.02 Amendments, Waivers and Consents. Any provision in this Agreement to
---------------------------------
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only upon the prior written consent of PIC and Thermo. Any
provision of this Agreement or the Note notwithstanding, changes in or additions
to the Note may be made, and compliance with any provision of the Note or this
Agreement relating to the Note may be omitted or waived, only upon the prior
written consent of holders of greater than 50% of the principal amount of the
Notes; provided, however, that no such consent shall be effective to reduce or
-------- -------
to postpone the date fixed for the payment of the principal (including any
required redemption) or interest payable on any Note, without the consent of the
holder thereof, or to reduce the percentage of the Notes the consent of the
holders of which is required under this Section. Any waiver or consent may be
given subject to satisfaction of conditions stated therein and any waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
7.03 Address for Notices, etc. All notices, requests, demands and other
-------------------------
communications provided for hereunder shall be in writing and mailed by means of
certified mail (or other form of registered mail) or telegraphed or delivered to
the applicable party at the addresses indicated below:
If to the Company:
Photoelectron Corporation
580 Winter Street
Waltham, MA 02254
If to Thermo or PIC: at the address set forth opposite their respective
names as set forth on Exhibit 1.02.
------------
If to any other holder of the Notes: at such holder's address for notice as
set forth in the register maintained by the Company, or, as to each of the
foregoing, at such other address as shall be designated by such Person in a
written notice to the other party complying as to delivery with the terms of
this Section.
7.04 Binding Effect; Assignment. This Agreement shall be binding upon and
---------------------------
inure to the benefit of the Company, PIC and Thermo and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of Thermo and PIC obtained in accordance with Section 7.02 hereof and
the rights and interests of Thermo and PIC, respectively, including any shares
of Common Stock, Conversion
<PAGE>
-23-
Shares or Notes shall be assignable without the consent of the Company to any
Permitted Assignee.
7.05 Prior Agreements. This Agreement constitutes the entire agreement
-----------------
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
7.06 Severability. The invalidity or unenforceability of any provision
-------------
hereof shall in no way affect the validity or enforceability of any other
provision.
7.07 Governing Law. This Agreement and the Notes shall be governed by,
--------------
and construed in accordance with, the laws of the Commonwealth of Massachusetts.
7.08 Headings. Article, Section and subsection headings in this
---------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
7.09 Sealed Instrument. This Agreement is deemed to be executed as an
------------------
instrument under seal.
7.10 Counterparts. This Agreement may be executed in any number of
-------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
PHOTOELECTRON CORPORATION
By: /s/ Peter M. Nomikos
------------------------------
THERMO ELECTRON CORPORATION
By: /s/ George N. Hatsopoulos
------------------------------
Its: PRESIDENT
PHOTOELECTRON INVESTMENTS CORPORATION OF
LIBERIA
By: /s/ Peter M. Nomikos
------------------------------
Peter M. Nomikos, President
<PAGE>
Exhibit 1.01
------------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
8% Subordinated Note Due 1997
No. -1 Waltham, Massachusetts
May __, 1990
For value received, PHOTOELECTRON CORPORATION, a Massachusetts corporation
(the "Company"), hereby promises to pay to ______________________ (hereinafter
referred to as the "Payee"), or registered assigns, on May __, 1997, as
described below, the principal sum of _________________ ($________) or such part
thereof as then remains unpaid, to pay interest from the date hereof on the
whole amount of said principal sum remaining from time to time unpaid at the
rate of eight percent (8%) per annum, such interest to be payable on each
November __ and May __, the first such payment to be due and payable on November
__, 1990, until the whole amount of the principal hereof remaining unpaid shall
become due and payable, and to pay interest on all overdue principal (including
any overdue required redemption) and interest at a rate per annum equal to the
prime or base lending rate of the First National Bank of Boston plus three
----
percent (3%). Principal and all accrued but unpaid interest shall be repaid on
May __, 1997. Principal and interest shall be payable in lawful money of the
United States of America, in immediately available funds, at the principal
office of the Payee or at such other place as the legal holder may designate
from time to time in writing to the Company. Interest shall be computed on the
basis of a 360-day year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note Purchase Agreement dated as of May __,
1990, between the Company, Thermo Electron Corporation and Photoelectron
Investments Corporation
<PAGE>
of Liberia identified therein (as the same may be amended from time to time, the
"Agreement"), and each holder of this Note, by its acceptance hereof, agrees to
be bound by the provisions of the Agreement, a copy of which may be inspected by
the legal holder hereof at the principal office of the Company. As provided in
the Agreement, (i) this Note is subject to prepayment as specified in the
Agreement, (ii) the principal of and interest on this Note is subordinated to
Senior Debt, as defined in the Agreement, and (iii) this Note is convertible
into Common Stock of the Company in the manner set forth in the Agreement.
As further provided in the Agreement, upon surrender of this Note for
transfer or exchange, a new Note or new Notes of the same tenor dated the date
to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due, the
Company further promises to pay all cost of collection, including all reasonable
attorney's fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts and shall have the effect of a sealed
instrument.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:
-----------------------------
Title:
--------------------------
Attest:
- ---------------------------------
<PAGE>
Exhibit 1.02
------------
Principal Amount of
Purchaser Notes Purchased
- --------- -------------------
Thermo Electron Corporation $125,000
101 First Avenue
Waltham, MA 02254
Photoelectron Investments
Corporation of Liberia $175,000
c/o Mr. Gordon Greer, Esq.
Bingham, Dana & Gould
150 Federal Street
Boston, MA. 12110
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
Amended and Restated
8% Subordinated Note Due 1997
Lexington, Massachusetts
August 1, 1996
For value received, PHOTOELECTRON CORPORATION, a Massachusetts
corporation (the "Company"), hereby promises to pay to Thermo Electron
Corporation (hereinafter referred to as the "Payee"), or registered assigns, on
May 31, 1997, as described below, the principal sum of One Hundred Twenty-Five
Thousand Dollars ($125,000.00) or such part thereof as then remains unpaid, to
pay interest from January 1, 1991 on the whole amount of said principal sum
remaining from time to time unpaid at the rate of eight percent (8%) per annum.
Such interest shall accrue on March 31, June 30, September 30 and December 31 of
each year, until the whole amount of the principal hereof remaining unpaid shall
become due and payable. The Company agrees to pay interest on all overdue
principal (including any overdue required redemption) and interest at a rate per
annum equal to the prime or base lending rate of the First National Bank of
Boston plus three percent (3%). The Company also agrees to make an additional
----
payment of previously accrued interest in the amount of One Thousand Forty-Four
Dollars ($1,044.00). Subject to the holder's option to convert the outstanding
principal and accrued but unpaid interest to Common Stock referenced below,
principal and all accrued but unpaid interest shall be repaid on May 31, 1997.
Principal and interest shall be payable in lawful money of the United States of
America, in immediately available funds, at the principal office of the Payee or
at such other place as the legal holder may designate from time to time in
writing to the Company. Interest shall be computed on the basis of a 360-day
year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note Purchase Agreement dated as of May 22,
1990, between the Company, Payee and Photoelectron Investments Corporation of
Liberia identified therein (as the same may be amended from time to time, the
"1990 Agreement"), and each holder of this Note, by its acceptance hereof,
agrees to be bound by the provisions of the 1990 Agreement, a copy of which may
be inspected by the legal holder hereof at the principal office of the Company.
As provided in the 1990 Agreement, (i) this Note is
<PAGE>
subject to prepayment as specified in the 1990 Agreement, (ii) the principal of
and interest on this Note is subordinated to Senior Debt, as defined in the 1990
Agreement, and (iii) the outstanding principal balance under the Note, and all
accrued but unpaid interest on such principal balance, is convertible into
Common Stock of the Company in the manner set forth in the 1990 Agreement.
As further provided in the 1990 Agreement, upon surrender of this Note
for transfer or exchange, a new Note or new Notes of the same tenor dated the
date to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due,
the Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its law governing
conflicts of law, and shall have the effect of a sealed instrument effective as
of the date first above written.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:_____________________________
Peter E. Oettinger
Vice President and Chief Operating
Officer
Attest:
___________________________
-2-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1)WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
Amended and Restated
8% Subordinated Note Due 1997
Lexington, Massachusetts
August 1, 1996
For value received, PHOTOELECTRON CORPORATION, a Massachusetts
corporation (the "Company"), hereby promises to pay to PYC Corporation, formerly
known as Photoelectron Investment Corporation of Liberia (hereinafter referred
to as the "Payee"), or registered assigns, on May 31, 1997, as described below,
the principal sum of One Hundred Seventy-Five Thousand Dollars ($175,000.00) or
such part thereof as then remains unpaid, to pay interest from May 4, 1990 on
the whole amount of said principal sum remaining from time to time unpaid at the
rate of eight percent (8%) per annum. Such interest shall accrue on March 31,
June 30, September 30 and December 31 of each year, until the whole amount of
the principal hereof remaining unpaid shall become due and payable. The Company
agrees to pay interest on all overdue principal (including any overdue required
redemption) and interest at a rate per annum equal to the prime or base lending
rate of the First National Bank of Boston plus three percent (3%). Subject to
----
the holder's option to convert the outstanding principal and accrued but unpaid
interest to Common Stock referenced below, principal and all accrued but unpaid
interest shall be repaid on May 31, 1997. Principal and interest shall be
payable in lawful money of the United States of America, in immediately
available funds, at the principal office of the Payee or at such other place as
the legal holder may designate from time to time in writing to the Company.
Interest shall be computed on the basis of a 360-day year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note Purchase Agreement dated as of May 22,
1990, between the Company, Thermo Electron Corporation and Photoelectron
Investment Corporation of Liberia identified therein (as the same may be amended
from time to time, the "1990 Agreement"), and each holder of this Note, by its
acceptance hereof, agrees to be bound by the provisions of the 1990 Agreement, a
copy of which may be inspected by the legal holder hereof at the principal
office of the Company. As provided in the 1990 Agreement, (i) this Note is
subject to prepayment as specified in the 1990 Agreement, (ii) the principal of
and interest on this Note is subordinated to Senior Debt, as defined in the
<PAGE>
1990 Agreement, and (iii) the outstanding principal balance under the Note, and
all accrued but unpaid interest on such principal balance, is convertible into
Common Stock of the Company in the manner set forth in the 1990 Agreement.
As further provided in the 1990 Agreement, upon surrender of this Note
for transfer or exchange, a new Note or new Notes of the same tenor dated the
date to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due,
the Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its law governing
conflicts of law, and shall have the effect of a sealed instrument effective as
of the date first above written.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:
-----------------------------------
Peter E. Oettinger
Vice President and Chief Operating
Officer
Attest:
- ---------------------------
<PAGE>
EXHIBIT 4.4
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
Amended and Restated
8% Subordinated Note Due 1997
Lexington, Massachusetts
August 1, 1996
For value received, PHOTOELECTRON CORPORATION, a Massachusetts
corporation (the "Company"), hereby promises to pay to Thermo Electron
Corporation (hereinafter referred to as the "Payee"), or registered assigns, on
May 31, 1997, as described below, the principal sum of One Hundred Twenty-Five
Thousand Dollars ($125,000.00) or such part thereof as then remains unpaid, to
pay interest from January 1, 1991 on the whole amount of said principal sum
remaining from time to time unpaid at the rate of eight percent (8%) per annum.
Such interest shall accrue on March 31, June 30, September 30 and December 31 of
each year, until the whole amount of the principal hereof remaining unpaid shall
become due and payable. The Company agrees to pay interest on all overdue
principal (including any overdue required redemption) and interest at a rate per
annum equal to the prime or base lending rate of the First National Bank of
Boston plus three percent (3%). The Company also agrees to make an additional
payment of previously accrued interest in the amount of One Thousand Forty-Four
Dollars ($1,044.00). Subject to the holder's option to convert the outstanding
principal and accrued but unpaid interest to Common Stock referenced below,
principal and all accrued but unpaid interest shall be repaid on May 31, 1997.
Principal and interest shall be payable in lawful money of the United States of
America, in immediately available funds, at the principal office of the Payee or
at such other place as the legal holder may designate from time to time in
writing to the Company. Interest shall be computed on the basis of a 360-day
year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note Purchase Agreement dated as of May 22,
1990, between the Company, Payee and Photoelectron Investments Corporation of
Liberia identified therein (as the same may be amended from time to time, the
"1990 Agreement"), and each holder of this Note, by its acceptance hereof,
agrees to be bound by the provisions of the 1990 Agreement, a copy of which may
be inspected by the legal holder hereof at the principal office of the Company.
As provided in the 1990 Agreement, (i) this Note is
<PAGE>
subject to prepayment as specified in the 1990 Agreement, (ii) the principal of
and interest on this Note is subordinated to Senior Debt, as defined in the 1990
Agreement, and (iii) the outstanding principal balance under the Note, and all
accrued but unpaid interest on such principal balance, is convertible into
Common Stock of the Company in the manner set forth in the 1990 Agreement.
As further provided in the 1990 Agreement, upon surrender of this Note
for transfer or exchange, a new Note or new Notes of the same tenor dated the
date to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due,
the Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its law governing
conflicts of law, and shall have the effect of a sealed instrument effective as
of the date first above written.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
-----------------------------
Peter E. Oettinger
Vice President and Chief Operating
Officer
Attest:
/s/ William O. Flannery
- ---------------------------
-2-
<PAGE>
EXHIBIT 4.5
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
Amended and Restated
8% Subordinated Note Due 1997
Lexington, Massachusetts
August 1, 1996
For value received, PHOTOELECTRON CORPORATION, a Massachusetts
corporation (the "Company"), hereby promises to pay to Peter M. Nomikos
(hereinafter referred to as the "Payee"), or registered assigns, on May 31,
1997, as described below, the principal sum of One Hundred Seventy-Five Thousand
Dollars ($175,000.00) or such part thereof as then remains unpaid, to pay
interest from May 4, 1990 on the whole amount of said principal sum remaining
from time to time unpaid at the rate of eight percent (8%) per annum. Such
interest shall accrue on March 31, June 30, September 30 and December 31 of each
year, until the whole amount of the principal hereof remaining unpaid shall
become due and payable. The Company agrees to pay interest on all overdue
principal (including any overdue required redemption) and interest at a rate per
annum equal to the prime or base lending rate of the First National Bank of
Boston plus three percent (3%). Subject to the holder's option to convert the
----
outstanding principal and accrued but unpaid interest to Common Stock referenced
below, principal and all accrued but unpaid interest shall be repaid on May 31,
1997. Principal and interest shall be payable in lawful money of the United
States of America, in immediately available funds, at the principal office of
the Payee or at such other place as the legal holder may designate from time to
time in writing to the Company. Interest shall be computed on the basis of a
360-day year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note Purchase Agreement dated as of May 22,
1990, between the Company, Thermo Electron Corporation and Photoelectron
Investment Corporation of Liberia identified therein (as the same may be amended
from time to time, the "1990 Agreement"), and each holder of this Note, by its
acceptance hereof, agrees to be bound by the provisions of the 1990 Agreement, a
copy of which may be inspected by the legal holder hereof at the principal
office of the Company. As provided in the 1990 Agreement, (i) this Note is
subject to prepayment as specified in the 1990 Agreement, (ii) the principal of
and interest on this Note is subordinated to Senior Debt, as defined in the
<PAGE>
1990 Agreement, and (iii) the outstanding principal balance under the Note, and
all accrued but unpaid interest on such principal balance, is convertible into
Common Stock of the Company in the manner set forth in the 1990 Agreement.
As further provided in the 1990 Agreement, upon surrender of this Note
for transfer or exchange, a new Note or new Notes of the same tenor dated the
date to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due,
the Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its law governing
conflicts of law, and shall have the effect of a sealed instrument effective as
of the date first above written.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:/s/ Peter E. Oettinger
-----------------------------------
Peter E. Oettinger
Vice President and Chief Operating
Officer
Attest:
/s/ William O. Flannery
- ---------------------------
<PAGE>
EXHIBIT 4.6
PHOTOELECTRON CORPORATION
AMENDED AND RESTATED
CONVERTIBLE NOTE PURCHASE AGREEMENT
Originally Dated As Of July 11, 1991
<PAGE>
This Agreement is dated as of the 8th day of August, 1996 among
Photoelectron Corporation, a Massachusetts corporation (the "Company"), PYC
Corporation, formerly known as Photoelectron Investments Corporation of Liberia,
a Liberian corporation ("PYC") and Peter M. Nomikos (the "Purchaser").
The following sets forth the factual background to this Agreement:
A. The Company and PYC entered into a certain Subordinated Convertible
Note Purchase Agreement, dated as of July 11, 1991 (the "1991 Agreement")
pursuant to which the Company issued certain 8% Subordinated Notes Due 1998 to
Purchaser in a principal amount totaling $500,000.
B. On or about July 30, 1991, PYC assigned all of its rights, title and
interest in the 1991 Agreement, and any and all Notes issued thereunder, to
Peter M. Nomikos.
C. The Company is contemplating an Initial Public Offering (as defined
below) and the parties desire to amend and restate certain provisions of the
1991 Agreement. The parties also desire to set forth in writing waivers of the
Purchaser's rights regarding the Company's non-compliance with certain
provisions of the 1991 Agreement.
D. The Company and the Purchaser acknowledge that the amendments and
waivers set forth in this Agreement are in the best interests of the Company and
of Purchaser as a stockholder of the Company.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.01 The Securities. The Company has authorized the issuance and sale of
---------------
the Company's 8% Convertible Note Due 1998 in a principal amount of $500,000
(the "Note"). The Note shall be substantially in the form set forth in Exhibit
A hereto. The term "Note" or "Notes" shall also include any note or notes
delivered in exchange or replacement for the Note. Any shares of Common Stock
issuable upon conversion of the Note, and such shares when issued, are herein
referred to as the "Conversion Shares."
-2-
<PAGE>
1.02 Acknowledgment of Assignment.
-----------------------------
The Company acknowledges the assignment referenced in paragraph B above and
agrees to issue to the Purchaser, and, subject to and in reliance upon the terms
and conditions of this Agreement, the Purchaser agrees to accept an Amended and
Restated 8% Convertible Note Due 1998 substantially in the form set forth in
Exhibit A hereto.
1.03 Acknowledgment of Advances.
---------------------------
The Company hereby acknowledges the receipt of advances totalling $500,000
through the date hereof which shall bear interest at the rate of 8% per annum as
set forth herein and the Note as of the date first advanced to the Company, all
as set forth in Exhibit B hereto.
1.04 Transfer and Exchange of the Note. The registered holder of the Note
----------------------------------
may, prior to maturity or prepayment thereof, surrender the Note at the
principal office of the Company for transfer or exchange to any assignee.
Within a reasonable time after notice to the Company from a registered holder of
his intention to make such exchange and without expense (other than transfer
taxes, if any) to such registered holder, the Company shall issue in exchange
therefor another Note for the same aggregate principal amount as the unpaid
principal amount of the Note so surrendered (or in such multiples thereof as may
be requested by the registered holder) and having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Note so surrendered. Each new Note shall be made payable to
such Person or Persons, or registered assigns, as the registered holder of such
surrendered Note may designate, and such transfer or exchange shall be made in
such a manner that no gain or loss of principal or interest shall result
therefrom.
1.05 Replacement of the Note. Upon receipt of evidence satisfactory to
------------------------
the Company of the loss, theft, destruction or mutilation of the Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; provided, however, if any Note of which the
Purchaser, its nominees or any of its affiliates is the registered holder is
lost, stolen or destroyed, the affidavit of the owner or the president,
treasurer or assistant treasurer, as the case may be, of the registered holder,
including a representation to the effect that such Note has not been negotiated
and setting forth the circumstances with respect to such loss, theft or
destruction, shall be accepted as satisfactory evidence thereof, and no
indemnity bond or other security shall be required as a condition to the
execution and delivery by the Company of a new Note in replacement of such lost,
stolen or destroyed Note other than the registered holder's written agreement to
indemnify the Company.
-3-
<PAGE>
1.06 Subordination. The Company, for itself, its successors and assigns,
-------------
covenants and agrees, and the Purchaser and each successor holder of the Note by
its or his acceptance thereof likewise covenants and agrees, that
notwithstanding any other provision of this Agreement or the Note, the payment
of the principal of and interest on the Note shall be subordinated in right of
payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Debt (as hereinafter defined) at any time
outstanding.
(a) Payment of Senior Debt. In the event of any insolvency or
-----------------------
bankruptcy proceedings, or any proceedings in connection therewith, relative to
the Company or to its property, or, in the event of any proceedings for the
Company of distribution or marshalling of its assets or any composition with
creditors of the Company, whether or not involving insolvency or bankruptcy,
then and in any such event all Senior Debt shall be paid in full before any
payment or distribution of any character, whether in cash, securities or other
property, shall be made on account of the Note; and any such payment or
distribution, except securities that are subordinated and junior in right of
payment to the payment of all Senior Debt then outstanding in terms of
substantially the same tenor as this Section 1.06, which would, but for the
provisions hereof be payable or deliverable with respect to the Note shall be
paid or delivered directly to the holders of Senior Debt (or their duly
authorized representatives), in the proportions in which they hold the same,
until all Senior Debt shall have been paid in full, and any holder of the Note
by becoming a holder thereof shall have designated and appointed the holder or
holders of Senior Debt (and their duly authorized representatives) as its or his
agents and attorneys-in-fact to demand, sue for, collect and receive such Senior
Debt holder's ratable share of all such payments and distributions and to file
any necessary proof of claim therefor and to take all other action (including
the right to vote such Senior Debt holder's ratable share of the Note), in the
name of the holders (or their authorized representatives), that such Senior Debt
holder may determine to be necessary or appropriate for the enforcement of this
Section 1.06. The Purchaser and each successor holder of the Note by its or his
acceptance thereof agrees to execute, at the request of the Company, a separate
agreement with any holder of Senior Debt on the terms set forth in this Section
1.06.
(b) No Payment on Note Under Certain Conditions.
--------------------------------------------
In the event that:
(i) any default occurs in the payment of principal of or interest on
any Senior Debt and during the continuance of such default, or (if a shorter
period) until such payment has been made or such default has been cured or
waived in writing by such holder of Senior Debt; or
-4-
<PAGE>
(ii) the maturity of any Senior Debt is accelerated by any holder
thereof because of a default with respect thereto and until such acceleration
has been rescinded or said Senior Debt has been paid;
then and during the continuance of any of such events no payment shall be made
by the Company, directly or indirectly, on account of the principal of or
interest on the Note.
(c) Payments Held in Trust. In case any payment or distribution shall
-----------------------
be paid or delivered to any holder of the Note in violation or contravention of
the terms of this subordination, before all Senior Debt shall have been paid in
full, such payment or distribution shall be held in trust for and paid and
delivered to the holders of Senior Debt (or their duly authorized
representatives) until all Senior Debt shall have been paid in full.
(d) Subrogation. Subject to the payment in full of all Senior Debt
------------
and until the Note shall be paid in full, the holder of the Note shall be
subrogated to the rights of the holders of the Senior Debt (to the extent of
payments or distributions previously made to such holders of Senior Debt
pursuant to the provisions of subsections (a) and (c) of this Section 1.06) to
receive payments or distributions of assets of the Company applicable to the
Senior Debt. No such payments or distributions applicable to the Senior Debt
shall, as between the Company and its creditors, other than the holders of
Senior Debt and the holder of the Note, be deemed to be a payment by the Company
to or on account of the Note; and for the purposes of such subrogation, no
payments or distributions to the holders of Senior Debt to which the holder of
the Note would be entitled except for the provisions of this Section 1.06 shall,
as between the Company and its creditors, other than the holders of Senior Debt
and the holder of the Note, be deemed to be a payment by the Company to or on
account of the Senior Debt.
(e) Scope of Section. The provisions of this Section 1.06 are
----------------
intended solely for the purpose of defining the relative rights of the holder of
the Note, on the one hand, and the holders of the Senior Debt on the other hand.
Nothing contained in this Section 1.06 or elsewhere in this Agreement or the
Note is intended to or shall impair, as between the Company and its creditors,
other than the holders of Senior Debt, and the holder of the Note, the
obligation of the Company, which is unconditional and absolute, to pay to the
holder of the Note the principal of and interest on the Note as and when the
same shall become due and payable in accordance with the terms thereof, or to
affect the relative rights of the holders of the Senior Debt, nor shall anything
herein or therein prevent the holder of the Note from accepting any payment,
with respect to such Note or exercising all remedies otherwise permitted by
applicable law upon default under such Note, subject to the rights, if any,
under this Section 1.06 of the holders of Senior Debt in respect of cash,
property or notes of the Company received by the holders of the Note.
(f) Survival of Rights. The right of any present or future holder of
-------------------
Senior Debt to enforce subordination of the Note pursuant to the provisions of
this Section 1.06 shall not at any time be prejudiced or impaired by any act or
failure to act on the part of the Company or any such holder of Senior Debt,
including without limitation,
-5-
<PAGE>
any forbearance, waiver, consent, compromise, amendment, extension, renewal or
taking or release of security of or in respect of any Senior Debt or by
noncompliance by the Company with the terms of such subordination regardless of
any knowledge thereof such holder may have or otherwise been charged with.
(g) Amendment or Waiver. The provisions of this Section 1.06 may not
-------------------
be amended or waived in any manner that is detrimental to any Senior Debt
without the consent of the holders of all then existing Senior Debt.
(h) Senior Debt Defined. The term "Senior Debt" shall mean (i) all
--------------------
Indebtedness of the Company (which is not convertible into equity securities of
the Company and is not issued in conjunction with equity securities of the
Company or options or warrants to purchase equity securities of the Company) for
money borrowed, including any extension or renewals thereof, whether outstanding
on the date hereof or thereafter created or incurred, which is not by its terms
subordinate and junior to or on a parity with the Note, and (ii) all other
indebtedness to which the obligations of the Note shall be expressly
subordinated by the holder of the Note in writing, citing this Section 1.06.
(i) Proof of Subordination. The Purchaser agrees that he will execute
-----------------------
and deliver any other documents evidencing the subordination of the Note to
Senior Debt that may be reasonably requested by the Company or the holders of
Senior Debt so long as none of the provisions contained in such documents
diminish the rights of the Purchaser in any manner.
1.07 Payment of Interest. The Company shall pay interest on the
--------------------
outstanding principal balance on the Note at a rate of 8% per annum. Interest
shall accrue on March 31, June 30, September 30 and December 31, of each year
until the whole amount of the outstanding principal of the Note shall become due
and payable. The Company agrees to pay interest on all overdue principal
(including any overdue required redemption) and interest at a rate per annum
equal to the prime or base lending rate of the First National Bank of Boston
plus three percent (3%). Subject to the holder's option, referenced in Section
- ----
3.01, to convert all then accrued but unpaid interest to Common Stock, accrued
but unpaid interest shall be repaid on July 31, 1998.
1.08 Representations by the Purchaser. The Purchaser represents that it is
---------------------------------
its present intention to acquire the Note for its own account and that the Note
is being and will be acquired for the purpose of investment and not with a view
to distribution or resale thereof. The acquisition by the Purchaser of the Note
shall constitute a confirmation by him of this representation.
ARTICLE II
COVENANTS OF THE COMPANY
-6-
<PAGE>
2.01 Affirmative Covenants of the Company Other Than Reporting
---------------------------------------------------------
Requirements. Without limiting any other covenants and provisions hereof, the
- -------------
Company covenants and agrees that, so long as the Note is outstanding, it will
perform and observe the following covenants and provisions:
(a) Punctual Payment. Pay the principal of and interest on the Note
-----------------
at the times and place and in the manner provided in the Note and herein.
(b) Preservation of Corporate Existence. Preserve and maintain its
------------------------------------
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified, as a foreign corporation in
each jurisdiction in which such qualification is necessary or desirable in view
of its business and operations or the ownership of its properties; and preserve
and maintain all material licenses and other rights to use patents, processes,
licenses, trademarks, trade names, inventions, intellectual property rights or
copyrights owned or possessed by it and necessary to the conduct of its
business.
(c) Compliance with Laws. Comply, in all material respects with all
---------------------
applicable laws, rules, regulations and orders of any governmental authority,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
(d) Keeping of Records and Books of Account. Keep adequate records
----------------------------------------
and books of account in which complete entries will be made in accordance with
generally accepted accounting principles consistently applied, reflecting all
financial transactions of the Company and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection within its business shall be made.
(e) Budgets and Board Approval. Prior to the commencement of each
---------------------------
fiscal year, prepare and submit to, and obtain the approval of a majority of,
the Board of Directors of a budget for the upcoming fiscal year, including
projections of research and development expenditures, capital and operating
expenses, cash flow and profits and losses, all itemized in reasonable detail.
(f) Financings. Promptly, fully and in detail, inform the Board of
-----------
Directors in advance of any commitments or contracts relating to financing of
any nature for the Company or pledge of corporate assets.
(g) Board of Directors: Indemnification. The Board of Directors shall
------------------------------------
not consist of more than four (4) directors. The By-laws of the Company shall
at all times provide for the indemnification of the Board of Directors to the
full extent provided by the law of the jurisdiction in which the Company is
organized. The Company shall
-7-
<PAGE>
maintain directors and officers insurance with coverage and premium levels
consistent with policies carried by companies of similar size engaged in similar
businesses.
2.02 Negative Covenants of the Company. Without limiting any other
----------------------------------
covenants and provisions hereof, the Company covenants and agrees that, so long
as the Conversion Shares issuable upon conversion of the Note and the shares
issued by the Company on January 4, 1989 or issuable upon conversion of the 8%
Subordinated Convertible Note issued by the Company on January 4, 1989, or the
8% Subordinated Convertible Notes issued by the Company on May 22, 1990, in the
aggregate, are greater than 50% of the total outstanding voting securities of
the Company, without the consent of the Purchaser, the Company will not:
(a) Mergers, Sale of Assets, Etc. Merge or consolidate with, or sell,
-----------------------------
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) a material portion
of its assets (whether now owned or hereafter acquired) to, any Person, except
for sales or other dispositions of assets in the ordinary course of business.
(b) Dealings with Affiliates and Others. From and after the date of
------------------------------------
this Agreement, enter into any transaction, including, without limitation, any
loans or extensions of credit or royalty agreements, with any officer or
director of the Company or holder of any class of capital stock of the Company,
or any member of their respective immediate families or any corporation or other
entity directly or indirectly controlled by one or more of such officers,
directors or stockholders or members of their immediate families.
(c) Change in Nature of Business. Make any material change in the
-----------------------------
nature of its business as carried on as of the date hereof.
(d) Dividends. Declare or pay any dividends on any class of the
----------
Company's capital stock now or hereafter outstanding or purchase, redeem or
otherwise acquire or retire any of the Company's capital stock of any class now
or hereafter outstanding or otherwise return capital or make distributions of
assets to stockholders as such, except the repurchase of capital stock pursuant
to a certain Stockholders' Agreement of January 4, 1989 among the parties
hereto.
2.03 Reporting Requirements. The Company will furnish the following to
-----------------------
each holder who owns of record or beneficially or has the right to acquire from
the Company any Conversion Shares, to each holder of the Note and to each holder
of 15% or more of the Company's Common Stock:
(a) As soon as available and in any event within thirty (30) days
after the end of each fiscal quarter of the Company, a balance sheet of the
Company as of the end of such quarter and a statement of income and retained
earnings and of changes in
-8-
<PAGE>
financial position of the Company for the period ending with such quarter, all
in reasonable detail and duly certified (subject to year-end audit adjustments)
by the chief financial officer of the Company as having been prepared in
accordance with the accounting principles applied in the prior annual audited
financial statements of the Company, and such financial statements shall set
forth in comparative form the corresponding figures for the corresponding period
of the prior fiscal year.
(b) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, a balance sheet of the Company
as of the end of such fiscal year and statements of income and retained earnings
and of changes in financial position of the Company for such fiscal year,
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, and, if audited, all such statements in audited form and
duly certified by a nationally recognized independent public accountant;
(c) Any written report submitted to the Company by independent public
accountants in connection with any annual or interim audit of the books of the
Company made by such accountants;
(d) Promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, materially
affecting the Company when considered as a whole that are not fully covered by
insurance; and
(e) At least thirty (30) days prior to the commencement of each fiscal
year of the Company, a copy of the operating plan and budget.
ARTICLE III
CONVERSION OF THE NOTE
3.01 Conversion Rights.
------------------
(a) Principal. Subject to and in compliance with the provisions of
----------
this Article III, at the option of the holder, all or any part of the principal
amount outstanding on the Note may be converted at any time at the Applicable
Principal Conversion Value (as defined below) into fully paid and non-assessable
shares of Common Stock in accordance with the provisions of Sections 3.02 to
3.15.
(b) Interest. Subject to and in compliance with the provisions of
---------
this Article III, at the option of the holder, all of the accrued and unpaid
interest on the Note may be converted at any time at the Applicable Interest
Conversion Value (as defined below) into fully paid and non-assessable shares of
Common Stock in accordance with the provisions of Sections 3.02 and 3.06 to
3.15; provided, however, that upon conversion
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<PAGE>
of all or any part of the principal amount of the Note pursuant to clause (a) of
this Section, all accrued and unpaid interest on such Note up to and including
the Conversion Date (as defined below) shall be converted at the Applicable
Interest Conversion Value into fully paid and non-assessable shares of Common
Stock.
3.02 Conversion Values.
------------------
(a) Applicable Principal Conversion Value. The price at which the
--------------------------------------
outstanding principal of the Note may be converted into Common Stock (the
"Applicable Principal Conversion Value") shall, subject to adjustment as
provided in Sections 3.03 through 3.15, be one dollar and fifty cents ($1.50).
(b) Applicable Interest Conversion Value. The price at which accrued
-------------------------------------
and unpaid interest on the outstanding principal balance of any Note issued
under this Agreement may be converted into Common Stock (the "Applicable
Interest Conversion Value") shall, subject to adjustment as provided in Sections
3.06 through 3.15, be equal to the fair market value of the Common Stock on the
first day of the fiscal quarter in which the interest to be converted accrued.
Prior to the time that the Common Stock is traded over-the-counter, on the New
York or American stock exchanges or on the National Association of Securities
Dealers Automated Quotation National Market System ("NASDAQ"), the fair market
value shall be the price at which the Company most recently issued any stock,
Common or Preferred, in a private placement of securities. From and after the
date upon which the Common Stock is traded over-the-counter, on the New York or
American stock exchanges or on NASDAQ, the fair market value of the Common Stock
shall be the Market Price of such stock on the date upon which the interest
accrued as determined in accordance with the provisions of clause (d) of this
Section.
(c) Applicable Conversion Value. For the purposes of Section 3.06,
----------------------------
the Applicable Principal Conversion Value and the Applicable Interest Conversion
Value are collectively referred to as the "Applicable Conversion Value."
(d) Market Price. The term "Market Price" shall mean the average of
-------------
the per share daily closing prices of Common Stock for the 10 consecutive
business days beginning with the first day of the fiscal quarter in which the
interest to be converted accrued. The closing price for each day shall be (i)
the last reported sales price or, in case no such reported sale takes place on
such day, the average of the reported closing bid and ask prices, in either case
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if the Common Stock is not listed or admitted
to trading on any national securities exchange, on NASDAQ, (ii) if the Common
Stock is not listed or admitted to trading on any national securities exchange
or quoted on NASDAQ, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
reasonably selected from time to time by the Company for that purpose, or (iii)
if the Common Stock is not listed or admitted to trading on any national
securities exchange or quoted on NASDAQ and the
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<PAGE>
average price cannot be determined as contemplated by clause (ii), the fair
market value as reasonably determined in good faith by the Company's Board of
Directors or in any manner reasonably prescribed by the Company's Board of
Directors. For the purposes of this Section 3.02, the term "business day" shall
mean each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on
which securities are not traded on such exchange or in such market.
3.03 Adjustments for Sale of Common Stock at Less Than Applicable
------------------------------------------------------------
Principal Conversion Value. Except for the issuance of up to 120,000 shares of
- --------------------------
the Company's Common Stock to employees, directors or consultants of the Company
pursuant to an option plan or plans approved by the Company's Board of Directors
(the "Reserved Employee Shares"), if the Company shall, while there is any Note
outstanding, issue or sell shares of its Common Stock without consideration or
at a price per share less than the Applicable Principal Conversion Value in
effect immediately prior to such issuance or sale, then in each such case such
Applicable Principal Conversion Value upon each such issuance or sale, except as
hereinafter provided, shall be lowered so as to be equal to an amount determined
by multiplying the Applicable Principal Conversion Value by a fraction:
(1) the numerator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock, plus (b) the number of shares of
Common Stock that the net aggregate consideration if any, received by
the Company for the total number of such additional shares of Common
Stock so issued would purchase at the Applicable Principal Conversion
Value in effect immediately prior to such issuance; and
(2) the denominator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock plus (b) the number of such
additional shares of Common Stock so issued.
For purposes of computation of the Applicable Principal Conversion Value, if
part or all of the consideration to be received by the Company in connection
with the issuance of shares of Common Stock or any of the other securities
described in this Article III consists of property other than cash, such
consideration shall be deemed to have a fair market value that is reasonably
determined in good faith by the Board of Directors.
3.04 Warrants, Options, Etc., for Common Stock. For the purposes of this
-------------------------------------------
Article III, the issuance after the date of this Agreement of any warrants,
options (other than the Reserved Employee Shares), subscriptions or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share (as
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<PAGE>
hereinafter determined) that may be received by the Company for such Common
Stock shall be less than the Applicable Principal Conversion Value at the time
of such issuance. Any obligation, agreement or undertaking to issue warrants,
options, subscriptions or purchase rights at any time in the future shall be
deemed to be an issuance at the time such obligation, agreement or undertaking
is made or arises. No adjustment of the Applicable Principal Conversion Value
shall be made upon the issuance of any shares of Common Stock that are issued
pursuant to the exercise of any conversion or exchange rights in any convertible
securities to the extent a corresponding adjustment shall previously have been
made upon the issuance of any such warrants, options or subscriptions or
purchase rights or upon the issuance of any convertible securities (or upon the
issuance of any warrants, options or any rights therefor) as provided above. Any
adjustment of the Applicable Principal Conversion Value that relates to
warrants, options, subscriptions or purchase rights with respect to shares of
Common Stock shall be disregarded if, as and when all of such warrants, options,
subscriptions or purchase rights expire or are canceled without being exercised,
so that the Applicable Principal Conversion Value effective immediately upon
such cancellation or expiration shall be equal to the Applicable Principal
Conversion Value in effect immediately prior to the issuance of the expired or
canceled warrants, options, subscriptions or purchase rights, with such
additional adjustments as would have been made to that Applicable Principal
Conversion Value had the expired or canceled warrants, options, subscriptions or
purchase rights not been issued. For purposes of this Article III, the "Net
Consideration Per Share" that may be received by the Company shall be determined
as follows:
(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company
for the issuance of such warrants, options, subscriptions or other
purchaser rights or convertible or exchangeable securities, plus the
minimum amount of consideration, if any, payable to the Company upon
exercise or conversion thereof, divided by the aggregate number of
shares of Common Stock that would be issued if all such warrants,
options, subscriptions or other purchase rights or convertible or
exchangeable securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" that may be received by the
Company shall be determined in each instance as of the date of
issuance of warrants, options, subscriptions or other purchase rights
or convertible or exchangeable securities without giving effect to
any possible future price adjustments or value adjustment that may be
applicable with respect to such warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities.
(C) If a part or all of the consideration received by the Company in
connection with the issuance of shares of the Common Stock or the
issuance of any of the securities described in this Section 3.04
consists of property other than cash, and the Board of Directors of
the Company is
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<PAGE>
unable to arrive at any valuation of such property, the Company at
its expense will promptly cause independent accountants of recognized
standing selected by the Company to value such property, whereupon
such value shall be given to such consideration and shall be recorded
on the books of the Company with respect to receipt of such property.
3.05 Dilution in Case of Other Securities. In case any Other Securities
-------------------------------------
shall be issued or sold, or shall become subject to issue upon the conversion or
exchange of any stock (or Other Securities) of the Company (or any other issuer
of Other Securities or any other Person referred to in Section 3.08) or to
subscription, purchase or other acquisition pursuant to any rights or options
granted by the Company (or such other issuer or Person), for a consideration per
share so as to dilute the conversion rights evidenced by the Note, the
computations, adjustments and readjustments provided for in Sections 3.03 and
3.04 with respect to the Applicable Principal Conversion Value shall be made as
nearly as possible in the manner so provided and applied to determine the amount
of Other Securities from time to time receivable on the conversion of the Note,
so as to protect the holders of the Note against the effect of such dilution.
3.06 Extraordinary Events. If the Company shall after the date of this
---------------------
Agreement (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock or (iii) combine its outstanding shares of the Common stock into
a smaller number of shares of the Common Stock, then, in each such event, the
Applicable Conversion Value shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Applicable Conversion Value by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Applicable Conversion
Value then in effect. The Applicable Conversion Value, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 3.06.
3.07 Adjustment for Dividends in Other Stock, Property, Etc.;
--------------------------------------------------------
Reclassification, Etc. In case at any time or from time to time after the date
- ----------------------
of this Agreement the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash, or
(c) other or additional stock or other securities or property
(including
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<PAGE>
cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement, other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock split
(adjustments in respect of which are provided for in Section 3.06)
and normal cash dividends,
then and in each such case the holder of the Note, on the conversion thereof as
provided in this Article III, shall be entitled to receive the amount of stock
and other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3.07) that such holder would hold on the
date of such conversion if on the date thereof it had been the holder of record
of the number of shares of Common Stock that it would have received had the Note
been converted into Common Stock immediately before the date of such event to
and including the Conversion Date (as that term is defined in Section 3.11), and
had thereafter, during the period from the date hereof to and including the date
of such conversion, retained such shares and all such other or additional stock
and other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3.07) receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period
under this Article III.
3.08 Adjustment for Reorganization, Consolidation, Merger, Etc.
----------------------------------------------------------
(a) Generally. If at any time or from time to time the Company shall
----------
(i) effect a reorganization, (ii) consolidate with or merge into any other
Person or (iii) transfer all or substantially all of its properties or assets to
any other Person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, the holder of the Note, on the conversion
thereof as provided in this Article III at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such holder had so
converted the Note immediately prior thereto, all subject to further adjustment
thereafter as provided under this Article III.
(b) Dissolution. In the event of any dissolution of the Company
------------
following the transfer of all or substantially all of its properties or assets,
the Company, prior to such dissolution, shall at its expense deliver or cause to
be delivered the stock and other securities and property (including cash, if
applicable) receivable by the holder of the Note after the effective date of
such dissolution pursuant to this Section 3.08 to a bank or trust company having
its principal office in Boston, Massachusetts, as trustee for the holder or
holders of the Note, which shall establish procedures for the exchange of such
property for the Note.
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<PAGE>
(c) Continuation of Terms. Upon any reorganization,
----------------------
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3.08, the Note shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the conversion of the Note after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of the Note as provided in Section 3.09.
3.09 No Dilution or 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 the
Note, 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 holders of shares of Common Stock issuable
upon conversion of the Note against dilution or other impairment.
3.10 Certificate as to Adjustments. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on the
conversion of the Note, the Company at its expense will promptly provide each
holder of the Note, at the election of such holder, a certificate of the
President and of the chief financial officer of the Company setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding and (c) the Applicable Principal
Conversion Value in effect immediately prior to such issue or sale and as
adjusted and readjusted on account hereof.
3.11 Exercise of Conversion Privilege.
---------------------------------
(a) Principal. To exercise the principal conversion privilege, a
----------
holder of the Note shall surrender the Note being converted to the Company at
the Company's principal office, and shall give written notice to the Company at
that office that such holder elects to convert the outstanding principal
balance of such Note, or a portion thereof. Such notice shall also state the
name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The Note surrendered for conversion shall be accompanied by proper
assignment thereof to the Company or in blank. For purposes of this clause
(a), the date when such written notice is received by the Company, together
with the Note being converted, shall be the "Conversion Date." As promptly as
practicable, but
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<PAGE>
in any event within 15 days after the Conversion Date, the Company shall issue
and shall deliver to the holder of the Note being converted, or on its written
order, such certificate or certificates as it may request for the number of
whole shares of Common Stock issuable upon the conversion of such Note in
accordance with the provisions of this Article III, the number of whole shares
of Common Stock issuable upon the conversion of all accrued and unpaid interest
on such Note up to and including the Conversion Date, any property or
securities issuable upon conversion as provided in Section 3.07 and cash, as
provided in Section 3.12, in respect of any fraction of a share of Common Stock
issuable upon such conversion. Such conversion shall be deemed to have been
made immediately prior to the close of business on the Conversion Date, and at
such time the rights of the holder as holder of the Note shall cease and the
Person or Persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed
to have become the holder or holders of record of the shares of Common Stock
represented thereby.
(b) Interest. To exercise the interest conversion privilege, a holder
---------
of the Note shall give written notice to the Company at the Company's principal
office that such holder elects to convert all accrued and unpaid interest on
such Note. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. For purposes of this clause
(b), the date when such written notice is received by the Company shall be the
"Conversion Date." As promptly as practicable, but in any event within 15 days
after the Conversion Date, the Company shall issue and shall deliver to the
holder of the Note, or on its written order, such certificate or certificates
as it may request for the number of whole shares of Common Stock issuable upon
the conversion of the interest and cash, as provided in Section 3.12, in
respect of any fraction of a share of Common Stock issuable upon such
conversion.
3.12 Cash in Lieu of Fractional Shares. No fractional shares of Common
----------------------------------
Stock shall be issued upon the conversion of principal and/or interest with
respect to the Note. Instead of any fractional shares of Common Stock that
would otherwise be issuable upon such conversion, the Company shall pay to the
holder of the Note a cash adjustment in respect of such fractional shares in an
amount equal to the same fraction of the Applicable Principal Conversion Value
(in a case of conversion of principal) or the Applicable Interest Conversion
Value (in a case of conversion of interest).
3.13. Partial Conversion. In the event some but not all of the principal
------------------
amount represented by the Note surrendered by a holder is converted, the
Company shall execute and deliver to or on the order of the holder, at the
expense of the Company, a new Note representing the principal amount that was
not converted.
3.14 Reservation of Common Stock. The Company shall at all times reserve
----------------------------
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Note, sufficient
shares of Common Stock to effect the conversion of all outstanding Notes, and
if at any time the number of
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<PAGE>
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding Notes, the Company shall take
such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to a number of shares that shall be sufficient
for that purpose.
3.15 Notice of Record Date. In the event of:
---------------------
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof that are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
(c) any voluntary or involuntary dissolution, liquidation or winding up of
the Company, then and in each such event the Company shall mail or cause to be
mailed to each holder of a Note a notice specifying (i) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective and (iii) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for securities or
other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up. Such notice shall be mailed at least 30 days prior to the date
specified in such notice on which such action is to be taken.
ARTICLE IV
4.01 Right of First Refusal. Except for the Reserved Employee shares, the
-----------------------
Company shall not issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, (i) any shares of Common
Stock, (ii) any other equity security of the Company, including, without
limitation, shares of preferred stock, (iii) any option, warrant or other right
to subscribe for, purchase or otherwise acquire any equity security of the
Company or (iv) any Debt Security, unless in each such case the Company shall
have first received an unconditional bona fide offer from a third party to
purchase such securities (the "Offered Securities") and shall have offered to
sell such Offered Securities to Thermo Electron Corporation ("Thermo") and the
Purchaser as follows: The Company shall offer to sell to each of Thermo and the
Purchaser a portion
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<PAGE>
of the Offered Securities so that the aggregate number of shares of Common Stock
and Conversion Shares then held by or issuable to each of Thermo and the
Purchaser equals forty percent (40%) of the total number shares of Common Stock
to be outstanding after the proposed issuance by the Company (assuming the
conversion of the Note and exercise of all options held by employees of the
Company and the issuance and exercise of all options reserved for issuance to
employees of the Company by the Board of Directors pursuant to any option plan
approved by the Directors and shareholders of the Company), at a price and on
the other terms specified by the Company in writing delivered to Thermo and the
Purchaser (the "Offer"), and the Offer by its terms shall remain open and
irrevocable for a period of twenty (20) days, unless waived by Thermo and the
Purchaser.
4.02 Notice of Acceptance. Notice of Thermo's or the Purchaser's
---------------------
intention to accept, in whole or in part, an Offer made pursuant to Section 4.01
shall be evidenced by a writing signed by Thermo or the Purchaser, as the case
may be, and delivered to the Company prior to the end of the twenty (20) day
period of the Offer, setting forth the portion of the Offered Securities that
such party elects to purchase. If either Thermo or the Purchaser elects not to
purchase all such portion of Offered Securities, then any such securities not
elected to be purchased shall be then offered to whichever of Thermo or the
Purchaser elected to purchase all of its portion of the Offer, in the same
manner as set forth in Section 4.01. Such secondary offer shall be open for 10
days.
4.03 Conditions to Acceptance and Purchase.
--------------------------------------
(a) Permitted Sales of Refused Securities. If Notices of Acceptance
--------------------------------------
are not given by Thermo and the Purchaser in respect of all the Offered
Securities pursuant to Sections 4.01 and 4.02, the Company shall have sixty (60)
days from the expiration of the 10-day period set forth in Section 4.02 to sell
all or any part of such Offered Securities as to which a Notice of Acceptance
has not been given by Thermo or the Purchaser and all of the Offered Securities
not subject to the option of Thermo or the Purchaser pursuant to this Article IV
(the "Refused Securities") to the Person or Persons specified in the Offer, but
only for cash and otherwise in all respects upon terms and conditions,
including, without limitation, unit price and interest rates, which are not more
favorable, in the aggregate, to such other Person or Persons or less favorable
to the Company than those set forth in the Offer.
(b) Reduction in Amount of Offered Securities. In the event the
------------------------------------------
Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 4.03(a) above),
then Thermo and the Purchaser shall reduce the number of, or other units of, the
Offered Securities specified in their respective Notices of Acceptance to an
amount that shall be not less than the amount of the Offered Securities that
each of Thermo and the Purchaser elected to purchase pursuant to Section 4.02
multiplied by a fraction, (i) the numerator of which shall be the amount of
Offered Securities the Company actually proposes to sell, and (ii) the
denominator of which shall be the amount of all Offered Securities. In such
event, the
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<PAGE>
Company may not sell or otherwise dispose of more than the reduced amount of the
Offered Securities until such securities have again been offered to Thermo and
the Purchaser in accordance with Section 4.01.
(c) Closing. Upon the closing, which shall include full payment to
--------
the Company, of the sale to such other Person or Persons of all or less than all
the Refused Securities, Thermo and the Purchaser shall purchase from the
Company, and the Company shall sell to Thermo and the Purchaser, the number of
Offered Securities specified in their respective Notices of Acceptance, as
reduced pursuant to Section 4.03(b), upon the terms and conditions specified in
the Offer. The purchase by Thermo and the Purchaser of any Offered Securities
is subject in all cases to the preparation, execution and delivery by the
Company, Thermo and the Purchaser of a purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to Thermo, PIC
and their counsel.
4.04 Further Sale. In each case, Offered Securities not purchased by
-------------
Thermo, the Purchaser or other Person or Persons in accordance with Section 4.03
may not be sold or otherwise disposed of until they are again offered to Thermo
under the procedures specified in Sections 4.01, 4.02 and 4.03.
4.05 Exceptions. The rights of Thermo under this Article IV shall not
-----------
apply to:
(a) Common stock issued as a stock dividend to holders of Common Stock
or upon any subdivision or combination of shares of Common Stock, or
(b) up to 800,000 shares of Common Stock, or options exercisable
therefor, including options outstanding on the date of this Agreement (such
number to be equitably adjusted in the event of any stock split, combination,
reclassification or other similar event occurring on or after the date of this
Agreement) issuable to current and future officers, employees, directors or
consultants of the Company pursuant to any stock option plan or stock purchase
plan approved by a vote of not less than a majority of the Board of Directors of
the Company.
ARTICLE V
EVENTS OF DEFAULT
5.01 Events of Default. If any of the following events ("Events of
------------------
Default") shall occur and be continuing seven days after delivery of notice (as
described below) to the Company:
(a) The Company shall fail to pay any installment of principal of the
Note when due; or
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<PAGE>
(b) The Company shall fail to pay any interest on the Note when due or
shall default in the performance of any covenant contained in Section 2.02 and
such failure or default shall continue for seven (7) business days; or
(c) The Company shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or the Note on its part to be
performed or observed and any such failure remains unremedied for thirty (30)
days after written notice thereof shall have been given to the Company by the
holder of the Note; or
(d) The Company shall fail to pay any Indebtedness for borrowed money
(other than as evidenced by the Note) owing by the Company or any interest or
premium thereon, when due (or, if permitted by the terms of the relevant
document, within any applicable grace period), whether such Indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise, or shall fail to perform any term, covenant or agreement on
its part to be performed under any agreement or instrument (other than this
Agreement or the Note) evidencing or securing or relating to any Indebtedness
owing by the Company when required to be performed (or, if permitted by the
terms of the relevant document, within any applicable grace period), if the
effect of such failure to pay or perform is to accelerate, or to permit the
holder or holders of such Indebtedness, or the trustee or trustees under any
such agreement or instrument, to accelerate, the maturity of such Indebtedness,
unless such failure to pay or perform shall be waived by the holder or holders
of such Indebtedness or such trustee or trustees; or
(e) The Company shall be involved in financial difficulties as
evidenced (i) by its admitting in writing its inability to pay its debts
generally as they become due, (ii) by its commencement of a voluntary case under
Title 11 of the United States Code as from time to time in effect, or by its
authorizing, by appropriate proceedings of its Board of Directors or other
governing body, the commencement of such a voluntary case, (iii) by its filing
an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of any
such petition, (iv) by the entry of an order for relief in any involuntary case
commenced under said Title 11, (v) by its seeking relief as a debtor under any
applicable law, other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the modification or alteration of
the rights of creditors, or by its consenting to or acquiescing in such relief,
(vi) by the entry of an order by a court of competent jurisdiction (a) finding
it to be bankrupt or insolvent, (b) ordering or approving its liquidation,
reorganization or any modification or alteration of the rights of its creditors
or (c) assuming custody of, or appointing a receiver or other custodian for, all
or a substantial part of its property or (vii) by its making an assignment for
the benefit of, or entering into a composition with, its creditors, or
appointing or consenting to the appointment of a receiver or other custodian for
all or a substantial part of its property; or
-20-
<PAGE>
(f) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Company and such judgment, writ or similar process shall not be released,
vacated or fully bonded within ninety (90) days after its issue or levy;
then, and in any such event, the Purchaser or any other holder of a Note may, by
notice to the Company, declare the entire unpaid principal amount of the Note,
all interest accrued and unpaid thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Note, all such accrued
interest and all such amounts shall become and be forthwith due and payable
(unless there shall have occurred an Event of Default under subsection 5.01 (e)
in which case all such amounts shall automatically become due and payable),
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by the Company.
ARTICLE VI
DEFINITIONS AND ACCOUNTING TERMS
6.01 Certain Defined Terms. As used in this Agreement, the following
---------------------
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Debt Security" means and includes (i) any debt security of the Company
that by its terms is convertible into or exchangeable for any equity security of
the Company, (ii) any security of the Company that is a combination of debt and
equity or (iii) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any such debt security of the Company.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles consistently
applied, be classified upon the obligor's balance sheet as liabilities,
excluding any liabilities in respect of deferred federal or state income taxes,
but in any event including, without limitation, liabilities secured by any
mortgage on property owned or acquired subject to such mortgage, whether or not
the liability secured thereby shall have been assumed, and also including,
without limitation, (i) all guaranties, endorsements and other contingent
obligations, in respect of Indebtedness of others, whether or not the same are
or should be so reflected in said balance sheet, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and (ii) the present value of
any lease payments due under leases required to be capitalized in accordance
with applicable Statements of Financial Accounting Standards, determined by
discounting all such payment at the interest rate determined in accordance with
applicable Statements of Financial Accounting Standards.
-21-
<PAGE>
"Initial Public Offering" shall mean the effectiveness of the Company's
Registration Statement on Form S-1 under the Securities Act of 1933, as amended,
in connection with an initial public offering of the Company's Common Stock
which yields at least $7,500,000 in gross proceeds to the Company.
"Other Securities" shall mean any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) that the
holder of the Note at any time shall be entitled to receive, or shall have
received, on the conversion of the Note, in lieu of or in addition to Common
Stock, or that at any time may be issuable or shall have been issued in exchange
for or in replacement of Common Stock or Other Securities pursuant to Article
III.
"Permitted Assignee" shall mean with respect to the Purchaser any person or
entity directly or indirectly controlling, controlled by or under common control
with such assigning person. For the purposes of this definition, "Control"
shall mean the power and authority to direct the affairs of the entity in
question through the direct or indirect ownership or control over not less than
50.1% of the such entity's voting securities or equity.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or of any other federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at the time.
ARTICLE VII
AMENDMENTS EFFECTIVE UPON AN
INITIAL PUBLIC OFFERING
7.01 Effective upon the consummation of an Initial Public Offering, the
parties hereto amend this Agreement as follows:
(a) by deleting the first sentence of Section 2.01(g);
(b) by deleting Section 2.02 in its entirety;
(c) by deleting Section 2.03 in its entirety; and
(d) by deleting Article IV in its entirety.
-22-
<PAGE>
ARTICLE VIII
WAIVERS OF PRIOR NON-COMPLIANCE
8.01. Purchaser hereby waives any and all defaults which may have occurred
under the following provisions of the 1991 Agreement prior to the date hereof:
(i) the obligation to pay interest on any Note issued under the 1991
Agreement at the times and place and in the manner provided in the
Note and in the 1991 Agreement in compliance with Section 2.01(a);
(ii) the obligation to prepare, submit to, and obtain approval from a
majority of the Company's Board of Directors, of a budget for the
upcoming year in compliance with Section 2.01(e);
(iii) the obligation to maintain directors and officers insurance in
compliance with the last sentence of Section 2.01(g);
(iv) the negative covenant restricting affiliated transactions as set
forth in Section 2.02(b) as applied to transactions with the
Purchaser, or affiliates of the Purchaser, that were approved by
the Board of Directors of the Company and pursuant to which
Nomikos or his affiliates loaned money to or acquired capital
stock, warrants or other securities in the Company;
(v) the negative covenant restricting change in the nature of the
business of the Company as set forth in Section 2.02(c) as applied
to the change in the Company's business from the photocathode
business in which the Company was engaged at the time of its
organization to the medical devices business in which it is now
engaged;
(vi) the reporting requirements set forth in Section 2.03; and
(vii) the consent requirements of Section 7.02 of the 1991 Agreement (now
amended and restated as Section 9.02 of this Amended and Restated
Agreement).
8.02 Purchaser also waives any rights that it may have under this
Agreement arising from the Company's non-compliance with the terms of Article
IV as applied to the Initial Public Offering and all issuances prior thereto
approved by the Board of Directors of the Company of capital stock, debt
instruments, options and warrants of the Company.
-23-
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.01 No Waiver: Cumulative Remedies. No failure or delay on the part of
-------------------------------
the Purchaser, or any other holder of the Note, in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
9.02 Amendments, Waivers and Consents. Any provision in this Agreement to
---------------------------------
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only upon the consent of the Purchaser. Any provision of
this Agreement or the Note notwithstanding, changes in or additions to the Note
may be made, and compliance with any provision of the Note or this Agreement
relating to the Note may be omitted or waived, only upon the consent of holders
of greater than 50% of the principal amount of the Note; provided, however, that
no such consent shall be effective to reduce or to postpone the date fixed for
the payment of the principal (including any required redemption) or interest
payable on any Note, without the consent of the holder thereof, or to reduce the
percentage of the Note the consent of the holders of which is required under
this Section. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
9.03 Address for Notices, Etc. All notices, requests, demands and other
-------------------------
communications provided for hereunder shall be in writing and mailed by means of
certified mail (or other form of registered mail) or telegraphed or delivered to
the applicable party at the addresses indicated below:
If to the Company: Photoelectron Corporation
5 Forbes Road
Lexington, MA 02173
If to the Purchaser: At the Purchaser's address for notice as set forth in
the register maintained by the Company
If to any other
holder of the Note: At such holder's address for notice as set forth in
the register maintained by the Company
-24-
<PAGE>
In addition, as to each of the foregoing, at such other address as shall be
designated by such Person in a written notice to the other party complying as to
delivery with the terms of this Section.
9.04 Binding Effect: Assignment. This Agreement shall be binding upon and
---------------------------
inure to the benefit of the Company and the Purchaser and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the consent of the
Purchaser obtained in accordance with Section 9.02 hereof and the rights and
interests of the Purchaser, including rights and interests in any shares of
Common Stock or in the Note, shall be assignable without the consent of the
Company to any Permitted Assignee.
9.05 Prior Agreements. This Agreement constitutes the entire agreement
-----------------
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
9.06 Severability. The invalidity or unenforceability of any provision
-------------
hereof shall in no way affect the validity or enforceability of any other
provision.
9.07 Governing Law. This Agreement and the Note shall be governed by, and
--------------
construed in accordance with, the laws of the Commonwealth of Massachusetts
without regard to its law governing conflicts of law.
9.08 Headings. Article, Section and subsection headings in this Agreement
---------
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
9.09 Sealed Instrument. This Agreement is deemed to be executed as an
-----------------
instrument under seal.
9.10 Counterparts. This Agreement may be executed in any number of
-------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
---------------------------
Peter E. Oettinger
Vice President and
Chief Operating Officer
/s/ Peter M. Nomikos
--------------------------------
Peter M. Nomikos
PYC Corporation, formerly known as Photoelectron Investments
Corporation of Liberia, hereby acknowledges and confirms the accuracy of the
factual recitations set forth in paragraphs A and B above.
PHOTOELECTRON INVESTMENTS
CORPORATION OF LIBERIA
By:/s/ Peter M. Nomikos
-----------------------------
Name: Peter M. Nomikos
Title: President
-26-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
8% Subordinated Convertible Note Due 1998
Lexington, Massachusetts
No. 1996-1 August 8, 1996
For value received, PHOTOELECTRON CORPORATION, a Massachusetts corporation
(the "Company"), hereby promises to pay to Peter M. Nomikos (hereinafter
referred to as the "Payee"), or registered assigns, on July 31, 1998, as
described below, the principal sum of Five Hundred Thousand Dollars
($500,000.00) in consideration of advances made by the Payee and his predecessor
in interest under the Subordinated Convertible Note Purchase Agreement
hereinafter referred to, or such part thereof as then remains unpaid. The
Company further agrees to pay interest from the date hereof on the principal
amount of such advance remaining from time to time unpaid at the rate of eight
percent (8%) per annum. Such interest shall accrue on March 31, June 30,
September 30 and December 31 of each year, until the whole amount of the
principal hereof remaining unpaid shall become due and payable. The Company
agrees to pay interest on all overdue principal (including any overdue required
redemption) and interest at a rate per annum equal to the prime or base lending
rate of the First National Bank of Boston plus three percent (3%). Subject to
----
the holder's option (referenced below) to convert all or a portion of the
outstanding principal and all then accrued but unpaid interest to Common Stock,
principal and all accrued but unpaid interest shall be repaid on July 31, 1998.
Principal and interest shall be payable in lawful money of the United States of
America, in immediately available funds, at the principal office of the Payee or
at such other place as the legal holder may designate from time to time in
writing to the Company. Interest shall be computed on the basis of a 360-day
year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note Purchase Agreement dated as of July 11,
1991, between the Company and Payee identified therein (as the same may be
amended from time to time, the "1991 Agreement"), and each holder of this Note,
by its acceptance hereof,
<PAGE>
agrees to be bound by the provisions of the 1991 Agreement, a copy of which may
be inspected by the legal holder hereof at the principal office of the Company.
As provided in the 1991 Agreement, (i) this Note is subject to prepayment as
specified in the 1991 Agreement, (ii) the principal of and interest on this Note
is subordinated to Senior Debt, as defined in the 1991 Agreement, and (iii) all
or a portion of the outstanding principal balance under the Note, and all then
accrued but unpaid interest, is convertible into Common Stock of the Company in
the manner set forth in the 1991 Agreement.
As further provided in the 1991 Agreement, upon surrender of this Note for
transfer or exchange, a new Note of the same tenor dated the date to which
interest has been paid on the surrendered Note and in an aggregate principal
amount equal to the unpaid principal amount of the Note so surrendered will be
issued to, and registered in the name of, the transferee or transferees. The
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due, the
Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, without regard to its law governing conflicts
of law, and shall have the effect of a sealed instrument effective as of the
date first written above.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:
-----------------------------
Peter E. Oettinger
Vice President and Chief Operating
Officer
Attest:
- --------------------------
-2-
<PAGE>
Exhibit B
Date Amount
--------- --------
12-4-90 $ 52,000
2-28-91 50,000
3-15-91 50,000
4-16-91 25,000
4-18-91 25,000
5-21-91 50,000
6-24-91 60,000
7-19-91 70,000
8-18-91 70,000
9-24-91 48,000
Total $500,000
========
<PAGE>
EXHIBIT 4.7
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
8% Subordinated Convertible Note Due 1998
Lexington, Massachusetts
No. 1996-1 August 8, 1996
For value received, PHOTOELECTRON CORPORATION, a Massachusetts corporation
(the "Company"), hereby promises to pay to Peter M. Nomikos (hereinafter
referred to as the "Payee"), or registered assigns, on July 31, 1998, as
described below, the principal sum of Five Hundred Thousand Dollars
($500,000.00) in consideration of advances made by the Payee and his predecessor
in interest under the Subordinated Convertible Note Purchase Agreement
hereinafter referred to, or such part thereof as then remains unpaid. The
Company further agrees to pay interest from the date hereof on the principal
amount of such advance remaining from time to time unpaid at the rate of eight
percent (8%) per annum. Such interest shall accrue on March 31, June 30,
September 30 and December 31 of each year, until the whole amount of the
principal hereof remaining unpaid shall become due and payable. The Company
agrees to pay interest on all overdue principal (including any overdue required
redemption) and interest at a rate per annum equal to the prime or base lending
rate of the First National Bank of Boston plus three percent (3%). Subject to
----
the holder's option (referenced below) to convert all or a portion of the
outstanding principal and all then accrued but unpaid interest to Common Stock,
principal and all accrued but unpaid interest shall be repaid on July 31, 1998.
Principal and interest shall be payable in lawful money of the United States of
America, in immediately available funds, at the principal office of the Payee or
at such other place as the legal holder may designate from time to time in
writing to the Company. Interest shall be computed on the basis of a 360-day
year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note Purchase Agreement dated as of July 11,
1991, between the Company and Payee identified therein (as the same may be
amended from time to time, the "1991 Agreement"), and each holder of this Note,
by its acceptance hereof,
<PAGE>
agrees to be bound by the provisions of the 1991 Agreement, a copy of which may
be inspected by the legal holder hereof at the principal office of the Company.
As provided in the 1991 Agreement, (i) this Note is subject to prepayment as
specified in the 1991 Agreement, (ii) the principal of and interest on this Note
is subordinated to Senior Debt, as defined in the 1991 Agreement, and (iii) all
or a portion of the outstanding principal balance under the Note, and all then
accrued but unpaid interest, is convertible into Common Stock of the Company in
the manner set forth in the 1991 Agreement.
As further provided in the 1991 Agreement, upon surrender of this Note for
transfer or exchange, a new Note of the same tenor dated the date to which
interest has been paid on the surrendered Note and in an aggregate principal
amount equal to the unpaid principal amount of the Note so surrendered will be
issued to, and registered in the name of, the transferee or transferees. The
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due, the
Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts, without regard to its law governing conflicts
of law, and shall have the effect of a sealed instrument effective as of the
date first written above.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
-----------------------------
Peter E. Oettinger
Vice President and Chief Operating
Officer
Attest:
/s/ William O. Flannery
- --------------------------
-2-
<PAGE>
<PAGE>
Exhibit 4.8
PHOTOELECTRON CORPORATION
CONVERTIBLE NOTE AND WARRANT
PURCHASE AGREEMENT
Dated as of May 13, 1992
<PAGE>
This Agreement is dated as of the 13th day of May, 1992 by and between Mr.
Peter M. Nornikos, an individual residing in London, England (the "Purchaser"),
and Photoelectron Corporation, a Massachusetts corporation (the "Company").
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.01 The Securities. The Company has authorized the issuance and sale of
---------------
up to $4,500,000 principal amount of the Company's 8% Convertible Note (the
"Note") and Common Stock Purchase Warrants (the "Warrants") for the purchase of
up to 3,000,000 shares of the Common Stock, $.01 par value per share ("Common
Stock") of the Company. The Note shall be in the principal amount set forth in
the preceding sentence and shall otherwise be substantially in the form set
forth in Exhibit A hereto. The term "Note" shall also include any note or notes
delivered in exchange or replacement for the Note. The Warrants shall be
substantially in the form set forth in Exhibit B hereto. The terms "Warrant" or
"Warrants" shall also include any Warrant or Warrants delivered in exchange or
replacement for the Warrants. Any shares of Common Stock issuable upon exercise
of the Warrants, and such shares when issued, are herein referred to as the
"Warrant Shares."
1.02 The Closing.
------------
The Company agrees to issue and sell to the Purchaser, and, subject to and
in reliance upon the terms and conditions of this Agreement, the Purchaser
agrees to purchase the principal amount of the Note, at par, set forth in
Section 1.01 at the times set forth below.
Subject to all of the terms and conditions hereof and so long as there
shall exist no Default (as defined herein) on such dates as the Company shall
from time to time request by not fewer than three business days prior telephone
notice to the Purchaser, the Purchaser shall advance the amount of such sum
requested to the Company at its principal office in Waltham, Massachusetts (such
sum advanced from time to time in the aggregate referred to as the "Advances"),
provided that the aggregate principal amount of all Advances outstanding shall
not at any time exceed an amount equal to Four Million Five Hundred Thousand
Dollars ($4,500,000). Upon each advance, the Purchaser shall set forth the
amount and date of the Advance on Schedule A to the Note and shall provide a
copy of the revised Schedule A to the Company. At the time of each Advance, the
Company will also issue a Warrant in the name of the Purchaser providing for the
purchase of Warrant Shares equal to the principal amount of the Advance divided
by the Applicable Conversion Value (as defined herein), in exchange for a
warrant purchase
-2-
<PAGE>
price equal to $.10 per Warrant Share issued, payable by the Purchaser within 60
days after the date of the Advance.
1.04 Transfer and Exchange of the Note. The registered holder of the Note
----------------------------------
may, prior to maturity or prepayment thereof, surrender the Note at the
principal office of the Company for transfer or exchange to any assignee.
Within a reasonable time after notice to the Company from a registered holder of
its intention to make such exchange and without expense (other than transfer
taxes, if any) to such registered holder, the Company shall issue in exchange
therefor another Note for the same aggregate principal amount as the unpaid
principal amount of the Note so surrendered (or in such multiples thereof as may
be requested by the registered holder) and having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Note so surrendered. Each new Note shall be made payable to
such Person or Persons, or registered assigns, as the registered holder of such
surrendered Note may designate, and such transfer or exchange shall be made in
such a manner that no gain or loss of principal or interest shall result
therefrom.
1.05 Replacement of Notes. Upon receipt of evidence satisfactory to the
---------------------
Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; provided, however, if any Note of which the
Purchaser, his nominees or any of his affiliates is the registered holder is
lost, stolen or destroyed, the affidavit of the owner or the president,
treasurer or assistant treasurer, as the case may be, of the registered holder,
including a representation to the effect that such Note has not been negotiated
and setting forth the circumstances with respect to such loss, theft or
destruction, shall be accepted as satisfactory evidence thereof, and no
indemnity bond or other security shall be required as a condition to the
execution and delivery by the Company of a new Note in replacement of such lost,
stolen or destroyed Note other than the registered holder's written agreement to
indemnify the Company.
1.06 Subordination. The Company, for itself, its successors and assigns,
-------------
covenants and agrees, and the Purchaser and each successor holder of the Note by
his or its acceptance thereof likewise covenants and agrees, that
notwithstanding any other provision of this Agreement or the Note, the payment
of the principal of and interest on of the Note shall be subordinated in right
of payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Debt (as hereinafter defined) at any time
outstanding.
(a) Payment of Senior Debt. In the event of any insolvency or
bankruptcy proceedings, or any proceedings in connection therewith, relative to
the Company or to its property, or, in the event of any proceedings for the
Company of distribution or marshalling of its assets or any composition with
creditors of the
-3-
<PAGE>
Company, whether or not involving insolvency or bankruptcy, then and in any such
event all Senior Debt shall be paid in full before any payment or distribution
of any character, whether in cash, securities or other property, shall be made
on account of the Note; and any such payment or distribution, except securities
that are subordinated and junior in right of payment to the payment of all
Senior Debt then outstanding in terms of substantially the same tenor as this
Section 1.06, which would, but for the provisions hereof be payable or
deliverable with respect to the Note shall be paid or delivered directly to the
holders of Senior Debt (or their duly authorized representatives), in the
proportions in which they hold the same, until all Senior Debt shall have been
paid in full, and any holder of the Note by becoming a holder thereof shall have
designated and appointed the holder or holders of Senior Debt (and their duly
authorized representatives) as his or its agents and attorneys-in-fact to
demand, sue for, collect and receive such Senior Debt holder's ratable share of
all such payments and distributions and to file any necessary proof of claim
therefor and to take all other action (including the right to vote such Senior
Debt holder's ratable share of the Note), in the name of the holders (or their
authorized representatives), that such Senior Debt holder may determine to be
necessary or appropriate for the enforcement of this Section 1.06. The Purchaser
and each successor holder of the Note by its or his acceptance thereof agrees to
execute, at the request of the Company, a separate agreement with any holder of
Senior Debt on the terms set forth in this Section 1.06.
(b) No Payment on Note Under Certain Conditions.
In the event that:
(i) any default occurs in the payment of principal of or interest on
any Senior Debt and during the continuance of such default, or (if a shorter
period) until such payment has been made or such default has been cured or
waived in writing by such holder of Senior Debt; or
(ii) the maturity of any Senior Debt is accelerated by any holder
thereof because of a default with respect thereto and until such acceleration
has been rescinded or said Senior Debt has been paid;
then and during the continuance of any of such events no payment shall be made
by the Company, directly or indirectly, on account of the principal of or
interest on the Note.
(c) Payments Held in Trust. In case any payment or distribution shall
be paid or delivered to any holder of the Note in violation or contravention of
the terms of this subordination, before all Senior Debt shall have been paid in
full, such payment or distribution shall be held in trust for and paid and
delivered to the holders of Senior Debt (or their duly authorized
representatives) until all Senior Debt shall have been paid in full.
-4-
<PAGE>
(d) Subrogation. Subject to the payment in full of all Senior Debt
and until the Note shall be paid in full, the holder of the Note shall be
subrogated to the rights of the holders of the Senior Debt (to the extent of
payments or distributions previously made to such holders of Senior Debt
pursuant to the provisions of subsections (a) and (c) of this Section 1.06) to
receive payments or distributions of assets of the Company applicable to the
Senior Debt. No such payments or distributions applicable to the Senior Debt
shall, as between the Company and its creditors, other than the holders of
Senior Debt and the holder of the Note, be deemed to be a payment by the Company
to or on account of the Note; and for the purposes of such subrogation, no
payments or distributions to the holders of Senior Debt to which the holder of
the Note would be entitled except for the provisions of this Section 1.06 shall,
as between the Company and its creditors, other than the holders of Senior Debt
and the holder of the Note, be deemed to be a payment by the Company to or on
account of the Senior Debt.
(e) Scope of Section. The provisions of this Section 1.06 are
intended solely for the purpose of defining the relative rights of the holder of
the Note, on the one hand, and the holders of the Senior Debt on the other hand.
Nothing contained in this Section 1.06 or elsewhere in this Agreement or the
Note is intended to or shall impair, as between the Company and its creditors,
other than the holders of Senior Debt, and the holder of the Note, the
obligation of the Company, which is unconditional and absolute, to pay to the
holder of the Note the principal of and interest on the Note as and when the
same shall become due and payable in accordance with the terms thereof, or to
affect the relative rights of the holders of the Senior Debt, nor shall anything
herein or therein prevent the holder of the Note from accepting any payment,
with respect to such Note or exercising all remedies otherwise permitted by
applicable law upon default under such Note, subject to the rights, if any,
under this Section 1.06 of the holders of Senior Debt in respect of cash,
property or notes of the Company received by the holders of the Notes.
(f) Survival of Rights. The right of any present or future holder of
Senior Debt to enforce subordination of the Note pursuant to the provisions of
this Section 1.06 shall not at any time be prejudiced or impaired by any act or
failure to act on the part of the Company or any such holder of Senior Debt,
including without limitation, any forbearance, waiver, consent, compromise,
amendment, extension, renewal or taking or release of security of or in respect
of any Senior Debt or by noncompliance by the Company with the terms of such
subordination regardless of any knowledge thereof such holder may have or
otherwise been charged with.
(g) Amendment or Waiver. The provisions of this Section 1.06 may not
be amended or waived in any manner that is detrimental to any Senior Debt
without the consent of the holders of all then existing Senior Debt.
(h) Senior Debt Defined. The term "Senior Debt" shall mean (i) all
Indebtedness of the Company (which is not convertible into equity securities of
the Company and is not issued in conjunction with equity securities of the
Company or options or warrants to purchase equity securities of the Company) for
money borrowed,
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<PAGE>
including any extension or renewals thereof, whether outstanding on the date
hereof or thereafter created or incurred, which is not by its terms subordinate
and junior to or on a parity with the Note, and (ii) all other indebtedness to
which the obligations of the Note shall be expressly subordinated by the holder
of the Note in writing, citing this Section 1.06.
(i) Proof of Subordination. The Purchaser agrees that he will execute
and deliver any other documents evidencing the subordination of the Note to
Senior Debt that may be reasonably requested by the Company or the holders of
Senior Debt so long as none of the provisions contained in such documents
diminish the rights of the Purchaser in any manner.
1.07 Representations by the Purchaser. The Purchaser represents that it is
---------------------------------
his present intention to acquire the Note and Warrants for his own account and
that the Notes and Warrants are being and will be acquired for the purpose of
investment and not with a view to distribution or resale thereof. The
acquisition by the Purchaser of the Note and Warrants shall constitute a
confirmation by him of this representation.
ARTICLE II
COVENANTS OF THE COMPANY
2.01 Affirmative Covenants of the Company Other Than Reporting
---------------------------------------------------------
Requirements. Without limiting any other covenants and provisions hereof, the
- -------------
Company covenants and agrees that, so long as any of the Notes are outstanding,
it will perform and observe the following covenants and provisions:
(a) Punctual Payment. Pay the principal of and interest on the Note
at the times and place and in the manner provided in the Note and herein.
(b) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified, as a foreign corporation in
each jurisdiction in which such qualification is necessary or desirable in view
of its business and operations or the ownership of its properties; and preserve
and maintain all material licenses and other rights to use patents, processes,
licenses, trademarks, trade names, inventions, intellectual property rights or
copyrights owned or possessed by it and necessary to the conduct of its
business.
(c) Compliance with Laws. Comply, in all material respects with all
applicable laws, rules, regulations and orders of any governmental authority,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
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(d) Keeping of Records and Books of Account. Keep adequate records
and books of account in which complete entries will be made in accordance with
generally accepted accounting principles consistently applied, reflecting all
financial transactions of the Company and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection within its business shall be made.
(e) Budgets and Board Approval. Prior to the commencement of each
fiscal year, prepare and submit to, and obtain the approval of a majority of,
the Board of Directors of a budget for the upcoming fiscal year, including
projections of research and development expenditures, capital and operating
expenses, cash flow and profits and losses, all itemized in reasonable detail.
(f) Financings. Promptly, fully and in detail, inform the Board of
Directors in advance of any commitments or contracts relating to financing of
any nature for the Company or pledge of corporate assets.
(g) Board of Directors: Indemnification. The Board of Directors shall
not consist of more than four (4) directors. The By-laws of the Company shall
at all times provide for the indemnification of the Board of Directors to the
full extent provided by the law of the jurisdiction in which the Company is
organized. The Company shall maintain directors and officers insurance with
coverage and premium levels consistent with policies carried by companies of
similar size engaged in similar businesses.
2.02 Negative Covenants of the Company. Without limiting any other
----------------------------------
covenants and provisions hereof, the Company covenants and agrees that, so long
as the Conversion Shares issuable upon conversion of the Note and the shares
issued by the Company on January 4, 1989 or issuable upon conversion of the 8%
Subordinated Convertible Note issued by the Company on January 4, 1989, or the
8% Subordinated Convertible Notes issued by the Company on May 22, 1990, in the
aggregate, are greater than 50% of the total outstanding voting securities of
the Company, without the consent of the Purchaser, the Company will not:
(a) Mergers, Sale of Assets, Etc. Merge or consolidate with, or sell,
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) a material portion
of its assets (whether now owned or hereafter acquired) to, any Person, except
for sales or other dispositions of assets in the ordinary course of business.
(b) Dealings with Affiliates and Others. From and after the date of
this Agreement, enter into any transaction, including, without limitation, any
loans or extensions of credit or royalty agreements, with any officer or
director of the Company or holder of any class of capital stock of the Company,
or any member of their respective immediate families or any corporation or other
entity directly or indirectly controlled by
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<PAGE>
one or more of such officers, directors or stockholders or members of their
immediate families.
(c) Change in Nature of Business. Make any material change in the
nature of its business as carried on as of the date hereof.
(d) Dividends. Declare or pay any dividends on any class of the
Company's capital stock now or hereafter outstanding or purchase, redeem or
otherwise acquire or retire any of the Company's capital stock of any class now
or hereafter outstanding or otherwise return capital or make distributions of
assets to stockholders as such, except the repurchase of capital stock pursuant
to a certain Stockholders' Agreement of January 4, 1989 among the parties
hereto.
2.03 Reporting Requirements. The Company will furnish the following to
-----------------------
each holder who owns of record or beneficially or has the right to acquire from
the Company any Conversion Shares, to each holder of the Notes and to each
holder of 15% or more of the Company's Common Stock:
(a) As soon as available and in any event within thirty (30) days
after the end of each fiscal quarter of the Company, a balance sheet of the
Company as of the end of such quarter and a statement of income and retained
earnings and of changes in financial position of the Company for the period
ending with such quarter, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief financial officer of the Company as
having been prepared in accordance with the accounting principles applied in the
prior annual audited financial statements of the Company, and such financial
statements shall set forth in comparative form the corresponding figures for the
corresponding period of the prior fiscal year.
(b) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, a balance sheet of the Company
as of the end of such fiscal year and statements of income and retained earnings
and of changes in financial position of the Company for such fiscal year,
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, and, if audited, all such statements in audited form and
duly certified by a nationally recognized independent public accountant;
(c) Any written report submitted to the Company by independent public
accountants in connection with any annual or interim audit of the books of the
Company made by such accountants;
(d) Promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, materially
affecting the Company when considered as a whole that are not fully covered by
insurance; and
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<PAGE>
(e) At least thirty (30) days prior to the commencement of each fiscal
year of the Company, a copy of the operating plan and budget.
ARTICLE III
CONVERSION OF THE NOTE
3.01 Conversion Rights. (a) Principal: Subject to and in compliance with
------------------
the provisions of this Article III, at the option of the holder, all or any part
of the principal amount outstanding on any Note issued pursuant to this
Agreement may be converted at any time at the Applicable Principal Conversion
Value (as defined below) into fully paid and non-assessable shares of Common
Stock in accordance with the provisions of Sections 3.02 to 3.15. (b) Interest:
Subject to and in compliance with the provisions of this Article III, at the
option of the holder, all of the accrued and unpaid interest on any Note issued
pursuant to this Agreement may be converted at any time at the Applicable
Interest Conversion Value (as defined below) into fully paid and non-assessable
shares of Common Stock in accordance with the provisions of Sections 3.02 and
3.06 to 3.15; provided, however, that upon conversion of all or any part of the
principal amount of any Note pursuant to clause (a) of this Section, all accrued
and unpaid interest on such Note up to and including the Conversion Date (as
defined below) shall be converted at the Applicable Interest Conversion Value
into fully paid and non-assessable shares of Common Stock.
3.02 Conversion Values. (a) Applicable Principal Conversion Value: The
------------------
price at which the outstanding principal of any Note issued under this Agreement
may be converted into Common Stock (the "Applicable Principal Conversion Value")
shall, subject to adjustment as provided in Sections 3.03 through 3.15, be one
dollar and fifty cents ($1.50). (b) Applicable Interest Conversion Value: The
price at which accrued and unpaid interest on the outstanding principal balance
of any Note issued under this Agreement may be converted into Common Stock (the
"Applicable Interest Conversion Value") shall, subject to adjustment as provided
in Sections 3.06 through 3.15, be equal to the fair market value of the Common
Stock on the first day of the fiscal quarter in which the interest to be
converted accrued. Prior to the time that the Common Stock is traded over-the-
counter, on the New York or American stock exchanges or on the National
Association of Securities Dealers Automated Quotation National Market System
("NASDAQ"), the fair market value shall be the price at which the Company most
recently issued any stock, Common or Preferred, in a private placement of
securities. From and after the date upon which the Common Stock is traded over-
the-counter, on the New York or American stock exchanges or on NASDAQ, the fair
market value of the Common Stock shall be the Market Price of such stock on the
date upon which the interest accrued as determined in accordance with the
provisions of clause (d) of this Section. (c) Applicable Conversion Value: For
the purposes of Section 3.06, the Applicable Principal Conversion Value and the
Applicable Interest Conversion Value are
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<PAGE>
collectively referred to as the "Applicable Conversion Value." (d) Market Price:
The term "Market Price" shall mean the average of the per share daily closing
prices of Common Stock for the 10 consecutive business days beginning with the
first day of the fiscal quarter in which the interest to be converted accrued.
The closing price for each day shall be (i) the last reported sales price or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and ask prices, in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange, on NASDAQ, (ii) if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on NASDAQ, the average of
the closing bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm reasonably selected from time to time by
the Company for that purpose, or (iii) if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on NASDAQ and
the average price cannot be determined as contemplated by clause (ii), the fair
market value as reasonably determined in good faith by the Company's Board of
Directors or in any manner reasonably prescribed by the Company's Board of
Directors. For the purposes of this Section 3.02, the term "business day" shall
mean each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on
which securities are not traded on such exchange or in such market.
3.03 Adjustments for Sale of Common Stock at Less Than Applicable
------------------------------------------------------------
Principal Conversion Value. Except for the issuance of up to 120,000 shares of
- --------------------------
the Company's Common Stock to employees, directors or consultants of the Company
pursuant to an option plan or plans approved by the Company's Board of Directors
(the "Reserved Employee Shares"), if the Company shall, while there are any
Notes outstanding, issue or sell shares of its Common Stock without
consideration or at a price per share less than the Applicable Principal
Conversion Value in effect immediately prior to such issuance or sale, then in
each such case such Applicable Principal Conversion Value upon each such
issuance or sale, except as hereinafter provided, shall be lowered so as to be
equal to an amount determined by multiplying the Applicable Principal Conversion
Value by a fraction:
(1) the numerator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock, plus (b) the number of shares of
Common Stock that the net aggregate consideration if any, received by
the Company for the total number of such additional shares of Common
Stock so issued would purchase at the Applicable Principal Conversion
Value in effect immediately prior to such issuance; and
(2) the denominator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock plus (b) the number of such
additional shares of Common Stock so issued.
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<PAGE>
For purposes of computation of the Applicable Principal Conversion Value, if
part or all of the consideration to be received by the Company in connection
with the issuance of shares of Common Stock or any of the other securities
described in this Article III consists of property other than cash, such
consideration shall be deemed to have a fair market value that is reasonably
determined in good faith by the Board of Directors.
3.04 Warrants, Options, Etc., for Common Stock. For the purposes of this
-------------------------------------------
Article III, the issuance after the date of this Agreement of any warrants,
options (other than the Reserved Employee Shares), subscriptions or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share (as hereinafter determined) that may be
received by the Company for such Common Stock shall be less than the Applicable
Principal Conversion Value at the time of such issuance. Any obligation,
agreement or undertaking to issue warrants, options, subscriptions or purchase
rights at any time in the future shall be deemed to be an issuance at the time
such obligation, agreement or undertaking is made or arises. No adjustment of
the Applicable Principal Conversion Value shall be made upon the issuance of any
shares of Common Stock that are issued pursuant to the exercise of any
conversion or exchange rights in any convertible securities to the extent a
corresponding adjustment shall previously have been made upon the issuance of
any such warrants, options or subscriptions or purchase rights or upon the
issuance of any convertible securities (or upon the issuance of any warrants,
options or any rights therefor) as provided above. Any adjustment of the
Applicable Principal Conversion Value that relates to warrants, options,
subscriptions or purchase rights with respect to shares of Common Stock shall be
disregarded if, as and when all of such warrants, options, subscriptions or
purchase rights expire or are canceled without being exercised, so that the
Applicable Principal Conversion Value effective immediately upon such
cancellation or expiration shall be equal to the Applicable Principal Conversion
Value in effect immediately prior to the issuance of the expired or canceled
warrants, options, subscriptions or purchase rights, with such additional
adjustments as would have been made to that Applicable Principal Conversion
Value had the expired or canceled warrants, options, subscriptions or purchase
rights not been issued. For purposes of this Article III, the "Net
Consideration Per Share" that may be received by the Company shall be determined
as follows:
(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company
for the issuance of such warrants, options, subscriptions or other
purchaser rights or convertible or exchangeable securities, plus the
minimum amount of consideration, if any, payable to the Company upon
exercise or conversion thereof, divided by the aggregate number of
shares of Common Stock that would be issued if all such warrants,
options,
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<PAGE>
subscriptions or other purchase rights or convertible or exchangeable
securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" that may be received by the
Company shall be determined in each instance as of the date of
issuance of warrants, options, subscriptions or other purchase rights
or convertible or exchangeable securities without giving effect to
any possible future price adjustments or value adjustment that may be
applicable with respect to such warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities.
(C) If a part or all of the consideration received by the Company in
connection with the issuance of shares of the Common Stock or the
issuance of any of the securities described in this Section 3.04
consists of property other than cash, and the Board of Directors of
the Company is unable to arrive at any valuation of such property,
the Company at its expense will promptly cause independent
accountants of recognized standing selected by the Company to value
such property, whereupon such value shall be given to such
consideration and shall be recorded on the books of the Company with
respect to receipt of such property.
3.05 Dilution in Case of Other Securities. In case any Other Securities
-------------------------------------
shall be issued or sold, or shall become subject to issue upon the conversion or
exchange of any stock (or Other Securities) of the Company (or any other issuer
of Other Securities or any other Person referred to in Section 3.08) or to
subscription, purchase or other acquisition pursuant to any rights or options
granted by the Company (or such other issuer or Person), for a consideration per
share so as to dilute the conversion rights evidenced by the Note, the
computations, adjustments and readjustments provided for in Sections 3.03 and
3.04 with respect to the Applicable Principal Conversion Value shall be made as
nearly as possible in the manner so provided and applied to determine the amount
of Other Securities from time to time receivable on the conversion of the Note,
so as to protect the holders of the Note against the effect of such dilution.
3.06 Extraordinary Events. If the Company shall after the date of this
---------------------
Agreement (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock or (iii) combine its outstanding shares of the Common stock into
a smaller number of shares of the Common Stock, then, in each such event, the
Applicable Conversion Value shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Applicable Conversion Value by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Applicable Conversion
Value then in effect. The Applicable Conversion Value, as so
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adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 3.06.
3.07 Adjustment for Dividends in Other Stock, Property, Etc.;
--------------------------------------------------------
Reclassification, Etc. In case at any time or from time to time after the date
- ----------------------
of this Agreement the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash, or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement, other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock split
(adjustments in respect of which are provided for in Section 3.06)
and normal cash dividends,
then and in each such case each holder of a Note, on the conversion thereof as
provided in this Article III, shall be entitled to receive the amount of stock
and other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3.07) that such holder would hold on the
date of such conversion if on the date thereof it had been the holder of record
of the number of shares of Common Stock that it would have received had its Note
been converted into Common Stock immediately before the date of such event to
and including the Conversion Date (as that term is defined in Section 3.11), and
had thereafter, during the period from the date hereof to and including the date
of such conversion, retained such shares and all such other or additional stock
and other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3.07) receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period
under this Article III.
3.08 Adjustment for Reorganization, Consolidation, Merger, Etc.
----------------------------------------------------------
(a) Generally: If at any time or from time to time the Company shall (i)
effect a reorganization, (ii) consolidate with or merge into any other Person or
(iii) transfer all or substantially all of its properties or assets to any other
Person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, each holder of a Note, on the conversion
thereof as provided in this Article III at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would
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<PAGE>
have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so converted its Note
immediately prior thereto, all subject to further adjustment thereafter as
provided under this Article III.
(b) Dissolution: In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, if
applicable) receivable by the holders of the Note after the effective date of
such dissolution pursuant to this Section 3.08 to a bank or trust company having
its principal office in Boston, Massachusetts, as trustee for the holder or
holders of the Note, which shall establish procedures for the exchange of such
property for the Note.
(c) Continuation of Terms: Upon any reorganization, consolidation, merger
or transfer (and any dissolution following any transfer) referred to in this
Section 3.08, each Note shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the conversion of any Note after the consummation of such
reorganization, consolidation or merger or the effective date of dissolution
following any such transfer, as the case may be, and shall be binding upon the
issuer of any such stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the properties or
assets of the Company, whether or not such person shall have expressly assumed
the terms of the Note as provided in Section 3.09.
3.09 No Dilution or 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 the
Note, 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 holders of shares of Common Stock issuable
upon conversion of the Note against dilution or other impairment.
3.10 Certificate as to Adjustments. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on the
conversion of the Note, the Company at its expense will promptly provide each
holder of the Note, at the election of such holder, a certificate of the
president and of the chief financial officer of the Company setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding and (c) the Applicable Principal
Conversion Value in effect immediately prior to such issue or sale and as
adjusted and readjusted on account hereof.
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<PAGE>
3.11 Exercise of Conversion Privilege. (a) Principal: To exercise its
---------------------------------
principal conversion privilege, a holder of a Note shall surrender the Note
being converted to the Company at the Company's principal office, and shall
give written notice to the Company at that office that such holder elects to
convert the outstanding principal balance of such Note, or a portion thereof.
Such notice shall also state the name or names (with address or addresses) in
which the certificate or certificates for shares of Common Stock issuable upon
such conversion shall be issued. The Note surrendered for conversion shall be
accompanied by proper assignment thereof to the Company or in blank. For
purposes of this clause (a), the date when such written notice is received by
the Company, together with the Note being converted, shall be the "Conversion
Date." As promptly as practicable, but in any event within 15 days after the
Conversion Date, the Company shall issue and shall deliver to the holder of the
Note being converted, or on its written order, such certificate or certificates
as it may request for the number of whole shares of Common Stock issuable upon
the conversion of such Note in accordance with the provisions of this Article
III, the number of whole shares of Common Stock issuable upon the conversion of
all accrued and unpaid interest on such Note up to and including the Conversion
Date, any property or securities issuable upon conversion as provided in
Section 3.07 and cash, as provided in Section 3.12, in respect of any fraction
of a share of Common Stock issuable upon such conversion. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the Conversion Date, and at such time the rights of the holder as holder of a
Note shall cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Common Stock represented thereby. (b) Interest: To exercise
its interest conversion privilege, a holder of a Note shall give written notice
to the Company at the Company's principal office that such holder elects to
convert all accrued and unpaid interest on such Note. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. For purposes of this clause (b), the date when such written notice is
received by the Company shall be the "Conversion Date." As promptly as
practicable, but in any event within 15 days after the Conversion Date, the
Company shall issue and shall deliver to the holder of the Note, or on its
written order, such certificate or certificates as it may request for the
number of whole shares of Common Stock issuable upon the conversion of the
interest and cash, as provided in Section 3.12, in respect of any fraction of a
share of Common Stock issuable upon such conversion.
3.12 Cash in Lieu of Fractional Shares. No fractional shares of Common
----------------------------------
Stock shall be issued upon the conversion of principal and/or interest with
respect to any Note. Instead of any fractional shares of Common Stock that
would otherwise be issuable upon such conversion, the Company shall pay to the
holder of the Note a cash adjustment in respect of such fractional shares in an
amount equal to the same fraction of the Applicable Principal Conversion Value
(in a case of conversion of principal) or the Applicable Interest Conversion
Value (in a case of conversion of interest).
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<PAGE>
3.13. Partial Conversion. In the event some but not all of the principal
------------------
amount represented by a Note surrendered by a holder is converted, the Company
shall execute and deliver to or on the order of the holder, at the expense of
the Company, a new Note representing the principal amount that was not
converted.
3.14 Reservation of Common Stock. The Company shall at all times reserve
----------------------------
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Note, sufficient
shares of Common Stock to effect the conversion of all outstanding Notes, and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding Notes,
the Company shall take such corporate action as may be necessary to increase
its authorized but unissued shares of Common Stock to a number of shares that
shall be sufficient for that purpose.
3.15 Notice of Record Date. In the event of:
---------------------
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof that are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
(c) any voluntary or involuntary dissolution, liquidation or winding up of
the Company, then and in each such event the Company shall mail or cause to be
mailed to each holder of a Note a notice specifying (i) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective and (iii) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for securities or
other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up. Such notice shall be mailed at least 30 days prior to the date
specified in such notice on which such action is to be taken.
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<PAGE>
ARTICLE IV
4.01 Right of First Refusal. Except for the Reserved Employee shares, the
------------------------
Company shall not issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, (i) any shares of Common
Stock, (ii) any other equity security of the Company, including, without
limitation, shares of preferred stock, (iii) any option, warrant or other right
to subscribe for, purchase or otherwise acquire any equity security of the
Company or (iv) any Debt Security, unless in each such case the Company shall
have first received an unconditional bona fide offer from a third party to
purchase such securities (the "Offered Securities") and shall have offered to
sell such Offered Securities to Thermo Electron Corporation ("Thermo") and the
Purchaser as follows: The Company shall offer to sell to each of Thermo and the
Purchaser a portion of the Offered Securities so that the aggregate number of
shares of Common Stock and Warrant Shares then held by or issuable to each of
Thermo and the Purchaser equals forty percent (40%) of the total number shares
of Common Stock to be outstanding after the proposed issuance by the Company
(assuming the conversion of the Note and exercise of all options held by
employees of the Company and the issuance and exercise of all options reserved
for issuance to employees of the Company by the Board of Directors pursuant to
any option plan approved by the Directors and shareholders of the Company), at a
price and on the other terms specified by the Company in writing delivered to
Thermo and the Purchaser (the "Offer"), and the Offer by its terms shall remain
open and irrevocable for a period of twenty (20) days, unless waived by Thermo
and the Purchaser.
4.02 Notice of Acceptance. Notice of Thermo's or the Purchaser's
---------------------
intention to accept, in whole or in part, an Offer made pursuant to Section 4.01
shall be evidenced by a writing signed by Thermo or the Purchaser, as the case
may be, and delivered to the Company prior to the end of the twenty (20) day
period of the Offer, setting forth the portion of the Offered Securities that
such party elects to purchase. If either Thermo or the Purchaser elects not to
purchase all such portion of Offered Securities, then any such securities not
elected to be purchased shall be then offered to whichever of Thermo or the
Purchaser elected to purchase all of its portion of the Offer, in the same
manner as set forth in Section 4.01. Such secondary offer shall be open for 10
days.
4.03 Conditions to Acceptance and Purchase.
--------------------------------------
(a) Permitted Sales of Refused Securities. If Notices of Acceptance
are not given by Thermo and the Purchaser in respect of all the Offered
Securities pursuant to Sections 4.01 and 4.02, the Company shall have sixty (60)
days from the expiration of the 10-day period set forth in Section 4.02 to sell
all or any part of such Offered Securities as to which a Notice of Acceptance
has not been given by Thermo or the Purchaser and all of the Offered Securities
not subject to the option of Thermo or the Purchaser pursuant to this Article IV
(the "Refused Securities") to the Person or Persons specified in the Offer, but
only for cash and otherwise in all respects upon terms and conditions,
including, without limitation, unit price and interest rates, which are not more
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<PAGE>
favorable, in the aggregate, to such other Person or Persons or less favorable
to the Company than those set forth in the Offer.
(b) Reduction in Amount of Offered Securities. In the event the
Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 4.03(a) above),
then Thermo and the Purchaser shall reduce the number of, or other units of, the
Offered Securities specified in their respective Notices of Acceptance to an
amount that shall be not less than the amount of the Offered Securities that
each of Thermo and the Purchaser elected to purchase pursuant to Section 4.02
multiplied by a fraction, (i) the numerator of which shall be the amount of
Offered Securities the Company actually proposes to sell, and (ii) the
denominator of which shall be the amount of all Offered Securities. In such
event, the Company may not sell or otherwise dispose of more than the reduced
amount of the Offered Securities until such securities have again been offered
to Thermo and the Purchaser in accordance with Section 4.01.
(c) Closing. Upon the closing, which shall include full payment to
the Company, of the sale to such other Person or Persons of all or less than all
the Refused Securities, Thermo and the Purchaser shall purchase from the
Company, and the Company shall sell to Thermo and the Purchaser, the number of
Offered Securities specified in their respective Notices of Acceptance, as
reduced pursuant to Section 4.03(b), upon the terms and conditions specified in
the Offer. The purchase by Thermo and the Purchaser of any Offered Securities
is subject in all cases to the preparation, execution and delivery by the
Company, Thermo and the Purchaser of a purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to Thermo, PIC
and their counsel.
4.04 Further Sale. In each case, Offered Securities not purchased by
-------------
Thermo, the Purchaser or other Person or Persons in accordance with Section 4.03
may not be sold or otherwise disposed of until they are again offered to Thermo
under the procedures specified in Sections 4.01, 4.02 and 4.03.
4.05 Exceptions. The rights of Thermo under this Article IV shall not
-----------
apply to:
(a) Common stock issued as a stock dividend to holders of Common Stock
or upon any subdivision or combination of shares of Common Stock, or
(b) up to 800,000 shares of Common Stock, or options exercisable
therefor, including options outstanding on the date of this Agreement (such
number to be equitably adjusted in the event of any stock split, combination,
reclassification or other similar event occurring on or after the date of this
Agreement) issuable to current and future officers, employees, directors or
consultants of the Company pursuant to any stock option plan or stock purchase
plan approved by a vote of not less than a majority of the Board of Directors of
the Company.
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<PAGE>
ARTICLE V
EVENTS OF DEFAULT
5.01 Events of Default. If any of the following events ("Events of
------------------
Default") shall occur and be continuing seven days after delivery of notice (as
described below) to the Company:
(a) The Company shall fail to pay any installment of principal of the
Note when due; or
(b) The Company shall fail to pay any interest on the Note when due or
shall default in the performance of any covenant contained in Section 2.02 and
such failure or default shall continue for seven (7) business days; or
(c) The Company shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or the Note on its part to be
performed or observed and any such failure remains unremedied for thirty (30)
days after written notice thereof shall have been given to the Company by the
holder of the Note; or
(d) The Company shall fail to pay any Indebtedness for borrowed money
(other than as evidenced by the Note) owing by the Company or any interest or
premium thereon, when due (or, if permitted by the terms of the relevant
document, within any applicable grace period), whether such Indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise, or shall fail to perform any term, covenant or agreement on
its part to be performed under any agreement or instrument (other than this
Agreement or the Note) evidencing or securing or relating to any Indebtedness
owing by the Company when required to be performed (or, if permitted by the
terms of the relevant document, within any applicable grace period), if the
effect of such failure to pay or perform is to accelerate, or to permit the
holder or holders of such Indebtedness, or the trustee or trustees under any,
such agreement or instrument, to accelerate, the maturity of such Indebtedness,
unless such failure to pay or perform shall be waived by the holder or holders
of such Indebtedness or such trustee or trustees; or
(e) The Company shall be involved in financial difficulties as
evidenced (i) by its admitting in writing its inability to pay its debts
generally as they become due, (ii) by its commencement of a voluntary case under
Title 11 of the United States Code as from time to time in effect, or by its
authorizing, by appropriate proceedings of its Board of Directors or other
governing body, the commencement of such a voluntary case, (iii) by its filing
an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of
such petition, (iv)
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<PAGE>
by the entry of an order for relief in any involuntary case commenced under
said Title 11, (v) by its seeking relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors, or by its consenting to or acquiescing in such relief, (vi) by the
entry of an order by a court of competent jurisdiction (a) finding it to be
bankrupt or insolvent, (b) ordering or approving its liquidation, reorganization
or any modification or alteration of the rights of its creditors or (c) assuming
custody of, or appointing a receiver or other custodian for, all or a
substantial part of its property or (vii) by its making an assignment for the
benefit of, or entering into a composition with, its creditors, or appointing or
consenting to the appointment of a receiver or other custodian for all or a
substantial part of its property; or
(f) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Company and such judgment, writ or similar process shall not be released,
vacated or fully bonded within ninety (90) days after its issue or levy;
then, and in any such event, the Purchaser or any other holder of the Note may,
by notice to the Company, declare the entire unpaid principal amount of the
Note, all interest accrued and unpaid thereon and all other amounts payable
under this Agreement to be forthwith due and payable, whereupon the Note, all
such accrued interest and all such amounts shall become and be forthwith due and
payable (unless there shall have occurred an Event of Default under subsection
5.01 (e) in which case all such amounts shall automatically become due and
payable), without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Company.
ARTICLE VI
DEFINITIONS AND ACCOUNTING TERMS
6.01 Certain Defined Terms. As used in this Agreement, the following
---------------------
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Debt Security" means and includes (i) any debt security of the Company
that by its terms is convertible into or exchangeable for any equity security of
the Company, (ii) any security of the Company that is a combination of debt and
equity or (iii) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any such debt security of the Company.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles consistently
applied, be classified upon the obligor's balance sheet as liabilities,
excluding any liabilities in respect of deferred federal or state income taxes,
but in any event including, without
-20-
<PAGE>
limitation, liabilities secured by any mortgage on property owned or acquired
subject to such mortgage, whether or not the liability secured thereby shall
have been assumed, and also including, without limitation, (i) all guaranties,
endorsements and other contingent obligations, in respect of Indebtedness of
others, whether or not the same are or should be so reflected in said balance
sheet, except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business and (ii)
the present value of any lease payments due under leases required to be
capitalized in accordance with applicable Statements of Financial Accounting
Standards, determined by discounting all such payment at the interest rate
determined in accordance with applicable Statements of Financial Accounting
Standards.
"Other Securities" shall mean any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) that the
holder of the Note at any time shall be entitled to receive, or shall have
received, on the conversion of the Note, in lieu of or in addition to Common
Stock, or that at any time may be issuable or shall have been issued in exchange
for or in replacement of Common Stock or Other Securities pursuant to Article
III.
"Permitted Assignee" shall mean with respect to the Purchaser any person or
entity directly or indirectly controlling, controlled by or under common control
with such assigning person. For the purposes of this definition, "Control"
shall mean the power and authority to direct the affairs of the entity in
question through the direct or indirect ownership or control over not less than
50.1% of the such entity's voting securities or equity.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or of any other federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at the time.
ARTICLE VII
MISCELLANEOUS
7.01 No Waiver: Cumulative Remedies. No failure or delay on the part of
-------------------------------
the Purchaser, or any other holder of the Note, in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
-21-
<PAGE>
7.02 Amendments, Waivers and Consents. Any provision in this Agreement to
---------------------------------
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only upon the consent of the Purchaser. Any provision of
this Agreement or the Note notwithstanding, changes in or additions to the Note
may be made, and compliance with any provision of the Note or this Agreement
relating to the Note may be omitted or waived, only upon the consent of holders
of greater than 50% of the principal amount of the Note; provided, however, that
no such consent shall be effective to reduce or to postpone the date fixed for
the payment of the principal (including any required redemption) or interest
payable on any Note, without the consent of the holder thereof, or to reduce the
percentage of the Note the consent of the holders of which is required under
this Section. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
7.03 Address for Notices, Etc. All notices, requests, demands and other
-------------------------
communications provided for hereunder shall be in writing and mailed by means of
certified mail (or other form of registered mail) or telegraphed or delivered to
the applicable party at the addresses indicated below:
If to the Company: Photoelectron Corporation
400-1 Totten Pond Road
Waltham, MA 02154
If to the Purchaser: At the Purchaser's address for notice as set forth in
the register maintained by the Company
If to any other
holder of the Note: At such holder's address for notice as set forth in
the register maintained by the Company
In addition, as to each of the foregoing, at such other address as shall be
designated by such Person in a written notice to the other party complying as to
delivery with the terms of this Section.
7.04 Binding Effect: Assignment. This Agreement shall be binding upon and
---------------------------
inure to the benefit of the Company and the Purchaser and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the consent of the
Purchaser obtained in accordance with Section 7.02 hereof and the rights and
interests of the Purchaser, including rights and interests in any shares of
Common Stock or in the Note, shall be assignable without the consent of the
Company to any Permitted Assignee.
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<PAGE>
7.05 Prior Agreements. This Agreement constitutes the entire agreement
-----------------
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
7.06 Severability. The invalidity or unenforceability of any provision
-------------
hereof shall in no way affect the validity or enforceability of any other
provision.
7.07 Governing Law. This Agreement and the Note shall be governed by, and
--------------
construed in accordance with, the laws of the Commonwealth of Massachusetts
without regard to its law governing conflicts of law.
7.08 Headings. Article, Section and subsection headings in this Agreement
---------
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
7.09 Sealed Instrument. This Agreement is deemed to be executed as an
-----------------
instrument under seal.
7.10 Counterparts. This Agreement may be executed in any number of
-------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger /s/ Peter M. Nomikos
--------------------------- -------------------------------
Peter E. Oettinger Peter M. Nomikos
Vice President and
Chief Operating Officer
-23-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
8% Convertible Note Due On Demand
No. Waltham, Massachusetts
May 13, 1992
For value received, PHOTOELECTRON CORPORATION, a Massachusetts corporation
(the "Company"), hereby promises to pay to Mr. Peter M. Nomikos (hereinafter
referred to as the "Payee"), or registered assigns, on demand, as described
below, the principal sum of up to Four Million Five Hundred Five Thousand
Dollars ($4,500,000.00) in consideration of advances made by the Payee under the
Convertible Note and Warrant Purchase Agreement hereinafter referred to, or such
part thereof as then remains unpaid. The dates and amounts of the advances are
reflected in Schedule A to this Note. The Company further agrees
----------
to pay interest from the date of each such advance on the principal amount of
such advance remaining from time to time unpaid at the rate of eight percent
(8%) per annum. Such interest shall accrue on March 31, June 30, September 30
and December 31 of each year, until the whole amount of the principal hereof
remaining unpaid shall become due and payable. The Company agrees to pay
interest on all overdue principal (including any overdue required redemption)
and interest at a rate per annum equal to the prime or base lending rate of the
First National Bank of Boston plus three percent (3%). The outstanding
----
principal amount and all accrued but unpaid interest shall be repaid on demand.
Subject to the holder's option (referenced below) to convert all or part of the
outstanding principal balance, and all accrued but unpaid interest, to Common
Stock, principal and interest shall be payable in lawful money of the United
States of America, in immediately available funds, at the principal office of
the Payee or at such other place as the legal holder may designate from time to
time in writing to the Company. Interest shall be computed on the basis of a
360-day year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note and Warrant Purchase Agreement dated as of
May 13, 1992, between the Company and the Payee (as the same may be amended from
time to
<PAGE>
time, the "1992 Agreement"), and each holder of this Note, by his or its
acceptance hereof, agrees to be bound by the provisions of the 1992 Agreement, a
copy of which may be inspected by the legal holder hereof at the principal
office of the Company. As provided in the 1992 Agreement, (i) this Note is
subject to prepayment as specified in the 1992 Agreement, (ii) the principal of
and interest on this Note is subordinated to Senior Debt, as defined in the 1992
Agreement, and (iii) all or any portion of the outstanding principal balance
under the Note, and all then accrued but unpaid interest on such principal
balance, is convertible into Common Stock of the Company in the manner set forth
in the 1992 Agreement.
As further provided in the 1992 Agreement, upon surrender of this Note for
transfer or exchange, a new Note or new Notes of the same tenor dated the date
to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due, the
Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts, without regard to its law governing
conflicts of law, and shall have the effect of a sealed instrument.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:
------------------------------------------
Peter E. Oettinger
Vice President and Chief Operating Officer
Attest:
- --------------------------------
-2-
<PAGE>
Schedule A
----------
Date of Advance Amount of Advance Interest Conversion Date
--------------- ----------------- -------- ---------------
-3-
<PAGE>
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or registered or qualified under any state
securities laws, and such securities may not be sold, transferred or otherwise
disposed of in the absence of an effective registration statement under such Act
and registration and qualification under all applicable state securities laws or
pursuant to exemptions therefrom.
Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
STOCK PURCHASE WARRANT
Date of Issuance: Right to Purchase
Shares of Common Stock
(subject to adjustment)
Warrant #
For value received, Photoelectron Corporation, a Massachusetts corporation
(the "Company"), hereby grants to Mr. Peter M. Nomikos, or his registered
assigns (the "Registered Holder"), the right to purchase from the Company
shares of the Company's Common Stock (subject to adjustment pursuant to Section
4 hereof) at a price of $1.50 per share (as adjusted pursuant to Section 3
hereof, the "Exercise Price"). The amount and kind of securities purchasable
pursuant to the rights granted under this Warrant and the purchase price for
such securities are subject to adjustment pursuant to the provisions contained
in this Warrant.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following terms have the
------------
meanings set forth below:
"Common Stock" means the Company's Common Stock, $.01 par value per
------------
share.
"Date of Issuance" shall have the meaning specified in Section 10 of
----------------
this Warrant.
"Market Price" is defined as the average of the daily closing prices
------------
for the 20 consecutive trading days, immediately preceding the date of
computation. The closing price for each day shall be (i) if the shares of Common
Stock are listed or admitted to trading on a principal national securities
exchange or the National Market System of NASDAQ, the last
<PAGE>
2
principal national securities exchange or the National Market System of NASDAQ,
the last reported sales price on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or on the
National Market System of NASDAQ or (ii) if the shares of Common Stock are not
listed or admitted to trading on any such exchange, the average of the highest
bid and lower asked prices, as reported on the Automated Quotation System of the
National Quotations Bureau, Incorporated or an equivalent, generally accepted
reporting service. If at any time such security is not listed on any domestic
securities exchange or quoted in the NASDAQ System or the domestic over-the-
counter market, the "Market Price" will be the fair value thereof determined by
the Board of Directors in good faith.
"NASDAQ System" means the NASDAQ Inter-Dealer Quotation System
-------------
or such other similar inter-dealer quotation system as may in the future be used
generally by members of the National Association of Securities Dealers, Inc. for
the over-the-counter transactions in securities.
"Person" means an individual, a partnership, a corporation, a
--------
trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof.
"Warrant" or "Warrants" means the Warrant and all stock purchase
--------- ----------
warrants issued in exchange therefor pursuant to the terms thereof.
"Warrant Stock" means shares of the Company's authorized but
---------------
unissued Common Stock; provided that if there is a change such that the
securities issuable upon exercise of the Warrant are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Warrant Stock" will mean one share of the security issuable upon
exercise of the Warrant if such security is issuable in shares, or will mean the
smallest unit in which such security is issuable if such security is not
issuable in shares.
2. Exercise of Warrant.
--------------------
2.1 Exercise Period. The Registered Holder may exercise this
----------------
Warrant, in whole or in part (but not as to a fractional share of Warrant
Stock), at any time and from time to time prior to the seventh anniversary of
the Date of Issuance of the Warrant ("Exercise Period").
2.2 Exercise Procedure.
-------------------
(a) This Warrant will be deemed to have been exercised
at such time as the Company has received all of the following items (the
"Exercise Date"):
(i) a completed Exercise Agreement, as
described below, executed by the Person exercising all or part
of the purchase right represented by this Warrant (the
"Purchaser");
(ii) this Warrant;
<PAGE>
3
(iii) if this Warrant is not registered in the name of
the Purchaser, an Assignment or Assignments in the form set forth in
Exhibit II hereto, evidencing the assignment of this Warrant to the
Purchaser; and
(iv) a check payable to the Company in an amount
equal to the product of the Exercise Price multiplied by the number of
shares of Warrant Stock being purchased upon such exercise.
(b) Certificates for shares of Warrant Stock purchased upon
exercise of this Warrant will be delivered by the Company to the Purchaser
within ten days after the Exercise Date. Unless this Warrant has expired or all
of the purchase rights represented hereby have been exercised, the Company will
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised.
The Company will, within such ten-day period, deliver such new Warrant to the
Person designated for delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise of this
Warrant will be deemed to have been issued to the Purchaser on the Exercise
Date, and the Purchaser will be deemed for all purposes to have been the record
holder of such Warrant Stock on the Exercise Date.
(d) The issuance of certificates for shares of Warrant Stock
upon exercise of this Warrant will be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or any other
cost incurred by the Company in connection with such exercise and the related
issuance of shares of Warrant Stock. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer, in
whole or in part, of this Warrant (including the issuance of new Warrants in
connection therewith or the delivery of stock certificates in a name other than
that of the Registered Holder of this Warrant presented for exercise, and any
such tax shall be paid by such Registered Holder at the time of presentation.
(e) The Company will not close its books for the transfer of
this Warrant or of any share of Warrant Stock issued or issuable upon the
exercise on this Warrant in any manner which interferes with the timely exercise
of this Warrant.
2.3 Exercise Agreement. The Exercise Agreement will be substantially
-------------------
in the form set forth in Exhibit I hereto, except that if the shares of Warrant
Stock are not to be issued in the name of the Registered Holder of this Warrant,
the Exercise Agreement will also state the name of the Person to whom the
certificates for the shares of Warrant Stock are to be issued, and if the number
of shares of Warrant Stock to be issued does not include all the shares of
Warrant Stock purchasable hereunder, it will also state the name of the Person
to whom a new Warrant for the unexercised portion of the rights hereunder is to
be delivered.
2.4 Fractional Shares. If a fractional share of Warrant Stock would,
------------------
but for the provisions of Subsection 2.1, be issuable upon exercise of the
rights represented by this
<PAGE>
4
Warrant, the Company will, within ten days after the Exercise Date, deliver to
the Purchaser a check payable to the Purchaser in lieu of such fractional share,
in an amount equal to the Market Price of such fractional share as of the close
of business on the Exercise Date.
3. Exercise Price
--------------
3.1 General. The initial Exercise Price will be $1.50. In order to
-------
prevent dilution of the rights granted under this Warrant, the Exercise Price
will be subject to adjustment from time to time pursuant to this Section 3.
3.2 Subdivision or Combination of Common Stock and Stock Dividends. In
--------------------------------------------------------------
case the Company shall at any time after the date hereof (a) issue any shares of
Common Stock as a dividend upon Common Stock, or (b) issue any shares of Common
Stock by reclassification or otherwise, or (c) combine outstanding shares of
Common Stock, by reclassification or otherwise, the Exercise Price which would
apply if purchase rights hereunder were being exercised immediately prior to
such action by the Company shall be adjusted by multiplying it by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such dividend, subdivision or combination and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such dividend, subdivision or combination.
3.3 Certain Dividends. In case the Company shall declare a dividend
-----------------
upon the Common Stock payable otherwise than out of earnings or retained
earnings and otherwise than in Common Stock, the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the
declaration of such dividend by a fraction, the numerator of which shall be the
current Market Price per share of Common Stock, on such date, less the fair
market value, as determined by the Board of Directors of the Company, whose
determination shall be conclusive, of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights, options or
warrants applicable to one share of Common Stock, and of which the denominator
shall be such current Market Price per share of Common Stock. For the purposes
of the foregoing, a dividend other than in cash shall be considered payable out
of earnings or retained earnings only to the extent that such earnings or
retained earnings are charged an amount equal to the value of such dividend as
determined by the Board of Directors of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend, or, if a record is not taken, the date as of which the holders of
Common Stock or record entitled to such dividend are to be determined.
3.4 No Adjustment. No adjustment of the Exercise Price shall be made
-------------
if the amount of such adjustment shall be less than one cent per share, but in
such case any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to not less than one cent per share.
4. Adjustment of Number of Shares Issuable upon Exercise. In the event of
-----------------------------------------------------
a stock dividend, stock split, combination or other event described in Section
3.2 and 3.3 hereof, the
<PAGE>
5
Registered Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase the number of shares of Warrant Stock,
calculated to the nearest full share, determined by (a) multiplying the number
of shares of Warrant Stock purchasable hereunder immediately prior to the
adjustment of the Exercise Price by the Exercise Price in effect immediately
prior to such adjustment, and (b) dividing the product so obtained by the
adjusted Exercise Price in effect immediately after such adjustment.
5. Effect of Reorganization, Reclassification, Consolidation, Merger
-----------------------------------------------------------------
or Sale. If at any time while this Warrant is outstanding there shall be any
- --------
reorganization or reclassification of the capital stock of the Company (other
than a subdivision or combination of shares provided for in Subsection 3.3
hereof) or any consolidation or merger of the Company with another corporation
(other than a consolidation or merger in which the Company is the surviving
entity and which does not result in any change in the Common Stock), or any sale
or other disposition by the Company of all or substantially all of its assets to
any other corporation, the holder of this Warrant shall thereafter upon exercise
of this Warrant be entitled to receive the number of shares of stock or other
securities or property of the Company, or of the successor corporation resulting
from such consolidation or merger, as the case may be, to which the Warrant
Common Stock (and any other securities and property) of the Company, deliverable
upon the exercise of this Warrant, would have been entitled upon such
reorganization, reclassification of capital stock, consolidation, merger, sale
or other disposition if this Warrant had been exercised immediately prior to
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition. In any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant with respect to the
rights and interests thereafter of the holder of this Warrant to the end that
the provisions set forth in this Warrant (including those relating to
adjustments of the Exercise Price and the number of shares issuable upon the
exercise of this Warrant) shall thereafter be applicable, as near as reasonably
may be, in relation to any shares or other property thereafter deliverable upon
the exercise hereof as if this Warrant had been exercised immediately prior to
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition and the holder hereof had carried out the terms of the
exchange as provided for by such reorganization, reclassification of capital
stock, consolidation or merger. Notwithstanding any other provisions of this
Warrant, in the event of sale or other disposition of all or substantially all
of the assets of the Company as a part of a plan for liquidation of the Company,
all rights to exercise the Warrant shall terminate 30 days after the Company
gives written notice to the Registered Holder of this Warrant that such sale or
other disposition has been consummated.
6. Notice of Adjustments. Immediately upon any adjustment of the
----------------------
Exercise Price or increase or decrease in the number of shares of Common Stock
purchasable upon exercise of this Warrant, the Company will send written notice
thereof to all Registered Holders, stating the adjusted Exercise Price and the
increased or decreased number of shares purchasable upon exercise of this
Warrant and setting forth in reasonable detail the method of calculation for
such adjustment or decrease.
<PAGE>
6
7. Reservation of Common Stock. The company will at all times
---------------------------
reserve and keep available for issuance upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants, and upon
such issuance such shares of Common Stock will be validly issued, fully paid and
nonassessable.
8. No Voting Rights; Limitations of Liability. This Warrant will
------------------------------------------
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Registered Holder to purchase Warrant Stock, and no
enumeration in this Warrant of the rights or privileges of the Registered
Holder, will give rise to any liability of such Holder for the Exercise Price of
Warrant Stock acquirable by exercise hereof or as a stockholder of the Company.
9. Warrant Transferable.
--------------------
(a) Subject to the transfer conditions referred to in paragraph
(b), below, this Warrant and all rights hereunder are transferable, in whole or
in part, without charge to the Registered Holder, upon surrender of this Warrant
with a properly executed Assignment (in the form of Exhibit II hereto) at the
principal office of the Company.
(b) Each Registered Holder of this Warrant acknowledges that
this Warrant has not been registered under the Securities Act of 1933, as
amended (the "Act"), and agrees not to sell, pledge, distribute, offer for sale,
transfer of otherwise dispose of this Warrant or any Warrant Stock issued upon
its exercise in the absence of (i) an effective registration statement as to
this Warrant or such Warrant Stock under the Act (or any similar statute then in
effect), or (ii), an opinion of counsel for the company to the effect that such
registration is not, under the circumstances, required.
10. Warrant Exchangeable for Different Denominations. This Warrant
------------------------------------------------
is exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrants will
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" of this Warrant regardless
of the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant are issued.
11. Representations, Warranties and Covenants of the Registered
-----------------------------------------------------------
Holder. (a) The Registered Holder represents and warrants to, and covenants
- ------
with, the Company that: (i) the Registered Holder, taking into account the
personnel and resources it can practically bring to bear on the purchase of the
Warrant, is knowledgeable, sophisticated and experienced in making, and is
qualified to make, decisions with respect to investments in shares presenting an
investment decision like that involved in the purchase of the Warrant, including
investments in securities issued by the Company, and has requested, received
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Warrant; (ii) the Registered
<PAGE>
7
Holder is acquiring the Warrant for investment and with no present intention of
distributing the Warrant (this representation and warranty not limiting the
Registered Holder's right to transfer all or any part of the Warrant pursuant to
Section 9); and (iii) the Registered Holder will not, directly or indirectly,
voluntarily offer, sell, pledge, purchase or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) the
Warrant except in compliance with the Securities Act, and the rules and
regulations promulgated thereunder, or an exception thereto.
(b) The Registered Holder further represents and warrants to, and
covenants with, the Company that (i) the Registered Holder has full right,
power, authority and capacity to enter into this Warrant and to consummate the
transactions contemplated hereby, and (ii) upon the execution and delivery of
this Warrant (for the limited purpose of this Section 11), this Warrant shall
constitute a valid and binding obligation to the Registered Holder enforceable
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
12. Miscellaneous.
-------------
12.1 Amendment and Waiver. The provisions of the Warrants
--------------------
may be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Registered Holders of Warrants representing
at least 50% of the shares of Warrant Stock obtainable upon the exercise of the
Warrants outstanding at the time of such consent.
12.2 Notices. Any notices required to be sent to a
-------
Registered Holder will be delivered to the address of such Registered Holder
shown on the books of the Company. All notices referred to herein will be
delivered in person or sent by first class mail, postage prepaid, and will be
deemed to have been given when so delivered or sent.
12.3 Descriptive Headings; Governing Law. The descriptive
-----------------------------------
headings of the paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. The construction, validity and
interpretation of this Warrant will be governed by the laws of the Commonwealth
of Massachusetts.
<PAGE>
8
IN WITNESS WHEREOF, the Company and the Registered Holder (for the
limited purpose of Section 11 hereof) have caused this Warrant to be signed and
attested by their duly authorized officers, and in the case of the Company,
under its corporate seal.
PHOTOELECTRON CORPORATION
By:
----------------------------
Name: Peter E. Oettinger
Title: Vice President and Chief
Operating Officer
[CORPORATE SEAL]
Attest:
- -----------------------------
Clerk
Accepted and agreed to by the Registered
Holder for the limited purpose of Section 11
hereof:
By:
--------------------------------
Peter M. Nomikos
<PAGE>
EXHIBIT I
---------
EXERCISE AGREEMENT
------------------
To: Photoelectron Corporation Date:
----------------
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase shares of the Warrant
------
Stock covered by such Warrant and makes payment herewith in full for such
Warrant Stock at the price per share provided by such Warrant.
Name
---------------------
---------------------
Signature
---------------------
---------------------
Address
---------------------
---------------------
This Exercise Agreement must be completed and sent with the items specified
in Section 2.2 of the Warrant Agreement to:
Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
Att'n: John J. Crowley, Controller
<PAGE>
10
EXHIBIT II
----------
ASSIGNMENT
----------
FOR VALUE RECEIVED, hereby sells, assigns and transfers all of
--------------
the rights of the undersigned under the within Warrant with respect to the
number of shares of the Warrant Stock covered thereby set forth below, unto:
Names of Assignees Address No. of Shares
Date: Signature
----------------------------- -------------------------------
----------------------------------------
Witness
---------------------------------
This Assignment must be completed and sent to:
Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
Attn: John J. Crowley, Controller
<PAGE>
EXHIBIT 4.9
AMENDMENT AND WAIVER OF
CONVERTIBLE NOTE AND WARRANT
PURCHASE AGREEMENT DATED AS OF MAY 13, 1992
This Agreement, dated as of August 1, 1996, is made and entered into
by and between Photoelectron Corporation, a Massachusetts corporation
("Company") and Mr. Peter M. Nomikos ("Nomikos").
The following sets forth the factual background to this Agreement:
A. The parties hereto entered into a certain Convertible Note and
Warrant Purchase Agreement, dated as of May 13, 1992 (the "1992 Agreement"), a
copy of which is attached hereto as Exhibit A, pursuant to which the Company
issued an 8% Subordinated Note Due on Demand to Nomikos in a principal amounts
of up to $4,500,000 (collectively, the "1992 Note").
B. On or about December 31, 1993, Nomikos converted the outstanding
principal balance of the 1992 Note and all interest accrued thereon to Common
Stock. Since that time, Nomikos has advanced the Company an additional
principal amount of $705,000 pursuant to the terms of the 1992 Agreement which
remains outstanding as of the date of this Agreement.
C. The Company is contemplating an Initial Public Offering (as
defined below) and the parties desire to amend certain provisions of the 1992
Agreement to be effective in the event of an Initial Public Offering. The
parties also desire to set forth in writing waivers of Nomikos' rights regarding
the Company's non-compliance with certain provisions of the 1992 Agreement.
D. The parties desire to agree on a form of Amended and Restated Note
to reflect the presently outstanding principal balance loaned by Nomikos to the
Company under the 1992 Agreement.
E. The parties acknowledge that the amendments and waivers set forth
in this Agreement are in the best interests of the Company and of Nomikos as a
stockholder of the Company.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. In replacement of any prior Note issued under the 1992 Agreement,
and to accurately reflect the current principal balance outstanding under the
1992 Agreement, the Company agrees to issue to Nomikos, and Nomikos agrees to
accept, the Amended and Restated 8% Subordinated Note in the form attached
hereto as Exhibit B, as a replacement for any and all Notes previously issued
under the 1992 Agreement. The
<PAGE>
parties agree that, upon issuance of the replacement Note, any and all Notes
previously issued under the 1992 Agreement shall be deemed cancelled and of no
further force and effect.
2. Effective upon the consummation of an Initial Public Offering (as
defined below), the parties hereto amend the 1992 Agreement as follows:
(a) by deleting the first sentence of Section 2.01(g);
(b) by deleting Section 2.02 entitled Negative Covenants Of The
--------------------------
Company in its entirety;
--------
(c) by deleting Section 2.03 entitled Reporting Requirements in its
----------------------
entirety; and
(d) by deleting Article IV entitled RIGHT OF FIRST REFUSAL
in its entirety.
3. Nomikos also waives any rights that he may have under the 1992
Agreement arising from the Company's non-compliance with the terms of Article IV
in connection with the Initial Public Offering and all issuances prior thereto
approved by the Board of Directors of the Company of capital stock, debt
instruments, options and warrants of the Company.
4. "Initial Public Offering" means effectiveness of the Company's
Registration Statement on Form S-1 under the Securities Act of 1933, as amended,
in connection with an initial public offering of the Company's Common Stock
which yields at least $7,500,000 in gross proceeds to the Company.
5. Nomikos hereby waives any and all defaults which may have occurred
under the following provisions of the 1992 Agreement prior to the date hereof:
(i) the obligation to pay interest the Note issued under the 1992
Agreement at the times and place and in the manner provided in the
Note and in the 1992 Agreement in compliance with Section 2.01(a);
(ii) the obligation to prepare, submit to, and obtain approval from a
majority of the Company's Board of Directors, of a budget for the
upcoming year in compliance with Section 2.01(e);
(iii) the obligation to maintain directors and officers insurance in
compliance with the last sentence of Section 2.01(g);
(iv) the negative covenant restricting affiliated transactions as set
forth in Section 2.02(b) in connection with transactions with Peter
Nomikos
<PAGE>
("Nomikos"), or affiliates of Nomikos, that were approved by
the Board of Directors of the Company and pursuant to which Nomikos
or his affiliates loaned money to or acquired capital stock,
warrants or other securities in the Company;
(v) the negative covenant restricting change in the nature of the
business of the Company as set forth in Section 2.02(c) in
connection with the change in the Company's business from the
photocathode business in which the Company was engaged at the time
of its organization to the medical devices business in which it is
now engaged; and
(vi) the reporting requirements set forth in Section 2.03.
6. Except as herein waived or amended, the 1992 Agreement is hereby
confirmed in its entirety.
7. This Agreement shall be binding upon and inure to the benefit of the
respective parties hereto, and their successors and assigns, and shall be
governed by, and construed in accordance with, the laws of the Commonwealth of
Massachusetts without regard to its law relating to conflicts of law.
8. This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart.
This Agreement is effective as a sealed instrument, except where
specifically stated otherwise, as of the date first set forth above.
PHOTOELECTRON CORPORATION, a
Massachusetts corporation
By:/s/ Peter E. Oettinger
----------------------------------
Peter E. Oettinger
Vice President and Chief Operating
Officer
/s/ Peter M. Nomikos
----------------------------------
Peter M. Nomikos
<PAGE>
PHOTOELECTRON CORPORATION
CONVERTIBLE NOTE AND WARRANT
PURCHASE AGREEMENT
Dated as of May 13, 1992
<PAGE>
This Agreement i.e. Nomikos is dated as of the 13th day of May, 1992 by and
between Mr. Peter M. Nomikos, an individual residing in London, England (the
"Purchaser"), and Photoelectron Corporation, a Massachusetts corporation (the
"Company").
ARTICLE I
PURCHASE AND SALE OF THE SECURITIES
1.01 The Securities. The Company has authorized the issuance and sale of
---------------
up to $4,500,000 principal amount of the Company's 8% Convertible Note (the
"Note") and Common Stock Purchase Warrants (the "Warrants") for the purchase of
up to 3,000,000 shares of the Common Stock, $.01 par value per share ("Common
Stock") of the Company. The Note shall be in the principal amount set forth in
the preceding sentence and shall otherwise be substantially in the form set
forth in Exhibit A hereto. The term "Note" shall also include any note or notes
delivered in exchange or replacement for the Note. The Warrants shall be
substantially in the form set forth in Exhibit B hereto. The terms "Warrant" or
"Warrants" shall also include any Warrant or Warrants delivered in exchange or
replacement for the Warrants. Any shares of Common Stock issuable upon exercise
of the Warrants, and such shares when issued, are herein referred to as the
"Warrant Shares."
1.02 The Closing.
------------
The Company agrees to issue and sell to the Purchaser, and, subject to and
in reliance upon the terms and conditions of this Agreement, the Purchaser
agrees to purchase the principal amount of the Note, at par, set forth in
Section 1.01 at the times set forth below.
Subject to all of the terms and conditions hereof and so long as there
shall exist no Default (as defined herein) on such dates as the Company shall
from time to time request by not fewer than three business days prior telephone
notice to the Purchaser, the Purchaser shall advance the amount of such sum
requested to the Company at its principal office in Waltham, Massachusetts (such
sum advanced from time to time in the aggregate referred to as the "Advances"),
provided that the aggregate principal amount of all Advances outstanding shall
not at any time exceed an amount equal to Four Million Five Hundred Thousand
Dollars ($4,500,000). Upon each advance, the Purchaser shall set forth the
amount and date of the Advance on Schedule A to the Note and shall provide a
copy of the revised Schedule A to the Company. At the time of each Advance, the
Company will also issue a Warrant in the name of the Purchaser providing for the
purchase of Warrant Shares equal to the principal amount of the Advance divided
by the Applicable Conversion Value (as defined herein), in exchange for a
warrant purchase
-2-
<PAGE>
price equal to $.10 per Warrant Share issued, payable by the Purchaser within 60
days after the date of the Advance.
1.04 Transfer and Exchange of the Note. The registered holder of the Note
----------------------------------
may, prior to maturity or prepayment thereof, surrender the Note at the
principal office of the Company for transfer or exchange to any assignee.
Within a reasonable time after notice to the Company from a registered holder of
its intention to make such exchange and without expense (other than transfer
taxes, if any) to such registered holder, the Company shall issue in exchange
therefor another Note for the same aggregate principal amount as the unpaid
principal amount of the Note so surrendered (or in such multiples thereof as may
be requested by the registered holder) and having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Note so surrendered. Each new Note shall be made payable to
such Person or Persons, or registered assigns, as the registered holder of such
surrendered Note may designate, and such transfer or exchange shall be made in
such a manner that no gain or loss of principal or interest shall result
therefrom.
1.05 Replacement of Notes. Upon receipt of evidence satisfactory to the
---------------------
Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; provided, however, if any Note of which the
Purchaser, his nominees or any of his affiliates is the registered holder is
lost, stolen or destroyed, the affidavit of the owner or the president,
treasurer or assistant treasurer, as the case may be, of the registered holder,
including a representation to the effect that such Note has not been negotiated
and setting forth the circumstances with respect to such loss, theft or
destruction, shall be accepted as satisfactory evidence thereof, and no
indemnity bond or other security shall be required as a condition to the
execution and delivery by the Company of a new Note in replacement of such lost,
stolen or destroyed Note other than the registered holder's written agreement to
indemnify the Company.
1.06 Subordination. The Company, for itself, its successors and assigns,
-------------
covenants and agrees, and the Purchaser and each successor holder of the Note by
his or its acceptance thereof likewise covenants and agrees, that
notwithstanding any other provision of this Agreement or the Note, the payment
of the principal of and interest on the Note shall be subordinated in right of
payment, to the extent and in the manner hereinafter set forth, to the prior
payment in full of all Senior Debt (as hereinafter defined) at any time
outstanding.
(a) Payment of Senior Debt. In the event of any insolvency or
bankruptcy proceedings, or any proceedings in connection therewith, relative to
the Company or to its property, or, in the event of any proceedings for the
Company of distribution or marshalling of its assets or any composition with
creditors of the
-3-
<PAGE>
Company, whether or not involving insolvency or bankruptcy, then and in any such
event all Senior Debt shall be paid in full before any payment or distribution
of any character, whether in cash, securities or other property, shall be made
on account of the Note; and any such payment or distribution, except securities
that are subordinated and junior in right of payment to the payment of all
Senior Debt then outstanding in terms of substantially the same tenor as this
Section 1.06, which would, but for the provisions hereof be payable or
deliverable with respect to the Note shall be paid or delivered directly to the
holders of Senior Debt (or their duly authorized representatives), in the
proportions in which they hold the same, until all Senior Debt shall have been
paid in full, and any holder of the Note by becoming a holder thereof shall have
designated and appointed the holder or holders of Senior Debt (and their duly
authorized representatives) as his or its agents and attorneys-in-fact to
demand, sue for, collect and receive such Senior Debt holder's ratable share of
all such payments and distributions and to file any necessary proof of claim
therefor and to take all other action (including the right to vote such Senior
Debt holder's ratable share of the Note), in the name of the holders (or their
authorized representatives), that such Senior Debt holder may determine to be
necessary or appropriate for the enforcement of this Section 1.06. The Purchaser
and each successor holder of the Note by its or his acceptance thereof agrees to
execute, at the request of the Company, a separate agreement with any holder of
Senior Debt on the terms set forth in this Section 1.06.
(b) No Payment on Note Under Certain Conditions.
In the event that:
(i) any default occurs in the payment of principal of or interest on
any Senior Debt and during the continuance of such default, or (if a shorter
period) until such payment has been made or such default has been cured or
waived in writing by such holder of Senior Debt; or
(ii) the maturity of any Senior Debt is accelerated by any holder
thereof because of a default with respect thereto and until such acceleration
has been rescinded or said Senior Debt has been paid;
then and during the continuance of any of such events no payment shall be made
by the Company, directly or indirectly, on account of the principal of or
interest on the Note.
(c) Payments Held in Trust. In case any payment or distribution shall
be paid or delivered to any holder of the Note in violation or contravention of
the terms of this subordination, before all Senior Debt shall have been paid in
full, such payment or distribution shall be held in trust for and paid and
delivered to the holders of Senior Debt (or their duly authorized
representatives) until all Senior Debt shall have been paid in full.
-4-
<PAGE>
(d) Subrogation. Subject to the payment in full of all Senior Debt
and until the Note shall be paid in full, the holder of the Note shall be
subrogated to the rights of the holders of the Senior Debt (to the extent of
payments or distributions previously made to such holders of Senior Debt
pursuant to the provisions of subsections (a) and (c) of this Section 1.06) to
receive payments or distributions of assets of the Company applicable to the
Senior Debt. No such payments or distributions applicable to the Senior Debt
shall, as between the Company and its creditors, other than the holders of
Senior Debt and the holder of the Note, be deemed to be a payment by the Company
to or on account of the Note; and for the purposes of such subrogation, no
payments or distributions to the holders of Senior Debt to which the holder of
the Note would be entitled except for the provisions of this Section 1.06 shall,
as between the Company and its creditors, other than the holders of Senior Debt
and the holder of the Note, be deemed to be a payment by the Company to or on
account of the Senior Debt.
(e) Scope of Section. The provisions of this Section 1.06 are
intended solely for the purpose of defining the relative rights of the holder of
the Note, on the one hand, and the holders of the Senior Debt on the other hand.
Nothing contained in this Section 1.06 or elsewhere in this Agreement or the
Note is intended to or shall impair, as between the Company and its creditors,
other than the holders of Senior Debt, and the holder of the Note, the
obligation of the Company, which is unconditional and absolute, to pay to the
holder of the Note the principal of and interest on the Note as and when the
same shall become due and payable in accordance with the terms thereof, or to
affect the relative rights of the holders of the Senior Debt, nor shall anything
herein or therein prevent the holder of the Note from accepting any payment,
with respect to such Note or exercising all remedies otherwise permitted by
applicable law upon default under such Note, subject to the rights, if any,
under this Section 1.06 of the holders of Senior Debt in respect of cash,
property or notes of the Company received by the holders of the Notes.
(f) Survival of Rights. The right of any present or future holder of
Senior Debt to enforce subordination of the Note pursuant to the provisions of
this Section 1.06 shall not at any time be prejudiced or impaired by any act or
failure to act on the part of the Company or any such holder of Senior Debt,
including without limitation, any forbearance, waiver, consent, compromise,
amendment, extension, renewal or taking or release of security of or in respect
of any Senior Debt or by noncompliance by the Company with the terms of such
subordination regardless of any knowledge thereof such holder may have or
otherwise been charged with.
(g) Amendment or Waiver. The provisions of this Section 1.06 may not
be amended or waived in any manner that is detrimental to any Senior Debt
without the consent of the holders of all then existing Senior Debt.
(h) Senior Debt Defined. The term "Senior Debt" shall mean (i) all
Indebtedness of the Company (which is not convertible into equity securities of
the Company and is not issued in conjunction with equity securities of the
Company or options or warrants to purchase equity securities of the Company) for
money borrowed,
-5-
<PAGE>
including any extension or renewals thereof, whether outstanding on the date
hereof or thereafter created or incurred, which is not by its terms subordinate
and junior to or on a parity with the Note, and (ii) all other indebtedness to
which the obligations of the Note shall be expressly subordinated by the holder
of the Note in writing, citing this Section 1.06.
(i) Proof of Subordination. The Purchaser agrees that he will execute
and deliver any other documents evidencing the subordination of the Note to
Senior Debt that may be reasonably requested by the Company or the holders of
Senior Debt so long as none of the provisions contained in such documents
diminish the rights of the Purchaser in any manner.
1.07 Representations by the Purchaser. The Purchaser represents that it is
--------------------------------
his present intention to acquire the Note and Warrants for his own account and
that the Notes and Warrants are being and will be acquired for the purpose of
investment and not with a view to distribution or resale thereof. The
acquisition by the Purchaser of the Note and Warrants shall constitute a
confirmation by him of this representation.
ARTICLE II
COVENANTS OF THE COMPANY
2.01 Affirmative Covenants of the Company Other Than Reporting
---------------------------------------------------------
Requirements. Without limiting any other covenants and provisions hereof, the
- ------------
Company covenants and agrees that, so long as any of the Notes are outstanding,
it will perform and observe the following covenants and provisions:
(a) Punctual Payment. Pay the principal of and interest on the Note
at the times and place and in the manner provided in the Note and herein.
(b) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified, as a foreign corporation in
each jurisdiction in which such qualification is necessary or desirable in view
of its business and operations or the ownership of its properties; and preserve
and maintain all material licenses and other rights to use patents, processes,
licenses, trademarks, trade names, inventions, intellectual property rights or
copyrights owned or possessed by it and necessary to the conduct of its
business.
(c) Compliance with Laws. Comply, in all material respects with all
applicable laws, rules, regulations and orders of any governmental authority,
noncompliance with which could materially adversely affect its business or
condition, financial or otherwise.
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<PAGE>
(d) Keeping of Records and Books of Account. Keep adequate records
and books of account in which complete entries will be made in accordance with
generally accepted accounting principles consistently applied, reflecting all
financial transactions of the Company and in which, for each fiscal year, all
proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection within its business shall be made.
(e) Budgets and Board Approval. Prior to the commencement of each
fiscal year, prepare and submit to, and obtain the approval of a majority of,
the Board of Directors of a budget for the upcoming fiscal year, including
projections of research and development expenditures, capital and operating
expenses, cash flow and profits and losses, all itemized in reasonable detail.
(f) Financings. Promptly, fully and in detail, inform the Board of
Directors in advance of any commitments or contracts relating to financing of
any nature for the Company or pledge of corporate assets.
(g) Board of Directors: Indemnification. The Board of Directors shall
not consist of more than four (4) directors. The By-laws of the Company shall
at all times provide for the indemnification of the Board of Directors to the
full extent provided by the law of the jurisdiction in which the Company is
organized. The Company shall maintain directors and officers insurance with
coverage and premium levels consistent with policies carried by companies of
similar size engaged in similar businesses.
2.02 Negative Covenants of the Company. Without limiting any other
----------------------------------
covenants and provisions hereof, the Company covenants and agrees that, so long
as the Conversion Shares issuable upon conversion of the Note and the shares
issued by the Company on January 4, 1989 or issuable upon conversion of the 8%
Subordinated Convertible Note issued by the Company on January 4, 1989, or the
8% Subordinated Convertible Notes issued by the Company on May 22, 1990, in the
aggregate, are greater than 50% of the total outstanding voting securities of
the Company, without the consent of the Purchaser, the Company will not:
(a) Mergers, Sale of Assets, Etc. Merge or consolidate with, or sell,
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) a material portion
of its assets (whether now owned or hereafter acquired) to, any Person, except
for sales or other dispositions of assets in the ordinary course of business.
(b) Dealings with Affiliates and Others. From and after the date of
this Agreement, enter into any transaction, including, without limitation, any
loans or extensions of credit or royalty agreements, with any officer or
director of the Company or holder of any class of capital stock of the Company,
or any member of their respective immediate families or any corporation or other
entity directly or indirectly controlled by
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<PAGE>
one or more of such officers, directors or stockholders or members of their
immediate families.
(c) Change in Nature of Business. Make any material change in the
nature of its business as carried on as of the date hereof.
(d) Dividends. Declare or pay any dividends on any class of the
Company's capital stock now or hereafter outstanding or purchase, redeem or
otherwise acquire or retire any of the Company's capital stock of any class now
or hereafter outstanding or otherwise return capital or make distributions of
assets to stockholders as such, except the repurchase of capital stock pursuant
to a certain Stockholders' Agreement of January 4, 1989 among the parties
hereto.
2.03 Reporting Requirements. The Company will furnish the following to
-----------------------
each holder who owns of record or beneficially or has the right to acquire from
the Company any Conversion Shares, to each holder of the Notes and to each
holder of 15% or more of the Company's Common Stock:
(a) As soon as available and in any event within thirty (30) days
after the end of each fiscal quarter of the Company, a balance sheet of the
Company as of the end of such quarter and a statement of income and retained
earnings and of changes in financial position of the Company for the period
ending with such quarter, all in reasonable detail and duly certified (subject
to year-end audit adjustments) by the chief financial officer of the Company as
having been prepared in accordance with the accounting principles applied in the
prior annual audited financial statements of the Company, and such financial
statements shall set forth in comparative form the corresponding figures for the
corresponding period of the prior fiscal year.
(b) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, a balance sheet of the Company
as of the end of such fiscal year and statements of income and retained earnings
and of changes in financial position of the Company for such fiscal year,
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, and, if audited, all such statements in audited form and
duly certified by a nationally recognized independent public accountant;
(c) Any written report submitted to the Company by independent public
accountants in connection with any annual or interim audit of the books of the
Company made by such accountants;
(d) Promptly after the commencement thereof, notice of all actions,
suits and proceedings before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, materially
affecting the Company when considered as a whole that are not fully covered by
insurance; and
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<PAGE>
(e) At least thirty (30) days prior to the commencement of each fiscal
year of the Company, a copy of the operating plan and budget.
ARTICLE III
CONVERSION OF THE NOTE
3.01 Conversion Rights. (a) Principal: Subject to and in compliance with
------------------
the provisions of this Article III, at the option of the holder, all or any part
of the principal amount outstanding on any Note issued pursuant to this
Agreement may be converted at any time at the Applicable Principal Conversion
Value (as defined below) into fully paid and non-assessable shares of Common
Stock in accordance with the provisions of Sections 3.02 to 3.15. (b) Interest:
Subject to and in compliance with the provisions of this Article III, at the
option of the holder, all of the accrued and unpaid interest on any Note issued
pursuant to this Agreement may be converted at any time at the Applicable
Interest Conversion Value (as defined below) into fully paid and non-assessable
shares of Common Stock in accordance with the provisions of Sections 3.02 and
3.06 to 3.15; provided, however, that upon conversion of all or any part of the
principal amount of any Note pursuant to clause (a) of this Section, all accrued
and unpaid interest on such Note up to and including the Conversion Date (as
defined below) shall be converted at the Applicable Interest Conversion Value
into fully paid and non-assessable shares of Common Stock.
3.02 Conversion Values. (a) Applicable Principal Conversion Value: The
------------------
price at which the outstanding principal of any Note issued under this Agreement
may be converted into Common Stock (the "Applicable Principal Conversion Value")
shall, subject to adjustment as provided in Sections 3.03 through 3.15, be two
dollars ($2.00). (b) Applicable Interest Conversion Value: The price at which
accrued and unpaid interest on the outstanding principal balance of any Note
issued under this Agreement may be converted into Common Stock (the "Applicable
Interest Conversion Value") shall, subject to adjustment as provided in Sections
3.06 through 3.15, be equal to the fair market value of the Common Stock on the
first day of the fiscal quarter in which the interest to be converted accrued.
Prior to the time that the Common Stock is traded over-the-counter, on the New
York or American stock exchanges or on the National Association of Securities
Dealers Automated Quotation National Market System ("NASDAQ"), the fair market
value shall be the price at which the Company most recently issued any stock,
Common or Preferred, in a private placement of securities. From and after the
date upon which the Common Stock is traded over-the-counter, on the New York or
American stock exchanges or on NASDAQ, the fair market value of the Common Stock
shall be the Market Price of such stock on the date upon which the interest
accrued as determined in accordance with the provisions of clause (d) of this
Section. (c) Applicable Conversion Value: For the purposes of Section 3.06,
the Applicable Principal Conversion Value and the Applicable Interest Conversion
Value are
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<PAGE>
collectively referred to as the "Applicable Conversion Value." (d) Market Price:
The term "Market Price" shall mean the average of the per share daily closing
prices of Common Stock for the 10 consecutive business days beginning with the
first day of the fiscal quarter in which the interest to be converted accrued.
The closing price for each day shall be (i) the last reported sales price or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and ask prices, in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange, on NASDAQ, (ii) if the Common Stock is not listed or admitted to
trading on any national securities exchange or quoted on NASDAQ, the average of
the closing bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm reasonably selected from time to time by
the Company for that purpose, or (iii) if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on NASDAQ and
the average price cannot be determined as contemplated by clause (ii), the fair
market value as reasonably determined in good faith by the Company's Board of
Directors or in any manner reasonably prescribed by the Company's Board of
Directors. For the purposes of this Section 3.02, the term "business day" shall
mean each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on
which securities are not traded on such exchange or in such market.
3.03 Adjustments for Sale of Common Stock at Less Than Applicable
------------------------------------------------------------
Principal Conversion Value. Except for the issuance of up to 120,000 shares of
- --------------------------
the Company's Common Stock to employees, directors or consultants of the Company
pursuant to an option plan or plans approved by the Company's Board of Directors
(the "Reserved Employee Shares"), if the Company shall, while there are any
Notes outstanding, issue or sell shares of its Common Stock without
consideration or at a price per share less than the Applicable Principal
Conversion Value in effect immediately prior to such issuance or sale, then in
each such case such Applicable Principal Conversion Value upon each such
issuance or sale, except as hereinafter provided, shall be lowered so as to be
equal to an amount determined by multiplying the Applicable Principal Conversion
Value by a fraction:
(1) the numerator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock, plus (b) the number of shares of
Common Stock that the net aggregate consideration if any, received by
the Company for the total number of such additional shares of Common
Stock so issued would purchase at the Applicable Principal Conversion
Value in effect immediately prior to such issuance; and
(2) the denominator of which shall be (a) the number of shares of
Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock plus (b) the number of such
additional shares of Common Stock so issued.
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<PAGE>
For purposes of computation of the Applicable Principal Conversion Value, if
part or all of the consideration to be received by the Company in connection
with the issuance of shares of Common Stock or any of the other securities
described in this Article III consists of property other than cash, such
consideration shall be deemed to have a fair market value that is reasonably
determined in good faith by the Board of Directors.
3.04 Warrants, Options, Etc., for Common Stock. For the purposes of this
-------------------------------------------
Article III, the issuance after the date of this Agreement of any warrants,
options (other than the Reserved Employee Shares), subscriptions or purchase
rights with respect to shares of Common Stock and the issuance of any securities
convertible into or exchangeable for shares of Common Stock (or the issuance of
any warrants, options or any rights with respect to such convertible or
exchangeable securities) shall be deemed an issuance at such time of such Common
Stock if the Net Consideration Per Share (as hereinafter determined) that may be
received by the Company for such Common Stock shall be less than the Applicable
Principal Conversion Value at the time of such issuance. Any obligation,
agreement or undertaking to issue warrants, options, subscriptions or purchase
rights at any time in the future shall be deemed to be an issuance at the time
such obligation, agreement or undertaking is made or arises. No adjustment of
the Applicable Principal Conversion Value shall be made upon the issuance of any
shares of Common Stock that are issued pursuant to the exercise of any
conversion or exchange rights in any convertible securities to the extent a
corresponding adjustment shall previously have been made upon the issuance of
any such warrants, options or subscriptions or purchase rights or upon the
issuance of any convertible securities (or upon the issuance of any warrants,
options or any rights therefor) as provided above. Any adjustment of the
Applicable Principal Conversion Value that relates to warrants, options,
subscriptions or purchase rights with respect to shares of Common Stock shall be
disregarded if, as and when all of such warrants, options, subscriptions or
purchase rights expire or are canceled without being exercised, so that the
Applicable Principal Conversion Value effective immediately upon such
cancellation or expiration shall be equal to the Applicable Principal Conversion
Value in effect immediately prior to the issuance of the expired or canceled
warrants, options, subscriptions or purchase rights, with such additional
adjustments as would have been made to that Applicable Principal Conversion
Value had the expired or canceled warrants, options, subscriptions or purchase
rights not been issued. For purposes of this Article III, the "Net
Consideration Per Share" that may be received by the Company shall be determined
as follows:
(A) The "Net Consideration Per Share" shall mean the amount equal to
the total amount of consideration, if any, received by the Company
for the issuance of such warrants, options, subscriptions or other
purchaser rights or convertible or exchangeable securities, plus the
minimum amount of consideration, if any, payable to the Company upon
exercise or conversion thereof, divided by the aggregate number of
shares of Common Stock that would be issued if all such warrants,
options,
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<PAGE>
subscriptions or other purchase rights or convertible or exchangeable
securities were exercised, exchanged or converted.
(B) The "Net Consideration Per Share" that may be received by the
Company shall be determined in each instance as of the date of
issuance of warrants, options, subscriptions or other purchase rights
or convertible or exchangeable securities without giving effect to
any possible future price adjustments or value adjustment that may be
applicable with respect to such warrants, options, subscriptions or
other purchase rights or convertible or exchangeable securities.
(C) If a part or all of the consideration received by the Company in
connection with the issuance of shares of the Common Stock or the
issuance of any of the securities described in this Section 3.04
consists of property other than cash, and the Board of Directors of
the Company is unable to arrive at any valuation of such property,
the Company at its expense will promptly cause independent
accountants of recognized standing selected by the Company to value
such property, whereupon such value shall be given to such
consideration and shall be recorded on the books of the Company with
respect to receipt of such property.
3.05 Dilution in Case of Other Securities. In case any Other Securities
-------------------------------------
shall be issued or sold, or shall become subject to issue upon the conversion or
exchange of any stock (or Other Securities) of the Company (or any other issuer
of Other Securities or any other Person referred to in Section 3.08) or to
subscription, purchase or other acquisition pursuant to any rights or options
granted by the Company (or such other issuer or Person), for a consideration per
share so as to dilute the conversion rights evidenced by the Note, the
computations, adjustments and readjustments provided for in Sections 3.03 and
3.04 with respect to the Applicable Principal Conversion Value shall be made as
nearly as possible in the manner so provided and applied to determine the amount
of Other Securities from time to time receivable on the conversion of the Note,
so as to protect the holders of the Note against the effect of such dilution.
3.06 Extraordinary Events. If the Company shall after the date of this
---------------------
Agreement (i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock or (iii) combine its outstanding shares of the Common stock into
a smaller number of shares of the Common Stock, then, in each such event, the
Applicable Conversion Value shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Applicable Conversion Value by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such event and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Applicable Conversion
Value then in effect. The Applicable Conversion Value, as so
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<PAGE>
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 3.06.
3.07 Adjustment for Dividends in Other Stock, Property, Etc.;
--------------------------------------------------------
Reclassification, Etc. In case at any time or from time to time after the date
- ----------------------
of this Agreement the holders of Common Stock (or Other Securities) shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor,
(a) other or additional stock or other securities or property (other
than cash) by way of dividend, or
(b) any cash, or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares or similar corporate
rearrangement, other than additional shares of Common Stock (or Other
Securities) issued as a stock dividend or in a stock split
(adjustments in respect of which are provided for in Section 3.06)
and normal cash dividends,
then and in each such case each holder of a Note, on the conversion thereof as
provided in this Article III, shall be entitled to receive the amount of stock
and other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3.07) that such holder would hold on the
date of such conversion if on the date thereof it had been the holder of record
of the number of shares of Common Stock that it would have received had its Note
been converted into Common Stock immediately before the date of such event to
and including the Conversion Date (as that term is defined in Section 3.11), and
had thereafter, during the period from the date hereof to and including the date
of such conversion, retained such shares and all such other or additional stock
and other securities and property (including cash in the cases referred to in
clauses (b) and (c) of this Section 3.07) receivable by it as aforesaid during
such period, giving effect to all adjustments called for during such period
under this Article III.
3.08 Adjustment for Reorganization, Consolidation, Merger, Etc.
----------------------------------------------------------
(a) Generally: If at any time or from time to time the Company shall (i)
effect a reorganization, (ii) consolidate with or merge into any other Person or
(iii) transfer all or substantially all of its properties or assets to any other
Person under any plan or arrangement contemplating the dissolution of the
Company, then, in each such case, each holder of a Note, on the conversion
thereof as provided in this Article III at any time after the consummation of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock (or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash) to
which such holder would
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<PAGE>
have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so converted its Note
immediately prior thereto, all subject to further adjustment thereafter as
provided under this Article III.
(b) Dissolution: In the event of any dissolution of the Company following
the transfer of all or substantially all of its properties or assets, the
Company, prior to such dissolution, shall at its expense deliver or cause to be
delivered the stock and other securities and property (including cash, if
applicable) receivable by the holders of the Note after the effective date of
such dissolution pursuant to this Section 3.08 to a bank or trust company having
its principal office in Boston, Massachusetts, as trustee for the holder or
holders of the Note, which shall establish procedures for the exchange of such
property for the Note.
(c) Continuation of Terms: Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3.08, each Note shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the conversion of any Note after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of the Note as provided in Section 3.09.
3.09 No Dilution or 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 the
Note, 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 holders of shares of Common Stock issuable
upon conversion of the Note against dilution or other impairment.
3.10 Certificate as to Adjustments. In each case of any adjustment or
-----------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on the
conversion of the Note, the Company at its expense will promptly provide each
holder of the Note, at the election of such holder, a certificate of the
president and of the chief financial officer of the Company setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding and (c) the Applicable Principal
Conversion Value in effect immediately prior to such issue or sale and as
adjusted and readjusted on account hereof.
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<PAGE>
3.11 Exercise of Conversion Privilege. (a) Principal: To exercise its
---------------------------------
principal conversion privilege, a holder of a Note shall surrender the Note
being converted to the Company at the Company's principal office, and shall
give written notice to the Company at that office that such holder elects to
convert the outstanding principal balance of such Note, or a portion thereof.
Such notice shall also state the name or names (with address or addresses) in
which the certificate or certificates for shares of Common Stock issuable upon
such conversion shall be issued. The Note surrendered for conversion shall be
accompanied by proper assignment thereof to the Company or in blank. For
purposes of this clause (a), the date when such written notice is received by
the Company, together with the Note being converted, shall be the "Conversion
Date." As promptly as practicable, but in any event within 15 days after the
Conversion Date, the Company shall issue and shall deliver to the holder of the
Note being converted, or on its written order, such certificate or certificates
as it may request for the number of whole shares of Common Stock issuable upon
the conversion of such Note in accordance with the provisions of this Article
III, the number of whole shares of Common Stock issuable upon the conversion of
all accrued and unpaid interest on such Note up to and including the Conversion
Date, any property or securities issuable upon conversion as provided in
Section 3.07 and cash, as provided in Section 3.12, in respect of any fraction
of a share of Common Stock issuable upon such conversion. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the Conversion Date, and at such time the rights of the holder as holder of a
Note shall cease and the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Common Stock represented thereby. (b) Interest: To exercise
its interest conversion privilege, a holder of a Note shall give written notice
to the Company at the Company's principal office that such holder elects to
convert all accrued and unpaid interest on such Note. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. For purposes of this clause (b), the date when such written notice is
received by the Company shall be the "Conversion Date." As promptly as
practicable, but in any event within 15 days after the Conversion Date, the
Company shall issue and shall deliver to the holder of the Note, or on its
written order, such certificate or certificates as it may request for the
number of whole shares of Common Stock issuable upon the conversion of the
interest and cash, as provided in Section 3.12, in respect of any fraction of a
share of Common Stock issuable upon such conversion.
3.12 Cash in Lieu of Fractional Shares. No fractional shares of Common
----------------------------------
Stock shall be issued upon the conversion of principal and/or interest with
respect to any Note. Instead of any fractional shares of Common Stock that
would otherwise be issuable upon such conversion, the Company shall pay to the
holder of the Note a cash adjustment in respect of such fractional shares in an
amount equal to the same fraction of the Applicable Principal Conversion Value
(in a case of conversion of principal) or the Applicable Interest Conversion
Value (in a case of conversion of interest).
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<PAGE>
3.13. Partial Conversion. In the event some but not all of the principal
------------------
amount represented by a Note surrendered by a holder is converted, the Company
shall execute and deliver to or on the order of the holder, at the expense of
the Company, a new Note representing the principal amount that was not
converted.
3.14 Reservation of Common Stock. The Company shall at all times reserve
----------------------------
and keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Note, sufficient
shares of Common Stock to effect the conversion of all outstanding Notes, and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding Notes,
the Company shall take such corporate action as may be necessary to increase
its authorized but unissued shares of Common Stock to a number of shares that
shall be sufficient for that purpose.
3.15 Notice of Record Date. In the event of:
---------------------
(a) any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof that are entitled
to receive any dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company or any transfer of all or substantially all of the
assets of the Company to any other corporation, or any other entity or person,
or
(c) any voluntary or involuntary dissolution, liquidation or winding up of
the Company, then and in each such event the Company shall mail or cause to be
mailed to each holder of a Note a notice specifying (i) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (ii) the date
on which any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up is expected to
become effective and (iii) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or Other Securities) shall be entitled to
exchange their shares of Common Stock (or Other Securities) for securities or
other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up. Such notice shall be mailed at least 30 days prior to the date
specified in such notice on which such action is to be taken.
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<PAGE>
ARTICLE IV
4.01 Right of First Refusal. Except for the Reserved Employee shares, the
------------------------
Company shall not issue, sell or exchange, agree to issue, sell or exchange, or
reserve or set aside for issuance, sale or exchange, (i) any shares of Common
Stock, (ii) any other equity security of the Company, including, without
limitation, shares of preferred stock, (iii) any option, warrant or other right
to subscribe for, purchase or otherwise acquire any equity security of the
Company or (iv) any Debt Security, unless in each such case the Company shall
have first received an unconditional bona fide offer from a third party to
purchase such securities (the "Offered Securities") and shall have offered to
sell such Offered Securities to Thermo Electron Corporation ("Thermo") and the
Purchaser as follows: The Company shall offer to sell to each of Thermo and the
Purchaser a portion of the Offered Securities so that the aggregate number of
shares of Common Stock and Warrant Shares then held by or issuable to each of
Thermo and the Purchaser equals forty percent (40%) of the total number shares
of Common Stock to be outstanding after the proposed issuance by the Company
(assuming the conversion of the Note and exercise of all options held by
employees of the Company and the issuance and exercise of all options reserved
for issuance to employees of the Company by the Board of Directors pursuant to
any option plan approved by the Directors and shareholders of the Company), at a
price and on the other terms specified by the Company in writing delivered to
Thermo and the Purchaser (the "Offer"), and the Offer by its terms shall remain
open and irrevocable for a period of twenty (20) days, unless waived by Thermo
and the Purchaser.
4.02 Notice of Acceptance. Notice of Thermo's or the Purchaser's
---------------------
intention to accept, in whole or in part, an Offer made pursuant to Section 4.01
shall be evidenced by a writing signed by Thermo or the Purchaser, as the case
may be, and delivered to the Company prior to the end of the twenty (20) day
period of the Offer, setting forth the portion of the Offered Securities that
such party elects to purchase. If either Thermo or the Purchaser elects not to
purchase all such portion of Offered Securities, then any such securities not
elected to be purchased shall be then offered to whichever of Thermo or the
Purchaser elected to purchase all of its portion of the offer, in the same
manner as set forth in Section 4.01. Such secondary offer shall be open for 10
days.
4.03 Conditions to Acceptance and Purchase.
--------------------------------------
(a) Permitted Sales of Refused Securities. If Notices of Acceptance
are not given by Thermo and the Purchaser in respect of all the Offered
Securities pursuant to Sections 4.01 and 4.02, the Company shall have sixty (60)
days from the expiration of the 10-day period set forth in Section 4.02 to sell
all or any part of such Offered Securities as to which a Notice of Acceptance
has not been given by Thermo or the Purchaser and all of the Offered Securities
not subject to the option of Thermo or the Purchaser pursuant to this Article IV
(the "Refused Securities") to the Person or Persons specified in the Offer, but
only for cash and otherwise in all respects upon terms and conditions,
including, without limitation, unit price and interest rates, which are not more
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<PAGE>
favorable, in the aggregate, to such other Person or Persons or less favorable
to the Company than those set forth in the Offer.
(b) Reduction in Amount of Offered Securities. In the event the
Company shall propose to sell less than all the Refused Securities (any such
sale to be in the manner and on the terms specified in Section 4.03(a) above),
then Thermo and the Purchaser shall reduce the number of, or other units of, the
Offered Securities specified in their respective Notices of Acceptance to an
amount that shall be not less than the amount of the Offered Securities that
each of Thermo and the Purchaser elected to purchase pursuant to Section 4.02
multiplied by a fraction, (i) the numerator of which shall be the amount of
Offered Securities the Company actually proposes to sell, and (ii) the
denominator of which shall be the amount of all Offered Securities. In such
event, the Company may not sell or otherwise dispose of more than the reduced
amount of the Offered Securities until such securities have again been offered
to Thermo and the Purchaser in accordance with Section 4.01.
(c) Closing. Upon the closing, which shall include full payment to
the Company, of the sale to such other Person or Persons of all or less than all
the Refused Securities, Thermo and the Purchaser shall purchase from the
Company, and the Company shall sell to Thermo and the Purchaser, the number of
Offered Securities specified in their respective Notices of Acceptance, as
reduced pursuant to Section 4.03(b), upon the terms and conditions specified in
the Offer. The purchase by Thermo and the Purchaser of any Offered Securities
is subject in all cases to the preparation, execution and delivery by the
Company, Thermo and the Purchaser of a purchase agreement relating to such
Offered Securities reasonably satisfactory in form and substance to Thermo, PIC
and their counsel.
4.04 Further Sale. In each case, Offered Securities not purchased by
-------------
Thermo, the Purchaser or other Person or Persons in accordance with Section 4.03
may not be sold or otherwise disposed of until they are again offered to Thermo
under the procedures specified in Sections 4.01, 4.02 and 4.03.
4.05 Exceptions. The rights of Thermo under this Article IV shall not
-----------
apply to:
(a) Common stock issued as a stock dividend to holders of Common Stock
or upon any subdivision or combination of shares of Common Stock, or
(b) up to 800,000 shares of Common Stock, or options exercisable
therefor, including options outstanding on the date of this Agreement (such
number to be equitably adjusted in the event of any stock split, combination,
reclassification or other similar event occurring on or after the date of this
Agreement) issuable to current and future officers, employees, directors or
consultants of the Company pursuant to any stock option plan or stock purchase
plan approved by a vote of not less than a majority of the Board of Directors of
the Company.
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<PAGE>
ARTICLE V
EVENTS OF DEFAULT
5.01 Events of Default. If any of the following events ("Events of
------------------
Default") shall occur and be continuing seven days after delivery of notice (as
described below) to the Company:
(a) The Company shall fail to pay any installment of principal of the
Note when due; or
(b) The Company shall fail to pay any interest on the Note when due or
shall default in the performance of any covenant contained in Section 2.02 and
such failure or default shall continue for seven (7) business days; or
(c) The Company shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement or the Note on its part to be
performed or observed and any such failure remains unremedied for thirty (30)
days after written notice thereof shall have been given to the Company by the
holder of the Note; or
(d) The Company shall fail to pay any Indebtedness for borrowed money
(other than as evidenced by the Note) owing by the Company or any interest or
premium thereon, when due (or, if permitted by the terms of the relevant
document, within any applicable grace period), whether such Indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise, or shall fail to perform any term, covenant or agreement on
its part to be performed under any agreement or instrument (other than this
Agreement or the Note) evidencing or securing or relating to any Indebtedness
owing by the Company when required to be performed (or, if permitted by the
terms of the relevant document, within any applicable grace period), if the
effect of such failure to pay or perform is to accelerate, or to permit the
holder or holders of such Indebtedness, or the trustee or trustees under any,
such agreement or instrument, to accelerate, the maturity of such Indebtedness,
unless such failure to pay or perform shall be waived by the holder or holders
of such Indebtedness or such trustee or trustees; or
(e) The Company shall be involved in financial difficulties as
evidenced (i) by its admitting in writing its inability to pay its debts
generally as they become due, (ii) by its commencement of a voluntary case under
Title 11 of the United States Code as from time to time in effect, or by its
authorizing, by appropriate proceedings of its Board of Directors or other
governing body, the commencement of such a voluntary case, (iii) by its filing
an answer or other pleading admitting or failing to deny the material
allegations of a petition filed against it commencing an involuntary case under
said Title 11, or seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material allegations of any
such petition, (iv) by
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<PAGE>
the entry of an order for relief in any involuntary case commenced under said
Title 11, (v) by its seeking relief as a debtor under any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors, or by its consenting to or acquiescing in such relief, (vi) by the
entry of an order by a court of competent jurisdiction (a) finding it to be
bankrupt or insolvent, (b) ordering or approving its liquidation, reorganization
or any modification or alteration of the rights of its creditors or (c) assuming
custody of, or appointing a receiver or other custodian for, all or a
substantial part of its property or (vii) by its making an assignment for the
benefit of, or entering into a composition with, its creditors, or appointing or
consenting to the appointment of a receiver or other custodian for all or a
substantial part of its property; or
(f) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied against a substantial part of the property of
the Company and such judgment, writ or similar process shall not be released,
vacated or fully bonded within ninety (90) days after its issue or levy;
then, and in any such event, the Purchaser or any other holder of the Note may,
by notice to the Company, declare the entire unpaid principal amount of the
Note, all interest accrued and unpaid thereon and all other amounts payable
under this Agreement to be forthwith due and payable, whereupon the Note, all
such accrued interest and all such amounts shall become and be forthwith due and
payable (unless there shall have occurred an Event of Default under subsection
5.01 (e) in which case all such amounts shall automatically become due and
payable), without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Company.
ARTICLE VI
DEFINITIONS AND ACCOUNTING TERMS
6.01 Certain Defined Terms. As used in this Agreement, the following
---------------------
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Debt Security" means and includes (i) any debt security of the Company
that by its terms is convertible into or exchangeable for any equity security of
the Company, (ii) any security of the Company that is a combination of debt and
equity or (iii) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any such debt security of the Company.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles consistently
applied, be classified upon the obligor's balance sheet as liabilities,
excluding any liabilities in respect of deferred federal or state income taxes,
but in any event including, without
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<PAGE>
limitation, liabilities secured by any mortgage on property owned or acquired
subject to such mortgage, whether or not the liability secured thereby shall
have been assumed, and also including, without limitation, (i) all guaranties,
endorsements and other contingent obligations, in respect of Indebtedness of
others, whether or not the same are or should be so reflected in said balance
sheet, except guaranties by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business and (ii)
the present value of any lease payments due under leases required to be
capitalized in accordance with applicable Statements of Financial Accounting
Standards, determined by discounting all such payment at the interest rate
determined in accordance with applicable Statements of Financial Accounting
Standards.
"Other Securities" shall mean any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) that the
holder of the Note at any time shall be entitled to receive, or shall have
received, on the conversion of the Note, in lieu of or in addition to Common
Stock, or that at any time may be issuable or shall have been issued in exchange
for or in replacement of Common Stock or Other Securities pursuant to Article
III.
"Permitted Assignee" shall mean with respect to the Purchaser any person or
entity directly or indirectly controlling, controlled by or under common control
with such assigning person. For the purposes of this definition, "Control"
shall mean the power and authority to direct the affairs of the entity in
question through the direct or indirect ownership or control over not less than
50.1% of the such entity's voting securities or equity.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization, or a government or any agency or political
subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Securities and
Exchange Commission (or of any other federal agency then administering the
Securities Act) thereunder, all as the same shall be in effect at the time.
ARTICLE VII
MISCELLANEOUS
7.01 No Waiver: Cumulative Remedies. No failure or delay on the part of
------------------------------
the Purchaser, or any other holder of the Note, in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
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<PAGE>
7.02 Amendments, Waivers and Consents. Any provision in this Agreement to
---------------------------------
the contrary notwithstanding, changes in or additions to this Agreement may be
made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only upon the consent of the Purchaser. Any provision of
this Agreement or the Note notwithstanding, changes in or additions to the Note
may be made, and compliance with any provision of the Note or this Agreement
relating to the Note may be omitted or waived, only upon the consent of holders
of greater than 50% of the principal amount of the Note; provided, however, that
no such consent shall be effective to reduce or to postpone the date fixed for
the payment of the principal (including any required redemption) or interest
payable on any Note, without the consent of the holder thereof, or to reduce the
percentage of the Note the consent of the holders of which is required under
this Section. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
7.03 Address for Notices, Etc. All notices, requests, demands and other
-------------------------
communications provided for hereunder shall be in writing and mailed by means of
certified mail (or other form of registered mail) or telegraphed or delivered to
the applicable party at the addresses indicated below:
If to the Company: Photoelectron Corporation
400-1 Totten Pond Road
Waltham, MA 02154
If to the Purchaser: At the Purchaser's address for notice as set forth in
the register maintained by the Company
If to any other
holder of the Note: At such holder's address for notice as set forth in
the register maintained by the Company
In addition, as to each of the foregoing, at such other address as shall be
designated by such Person in a written notice to the other party complying as to
delivery with the terms of this Section.
7.04 Binding Effect: Assignment. This Agreement shall be binding upon and
---------------------------
inure to the benefit of the Company and the Purchaser and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the consent of the
Purchaser obtained in accordance with Section 7.02 hereof and the rights and
interests of the Purchaser, including rights and interests in any shares of
Common Stock or in the Note, shall be assignable without the consent of the
Company to any Permitted Assignee.
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<PAGE>
7.05 Prior Agreements. This Agreement constitutes the entire agreement
-----------------
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
7.06 Severability. The invalidity or unenforceability of any provision
-------------
hereof shall in no way affect the validity or enforceability of any other
provision.
7.07 Governing Law. This Agreement and the Note shall be governed by, and
--------------
construed in accordance with, the laws of the Commonwealth of Massachusetts
without regard to its law governing conflicts of law.
7.08 Headings. Article, Section and subsection headings in this Agreement
---------
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
7.09 Sealed Instrument. This Agreement is deemed to be executed as an
-----------------
instrument under seal.
7.10 Counterparts. This Agreement may be executed in any number of
-------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger /s/ Peter M. Nomikos
--------------------------- -------------------------------
Peter E. Oettinger Peter M. Nomikos
Vice President and
Chief Operating Officer
-23-
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1) WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
8% Convertible Note Due On Demand
No. Waltham, Massachusetts
May 13, 1992
For value received, PHOTOELECTRON CORPORATION, a Massachusetts corporation
(the "Company"), hereby promises to pay to Mr. Peter M. Nomikos (hereinafter
referred to as the "Payee"), or registered assigns, on demand, as described
below, the principal sum of up to Four Million Five Hundred Five Thousand
Dollars ($4,500,000.00) in consideration of advances made by the Payee under the
Convertible Note and Warrant Purchase Agreement hereinafter referred to, or such
part thereof as then remains unpaid. The dates and amounts of the advances are
reflected in Schedule A to this Note. The Company further agrees
----------
to pay interest from the date of each such advance on the principal amount of
such advance remaining from time to time unpaid at the rate of eight percent
(8%) per annum. Such interest shall accrue on March 31, June 30, September 30
and December 31 of each year, until the whole amount of the principal hereof
remaining unpaid shall become due and payable. The Company agrees to pay
interest on all overdue principal (including any overdue required redemption)
and interest at a rate per annum equal to the prime or base lending rate of the
First National Bank of Boston plus three percent (3%). The outstanding
----
principal amount and all accrued but unpaid interest shall be repaid on demand.
Subject to the holder's option (referenced below) to convert all or part of the
outstanding principal balance, and all accrued but unpaid interest, to Common
Stock, principal and interest shall be payable in lawful money of the United
States of America, in immediately available funds, at the principal office of
the Payee or at such other place as the legal holder may designate from time to
time in writing to the Company. Interest shall be computed on the basis of a
360-day year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Subordinated Convertible Note and Warrant Purchase Agreement dated as of
May 13, 1992, between the Company and the Payee (as the same may be amended from
time to
<PAGE>
time, the "1992 Agreement"), and each holder of this Note, by his or its
acceptance hereof, agrees to be bound by the provisions of the 1992 Agreement, a
copy of which may be inspected by the legal holder hereof at the principal
office of the Company. As provided in the 1992 Agreement, (i) this Note is
subject to prepayment as specified in the 1992 Agreement, (ii) the principal of
and interest on this Note is subordinated to Senior Debt, as defined in the 1992
Agreement, and (iii) all or any portion of the outstanding principal balance
under the Note, and all then accrued but unpaid interest on such principal
balance, is convertible into Common Stock of the Company in the manner set forth
in the 1992 Agreement.
As further provided in the 1992 Agreement, upon surrender of this Note for
transfer or exchange, a new Note or new Notes of the same tenor dated the date
to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due, the
Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts, without regard to its law governing
conflicts of law, and shall have the effect of a sealed instrument.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:
------------------------------------------
Peter E. Oettinger
Vice President and Chief Operating Officer
Attest:
- --------------------------------
-2-
<PAGE>
Schedule A
----------
Date of Advance Amount of Advance Interest Conversion Date
--------------- ----------------- -------- ---------------
-3-
<PAGE>
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or registered or qualified under any state
securities laws, and such securities may not be sold, transferred or otherwise
disposed of in the absence of an effective registration statement under such Act
and registration and qualification under all applicable state securities laws or
pursuant to exemptions therefrom.
Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
STOCK PURCHASE WARRANT
Date of Issuance: Right to Purchase
Shares of Common Stock
(subject to adjustment)
Warrant #
For value received, Photoelectron Corporation, a Massachusetts corporation
(the "Company"), hereby grants to Mr. Peter M. Nomikos, or his registered
assigns (the "Registered Holder"), the right to purchase from the Company
shares of the Company's Common Stock (subject to adjustment pursuant to Section
4 hereof) at a price of $1.50 per share (as adjusted pursuant to Section 3
hereof, the "Exercise Price"). The amount and kind of securities purchasable
pursuant to the rights granted under this Warrant and the purchase price for
such securities are subject to adjustment pursuant to the provisions contained
in this Warrant.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following terms have the
------------
meanings set forth below:
"Common Stock" means the Company's Common Stock, $.01 par value per
------------
share.
"Date of Issuance" shall have the meaning specified in Section 10 of
----------------
this Warrant.
"Market Price" is defined as the average of the daily closing prices
------------
for the 20 consecutive trading days, immediately preceding the date of
computation. The closing price for each day shall be (i) if the shares of Common
Stock are listed or admitted to trading on a principal national securities
exchange or the National Market System of NASDAQ, the last
<PAGE>
2
principal national securities exchange or the National Market System of NASDAQ,
the last reported sales price on the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading or on the
National Market System of NASDAQ or (ii) if the shares of Common Stock are not
listed or admitted to trading on any such exchange, the average of the highest
bid and lower asked prices, as reported on the Automated Quotation System of the
National Quotations Bureau, Incorporated or an equivalent, generally accepted
reporting service. If at any time such security is not listed on any domestic
securities exchange or quoted in the NASDAQ System or the domestic over-the-
counter market, the "Market Price" will be the fair value thereof determined by
the Board of Directors in good faith.
"NASDAQ System" means the NASDAQ Inter-Dealer Quotation System
-------------
or such other similar inter-dealer quotation system as may in the future be used
generally by members of the National Association of Securities Dealers, Inc. for
the over-the-counter transactions in securities.
"Person" means an individual, a partnership, a corporation, a
--------
trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof.
"Warrant" or "Warrants" means the Warrant and all stock purchase
--------- ----------
warrants issued in exchange therefor pursuant to the terms thereof.
"Warrant Stock" means shares of the Company's authorized but
---------------
unissued Common Stock; provided that if there is a change such that the
securities issuable upon exercise of the Warrant are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Warrant Stock" will mean one share of the security issuable upon
exercise of the Warrant if such security is issuable in shares, or will mean the
smallest unit in which such security is issuable if such security is not
issuable in shares.
2. Exercise of Warrant.
--------------------
2.1 Exercise Period. The Registered Holder may exercise this
----------------
Warrant, in whole or in part (but not as to a fractional share of Warrant
Stock), at any time and from time to time prior to the seventh anniversary of
the Date of Issuance of the Warrant ("Exercise Period").
2.2 Exercise Procedure.
-------------------
(a) This Warrant will be deemed to have been exercised
at such time as the Company has received all of the following items (the
"Exercise Date"):
(i) a completed Exercise Agreement, as
described below, executed by the Person exercising all or part
of the purchase right represented by this Warrant (the
"Purchaser");
(ii) this Warrant;
<PAGE>
3
(iii) if this Warrant is not registered in the name of
the Purchaser, an Assignment or Assignments in the form set forth in
Exhibit II hereto, evidencing the assignment of this Warrant to the
Purchaser; and
(iv) a check payable to the Company in an amount
equal to the product of the Exercise Price multiplied by the number of
shares of Warrant Stock being purchased upon such exercise.
(b) Certificates for shares of Warrant Stock purchased upon
exercise of this Warrant will be delivered by the Company to the Purchaser
within ten days after the Exercise Date. Unless this Warrant has expired or all
of the purchase rights represented hereby have been exercised, the Company will
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised.
The Company will, within such ten-day period, deliver such new Warrant to the
Person designated for delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise of this
Warrant will be deemed to have been issued to the Purchaser on the Exercise
Date, and the Purchaser will be deemed for all purposes to have been the record
holder of such Warrant Stock on the Exercise Date.
(d) The issuance of certificates for shares of Warrant Stock
upon exercise of this Warrant will be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or any other
cost incurred by the Company in connection with such exercise and the related
issuance of shares of Warrant Stock. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer, in
whole or in part, of this Warrant (including the issuance of new Warrants in
connection therewith or the delivery of stock certificates in a name other than
that of the Registered Holder of this Warrant presented for exercise, and any
such tax shall be paid by such Registered Holder at the time of presentation.
(e) The Company will not close its books for the transfer of
this Warrant or of any share of Warrant Stock issued or issuable upon the
exercise on this Warrant in any manner which interferes with the timely exercise
of this Warrant.
2.3 Exercise Agreement. The Exercise Agreement will be substantially
-------------------
in the form set forth in Exhibit I hereto, except that if the shares of Warrant
Stock are not to be issued in the name of the Registered Holder of this Warrant,
the Exercise Agreement will also state the name of the Person to whom the
certificates for the shares of Warrant Stock are to be issued, and if the number
of shares of Warrant Stock to be issued does not include all the shares of
Warrant Stock purchasable hereunder, it will also state the name of the Person
to whom a new Warrant for the unexercised portion of the rights hereunder is to
be delivered.
2.4 Fractional Shares. If a fractional share of Warrant Stock would,
------------------
but for the provisions of Subsection 2.1, be issuable upon exercise of the
rights represented by this
<PAGE>
4
Warrant, the Company will, within ten days after the Exercise Date, deliver to
the Purchaser a check payable to the Purchaser in lieu of such fractional share,
in an amount equal to the Market Price of such fractional share as of the close
of business on the Exercise Date.
3. Exercise Price
--------------
3.1 General. The initial Exercise Price will be $1.50. In order to
-------
prevent dilution of the rights granted under this Warrant, the Exercise Price
will be subject to adjustment from time to time pursuant to this Section 3.
3.2 Subdivision or Combination of Common Stock and Stock Dividends. In
--------------------------------------------------------------
case the Company shall at any time after the date hereof (a) issue any shares of
Common Stock as a dividend upon Common Stock, or (b) issue any shares of Common
Stock by reclassification or otherwise, or (c) combine outstanding shares of
Common Stock, by reclassification or otherwise, the Exercise Price which would
apply if purchase rights hereunder were being exercised immediately prior to
such action by the Company shall be adjusted by multiplying it by a fraction,
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such dividend, subdivision or combination and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such dividend, subdivision or combination.
3.3 Certain Dividends. In case the Company shall declare a dividend
-----------------
upon the Common Stock payable otherwise than out of earnings or retained
earnings and otherwise than in Common Stock, the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the
declaration of such dividend by a fraction, the numerator of which shall be the
current Market Price per share of Common Stock, on such date, less the fair
market value, as determined by the Board of Directors of the Company, whose
determination shall be conclusive, of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights, options or
warrants applicable to one share of Common Stock, and of which the denominator
shall be such current Market Price per share of Common Stock. For the purposes
of the foregoing, a dividend other than in cash shall be considered payable out
of earnings or retained earnings only to the extent that such earnings or
retained earnings are charged an amount equal to the value of such dividend as
determined by the Board of Directors of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend, or, if a record is not taken, the date as of which the holders of
Common Stock or record entitled to such dividend are to be determined.
3.4 No Adjustment. No adjustment of the Exercise Price shall be made
-------------
if the amount of such adjustment shall be less than one cent per share, but in
such case any adjustment that would otherwise be required then to be made shall
be carried forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to not less than one cent per share.
4. Adjustment of Number of Shares Issuable upon Exercise. In the event of
-----------------------------------------------------
a stock dividend, stock split, combination or other event described in Section
3.2 and 3.3 hereof, the
<PAGE>
5
Registered Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase the number of shares of Warrant Stock,
calculated to the nearest full share, determined by (a) multiplying the number
of shares of Warrant Stock purchasable hereunder immediately prior to the
adjustment of the Exercise Price by the Exercise Price in effect immediately
prior to such adjustment, and (b) dividing the product so obtained by the
adjusted Exercise Price in effect immediately after such adjustment.
5. Effect of Reorganization, Reclassification, Consolidation, Merger
-----------------------------------------------------------------
or Sale. If at any time while this Warrant is outstanding there shall be any
- --------
reorganization or reclassification of the capital stock of the Company (other
than a subdivision or combination of shares provided for in Subsection 3.3
hereof) or any consolidation or merger of the Company with another corporation
(other than a consolidation or merger in which the Company is the surviving
entity and which does not result in any change in the Common Stock), or any sale
or other disposition by the Company of all or substantially all of its assets to
any other corporation, the holder of this Warrant shall thereafter upon exercise
of this Warrant be entitled to receive the number of shares of stock or other
securities or property of the Company, or of the successor corporation resulting
from such consolidation or merger, as the case may be, to which the Warrant
Common Stock (and any other securities and property) of the Company, deliverable
upon the exercise of this Warrant, would have been entitled upon such
reorganization, reclassification of capital stock, consolidation, merger, sale
or other disposition if this Warrant had been exercised immediately prior to
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition. In any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant with respect to the
rights and interests thereafter of the holder of this Warrant to the end that
the provisions set forth in this Warrant (including those relating to
adjustments of the Exercise Price and the number of shares issuable upon the
exercise of this Warrant) shall thereafter be applicable, as near as reasonably
may be, in relation to any shares or other property thereafter deliverable upon
the exercise hereof as if this Warrant had been exercised immediately prior to
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition and the holder hereof had carried out the terms of the
exchange as provided for by such reorganization, reclassification of capital
stock, consolidation or merger. Notwithstanding any other provisions of this
Warrant, in the event of sale or other disposition of all or substantially all
of the assets of the Company as a part of a plan for liquidation of the Company,
all rights to exercise the Warrant shall terminate 30 days after the Company
gives written notice to the Registered Holder of this Warrant that such sale or
other disposition has been consummated.
6. Notice of Adjustments. Immediately upon any adjustment of the
----------------------
Exercise Price or increase or decrease in the number of shares of Common Stock
purchasable upon exercise of this Warrant, the Company will send written notice
thereof to all Registered Holders, stating the adjusted Exercise Price and the
increased or decreased number of shares purchasable upon exercise of this
Warrant and setting forth in reasonable detail the method of calculation for
such adjustment or decrease.
<PAGE>
6
7. Reservation of Common Stock. The company will at all times
---------------------------
reserve and keep available for issuance upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants, and upon
such issuance such shares of Common Stock will be validly issued, fully paid and
nonassessable.
8. No Voting Rights; Limitations of Liability. This Warrant will
------------------------------------------
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Registered Holder to purchase Warrant Stock, and no
enumeration in this Warrant of the rights or privileges of the Registered
Holder, will give rise to any liability of such Holder for the Exercise Price of
Warrant Stock acquirable by exercise hereof or as a stockholder of the Company.
9. Warrant Transferable.
--------------------
(a) Subject to the transfer conditions referred to in paragraph
(b), below, this Warrant and all rights hereunder are transferable, in whole or
in part, without charge to the Registered Holder, upon surrender of this Warrant
with a properly executed Assignment (in the form of Exhibit II hereto) at the
principal office of the Company.
(b) Each Registered Holder of this Warrant acknowledges that
this Warrant has not been registered under the Securities Act of 1933, as
amended (the "Act"), and agrees not to sell, pledge, distribute, offer for sale,
transfer of otherwise dispose of this Warrant or any Warrant Stock issued upon
its exercise in the absence of (i) an effective registration statement as to
this Warrant or such Warrant Stock under the Act (or any similar statute then in
effect), or (ii), an opinion of counsel for the company to the effect that such
registration is not, under the circumstances, required.
10. Warrant Exchangeable for Different Denominations. This Warrant
------------------------------------------------
is exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrants will
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" of this Warrant regardless
of the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant are issued.
11. Representations, Warranties and Covenants of the Registered
-----------------------------------------------------------
Holder. (a) The Registered Holder represents and warrants to, and covenants
- ------
with, the Company that: (i) the Registered Holder, taking into account the
personnel and resources it can practically bring to bear on the purchase of the
Warrant, is knowledgeable, sophisticated and experienced in making, and is
qualified to make, decisions with respect to investments in shares presenting an
investment decision like that involved in the purchase of the Warrant, including
investments in securities issued by the Company, and has requested, received
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Warrant; (ii) the Registered
<PAGE>
7
Holder is acquiring the Warrant for investment and with no present intention of
distributing the Warrant (this representation and warranty not limiting the
Registered Holder's right to transfer all or any part of the Warrant pursuant to
Section 9); and (iii) the Registered Holder will not, directly or indirectly,
voluntarily offer, sell, pledge, purchase or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) the
Warrant except in compliance with the Securities Act, and the rules and
regulations promulgated thereunder, or an exception thereto.
(b) The Registered Holder further represents and warrants to, and
covenants with, the Company that (i) the Registered Holder has full right,
power, authority and capacity to enter into this Warrant and to consummate the
transactions contemplated hereby, and (ii) upon the execution and delivery of
this Warrant (for the limited purpose of this Section 11), this Warrant shall
constitute a valid and binding obligation to the Registered Holder enforceable
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
12. Miscellaneous.
-------------
12.1 Amendment and Waiver. The provisions of the Warrants
--------------------
may be amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Registered Holders of Warrants representing
at least 50% of the shares of Warrant Stock obtainable upon the exercise of the
Warrants outstanding at the time of such consent.
12.2 Notices. Any notices required to be sent to a
-------
Registered Holder will be delivered to the address of such Registered Holder
shown on the books of the Company. All notices referred to herein will be
delivered in person or sent by first class mail, postage prepaid, and will be
deemed to have been given when so delivered or sent.
12.3 Descriptive Headings; Governing Law. The descriptive
-----------------------------------
headings of the paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. The construction, validity and
interpretation of this Warrant will be governed by the laws of the Commonwealth
of Massachusetts.
<PAGE>
8
IN WITNESS WHEREOF, the Company and the Registered Holder (for the
limited purpose of Section 11 hereof) have caused this Warrant to be signed and
attested by their duly authorized officers, and in the case of the Company,
under its corporate seal.
PHOTOELECTRON CORPORATION
By:
----------------------------
Name: Peter E. Oettinger
Title: Vice President and Chief
Operating Officer
[CORPORATE SEAL]
Attest:
- -----------------------------
Clerk
Accepted and agreed to by the Registered
Holder for the limited purpose of Section 11
hereof:
By:
--------------------------------
Peter M. Nomikos
<PAGE>
10
EXHIBIT II
----------
ASSIGNMENT
----------
FOR VALUE RECEIVED, hereby sells, assigns and transfers all of
--------------
the rights of the undersigned under the within Warrant with respect to the
number of shares of the Warrant Stock covered thereby set forth below, unto:
Names of Assignees Address No. of Shares
Date: Signature
----------------------------- -------------------------------
----------------------------------------
Witness
---------------------------------
This Assignment must be completed and sent to:
Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
Attn: John J. Crowley, Controller
<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1)WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
Amended and Restated
8% Subordinated Convertible Note Due on Demand
No. R1-1992-1 Lexington, Massachusetts
As of August 1, 1996
For value received, PHOTOELECTRON CORPORATION, a Massachusetts
corporation (the "Company"), hereby promises to pay to Mr. Peter M. Nomikos
(hereinafter referred to as the "Payee"), or registered assigns, on demand, as
described below, the principal sum of Seven Hundred Five Thousand Dollars
($705,000.00) in consideration of advances made by the Payee under the
Convertible Note and Warrant Purchase Agreement hereinafter referred to, or such
part thereof as then remains unpaid. The dates and amounts of the advances are
reflected in Schedule A to this Note. The Company further agrees to pay
----------
interest from the date of each such advance on the principal amount of such
advance remaining from time to time unpaid at the rate of eight percent (8%) per
annum. Such interest shall accrue on March 31, June 30, September 30 and
December 31 of each year, until the whole amount of the principal hereof
remaining unpaid shall become due and payable. The Company agrees to pay
interest on all overdue principal (including any overdue required redemption)
and interest at a rate per annum equal to the prime or base lending rate of the
First National Bank of Boston plus three percent (3%). The outstanding
----
principal amount and all accrued but unpaid interest shall be repaid on demand.
Subject to the holder's option (referenced below) to convert all or part of the
outstanding principal balance, and all accrued but unpaid interest, to Common
Stock, principal and interest shall be payable in lawful money of the United
States of America, in immediately available funds, at the principal office of
the Payee or at such other place as the legal holder may designate from time to
time in writing to the Company. Interest shall be computed on the basis of a
360-day year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Convertible Note and Purchase Agreement dated as of May 13, 1992,
between the Company and Payee identified therein (as the same may be amended
from time to time, the "1992 Agreement"), and each holder of this Note, by its
acceptance hereof, agrees to be bound by the provisions of the 1992 Agreement, a
copy of which may be inspected by
<PAGE>
the legal holder hereof at the principal office of the Company. As provided in
the 1992 Agreement, (i) this Note is subject to prepayment as specified in the
1992 Agreement, (ii) the principal of and interest on this Note is subordinated
to Senior Debt, as defined in the 1992 Agreement, and (iii) all or any portion
of the outstanding principal balance under the Note, and all then accrued but
unpaid interest, is convertible into Common Stock of the Company in the manner
set forth in the 1992 Agreement.
As further provided in the 1992 Agreement, upon surrender of this Note
for transfer or exchange, a new Note or new Notes of the same tenor dated the
date to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due,
the Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its law governing
conflicts of law, and shall have the effect of a sealed instrument as of the
date first written above.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:
--------------------------------
Peter E. Oettinger
Vice President and Chief Operating
Officer
Attest:
- -------------------------
-2-
<PAGE>
Schedule A
----------
<TABLE>
<CAPTION>
Date of Advance Amount
--------------- ------
<S> <C>
January 18, 1994 $ 90,000
January 28, 1994 90,000
February 15, 1994 90,000
February 24, 1994 75,000
February 26, 1994 90,000
March 21, 1994 90,000
March 30, 1994 90,000
April 11, 1994 90,000
Total $705,000
=======
</TABLE>
-3-
<PAGE>
EXHIBIT 4.10
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT, AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD,
PLEDGED, MORTGAGED, HYPOTHECATED OR OTHERWISE TRANSFERRED (1)WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING THESE SECURITIES OR (2)
UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
PHOTOELECTRON CORPORATION
Amended and Restated
8% Subordinated Convertible Note Due on Demand
No. R1-1992-1 Lexington, Massachusetts
As of August 1, 1996
For value received, PHOTOELECTRON CORPORATION, a Massachusetts
corporation (the "Company"), hereby promises to pay to Mr. Peter M. Nomikos
(hereinafter referred to as the "Payee"), or registered assigns, on demand, as
described below, the principal sum of Seven Hundred Five Thousand Dollars
($705,000.00) in consideration of advances made by the Payee under the
Convertible Note and Warrant Purchase Agreement hereinafter referred to, or such
part thereof as then remains unpaid. The dates and amounts of the advances are
reflected in Schedule A to this Note. The Company further agrees to pay
----------
interest from the date of each such advance on the principal amount of such
advance remaining from time to time unpaid at the rate of eight percent (8%) per
annum. Such interest shall accrue on March 31, June 30, September 30 and
December 31 of each year, until the whole amount of the principal hereof
remaining unpaid shall become due and payable. The Company agrees to pay
interest on all overdue principal (including any overdue required redemption)
and interest at a rate per annum equal to the prime or base lending rate of the
First National Bank of Boston plus three percent (3%). The outstanding
----
principal amount and all accrued but unpaid interest shall be repaid on demand.
Subject to the holder's option (referenced below) to convert all or part of the
outstanding principal balance, and all accrued but unpaid interest, to Common
Stock, principal and interest shall be payable in lawful money of the United
States of America, in immediately available funds, at the principal office of
the Payee or at such other place as the legal holder may designate from time to
time in writing to the Company. Interest shall be computed on the basis of a
360-day year.
This Note is issued pursuant to and is entitled to the benefits of a
certain Convertible Note and Purchase Agreement dated as of May 13, 1992,
between the Company and Payee identified therein (as the same may be amended
from time to time, the "1992 Agreement"), and each holder of this Note, by its
acceptance hereof, agrees to be bound by the provisions of the 1992 Agreement, a
copy of which may be inspected by
<PAGE>
the legal holder hereof at the principal office of the Company. As provided in
the 1992 Agreement, (i) this Note is subject to prepayment as specified in the
1992 Agreement, (ii) the principal of and interest on this Note is subordinated
to Senior Debt, as defined in the 1992 Agreement, and (iii) all or any portion
of the outstanding principal balance under the Note, and all then accrued but
unpaid interest, is convertible into Common Stock of the Company in the manner
set forth in the 1992 Agreement.
As further provided in the 1992 Agreement, upon surrender of this Note
for transfer or exchange, a new Note or new Notes of the same tenor dated the
date to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
In case any payment herein provided for shall not be paid when due,
the Company further promises to pay all costs of collection, including all
reasonable attorney's fees.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its law governing
conflicts of law, and shall have the effect of a sealed instrument as of the
date first written above.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
PHOTOELECTRON CORPORATION
By:/s/Peter E. Oettinger
--------------------------------
Peter E. Oettinger
Vice President and Chief Operating
Officer
Attest:
/s/William O. Flannery
- -------------------------
-2-
<PAGE>
Schedule A
----------
<TABLE>
<CAPTION>
Date of Advance Amount
--------------- ------
<S> <C>
January 18, 1994 $ 90,000
January 28, 1994 90,000
February 15, 1994 90,000
February 24, 1994 75,000
February 26, 1994 90,000
March 21, 1994 90,000
March 30, 1994 90,000
April 11, 1994 90,000
Total $705,000
=======
</TABLE>
-3-
<PAGE>
EXHIBIT 10.1
DATE OF LEASE EXECUTION: June 12, 1996
(To be Completed by Landlord)
ARTICLE I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO:
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this
Section 1.1:
LANDLORD: THE TRUSTEES OF LEXINGTON DEVELOPMENT COMPANY TRUST
---------------------------------------------------
MANAGING AGENT: Spaulding and Slye Services Limited Partnership
-----------------------------------------------
LANDLORD'S & MANAGING AGENT'S ADDRESS:
c/o Spaulding and Slye Services Ltd. Partnership
25 Burlington Mall Road
Burlington, MA 01803
Attention: Treasurer
LANDLORD'S REPRESENTATIVE: Bruce D. Nolen
--------------
TENANT: Photoelectron Corporation
-------------------------
TENANT'S ADDRESS (For Notice and Billing): Five Forbes Road, Lexington, MA 02173
-------------------------------------
TENANT'S REPRESENTATIVE: Mr. Peter Oettinger
-------------------
BUILDING ADDRESS: Five Forbes Road, Lexington, Massachusetts 02173
-------------------------------------------------
RENTABLE FLOOR AREA OF TENANT'S SPACE: 14,992 Square Feet (r.s.f.) approximately
------
(per Exhibit A)
- ---------------
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 30,710 Square Feet (r.s.f.)
------
approximately
TENANT'S DESIGN COMPLETION DATE: May 16, 1996
------------
SCHEDULED TERM COMMENCEMENT DATE: May 7, 1996
------------
RENT COMMENCEMENT DATE: The earlier of July 15, 1996 or Certificate of Occupancy
--------------------------------------------------------
for Leasehold Improvements.
- ---------------------------
TERM EXPIRATION DATE: July 31, 2002 APPROXIMATE TERM: Six Years, Three Months
------------- -----------------------
ANNUAL BASE RENT: $7.25 (subject to increase per Exhibit B, Rider To Lease) Per
---------------------------------------------------------
Rentable Square Foot (p.r.s.f.)
ANNUAL ESTIMATED OPERATING COSTS: $207,292.50 for the Building: $6.75 =
----------- -----
(p.r.s.f.)
ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE (included in Annual Rent):
$12,743.20: $.85 (p.r.s.f.)
- ---------- ----
OTHER: for the Building: $ = (p.r.s.f.)
ANNUAL RENT: $222,631.20 (Subject to an Annual Adjustment as provided in Article
-----------
IV and as provided in Exhibit B, Rider To Lease), computed as follows:
ANNUAL RENT: $7.25 (subject to increase per Exhibit B, Rider To Lease
-------------------------------------------------------
Annual Base Rent (p.r.s.f.) + $6.75 Annual Estimated
-----
Operating Costs (p.r.s.f.) + $.85 Annual Estimated Electrical
----
Costs to Tenant's Space (p.r.s.f.) + N/A Other (p.r.s.f.) =
---
$14.85 Total Rate (p.r.s.f.) X 14,992 rentable square feet =
------ ------
$222,631.20 Annual Rent, (Subject to adjustment per Exhibit B,
-----------
Rider attached.)
FIRST FISCAL YEAR FOR TENANT'S PAYING OPERATING COST ESCALATION: YEAR ENDING:
December 31, 1997
- -----------------
SECURITY DEPOSIT: $125,000 GUARANTOR: N/A
-------- ---
TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD: Premises Delivered in "As-Is"
-----------------------------
Condition
- ---------
PERMITTED USES: General Office/Uses Accessory to Permitted Scientific Research,
---------------------------------------------------------------
Development or Related Production, as permitted by Law.
- -------------------------------------------------------
PUBLIC LIABILITY INSURANCE: BODILY INJURY: $2,000,000 PROPERTY DAMAGE:
$1,000,000
SPECIAL PROVISIONS: See Exhibit B, Rider To Lease; Premises are delivered in
--------------------------------------------------------
strictly "As-Is" condition.
- ---------------------------
1.2 EXHIBITS
The Exhibits listed below in this section are incorporated in this Lease by
reference and are to be construed as part of this Lease:
Exhibit A - Plan showing Tenant's Space.
Exhibit B - Riders (if applicable).
Exhibit C - Specifications of Leasehold Improvements and Tenant Layout (if
applicable).
Exhibit D - Landlord's Services.
Exhibit E - Rules and Regulations.
<PAGE>
<TABLE>
<CAPTION>
1.3 TABLE OF CONTENTS PAGE
<S> <C>
ARTICLE II
PREMISES AND TERM..........................................................................................4
2.1 PREMISES..........................................................................................4
2.2 TERM..............................................................................................4
ARTICLE III
CONSTRUCTION...............................................................................................4
3.1 INITIAL CONSTRUCTION..............................................................................4
3.2 PREPARATION OF PREMISES FOR OCCUPANCY:............................................................5
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.....................................................5
3.4 REPRESENTATIVES...................................................................................6
ARTICLE IV
RENT.......................................................................................................6
4.1 RENT..............................................................................................6
4.2 OPERATING COSTS: ESCALATION.......................................................................6
4.3 ESTIMATED ESCALATION PAYMENTS.....................................................................7
4.4 CHANGE OF FISCAL YEAR.............................................................................8
4.5 PAYMENTS..........................................................................................8
ARTICLE V
LANDLORD'S COVENANTS.......................................................................................8
5.1 LANDLORD'S COVENANTS DURING THE TERM..............................................................8
5.1.1 Building Services.............................................................................8
5.1.2 Additional Building Services..................................................................8
5.1.3 Repairs.......................................................................................8
5.1.4 Quiet Enjoyment...............................................................................8
5.2 INTERRUPTIONS.....................................................................................8
ARTICLE VI
TENANT'S COVENANTS.........................................................................................9
6.1 TENANT'S COVENANTS DURING THE TERM................................................................9
6.1.1 Tenant's Payments.............................................................................9
6.1.2 Repairs and Yielding Up.......................................................................9
6.1.3 Occupancy and Use.............................................................................9
6.1.4 Rules and Regulations.........................................................................9
6.1.5 Safety Appliances.............................................................................9
6.1.6 Assignment and Subletting.....................................................................9
6.1.7 Indemnity....................................................................................10
6.1.8 Tenant's Liability Insurance.................................................................10
6.1.9 Tenant's Worker's Compensation Insurance.....................................................10
6.1.10 Landlord's Right of Entry....................................................................10
6.1.11 Loading......................................................................................11
6.1.12 Landlord's Costs.............................................................................11
6.1.13 Tenant's Property............................................................................11
6.1.14 Labor or Materialmen's Liens.................................................................Il
6.1.15 Changes or Additions.........................................................................11
6.1.16 Holdover.....................................................................................11
ARTICLE VII
CASUALTY AND TAKING.......................................................................................11
7.1 CASUALTY AND TAKING..............................................................................11
7.2 RESERVATION OF AWARD.............................................................................12
ARTICLE VIII
RIGHTS OF MORTGAGEE.......................................................................................12
8.1 PRIORITY OF LEASE................................................................................12
8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S LIABILITY..................................12
8.3 MORTGAGEE'S ELECTION.............................................................................12
8.4 NO PREPAYMENT OR MODIFICATION, ETC...............................................................13
8.5 NO RELEASE OR TERMINATION........................................................................13
8.6 CONTINUING OFFER.................................................................................13
8.7 MORTGAGEE'S APPROVAL.............................................................................13
ARTICLE IX
DEFAULT 13
9.1 EVENTS OF DEFAULT................................................................................13
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION...........................................................14
ARTICLE X
</TABLE>
<PAGE>
<TABLE>
<S> <C>
MISCELLANEOUS 14
10.1 NOTICE OF LEASE..............................................................................14
10.2 RELOCATION...................................................................................15
10.3 NOTICES FROM ONE PARTY TO THE OTHER..........................................................15
10.4 BIND AND INURE...............................................................................15
10.5 NO SURRENDER.................................................................................15
10.6 NO WAIVER, ETC...............................................................................15
10.7 NO ACCORD AND SATISFACTION...................................................................15
10.8 CUMULATIVE REMEDIES..........................................................................15
10.9 LANDLORD'S RIGHT TO CURE.....................................................................16
10.10 ESTOPPEL CERTIFICATE.........................................................................16
10.11 WAIVER OF SUBROGATION........................................................................16
10.12 ACTS OF GOD..................................................................................16
10.13 BROKERAGE....................................................................................16
10.14 SUBMISSION NOT AN OFFER......................................................................16
10.15 APPLICABLE LAW AND CONSTRUCTION..............................................................16
ARTICLE XI
SECURITY DEPOSIT..........................................................................................17
</TABLE>
<PAGE>
ARTICLE II
PREMISES AND TERM
2.1 PREMISES.
Subject to and with the benefit of the provisions of this Lease and any
ground lease or land disposition agreement relating to the parcel on which the
Building is located (the "Lot"), Landlord hereby leases to Tenant, and Tenant
leases from Landlord, Tenant's Space in the Building, excluding exterior faces
of exterior walls, the common facilities area and building service fixtures and
equipment serving exclusively or in common other parts of the Building. Tenant's
Space, with such exclusions, is hereinafter referred to as the "Premises".
Tenant shall have, as appurtenant to the Premises, the right to use in common
with others entitled thereto: (a) the common facilities included in the Building
or on the Lot, including the parking facility, if any, on a first-come,
first-served basis, to the extent and in the location from time to time
designated by Landlord, and (b) the building service fixtures and equipment
serving the Premises.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use, (a) to install, repair, replace, use, maintain
and relocate for service to the Premises and to other parts of the Building or
either, building service fixtures and equipment wherever located in the Building
and (b) to alter or relocate any common facilities, it being understood that if
any parking spaces are provided, the same may be relocated on or off the Lot
from time to time by Landlord, provided that in all events substitutions are
substantially equivalent.
2.2 TERM.
To have and to hold for a period (the "Term") commencing on the earliest of
(a) if Landlord is not obligated to perform construction work, on the Scheduled
Term Commencement Date, or (b) if Landlord is obligated to perform construction
work pursuant to Exhibit C, on the date on which the Premises are deemed ready
for occupancy as provided in Section 3.2, and (c) in all events, the date on
which Tenant occupies all or any part of the Premises (whichever of said dates
is appropriate being hereafter referred to as the "Commencement Date"), and
continuing until the Term Expiration Date, unless sooner terminated as provided
in Section 3.2 or 7.1 or in Article IX. Landlord and Tenant will execute, upon
request of either, a certificate acknowledging the Commencement Date of this
Lease once such commencement date has occurred.
ARTICLE III
CONSTRUCTION
3.1 INITIAL CONSTRUCTION.
On or before Tenant's Design Completion Date, if such date is indicated in
Section 1.1, Tenant shall provide to Landlord for approval complete sets of
construction drawings and specifications (the "Complete Plans") prepared at
Tenant's expense by Landlord's architect or an architect approved by Landlord
and Landlord's engineer, including but not limited to:
a. [Stricken Language]
b. Dimensioned Partition Plans
c. Dimensioned Electrical and Telephone Outlet Plans
d. Reflected Ceiling Plans
e. Door and Hardware Schedules
f. Room Finish Schedules including wall, carpet and floor tile colors
g. Electrical, mechanical and structural engineering plans
h. All necessary construction details and specifications for work not
specified in Exhibit C
Landlord and Tenant shall initial the Complete Plans after the same have been
submitted by Tenant and approved by Landlord.
If no date is indicated for Tenant's Design Completion Date in Section 1.1,
Tenant agrees to accept the Premises on the Commencement Date in substantially
the same condition as they exist on the date of execution of this Lease. All of
Tenant's construction, installation of furnishings, and later changes or
additions shall be coordinated with any work being performed by Landlord in such
manner as to maintain harmonious labor relations and not to damage the Building
or Lot or interfere with Building operations. Except for installation of
furnishings and the installation of telephone outlets which must be performed by
a local telephone company at Tenant's direction and expense, all work described
in the Complete Plans (the "Leasehold Improvements") shall be performed by
[Stricken Language] Lee Construction Incorporated as general contractor,
--------------------------------
[Stricken Language]and shall be approved in advance by the Landlord's building
- ------------------------------------------------------------------------------
requirements, regulations and procedures.
- ----------------------------------------
<PAGE>
[Stricken Language]
Landlord will not approve any construction, alterations, or additions
requiring unusual expense to readapt the Premises to normal office use or lease
termination or increasing the cost of construction, insurance or taxes on the
Building or of Landlord's services called for by Section 5.1 unless Tenant first
gives assurances acceptable to Landlord that such readaptation will be made
prior to such termination without expense to Landlord and makes provisions
acceptable to Landlord for payment of such increased cost. Landlord will also
disapprove any alterations or additions requested by Tenant which will delay
completion of the Premises or the Building. All changes and additions shall be
part of the Building except such items as by writing at the time of approval the
parties agree either shall be removed by Tenant on termination of this Lease, or
shall be removed or left at Tenant's election.
3.2 PREPARATION OF PREMISES FOR OCCUPANCY.
If Landlord is obligated to perform construction work pursuant to Exhibit C,
Landlord agrees to use reasonable efforts to have the Premises ready for
occupancy on or before the Scheduled Term Commencement Date, which shall,
however, be extended for a period equal to that of any delays due to
governmental regulations, unusual scarcity of or inability to obtain labor or
materials, labor difficulties, casualty or other causes beyond Landlord's
reasonable control. The Premises shall be deemed ready for occupancy on the date
on which the Leasehold Improvements, as specified in Exhibit C and in the
Complete Plans, are ready for occupancy as certified by Landlord's architect
with the exception of minor items which can be fully completed without material
interference with Tenant and other items which because of the season or weather
or the nature of the item are not practicable to do at the time, provided that
none of said items is necessary to make the Premises tenantable for the
Permitted Uses; provided, however, that if Landlord is unable to complete
construction due to delay in Tenant's compliance with the provisions of Section
3.1 of this Lease, then the Premises shall be deemed ready for occupancy no
later than the Scheduled Term Commencement Date.
Landlord shall permit Tenant access for installing equipment and furnishings
in the Premises prior to the Term if it can be done without material
interference with completion of the Building or remaining portions of the
Leasehold Improvements.
In the event of Tenant's failure to comply with the previsions of Section 3.1
to submit information or to deliver construction drawings and specifications
which meet Landlord's approval, Landlord may, at Landlord's option, exercisable
by notice to Tenant, either (a) terminate this Lease on the date specified in
said notice to Tenant, and upon such termination Landlord shall have all the
rights provided in Article IX of this Lease in the event of Tenant's default or
(b) assess Tenant liquidated damages in an amount equal to the Annual Rent
divided by 365 for each day such failure continues, which damages shall be paid
to Landlord on the Commencement Date. Notwithstanding the foregoing provisions,
if the Premises are not deemed ready for occupancy within 120 days after the
Scheduled Term Commencement Date for whatever reason, other than Tenant's
default, Tenant may elect to cancel this Lease at any time thereafter while the
Premises are not deemed ready for occupancy by giving notice to Landlord of such
cancellation which shall be effective when given, it being understood that said
election shall be Tenant's sole remedy at law or in equity for Landlord's
failure to have the Premises ready for occupancy.
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurers of the Building. Either party may
inspect the work of the other at
<PAGE>
PAGE>
reasonable times and promptly shall give notice of observed defects. Landlord's
obligations under Section 3.1 shall be deemed to have been performed when Tenant
commences to occupy any portion of the Premises for the Permitted Uses except
for items which are incomplete or do not conform with the requirements of
Section 3.1 and as to which Tenant shall in either case have given written
notice to Landlord prior to such commencement. If Tenant shall not have
commenced to occupy the Premises for the Permitted Uses within 30 days after
they are deemed ready for occupancy as provided in Section 3.2, a certificate of
completion by a licensed architect or registered engineer shall be conclusive
evidence that Landlord has performed all such obligations except for items
stated in such certificate to be incomplete or not in conformity with such
requirements. Landlord shall not be responsible for any loss, damage, or injury
resulting from the installation of any components, fixtures, or equipment
provided they were appropriately specified and installed in accordance with the
manufacturer's or supplier's instructions.
3.4 REPRESENTATIVES.
Each party authorizes the other to rely in connection with their respective
rights and obligations under this Article III upon approval and other actions on
the party's behalf by Landlord's Representative in the case of Landlord or
Tenant's Representative in the case of Tenant or by any person designated in
substitution or addition by notice to the party relying.
ARTICLE IV
RENT
4.1 RENT.
Tenant agrees to pay rent to Landlord without any offset or reduction
whatever (except as made in accordance with the express provisions of this
Lease), equal to 1/12th of the Annual Rent in equal installments in advance on
the first day of each calendar month included in the Term; and for any portion
of a calendar month at the beginning or end of the Term, at the proportionate
rate payable for such portion, in advance.
[Stricken Language]
The term "Base Rent" shall mean the Annual Rent as most recently increased,
less the sum of (a) $ 6.75 (p.r.s.f), being Tenant's proportionate share of
-------------
the Annual Estimated Operating Costs and (b) $.85 (p.r.s.f), being the
------------
Estimated Cost of Electrical Service to Tenant's Space and (c) $ _, being other
costs, if any.
4.2 OPERATING COSTS: ESCALATION.
Tenant's proportionate share of the Annual Estimated Operating Costs shall be
determined by multiplying Annual Estimated Operating Costs by a fraction, the
numerator of which is the Rentable Floor Area of Tenant's Space, and the
denominator of which is the Total Rentable Floor Area of the Building.
With respect to the First Fiscal Year for Tenant's Paying Operating Cost
Escalation, or fraction thereof, and any fiscal year or fraction thereof
thereafter, Tenant shall pay to Landlord, as additional rent, Operating Cost
Escalation (as defined below), if any, on or before the thirtieth (30th) day
following receipt by Tenant of Landlord's Statement (as defined below). As soon
as practicable after the end of each Fiscal Year ending during the Term and
after Lease termination, Landlord shall render a statement ("Landlord's
Statement") in reasonable detail and according to usual accounting practices
certified by Landlord and showing for the preceding Fiscal Year or fraction
thereof, as the case may be, Landlord's Operating Costs,
excluding the interest and amortization on mortgages for the Building and Lot
or leasehold interests therein and the cost of special services rendered to
tenants (including Tenant) for which a special charge is made,
but including, without limitation: real estate taxes on the Building and Lot;
installments and interest on assessments for public betterments or public
improvements; expenses of any proceedings for abatement of taxes and assessments
with respect to any fiscal year or fraction of a fiscal year; premiums for
insurance; fees payable to third parties for financial audits of Landlord's
Operating Costs; compensation and all fringe benefits, worker's compensation
insurance premiums and payroll taxes paid by Landlord to, for or with respect to
all persons engaged in the operating, maintaining, or cleaning of the Building
and Lot; all utility charges not billed directly to tenants by Landlord or the
utility; payments to independent contractors under service contracts for
cleaning, operating, managing, maintaining
<PAGE>
and repairing the Building and Lot (which payments may be to affiliates of
Landlord provided the same are at reasonable rates consistent with the type of
occupancy and the services rendered) rent paid by the managing agent or imputed
cost equal to the loss of rent by Landlord for making available to the managing
agent space for a Building office on the ground floor or above; if the Building
shares common areas or facilities with another building or buildings, the
Buildings' pro rata share (as reasonably determined by Landlord) of the cost of
cleaning, operating, managing (including the cost of the management office for
such buildings and facilities), maintaining and repairing such common areas and
facilities; and all other reasonable and necessary expenses paid in connection
with the cleaning, operating, managing, maintaining and repairing of the
Building and Lot, or either, and properly chargeable against income, it being
agreed that if Landlord installs a new or replacement capital item for the
purpose of reducing Landlord's Operating Costs, the cost thereof as reasonably
amortized in accordance with generally accepted accounting practices by
----------------------------------------------------------
Landlord, with interest at the average prime commercial rate in effect from time
to time at the three largest national banks in Boston, Massachusetts on the
unamortized amount, shall be included in Landlord's Operating Costs. Landlord's
Statement shall also show the average number of square feet of the Building
which were occupied for the preceding fiscal year or fraction thereof.
"Operating Cost Escalation" shall be equal to the difference, if any,
between:
(a) the product of Landlord's Operating Costs as indicated in Landlord's
Statement and a fraction, the numerator of which shall be the Rentable Floor
Area of Tenant's Space and the denominator of which shall be one-half of the
Total Rentable Floor Area of the Building plus one-half of the average number of
such square feet as are occupied during such fiscal year or fraction thereof and
(b) the product of the Annual Estimated Operating Costs (as reduced pursuant
to this Section 4.2) and a fraction, the numerator of which shall be the
Rentable Floor Area of Tenant's Space and the denominator of which shall be the
Total Rentable Floor Area of the Building.
If the management fee is reduced by reason of a tenant's default in the
payment of Annual Rent or additional rent, Landlord shall reduce the Annual
Estimated Operating Costs by the amount of such reduction in the management fee.
In case of special services which are not rendered to all areas on a comparable
basis, the proportion allocable to the Premises shall be the same proportion
which the Rentable Floor Area of Tenant's Space bears to the total rentable
floor area to which such service is so rendered (such latter area to be
determined in the same manner as the Total Rentable Floor Area of the Building).
The term "real estate taxes" as used above shall mean all taxes of every kind
and nature assessed by any government authority on the Lot, the Building and
improvements, or both, which the Landlord shall become obligated to pay because
of or in connection with the ownership, leasing and operation of the Lot, the
Building and improvements, or both, subject to the following: There shall be
excluded from such taxes all income taxes, excess profits taxes, excise taxes,
franchise taxes, and estate, succession, inheritance and transfer taxes,
provided, however, that if at any time during the Term the present system of ad
valorem taxation of real property shall be changed so that in lieu of the whole
or any part of the ad valorem tax on real property, there shall be assessed on
Landlord a capital levy or other tax on the gross rents received with respect to
the Lot, Building, and improvements, or both, or a federal, state, county,
municipal or other local income, franchise, excise or similar tax, assessment,
levy or charge (distinct from any now in effect) measured by or based, in whole
or in part, upon any such gross rents, then any and all of such taxes,
assessments, levies or charges, to the extent so measured or based, shall be
deemed to be included within the term "real estate taxes".
Notwithstanding any other provision of this Section 4.2, if the Term expires
or is terminated as of a date other than the last day of a fiscal year, then for
such fraction of a fiscal year at the end of the Term, Tenant's last payment to
Landlord under this Section 4.2 shall be made on the basis of Landlord's best
estimate of the items otherwise includable in Landlord's Statement and shall be
made on or before the later of (a) 10 days after Landlord delivers such estimate
to Tenant or (b) the last day of the Term, with an appropriate payment or refund
to be made upon submission of Landlord's Statement.
4.3 ESTIMATED ESCALATION PAYMENTS.
If, with respect to any fiscal year or fraction thereof during the Term,
Landlord estimates that Tenant shall be obligated to pay Operating Cost
Escalation, then Tenant shall pay, as additional rent, on the first day of each
month of such fiscal year and each ensuing fiscal year thereafter, Estimated
Monthly Escalation Payments equal to 1/12th of the estimated Operating Cost
Escalation for the respective fiscal year, with an appropriate additional
payment or refund to be made within 30 days after Landlord's Statement is
delivered to Tenant. Landlord may adjust such Estimated Monthly Escalation
Payment from time to time and at any time during a fiscal year, and Tenant shall
pay, as additional rent, on the first day of each month following receipt of
Landlord's notice thereof, the adjusted Estimated Monthly Escalation Payment.
<PAGE>
4.3.1 ELECTRICITY
- ----- -----------
Tenant shall be responsible for paying its prorata share of all electricity
---------------------------------------------------------------------------
charges for relating to its use of the Premises as reasonably determined by the
- -------------------------------------------------------------------------------
Landlord. Accordingly, the Annual Rent may be adjusted to reflect increases in
- ------------------------------------------------------------------------------
the Estimated Cost of the Electrical Service to Tenant's Space. At Tenant's
- ---------------------------------------------------------------------------
option, if the Tenant is in full occupancy of the Total Rentable Floor Area of
- ------------------------------------------------------------------------------
the Building, Tenant may pay all electricity charges to directly to the utility
- -------------------------------------------------------------------------------
providing electric service, provided that all payments are made prior to the
- ----------------------------------------------------------------------------
date that such charges are due. In the event that Tenant exercises such option,
- -------------------------------------------------------------------------------
Tenant shall no longer pay the Estimated Electrical Cost To Tenant's Space or
- -----------------------------------------------------------------------------
other costs to Landlord and the Annual Estimated Operating Costs shall be
- -------------------------------------------------------------------------
reduced to reflect the decrease in the Landlord's Operating Costs resulting
- ---------------------------------------------------------------------------
therefrom. Notwithstanding the foregoing, in no event shall such a
- ------------------------------------------------------------------
modification of the Estimated Electrical Costs result in a modification of
- --------------------------------------------------------------------------
Annual Rent.
- ------------
4.4 CHANGE OF FISCAL YEAR.
Landlord shall have the right from time to time to change the periods of
accounting under Section 4.2 to any annual period other than a fiscal year, and
upon any such change all items referred to in this Section 4.4 shall be
appropriately apportioned. In all Landlord's Statements rendered under this
Section 4.4, amounts for periods partially within and partially without the
accounting periods shall be appropriately apportioned, and any items which are
not determinable at the time of a Landlord's Statement shall be included therein
on the basis of Landlord's estimate, and with respect thereto Landlord shall
render promptly after determination a supplemental Landlord's Statement, and
appropriate adjustment shall be made according thereto. All Landlord's
Statements shall be prepared on an accrual basis of accounting. Tenant shall
------------
have the right to audit the Landlord's Annual Statement, by a qualified
- -----------------------------------------------------------------------
accountant, with at least fourteen (14) days prior written notice. Tenant shall
- -------------------------------------------------------------------------------
pay the full cost of such audit, which must be performed in Landlord's office
- -----------------------------------------------------------------------------
during normal business hours.
- -----------------------------
4.5 PAYMENTS.
All payments of Annual Rent and additional rent shall be made to Managing
Agent, or to such other person as Landlord may from time to time designate. If
any installment of Annual Rent or additional rent or on account of leasehold
improvements is paid more than 5 days after the due date thereof, at Landlord's
election, it shall bear interest at a rate equal to the average prime commercial
rate from time to time established by the three largest national banks in
Boston, Massachusetts plus 4% per annum from such due date, which interest shall
be immediately due and payable as further additional rent.
ARTICLE V
LANDLORD'S COVENANTS
5.1 LANDLORD'S COVENANTS DURING THE TERM.
Landlord covenants during the Term:
5.1.1 Building Services - To furnish, through Landlord's employees or
independent contractors, the services listed in Exhibit D;
5.1.2 Additional Building Services - To furnish, through Landlord's
employees or independent contractors, reasonable additional Building operation
services upon reasonable advance request of Tenant at equitable rates from time
to time established by Landlord to be paid by Tenant;
5.1.3 Repairs - Except as otherwise provided in Article VII, to make such
repairs to the roof, exterior walls, floor slabs, other structural components
and common facilities of the Building as may be necessary to keep them in
serviceable condition; and
5.1.4 Quiet Enjoyment - That Landlord has the right to make this Lease and
that Tenant on paying the rent and performing its obligations hereunder, shall
peacefully and quietly have, hold and enjoy the Premises throughout the Term
without any manner of hindrance or molestation from Landlord or anyone claiming
under Landlord, subject however to all the terms and provisions hereof.
5.2 INTERRUPTIONS.
Landlord shall not be liable to Tenant for any compensation or reduction of
rent by reason of inconvenience, annoyance, injury, death or for loss of
business arising from power losses or shortages, air pollution or contamination
by hazardous substances or from the necessity of Landlord's entering the
Premises for any of the purposes in this Lease authorized, or for repairing the
Premises or any portion of the Building or Lot, or for interruption or
termination (by reason of any cause reasonably beyond Landlord's control,
including without limitation, loss of any applicable
<PAGE>
license or governmental approval), of the food service provided by Landlord
pursuant to Section 5.1.5, or for excessive losses pursuant to Section 5.1.5. In
case Landlord is prevented or delayed from making any repairs, alterations or
improvements, or furnishing any service or performing any other covenant or duty
to be performed on Landlord's part, by reason of any cause reasonably beyond
Landlord's control, Landlord shall not be liable to Tenant therefor, nor except
as expressly otherwise provided in Article VII, shall Tenant be entitled to any
abatement or reduction of rent by reason thereof, nor shall the same give rise
to a claim in tenant's favor that such failure constitutes actual or
constructive, total or partial, eviction from the Premises. Landlord shall use
reasonable efforts in case of power losses or shortages, air pollution or
contamination by hazardous substances to restore the services required to be
provided under this Lease. However Landlord agrees to use its best efforts to
diligently remedy the situation and minimize the disruption to Tenant's
business.
Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency or until necessary repairs have
been completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such policies, programs and
measures as may be necessary, required or expedient for the conservation or
preservation of energy or energy services or as may be necessary or required to
comply with applicable codes, rules, regulations or standards.
ARTICLE VI
TENANT'S COVENANTS
6.1 TENANT'S COVENANTS DURING THE TERM.
Tenant covenants during the Term and such further time as Tenant occupies any
part of the Premises:
6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent and
additional rent, (b) all taxes which may be imposed on Tenant's personal
property in the Premises (including, without limitation, Tenant's fixtures and
equipment) regardless to whomever assessed, (c) all charges by public utilities
for telephone and other utility services (including service inspections
therefor) rendered to the Premises not otherwise required hereunder to be
furnished by Landlord without charge and not consumed in connection with any
services required to be furnished by Landlord without charge, and (d) as
additional rent, all charges to Landlord for services rendered pursuant to
Section 5.1.2 hereof;
6.1.2 Repairs and Yielding Up - Except as otherwise provided in Article VII
and Section 5.1.3, to keep the Premises in good order, repair and condition,
reasonable wear only excepted; and at the expiration or termination of this
Lease peaceably to yield up the Premises and all changes and additions therein
in such order, repair and condition, first removing all goods and effects of
Tenant and any items, the removal of which is required by agreement or specified
herein to be removed at Tenant's election and which Tenant elects to remove, and
repairing all damage caused by such removal and restoring the Premises and
leaving them clean and neat;
6.1.3 Occupancy and Use - Continuously from the Commencement Date, to use
and occupy the Premises only for the Permitted Uses; not to injure or deface the
Premises, Building, or Lot; and not to permit in the Premises anything or permit
in the Premises any use thereof which is improper, offensive, contrary to law or
ordinances, or liable to create a nuisance or to create an unsafe or hazardous
condition or to invalidate or increase the premiums for any insurance on the
Building or its contents or liable to render necessary any alteration or
addition to the Building; not to dump, flush, or in any way introduce any
hazardous substances or any other toxic substances into the atmosphere, septic,
----------
sewage or other waste disposal system serving the Premises, not to generate,
store or dispose of hazardous substances in or on the Premises or dispose of
hazardous substances, from the Premises to any other location without the prior
written consent of Landlord and then only in compliance with the Resource
Conservation and Recovery Act of 1976, as amended, 42 U.S.C. (S) 6901 et seq.,
and all other applicable laws, ordinances and regulations; to notify Landlord of
any incident which would require the filing of a notice under applicable
federal, state, or local law; not to store or dispose of hazardous substances on
the Premises, which shall include but not be limited to hazardous conditions
---------------------------------------------------------------
from x-ray equipment or compressed gases without first submitting to Landlord
- ----------------------------------------
a list of all such hazardous substances and all permits required therefor and
thereafter providing to Landlord on an annual basis Tenant's certification that
all such permits have been renewed with copies of such renewed permits; and to
comply with the orders and regulations of all governmental authorities with
respect to zoning, building, fire, health, and other codes, regulations,
ordinances or laws applicable to the Premises. "Hazardous substances" as used in
this paragraph shall mean "hazardous substances" as defined in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, 42
U.S.C. (S) 9601 and regulations adopted pursuant to said Act.
<PAGE>
6.1.4 Rules and Regulations - To comply with the Rules and Regulations set
forth in Exhibit E and all other reasonable Rules and Regulations hereafter made
by Landlord, of which Tenant has been given notice, for the care and use of the
Building and Lot and their facilities and approaches, it being understood that
Landlord shall not be liable to Tenant for the failure of other tenants of the
Building to conform to such Rules and Regulations;
6.1.5 Safety Appliances - To keep the Premises equipped with all safety
appliances required by law or ordinance or any other regulation of any public
authority because of any use made by Tenant and to procure all licenses and
permits so required because of such use and, if requested by Landlord, to do any
work so required because of such use, it being understood that the foregoing
provisions shall not be construed to broaden in any way Tenant's Permitted Uses;
6.1.6 Assignment and Subletting - Not without the prior written consent of
Landlord to assign this Lease, to make any sublease, or to permit occupancy of
the Premises or any part thereof by anyone other than Tenant, voluntarily or by
operation of law [Stricken Language]; as additional rent, to reimburse Landlord
promptly for reasonable legal and other expenses incurred by Landlord in
connection with any request by Tenant for consent to assignment or subletting;
no assignment or subletting shall affect the continuing primary liability of
Tenant (which, following assignment, shall be joint and several with the
assignee); no consent to any of the foregoing in a specific instance shall
operate as a waiver in any subsequent instance. Landlord's consent to any
proposed assignment or subletting is required both as to the terms and
conditions thereof, and as to the creditworthiness of the proposed assignee or
subtenant and the consistency of the proposed assignee's or subtenant's business
with other uses and tenants in the Building. Landlord's consent to assignment or
subletting by Tenant shall not be unreasonably withheld, provided that Tenant is
not then in default under this Lease.
[Stricken Language]
Tenant shall not be permitted to publicly market any portion of the Premises
- ----------------------------------------------------------------------------
for assignment or sublet when the Landlord has other space in the Office Park
- -----------------------------------------------------------------------------
available for lease. In the event that any assignee or subtenant pays to Tenant
- --------------------
any amounts in excess of the Annual Rent and additional rent then payable
hereunder, or pro rata portion thereof on a square footage basis for any portion
of the Premises, Tenant shall promptly pay 50% of said excess (net of
------ -------
reasonable costs incurred by Tenant in entering into such sublease or
- ----------------------------------------------------------------------
assignment) to Landlord as and when received by Tenant. If Tenant requests
- -----------
Landlord's consent to assign this Lease or sublet more than 25% of the Premises,
Landlord shall have the option, exercisable by written notice to Tenant given
within 10 days after receipt of such request, to terminate this Lease as of a
date specified in such notice which shall not be less than 30 or more than 60
days after the date of such notice;
If, at any time during the Term of this Lease, Tenant is:
(i) a corporation or a trust (whether or not having shares of beneficial
interest) and there shall occur any "change in control" (as defined below) of
----------------------------------------
Tenant [Stricken Language] or
- ------
(ii) a partnership or association or otherwise not a natural person (and
is not a corporation or a trust) and there shall occur any change in the
identity of any of the persons who then are members of such partnership or
association or who comprise Tenant;
Tenant shall so notify Landlord and Landlord may terminate this Lease by notice
to Tenant given within 90 days thereafter if, in Landlord's reasonable
judgement; the credit of Tenant is thereby impaired. This paragraph shall not
apply if the initial Tenant named herein is a corporation and the outstanding
voting stock thereof is listed on a recognized securities exchange including,
----------
but not limited to, the New York Stock Exchange, the American Stock Exchange or
- -------------------------------------------------------------------------------
the National Association of Securities Dealers Automated Quotation System
- -------------------------------------------------------------------------
(NASDAQ). For purposes of this paragraph, a "change in control" shall occur if
- ------------------------------------------------------------------------------
Mr. Peter M. Nomikos and companies in which he has a controlling interest hold
- ------------------------------------------------------------------------------
less than 50.1% of the outstanding voting stock of Tenant.
- ----------------------------------------------------------
6.1.7 Indemnity - To defend, with counsel approved by Landlord, all actions
against Landlord, any partner, trustee, stockholder, officer, director,
employee or beneficiary of Landlord, holders of mortgages secured by the
Premises or the Building and Lot and any other party having an interest in the
Premises ("Indemnified Parties") with respect to, and to pay, protect, indemnify
and save harmless, to the extent permitted by law, all Indemnified Parties from
and against, any and all liabilities, losses, damages, costs, expenses
(including reasonable attorney's fees and
<PAGE>
expenses) causes of action, suits, claims, demands or judgements of any nature
[Stricken Language] arising from (i) injury to or death or any person, or
damage to or loss of property, on the Premises or on adjoining sidewalks,
streets or ways, or connected with the use, condition or occupancy of any
thereof unless caused by the negligence or willful misconduct of Landlord or its
---------------------
servants or agents, (ii) violation of this Lease, or (iii) any act, fault,
omission, or other misconduct of Tenant or its agents, contractors, licensees,
sublessees or invitees.
6.1.8 Tenant's Liability Insurance - To maintain public liability insurance
on the Premises indemnifying Landlord and Tenant against all claims and demands
for (i) injury to or death of any person or damage to or loss or property, on
the Premises or adjoining walks, streets or ways, or connected with the use,
condition or occupancy of any thereof unless caused by the negligence or willful
----------
misconduct of Landlord or its servants or agents, (ii) violation of this Lease,
- ----------
or (iii) any act, fault or omission, or other misconduct of Tenant or its
agents, contractors, licensees, sublessees or invitees, in amounts which shall,
at the beginning of the Term, be at least equal to the limits set forth in
Section 1.1, and from time to time during the Term, shall be for such higher
limits, if any, as are customarily carried in the area in which the Premises are
located on property similar to the Premises and used for similar purposes, and
shall be written on the "Occurrence Basis" and include Host Liquor liability
insurance, and to furnish Landlord with certificates thereof;
6.1.9 Tenant's Worker's Compensation Insurance - To keep all of Tenant's
employees working in the Premises covered by worker's compensation insurance in
statutory amounts and to furnish Landlord with certificates thereof;
6.1.10 Landlord's Right of Entry - To permit Landlord and Landlord's agents
entry: to examine the Premises at reasonable times and, if Landlord shall so
elect, to make repairs or replacements; to remove, at Tenant's expense, any
changes, additions, signs, curtains, blinds, shades, awnings, aerials,
flagpoles, or the like not consented to in writing; and to show the Premises to
prospective tenants during the 12 months preceding expiration of the Term and
to prospective purchasers and mortgagees at all reasonable times;
6.1.11 Loading - Not to place Tenant's Property, as defined in
Section 6.1.13, upon the Premises so as to exceed a rate of 50 pounds of live
load per square foot and not to move any safe, vault or other heavy equipment
in, about or out of the Premises except in such manner and at such times as
Landlord shall in each instance approve; Tenant's business machines and
mechanical equipment which cause vibration or noise that may be transmitted to
the Building structure or to any other leased space in the Building shall be
placed and maintained by Tenant in settings of cork, rubber, spring, or other
types of vibration eliminators sufficient to eliminate such vibration or noise;
6.1.12 Landlord's Costs - In case Landlord shall be made party to any
litigation commenced by or against Tenant or by or against any parties in
possession of the Premises or any part thereof claiming under Tenant, to pay, as
additional rent, all costs including, without implied limitation, reasonable
counsel fees incurred by or imposed upon Landlord in connection with such
litigation, and, as additional rent, also to pay all such costs and fees
incurred by Landlord in connection with the successful enforcement by Landlord
of any obligations of Tenant under this Lease;
6.1.13 Tenant's Property - All the furnishings, fixtures, equipment, effects
and property of every kind, nature and description of Tenant and of all persons
claiming by, through or under Tenant which, during the continuance of this Lease
or any occupancy of the Premises by Tenant or anyone claiming under Tenant, may
be on the Premises or elsewhere in the Building or on the Lot shall be at the
sole risk and hazard of Tenant, and if the whole or any part thereof shall be
destroyed or damaged by fire, water or otherwise, or by the leakage or bursting
of water pipes, steam pipes, or other pipes, by theft, or from any other cause,
no part of said loss or damage is to be charged to or to be borne by Landlord
unless due to the gross negligence of Landlord;
6.1.14 Labor or Materialmen's Liens - To pay promptly when due the entire
cost of any work done on the Premises by Tenant, its agents, employees, or
independent contractors; not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises; and
immediately to discharge any such liens which may so attach;
6.1.15 Changes or Additions - Not to make any changes or additions to the
Premises without Landlord's prior written consent, provided that Tenant shall
reimburse Landlord for all costs incurred by Landlord in reviewing Tenant's
proposed changes or additions, and provided further that, in order to protect
the functional integrity of the Building, all such changes and additions shall
be performed by contractors selected from a list of approved contractors
prepared by Landlord from time to time;
<PAGE>
6.1.16 Holdover - To pay to Landlord the greater of twice (a) the then fair
market rent as conclusively determined by Landlord or (b) the total of the
Annual Rent and additional rent then applicable for each month or portion
thereof Tenant shall retain possession of the Premises or any part thereof after
the termination of this Lease, whether by lapse of time or otherwise, and also
to pay all damages sustained by Landlord on account thereof; the provisions of
this subsection shall not operate as a waiver by Landlord of the right of re-
entry provided in this Lease; at the option of Landlord exercised by a written
notice given to Tenant while such holding over continues, such holding over
shall constitute an extension of this Lease for a period of one year.
ARTICLE VII
CASUALTY AND TAKING
7.1 CASUALTY AND TAKING.
In case during the Term all or any substantial part of the Premises,
Building, or Lot or any one or more of them, are damaged materially by fire or
any other cause, or by action of the public or other authority in consequence
thereof or are taken by eminent domain or Landlord receives compensable damage
by reason of anything lawfully done in pursuance of public or other authority,
this Lease shall terminate at Landlord's election, which may be made,
notwithstanding Landlord's entire interest may have been divested, by notice to
Tenant within 30 days after the occurrence of the event giving rise to the
election to terminate, which notice shall specify the effective date of
termination which shall be not less than 30 nor more than 60 days after the date
of notice of such termination. If in any such case the Premises are rendered
unfit for use and occupation and the Lease is not terminated, Landlord shall use
due diligence to put the Premises, or, in case of a taking, what may remain
thereof (excluding any items installed or paid for by Tenant which Tenant may be
required or permitted to remove) into proper condition for use and occupation to
the extent permitted by the net award of insurance or damages available to
Landlord, and a just proportion of the Annual Rent and additional rent according
to the nature and extent of the injury shall be abated until the Premises or
such remainder shall have been put by Landlord in such condition; and in case of
a taking which permanently reduces the area of the Premises, a just proportion
of the Annual Rent and additional rent shall be abated for the remainder of the
Term and an appropriate adjustment shall be made to the Annual Estimated
Operating Expenses.
7.2 RESERVATION OF AWARD.
Landlord reserves to itself any and all rights to receive awards made for
damages to the Premises, Building or Lot and the leasehold hereby created, or
any one or more of them, accruing by reason of exercise of eminent domain or by
reason of anything lawfully done in pursuance of public or other authority.
Tenant hereby releases and assigns to Landlord all Tenant's rights to such
awards, and covenants to deliver such further assignments and assurances thereof
as Landlord may from time to time request, and hereby irrevocably designates and
appoints Landlord its attorney-in-fact to execute and deliver in Tenant's name
and behalf all such further assignments thereof. It is agreed and understood,
however, that Landlord does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for (i) movable trade fixtures installed by Tenant
or anybody claiming under Tenant, at its own expense or (ii) relocation expenses
recoverable by Tenant from such authority in a separate action.
ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE.
This Lease is and shall continue to be subject and subordinate to any
presently existing mortgage or deed of trust of record covering the Lot or
Building or both (the "mortgaged premises"). The holder of any such presently
existing mortgage or deed of trust shall have the election to subordinate the
same to the rights and interests of Tenant under this Lease exercisable by
filing with the appropriate recording office a notice of such election,
whereupon the Tenant's rights and interests hereunder shall have priority over
such mortgage or deed of trust.
Unless the option provided for in the next following sentence shall be
exercised, this Lease shall be superior to and shall not be subordinate to any
mortgage, deed of trust or other voluntary lien hereafter placed on the
mortgaged premises. The holder of any such mortgage, deed of trust or other
voluntary lien shall have the option to subordinate this Lease to the same,
provided that such holder enters into an agreement with Tenant by the terms of
which the holder will agree to recognize the rights of Tenant under this Lease
and to accept Tenant as tenant of the Premises under the terms and conditions of
this Lease in the event of acquisition of title by such holder through
foreclosure proceeding or other wise and Tenant will agree to recognize the
holder of such mortgage as Landlord in such event, which agreement shall be made
to expressly bind and inure to the benefit of the successors and assigns of
Tenant and of the holder and upon any one purchasing the mortgaged premises at
any foreclosure sale. Any such mortgage to which this Lease shall be
subordinated may contain such terms, provisions and conditions as the holder
deems usual or customary.
<PAGE>
8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S LIABILITY
The word "mortgage" as used herein includes mortgages, deeds of trust or
other similar instruments evidencing other voluntary liens or encumbrances and
modifications, consolidations, extensions, renewals, replacements and
substitutes thereof. The word "holder" shall mean a mortgagee, and any
subsequent holder or holders of a mortgage. Until the holder of a mortgage shall
enter and take possession of the Premises for the purpose of foreclosure, such
holder shall have only such rights of Landlord as are necessary to preserve the
integrity of this Lease as security. Upon entry and taking possession of the
Premises for the purpose of foreclosure, such holder shall have all the rights
of Landlord. Notwithstanding any other provision of this Lease to the contrary,
including without limitation Section 10.4, no such holder of a mortgage shall be
liable, either as mortgagee or as assignee, to perform, or be liable in damages
for failure to perform, any of the obligations of Landlord unless and until such
holder shall enter and take possession of the Premises for the purpose of
foreclosure, and such holder shall not in any event be liable to perform or for
failure to perform all of the obligations of Landlord under Section 3.1. Upon
entry for the purpose of foreclosure, such holder shall be liable to perform all
of the obligations of Landlord (except for the obligations under Section 3.1),
subject to and with the benefit of the provisions of Section 10.4, provided
that a discontinuance of any foreclosure proceeding shall be deemed a conveyance
under said provisions to the owner of the equity of the Premises.
8.3 MORTGAGEE'S ELECTION.
Notwithstanding any other provision to the contrary contained in this Lease,
if prior to substantial completion of Landlord's obligations under Article III,
any holder of a first mortgage on the mortgaged premises enters and takes
possession thereof for the purpose of foreclosing the mortgage, such holder may
elect, by written notice given to Tenant and Landlord at any time within 90 days
after such entry and taking of possession, not to perform Landlord's obligations
under Article III, and in such event such holder and all persons claiming under
it shall be relieved of all obligations to perform, and all its obligations
hereunder by written notice to Landlord and such holder given within 30 days
after the day on which such holder shall have given its notice as aforesaid.
8.4 NO PREPAYMENT OR MODIFICATION, ETC.
Tenant shall not pay Annual Rent, additional rent, or any other charge more
than 10 days prior to the due date thereof. No prepayment of Annual Rent,
additional rent or other charge, no assignment of this Lease and no agreement to
modify so as to reduce the rent, change the Term, or otherwise materially change
the rights of the Landlord under this Lease, or to relieve Tenant of any
obligations or liability under this Lease, shall be valid unless consented to in
writing by Landlord's mortgagees of record, if any.
8.5 NO RELEASE OR TERMINATION.
No act or failure to act on the part of Landlord which would entitle Tenant
under the terms of this Lease, or by law, to be relieved of Tenant's obligations
hereunder or to terminate this Lease, shall result in a release or termination
of such obligations or a termination of this Lease unless (i) Tenant shall have
first given written notice of Landlord's act or failure to act to Landlord's
mortgagees of record, if any, specifying the act or failure to act on the part
of Landlord which could or would give basis to Tenant's rights and (ii) such
mortgagees, after receipt of such notice, have failed or refused to correct or
cure the condition complained of within a reasonable time thereafter, but
nothing contained in this Section 8.5 shall be deemed to impose any obligation
on any such mortgagee to correct or cure any such condition. "Reasonable time"
as used above means and includes a reasonable time to obtain possession of the
mortgaged premises, if the mortgagee elects to do so, and a reasonable time to
correct or cure the condition if such condition is determined to exist.
8.6 CONTINUING OFFER.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants and agreements contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiring an assignment of this Lease or by entry or foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to this Lease as an obligee hereunder to
the same extent as though its name were written hereon as such; and such
mortgagee shall be entitled to enforce such provisions in its own name. Tenant
agrees on request of Landlord to execute and deliver from time to time any
agreement which may reasonably be deemed necessary to implement the provisions
of this Article VIII.
<PAGE>
8.7 MORTGAGEE'S APPROVAL.
Landlord's obligation to perform its covenants and agreements hereunder is
subject to the condition precedent that this Lease be approved by the holder of
any mortgage of which the Premises are a part and by the issuer of any
commitment to make a mortgage loan which is in effect on the date hereof. Unless
Landlord gives Tenant written notice within 30 business days after the date
hereof that such holder or issuer, or both, disapprove this Lease, then this
condition shall be deemed to have been satisfied or waived and the provisions of
this Section 8.7 shall be of no further force or effect.
ARTICLE IX
DEFAULT
9.1 EVENTS OF DEFAULT.
If any default by Tenant continues after notice, in case of Annual Rent,
additional rent, Tenant Improvement Reimbursement or any other monetary
obligation to Landlord for more than 10 days, or in any other case for more than
30 days and such additional time, if any, as is reasonably necessary to cure the
default if the default is of such a nature that it cannot reasonably be cured in
30 days and Tenant diligently endeavors to cure such default; or if Tenant
becomes insolvent, fails to pay its debts as they fall due, files a petition
under any chapter of the U. S. Bankruptcy Code, 11 U.S.C. 101 et seq., as it may
be amended (or any similar petition under any insolvency law of any
jurisdiction), or if such petition is filed against Tenant; or if Tenant
proposes any dissolution, liquidation, composition, financial reorganization or
recapitalization with creditors, makes an assignment or trust mortgage for
benefit of creditors, or if a receiver, trustee, custodian or similar agent is
appointed or takes possession with respect to any property of Tenant; or if the
leasehold hereby created is taken on execution or other process of law in any
action against Tenant; then, and in any such case, Landlord and the agents and
servants of Landlord may, in addition to and not in derogation of any remedies
for any preceding breach of covenant, immediately or at any time thereafter
while such default continues and without further notice, at Landlord's election,
do any one or more of the following: (1) give Tenant written notice stating that
the Lease is terminated, effective upon the giving of such notice or upon a date
stated in such notice, as Landlord may elect, in which event the Lease shall be
irrevocably extinguished and terminated as stated in such notice without any
further action, or (2) with or without process of law, in a lawful manner, enter
and repossess the Premises as of Landlord's former estate, and expel Tenant and
those claiming through or under Tenant, and remove its and their effects,
without being guilty of trespass, in which event the Lease shall be irrevocably
extinguished and terminated at the time of such entry, or (3) pursue any other
rights or remedies permitted by law. Any such termination of the Lease shall be
without prejudice to any remedies which might otherwise be used for arrears of
rent or prior breach of covenant, and in the event of such termination Tenant
shall remain liable under this Lease as hereinafter provided. Tenant hereby
waives all statutory rights (including, without limitation, rights of
redemption, if any) to the extent such rights may be lawfully waived, and
Landlord, without notice to Tenant, may store Tenant's effects and those of any
person claiming through or under Tenant at the expense and risk of Tenant and,
if Landlord so elects, may sell such effects at public auction or private sale
and apply the net proceeds to the payment of all sums due to Landlord from
tenant, if any, and pay over the balance, if any, to Tenant.
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION
In the event that this Lease is terminated under any of the provisions
contained in Section 9.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the excess of the total rent reserved for the residue of the Term
over the rental value of the Premises for said residue of the Term. In
calculating the rent reserved, there shall be included, in addition to the
annual Rent and all additional rent, the value of all other consideration agreed
to be paid or performed by Tenant for said residue. Tenant further covenants as
an additional and cumulative obligation after any such ending to pay punctually
to Landlord all the sums and perform all the obligations which Tenant covenants
in this Lease to pay and to perform in the same manner and to the same extent
and at the same time as if this Lease had not been terminated. In calculating
the amounts to be paid by Tenant under the next foregoing covenant, Tenant shall
be credited with any amount paid to Landlord as compensation as provided in the
first sentence of this Section 9.2 and also with the net proceeds of any rents
obtained by Landlord by reletting the Premises, after deducting all Landlord's
expenses in connection with such reletting, including, without implied
limitation, all repossession costs, brokerage commissions, fees for legal
services and expenses of preparing the Premises for such reletting, it being
agreed by Tenant that Landlord may (i) relet the Premises or any part or parts
thereof for a term or terms which may at Landlord's option be equal to or less
than or exceed the period which would otherwise have constituted the balance of
the Term and may grant such concessions and free rent as Landlord in its sole
judgment considers advisable or necessary to relet the same and (ii) make such
alterations, repairs and decorations in the Premises as Landlord in its sole
judgement considers advisable or necessary to relet the same, and no action of
Landlord in accordance with the foregoing or failure to relet or to collect rent
under
<PAGE>
reletting shall operate or be construed to release or reduce Tenant's liability
as aforesaid.
So long as at least 12 months of the Term remain unexpired at the time of
such termination, in lieu of any other damages or indemnity and in lieu of full
recovery by Landlord of all sums payable under all the foregoing provisions of
this Section 9.2, Landlord may by written notice to Tenant, at any time after
this Lease is terminated under any of the provisions contained in Section 9.1,
or is otherwise terminated for breach of any obligation of Tenant and before
such full recovery, elect to recover, and Tenant shall thereupon pay, as
liquidated damages, an amount equal to the aggregate of the Annual Rent and
additional rent accrued under Article IV in the 12 months ended next prior to
such termination plus the amount of Annual Rent and additional rent of any kind
accrued and unpaid at the time of termination and less the amount of any
recovery by Landlord under the foregoing provisions of this Section 9.2 up to
the time of payment of such liquidated damages.
Nothing contained in this Lease shall, however, limit or prejudice the right
of Landlord to prove and obtain in proceedings for bankruptcy or insolvency by
reason of the termination of this Lease, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater, equal to, to less than the amount of the loss or damages referred to
above.
ARTICLE X
MISCELLANEOUS
10.1 NOTICE OF LEASE.
Upon request of either party, both parties shall execute and deliver, after
the Term begins, a short form of this Lease in form appropriate for recording or
registration, and if this Lease is terminated before the Term expires, an
instrument in such form acknowledging the date of termination.
10.2 [Stricken Language]
10.3 NOTICES FROM ONE PARTY TO THE OTHER.
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at Tenant's Address or such ether address as Tenant
shall have last designated by notice in writing to Landlord and, if to Landlord,
at Landlord's Address or such other address as Landlord shall have last
designated by notice in writing to the Tenant. Any notice shall have been deemed
duly given if mailed to such address postage prepaid, registered or certified
mail, return receipt requested, when deposited with the U.S. Postal Service, or
if delivered to such address by hand, when so delivered.
10.4 BIND AND INURE.
The obligations of this Lease shall run with the land, and this Lease shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Landlord named herein and
each successive owner of the Premises shall be liable only for the obligations
accruing during the period of its ownership. The obligations of Landlord shall
be binding upon the assets of Landlord which comprise the Premises but not upon
other assets of Landlord. No individual partner, trustee, stockholder, officer,
director, employee or beneficiary of Landlord shall be personally liable under
this Lease and Tenant shall look solely to Landlord's interest in the Premises
in pursuit of its remedies upon an event of default hereunder, and the general
assets of the individual partners, trustees, stockholders, officers, employees
or beneficiaries of Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant.
10.5 NO SURRENDER.
The delivery of keys to any employee of Landlord or to Landlord's agent or
any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
<PAGE>
10.6 NO WAIVER, ETC.
The failure of Landlord or of Tenant to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this Lease
or, with respect to such failure of Landlord, any of the Rules and Regulations
referred to in Section 6.1.4, whether heretofore or hereafter adopted by
Landlord, shall not be deemed a waiver of such violation nor prevent a
subsequent act, which would have originally constituted a violation, from having
all the force and effect of an original violation, nor shall the failure of
Landlord to enforce any of said Rules and Regulations against any other tenant
in the Building be deemed a waiver of any such Rules or Regulations. The receipt
by Landlord of Annual Rent or additional rent with knowledge of the breach of
any covenant of this Lease shall not be deemed a waiver of such breach by
Landlord, unless such waiver be in writing and signed by Landlord. No consent or
waiver, express or implied, by Landlord or Tenant to or of any breach of any
agreement or duty shall be construed as a waiver or consent to or of any other
breach of the same or any other agreement or duty.
10.7 NO ACCORD AND SATISFACTION.
No acceptance by Landlord of a lesser sum than the Annual Rent and additional
rent then due shall be deemed to be other than on account of the earliest
installment of such rent due, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed as
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
10.8 CUMULATIVE REMEDIES.
The specific remedies to which Landlord may resort under the terms of this
Lease are cumulative and are not intended to be exclusive of any other remedies
or means of redress to which it may be lawfully entitled in case of any breach
or threatened breach by Tenant of any provisions of this Lease. In addition to
the other remedies provided in this Lease, Landlord shall be entitled to the
restraint by injunction of the violation or attempted or threatened violation of
any of the covenants, conditions or provisions of this Lease or to a decree
compelling specific performance of any such covenants, conditions or provisions.
10.9 LANDLORD'S RIGHT TO CURE.
If Tenant shall at any time default in the performance of any obligation
under this Lease, Landlord shall have the right, but shall not be obligated, to
enter upon the Premises and to perform such obligation, notwithstanding the fact
that no specific provision for such substituted performance by Landlord is made
in this Lease with respect to such default. In performing such obligation,
Landlord may make any payment of money or perform any other act. All sums so
paid by Landlord (together with interest at the rate of 4% per annum in excess
of the then average prime commercial rate of interest being charged by the three
largest national banks in Boston, Massachusetts) and all necessary incidental
costs and expenses in connection with the performance of any such act by
Landlord, shall be deemed to be additional rent under this Lease and shall be
payable to Landlord immediately on demand. Landlord may exercise the foregoing
rights without waiving any other of its rights or releasing Tenant from any of
its obligations under this Lease.
10.10 ESTOPPEL CERTIFICATE.
Tenant agrees, from time to time, upon not less than 15 days' prior written
request by Landlord, to execute, acknowledge and deliver to Landlord a statement
in writing certifying that this Lease is unmodified and in full force and
effect; that Tenant has no defenses, offsets or counterclaims against its
obligations to pay the Annual Rent and additional rent and to perform its other
covenants under this Lease; that there are no uncured defaults of Landlord or
Tenant under this Lease (or, if there have been modifications, that this Lease
is in full force and effect as modified and stating the modifications, and, if
there are any defenses, offsets, counterclaims, or defaults, setting them forth
in reasonable detail); and the dates to which the Annual Rent, additional rent
and other charges have been paid. Any such statement delivered pursuant to this
Section 10.10 shall be in a form reasonably acceptable to and may be relied
upon by any prospective purchaser or mortgagee of the premises which include the
Premises or any prospective assignee of any such mortgagee.
10.11 WAIVER OF SUBROGATION.
Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrences of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
<PAGE>
10.12 ACTS OF GOD.
In any case where either party hereto is required to do any act, delays
caused by or resulting from Acts of God, war, civil commotion, fire, flood or
other casualty, labor difficulties, shortages of labor, materials or equipment,
government regulations, unusually severe weather, or other causes beyond such
party's reasonable control shall not be counted in determining the time during
which work shall be completed, whether such time be designated by a fixed date,
a fixed time or a "reasonable time", and such time shall be deemed to be
extended by the period of such delay.
10.13 BROKERAGE.
Tenant represents and warrants that it has dealt with no broker in connection
with this transaction other than Spaulding and Slye Colliers Limited Partnership
and The Conrad Group and agrees to defend, with counsel approved by Landlord,
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indemnify and save Landlord harmless from and against any and all cost, expense
or liability for any compensation, commissions or charges claimed by a broker or
agent, other than Spaulding and Slye Colliers Limited Partnership and The Conrad
--------------
Group with respect to Tenant's dealings in connection with this Lease.
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10.14 SUBMISSION NOT AN OFFER.
The submission of a draft of this Lease or a summary of some or all of its
provisions does not constitute an offer to lease or demise the Premises, it
being understood and agreed that neither Landlord nor Tenant shall be legally
bound with respect to the leasing of the Premises unless and until this Lease
has been executed by both Landlord and Tenant and a fully executed copy has been
delivered to each of them.
10.15 APPLICABLE LAW AND CONSTRUCTION.
This Lease shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts. If any term, covenant, condition or provision
of this Lease or the application thereof to any person or circumstances shall be
declared invalid or unenforceable by the final ruling of a court of competent
jurisdiction having final review, the remaining terms, covenants, conditions and
provisions of this Lease and their application to persons or circumstances shall
not be affected thereby and shall continue to be enforced and recognized as
valid agreements of the parties, and in the place of such invalid or
unenforceable provision, there shall be substituted a like, but valid and
enforceable provision which comports to the findings of the aforesaid court and
most nearly accomplishes the original intention of the parties.
There are no oral or written agreements between Landlord and Tenant affecting
this Lease. This Lease may be amended, and the provisions hereof may be waived
or modified, only by instruments in writing executed by Landlord and Tenant.
The titles of the several Articles and Sections contained herein are for
convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant" appearing
in this Lease shall be construed to mean those named above and their respective
heirs, executors, administrators, successors and assigns, and those claiming
through or under them respectively. If there be more than one Tenant, the
obligations imposed by this Lease upon Tenant shall be joint and several.
<PAGE>
ARTICLE XI
SECURITY DEPOSIT
Landlord acknowledges receipt from Tenant of the Security Deposit, to be
held by Landlord, as security, which shall be increased by the lesser of
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(a) the cost of the Leasehold Improvements or (b) $225,000 (hereinafter the
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"Leasehold Improvement Security Deposit") on the ninety-first (91st) day
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following the Commencement Date, if, and only if, the Tenant does not
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substantially complete the Leasehold lmprovements in accordance with Article III
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within ninety (90) days from the Commencement Date. The Leasehold Improvement
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Security Deposit shall be returned to Tenant upon completion of the Leasehold
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Improvements, which completion shall be certified by the Landlord's Architect.
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The Security Deposit shall be held [without] in an interest bearing escrow
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account for and during the Term, which deposit plus interest shall be returned
- ------- -------------
to Tenant at the termination of this Lease, provided there exists no breach
of any undertaking of Tenant. Notwithstanding the foregoing, the Security
--------------------------------------------
Deposit shall be reduced on August 1 1999 to $47,000 (the "Security Deposit
- ----------------------------------------------------------------------------
Reduction Date"), provided that the Tenant has not been in default at any
- -------------------------------------------------------------------------
time during the Term. If all or any part of the Security Deposit is applied to
- --------------------
an obligation of Tenant hereunder, Tenant shall immediately upon request by
Landlord restore the Security Deposit to its original amount. Tenant shall not
have the right to call upon Landlord to apply all or any part of the Security
Deposit to cure any default or fulfill any obligation of Tenant, but such use
shall be solely in the discretion of Landlord. Upon any conveyance by Landlord
of its interest under this Lease, the Security Deposit may be delivered by
Landlord to Landlord's grantee or transferee. Upon any such delivery, Tenant
hereby releases Landlord herein named of any and all liability with respect to
the Security Deposit, its application and return, and Tenant agrees to look
solely to such grantee or transferee. It is further understood that this
provision shall also apply to subsequent grantees and transferees.
If, in the Landlord's sole and reasonable discretion, Landlord deems the
- ------------------------------------------------------------------------
Tenant's creditworthiness to be significantly improved as a result of an Initial
- --------------------------------------------------------------------------------
Public Stock Offering, Landlord shall review the terms of the Security Deposit,
- -------------------------------------------------------------------------------
which may be reduced earlier than the Security Deposit Reduction Date. In all
- -----------------------------------------------------------------------------
other respects the terms of the Security Deposit as described herein shall
- --------------------------------------------------------------------------
remain unchanged.
- ----------------
EXECUTED as a sealed instrument in three or more counterparts on the
day and year first written above.
LANDLORD: THE TRUSTEES OF LEXINGTON DEVELOPMENT COMPANY TRUST
by its Agent, Spaulding and Slye Services Limited
Partnership
/s/Robert K. Lemons
By:--------------------------
Robert K. Lemons
Senior Vice President
TENANT:
/s/Peter M. Nomikos
By:--------------------------
Peter M. Nomikos
Name:------------------------
(please print or type)
President of Photoelectron Corp.
Title:-----------------------
(please print or type)
A copy of Tenant's Corporate authorization for
such execution is attached hereto.
<PAGE>
EXHIBIT B
---------
RIDER TO LEASE
between
The Trustees of Lexington Development Company Trust
and
PhotoElectron Corporation
The following provisions are incorporated as an integral part of the captioned
Lease.
1. ANNUAL RENT INCREASE The Annual Base Rent shall be
-------------------- ----
adjusted as follows:
For the period of July 15, 1997 - July 31, 1998 - The Annual Base
----
Rent shall be increased to $8.75/RSF:
For the period of August 1, 1998 - July 31, 1999 - The Annual Base Rent
----
shall be increased to $9.25/RSF:
For the period of August 1, 1999 - July 31, 2000 - The Annual Base Rent
----
shall be increased to $10.25/RSF:
For the period of August 1, 2000 - July 31, 2001 - The Annual Base Rent
----
shall be increased to $11.25/RSF:
For the period of August 1, 2001 - July 31, 2002 - The Annual Base Rent
----
shall be increased to $11.75/RSF:
2. (Intentionally Deleted)
---------------------
3. LEASEHOLD IMPROVEMENTS Tenant agrees to accept the Premises in its "as-is"
----------------------
condition; with the exception that Landlord shall be responsible for the removal
and repair of approximately twelve (12) half-height partitions located in the
Northwest corner of the first floor area only. Tenant shall be responsible to
pay all expenses toward the cost of architectural and engineering costs to
prepare the Complete Plans.
4. LEASE EXTENSION
---------------
Provided that this Lease is in full force and effect, Tenant has not been in
default under the terms of this Lease at any time during the term of the Lease
or at the time that Tenant exercises its option to extend the term or at the
commencement of such extension term and further provided that Tenant has not
assigned or sublet the original Premises and, in the event Tenant has exercised
-------- ---------------------------------------
its Option To Expand, the Tenant has not sublet or assigned more than 25% of
- -----------------------------------------------------------------------------
the Total Rentable Floor Area of the Building, [Stricken Language] and
- ----------------------------------------------
Tenant is the then occupant of the [Stricken Language] Premises, Tenant shall
have the right to extend the term hereof for one (1) additional term of (5)
five years to commence immediately upon the expiration of the initial term by
written notice ("Tenant Extension Notice") to the Landlord given on or before
that date which is nine (9) months prior to the expiration of the initial
Term. If Tenant does not provide written notice of its option to extend on or
before the
<PAGE>
Exhibit B, Rider To Lease
Photoelectron
pg. 2 of 3
dates specified herein, Tenant's option to extend shall be null and void and
Tenant shall have no right to extend the Term.
Such extension term shall be upon all of the same terms and conditions described
herein with the exception that Annual Rent payable shall be the then Fair Market
Rent. Landlord shall not be responsible for any leasehold improvements to the
Premises during the Extension Term.
If Tenant does not provide written notice of its option to extend on or before
the dates specified herein, Tenant's option to extend shall be null and void and
Tenant shall have no right to extend the Term.
5. OPTION TO EXPAND
----------------
Effective [Stricken Language] August 1, 1999 (the "Expansion Commencement
Date"), provided that Tenant is not then in default hereunder, Tenant shall have
the option to lease 15,718 RSF of additional space on the second floor at Five
Forbes Road (the "Expansion Space" as described in Exhibit A-1). Tenant shall
exercise this option by giving nine (9) months written notice to Landlord
[Stricken Language] prior to the Expansion Commencement Date of its intention to
lease the Expansion Space. Within fifteen (15) days of receipt by Landlord of
--------------------------------------------------
Tenant's notice, Landlord shall notify Tenant of the Annual Rent for the term
- ----------------------------------------------------------------------------
[Stricken Language] of the Lease for the additional space (the "Fair Market
------ -----------------
Rent Notice") which shall be upon all of the same terms and conditions as are
- ------------
contained herein except that the Annual Rent shall be the then Fair Market
-------------------
Rent which (a) Fair Market Rent shall not be less than $17.83/RSF
- -----------------------------------------------------------------
including the Tenant's original Annual Estimated Operating Costs,
- -----------------------------------------------------------------
being the average annual rent payable for the last three years of the Tenant's
- ------------------------------------------------------------------------------
original term and (b) Fair Market Rent shall not be greater than $20.00/RSF
- ---------------------------------------------------------------------------
including the Tenant's original Annual Estimated Operating Costs. Tenant shall
- ------------------------------------------------------------------------------
have fifteen (15) days from the Fair Market Rent Notice to advise Landlord in
- -----------------------------------------------------------------------------
writing of Tenant's acceptance of the Fair Market Rent. If Tenant fails to
- --------------------------------------------------------------------------
notify Landlord within such time period, Tenant shall be deemed to have rejected
- --------------------------------------------------------------------------------
Landlord's offer, and Landlord shall be free to lease space to any third party
- ------------------------------------------------------------------------------
without further notice to Tenant. Additionally, if Landlord and Tenant, acting
- ------------------------------------------------------------------------------
reasonably and in good faith to negotiate the Fair Market Rent, are unable to
- -----------------------------------------------------------------------------
agree to the Fair Market Rent within thirty (30) days from the Fair Market Rent
- -------------------------------------------------------------------------------
Notice date, then Landlord shall be free to lease space to any third party
- --------------------------------------------------------------------------
without further notice to Tenant. [Stricken Language] Landlord and Tenant
- --------------------------------
further agree that the term shall be co-terminus with the Term of this Lease.
-----
Landlord shall not be responsible for any Leasehold Improvements to the
Expansion Space.
6. RIGHT OF FIRST OFFER
--------------------
Subject to the conditions subsequently set forth, and provided this Lease is in
full force and effect, and provided that Tenant has not been in default under
the terms of this Lease at any time during the term of the Lease or at the time
tenant exercises its right of first offer or at the commencement of the term for
the Additional Space (as defined herein) and provided further that Tenant
[Stricken Language] is the then occupant of the entire Premises, Tenant shall
have the Right of First Offer (the "Right of First Offer") to lease the rentable
area outlined on Exhibit A-2 (the
<PAGE>
Exhibit B, Rider To Lease
Photoelectron
pg. 3 of 3
"Additional Space"). Tenant's right to lease the Additional Space shall arise
only upon the expiration of the term of any leases and shall be subject to such
options to extend or expand or rights of first refusal or first offer or similar
rights as may be held by any other tenant in the Building, pursuant to the terms
of its lease.
In the event landlord intends to lease the Additional Space, and this Right of
First Offer is applicable in accordance with the foregoing, Landlord shall give
written notice to Tenant of the availability of such space for leasing and on
what terms Landlord intends to lease such space. The Additional Space shall be
offered in its strictly "as-is" condition. Upon receipt of Landlord's notice,
Tenant shall have fifteen (15) days from the date of Landlord's notice to advise
Landlord in writing of Tenant's election to exercise its rights hereunder. If
Tenant fails to notify Landlord within such time period, Tenant shall be deemed
to have rejected Landlord's offer, and Landlord shall be free to lease such
-----------------------------------------
portion of the Additional Space to any person or entity without making any
- --------------------------------------------------------------------------
further offer to Tenant. If accepted by Tenant then the Additional Space offered
- ----------------------------------------------
shall be taken by Tenant upon all the terms and conditions contained in
Landlord's offer. If requested by Landlord, Tenant shall execute a new lease or
amend the existing Lease to include the Additional Space.
<PAGE>
EXHIBIT A [FIVE FORBES ROAD, FIRST FLOOR DRAWING GOES HERE.]
<PAGE>
EXHIBIT A-1 [FIVE FORBES ROAD, SECOND FLOOR DRAWING GOES HERE.]
<PAGE>
EXHIBIT A-2 [ONE FORBES ROAD, FIRST FLOOR DRAWING GOES HERE.]
<PAGE>
EXHIBIT B [ONE FORBES ROAD, SECOND FLOOR DRAWING GOES HERE.]
<PAGE>
EXHIBIT C [FIVE FORBES ROAD PROPOSED TENANT IMPROVEMENTS DRAWING GOES HERE.]
<PAGE>
EXHIBIT D
LANDLORD'S SERVICES
I. CLEANING
A. General
1. All cleaning work will be performed between 8 a.m. and 12 midnight,
Monday through Friday, unless otherwise necessary for stripping, waxing,
etc.
2. Abnormal waste removal (e.g., computer installation paper, bulk
packaging, wood or cardboard crates, refuse from cafeteria operation,
etc.) shall be Tenant's responsibility.
B. Daily Operations (5 times per week)
1. Tenant Areas
a. Empty and clean all waste receptacles; wash receptacles as necessary.
b. Vacuum all rugs and carpeted areas.
c. Empty, damp-wipe and dry all ashtrays.
2. Lavatories
a. Sweep and wash floors with disinfectant.
b. Wash both sides of toilet seats with disinfectant.
c. Wash all mirrors, basins, bowls, urinals.
d. Spot clean toilet partitions.
e. Empty and disinfect sanitary napkin disposal receptacles.
f. Refill toilet tissue, towel, soap, and sanitary napkin dispensers.
3. Public Areas
a. Wipe down entrance doors and clean glass (interior and exterior).
b. Vacuum elevator carpets and wipe down doors and walls.
c. Clean water coolers.
C. Operations as Needed (but not less than every other day)
1. Tenant and Public Areas
a. Buff all resilient floor areas.
D. Weekly Operations
1. Tenant Areas, Lavatories, Public Areas
a. Hand-dust and wipe clean all horizontal surfaces with treated cloths
to include furniture, office equipment, window sills, door ledges,
chair rails, baseboards, convector tops, etc., within normal reach.
b. Remove finger marks from private entrance doors, light switches, and
doorways.
c. Sweep all stairways.
E. Monthly Operations
1. Tenant and Public Areas
a. Thoroughly vacuum seat cushions on chairs, sofas, etc.
b. Vacuum and dust grillwork.
2. Lavatories
a. Wash down interior walls and toilet partitions.
F. As Required and Weather Permitting
1. Entire Building
a. Clean inside of all windows.
b. Clean outside of all windows.
G. Yearly
1. Tenant and Public Areas
a. Strip and wax all resilient tile floor areas.
<PAGE>
II. HEATING, VENTILATING, AND AIR CONDITIONING.
1. Heating, ventilating, and air conditioning as required to provide
reasonably comfortable temperatures for normal business day occupancy
(excepting holidays); Monday through Friday from 8:00 a.m. to 6:00 p.m.
and Saturday from 8:00 a.m. to 1:00 p.m.
2. Maintenance of any additional or special air conditioning equipment and
the associated operating cost will be at Tenant's expense.
III. WATER
Hot water for lavatory purposes and cold water for drinking, lavatory and
toilet purposes.
IV. ELEVATORS (if Building is Elevatored)
Elevators for the use of all tenants and the general public for access to
and from all floors of the Building. Programming of elevators (including,
but not limited to, service elevators) shall be as Landlord from time to
time determines best for the Building as a whole.
V. RELAMPING OF LIGHT FIXTURES
Tenant will reimburse Landlord for the cost of lamps, ballasts and starters
and the cost of replacing same within the Premises.
VI. CAFETERIA AND VENDING INSTALLATIONS
1. Any space to be used primarily for lunchroom or cafeteria operation
shall be Tenant's responsibility to keep clean and sanitary, it being
understood that Landlord's approval of such use must be first obtained
in writing.
2. Vending machines or refreshment service installations by Tenant must be
approved by Landlord in writing and shall be restricted in use to
employees and business callers. All cleaning necessitated by such
installations shall be at Tenant's expense.
VII. ELECTRICITY
A. Landlord, at Landlord's expense, shall furnish electrical energy
required for lighting, electrical facilities, equipment, machinery,
fixtures, and appliances used in or for the benefit of Tenant's Space,
in accordance with the provisions of the Lease of which this Exhibit is
part.
B. Tenant shall not, without prior written notice to Landlord in each
instance, connect to the Building electric distribution system any
fixtures, appliances or equipment other than normal office machines
such as desk-top calculators and typewriters, or any fixtures,
appliances or equipment which Tenant on a regular basis operates beyond
normal building operating hours. In the event of any such connection,
Tenant agrees to an increase in the ANNUAL ESTIMATED ELECTRICAL COST TO
TENANT'S SPACE and a corresponding increase in Annual Rent by an amount
which will reflect the cost to Landlord of the additional electrical
service to be furnished by Landlord, such increase to be effective as
of the date of any such installation. If Landlord and Tenant cannot
agree thereon, such amount shall be conclusively determined by a
reputable independent electrical engineer or consulting firm to be
selected by Landlord and paid equally by both parties, and the cost
to Landlord will be included in Landlord's Operating Costs provided
in Section 4.2 hereof.
C. Tenant's use of electrical energy in Tenant's Space shall not at any
time exceed the capacity of any of the electrical conductors or
equipment in or otherwise serving Tenant's Space. In order to insure
that such capacity is not exceeded and to avert possible adverse effect
upon the Building electric service, Tenant shall not, without prior
written notice to Landlord in each instance, connect to the Building
electric distribution system any fixtures, appliances or equipment
which operate on a voltage in excess of 120 volts nominal or make any
alteration or
<PAGE>
addition to the electric system of Tenant's Space. Unless Landlord
shall reasonably object to the connection of any such fixtures,
appliances or equipment, all additional risers or other equipment
required therefor shall be provided by Landlord, and the cost thereof
shall be paid by Tenant upon Landlord's demand. In the event of any
such connection, Tenant agrees to an increase in the ANNUAL ESTIMATED
ELECTRICAL COST TO TENANT'S SPACE and a corresponding in Annual Rent by
an amount which will reflect the cost to Landlord of the additional
service to be furnished by Landlord, such increase to be effective as
of the date of any such connection. If Landlord and Tenant cannot agree
thereon, such amount shall be conclusively determined by a reputable
independent electrical engineer or consulting firm to be selected by
Landlord and paid equally by both parties, and the cost to Landlord
will be included in Landlord's Operating Costs provided in Section 4.2
hereof.
D. If at any time after the date of this Lease, the rates at which Landlord
purchases electrical energy from the public utility supplying electric
service to the Building, or any charges incurred or taxes payable by Landlord
in connection therewith, shall be increased or decreased, the Annual Rent and
ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE shall be increased or
decreased, as the case may be, by an amount equal to the estimated increase
or decrease, as the case may be, in Landlord's cost of furnishing the
electricity referred to in Paragraph A above as a result of such increase or
decrease in rates, charges, or taxes. If Landlord and Tenant cannot agree
thereon, such amount shall be conclusively determined by a reputable
independent electrical engineer or consulting firm to be selected by Landlord
and paid equally by both parties, and the cost to Landlord will be included
in Landlord's Operating Costs as provided in Section 4.2 hereof. Any such
increase or decrease shall be effective as of the date of the increase or
decrease in such rate, charges, or taxes.
E. Landlord may, at any time, elect to discontinue the furnishing of electrical
energy. In the event of any such election by Landlord: (1) Landlord agrees to
give reasonable advance notice of any such discontinuance to Tenant;
(2) Landlord agrees to permit Tenant to receive electrical service directly
from the public utility supplying service to the Building and to permit the
existing feeders, risers, wiring and other electrical facilities serving
Tenant's Space to be used by Tenant and/or such public utility for such
purpose to the extent they are suitable and safely capable; (3) Landlord
agrees to pay such charges and costs, if any, as such public utility may
impose in connection with the installation of Tenant's meters and to make or,
at such public utility's election, to pay for such other installations as
such public utility may require, as a condition of providing comparable
electrical service to Tenant; (4) the Annual Rent shall be equitably
decreased to reflect such discontinuance by an amount equal to the ANNUAL
ESTIMATED ELECTRICAL COST TO TENANT'S SPACE then in effect; and (5) Tenant
shall thereafter pay, directly to the utility furnishing the same, all
charges for electrical services to the Premises.
F. Whenever the Annual Rent is increased or decreased pursuant to any of the
foregoing paragraphs of this Article, the parties agree, upon request of
either, to execute and deliver each to the other an amendment to this Lease
confirming such increase or decrease.
<PAGE>
EXHIBIT E
RULES AND REGULATIONS
1. The entrances, lobbies, passages, corridors, elevators, halls, courts,
sidewalks, vestibules, and stairways shall not be encumbered or obstructed
by Tenant, Tenant's agents, servants, employees, licensees or visitors or
used by them for any purposes other than ingress or egress to and from the
Premises.
2. The moving in or out of all safes, freight, furniture, or bulky matter of
any description shall take place during the hours which Landlord may
determine from time to time. Landlord reserves the right to inspect all
freight and bulky matter to be brought into the Building and to exclude
from the Building all freight and bulky matter which violates any of these
Rules and Regulations or the Lease of which these Rules and Regulations are
a part. Landlord reserves the right to have Landlord's structural engineer
review Tenant's floor loads on the Premises at Tenant's expense.
3. Tenant, or the employees, agents, servants, visitors or licensees of Tenant
shall not at any time place, lease or discard any rubbish, paper, articles,
or objects of any kind whatsoever outside the doors of the Premises or in
the corridors or passageways of the Building. No animals or birds shall be
brought or kept in or about the Building. Bicycles shall not be permitted
in the Building.
4. Tenant shall not place objects against glass partitions or doors or windows
or adjacent to any common space which would be unsightly from the Building
corridors or from the exterior of the Building and will promptly remove the
same upon notice from Landlord.
5. Tenant shall not make noises, cause disturbances, create vibrations, odors
or noxious fumes or use or operate any electric or electrical devices or
other devices that emit sound waves or are dangerous to other tenants and
occupants of the Building or that would interfere with the operation of any
device or equipment or radio or television broadcasting or reception from
or within the Building or elsewhere, or with the operation of roads or
highways in the vicinity of the Building, and shall not place or install
any projections, antennae, aerials, or similar devices inside or outside of
the Premises, without the prior written approval of Landlord.
6. Tenant may not (without Landlord's approval therefor, which approval will
be signified on Tenant's Plans submitted pursuant to the Lease) and Tenant
shall not permit or suffer anyone to: (a) cook in the Premises; (b) place
vending or dispensing machines of any kind in or about the Premises; (c) at
any time sell, purchase or give away, or permit the sale, purchase, or gift
of food in any form.
7. Tenant shall not: (a) use the Premises for lodging, manufacturing or for
any immoral or illegal purposes; (b) use the Premises to engage in the
manufacture or sale of, or permit the use of spirituous, fermented,
intoxicating or alcoholic beverages on the Premises; (c) use the Premises
to engage in the manufacture or sale of, or permit the use of, any illegal
drugs on the Premises.
<PAGE>
8. No awning or other projections shall be attached to the outside walls or
windows. No curtains, blinds, shades, screens or signs other than those
furnished by Landlord shall be attached to, hung in, or used in connection
with any window or door of the Premises without prior written consent of
Landlord.
9. No signs, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or
inside of the Premises if visible from outside of the Premises without the
-----------
Landlord's prior written approval. Interior signs on doors and exterior
--------------------------------- ------------
signage as approved in the sole discretion of the Landlord shall be painted
----------------------------------------------------------
or affixed for Tenant by Landlord or by sign painters first approved by
Landlord at the expense of Tenant and shall be of a size, color, location
--------
and style acceptable to Landlord.
10. Tenant shall not use the name of the Building or use pictures or
illustrations of the Building in advertising or other publicity without
prior written consent of Landlord. Landlord shall have the right to
prohibit any advertising by Tenant which, in Landlord's opinion, tends to
impair the reputation of the Building or its desirability for offices, and
upon written notice from Landlord, Tenant will refrain from or discontinue
such advertising.
11. Door keys for doors in the Premises will be furnished at the Commencement
of the Lease by Landlord. Tenant shall not affix additional locks on doors
and shall purchase duplicate keys only from Landlord and will provide to
landlord the means of opening of safes, cabinets, or vaults left on the
Premises. In the event of the loss of any keys so furnished by Landlord,
Tenant shall pay to Landlord the cost thereof.
12. Tenant shall cooperate and participate in all security programs affecting
the Building.
13. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other means
of entry to the Premises closed and secured.
14. Tenant shall not make any room-to-room canvass to solicit business from
other tenants in the Building, and shall not exhibit, sell or offer to
sell, use, rent or exchange any item or services in or from the Premises
unless ordinarily embraced within Tenant's use of the Premises as specified
in its Lease. Canvassing, soliciting and peddling in the Building are
prohibited and Tenant shall cooperate to prevent the same. Peddlers,
solicitors and beggars shall be reported to the Management Office.
15. Tenant shall not mark, paint, drill into, or in any way deface any part of
the Building or Premises. No boring, driving of nails, or screws, cutting
or stringing of wires shall be permitted, except with the prior written
consent of Landlord, and as Landlord may direct. Tenant shall not install
any resilient tile or similar floor covering the Premises except with the
prior written approval of Landlord. The use of cement or other similar
adhesive material is expressly prohibited. Landlord consents to Tenant's
installation of normal office decorations including artwork, bulletin
boards, calendars, etc.
<PAGE>
16. Tenant shall not waste electricity or water and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building's
heating and air conditioning and shall refrain from attempting to adjust
controls. Tenant shall keep corridor doors closed except when being used
for access.
17. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein.
18. Building employees shall not be required to perform, and shall not be
requested by any tenant or occupant to perform, any work outside of their
regular duties, unless under specific instructions from the office of the
Managing Agent of the Building.
19. Tenant may request heating and/or air conditioning during other periods in
addition to normal working hours by submitting its request in writing to
the office of the Managing Agent of the Building no later than 2:00 pm the
preceding work day (Monday through Friday) on forms available from the
office of the Managing Agent. The request shall clearly state the start and
stop hours of the "off-hour" service. Tenant shall submit to the Building
Manager a list of personnel authorized to make such request. The Tenant
shall be charged for such operation in the form of additional rent; such
charges are to be determined by the Managing Agent and shall be fair and
reasonable and reflect the additional operating costs involved.
20. Tenant covenants and agrees that its use of the Premises shall not cause a
discharge of more than the gallonage per foot of Premises Design Floor Area
per day of sanitary (non-industrial) sewage allowed under the sewage
discharge permit for the Building. Discharges in excess of that amount, and
any discharge of industrial sewage, shall only be permitted if Tenant, at
its sole expense, shall have obtained all necessary permits and licenses
therefor, including without limitation permits from state and local
authorities having jurisdiction thereof. Tenant shall submit to Landlord on
December 31 of each year of the Term of this Lease a statement, certified
by an authorized officer of Tenant, which contains the following
information: name of all chemicals, gases, and hazardous substances, used,
generated, or stored on the Premises; type of substance (liquid, gas or
granular); quantity used, stored or generated per year; method of disposal;
permit number, if any, attributable to each substance, together with copies
of all permits for such substances; and permit expiration date for each
substance.
<PAGE>
EXHIBIT 10.2
Prototype Cash or Deferred
Profit-Sharing Plan #001
STANDARDIZED
ADOPTION AGREEMENT
PROTOTYPE CASH OR DEFERRED
PROFIT-SHARING PLAN AND TRUST
- -------------------------------------------------------------------------------
Sponsored by
AMERICAN FUNDS DISTRIBUTORS, INC.
The Employer named below hereby establishes a Cash or Deferred Profit-Sharing
Plan for eligible Employees as provided in this Adoption Agreement and the
accompanying Basic Prototype Plan and Trust/Basic Plan Document #03 (the
"Plan"). If multiple Employers are adopting the Plan, complete Section l
based on the lead Employer. Additional Employers may adopt this Plan by
attaching executed signature pages to the back of the Employer's Adoption
Agreement
1. EMPLOYER INFORMATION
Employer's Name: Photoelectron Corporation
-----------------------------------------------------------
Address: 400-1 Totten Pond Road
------------------------------------------------------------------
Waltham, MA 02154
------------------------------------------------------------------
Principal Address (if different):___________________________________________
____________________________________________________________________________
____________________________________________________________________________
Telephone Number: (617) 290 -5366 ext 401
--- --------------
Tax ID Number: 04 -3035323 Employer's Fiscal Year: December 31
-- -------- -------------
Form of Business:
[_] Sole Proprietor [_]Partnership [_]"S" Corporation
[X] Corporation [_] Other_______
Member of:
[_] Controlled Group [_] Affiliated Service Croup
[_] Group of trades or businesses under common control
Date of Incorporation:
Name of Plan: Photoelectron Corp, 401(k) Retirement Plan
------------------------------------------
Three Digit Plan Number for Annual Return/Report: 001.
2. EFFECTIVE DATE
2. (a) This is a new Plan having an effective date of 04/0l/95
---------
2. (b) This is an amended Plan.
The effective date of the original plan was ____. The effective
date of the amended Plan is____.
2. (c) If different from above, the Effective Date for the Plan's
Elective Deferral provisions shall be__________.
1
<PAGE>
Protoype Cash or Deferred
Profit-Sharing Plan #001
3. DEFINITIONS
3. (a) "Allocation Date(s)" Allocations to Participant Accounts will
be done in accordance with Article V of the Plan:
[ ] (i) daily.
[X] (ii) monthly.
[ ] (iii) quarterly
[ ] (iv) semi-annually.
[ ] (v) annually.
3. (b) "Compensation" Compensation shall be determined on the basis of
the Plan Year. Compensation [X] shall [ ] shall not include
Employer contributions made pursuant to a Salary Savings
Agreement, for this Plan or any other plan, which are not
includable in the gross income of the Employee for the reasons
indicated in the definition of Compensation at paragraph 1.13 of
the Plan.
Compensation [X] shall [ ] shall not be limited to Compensation
earned while a Participant in the Plan.
Compensation shall be determined on the basis of the following
safe-harbor definition of Compensation in IRS Regulation Section
1.414(s)-1(c):
[X] (i) Code Section 3401(a) - W-2 income subject to
income tax withholding.
[ ] (ii) Code Section 415 - W-2 income, share of
profits and other taxable income,
3. (c) "Entry Date"
[ ] (i) The first day of the Plan Year nearest the date
on which an Employee meets the eligibility
requirments.
[X] (ii) The earlier of the first day of the Plan Year or
the first day of the seventh month of the Plan
Year coinciding with or following the date on
which an Employee meets the eligibility
requirements.
[ ] (iii) The first day of the Plan Year following the date
on which the Employee meets the eligibility
requirements. If this election is made, the
Service requirement at 4(a) may not exceed 1/2
year and the age requirement at 4(b) may not
exceed 20-1/2.
[ ] (iv) The first day of the month or if earlier the
first day of the Plan Year coinciding with or
following the date on which an Employee meets the
eligibility requirements.
[ ] (v) The first day of the Plan Year, or the first day
of the fourth, seventh or tenth month, of the
Plan Year coinciding with or following the date
on which an Employee meets the eligibility
requirements.
3. (d) "Hours of Service" shall be determined on the basis of the method
selected below. Only one method may be selected. The method
selected shall be applied to all Employees covered under the Plan
as follows:
[ ] (i) On the basis of actual hours for which an
Employee is paid or entitled to payment.
[ ] (ii) On the basis of days worked. An Employee shall be
credited with ten (10) Hours of Service if under
paragraph 1.43 of the Plan such Employee would be
credited with at least one (1) Hour of Service
during the day.
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[ ] (iii) On the basis of weeks worked.
An Employee shall be credited wit forty-five (45)
Hours of Service if under paragraph 1.43 of the
Plan such Employee would be credited with at
least one (1) Hour of Service during the week.
[ ] (iv) On the basis of semi-monthly payroll periods.
An Employee shall be credited with ninety-five
(95) Hours of Service if under paragraph l.43 of
the Plan such Employee would be credited with at
least one (1) Hour of Service during the semi-
monthly payroll period.
[X] (v) On the basis of months worked.
An Employee shall be credited with one-hundred-
ninety (190) Hours of Service if under paragraph
1.43 of the Plan such Employee would be credited
with at least one (1) Hour of Service during the
month.
[ ] (vi) On the basis of Elapsed Time, as provided in
Article XVI of the Plan.
3. (e) "Limitation Year" The 12-consecutive month period commencing on
January 1 and ending on December 31.
--------- -----------
If applicable, the Limitation Year will he a short Limitation
Year commencing on 04/01/95 and ending on 12/31/95. Thereafter,
-------- --------
the Limitation Year shall end on the date last specified above.
3. (f) "Net Profit"
[X] (i) Not applicable. Profits will not be required
for any contributions to the Plan.
[_] (ii) As defined in paragraph 1.50 of the Plan.
3. (g) "Plan Year" The 12-consecutive month period commencing on
January 1 and ending on December 31. If applicable, the first
--------- -----------
Plan Year will be a short Plan Year commencing on
04/01/95 and ending on 12/31/95. Thereafter, the Plan Year shall
-------- --------
end on the date last specified.
3. (h) "Qualified Early Retirement Age" For purposes of making
distributions under the provisions of a Qualified Domestic
Relations Order, the Plan's Qualified Early Retirement Age with
regard to the Participant against whom the Order is entered
shall be the date the Order is determined to be qualified. This
will only allow payout to the alternate payee(s).
3. (i) "Qualified Joint and Survivor Annuity" The safe-harbor
provisions of paragraph 8.7 of the Plan [X] are [ ] are not
applicable. If not applicable, the survivor annuity shall be __%
(50%, 66-2/3% 75% or 100%) of the annuity payable during the
lives of the Participant and Spouse. If no answer is specified,
50% will be used.
3. (j) "Taxable Wage Base" [paragraph 1.81]
[x] (i) Not Applicable-Plan is not integrated with Social
Security.
[ ] (ii) The maximum earnings considered wages for such
Plan Year under Code Section 3121(a).
[ ] (iii) __% (not more than 100%) of the amount considered
wages for such Plan Year under Code Section
3121(a).
[ ] (iv) $____ provided that such amount is not in excess
of the amount determined under subsection
(ii)above.
[ ] (v) For the 1989 Plan Year $10,000. For all
subsequent Plan Years, 20% of the maximum
earnings considered wages for such Plan Year
under Code Section 3121(a).
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NOTE: Using less than the maximum at subsection (ii) may result in a
change in the allocation formula in Section 7(f) hereof.
4. ELIGIBILITY REQUIREMENTS
Employees meeting the following Service and Age requirements shall be
eligible to participate in the Plan:
4. (a) Service 1/4 [not more than one (1)] Year of Service. [A Year of
---
Service is a l2-consecutive month period during which a
Participant is credited with 1,000 hours.] If the Year of Service
selected is a fractional year, an Employee will not be required
to complete any specified number of Hours of Service to receive
credit for such fractional year.
4. (b) Age: Attainment of age 21 (not more than age 21).
--
4. (c) Initial Participants: Employees employed on the Plan's Effective
Date [_]do [X] do not have to satisfy the eligibility
requirements specified above.
NOTE: Employees covered under the terms of a collective bargaining
agreement (the agreement should indicate that retirement benefits
were the subject of good faith bargaining and the agreement
should benefit Employees of whom two percent or less are
professionals, as defined in Section 1.410(b)-9 of the
Regulations) between the Employer and Employee representatives
(does not include any organization more than half of whose
members are owners, officers, or executives of the Employer) and
nonresident aliens [within the meaning of Section 770(b)(1)(B)]
with no U.S. Income [within the meaning of Section 911(d)(2)]
from the Employer which constitutes income from sources within
the United States [within the meaning of Section 86(a)(3)] are
excluded from the Plan participation.
5. RETIREMENT AGES
If the Employer imposes a requirement that Employees retire upon reaching a
specified age, the Normal Retirement Age selected below may not exceed the
Employer imposed mandatory retirement age.
5. (a) Normal Retirement Age shall be 65 (not to exceed age 65).
5. (b) Normal Retirement Age shall be the later of attaining age __ (not
to exceed age 65) or the __ (not to exceed the 5th) anniversary
of the first day of the first Plan Year in which the Participant
commenced participation in the Plan.
5. (c) Early Retirement Age:
[ ] (i) Not applicable.
[X] (ii) The Plan shall have an Early Retirement Age of 62
--
(not less than 55) and completion of 5 Years of
-
Service.
6. EMPLOYEE CONTRIBUTIONS
[X] 6.(a)Participants shall be permitted to make Elective Deferrals in any
amount from 2 % up to 15 % of their Compensation. Participants may
- --
amend their Salary Savings Agreements to change the contribution
percentage as provided below:
[X] (i) on the first day of each month of the Plan Year. [_]
(ii) on the first day of the Plan Year and on the first day of
the fourth, seventh, and tenth months of the Plan Year.
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[ ] (iii) on the first day of the Plan Year and on the first day
of the seventh month of the Plan Year.
[ ] 6.(b)Participants shall be required to make after-tax Voluntary
Contributions as follows (Thrift Savings Plan):
[ ] (i) in any amount from __% up to __% of Compensation.
[ ] (ii) a percentage determined by the Employee on his or her
enrollment form.
NOTE: Elective Deferrals may not be recharacterized as Voluntary
Contributions for purposes of the Average Deferral Percentage (ADP)
Test. The ADP Test will apply to contributions under (a) above. The
Average Contribution Percentage (ACP) Test will apply to contributions
under (b) above, and may apply to (a).
7. EMPLOYER CONTRIBUTIONS AND ALLOCATION
The Employer shall make contributions to the Plan in accordance with the
formula or formulas selected below. The Employer's contribution shall be
subject to the limitations contained in Articles III and X of the Plan. For
this purpose, a contribution for a Plan Year shall be limited for the
Limitation Year which ends with or within such Plan Year. Also, the
allocation formulas below are for Plan Years beginning in 1989 and later.
The Employers allocation for earlier years shall be as specified in its Plan
prior to amendment for the Tax Reform Act of 1986.
7.(a) Profits Requirement - Current or Accumulated Net Profits are not
required unless otherwise indicated below:
[ ] (i) Matching Contributions.
[ ] (ii) Qualified Non-Elective Contributions.
[ ] (iii) discretionary contributions.
NOTE: Elective Deferrals and any contribution category not checked above may
always be contributed regardless of profits. Complete this Item in
conjunction with Item 3(f).
7.(b) Salary Savings Agreement:
The Employer shall contribute and allocate to each Participant's
account an amount equal to the amount withheld from the Compensation
of such Participant pursuant to his or her Salary Savings Agreement.
If applicable, the maximum percentage is specified in Section 6 above.
An Employee who has terminated his or her election under the Salary
Savings Agreement other than for hardship reasons may not make another
Elective Deferral:
[ ] (i) until the first day of the next Plan Year.
[X] (ii) for a period of 1 month(s) (not to exceed 12 months).
[X] 7(c) Matching Contribution [See Section (g) and (h)]:
[ ] (i) Percentage Match On Elective Deferrals: the Employer
shall contribute and allocate to each eligible
Participant's account an amount equal to __% of the
amount contributed and allocated in accordance with
Section 7(b) above. The Employer shall not match
Participant Elective Deferrals as provided above in
excess of $___or in excess of __% of the Participant's
Compensation.
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[ ] (ii) Percentage Match on Voluntary Contributions: The
Employer shall contribute and allocate to each eligible
Participant's account an amount equal to ___% of the
amount of Voluntary Contributions (if provided for
under Section 6(b) above) made in accordance with 4.7
of the Plan. The Employer shall not match Participant
Voluntary Contributions as provided above in excess of
$_____ or in excess of ____% the Participant's
Compensation
[X] (iii) Discretionary Match: The Employer shall contribute and
allocate to each eligible Participant's account a
percentage of the Participant's Elective Deferral
contributed and allocated in accordance with Section
7(b) above. The Employer shall set such percentage
prior to the end of the Plan Year. The Employer shall
not match the Participant Elective Deferrals in excess
of $n/a or in excess of 6% of the Participant's
--- ---
Compensation.
[X] (iv) Qualified Match: Matching Contributions will be treated
as Qualified Matching Contributions to the extent
specified below:
[ ] (A) all Matching Contributions.
[ ] (B) none.
[X] (C) the amount necessary to meet [ ] the ADP
test, [ ] the ACP test, [X] both the ADP
and ACP tests.
[X] (v) Eligibility for Matching Contributions: Matching
Contributions, whether or not Qualified, will only be
made on Employee Contributions:
[ ] (A) not withdrawn prior to the end of the
valuation period.
[ ] (B) not withdrawn prior to the end of the
Plan Year.
[X] (C) without regard to their withdrawal.
[X] (vi) Matching Contribution Computation Period: The time
period upon which Matching Contributions will be based
shall be:
[ ] (A) weekly.
[ ] (B) bi-weekly.
[ ] (C) semi-monthly.
[ ] (D) monthly.
[X] (E) quarterly.
[ ] (F) semi-annually.
[ ] (G) annually.
[X] 7.(d) Qualified Non-Elective Contribution -[See Sections (f) and (g)]
These contributions are fully vested when contributed.
The Employer shall have the right to make an additional discretionary
contribution which shall be allocated to each eligible Employee in
proportion to his or her Compensation as a percentage of the
Compensation of all eligible Employees. This part of the Employer's
contribution and the allocation thereof shall be unrelated to any
Employee contributions made hereunder. The amount of Qualified non-
Elective Contributions taken into account for purposes of meeting the
ADP or ACP test requirements is:
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[ ] (i) all Qualified non-Elective Contributions.
[ ] (ii) none.
[X] (iii) the amount necessary to meet [ ]the ADP test, [ ] the
ACP test, [X] both the ADP and ACP tests.
Qualified non-Elective Contributions will be made to:
[ ] (iv) all Employees eligible to participate.
[X] (v) only non-Highly-Compensated Employees eligible to
participate.
[ ] 7.(e) Additional Employer Contribution Other Than Qualified Non-
Elective Contributions - Non-integrated [See Sections (g) and
(h)]:
The Employer shall have the right to make an additional discretionary
contribution which shall be allocated to each eligible Employee in
proportion to his or her Compensation as a percentage of the
Compensation of all eligible Employees. This part of the Employer's
contributions and the allocation thereof shall be unrelated to any
Employee contributions made hereunder.
[ ] 7.(f) Additional Employer Contribution - Integrated Allocation
Formula (See Sections (g)and (h)]
The Employer shall have the right to make an additional discretionary
contribution. The Employer's contribution for the Plan Year plus any
forfeitures shall be allocated to the accounts of eligible
Participants as follows:
(i) First, to the extent contributions and forfeitures are
sufficient, all Participants will receive an allocation equal
to 3% of their Compensation.
(ii) Next, any remaining Employer Contributions and forfeitures will
be allocated to Participants who have Compensation in excess of
the Taxable Wage Base (excess Compensation). Each such
Participant will receive an allocation in the ratio that his or
her excess Compensation bears to the excess Compensation of all
Participants. Participants may only receive an allocation of 3%
of excess Compensation.
(iii) Next, any remaining Employer contributions and forfeitures will
be allocated to all Participants in the ratio that their
Compensation plus excess Compensation bears to the total
Compensation plus excess Compensation of all Participants.
Participants may only receive an allocation of up to 2.7% of
their Compensation plus excess Compensation, under this
allocation method. If the Taxable Wage Base defined at Section
3(j) is less than or equal to the greater of $10,000 or 20% of
the maximum, the 2.7% need not be reduced. If the amount
specified is greater than the greater of $10,000 or 20% of the
maximum Taxable Wage Base, but not more than 80%, 2.7% must be
reduced to 1.3%. If the amount specified is greater than 80%
but less than 100% of the maximum Taxable Wage Base, the 2.7%
must be reduced to 2.4%.
NOTE: If the Plan is not Top-Heavy or if the Top-Heavy minimum contribution
or benefit is provided under another Plan [see Section 11(c)(ii)]
covering the same Employees, subsection (i) and (ii) above may be
disregarded and 5.7%, 4.3% or 5.4% may be substituted for 2.7%, 1.35%
or 2.4% where it appears in (iii) above.
(iv) Next, any remaining Employer contributions and forfeitures will
be allocated to all Participants (whether or not they received
an allocation under the preceding paragraphs) in the ratio that
each Participants Compensation bears to all Participants'
Compensation.
NOTE: Only one plan maintained by the Employer may be integrated with Social
Security.
7.(g) Allocation of Excess Amounts (Annual Additions):
In the event that the allocation formula above results in an Excess
Amount, such excess shall be distributed to the Participant to the
extent such excess does not exceed the Participant's Elective
Deferrals, non-deductible Required Voluntary Contributions. To the
extent the Excess Amount exceeds the sum of the aforementioned
Employee contributions, such excess shall be:
7
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[X] (i) placed in a suspense account accruing no gains or losses for
the benefit of the Participant.
[ ] (ii) reallocated as additional Employer contributions to all
other Participants to the extent that they do not have any
Excess Amount.
7.(h) Minimum Employer Contribution Under Top-Heavy Plans:
For any Plan Year during which the Plan is Top-Heavy, the sum of the
contributions and forfeitures as allocated to eligible Employees under
sections 7(e), 7(f) and 9 of this Adoption Agreement shall not be less
than the amount required under paragraph 14.2 of the Plan. Top-Heavy
minimums will be allocated to:
[X] (i) all eligible Participants.
[ ] (ii) only eligible non-Key Employees who are Participants.
7.(i) Return of Excess Contributions and/or Excess Aggregate Contributions:
In the event that one or more Highly-Compensated Employees is subject
to both the ADP and ACP tests and the sum of such tests exceeds the
Aggregate Limit, the limit will be satisfied by reducing the ADP
and/or ACP of the affected Highly Compensated Employees.
8. ALLOCATIONS TO TERMINATED EMPLOYEES
(This option is not applicable if Hours of Service are determined on the
basis of Elapsed Time selected under Section 3(d)(vi) above.)
8.(a) For Plan Years beginning prior to 1993:
[ ] (i) the Employer will not allocate Employer-related
contributions to any Participant who terminates
employment during the Plan Year.
[ ] (ii) the Employer will allocate Employer-related
contributions to Employees who terminate during the
Plan Year as a result of:
[ ] (A) retirement.
[ ] (B) Disability
[ ] (C) death.
[ ] (D) other termination provided that the
Participant has completed a Year of
Service.
[ ] (E) other termination.
8.(b) For Plan Years beginning in 1993 and thereafter, the Employer will
allocate Employer-related contributions, except Matching
Contributions, to any Participant who is (i) credited with more than
500 Hours of Service, or (ii) employed on the last day of the Plan
Year without regard to the number of Hours of Service. The Employer
will also allocate Employer-related contributions to any Participant
who terminates during the Plan Year without accruing the necessary
Hours of Service if he or she terminates as a result of:
[X] (i) retirement.
[X] (ii) Disability.
[X] (iii) death.
Matching Contributions will be allocated to each Participant without
regard to whether he or she is employed on the last day of the Plan
Year and without regard to his or her Hours of Service.
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9. ALLOCATION OF FORFEITURES
NOTE: Forfeitures of Excess Aggregate Contributions shall be applied at the
end of the Plan Year in which they occur to reduce Employer
Contributions. Subsections (a), (b) and (c) below apply to
forfeitures of amounts other than Excess Aggregate Contributions.
9.(a) Allocation Alternatives:
Forfeitures shall be applied to reduce the Employer's contribution
for such Plan Year. If forfeitures were reallocated, pursuant to a
prior document's provisions, they will continue to be reallocated in
the same manner until the end of the Plan year in which this Adoption
Agreement is signed.
9.(b) Date for Reallocation of Forfeitures:
NOTE: If no distribution has been made to a former Participant, subsection
(i) below will automatically apply to such Participant
[ ] (i) Forfeitures shall be applied to reduce the Employer's
contribution at the end of the Plan year during which the
former Participant incurs his or her fifth consecutive
one-year Break In Service.
[X] (ii) Forfeitures shall be applied to reduce the Employer's
contribution at the end of the next Plan Year during
which the Participant has received distribution of his or
her vested interest.
9.(c) Restoration of Forfeitures:
If amounts are forfeited prior to five consecutive one-year Breaks in
Service, the Funds for restoration of account balances will be
obtained from the following resources in the order indicated (fill in
the appropriate number):
[1] (i) current year's forfeitures.
[2] (ii) additional Employer contributions.
10. LIMITATIONS ON ALLOCATIONS
This Section is not applicable if this is the only Plan you maintain or ever
maintained. Plans include Welfare Benefit Funds as described in Code Section
419(e) or an individual medical account as defined under Code Section
415(1)(2) under which amounts are treated as Annual Additions.
l0.(a) If the Participant is covered under another qualified Defined
Contribution Plan maintained by the Employer, other than a Master or
Prototype Plan, the provisions of Article X of the Plan will apply as
if the other plan were a Master or Prototype Plan.
l0.(b) If a Participant is or ever has been a Participant in a Defined
Benefit Plan maintained by the Employer, attach provisions which will
satisfy the 1.0 limitation of Code Section 415(e). Such language must
preclude Employer discretion The Employer must also specify the
interest and mortality assumptions used in determining present value
in the Defined Benefit Plan.
10.(c) The minimum contribution or benefit required under Code Section 416
relating to Top-Heavy Plans shall be satisfied by either:[ ] this
Plan or [ ]
- -------------------------------------------------------------------------------
(Name of other qualified plan of the Employer). If a Defined Benefit
Plan is or was maintained, an attachment must be provided showing
interest and mortality assumptions used in determining the Top-Heavy
Ratio.
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11. VESTING
11.(a) Computation Period: (This option is not applicable if Hours of
Service are determined on the basis of Elapsed Time selected under
Section 3(d)(vi) above.)
The computation period for purposes of determining Years of Service and
Breaks in Service for purposes of computing a Participant's
nonforfeitable right to his or her account balance derived from
Employer contributions:
[ ] (i) shall not be applicable since Participants are always
fully vested.
[X] (ii) shall commence on the first day of the Plan Year during
which an Employee first performs an Hour of Service for
the Employer and each subsequent 12-consecutive month
period shall commence on the anniversary thereof.
A Participant shall receive credit for a Year of Service if he or she
completes at least 1,000 Hours of Service at any time during the 12-
consecutive month computation period. Consequently, a Year of Service
may be earned prior to the end of the 12-consecutive month computation
period and the Participant need not be employed at the end of the 12-
consecutive month computation period to receive credit for a Year of
Service.
1l.(b) Vesting Schedules:
NOTE: Contributions under Sections 6(a), (b), 7(c)(iv) and (d) are always
fully vested. The vesting schedules below only apply to a Participant
who has at least one Hour of Service during or after the 1989 Plan
Year. If applicable, Participants who separated from Service prior to
the 1989 Plan Year will remain under the vesting schedule as in effect
in the Plan prior to amendment for the Tax Reform Act of 1986.
<TABLE>
<CAPTION>
[ ] (i) Full and Immediate Vesting.
Years of Service
----------------
1 2 3 4 5 6 7
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
[ ] (ii) ___% 100%
[ ] (iii) ___% ___% 100%
[ ] (iv) ___% 20% 40% 60% 80% 100%
[ ] (v) ___% ___% 20% 40% 60% 80% 100%
[ ] (vi) 10% 20% 30% 40% 60% 80% 100%
[X] (vii) 20% 40% 60% 80% 100%
--- --- --- ---
[ ] (viii) ___% ___% ___% ___% ___% ___% 100%
</TABLE>
NOTE: The percentages selected for schedule (viii) may not be less for any year
than the percentages shown at schedule (v).
[X] (A) All contributions other than those which
are fully vested when contributed will vest
under schedule vii above.
---
[ ] (B) All Matching Contributions will vest under schedule
___ above. All other Employer contributions other
than those which are fully vested when contributed
will vest under schedule ___above.
11.(c) Service disregarded for Vesting:
[X] (i) Not applicable. All Service shall be considered.
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[ ] (ii) Service prior to the Effective Date of this Plan or a
predecessor plan shall be disregarded when computing a
Participant's vested and nonforfeitable interest.
[ ] (iii) Service prior to a Participant having attained age 18 shall
be disregarded when computing a Participant's vested and
nonforfeitable interest.
11.(d) Top-Heavy Vesting:
Each Participant shall acquire a vested and nonforfeitable percentage
in his or her account balance attributable to Employer contributions
and the earnings thereon under the procedures selected above except
with respect to any Plan Year during which the Plan is Top-Heavy, in
which case the [X] Two-twenty vesting schedule [Section 11(b)(iv)] or
[ ] Three-Year Cliff vesting schedule [Section 11 (b)(iii)] shall
automatically apply unless the Employer has already elected a faster
vesting schedule. If the Plan is switched to Section 11 (b)(iii) or
11(b)(iv) because of its Top-Heavy status, that vesting schedule will
remain in effect, even if the Plan later becomes non-Top-Heavy, until
the Employer executes an amendment of this Adoption Agreement
indicating otherwise.
12. SERVICE WITH PREDECESSOR ORGANIZATION
For purposes of satisfying the Service requirements for eligibility and
vesting, Hours of Service shall include Service with the following predecessor
organization(s).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13. ROLLOVER/TRANSFER CONTRIBUTIONS
13.(a) Rollover Contributions, as described in paragraph 4.3 of the Plan, [X]
shall [ ] shall not be permitted. If permitted, Employees [X] may [ ]
may not make rollover contributions prior to meeting the eligibility
requirements for participation in the Plan
13.(b) Transfer Contributions, as described in paragraph 4.4 of the Plan, [X]
shall [ ] shall not be permitted. If permitted, Employees [X] may [ ]
may not Transfer Contributions prior to meeting the eligibility
requirements for participation in the Plan.
NOTE: Even if available, the Employer may refuse to accept such contributions
if its Plan meets the safe-harbor rules of paragraph 8.7 of the Plan.
14. HARDSHIP WITHDRAWALS
Hardship withdrawals, as provided for in paragraph 6.9 of the Plan, [X] are
[ ] are not permitted.
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15. PARTICIPANT LOANS
Participant loans, provided for in paragraph 13.4 of the Plan, [X] are [ ] are
not permitted. If permitted, repayments of principal and interest shall be
repaid to the Participant's segregated account.
16. EMPLOYER INVESTMENT DIRECTION
The Employer investment direction provisions, as set forth in paragraph 13.5
of the Plan [ ] shall [X] shall not be applicable.
17. EMPLOYEE INVESTMENT DIRECTION
The Employee investment direction provisions, as set forth in paragraph 13.6
of the Plan, [X] shall [ ] shall not be applicable.
NOTE: To the extent that Employee investment direction was previously
allowed, the Trustee shall have the right to either make the assets
part of the general Trust, or leave them as separately invested subject
to the provisions of paragraph 13.6 of the Plan.
18. EARLY PAYMENT OPTION
A Participant who separates from Service prior to retirement, death or
Disability may make application to the Employer requesting an early payment of
his or her vested account balance. Amounts under $3,500 [X] will [ ] will not
be cashed out immediately
18(a) A Participant who has not separated from Service [ ] may [X] may not
obtain a distribution of his or her vested Employer contributions.
Distribution can only be made if the Participant has completed five
Years of Service.
18(b) A Participant who has attained age 59-1/2 and has not separated from
Service [X] may [ ] may not obtain a distribution of his or her vested
Employer contributions.
18(c) A Participant who has attained the Plan's Normal Retirement Age
and who has not separated from Service [X] may [ ] may not receive a
distribution of his or her vested account balance.
NOTE: If the Participant has had the right to withdraw his or her
account balance in the past, this right may not be taken away.
Notwithstanding the above, to the contrary, required minimum
distributions will be paid. For timing of distributions, see item 19(a)
below.
19. DISTRIBUTIONS OPTIONS
19(a) Timing of Distributions:
In cases of termination including death, Disability or retirement,
benefits shall be paid:
[ ] (i) as soon as administratively feasible following the close of
the Plan Year during which a distribution is requested or is
otherwise payable.
[X] (ii) as soon as administratively feasible, following the date on
which a distribution is requested or is otherwise payable.
[ ] (iii) as soon as administratively feasible, after the close of the
Plan Year during which the Participant incurs a one-year
Break in Service.
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19.(b) Optional Forms of Payment:
[X] (i) Lump Sum.
[ ] (ii) Installment Payments.
[ ] (iii) Other form(s) as previously provided
(indicate all forms that apply):
-------------------------------
19.(c) Recalculation of Life Expectancy:
In determining required distributions under the Plan, a Participant
and/or Spouse (Surviving Spouse) [X] shall [ ]shall not have the right
to have their life expectancy recalculated annually. If life expectancy
is recalculated, it will follow the Employer's administrative policy.
20. SPONSOR CONTACT
Employers should direct questions concerning the language contained in and the
qualification of the Prototype to:
Capital Guardian Trust Company
Corporate Employee Benefits Department
(Phone Number) (714)671-7000
In the event that the Sponsor amends, discontinues or abandons this Prototype
Plan, notification will be provided to the Employer's address provided on the
first page of this Agreement
21. SIGNATURES
- -------------------------------------------------------------------------------
Due to the significant tax ramifications, the Sponsor recommends that before
you execute this Adoption Agreement, you contact your attorney or tax advisor.
(a) Employer Delegate or Committee Appointment:
The Employer has appointed the following individual(s) to act on behalf
of the Employer regarding all communications and requests between the
Employer and the Recordkeeper, pursuant to the terms and conditions of
the Plan. Unless otherwise directed by the Employer in written
directions to the Recordkeeper, the Recordkeeper may act upon the
instructions of any one of the persons listed below.
Name(s) (please type or print) Signature(s)
1. /s/John J. Crowley 1. /s/John J. Crowley
--------------------------- ---------------------------
400-1 Totten Pond Rd.
---------------------------
Address Waltham, MA 02154
2. 2.
--------------------------- ---------------------------
---------------------------
Address
3. 3.
--------------------------- ---------------------------
---------------------------
Address
(b) EMPLOYER:
Name and address of Employer if different than specified in
Section 1 above.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
13
<PAGE>
Protoype Cash or Deferred
Profit-Sharing Plan #001
The Employer hereby adopts the Plan, appoints Capital Guardian Trust
Company as Trustee and directs that contributions to the Plan shall be
invested in accordance with the instructions provided by it. The
Employer has read the Plan and Trust and Adoption Agreement, agrees to
the Terms and conditions set forth therein and has consulted with an
attorney about the effect of establishing the Plan.
This agreement and the corresponding provisions of the Plan and Trust
Basic Plan Document #03 were adopted by the Employer the 1 day of
April, 1995.
Signed for the Employer by: /s/John J. Crowley
------------------------------------------
Title: Controller
------------------------------------------
Signature: /s/John J. Crowley
------------------------------------------
The Employer understands that its failure to properly complete the
Adoption Agreement may result in disqualification of its Plan.
Employer's Reliance: All Employer who maintains or has ever maintained
or who later adopts any Plan [including, after December 31, 1985, a
Welfare Benefit Fund, as defined in Section 419(e) of the Code, which
provides post-retirement medical benefits allocated to separate
accounts for Key Employees, as defined in Section 419A(d)(3) or an
individual medical account, as defined in Code Section 415(1)(2)], in
addition to this Plan may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this
Plan is qualified under Section 401 of the Code. If the Employer who
adopts or maintains multiple Plans wishes to obtain reliance that such
Plan(s) are qualified, application for a determination letter should be
made to the appropriate Key District Director of Internal Revenue. The
employer understands that its failure to properly complete the Adoption
Agreement may result in disqualification of its plan.
This Adoption Agreement may only be used in conjunction with Basic Plan
Document #03.
[x] (c) TRUSTEE APPOINTMENT AND ACCEPTANCE:
The Employer hereby appoints Capital Guardian Trust Company to serve as
Trustee, and such Trustee hereby confirms acceptance of the appointment
and duties pursuant to the accompanying Plan and this Adoption
Agreement.
Capital Guardian Trust Company hereby accepts appointment as Trustee
the 21st day of July, 1995.
---- ---- ----
Signed for the Trustee by:
----------------------------------
HERMAN MARTINEZ
Title: ASSISTANT VICE PRESIDENT
----------------------------------
Signature: /s/Herman Martinez
----------------------------------
NOTE: In accordance with paragraph 13.7 of Basic Plan Document #03 an
additional trustee may be appointed to govern Plan assets held outside
the Fund. If so, the additional trustee shall be appointed in a
separate trust agreement.
14
<PAGE>
AMENDMENT
TO THE
PHOTOELECTRON CORPORATION
401(K) RETIREMENT PLAN
EFFECTIVE OCTOBER 1, 1995
WHEREAS, effective April 1, 1995, Photoelectron Corporation (The "Company")
adopted a Profit Sharing Plan; and
WHEREAS, Photoelectron Corporation 401(k) Retirement Plan (the "Plan") provides
certain benefits for eligible employees and is intended to qualify under Section
401 and Section 501 of the Internal Revenue Code of 1986; and
WHEREAS, the Company, desires to amend the Plan in order to provide for
quarterly entry dates; and
WHEREAS, the amendment of the Plan, as embodied herein, does not cause any part
of the trust to be used for, or diverted to, any purposes other than for the
exclusive benefit of the plan participants and their beneficiaries.
NOW THEREFORE, effective October, 1995, Item 4.(a) of the Standardized Adoption
Agreement Prototype Cash or Deferred Profit-Sharing Plan and Trust will be
deleted in its entirety and replaced by the following:
3. Definitions
3. (c) "Entry Date"
[ ] (i) The first day of the Plan Year nearest the date
on which an Employee meets the eligibility
requirements.
[ ] (ii) The earlier of the first day of the Plan Year or
the first day of the seventh month of the Plan
Year coinciding with or following the date on
which an Employee meets the eligibility
requirements.
[ ] (iii) The first day of the Plan Year following the date
on which the Employee meets eligibility
requirements. If this electiion is made, the
Service requirement at 4(a) may not exceed 1/2
year and the age requirement at 4(b) may not
exceed 20-1/2.
[ ] (iv) The first day of the month or if earlier the
first day of the Plan Year coinciding with or
following the date on which an Employee meets the
eligibility requirements.
[X] (v) The first day of the Plan Year, or the first day
of the fourth, seventh or tenth month, of the
Plan Year coinciding with or following the date
on which an Employee meets the eligibility
requirements.
<PAGE>
IN WITNESS THEREOF, the Company has caused this instrument, this Amendment to
the Plan, be executed as of this _______ day of ____________, 199__.
-------------------------------
(CORPORATE SEAL) Photoelectron Corporation
<PAGE>
CERTIFICATE OF CORPORATE RESOLUTION
The undersigned Secretary of Photoelectron Corporation, (the Corporation)
-------------------------
hereby certifies that the following resolutions were duly adopted by the Board
of Directors of the Corporation on _________________ and that the resolutions
have not been modified or rescinded as of the date hereof:
RESOLVED, that the amendment to the Photoelectron Corporation 401(k)
--------------------------------
Retirement Plan (the Plan) is hereby approved and adopted.
- ---------------
The undersigned further certifies that the attached hereto as Exhibit A is
a true copy of the amendment approved and adopted in the foregoing resolution.
------------------------------
Secretary
------------------------------
Date
<PAGE>
EXHIBIT 10.3
DESCRIPTION OF EMPLOYEE STOCK PURCHASE PLAN
The management of Photoelectron Corporation is pleased to provide you with
the opportunity to purchase shares of Photoelectron Common Stock. The principal
provisions of the plan are as follows:
1. The Offer. You may purchase shares of Photoelectron Common Stock
---------
at a price of $1.50 per share. A maximum of 600,000 shares will be
sold at this time. If the employees of Photoelectron commit to
purchasing in excess of that amount, all requests will be reduced pro
---
rata.
----
2. Payment for the Stock. You may select one of two methods of paying
---------------------
for the stock you buy:
(a) You may pay in full by personal or bank check at the time of
purchase; or
(b) You may borrow all or part of the purchase price (up to a maximum
of $15,000) from the Company and repay the loan through a payroll
deduction plan or by making payments of principal and accrued
interest on the first day of each calendar quarter.
If you choose to finance your purchase of stock, the loan would
be amortized over a five year term and would bear interest at the
rate of 5% per year. If you default on any payment or if you
leave the Company for any reason, the loan would be immediately
due and payable with accrued interest. Any stock not paid for at
that time would be forfeited. Your loan would be secured by the
stock being purchased.
3. Reservation of Rights; Speculative Investment. We reserve the right
---------------------------------------------
to reduce the number of shares sold to any employee if, in our
judgment, such purchase would prove to be a financial burden to that
employee. Although we are all optimistic concerning
<PAGE>
OFFER TO EMPLOYEES
Page Two
Photoelectron's prospects, a purchase of the Common Stock should be
viewed as a speculative investment and you should not invest more than
you can comfortably afford to lose.
4. Subscription Agreement. The specific terms of the offer are set forth
----------------------
in the Subscription Agreement provided with this document. We strongly
urge you to read that agreement carefully and to review it with your
attorney. The Subscription Agreement and the attached Promissory Note
contain many provisions not summarized here, such as limitations on
resale of the stock you purchase, registration rights in the event of
a public offering of the Common Stock, and various representations and
warranties by both you and Photoelectron.
5. Compensatory Benefit Plan. For purposes of federal securities
-------------------------
laws and regulations, this opportunity to purchase Photoelectron
Corporation Common Stock is a compensatory benefit plan available to
all employees of the Company on the terms stated in the attached
documents. Additional opportunities to purchase Photoelectron stock
may be provided to you in the future with the approval of and subject
to terms to be set by the Board of Directors.
If, after reading the attached documents, you continue to be
interested in purchasing stock, please complete the Subscription Agreement and
submit it to Peter Oettinger by no Monday, April 4, 1994. Should you have any
questions concerning the terms of purchase or the provisions of the Subscription
Agreement or Promissory Note, please speak with Peter.
March 24, 1994
<PAGE>
PHOTOELECTRON CORPORATION
Anthonius J. Boom
-----------------
Name of Purchaser
(please print)
SUBSCRIPTION AGREEMENT
----------------------
COMMON STOCK
Ladies and Gentlemen:
The undersigned (the "Purchaser") acknowledges that he or she has received and
reviewed the Description of Employee Stock Purchase Plan Offering (the "Offering
Description") attached as Exhibit A and that he or she wishes to subscribe for
---------
common stock of Photoelectron Corporation (the "Company") on the terms and
conditions described therein and herein.
1. Subscription: Subject to the terms and conditions hereof, the
------------
undersigned hereby subscribes for 9000 shares of the Company's
-------
common stock (the "Common Stock"), as described in the Offering
Description.
2. Acceptance of Subscription: The undersigned understands and agrees
--------------------------
that this subscription is made subject to the unconditional right of
the Company to reject any subscription, in whole or in part, and that
in such event, the Company will return to the undersigned the amount
so rejected.
3. Payment for Shares: On or prior to April 15, 1994, the Company shall
------------------
deliver a notice to each Purchaser informing such Purchaser of the
amount of his or her subscription (if any) which has been accepted by
the Company. No later than the date which is ten days after the
Purchaser's receipt of such notice (the "Closing Date"), the Purchaser
shall make payment to the Company for the Common Stock purchased by
such Purchaser (the "Purchased Stock"). Such payment may be made:
<PAGE>
(a) by delivery to the Company of a check, payable to the Company, for the
full purchase price of the Purchased Stock (the "Prepayment Method");
or
(b) by delivery to the Company of a duly executed promissory note (the
"Promissory Note") in the form of Exhibit B attached hereto, for the
---------
purchase price of the Purchased Stock, which such balance shall not
exceed $15,000 (the "Installment Method"). If the total Purchase Price
of the Purchase Stock exceeds $15,000 the Purchaser shall also deliver
a check for such excess amount payable to the Company. The Promissory
Note will be payable over five years, subject to acceleration by the
Company in the event of (i) effectiveness of any registration
statement filed with the United States Securities and Exchange
Commission providing for the registration for sale to the public of
shares of the Company's Common Stock (but only to the extent of the
amount of the Purchaser's Common Stock purchased pursuant to the
Promissory Note which is included in such registration statement),
(ii) termination of the Purchaser's employment with the Company, (for
whatever reason) or (iii) a merger, consolidation or sale of all or
substantially all of the stock of the Company, all as described in the
Promissory Note.
4. Election of Method of Payment: The Purchaser hereby agrees that, if his or
-----------------------------
her subscription is accepted by the Company, he or she will purchase Common
Stock pursuant to: (check one)
X the Prepayment Method (see Section 3(a)
[INITIALS -----
APPEAR X the Installment Method (see Section 3(b))
HERE] -----
If the Purchaser elects the Installment Method the Purchaser will make
payments on his or her Promissory Note via:
X Bi-weekly payroll deduction (or payroll deduction for such
----- other period as is applicable to the Purchaser, as more fully
described in the Promissory Note)
Quarterly payments, by check made payable to the Company
-----
<PAGE>
5. Delivery of Certificates; Pledge of Shares.
------------------------------------------
(a) In the event that the Purchaser elects the Prepayment Method,
immediately upon delivery of payment in full for the Purchased
Stock, the Company shall issue and deliver to the Purchaser a
certificate representing the full amount of the Purchased Stock,
registered in the Purchaser's name;
(b) In the event that the Purchaser elects the Installment Method:
(i) Immediately upon delivery of that portion of the
purchase price which is paid by check, on the Closing
Date, the Company shall issue and deliver to the
Purchaser a certificate representing that portion of the
Purchased Stock for which payment is so made, registered
in the Purchaser's name; and
(ii) Immediately upon delivery by the Purchaser of a
Promissory Note, duly executed by such Purchaser, in the
amount of the purchase price for that portion of the
Purchased Stock which is being purchased on installment,
("Leveraged Stock"), the Company shall issue a
certificate registered in the Purchaser's name for the
Leveraged Stock, and shall retain such certificate, in
pledge, until it is released in accordance with the
terms of Section 6, below.
6. Release of Leveraged Stock: Upon payment in full by a Purchaser for
--------------------------
his or her Leveraged Stock, the Company will release to such Purchaser
the certificate, held by the Company in pledge, representing such
stock. In the event that the Purchaser defaults on his or her
Promissory Note, the Company shall be entitled to pursue any of its
rights and remedies under Section 25 of Chapter 156B of the
Massachusetts Corporation Laws, a copy of which such Section is
attached hereto as Exhibit C.
---------
7. Company Right of First Refusal on Stock:
---------------------------------------
(a) Offer to Company. If the Purchaser wishes to sell, assign,
----------------
pledge, hypothecate, mortgage, encumber, dispose of or otherwise
transfer directly or indirectly (all hereinafter referred to as
"Transfer") any of his Purchased Stock (other than Leveraged
Stock, which such Leveraged Stock shall not be transferable under
any circumstances until released to the Purchaser in accordance
with Section 6 hereof), he or she shall first offer such
Purchased Stock for sale to the Company by written notice stating
the name of the proposed transferee, the number and type of
shares of Purchased Stock he or she desires to Transfer and the
proposed price and terms of Transfer.
<PAGE>
The Company shall have twenty (20) days from receipt of any such
notice within which to give notice of its intention to purchase
all or a portion of such Purchased Stock at the specified price
and terms. The Company's notice shall indicate the maximum number
of shares of Purchased Stock which the Company is willing to
purchase and shall be sent to the Purchaser.
Payment for shares of Purchased Stock purchased by the Company
shall be made within ten (10) days after the date of the
Company's notice to the Purchaser at the price and on the terms
specified in the Purchaser's notice.
(b) Right to Transfer. If, at the close of the twenty (20) day
-----------------
period provided in Section 7(a), the Company has not sent notice
of its intention to purchase all of the shares of Purchased Stock
offered, or if the Company has earlier notified the Purchaser
that it does not wish to purchase any shares of Purchased Stock
offered, the Purchaser shall have thirty (30) days from the
expiration of such period or from the date on which such notice
is received, whichever is earlier, to sell such shares of
Purchased Stock not agreed to be purchased by the Company to the
third party specified in the Purchaser's notice, at a price and
on terms not less favorable to the Purchaser than those as
specified therein.
8. Exceptions to Right of First Refusal: The following Transfers of
------------------------------------
Purchased Stock (other than Leveraged Stock, which such Leveraged
Stock shall not be transferable under any circumstances until released
to the Purchaser in accordance with Section 6 hereof) may be
consummated without restriction:
(a) Transfers of shares of Purchased Stock between the Purchaser and
the trustees of a trust revocable by him alone, the beneficiaries
of which consist solely of the Purchaser and transferees
enumerated in clause (d) below.
(b) Transfers of shares of Purchased Stock between the Purchaser and
his guardian or conservator.
(c) Transfers of the shares of Purchased Stock of the Purchaser, upon
his or her death, to his or her executors or administrators or to
trustees under his or her will.
(d) Transfers of the shares of Purchased Stock of the Purchaser, or
his or her guardian, conservator or trustee under an inter vivos
trust, or his or her executors, administrators, or trustees under
his or her will; to the Purchaser's spouse; to any of his or her
children or their issue (or to custodians for the benefit of
minor children or issue); or to the Purchaser's parents or
siblings.
(e) Transfers of shares of Purchased Stock in connection with the
merger, consolidation or sale of all or substantially all of the
stock of the Company.
<PAGE>
All shares of Purchased Stock transferred pursuant to clauses (a) through (d)
above shall remain subject to all of the restrictions applicable to the
Purchaser hereunder.
9. Representations and Warranties of the Purchaser: The Purchaser hereby
-----------------------------------------------
represents and warrants as follows:
9.1 The Purchaser acknowledges that: (a) the Common Stock is being
offered and sold under one or more of the exemptions from
registration provided for in the Securities Act of 1933, as
amended (the "1933 Act"), including Regulation D promulgated
thereunder, and any applicable state securities laws; (b) the
Purchaser is purchasing the Common Stock without being offered or
furnished any offering literature or prospectus other than the
Offering Description; and (c) this transaction has not been
reviewed and approved by the United States Securities and
Exchange Commission or by any regulatory authority charged with
the administration of the securities laws of any state.
9.2 The Purchaser (a) is a citizen of United States, (b) is a least
21 years of age, and (c) is a bona fide resident and domiciliary
(not a temporary or transient resident) of the state of
MASS. (FILL IN STATE) and has no present intention of becoming a
----
resident of any other state or jurisdiction.
9.3 The Purchaser confirms that he or she understands and has fully
considered for purposes of this investment the risks of this
investment and understands that; (a) this investment is suitable
only for an investor who is able to bear the economic
consequences of losing his or her entire investment; (b) the
purchase of the Common Stock is a speculative investment which
involves a significant degree of risk of loss by the Purchaser;
(c) there are substantial restrictions on the transferability of,
and there is no public market for the Common Stock, and,
accordingly, it may not be possible for the Purchaser to
liquidate his or her investment in the Common Stock.
9.4 The Purchaser confirms that he or she is able (a) to bear the
economic risk of this investment, (b) to hold the Common Stock
for an indefinite period of time, and (c) presently to afford a
complete loss of his or her investment; and represents that he or
she has sufficient liquid assets so that the illiquidity
associated with this investment will not cause any undue
financial difficulties or affect the Purchaser's ability to
provide for his or her current needs and possible financial
contingencies.
<PAGE>
9.5 The Common Stock is being acquired by the Purchaser solely for
his or her own personal account, for investment purposes only,
and not with a view to, or in connection with, any resale or
distribution thereof. The Purchaser will not sell, transfer,
assign or otherwise dispose of the Common Stock acquired upon
conversion thereof, and neither the Company nor any transfer
agent acting on its behalf shall be required to register or
otherwise recognize any transfer resulting from any such sale,
transfer, assignment or other disposition of any such Common
Stock, unless and until (a) the Common Stock to be disposed of
and the proposed disposition thereof are made the subject of a
currently-effective registration statement under the 1933 Act,
and under any applicable state statutes, or (b) the Company shall
have received an opinion of counsel, in form and substance
satisfactory to the Company, to the effect that the registration
of the Common Stock is not required in connection with such
proposed disposition by virtue of an exemption from and
registration requirements contained in the 1933 Act, and the
rules and regulations promulgated thereunder, or in any
applicable state statutes, rules and regulations.
9.6 The Purchaser hereby consents to the placement of a legend
substantially similar to the following on each certificate or
other document evidencing the shares of Common Stock and agrees
to abide by the restrictions described herein:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), AND MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED UNLESS SUCH
SHARES ARE REGISTERED UNDER THE 1933 ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH
SALE, TRANSFER OR ASSIGNMENT IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT, AND ANY APPLICABLE STATE SECURITIES
LAWS
Purchasers who have elected the Installment Method of payment for
their Common Stock hereby consent to the placement of a legend
substantially similar to the following on each certificate or
other document evidencing the shares of Leveraged Stock:
"____% PAID UP, BALANCE PAYABLE OVER FIVE YEARS (SUBJECT TO
ACCELERATION IN CERTAIN CIRCUMSTANCES) PURSUANT TO A PROMISSORY
NOTE DATED _______, 1994."
9.7 The Purchaser's overall commitment to investments which are not
readily marketable is not disproportionate to the Purchaser's net
worth, and the Purchaser's investment in the Company will not
cause such overall commitment to become disproportionate to the
Purchaser's net worth.
<PAGE>
The foregoing representations and warranties are made by the
Purchaser with the intent that they may be relied upon by the
Company for purposes of determining whether a sale of Common
Stock by the Company to the Purchaser may be made without
registration of such Common Stock under any federal or state
securities laws and in compliance with applicable federal and
state securities laws, and the Purchaser hereby agrees that such
representations and warranties shall survive the sale by the
Company to the Purchaser of the Common Stock. By initialing
below, the Purchaser represents that he or she has read and
hereby acknowledges each of the representations contained
herein.
[INITIAL APPEAR HERE]
---------------------
Initials
If more than one person is signing this Agreement, each
representation and warranty and undertaking made herein shall be
a joint and several representation, warranty or undertaking of
each person signing.
------------
Initials (if more than one person is signing)
10. Representations and Warranties of the Company
---------------------------------------------
10.1 The Company is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Massachusetts and has all requisite corporate power and
authority to own its property, to carry on its business as now
conducted and as proposed to be conducted and to carry out the
transactions contemplated hereby.
10.2 The Company presently has authorized 15,000,000 shares of Common
Stock $.01 par value, and 5,000,000 shares of Blank Check
Preferred Stock, $.01 par value. Of these, 1,936,677 shares of
Common Stock and 2,543,015 shares of Series A Convertible
Preferred Stock have been duly authorized and validly issued and
are fully-paid and non-assessable. The Company intends to seek
authorization of the issuance of up to 1,250,000 shares of
Series B Convertible Preferred Stock, which the Company intends
to sell to a small number of sophisticated investors. The
purchase price of the Series B Convertible Preferred Stock has
not been determined. At present, no shares of Series B
Convertible Preferred Stock are issued or outstanding.
<PAGE>
10.3 The execution, delivery and performance of this Agreement and
the issuance of the Common Stock have been duly authorized by
all necessary corporate or other action of the Company, and upon
acceptance, execution and delivery of this Agreement by the
Company, the obligations of the Company described herein shall
constitute valid and legally binding obligations of the Company.
The representations and warranties of the Company made herein
shall be true and accurate as of the date of the Company's
acceptance of this Agreement.
10.4 The Company is not in default in the performance of any material
obligation, agreement or condition contained in any evidence of
indebtedness of the Company which default affords to any person
the unconditional right to accelerate any material indebtedness
or terminate any material right or agreement of the Company.
Neither the execution and delivery of this Agreement, nor the
fulfillment of the terms herein set forth and the consummation
of transactions contemplated hereby, will (a) conflict with or
constitute a breach of, default under or a violation of the
Articles of Organization and by-laws of the Company or any
agreement, indenture, mortgage, deed of trust or other material
instrument or undertaking by which the Company is bound or to
which it or any of its properties are subject, or (b) result in
a violation of any court decree binding upon the Company or any
applicable laws or regulations, or (c) result in the creation or
imposition of any material lien, charge or encumbrance upon any
property or assets of the Company.
10.5 There is no action, suit, proceeding or investigation pending,
or, to the best of the Company's knowledge, any basis therefor
or threat thereof, against the Company or any of the officers or
directors of the Company, which questions the validity of this
Agreement or the right of the Company to enter into it, or which
might result, either individually or in the aggregate, in any
material adverse change in the assets, condition (financial or
otherwise), business or prospects of the Company.
11. Registration Rights: Holders of Common Stock purchased pursuant to
-------------------
the Offering Description shall have the right to register such Common
Stock, referred to as "Registrable Shares", as follows:
11.1 "Piggy-Back" Registration: If at any time the Company shall
------------------------
determine to register under the 1933 Act any of its Common Stock
(other than on Form S-8 or Form S-4 or their then equivalents
relating to shares of Common Stock to be issued solely in
connection with any acquisition of any entity or business or
shares of Common Stock issuable in connection with any stock
option or other employee benefit plan) it shall send to each
holder of Registrable Shares, including each holder who has the
right to acquire Registrable Shares, written notice of such
determination and, if within 15 days after receipt of such
notice, such holder shall so request in writing, the Company
shall use its best efforts to
<PAGE>
include in such registration statement all or any part of the
Registrable Shares such holder requests to be registered, except
that if, in connection with any offering involving an
underwriting of Common Stock to be issued by the Company, the
managing underwriter shall impose a limitation on the number of
shares of such Common Stock which may be included in any such
registration statement because, in its judgment, such limitation
is necessary to effect an orderly public distribution of the
Common Stock and to maintain a stable market for the securities
of the Company, and such limitation is imposed pro rata with
respect to all securities whose holders have a contractual,
incidental ("piggy-back") right to include such securities in
the registration statement and as to which inclusion has been
requested pursuant to such right, then the Company shall be
obligated to include in such registration statement only such
limited portion (which may be none) of the Registrable Shares
with respect to which such holder has requested inclusion
hereunder. The obligations of the Company under this Section
11.1 shall expire and terminate at such time as the holder of
Registrable Shares shall be entitled to sell such securities
without restriction and without a need for the filing of a
registration statement under the 1933 Act, including without
limitation, for any resales of restricted securities made
pursuant to Rule 144 as promulgated by the Securities and
Exchange Commission.
11.2 Expenses: In case of a registration under this Section 10, the
--------
Company shall bear all costs and expenses of each such
registration, including, but not limited to, printing, legal and
accounting expenses, Securities and Exchange Commission and NASD
filing fees and "Blue Sky" fees and expenses, provided, however,
-------- -------
that the Company shall have no obligation to pay or otherwise
bear any portion of the underwriters' commissions or discounts
attributable to the Registrable Shares or the fees and expenses
of any counsel for the selling holders of Registrable Shares in
connection with the registration of the Registrable Shares.
11.3 Lock-Up Agreement for Initial Public Offering: In connection
---------------------------------------------
with any initial public offering of equity securities of the
Company, the undersigned agrees not to sell, pledge, transfer or
otherwise dispose of, or grant any option or purchase right with
respect to, any shares of Common Stock then owned by him for a
period of 120 days from the effective date of such initial
public offering without the prior written consent of the Company
and the managing underwriter of such initial public offering.
12. The Purchaser agrees not to transfer or assign this Agreement, or any
of his or her interest herein, and further agrees that the assignment
and transfer of the Common Stock acquired pursuant hereto shall be
made only in accordance with all applicable laws.
<PAGE>
13. The Purchaser agrees that he or she may not cancel, terminate or
revoke this Agreement or any agreement of the Purchaser made hereunder
and that this Agreement shall survive his or her death or disability
and shall be binding upon the Purchaser's heirs, executors,
administrators, successors and assigns.
14. Miscellaneous:
--------------
14.1 All notices or other communications given or made hereunder
shall be in writing and shall be delivered or mailed by first
class mail, postage prepaid, to the undersigned at the address
set forth below or to the Company at the address set forth
above.
14.2 This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
14.3 This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and may be
amended or superseded only be a writing executed by the parties.
15. The representations and warranties contained in Section 9 hereof are
true and accurate as of the date of this Subscription Agreement, shall
be true and accurate as of the date of delivery to and acceptance by
the Company of the Purchaser's subscription for the purchase of Common
Stock, and shall survive such delivery and acceptance. If in any
respect such representations, warranties and acknowledgments shall not
be true and accurate prior to such delivery and acceptance, the
Purchaser shall give immediate written notice of such fact to the
Company, specifying which representations and warranties and
acknowledgments are not true and accurate and the reasons therefore.
<PAGE>
16. The Purchaser acknowledges that he or she understands the meaning and
legal consequences of the representations and warranties contained in
Section 9, and he or she hereby agrees to indemnify and hold harmless
the Company, its officers or any of its affiliates, associates, agents
or employees from and against any and all loss, damage or liability
(including costs and reasonable attorney's fees) due to or arising out
of a breach of any representation, warranty or acknowledgment of the
Purchaser contained in this Agreement.
IN WITNESS WHEREOF, the undersigned has hereby executed this Agreement
this 4th day of April, 1994.
/s/ Anthonius J. Boom 60 Mountain Rd.
--------------------- ----------------------
Signature of Survivor Street Address
(please print or type)
Anthonius J. Boom Burlington
--------------------- ----------------------
Name of Subscriber City or Town
(please print or type)
Mass. 01803
----------------------
State Zip Code
(617) 272-3898
----------------------
Telephone Number
The foregoing subscription is accepted by Photoelectron Corporation to the
extent of 9000 shares of Common Stock this 4th day of April, 1994.
---- --- -----
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
----------------------------
Title: Chief Operating Officer
-------------------------
<PAGE>
EXHIBIT B
PROMISSORY NOTE
$ 7500.- April 4, 1994
----- -------
FOR VALUE RECEIVED, Anthonius J. Boom (The "Employee") , hereby promises to
-----------------
pay to the order of PHOTOELECTRON CORPORATION (the "Company") Seventy Five
------------
Hundred ($ 7500. - ), together with interest on the unpaid principal balance
- ------- ------------
hereof from time to time outstanding at the rate of 6% per annum.
1. Payment. All payments of principal and interest made on the Note
shall be made in lawful money of the United States of America at the principal
office of the Company, 400-1 Totten Pond Road, Waltham, Massachusetts 02154, or
such other place as the holder hereof may from time to time designate in writing
to the Company.
All payments of principal and interest on the Note shall be made according
to the payment schedule and method checked below:
-------- In twenty (20) quarterly installments of principal, together with
current interest thereon, payable on March 31, June 30, September
30, and December 31 of each year, with a final payment of
principal, together with all accrued, unpaid interest thereon
payable on April 30, 1999.
--------
X In one hundred and thirty (130) bi-weekly installments of
--------
principal, together with current interest thereon, payable via
direct payroll deduction by the Company from Employee's salary,
with a final payment of principal, together with all accrued,
unpaid interest thereon, payable on April 30, 1999, provided,
-------- --------
that in the event that the Company institutes a payroll period
applicable to the Employee other than a bi-weekly period, the
number of installments due hereunder shall automatically be
recalculated on each date on which the Company effects a change
in its payroll period so as to result in payment in full of this
Note in that number of installments which corresponds to the
number of pay periods during the period ending on April 30, 1999.
--------
<PAGE>
Notwithstanding any of the foregoing, the entire unpaid principal amount of this
Note, together with all accrued, unpaid interest thereon, may be accelerated by
the Company and declared immediately due and payable upon either (a) termination
of Employee's employment with the Company (for whatever reason), or (b)
effectiveness of any registration statement filed with the United States
Securities and Exchange Commission providing for the registration for sale to
the public of shares of the Company's Common Stock (but only to the extent of
the amount of Employee's stock purchased pursuant to this Note which is included
in such registration statement) or (c) a merger, consolidation or sale of all or
substantially all of the stock of the Company.
2. Prepayment. Employee may prepay this Note at any time, without premium or
----------
penalty, in whole or in part. Any payment of principal by the Employee will
be accompanied by payment of all accrued and unpaid interest on the
principal sum being repaid.
3. Default. Any of the following shall constitute an "Event of Default"
-------
under this Note:
(a) Failure to make any payment of interest on this Note within five (5)
days of its required payment date;
(b) Failure to make any payment of principal on this Note when due;
(c) Any petition in bankruptcy being filed by or against Employee or any
proceedings in bankruptcy, insolvency or under any other laws relating
to the relief of debtors, being commenced for the relief or
readjustment of any indebtedness of Employee, either through
reorganization, composition, extension or otherwise, and which, in the
case of any involuntary proceedings shall be acquiesced to by Employee
or shall continue for a period of 60 days undismissed, undischarged or
unbonded;
(d) The making by Employee of an assignment for the benefit of creditors;
or
(e) The appointment of a receiver of any property of Employee which shall
not be vacated or removed within 60 days after appointment.
<PAGE>
Notwithstanding anything to the contrary contained herein, this Note shall
automatically become due and payable immediately upon the occurrence of any
Event of Default.
4. Governing Law. This Note shall be governed by, and construed in
-------------
accordance with, the internal laws of the Commonwealth of
Massachusetts.
5. Waiver. The Employee hereby waives presentment, demand, notice of
------
dishonor, protest and all other demands and notices in connection with
the delivery, acceptance, performance and enforcement of this Note.
6. Company's Remedies. Nothing contained herein shall be deemed to limit
------------------
or modify the Company's remedies under Section 25 of Chapter 156B of
the Massachusetts Corporation Laws, or any other applicable law, in
case of an Event of Default under this Note by the Employee.
IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of
the date first above written.
/s/ Anthonius J. Boom
---------------------
Employee
<PAGE>
Exhibit C
---------
(S)25. Default in instalment payments; sale; surplus or deficiency; action;
forfeiture; dividends on forfeited shares
If capital stock is issued payable by instalments, and a stockholder refuses
or neglects to pay an instalment for thirty days after the time limited for
payment in the demand under section twenty two, the treasurer of the corporation
may sell such stockholder's shares by public auction, and, out of the proceeds
of such sale, shall pay to the corporation all instalments then due from such
stockholder with interest and incidental charges. A notice stating the time and
place of such sale and the amount of the instalment due and payable and, if the
shares are certificated, the number or numbers of the certificate or
certificates and the number of shares of stock thus offered for sale shall be
sent by the treasurer by mail not less than ten days prior to such sale to such
stockholder and also the person who originally subscribed to the said delinquent
stock. Upon the sale of such stock as aforesaid, the directors shall transfer
the shares so sold to the purchaser. If the transfer is by delivery of a stock
certificate therefor, such certificate shall be so stamped as to indicate the
instalments paid. If the transfer is by registration of uncertificated shares
on the books of the corporation, the initial transaction statement issued
pursuant to Article 8 of chapter one hundred and six shall indicate the
instalments paid. In either case the purchaser shall be liable under this
section for all subsequent instalments. Upon such transfer any certificate or
certificates previously outstanding with respect to the shares shall be void
except as provided in said Article 8. The balance, if any, of the proceeds of
such sale shall be held by the corporation for such stockholder, his
representatives or assigns, and be paid to him or them at any time upon
surrender and delivery to the corporation of his certificate. If no person
offers an amount sufficient to pay all instalments due upon such stock with
interest and incidental charges, it may or may not be sold, and the delinquent
stockholder shall be liable to the corporation in an action at law for such
instalments, interest and incidental charges, if the stock is not sold, or for
the deficiency, if it is sold, and if a judgment rendered in such action remains
unsatisfied for thirty days, the original subscriber shall be so liable. In-
stead of offering such stock for sale, the directors, at the expiration of the
time limited in the notice for payment of such instalments, may proceed by an
action at law against the delinquent stockholder, and, if a judgment rendered
against him in such action remains unsatisfied for thirty days, against the
original subscriber, for the recovery of such instalments, interest and
incidental charges. The delinquent stockholder or the original subscriber, as
the case may be, upon the payment of such instalments, interest and incidental
charges, or of the judgment therefor, shall, if the shares are certificated, be
entitled to a certificate of stock, so stamped as to indicate the instruments
paid, whereupon the certificate outstanding for such shares shall be void,
except as provided in said Article 8 and, if the shares are uncertificated,
shall, if the payment is made by the delinquent stockholder, be entitled to a
periodic statement reflecting such payment or, if the payment is made by the
original subscriber, be entitled to an initial transaction statement reflecting
such payment. If a judgment rendered in an action against the original
subscriber remains unsatisfied for thirty days, said stock shall be forfeited to
the corporation, an entry or transfer to it shall be made on its books, and,
thereupon, if the shares are certificated, the certificate outstanding shall be
void as aforesaid. While the stock remains the property of the corporation, no
dividends shall be declared nor instalments paid upon it; but it shall remain
subject to the control of the corporation according to its by-laws.
Added by St.1964, c. 723, (S) 1. Amended by St.1969, c. 392, (S) 10;
St.1983. c.
<PAGE>
EXHIBIT 10.4
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
1. Purpose
-------
This Stock Option Plan (the "Plan") is intended to encourage ownership of
Common Stock, $.01 par value (the "Common Stock"), of Photoelectron Corporation
(the "Company") by persons selected by the Board of Directors of the Company in
its sole discretion, including directors, officers, key employees and
consultants of the Company and its affiliates and to provide additional
incentive for them to promote the success of the Company's business. The Plan is
intended to be a nonstatutory stock option plan.
2. Effective Date of the Plan
--------------------------
The Plan shall become effective upon January 20, 1989.
3. Stock Subject to Plan
---------------------
The maximum number of shares of Common Stock of the Company which may be
issued and sold under the Plan is 16,000; subject, however, to the provisions of
paragraph 11 of the Plan. Shares to be issued upon the exercise of options
granted under the Plan may be either authorized but unissued shares or shares
held by the Company in its treasury. If any option expires or terminates for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for options thereafter to be granted.
4. Administration
--------------
The Plan shall be administered by the Board of Directors of the Company
(the "Board"), no member of which shall act upon any matter exclusively
affecting any option granted or to be granted to himself under the Plan. Subject
to the provisions of the Plan, the Board shall have complete authority, in its
discretion, to make the following determinations with respect to each option to
be granted by the Company: (a) the person to receive the option (the
"Optionee"); (b) the time of granting the option; (c) the number of shares
subject thereto; (d) the option price; (e) the option period; and (f) the terms
of the option and form of option agreement (which need not be identical, but
which shall conform to the applicable terms and conditions of the Plan and
contain such other provisions as the Board deems advisable and not inconsistent
with the Plan).
<PAGE>
2
In making such determinations, the Board may take into account the nature of the
services rendered by the Optionees, their present and potential contributions to
the success of the Company and/or one or more of its affiliates, and such other
factors as the Board in its discretion shall deem relevant. Subject to the
provisions of the Plan, the Board shall also have complete authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of the respective option
agreements (which need not be identical) and to make all other determinations
necessary or advisable for the administration of the Plan. The Board's
determinations on the matters referred to in this paragraph 4 shall be
conclusive. The Board may delegate to a committee (the "Committee"), composed of
members of the Board the authority, in its discretion, to make the
determinations contemplated in this Plan.
5. Eligibility
-----------
An option may be granted to any person selected by the Board in its sole
discretion.
6. Time of Granting Options
------------------------
The granting of an option shall take place at the time specified by the
Board. Only if expressly so provided by the Board shall the granting of an
option be regarded as taking place at the time when a written option agreement
shall have been duly executed and delivered by or on behalf of the Company and
the Optionee to whom such option shall be granted. The agreement shall provide,
among other things, that it does not confer upon the Optionee any right to
continue in the employ of the Company and/or one or more of its affiliates or to
continue as a director or consultant of the Company, and that it does not
interfere in any way with the right of the Company or any such affiliate to
terminate the employment of the Optionee at any time if the Optionee is an
employee, or to remove the Optionee as a director of the Company if the Optionee
is a director, or to terminate the services of the Optionee if the Optionee is a
consultant.
7. Option Period
-------------
An Option may become exercisable immediately or in such installments,
cumulative or noncumulative, as the Board may determine. No option may be
exercised later than the tenth anniversary of the date on which it is granted.
8. Exercise of Option
------------------
An option may be exercised in accordance with its terms by written notice of
intent to exercise the option specifying the number of shares of stock with
respect to which the option is then being exercised. The notice shall be
accompanied by payment in the form of cash or shares of the Common Stock with a
current market value equal to the option price of the shares to be purchased,
subject to such rules as the Company may prescribe to determine valuation.
Against such payment the Company shall deliver or cause to be delivered to the
Optionee a certificate for the number of shares then being purchased by him. If
any law or applicable regulation of the Securities and Exchange Commission or
other body having jurisdiction in the premises shall require the Company or the
Optionee to take any action in connection with shares being
<PAGE>
3
purchased upon exercise of the option, exercise of the option and delivery of
the certificate or certificates for such shares shall be postponed until
completion of the necessary action, which shall be taken at the Company's
expense.
9. Transferability
---------------
Options shall not be transferable, otherwise than by will or the laws of
descent and distribution. Options may be exercised during the life of the
Optionee only by the Optionee.
10. Vesting, Restrictions and Termination of Options
------------------------------------------------
The Board, in its sole discretion, may determine the manner in which
options shall vest, the rights of the Company to repurchase the shares issued
upon the exercise of any option and the manner in which such rights shall lapse,
and the terms upon which any option granted shall terminate. The Board shall
have the right to accelerate the lapse of any repurchase rights. All of such
terms shall be specified in a written option agreement executed and delivered by
or on behalf of the Company and the Optionee to whom such option shall be
granted.
11. Adjustment of Number of Shares
------------------------------
Each stock option agreement shall provide that in the event of any stock
dividend payable in the Common Stock or any splitup or contraction in the number
of shares of the Common Stock occurring after the date of the agreement and
prior to the exercise in full of the option, the number of shares for which the
option may thereafter be exercised shall be proportionately adjusted and the
price to be paid for each share subject to the option shall be proportionately
adjusted. Each such agreement shall also provide that in case of any
reclassification or change of outstanding shares of the Common Stock or in case
of any consolidation or merger of the Company with or into another company or in
case of any sale or conveyance to another company or entity of the property of
the Company as a whole, the Optionee shall, upon exercise of the option, be
entitled to receive shares of stock or other securities in its place equivalent
in kind and value to those shares which he would have received if he had
exercised the option in full immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and had continued to hold the shares
subject to the option (together with all other shares, stock and securities
thereafter issued in respect thereof) to the time of the exercise of the option;
provided, however, that if any recapitalization is to be effected through an
increase in the par value of the Common Stock without an increase in the number
of authorized shares and such new par value will exceed the option price under
such agreement, the Company shall notify the Optionee of such proposed
recapitalization forthwith upon its being recommended by the Board for approval
by the stockholders, and the Optionee shall then have the right, exercisable at
any time prior to such recapitalization becoming effective, to purchase all of
the shares subject to the option which he has not theretofore purchased
(anything in such agreement to the contrary notwithstanding), but if the
Optionee fails to exercise such right before such recapitalization become
effective, the option price under such agreement shall be appropriately
adjusted. Each such agreement shall further provide that upon dissolution or
liquidation of the Company, the option shall terminate, but the Optionee (if at
the time in the employ of the Company and/or any one or more of its
<PAGE>
4
subsidiaries) shall have the right, immediately prior to such dissolution or
liquidation, to exercise the option to the full extent not theretofore
exercised; that no adjustment provided for above shall apply to any share with
respect to which the option has been exercised prior to the effective date of
such adjustment; and that no fraction of a share or fractional shares shall be
purchasable or deliverable under such agreement, but in the event any adjustment
thereunder of the number of shares covered by the option shall cause such number
to include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares. In the event of changes in the outstanding
Common Stock by reason of any stock dividend, splitup, contraction,
reclassification or change of outstanding shares of the Common Stock of the
nature contemplated by this paragraph 11, the number of shares of Common Stock
available for the purpose of the Plan as stated in paragraph 3 hereof shall be
correspondingly adjusted by the Board.
12. Limitation of Rights in Option Stock
------------------------------------
The Optionees shall have no rights as stockholders in respect of shares as
to which their options shall not have been exercised, certificates issued and
delivered and payment as herein provided made in full, and shall have no rights
with respect to such shares not expressly conferred by this Plan.
13. Stock Reserved
--------------
The Company shall at all times during the term of the options reserve and
keep available such number of shares of the Common Stock as will be sufficient
to satisfy the requirements of this Plan and shall pay all other fees and
expenses necessarily incurred by the Company in connection therewith.
14. Purchase for Investment
-----------------------
Each Optionee exercising an Option, at the request of the Company, will be
required to give a representation in form satisfactory to counsel for the
Company that he will not transfer, sell or otherwise dispose of the optioned
shares at any time purchased by him, upon the exercise of any portion of the
Option, in a manner which would violate the Securities Act of 1933, as amended,
and the regulations of the Securities and Exchange Commission thereunder and the
Company may, at its discretion, make a notation on any certificates issued upon
exercise of options to the effect that such certificate may not be transferred
except after receipt by the Company of an opinion of counsel satisfactory to it
to the effect that such transfer will not violate such Act and such regulations.
15. Termination and Amendment of Plan
---------------------------------
The Board may at any time terminate the Plan or make such modifications of the
Plan as it shall deem advisable; provided, however, that, except as provided in
paragraph 11 hereof, the Board may not, without approval by the holders of a
majority of the Common Stock, increase the maximum number of shares reserved for
issuance upon the exercise of options granted under the Plan. No termination or
amendment of the Plan may, without the consent of the Optionee to
<PAGE>
5
whom any option shall theretofore have been granted, adversely affect the rights
of such Optionee under such option.
Notwithstanding any other provisions hereof, the Plan shall terminate on January
20, 1999 and no options shall be granted hereunder thereafter.
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
James B. Dodge
- --------------------------------------------------------------------------------
Optionee
500 $10.00
- ---------------------------- ----------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
January 20, 1989
----------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.01 per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which is the
---------------------
earliest of (a) seven years after the Grant Date, (b) three months after the
date on which you cease to be a director or employee of the Company or a
subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
-2-
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
Period Percentage of Option Exercisable
------ --------------------------------
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions and Company Repurchase Option.
----------------------------------------------------
(a) Shares of Common Stock subject to the Option ("Optioned
Shares") and purchased upon exercise of the Option may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution (the "Transfer Restrictions"), unless and until the
Transfer Restrictions with respect to such Optioned Shares shall have lapsed as
provided herein. The Transfer Restrictions
<PAGE>
-3-
shall lapse in their entirety ninety days after the initial public offering of
the Common Stock by the Company is declared effective by the Securities and
Exchange Commission, provided such date occurs prior to the Employment
Termination Date, and provided further you shall have remained continuously a
director or employee of the Company or a subsidiary of the Company since the
Grant Date. From and after the Employment Termination Date, no further lapsing
of the Transfer Restrictions shall occur, and thereupon the Company shall have
the right, exercisable in accordance with Section 3(b) hereof, to repurchase all
or any portion of the Optioned Shares purchased by you upon exercise of the
Option with respect to which the Transfer Restrictions shall not have lapsed, at
a price per share equal to the Exercise Price specified on the first page of
this Agreement (the "Exercise Price"). The right of the Company to repurchase
Optioned Shares at the Exercise Price as provided in this Section 3(a) is
hereinafter referred to as the "Company Repurchase Option".
(b) The Company may exercise the Company Repurchase Option by
mailing to you at your last address listed in the records of the Company or the
relevant subsidiary of the Company, or by delivering to you, a notice that it
has exercised the Company Repurchase Option and the number of Optioned Shares
with respect to which it has exercised the Company Repurchase Option, within six
(6) months after the date that the Company shall first have been entitled to
exercise the Company Repurchase Option (the "Repurchase Option Period"). Such
notice shall be accompanied by a check payable to you in the amount of the
Exercise Price times the number of Optioned Shares with respect to which the
Company has exercised the Company Repurchase Option. Upon exercise by the
Company of the Company Repurchase Option as provided herein, the certificate or
certificates representing the Optioned Shares, and representing shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, which have been
repurchased shall forthwith be released from the escrow arrangement provided for
in Section 5 hereof and transferred of record to the Company. The Company
Repurchase Option shall lapse and be of no further force or effect if it shall
not have been exercised prior to the expiration of the Repurchase Option Period.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including
<PAGE>
-4-
without limitation by way of execution, levy, garnishment, attachment, pledge or
bankruptcy, and no such rights or interests shall be subject to any of your
obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions and the Company
Repurchase Option to the same extent that such Tendered Shares surrendered upon
such exercise were so subject immediately prior to such surrender. Receipt by
the Company of the Exercise Notice and the Exercise Consideration shall
constitute the exercise of the Option or a part thereof. As soon as reasonably
practicable thereafter, the Company shall deliver or cause to be delivered to
you a certificate or certificates representing the number of Optioned Shares
purchased, registered in your name. If such certificate(s) represent(s) Optioned
Shares with respect to which the Transfer Restrictions shall not have lapsed,
such certificate(s) shall, immediately upon your receipt thereof, be deposited
by you, together with a stock power endorsed in blank, in escrow with the
Company. In addition, any certificate(s) representing shares of Common Stock, or
other property other than cash, distributed (including pursuant to any stock
split) in respect of Optioned Shares purchased by you (a "Non-Cash
Distribution") with respect to which the Transfer Restrictions shall not have
lapsed shall,
<PAGE>
-5-
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions, and the Company Repurchase Option
to the same extent as the Optioned Shares in respect of which such Non-Cash
Distribution was made. All such deposited certificate(s) may have set forth
thereon a legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions and,
to the extent applicable, to the Company Repurchase Option, as provided herein.
All shares of Common Stock delivered upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial
issuance to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares (or
other property), including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with respect to
which the Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions and the Company Repurchase Option, to the extent applicable, and to
the other restrictions and limitations imposed thereon pursuant to the Plan and
this Agreement and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions or the Company Repurchase Option.
8. Securities Laws. You hereby represent and warrant that you will not
---------------
transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge
<PAGE>
-6-
and agree that any routine sales of the Optioned Shares purchased by you upon
exercise of the Option made in reliance upon Rule 144 under the Act may be made
only in limited amounts in accordance with the terms and conditions of that
Rule. You also acknowledge and agree that the certificate(s) representing
Optioned Shares delivered to you pursuant to Section 5 hereof may have set forth
thereon a legend indicating that such shares may be transferred, sold or
otherwise disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and
your transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any
--------
<PAGE>
-7-
recapitalization is to be effected through an increase in the par value of the
Common Stock without an increase in the number of authorized shares and such new
par value will exceed the Exercise Price hereunder, the Company shall notify you
of such proposed recapitalization, and you shall then have the right,
exercisable at any time prior to such recapitalization becoming effective, to
purchase all of the Optioned Shares not theretofore purchased by you (anything
in Section 1 hereof to the contrary notwithstanding), but if you fail to
exercise such right before such recapitalization becomes effective, the Exercise
Price hereunder shall be appropriately adjusted. Upon dissolution or liquidation
of the Company, the Option, shall terminate, but you (if at the time you are a
director or employee of the Company or a subsidiary of the Company) shall have
the right, immediately prior to such dissolution or liquidation, to purchase all
or any portion of the Optioned Shares not theretofore purchased by you. No
adjustment provided for in this Section 9 shall apply to any Optioned Shares
purchased prior to the effective date of such adjustment. No fraction of a share
or fractional shares shall be purchasable or deliverable under this Agreement,
but in the event any adjustment hereunder of the number of Optioned Shares shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Board of Directors of any provision of,
and the determination of any question arising under, this Agreement, the Plan,
or any rule or regulation adopted pursuant to the Plan, shall be final and
conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-8-
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
--------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Secretary of the Company, 580
Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
----------------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ James B. Dodge
- ----------------------------------
Optionee
409 Main Street
W. Townsend, MA 01474
- ----------------------------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated ____________________ (the "Stock
Option Agreement") between the Company and me, I hereby exercise the Option
granted to me with respect to _______ Option Shares.
Enclosed is the Exercise Consideration covering the purchase price of the shares
being exercised
TOTAL AMOUNT ENCLOSED.......................... $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of
certificate(s) for shares being
exercised:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Send new certificate(s) to:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Optionee:
- ---------------------------------- ----------------------------------
(print name) Signature
----------------------------------
Date
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
-----------------
Amendment to Stock Option Agreement
Dated January 20, 1989
----------------
The Stock Option Agreement referred to above (the "Agreement") between you
and Photoelectron Corporation (the "Company") is hereby amended, effective as of
the 11th day of July, 1991, as follows:
1. Section 3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of
Common Stock or other shares (or other property) received in any Non-
Cash Distribution (as defined herein) in respect of such Optioned
Shares, may not, without the prior written consent of the Company, be
sold, assigned, transferred, pledged, hypothecated or otherwise
disposed of, except by will or by applicable laws of descent and
distribution or pursuant to a qualified domestic relations order (the
"Transfer Restrictions"), unless and until the Transfer Restrictions
with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety
ninety days after the initial public offering of the Common Stock by
the Company is declared effective by the Securities and Exchange
Commission."
2. Section 5 is hereby amended by deleting from the third sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
third sentence shall read in its entirety as follows:
"As a condition to such consent, the Company may require that a
number of Optioned Shares acquired by you upon your exercise of the
Option equal to the number of Tendered Shares surrendered upon such
exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were
so subject immediately prior to such surrender."
<PAGE>
-2-
3. Section 5 is hereby amended by deleting from the seventh sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
seventh sentence shall read in its entirety as follows:
"In addition, any certificate(s) representing shares of Common
Stock, or other property other than cash, distributed (including
pursuant to any stock split) in respect of Optioned Shares purchased
by you (a "Non-Cash Distribution") with respect to which the Transfer
Restrictions shall not have lapsed shall, immediately upon your
receipt thereof, be deposited by you, together with a stock power
endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as
the Optioned Shares in respect of which such Non-Cash Distribution
was made."
4. Section 5 is hereby amended by deleting from the penultimate sentence
thereof the phrase "and, to the extent applicable, to the Company Repurchase
Option," so that as amended, the penultimate sentence shall read in its entirety
as follows:
"All such deposited certificate(s) may have set forth thereon a
legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other
property) represented by such certificate(s) are subject to the
Transfer Restrictions as provided herein."
5. Section 6 is hereby amended by deleting from the second sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
second sentence thereof shall read in its entirety as follows:
"Upon initial issuance to you of a certificate or certificates
representing Optioned Shares (or other property) received in any Non-
Cash Distribution in respect of Optioned Shares purchased by you, you
shall have ownership of such shares (or other property), including
the right to vote and receive dividends, subject, however, in the
case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions, and to the other restrictions and limitations imposed
thereon pursuant to the Plan and this Agreement and which may be now
or hereafter imposed by the Certificate of Incorporation or the By-
Laws of the Company, as amended from time to time.
<PAGE>
-3-
6. Section 7 is hereby amended by deleting from the first sentence thereof the
phrase "or the Company Repurchase Option", so that as amended, the first
sentence thereof shall read in its entirety as follows:
"As soon as reasonably practicable after the lapse of the Transfer
Restrictions with respect to any Optioned Shares purchased by you upon
exercise of the Option the Company shall deliver to you, or your
legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other
property) received in any Non-Cash Distribution in respect of such
shares, previously deposited in escrow with the Company pursuant to
Section 5 hereof, without any legend referring to the Transfer
Restrictions."
7. A new Section 15 is hereby added, to read in its entirety as follows:
"15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as defined in
---------------
Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares shall
lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any one
---------------------------------
of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine constitutes an effective change
in the control of the Company. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
<PAGE>
-4-
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to an Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the Company's Board of
Directors on the date of this Agreement) and any future director of the Company
who has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company or a subsidiary of the
Company."
8. In all other respects, the Agreement shall remain in full force and
effect.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
-----------------------------------------
Name: Peter E. Oettinger
----------------------------------
Title: Vice President and
---------------------------------
Chief Operating Officer
Accepted and Agreed to:
/s/ James B. Dodge
- -----------------------------
(Signature of Optionee)
Name: /s/ James B. Dodge
- -----------------------------
(please print)
Date: 11 March 92
------------------------
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
CONSULTANT STOCK OPTION AGREEMENT
Michael J. Dalterio
- --------------------------------------------------------------------------------
Optionee
1,400 $1.00
- ----------------------------- -------------------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
February 26, 1990
--------------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable at such time after the
Grant Date (as specified above, the "Grant Date") as specified herein and prior
to the Option Termination Date (as defined herein). Attached is a copy of the
Plan which is incorporated in this Stock Option Agreement (the "Agreement") by
reference and made a part hereof. The Option granted hereunder is intended to
be a non-statutory stock option and not a "qualified", "incentive", or "employee
stock purchase plan" stock option as those terms are defined in Sections 422,
422A and 423, respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which
---------------------
is the earliest of (a) seven years after the Grant Date, (b) three months after
the date on which you cease to be a consultant of the Company (the "Service
Termination Date"), or six months after the Service Termination Date if such
cessation is a result of your death, provided that immediately on
<PAGE>
-2-
the Service Termination Date, the Option shall terminate with respect to any
Optioned Shares (as defined herein) that are not Vested Shares (as defined
herein) and as to which the Transfer Restrictions (as defined herein) shall not
have lapsed or (c) the date of the dissolution or liquidation of the Company.
The date on which the Option shall terminate in whole or in part as provided in
this Section 1 is hereinafter referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on
November 27, 1990 and ending on the Option Termination Date as set forth in the
following table:
Period Percentage of Option Exercisable
------ --------------------------------
From and after
November 27, 1990 25%
From and after
November 27, 1991 50%
From and after
November 27, 1992 75%
From and after
November 27, 1993 100%
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions and Company Repurchase Option.
----------------------------------------------------
(a) Shares of Common Stock subject to the Option ("Optioned
Shares") and purchased upon exercise of the Option may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution (the "Transfer Restrictions"), unless and until the
Transfer Restrictions with respect to such Optioned Shares shall have lapsed as
provided herein. The Transfer Restrictions shall lapse in their entirety ninety
days after the initial public offering of the Common Stock by the Company is
declared effective by the Securities and Exchange Commission, provided such date
occurs prior to the Service Termination Date, and provided further you shall
have remained continuously a consultant to the Company since the Grant Date.
From and after the Service Termination Date, no further lapsing of the Transfer
<PAGE>
-3-
Restrictions shall occur, and thereupon the Company shall have the right,
exercisable in accordance with Section 3(b) hereof, to repurchase all or any
portion of the Optioned Shares purchased by you upon exercise of the Option with
respect to which the Transfer Restrictions shall not have lapsed, at a price per
share equal to the Exercise Price specified on the first page of this Agreement
(the "Exercise Price"). The right of the Company to repurchase Optioned Shares
at the Exercise Price as provided in this Section 3(a) is hereinafter referred
to as the "Company Repurchase Option".
(b) The Company may exercise the Company Repurchase Option by
mailing to you at your last address listed in the records of the Company or the
relevant subsidiary of the Company, or by delivering to you, a notice that it
has exercised the Company Repurchase Option and the number of Optioned Shares
with respect to which it has exercised the Company Repurchase Option, within six
(6) months after the date that the Company shall first have been entitled to
exercise the Company Repurchase Option (the "Repurchase Option Period"). Such
notice shall be accompanied by a check payable to you in the amount of the
Exercise Price times the number of Optioned Shares with respect to which the
Company has exercised the Company Repurchase Option. Upon exercise by the
Company of the Company Repurchase Option as provided herein, the certificate or
certificates representing the Optioned Shares, and representing shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, which have been
repurchased shall forthwith be released from the escrow arrangement provided for
in Section 5 hereof and transferred of record to the Company. The Company
Repurchase Option shall lapse and be of no further force or effect if it shall
not have been exercised prior to the expiration of the Repurchase Option Period.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount
<PAGE>
-4-
equal to the number of Optioned Shares being purchased multiplied by the
Exercise Price (the "Aggregate Exercise Price"), (b) in shares of the Company's
Common Stock (the "Tendered Shares") with a market value equal to the Aggregate
Exercise Price or (c) any combination of cash, certified or bank cashier's check
or Tendered Shares having a total value equal to the Aggregate Exercise Price
(such cash, check or Tendered Shares with such value being referred to as the
"Exercise Consideration"). However, Tendered Shares may be surrendered as all or
part of the Exercise Consideration only if (1) the Common Stock is publicly
traded over-the-counter or on a national securities exchange, (2) you shall have
acquired such Tendered Shares more than six months prior to the date of exercise
and, (3) if such Tendered Shares are then subject to Transfer Restrictions, only
with the prior written consent of the Company as provided in Section 3(a)
hereof. As a condition to such consent, the Company may require that a number of
Optioned Shares acquired by you upon your exercise of the Option equal to the
number of Tendered Shares surrendered upon such exercise shall be subject to the
Transfer Restrictions and the Company Repurchase Option to the same extent that
such Tendered Shares surrendered upon such exercise were so subject immediately
prior to such surrender. Receipt by the Company of the Exercise Notice and the
Exercise Consideration shall constitute the exercise of the Option or a part
thereof. As soon as reasonably practicable thereafter, the Company shall deliver
or cause to be delivered to you a certificate or certificates representing the
number of Optioned Shares purchased, registered in your name. If such
certificate(s) represent(s) Optioned Shares with respect to which the Transfer
Restrictions shall not have lapsed, such certificate(s) shall, immediately upon
your receipt thereof, be deposited by you, together with a stock power endorsed
in blank, in escrow with the Company. In addition, any certificate(s)
representing shares of Common Stock, or other property other than cash,
distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall, immediately upon your receipt
thereof, be deposited by you, together with a stock power endorsed in blank (if
applicable), in escrow with the Company, and shall be subject to the Transfer
Restrictions, and the Company Repurchase Option to the same extent as the
Optioned Shares in respect of which such Non-Cash Distribution was made. All
such deposited certificate(s) may have set forth thereon a legend or legends (in
addition to the legend referred to in Section 8 hereof) indicating that the
shares of Common Stock (or other property) represented by such certificate(s)
are subject to the Transfer Restrictions and, to the extent applicable, to the
Company Repurchase Option, as provided herein. All shares of Common Stock
delivered upon the exercise of the Option as provided herein shall be fully paid
and non-assessable.
<PAGE>
-5-
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial
issuance to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares (or
other property), including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with respect to
which the Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions and the Company Repurchase Option, to the extent applicable, and to
the other restrictions and limitations imposed thereon pursuant to the Plan and
this Agreement and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions or the Company Repurchase Option.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge and agree that
any routine sales of the Optioned Shares purchased by you upon exercise of the
Option made in reliance upon Rule 144 under the Act may be made only in limited
amounts in accordance with the terms and conditions of that Rule. You also
acknowledge and agree that the certificate(s) representing Optioned Shares
delivered to you pursuant to Section 5 hereof may have set forth thereon a
legend indicating that such shares may be transferred, sold or otherwise
disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and
your transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
<PAGE>
-6-
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock
------------------------------
dividend payable in Common Stock or any split-up or contraction in the number of
shares of Common Stock occurring after the date of this Agreement and prior to
the exercise in full of the Option, the number of shares for which the Option
may thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any recapitalization is to
--------
be effected through an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par value will exceed
the Exercise Price hereunder, the Company shall notify you of such proposed
recapitalization, and you shall then have the right, exercisable at any time
prior to such recapitalization becoming effective, to purchase all of the
Optioned Shares not theretofore purchased by you (anything in Section 1 hereof
to the contrary notwithstanding), but if you fail to exercise such right before
such recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such
<PAGE>
-7-
adjustment. No fraction of a share or fractional shares shall be purchasable or
deliverable under this Agreement, but in the event any adjustment hereunder of
the number of Optioned Shares shall cause such number to include a fraction of a
share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
--------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
<PAGE>
-8-
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Secretary of the Company, 580
Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
--------------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ Michael Dalterio
- ------------------------------
Optionee
652 Concord Rd.
Sudbury, MA 01776
- ------------------------------
Home Address
508-443-8018
<PAGE>
EXHIBIT A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________
(the "Stock Option Agreement") between the Company and me, I
hereby exercise the Option granted to me with respect to _______
Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED.......................... $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of certificate(s)
for shares being exercised:
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Send new certificate(s) to:
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Optionee:
- -------------------------- ----------------------------------------------
(print name) Signature
----------------------------------------------
Date
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
-----------------
Amendment to Stock Option Agreement
Dated February 26, 1990
-----------------
The Stock Option Agreement referred to above (the "Agreement") between
you and Photoelectron Corporation (the "Company") is hereby amended, effective
as of the 11th day of July, 1991, as follows:
1. Section 3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"3. Transfer Restrictions.
-----------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional
shares of Common Stock or other shares (or other property)
received in any Non-Cash Distribution (as defined herein) in
respect of such Optioned Shares, may not, without the prior
written consent of the Company, be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or
by applicable laws of descent and distribution or pursuant to a
qualified domestic relations order (the "Transfer Restrictions"),
unless and until the Transfer Restrictions with respect to such
Optioned Shares shall have lapsed as provided herein. The Transfer
Restrictions shall lapse in their entirety ninety days after the
initial public offering of the Common Stock by the Company is
declared effective by the Securities and Exchange Commission."
2. Section 5 is hereby amended by deleting from the third sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
third sentence shall read in its entirety as follows:
"As a condition to such consent, the Company may require that a
number of Optioned Shares acquired by you upon your exercise of
the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions
to the same extent that such Tendered Shares surrendered upon
such exercise were so subject immediately prior to such
surrender."
<PAGE>
-2-
3. Section 5 is hereby amended by deleting from the seventh sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
seventh sentence shall read in its entirety as follows:
"In addition, any certificate(s) representing shares of Common
Stock, or other property other than cash, distributed (including
pursuant to any stock split) in respect of Optioned Shares
purchased by you (a "Non-Cash Distribution") with respect to which
the Transfer Restrictions shall not have lapsed shall, immediately
upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the
Company, and shall be subject to the Transfer Restrictions to the
same extent as the Optioned Shares in respect of which such Non-
Cash Distribution was made."
4. Section 5 is hereby amended by deleting from the penultimate
sentence thereof the phrase "and, to the extent applicable, to the Company
Repurchase Option," so that as amended, the penultimate sentence shall read in
its entirety as follows:
"All such deposited certificate(s) may have set forth thereon a
legend or legends (in addition to the legend referred to in
Section 8 hereof) indicating that the shares of Common Stock (or
other property) represented by such certificate(s) are subject to
the Transfer Restrictions as provided herein."
5. Section 6 is hereby amended by deleting from the second sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
second sentence thereof shall read in its entirety as follows:
"Upon initial issuance to you of a certificate or certificates
representing Optioned Shares (or other property) received in any
Non-Cash Distribution in respect of Optioned Shares purchased by
you, you shall have ownership of such shares (or other property),
including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with
respect to which the Transfer Restrictions shall not have lapsed,
to the Transfer Restrictions, and to the other restrictions and
limitations imposed thereon pursuant to the Plan and this
Agreement and which may be now or hereafter imposed by the
Certificate of Incorporation or the By-Laws of the Company, as
amended from time to time."
<PAGE>
-3-
6. Section 7 is hereby amended by deleting from the first sentence
thereof the phrase "or the Company Repurchase Option", so that as amended, the
first sentence thereof shall read in its entirety as follows:
"As soon as reasonably practicable after the lapse of the Transfer
Restrictions with respect to any Optioned Shares purchased by you
upon exercise of the Option, the Company shall deliver to you, or
your legal representative in the case of your death, the
certificate or certificates representing such shares and any
shares (or other property) received in any Non-Cash Distribution
in respect of such shares, previously deposited in escrow with the
Company pursuant to Section 5 hereof, without any legend referring
to the Transfer Restrictions."
7. A new Section 15 is hereby added, to read in its entirety as
follows:
"15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means
---------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine constitutes an effective change
in the control of the Company. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
<PAGE>
-4-
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in
Rule 405 under the Securities Act of 1933 and any "group" (within the meaning
of such term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to an Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the Company's Board of
Directors on the date of this Agreement) and any future director of the Company
who has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company or a subsidiary of the
Company."
8. In all other respects, the Agreement shall remain in full force and
effect.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
--------------------------------
Name: Peter E. Oettinger
------------------------------
Title: Vice President and
-----------------------------
Chief Operating Officer
Accepted and Agreed to:
/s/ Michael Dalterio
- -----------------------------
(Signature of Optionee)
Name: Michael Dalterio
------------------------
(please print)
Date: 92 Feb 6
------------------------
<PAGE>
[PC 7/91]
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Michael J. Dalterio
===========================
Optionee
8,000 $1 .50
==================== ================
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
December 1, 1993
===========================
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which is
---------------------
the earliest of (a) seven years after the Grant Date, (b) three months after the
date on which you cease to be a director or employee of the Company or a
subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of your
death, provided that immediately on the Employment Termination Date, the Option
shall terminate with respect to any Optioned Shares (as defined herein) that are
not Vested Shares (as defined herein) and as to which the Transfer Restrictions
(as defined
<PAGE>
2
herein) shall not have lapsed or (c) the date of the dissolution or liquidation
of the Company. The date on which the Option shall terminate in whole or in
part as provided in this Section 1 is hereinafter referred to as the "Option
Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the Option
-------------------
shall be exercisable in installments during the period beginning on the first
anniversary of the Grant Date and ending on the Option Termination Date as set
forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
- ------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing table
are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and all
fractional shares shall be rounded down to next lower whole number of shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of Common Stock
or other shares (or other property) received in any Non-Cash Distribution (as
defined herein) in respect of such Optioned Shares, may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer Restrictions with
respect to such Optioned Shares shall have lapsed as provided herein. The
Transfer Restrictions shall lapse in their entirety ninety days after the
initial public offering of the Common Stock by the Company is declared effective
by the Securities and Exchange Commission.
<PAGE>
3
4. No Assignment of Rights. Except for assignments or transfers by
------------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
-----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only
if (1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such certificate(s)
shall, immediately upon your receipt thereof, be deposited by you, together with
a stock power endorsed in blank, in escrow with the Company. In addition, any
certificate(s) representing shares of Common Stock, or other property other than
cash, distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall, immediately upon your receipt
thereof, be deposited by you, together with a stock power endorsed in blank (if
applicable), in escrow with the Company, and shall be subject to the Transfer
Restrictions to the same extent as the Optioned Shares in respect of which such
Non-Cash Distribution was made. All such deposited certificate(s) may have set
forth thereon a legend or legends (in addition to the legend referred to in
Section 8 hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions as
provided herein. All shares of Common Stock delivered upon the exercise of the
Option as provided herein shall be fully paid and non-assessable.
<PAGE>
4
6. Rights With Respect to Optioned Shares. Prior to the date the
---------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial issuance
to you of a certificate or certificates representing Optioned Shares or shares
(or other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to the Plan
and this Agreement and which may be now or hereafter imposed by the Certificate
of Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
---------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will
----------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge and agree that
any routine sales of the Optioned Shares purchased by you upon exercise of the
Option made in reliance upon Rule 144 under the Act may be made only in limited
amounts in accordance with the terms and conditions of that Rule. You also
acknowledge and agree that the certificate(s) representing Optioned Shares
delivered to you pursuant to Section 5 hereof may have set forth thereon a
legend indicating that such shares may be transferred, sold or otherwise
disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other
<PAGE>
5
securities law, any requirement of any securities exchange listing agreement to
which the Company may be a party, or any other requirement of law or of any
regulatory body having jurisdiction over the Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
-------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any recapitalization is to
be effected through an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par value will exceed
the Exercise Price hereunder, the Company shall notify you of such proposed
recapitalization, and you shall then have the right, exercisable at any time
prior to such recapitalization becoming effective, to purchase all of the
Optioned Shares not theretofore purchased by you (anything in Section 1 hereof
to the contrary notwithstanding), but if you fail to exercise such right before
such recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
----------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
------------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation
<PAGE>
6
and construction by the Company's Board of Directors of any provision of, and
the determination of any question arising under, this Agreement, the Plan, or
any rule or regulation adopted pursuant to the Plan, shall be final and
conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
--------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means
---------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule l2b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall
<PAGE>
determine constitutes an effective change in the control of the Company. As used
in the preceding sentence, the following capitalized terms shall have the
respective meanings set forth below:
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule l3d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Clerk of the Company, 400-1 Totten
Pond Road, Waltham, Massachusetts 02154.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
-------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ Michael J. Dalterio 94 March 31
- -------------------------
Optionee
652 Concord Rd., Sudbury, MA 01776
- -------------------------
Home Address
<PAGE>
8
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated ____________ (the "Stock Option
Agreement") between the Company and me, I hereby exercise the Option granted to
me with respect to _____ Option Shares.
Enclosed is the Exercise Consideration covering the purchase price of the shares
being exercised
TOTAL AMOUNT ENCLOSED........................... $_____________
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS
Number and denominations(s) of certificate(s) for shares being exercised:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Send new certificate(s) to:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Optionee:
- --------------------------- ---------------------------
(print name) Signature
---------------------------
Date
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Alan P. Sliski
- --------------------------------------------------------------------------------
Optionee
5,000 $0.40
------------------------ ------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
July 11, 1991
------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
-2-
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
Period Percentage of Option Exercisable
------ --------------------------------
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of Common Stock
or other shares (or other property) received in any Non-Cash Distribution (as
defined herein) in respect of such Optioned Shares, may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer
<PAGE>
-3-
Restrictions with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety ninety days
after the initial public offering of the Common Stock by the Company is declared
effective by the Securities and Exchange Commission.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such
<PAGE>
-4-
certificate(s) shall, immediately upon your receipt thereof, be deposited by
you, together with a stock power endorsed in blank, in escrow with the Company.
In addition, any certificate(s) representing shares of Common Stock, or other
property other than cash, distributed (including pursuant to any stock split) in
respect of Optioned Shares purchased by you (a "Non-Cash Distribution") with
respect to which the Transfer Restrictions shall not have lapsed shall,
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as the Optioned
Shares in respect of which such Non-Cash Distribution was made. All such
deposited certificate(s) may have set forth thereon a legend or legends (in
addition to the legend referred to in Section 8 hereof) indicating that the
shares of Common Stock (or other property) represented by such certificate(s)
are subject to the Transfer Restrictions as provided herein. All shares of
Common Stock delivered upon the exercise of the Option as provided herein shall
be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial
issuance to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares (or
other property), including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with respect to
which the Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions, and to the other restrictions and limitations imposed thereon
pursuant to the Plan and this Agreement and which may be now or hereafter
imposed by the Certificate of Incorporation or the By-Laws of the Company, as
amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the
<PAGE>
-5-
Securities Act of 1933, as amended (the "Act"), the rules and regulations
thereunder and all applicable state securities laws and the rules and
regulations thereunder. You hereby acknowledge and agree that any routine sales
of the Optioned Shares purchased by you upon exercise of the Option made in
reliance upon Rule 144 under the Act may be made only in limited amounts in
accordance with the terms and conditions of that Rule. You also acknowledge and
agree that the certificate(s) representing Optioned Shares delivered to you
pursuant to Section 5 hereof may have set forth thereon a legend indicating that
such shares may be transferred, sold or otherwise disposed of only after receipt
by the Company of an opinion of counsel reasonably satisfactory to it that the
transfer, sale or other disposition will not violate the Act or the regulations
thereunder or any applicable state securities laws or the regulations
thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock
------------------------------
dividend payable in Common Stock or any split-up or contraction in the number of
shares of Common Stock occurring after the date of this Agreement and prior to
the exercise in full of the Option, the number of shares for which the Option
may thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares
of the Common Stock or in case of any consolidation or merger of the Company
with or into another company or in case of any sale or conveyance to another
company or entity of the property of the Company as a whole or substantially as
a whole, you shall, upon exercise of the Option, be entitled to receive shares
of stock or other securities in its place equivalent in kind and value to those
shares which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to
<PAGE>
-6-
hold the Optioned Shares (together with all other shares, stock and securities
thereafter issued in respect thereof) to the time of the exercise of the Option;
provided, that if any recapitalization is to be effected through an increase in
- --------
the par value of the Common Stock without an increase in the number of
authorized shares and such new par value will exceed the Exercise Price
hereunder, the Company shall notify you of such proposed recapitalization, and
you shall then have the right, exercisable at any time prior to such
recapitalization becoming effective, to purchase all of the Optioned Shares not
theretofore purchased by you (anything in Section 1 hereof to the contrary
notwithstanding), but if you fail to exercise such right before such
recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-7-
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
--------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as defined
---------------
in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any
---------------------------------
one of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine
<PAGE>
-8-
constitutes an effective change in the control of the Company. As used in the
preceding sentence, the following capitalized terms shall have the respective
meanings set forth below:
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to an Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the Company's Board of
Directors on the date of this Agreement) and any future director of the Company
who has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company or a subsidiary of the
Company.
Please confirm your acceptance of the Option, your receipt of a copy of
the Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such copy
promptly under confidential cover to the Secretary of the Company, 580 Winter
Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
----------------------------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
[SIGNATURE APPEARS HERE]
- -----------------------------
Optionee
273 Concord Rd. Lincoln, MA 01773
- -----------------------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated
---------------------
(the "Stock Option Agreement") between the Company and me, I
hereby exercise the Option granted to me with respect to
--------------
Option Shares.
Enclosed is the Exercise Consideration covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED........................ $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of certificate(s)
for shares being exercised:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Send new certificate(s) to:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Optionee:
---------------------- ---------------------------------------------
(print name) Signature
---------------------------------------------
Date
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
CONSULTANT STOCK OPTION AGREEMENT
Kenneth J. Harte
- --------------------------------------------------------------------------------
Optionee
3,000 $0.40
--------------------------- ---------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
July 11, 1991
-------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a consultant of the Company (the
"Service Termination Date"), or six months after the Service Termination Date if
such cessation is a result of your death, provided that immediately
<PAGE>
-2-
on the Service Termination Date, the Option shall terminate with respect to
any Optioned Shares (as defined herein) that are not Vested Shares (as defined
herein) and as to which the Transfer Restrictions (as defined herein) shall not
have lapsed or (c) the date of the dissolution or liquidation of the Company.
The date on which the Option shall terminate in whole or in part as provided in
this Section 1 is hereinafter referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
Period Percentage of Option Exercisable
------ --------------------------------
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of Common Stock
or other shares (or other property) received in any Non-Cash Distribution (as
defined herein) in respect of Optioned Shares, may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution (the "Transfer Restrictions"), unless and until the
Transfer Restrictions with respect to such Optioned Shares shall have lapsed as
provided herein. The Transfer Restrictions shall lapse in their entirety
<PAGE>
-3-
ninety days after the initial public offering of the Common Stock by the
Company is declared effective by the Securities and Exchange Commission.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such certificate(s)
shall, immediately upon your receipt thereof, be deposited by you, together with
a stock power endorsed in blank,
<PAGE>
-4-
in escrow with the Company. In addition, any certificate(s) representing shares
of Common Stock, or other property other than cash, distributed (including
pursuant to any stock split) in respect of Optioned Shares purchased by you (a
"Non-Cash Distribution") with respect to which the Transfer Restrictions shall
not have lapsed shall, immediately upon your receipt thereof, be deposited by
you, together with a stock power endorsed in blank (if applicable), in escrow
with the Company, and shall be subject to the Transfer Restrictions to the same
extent as the Optioned Shares in respect of which such Non-Cash Distribution was
made. All such deposited certificate(s) may have set forth thereon a legend or
legends (in addition to the legend referred to in Section 8 hereof) indicating
that the shares of Common Stock (or other property) represented by such
certificate(s) are subject to the Transfer Restrictions as provided herein. All
shares of Common Stock delivered upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial
issuance to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares (or
other property), including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with respect to
which the Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions, and to the other restrictions and limitations imposed thereon
pursuant to the Plan and this Agreement and which may be now or hereafter
imposed by the Certificate of Incorporation or the By-Laws of the Company, as
amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of -such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
<PAGE>
-5-
and the rules and regulations thereunder. You hereby acknowledge and agree that
any routine sales of the Optioned Shares purchased by you upon exercise of the
Option made in reliance upon Rule 144 under the Act may be made only in limited
amounts in accordance with the terms and conditions of that Rule. You also
acknowledge and agree that the certificate(s) representing Optioned Shares
delivered to you pursuant to Section 5 hereof may have set forth thereon a
legend indicating that such shares may be transferred, sold or otherwise
disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and your
by will or the laws of descent and distribution that any shares purchased upon
any exercise of this Option shall be acquired for your personal account and not
with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock
------------------------------
dividend payable in Common Stock or any split-up or contraction in the number of
shares of Common Stock occurring after the date of this Agreement and prior to
the exercise in full of the Option, the number of shares for which the Option
may thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you head exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time
<PAGE>
-6-
of the exercise of the Option; provided, that if any recapitalization is to be
--------
effected through an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par value will exceed
the Exercise Price hereunder, the Company shall notify you of such proposed
recapitalization, and you shall then have the right, exercisable at any time
prior to such recapitalization becoming effective, to purchase all of the
Optioned Shares not theretofore purchased by you (anything in Section 1 hereof
to the contrary notwithstanding), but if you fail to exercise such right before
such recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12 Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-7-
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
--------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as defined
---------------
in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means
---------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or
<PAGE>
-8-
(iii) any other event that the Prior Directors shall determine constitutes an
effective change in the control of the Company. As used in the preceding
sentence, the following capitalized terms shall have the respective meanings set
forth below:
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to an Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the Company's Board of
Directors on the date of this Agreement) and any future director of the Company
who has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company or a subsidiary of the
Company.
Please confirm your acceptance of the Option, your receipt of a copy of the
Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such copy
promptly under confidential cover to the Secretary of the Company, 580 Winter
Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
---------------------------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ Kenneth J. Harte
- -----------------------------
Optionee
64 Estabrook Rd. Carlisle, MA 01741
- -----------------------------------
Home Address
3991d
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated
--------------------
(the "Stock Option Agreement") between the Company and me, I
hereby exercise the Option granted to me with respect to
-------
Option Shares.
Enclosed is the Exercise Consideration covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED........................... $
-------
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of certificate(s)
for shares being exercised:
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Send new certificate(s) to:
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Optionee:
- ----------------------------- ----------------------------------------------
(print name) Signature
----------------------------------------------
Date
3991d1
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
CONSULTANT STOCK OPTION AGREEMENT
Kenneth J. Harte
- --------------------------------------------------------------------------------
Optionee
2,200 $10.00
- ----------------------------- -------------------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
January 20, 1989
--------------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which
---------------------
is the earliest of (a) ten years after the Grant Date, (b) three months after
the date on which you cease to be a consultant of the Company (the "Service
Termination Date"), or six months after the Service Termination Date if such
cessation is a result of your death, provided that immediately
<PAGE>
-2-
on the Service Termination Date, the Option shall terminate with respect to any
Optioned Shares (as defined herein) that are not Vested Shares (as defined
herein) and as to which the Transfer Restrictions (as defined herein) shall not
have lapsed or (c) the date of the dissolution or liquidation of the Company.
The date on which the Option shall terminate in whole or in part as provided in
this Section 1 is hereinafter referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date
as set forth in the following table:
Period No. of Shares Vested & Exercisable
------ ----------------------------------
From and after
one year from the Grant Date 500
From and after
two years from the Grant Date 500
From and after
three years from the Grant Date 240
From and after
four years from the Grant Date 240
From and after
five years from the Grant Date 240
From and after
six years from the Grant Date 240
From and after
seven years from the Grant Date 240
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions and Company Repurchase Option.
----------------------------------------------------
(a) Shares of Common Stock subject to the Option ("Optioned
Shares") and purchased upon exercise of the Option may
<PAGE>
-3-
not, without the prior written consent of the Company, be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by will or
by the applicable laws of descent and distribution (the "Transfer
Restrictions"), unless and until the Transfer Restrictions with respect to such
Optioned Shares shall have lapsed as provided herein. The Transfer Restrictions
shall lapse in their entirety ninety days after the initial public offering of
the Common Stock by the Company is declared effective by the Securities and
Exchange Commission, provided such date occurs prior to the Service Termination
Date, and provided further you shall have remained continuously a consultant to
the Company since the Grant Date. From and after the Service Termination Date,
no further lapsing of the Transfer Restrictions shall occur, and thereupon the
Company shall have the right, exercisable in accordance with Section 3(b)
hereof, to repurchase all or any portion of the Optioned Shares purchased by you
upon exercise of the Option with respect to which the Transfer Restrictions
shall not have lapsed, at a price per share equal to the Exercise Price
specified on the first page of this Agreement (the "Exercise Price"). The right
of the Company to repurchase Optioned Shares at the Exercise Price as provided
in this Section 3(a) is hereinafter referred to as the "Company Repurchase
Option".
(b) The Company may exercise the Company Repurchase Option by
mailing to you at your last address listed in the records of the Company or the
relevant subsidiary of the Company, or by delivering to you, a notice that it
has exercised the Company Repurchase Option and the number of Optioned Shares
with respect to which it has exercised the Company Repurchase Option, within six
(6) months after the date that the Company shall first have been entitled to
exercise the Company Repurchase Option (the "Repurchase Option Period"). Such
notice shall be accompanied by a check payable to you in the amount of the
Exercise Price times the number of Optioned Shares with respect to which the
Company has exercised the Company Repurchase Option. Upon exercise by the
Company of the Company Repurchase Option as provided herein, the certificate or
certificates representing the Optioned Shares, and representing shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, which have been
repurchased shall forthwith be released from the escrow arrangement provided for
in Section 5 hereof and transferred of record to the Company. The Company
Repurchase Option shall lapse and be of no further force or effect if it shall
not have been exercised prior to the expiration of the Repurchase Option Period.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and
<PAGE>
-4-
distribution, your rights and interests under this Agreement and the Plan may
not be assigned or transferred in whole or in part either directly or by
operation of law or otherwise, including without limitation by way of execution,
levy, garnishment, attachment, pledge or bankruptcy, and no such rights or
interests shall be subject to any of your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions and the Company
Repurchase Option to the same extent that such Tendered Shares surrendered upon
such exercise were so subject immediately prior to such surrender. Receipt by
the Company of the Exercise Notice and the Exercise Consideration shall
constitute the exercise of the Option or a part thereof. As soon as reasonably
practicable thereafter, the Company shall deliver or cause to be delivered to
you a certificate or certificates representing the number of Optioned Shares
purchased, registered in your name. If such certificate(s) represent(s) Optioned
Shares with respect to which the Transfer Restrictions shall not have lapsed,
such certificate(s) shall, immediately upon your receipt thereof, be deposited
by you, together with a stock power endorsed in blank, in escrow with the
Company. In addition, any certificate(s) representing shares of Common Stock, or
other property other than cash, distributed (including pursuant to any stock
split) in respect of Optioned Shares purchased by you (a "Non-Cash
Distribution") with respect
<PAGE>
-5-
to which the Transfer Restrictions shall not have lapsed shall, immediately upon
your receipt thereof, be deposited by you, together with a stock power endorsed
in blank (if applicable), in escrow with the Company, and shall be subject to
the Transfer Restrictions, and the Company Repurchase Option to the same extent
as the Optioned Shares in respect of which such Non-Cash Distribution was made.
All such deposited certificate(s) may have set forth thereon a legend or legends
(in addition to the legend referred to in Section 8 hereof) indicating that the
shares of Common Stock (or other property) represented by such certificate(s)
are subject to the Transfer Restrictions and, to the extent applicable, to the
Company Repurchase Option, as provided herein. All shares of Common Stock
delivered upon the exercise of the Option as provided herein shall be fully paid
and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial
issuance to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares (or
other property), including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with respect to
which the Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions and the Company Repurchase Option, to the extent applicable, and to
the other restrictions and limitations imposed thereon pursuant to the Plan and
this Agreement and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions or the Company Repurchase Option.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge
<PAGE>
-6-
and agree that any routine sales of the Optioned Shares purchased by you upon
exercise of the Option made in reliance upon Rule 144 under the Act may be made
only in limited amounts in accordance with the terms and conditions of that
Rule. You also acknowledge and agree that the certificate(s) representing
Optioned Shares delivered to you pursuant to Section 5 hereof may have set forth
thereon a legend indicating that such shares may be transferred, sold or
otherwise disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and
your transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock
------------------------------
dividend payable in Common Stock or any split-up or contraction in the number of
shares of Common Stock occurring after the date of this Agreement and prior to
the exercise in full of the Option, the number of shares for which the Option
may thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any
--------
<PAGE>
-7-
recapitalization is to be effected through an increase in the par value of the
Common Stock without an increase in the number of authorized shares and such new
par value will exceed the Exercise Price hereunder, the Company shall notify you
of such proposed recapitalization, and you shall then have the right,
exercisable at any time prior to such recapitalization becoming effective, to
purchase all of the Optioned Shares not theretofore purchased by you (anything
in Section 1 hereof to the contrary notwithstanding), but if you fail to
exercise such right before such recapitalization becomes effective, the Exercise
Price hereunder shall be appropriately adjusted. Upon dissolution or liquidation
of the Company, the Option shall terminate, but you (if at the time you are a
director or employee of the Company or a subsidiary of the Company) shall have
the right, immediately prior to such dissolution or liquidation, to purchase all
or any portion of the Optioned Shares not theretofore purchased by you. No
adjustment provided for in this Section 9 shall apply to any Optioned Shares
purchased prior to the effective date of such adjustment. No fraction of a share
or fractional shares shall be purchasable or deliverable under this Agreement,
but in the event any adjustment hereunder of the number of Optioned Shares shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-8-
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
--------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Secretary of the Company, 580
Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
--------------------------------
Name:
Title: Chief Operating Officer
Accepted and agreed:
/s/ Kenneth J. Harte
- ------------------------------
Optionee
64 Estabrook Rd., Carlisle, MA 01741
- ------------------------------------
Home Address
3985d
<PAGE>
EXHIBIT A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________
(the "Stock Option Agreement") between the Company and me, I
hereby exercise the Option granted to me with respect to _______
Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED.......................... $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of certificate(s)
for shares being exercised:
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Send new certificate(s) to:
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Optionee:
- -------------------------- ----------------------------------------------
(print name) Signature
----------------------------------------------
Date
3985d1
<PAGE>
Kenneth J. Harte
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
-----------------
Amendment to Stock Option Agreement
Dated January 20, 1989
-----------------
The Stock Option Agreement referred to above (the "Agreement") between
you and Photoelectron Corporation (the "Company") is hereby amended, effective
as of the 11th day of July, 1991, as follows:
1. Section 3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"3. Transfer Restrictions.
-----------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional
shares of Common Stock or other shares (or other property)
received in any Non-Cash Distribution (as defined herein) in
respect of such Optioned Shares, may not, without the prior
written consent of the Company, be sold, assigned, transferred,
pledged, hypothecated or otherwise disposed of, except by will or
by applicable laws of descent and distribution or pursuant to a
qualified domestic relations order (the "Transfer Restrictions"),
unless and until the Transfer Restrictions with respect to such
Optioned Shares shall have lapsed as provided herein. The Transfer
Restrictions shall lapse in their entirety ninety days after the
initial public offering of the Common Stock by the Company is
declared effective by the Securities and Exchange Commission."
2. Section 5 is hereby amended by deleting from the third sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
third sentence shall read in its entirety as follows:
"As a condition to such consent, the Company may require that a
number of Optioned Shares acquired by you upon your exercise of
the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions
to the same extent that such Tendered Shares surrendered upon
such exercise were so subject immediately prior to such
surrender."
<PAGE>
-2-
3. Section 5 is hereby amended by deleting from the seventh sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
seventh sentence shall read in its entirety as follows:
"In addition, any certificate(s) representing shares of Common
Stock, or other property other than cash, distributed (including
pursuant to any stock split) in respect of Optioned Shares
purchased by you (a "Non-Cash Distribution") with respect to which
the Transfer Restrictions shall not have lapsed shall, immediately
upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the
Company, and shall be subject to the Transfer Restrictions to the
same extent as the Optioned Shares in respect of which such Non-
Cash Distribution was made."
4. Section 5 is hereby amended by deleting from the penultimate
sentence thereof the phrase "and, to the extent applicable, to the Company
Repurchase Option," so that as amended, the penultimate sentence shall read in
its entirety as follows:
"All such deposited certificate(s) may have set forth thereon a
legend or legends (in addition to the legend referred to in
Section 8 hereof) indicating that the shares of Common Stock (or
other property) represented by such certificate(s) are subject to
the Transfer Restrictions as provided herein."
5. Section 6 is hereby amended by deleting from the second sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
second sentence thereof shall read in its entirety as follows:
"Upon initial issuance to you of a certificate or certificates
representing Optioned Shares (or other property) received in any
Non-Cash Distribution in respect of Optioned Shares purchased by
you, you shall have ownership of such shares (or other property),
including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with
respect to which the Transfer Restrictions shall not have lapsed,
to the Transfer Restrictions, and to the other restrictions and
limitations imposed thereon pursuant to the Plan and this
Agreement and which may be now or hereafter imposed by the
Certificate of Incorporation or the By-Laws of the Company, as
amended from time to time."
<PAGE>
-3-
6. Section 7 is hereby amended by deleting from the first sentence
thereof the phrase "or the Company Repurchase Option", so that as amended, the
first sentence thereof shall read in its entirety as follows:
"As soon as reasonably practicable after the lapse of the Transfer
Restrictions with respect to any Optioned Shares purchased by you
upon exercise of the Option, the Company shall deliver to you, or
your legal representative in the case of your death, the
certificate or certificates representing such shares and any
shares (or other property) received in any Non-Cash Distribution
in respect of such shares, previously deposited in escrow with the
Company pursuant to Section 5 hereof, without any legend referring
to the Transfer Restrictions."
7. A new Section 15 is hereby added, to read in its entirety as
follows:
"15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means
---------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine constitutes an effective change
in the control of the Company. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
<PAGE>
-4-
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in
Rule 405 under the Securities Act of 1933 and any "group" (within the meaning
of such term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to an Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the Company's Board of
Directors on the date of this Agreement) and any future director of the Company
who has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company or a subsidiary of the
Company."
8. In all other respects, the Agreement shall remain in full force and
effect.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
--------------------------------
Name: Peter E. Oettinger
------------------------------
Title: Vice President and
-----------------------------
Chief Operating Officer
Accepted and Agreed to:
/s/ Kenneth J. Harte
- -----------------------------
(Signature of Optionee)
Name: Kenneth J. Harte
------------------------
(please print)
Date: 13 Feb. 1992
------------------------
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
James B. Dodge
- --------------------------------------------------------------------------------
Optionee
500 $1.00
- ---------------------------- ----------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
February 26, 1990
----------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.01 per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which is the
---------------------
earliest of (a) seven years after the Grant Date, (b) three months after the
date on which you cease to be a director or employee of the Company or a
subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
-2-
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
Period Percentage of Option Exercisable
------ --------------------------------
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions and Company Repurchase Option.
----------------------------------------------------
(a) Shares of Common Stock subject to the Option ("Optioned
Shares") and purchased upon exercise of the Option may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution (the "Transfer Restrictions"), unless and until the
Transfer Restrictions with respect to such Optioned Shares shall have lapsed as
provided herein. The Transfer Restrictions
<PAGE>
-3-
shall lapse in their entirety ninety days after the initial public offering of
the Common Stock by the Company is declared effective by the Securities and
Exchange Commission, provided such date occurs prior to the Employment
Termination Date, and provided further you shall have remained continuously a
director or employee of the Company or a subsidiary of the Company since the
Grant Date. From and after the Employment Termination Date, no further lapsing
of the Transfer Restrictions shall occur, and thereupon the Company shall have
the right, exercisable in accordance with Section 3(b) hereof, to repurchase all
or any portion of the Optioned Shares purchased by you upon exercise of the
Option with respect to which the Transfer Restrictions shall not have lapsed, at
a price per share equal to the Exercise Price specified on the first page of
this Agreement (the "Exercise Price"). The right of the Company to repurchase
Optioned Shares at the Exercise Price as provided in this Section 3(a) is
hereinafter referred to as the "Company Repurchase Option".
(b) The Company may exercise the Company Repurchase Option by
mailing to you at your last address listed in the records of the Company or the
relevant subsidiary of the Company, or by delivering to you, a notice that it
has exercised the Company Repurchase Option and the number of Optioned Shares
with respect to which it has exercised the Company Repurchase Option, within six
(6) months after the date that the Company shall first have been entitled to
exercise the Company Repurchase Option (the "Repurchase Option Period"). Such
notice shall be accompanied by a check payable to you in the amount of the
Exercise Price times the number of Optioned Shares with respect to which the
Company has exercised the Company Repurchase Option. Upon exercise by the
Company of the Company Repurchase Option as provided herein, the certificate or
certificates representing the Optioned Shares, and representing shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, which have been
repurchased shall forthwith be released from the escrow arrangement provided for
in Section 5 hereof and transferred of record to the Company. The Company
Repurchase Option shall lapse and be of no further force or effect if it shall
not have been exercised prior to the expiration of the Repurchase Option Period.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including
<PAGE>
-4-
without limitation by way of execution, levy, garnishment, attachment, pledge or
bankruptcy, and no such rights or interests shall be subject to any of your
obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions and the Company
Repurchase Option to the same extent that such Tendered Shares surrendered upon
such exercise were so subject immediately prior to such surrender. Receipt by
the Company of the Exercise Notice and the Exercise Consideration shall
constitute the exercise of the Option or a part thereof. As soon as reasonably
practicable thereafter, the Company shall deliver or cause to be delivered to
you a certificate or certificates representing the number of Optioned Shares
purchased, registered in your name. If such certificate(s) represent(s) Optioned
Shares with respect to which the Transfer Restrictions shall not have lapsed,
such certificate(s) shall, immediately upon your receipt thereof, be deposited
by you, together with a stock power endorsed in blank, in escrow with the
Company. In addition, any certificate(s) representing shares of Common Stock, or
other property other than cash, distributed (including pursuant to any stock
split) in respect of Optioned Shares purchased by you (a "Non-Cash
Distribution") with respect to which the Transfer Restrictions shall not have
lapsed shall,
<PAGE>
-5-
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions, and the Company Repurchase Option
to the same extent as the Optioned Shares in respect of which such Non-Cash
Distribution was made. All such deposited certificate(s) may have set forth
thereon a legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions and,
to the extent applicable, to the Company Repurchase Option, as provided herein.
All shares of Common Stock delivered upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial
issuance to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares (or
other property), including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with respect to
which the Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions and the Company Repurchase Option, to the extent applicable, and to
the other restrictions and limitations imposed thereon pursuant to the Plan and
this Agreement and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions or the Company Repurchase Option.
8. Securities Laws. You hereby represent and warrant that you will not
---------------
transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge
<PAGE>
-6-
and agree that any routine sales of the Optioned Shares purchased by you upon
exercise of the Option made in reliance upon Rule 144 under the Act may be made
only in limited amounts in accordance with the terms and conditions of that
Rule. You also acknowledge and agree that the certificate(s) representing
Optioned Shares delivered to you pursuant to Section 5 hereof may have set forth
thereon a legend indicating that such shares may be transferred, sold or
otherwise disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and
your transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any
--------
<PAGE>
-7-
recapitalization is to be effected through an increase in the par value of the
Common Stock without an increase in the number of authorized shares and such new
par value will exceed the Exercise Price hereunder, the Company shall notify you
of such proposed recapitalization, and you shall then have the right,
exercisable at any time prior to such recapitalization becoming effective, to
purchase all of the Optioned Shares not theretofore purchased by you (anything
in Section 1 hereof to the contrary notwithstanding), but if you fail to
exercise such right before such recapitalization becomes effective, the Exercise
Price hereunder shall be appropriately adjusted. Upon dissolution or liquidation
of the Company, the Option shall terminate, but you (if at the time you are a
director or employee of the Company or a subsidiary of the Company) shall have
the right, immediately prior to such dissolution or liquidation, to purchase all
or any portion of the Optioned Shares not theretofore purchased by you. No
adjustment provided for in this Section 9 shall apply to any Optioned Shares
purchased prior to the effective date of such adjustment. No fraction of a share
or fractional shares shall be purchasable or deliverable under this Agreement,
but in the event any adjustment hereunder of the number of Optioned Shares shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Board of Directors of any provision of,
and the determination of any question arising under, this Agreement, the Plan,
or any rule or regulation adopted pursuant to the Plan, shall be final and
conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-8-
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
--------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Secretary of the Company, 580
Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
----------------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ James B. Dodge
- ----------------------------------
Optionee
409 Main Street
W. Townsend, MA 01474
- ----------------------------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated ____________________ (the "Stock
Option Agreement") between the Company and me, I hereby exercise the Option
granted to me with respect to _______ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised.
TOTAL AMOUNT ENCLOSED.......................... $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of
certificate(s) for shares being
exercised:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Send new certificate(s) to:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Optionee:
- ---------------------------------- ----------------------------------
(print name) Signature
----------------------------------
Date
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
-----------------
Amendment to Stock Option Agreement
Dated February 26, 1990
-----------------
The Stock Option Agreement referred to above (the "Agreement") between you
and Photoelectron Corporation (the "Company") is hereby amended, effective as of
the 11th day of July, 1991, as follows:
1. Section 3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of
Common Stock or other shares (or other property) received in any Non-
Cash Distribution (as defined herein) in respect of such Optioned
Shares, may not, without the prior written consent of the Company, be
sold, assigned, transferred, pledged, hypothecated or otherwise
disposed of, except by will or by applicable laws of descent and
distribution or pursuant to a qualified domestic relations order (the
"Transfer Restrictions"), unless and until the Transfer Restrictions
with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety
ninety days after the initial public offering of the Common Stock by
the Company is declared effective by the Securities and Exchange
Commission."
2. Section 5 is hereby amended by deleting from the third sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
third sentence shall read in its entirety as follows:
"As a condition to such consent, the Company may require that a
number of Optioned Shares acquired by you upon your exercise of the
Option equal to the number of Tendered Shares surrendered upon such
exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were
so subject immediately prior to such surrender."
<PAGE>
-2-
3. Section 5 is hereby amended by deleting from the seventh sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
seventh sentence shall read in its entirety as follows:
"In addition, any certificate(s) representing shares of Common
Stock, or other property other than cash, distributed (including
pursuant to any stock split) in respect of Optioned Shares purchased
by you (a "Non-Cash Distribution") with respect to which the Transfer
Restrictions shall not have lapsed shall, immediately upon your
receipt thereof, be deposited by you, together with a stock power
endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as
the Optioned Shares in respect of which such Non-Cash Distribution
was made."
4. Section 5 is hereby amended by deleting from the penultimate sentence
thereof the phrase "and, to the extent applicable, to the Company Repurchase
Option," so that as amended, the penultimate sentence shall read in its entirety
as follows:
"All such deposited certificate(s) may have set forth thereon a
legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other
property) represented by such certificate(s) are subject to the
Transfer Restrictions as provided herein."
5. Section 6 is hereby amended by deleting from the second sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
second sentence thereof shall read in its entirety as follows:
"Upon initial issuance to you of a certificate or certificates
representing Optioned Shares (or other property) received in any Non-
Cash Distribution in respect of Optioned Shares purchased by you, you
shall have ownership of such shares (or other property), including
the right to vote and receive dividends, subject, however, in the
case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions, and to the other restrictions and limitations imposed
thereon pursuant to the Plan and this Agreement and which may be now
or hereafter imposed by the Certificate of Incorporation or the By-
Laws of the Company, as amended from time to time.
<PAGE>
-3-
6. Section 7 is hereby amended by deleting from the first sentence thereof the
phrase "or the Company Repurchase Option", so that as amended, the first
sentence thereof shall read in its entirety as follows:
"As soon as reasonably practicable after the lapse of the Transfer
Restrictions with respect to any Optioned Shares purchased by you upon
exercise of the Option the Company shall deliver to you, or your
legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other
property) received in any Non-Cash Distribution in respect of such
shares, previously deposited in escrow with the Company pursuant to
Section 5 hereof, without any legend referring to the Transfer
Restrictions."
7. A new Section 15 is hereby added, to read in its entirety as follows:
"15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as defined in
---------------
Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares shall
lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any one
---------------------------------
of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine constitutes an effective change
in the control of the Company. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
<PAGE>
-4-
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to an Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the Company's Board of
Directors on the date of this Agreement) and any future director of the Company
who has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company or a subsidiary of the
Company."
8. In all other respects, the Agreement shall remain in full force and
effect.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
-----------------------------------------
Name: Peter E. Oettinger
----------------------------------
Title: Vice President and
---------------------------------
Chief Operating Officer
Accepted and Agreed to:
/s/ James B. Dodge
- -----------------------------
(Signature of Optionee)
Name: James B. Dodge
- -----------------------------
(please print)
Date: 11 Mar 92
------------------------
4381d
<PAGE>
EXHIBIT 10.5
PHOTOELECTRON CORPORATION
1996 EQUITY INCENTIVE PLAN
--------------------------
1. Purpose. This 1996 Equity Incentive Plan (the "Plan") is intended
-------
to provide incentives:
(a) to the officers and other employees of Photoelectron Corporation,
a Massachusetts corporation (the "Company"), and any present or future
subsidiaries of the Company (collectively, "Related Corporations"), by
providing them with opportunities to purchase stock in the Company pursuant
to options granted hereunder which qualify as "incentive stock options"
under Section 422(b) of the Internal Revenue Code of 1986 (the "Code")
("ISO" or "ISO's");
(b) to directors, officers, employees and consultants of the Company
and Related Corporations by providing them with opportunities to purchase
stock in the Company pursuant to options granted hereunder which do not
qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options");
(c) to directors, officers, employees and consultants of the Company
and Related Corporations by providing them with awards of stock in the
Company ("Awards"); and
(d) to directors, officers, employees and consultants of the Company
and Related Corporations by providing them with opportunities to make
direct purchases of stock in the Company ("Purchases").
Both ISOs and Non-Qualified Options are referred to hereafter individually as an
"Option" and collectively as "Options". Options, Awards and authorizations to
make Purchases are referred to hereafter collectively as "Stock Rights". As
used herein, the terms "parent" and "subsidiary" mean "parent corporation" and
"subsidiary corporation", respectively, as those terms are defined in Section
424 of the Code.
2. Administration of the Plan.
--------------------------
A. Board or Committee Administration. The Plan shall be administered by
---------------------------------
the Board of Directors of the Company (the "Board"). The Board may delegate any
or all of its responsibilities under the Plan to a Committee of two (2) or more
of its members who, if the Company is then a Public Company (as defined below),
qualify as "Non-Employee Directors" within the meaning of Rule 16b-3 adopted
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), to
administer the Plan; provided such Committee is delegated such powers in
accordance with state law, and provided further that grants of Stock Rights to
Board members shall be made by the Board in
1
<PAGE>
accordance with state law. (All references in this Plan to the "Committee" shall
mean the Board (i) if no Committee has been so appointed, or (ii) even if a
Committee has been appointed, with respect to Stock Rights granted to Board
members). The Company shall be a "Public Company" at such time as it registers
any class of any equity security pursuant to Section 12 of the Exchange Act.
B. Authority of Committee. Subject to the terms of the Plan, the
----------------------
Committee shall have the authority to:
(i) determine the employees of the Company and Related Corporations
(from among the class of employees eligible under paragraph 3 to receive
ISOs) to whom ISOs may be granted, and to determine (from among the class
of individuals and entities eligible under paragraph 3 to receive
Non-Qualified Options and Awards and to make Purchases) to whom
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted;
(ii) determine the time or times at which Options and Awards may be
granted and Purchases made;
(iii) determine the option price of shares subject to each Option,
which price in the case of an ISO shall not be less than the minimum price
specified in paragraph 6, and the purchase price of shares subject to each
Purchase;
(iv) determine whether each Option granted shall be an ISO or a Non-
Qualified Option;
(v) determine (subject to paragraph 7) the time or times when each
Option shall become exercisable and the duration of the exercise period;
(vi) determine whether restrictions such as repurchase options are to
be imposed on shares subject to Options, Awards and Purchases and the
nature of such restrictions, if any;
(vii) pre-establish objective performance goals with respect to Stock
Rights (other than ISOs and Non-Qualified Options with an exercise price
not less than the fair market value per share of Common Stock on the date
of grant) to be provided to "covered employees" within the meaning of
Section 162(m) of the Code but only if necessary to preclude the
applicability of said Section 162(m);
(viii) impose such other terms and conditions with respect to Stock
Rights not inconsistent with the terms of this Plan as it deems necessary
or desirable; and
(ix) interpret the Plan and prescribe and rescind rules and
regulations relating to it.
2
<PAGE>
If the Committee determines to issue a Non-Qualified Option, it shall take
whatever actions it deems necessary, under the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO.
The interpretation and construction by the Committee of any provisions of
the Plan or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem best. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to the Plan or any Stock Right granted under it.
C. Committee Actions. The Committee may select one of its members as its
-----------------
chairman, and shall hold meetings at such time and places as it may determine.
Acts by a majority of the Committee, or acts reduced to or approved in writing
by a majority of the members of the Committee, shall be the valid acts of the
Committee. From time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies however caused,
or remove all members of the Committee and thereafter directly administer the
Plan.
3. Eligible Employees and Others. ISOs may be granted to any employee of
-----------------------------
the Company or any Related Corporation. Those officers and directors of the
Company who are not employees may not be granted ISOs under the Plan.
Non-Qualified Options, Awards and authorizations to make Purchases may be
granted to any employee, or officer or director (whether or not also an
employee), or consultant of the Company or any Related Corporation. The
Committee may take into consideration a recipient's individual circumstances in
determining whether to grant a Stock Right. Granting a Stock Right to any
individual or entity shall neither entitle that individual or entity to
participate in, nor disqualify that individual or entity from participation in,
any other grant of Stock Rights.
4. Stock. The stock subject to Options and which may be issued as Awards
-----
and to persons making Purchases shall be authorized but unissued shares of
common stock of the Company, $.01 par value (the "Common Stock"), or shares of
Common Stock reacquired by the Company in any manner. The aggregate number of
shares which may be issued pursuant to the Plan is two hundred sixty-six
thousand seven hundred seventy-five (266,775), subject to adjustment as provided
in paragraph 10. Any such shares may be issued upon the exercise of ISOs or
Non-Qualified Options, or as Awards or Purchases, so long as the aggregate
number of shares so issued does not exceed such maximum number, as adjusted. If
any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, the unpurchased shares subject to such Options
and any unvested shares reacquired by the Company shall again be available for
grants of Stock Rights under the Plan.
3
<PAGE>
5. Granting of Stock Rights. Stock Rights may be granted under the Plan
------------------------
at any time after August 15, 1996 and prior to July 17, 2006. The date of grant
of a Stock Right under the Plan will be the date specified by the Committee at
the time it grants the Stock Right; provided, however, that such date shall not
be prior to the date on which the Committee acts to approve the grant. The
Committee shall have the right, with the consent of the optionee, to convert an
ISO granted under the Plan to a Non-Qualified Option pursuant to paragraph 14.
Nothing in the Plan shall be deemed to give any grantee of any Stock Right
the right to be retained in employment or other service by the Company or any
Related Corporation for any period of time.
6. Terms and Conditions of Stock Rights. Stock Rights shall be evidenced
------------------------------------
by instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments may be in the form of agreements to
be executed by both the Company and the individual or entity receiving the Stock
Right, or certificates, letters or similar instruments that need not be executed
by such individual or entity but acceptance of which will evidence agreement to
the terms thereof. Such instruments shall conform to the terms and conditions
set forth in the Plan and may contain such other provisions as the Committee
deems advisable which are not inconsistent with the Plan. Without limiting the
foregoing, such provisions may include such rights of refusal and repurchase
with respect to, and such other restrictions applicable to, shares of Common
Stock issuable upon exercise of Options, Awards and Purchases as the Committee
may deem appropriate. In granting any Non-Qualified Option, the Committee may
specify that such Non-Qualified Option shall be subject to the restrictions set
forth herein with respect to ISOs, or to such termination, cancellation or other
provisions as the Committee may determine.
The Committee may from time to time confer authority and responsibility on
one or more of its own members and/or one or more officers of the Company to
execute and deliver such instruments. The proper officers of the Company are
authorized and directed to take any and all action necessary or advisable from
time to time to carry out the terms of such instruments.
7. Option Duration. Subject to earlier termination as provided in
---------------
paragraph 8, each Option shall expire on the date specified by the Committee and
set forth in the original instrument granting such Option, but not more than ten
(10) years from the date of grant. Notwithstanding the foregoing, in the case
of an ISO granted to an employee owning stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Related Corporation, such ISO shall expire not more than five (5) years
from the date of grant. A Non-Qualified Option shall expire on the date
specified in the original instrument granting such Non-Qualified Option, subject
to extension as determined by the Committee. ISOs, or any part thereof, that
have been converted into Non-Qualified Options may be extended as provided in
paragraph 14.
4
<PAGE>
8. Special Rules for ISO.
---------------------
A. Price for ISOs. The exercise price per share specified in the
--------------
agreement relating to each ISO granted under the Plan shall not be less than the
fair market value per share of Common Stock on the date of such grant. In the
case of an ISO to be granted to an employee owning stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date of grant.
B. $100,000 Annual Limitation on ISOs. Each eligible employee may be
----------------------------------
granted ISOs only to the extent that, in the aggregate under this Plan and all
incentive stock option plans of the Company and any Related Corporation, such
ISOs do not become exercisable for the first time by such employee during any
calendar year in a manner which would entitle the employee to purchase more than
$100,000 in fair market value (determined at the time the ISOs were granted) of
Common Stock in that year. Any options granted to an employee in excess of such
amount will be granted as Non-Qualified Options.
C. Determination of Fair Market Value. If, at the time an Option is
----------------------------------
granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the date on which such Option is granted
or, if prices or quotes discussed in this sentence are not available for that
date, as of the last business day for which such prices or quotes are available
immediately prior to the date such Option is granted, and shall mean:
(i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then
traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock
on the NASDAQ National Market List, if the Common Stock is not
then traded on a national securities exchange; or
(iii) the closing bid price (or average of bid prices) of the Common
Stock last quoted (on that date) by an established quotation
service for over-the-counter securities, if the Common Stock is
not then traded on a national securities exchange or reported on
the NASDAQ National Market List.
However, if the Common Stock is not publicly traded at the time an Option is
granted under the Plan, "fair market value" shall be deemed to be the fair value
of the Common
5
<PAGE>
Stock as determined by the Committee after taking into consideration all factors
in good faith it deems appropriate, including, without limitation, recent sale
and offer prices of the Common Stock in private transactions negotiated at arm's
length.
D. Assignability. No ISO shall be assignable or transferable by the
-------------
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee each Option shall be exercisable only by him. No
ISO, nor the right to exercise any portion thereof, shall be subject to
execution, attachment, or similar process, assignment, or any other alienation
or hypothecation. Upon any attempt to transfer, assign, pledge, hypothecate, or
otherwise dispose of any ISO, or of any right or privilege conferred thereby,
contrary to the provisions thereof or hereof or upon the levy of any attachment
or similar process upon any ISO, or any right or privilege conferred thereby,
such Option and such rights and privileges shall immediately become null and
void.
E. Death. If an ISO optionee ceases to be employed by the Company and
-----
all Related Corporations by reason of his death, or if the Employee dies within
the thirty (30) day period after the Employee ceases to be employed by the
Company and all Related Corporations, any ISO of his may be exercised, to the
extent of the number of shares with respect to which he could have exercised it
on the date of his death, by his estate, personal representative or beneficiary
who has acquired the ISO by will or by the laws of descent and distribution, at
any time prior to the earlier of the specified expiration date of the ISO or one
hundred and eighty (180) days from the date of the optionee's death.
F. Disability. If an ISO optionee ceases to be employed by the Company
----------
and all Related Corporations by reason of his disability, he shall have the
right to exercise any ISO held by him on the date of termination of employment,
to the extent of the number of shares with respect to which he could have
exercised it on that date, at any time prior to the earlier of the specified
expiration date of the ISO or one (1) year from the date of the termination of
the optionee's employment. For the purposes of the Plan, the term "disability"
shall mean "permanent and total disability" as defined in Section 22(e)(3) of
the Code or successor statute.
G. Other Termination of Employment. If an ISO optionee ceases to be
-------------------------------
employed by the Company and all Related Corporations other than by reason of
death or disability as defined in paragraph 8(F), no further installments of his
ISOs shall become exercisable, and his ISOs shall terminate after the passage of
three (3) months from the date of termination of his employment, but in no event
later than on their specified expiration dates, except to the extent that such
ISOs (or unexercised installments thereof) have been converted into Non-
Qualified Options pursuant to paragraph 14.
9. Exercise of Option. Subject to the provisions of paragraphs 6 and 8,
------------------
each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option shall either be fully exercisable on the date
-------
of grant or shall become exercisable thereafter in such installments as the
Committee
6
<PAGE>
may specify. The Committee may also specify such other conditions precedent
as it deems appropriate to the exercise of an Option.
B. Full Vesting of Installments. Once an installment becomes
----------------------------
exercisable it shall remain exercisable until expiration or termination of
the Option, unless otherwise specified by the Committee.
C. Partial Exercise. Each Option or installment may be exercised at
----------------
any time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable, provided
that the Committee may specify a certain minimum number or percentage of
the shares issuable upon exercise of any Option that must be purchased upon
any exercise.
D. Acceleration of Vesting. The Committee shall have the right to
-----------------------
accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not accelerate the exercise date of any
installment of any Option granted to any employee as an ISO (and not
previously converted into a Non-Qualified Option pursuant to paragraph 14)
if such acceleration would violate the annual vesting limitation contained
in Section 422(d) of the Code, as described in paragraph 8(B).
10. Adjustments. Upon the occurrence of any of the following events, an
-----------
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common Stock shall
--------------------------------
be subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
B. Consolidations, Mergers or Sales of Assets or Stock. If the Company
---------------------------------------------------
is to be consolidated with or acquired by another person or entity in a merger,
sale of all or substantially all of the Company's assets or stock, or otherwise
(an "Acquisition"), the Committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board") shall,
with respect to outstanding Options, shares acquired upon exercise of any
Option, Awards granted and Purchases made, take one or more of the following
actions:
(i) make appropriate provision for the continuation of such Options
by substituting on an equitable basis for the shares then subject to such
Options the
7
<PAGE>
consideration payable with respect to the outstanding shares of Common
Stock in connection with the Acquisition;
(ii) accelerate the date of exercise of such Options or of any
installment of any such Options;
(iii) upon written notice to the optionees, provide that all Options
must be exercised, to the extent then exercisable, within a specified
number of days of the date of such notice, at the end of which period the
Options shall terminate;
(iv) terminate all Options in exchange for a cash payment equal to
the excess of the fair market value of the shares subject to such Options
(to the extent then exercisable) over the exercise price thereof; or
(v) in the event of a stock sale, require that the holder sell to
the purchaser to whom such stock sale is to be made, all shares previously
issued to the holder upon the exercise of any Option, all Awards granted
and all Purchases made, at a price equal to the portion of the net
consideration from such sale which is attributable to such shares.
C. Recapitalization or Reorganization. In the event of a
----------------------------------
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph B above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he would have
received if he had exercised his Option prior to such recapitalization or
reorganization and had been the owner of the Common Stock receivable upon such
exercise at such time.
D. Modification of ISOs. Notwithstanding the foregoing, any adjustments
--------------------
made pursuant to the foregoing subparagraphs A, B or C with respect to ISOs
shall be made only after the Committee, after consulting with counsel for the
Company, determines whether such adjustments would constitute a "modification"
of such ISOs (as that term is defined in Section 424 of the Code or any
successor thereto) or would cause any adverse tax consequences for the holders
of such ISOs. If the Committee determines that such adjustments made with
respect to ISOs would constitute a modification of such ISOs or would cause any
adverse tax consequences for the holders of such ISOs, it may refrain from
making such adjustments.
E. Dissolution or Liquidation. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, each Option will terminate immediately prior to
the consummation of such proposed action or at such other time and subject to
such other conditions as shall be determined by the Committee.
8
<PAGE>
F. Issuances of Securities. Except as expressly provided herein, no
-----------------------
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company (and, in the case of securities
of the Company, such adjustments shall be made pursuant to the foregoing
subparagraph A).
G. Fractional Shares. No fractional shares shall be issued under the Plan
-----------------
and an optionee shall receive from the Company cash in lieu of such fractional
shares.
H. Adjustments. Upon the happening of any of the foregoing events
-----------
described in subparagraphs A, B or C above, the class and aggregate number of
shares set forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this paragraph 10 and its determination shall be conclusive.
If any person or entity owning Common Stock obtained by exercise of a Stock
Right made hereunder receives shares or securities or cash in connection with a
corporate transaction described in subparagraphs A, B or C above as a result of
owning such Common Stock, such shares or securities or cash shall be subject to
all of the conditions and restrictions applicable to the Common Stock with
respect to which such shares or securities or cash were issued, unless otherwise
determined by the Committee.
11. Means of Exercising Options. A Stock Right (or any part or
---------------------------
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price (if any)
therefor either
(a) in United States dollars in cash or by check, or
(b) at the discretion of the Committee, through delivery of shares of
Common Stock having a fair market value equal as of the date of
the exercise to the cash exercise price of the Stock Right, or
(c) at the discretion of the Committee, by delivery of the grantee's
personal recourse note bearing interest payable not less than
annually at no less than one hundred percent (100%) of the lowest
applicable Federal rate, as defined in Section 1274(d) of the
Code, or
9
<PAGE>
(d) at the discretion of the Committee, by any combination of (a),
(b) and (c) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), or (d) of
the preceding sentence, such discretion shall be exercised in writing at the
time of the grant of the ISO in question.
The holder of a Stock Right shall not have the rights of a shareholder with
respect to the shares covered by his Stock Right until the date of issuance of a
stock certificate to him for such shares. Except as expressly provided above in
paragraph 10 with respect to changes in capitalization and stock dividends, no
adjustment shall be made for dividends or similar rights for which the record
date is before the date such stock certificate is issued.
12. Conditions on Delivery of Common Stock. The Company will not be
--------------------------------------
obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove any restriction from shares previously delivered under the Plan
(a) until all conditions on the grant of a Stock Right have been
satisfied or removed,
(b) until, in the opinion of the Company's counsel, all applicable
federal and state laws and regulations have been complied with,
(c) if the outstanding Common Stock is at the time listed on any
stock exchange, until the shares have been listed or authorized
to be listed on any such exchange upon official notice of
issuance, and
(d) until all other legal matters in connection with the issuance and
delivery of such shares have been approved by the Company's
counsel.
If the sale of Common Stock has not been registered under the Securities Act of
1933, as amended, the Company may require, as a condition to exercise of a Stock
Right, such representations or agreements as counsel for the Company may
consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Common Stock bear an appropriate legend restricting
transfer.
13. Term and Amendment of Plan. This Plan was adopted by the Board on
--------------------------
July 17, 1996 and will be presented to the stockholders of the Company for their
approval on or prior to July 16, 1997. If the approval of the stockholders is
not obtained on or prior to July 16, 1997, any grants of ISOs under the Plan
made on or prior to that date will be rescinded. The Plan shall expire on July
16, 2006 (except that Stock Rights granted prior to July 17, 2006 shall continue
in force beyond such expiration date in
10
<PAGE>
accordance with their terms). Subject to the provisions of paragraph 5 above,
Stock Rights may be granted under the Plan prior to the date of stockholder
approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time,
except that, without the approval of the stockholders obtained within twelve
(12) months before or after the Board adopts a resolution authorizing any of the
following actions:
(a) the total number of shares that may be issued under the Plan may
not be increased (except by adjustment pursuant to paragraph 10);
(b) the provisions of paragraph 3 regarding eligibility for grants of
ISOs may not be modified;
(c) the provisions of paragraph 8(A) regarding the exercise price at
which shares may be offered pursuant to ISOs may not be modified
(except by adjustment pursuant to paragraph 10); and
(d) the expiration date of the Plan may not be extended.
Except as otherwise provided in this paragraph 13, in no event may action of the
Board, the Committee or stockholders alter or impair the rights of a grantee
under any Option previously granted to him, without his consent.
14. Conversion of ISOs into Non-Qualified Options; Termination of ISOs.
------------------------------------------------------------------
The Committee, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of the appropriate installments of such Options. At
the time of such conversion, the Committee may impose such conditions on the
exercise of the resulting Non-Qualified Options as the Committee in its
discretion may determine, provided that such conditions shall not be
inconsistent with this Plan. Nothing in the Plan shall be deemed to give any
optionee the right to have such optionee's ISOs converted into Non-Qualified
Options, and no such conversion shall occur until and unless the Committee takes
appropriate action. The Committee, with the consent of the optionee, may also
terminate any portion of any ISO that has not been exercised at the time of such
termination.
15. Application of Funds. The proceeds received by the Company from the
--------------------
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
11
<PAGE>
16. Governmental Regulation. The Company's obligation to sell and deliver
-----------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
17. Withholding of Income Taxes. Upon the exercise of a Non-Qualified
---------------------------
Option, the grant of an Award, the making of a Purchase of Common Stock for less
than its fair market value, the making of a Disqualifying Disposition (as
defined in paragraph 18) or the vesting of restricted Common Stock acquired on
the exercise of a Stock Right hereunder, the Company may require the optionee,
Award recipient, purchaser or shareholder to pay (through the withholding of a
sufficient number of shares of Common Stock, or otherwise) any federal, state,
local and foreign withholding taxes in respect of the amount that is considered
compensation includible in such person's gross income. The Committee in its
discretion may condition (i) the exercise of an Option, (ii) the grant of an
Award, (iii) the making of a Purchase of Common Stock for less than its fair
market value, and (iv) the vesting of restricted Common Stock acquired by
exercising a Stock Right, on such person's payment of such withholding taxes.
18. Notice to Company of Disqualifying Disposition. Each employee who
----------------------------------------------
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of
(a) two (2) years after the date the employee was granted the ISO, or
(b) one (1) year after the date the employee acquired Common Stock by
exercising the ISO.
If the employee dies before such stock is sold, these holding period
requirements do not apply and no Disqualifying Disposition can occur thereafter.
19. Governing Law; Construction. The validity and construction of the
---------------------------
Plan and the instruments evidencing Options shall be governed by the laws of the
jurisdiction in which the Company or its successors in interest is organized.
In construing this Plan, the singular shall include the plural and the masculine
gender shall include the feminine and neuter, unless the context otherwise
requires.
12
<PAGE>
EXHIBIT 10.6
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or registered or qualified under any state
securities laws, and such securities may not be sold, transferred or otherwise
disposed of in the absence of an effective registration statement under such Act
and registration and qualification under all applicable state securities laws or
pursuant to exemptions therefrom.
Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
STOCK PURCHASE WARRANT
Date of Issuance: December 28, 1991 Right to Purchase 214,667
Shares of Common Stock
(subject to adjustment)
Warrant #1
For value received, Photoelectron Corporation, a Massachusetts corporation
(the "Company"), hereby grants to Photoelectron Investments Corporation of
Liberia, or its registered assigns (the "Registered Holder"), the right to
purchase from the Company 214,667 shares of the Company's Common Stock (subject
to adjustment pursuant to Section 4 hereof) at a price of $1.50 per share (as
adjusted pursuant to Section 3 hereof, the "Exercise Price"). The amount and
kind of securities purchasable pursuant to the rights granted under this Warrant
and the purchase price for such securities are subject to adjustment pursuant to
the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following terms have the
-----------
meanings set forth below:
"Common Stock" means the Company's Common Stock, $.0l par value per
------------
share.
<PAGE>
-2-
"Date of Issuance" shall have the meaning specified in Section 10 of
------------------
this Warrant.
"Market Price" is defined as the average of the daily closing prices
--------------
for the 20 consecutive trading days, immediately preceding the date of
computation. The closing price for each day shall be (i) if the shares of
Common Stock are listed or admitted to trading on a principal national
securities exchange or the National Market System of NASDAQ, the last reported
sales price on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or on the National Market System
of NASDAQ or (ii) if the shares of Common Stock are not listed or admitted to
trading on any such exchange, the average of the highest bid and lower asked
prices, as reported on the Automated Quotation System of the National Quotations
Bureau, Incorporated or an equivalent, generally accepted reporting service. If
at any time such security is not listed on any domestic securities exchange or
quoted in the NASDAQ System or the domestic over-the-counter market, the "Market
Price" will be the fair value thereof determined by the Board of Directors in
good faith.
"NASDAQ System" means the NASDAQ Inter-Dealer Quotation System or such
---------------
other similar inter-dealer quotation system as may in the future be used
generally by members of the National Association of Securities Dealers, Inc.,
for the over-the-counter transactions in securities.
"Person" means an individual, a partnership, a corporation, a trust, a
--------
joint venture, an unincorporated organization and a government or any department
or agency thereof.
"Warrant" or "Warrants" means this Warrant and all stock purchase
--------- ----------
warrants issued in exchange therefor pursuant to the terms thereof.
"Warrant Stock" means shares of the Company's authorized but unissued
---------------
Common Stock; provided that if there is a change such that the securities
--------
issuable upon exercise of the Warrant are issued by an entity other than the
Company or there is a change in the class of securities so issuable, then the
term "Warrant Stock" will mean one share of the security issuable upon exercise
of the Warrant if such security is issuable in shares, or will mean the smallest
unit in which such security is issuable if such security is not issuable in
shares.
<PAGE>
-3-
2. Exercise of Warrant.
--------------------
2.1 Exercise Period. The Registered Holder may exercise this
---------------
Warrant, in whole or in part (but not as to a fractional share of Warrant
Stock), at any time and from time to time prior to the fifth anniversary of the
Date of Issuance of the Warrant (the "Exercise Period").
2.2 Exercise Procedure.
------------------
(a) This Warrant will be deemed to have been exercised at such
time as the Company has received all of the following items (the "Exercise
Date"):
(i) a completed Exercise Agreement, as described below,
executed by the Person exercising all or part of the purchase
right represented by this Warrant (the "Purchaser");
(ii) this Warrant;
(iii) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
Exhibit II hereto, evidencing the assignment of this Warrant to
the Purchaser; and
(iv) a check payable to the Company in an amount equal
to the product of the Exercise Price multiplied by the number of
shares of Warrant Stock being purchased upon such exercise.
(b) Certificates for shares of Warrant Stock purchased upon
exercise of this Warrant will be delivered by the Company to the Purchaser
within ten days after the Exercise Date. Unless this Warrant has expired or all
of the purchase rights represented hereby have been exercised, the Company will
prepare a new Warrant, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been exercised.
The Company will, within such ten-day period, deliver such new Warrant to the
Person designated for delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise of this Warrant
will be deemed to have been issued to the Purchaser on the Exercise Date, and
the Purchaser will be deemed for all purposes to have been the record holder of
such Warrant Stock on the Exercise Date.
(d) The issuance of certificates for shares of Warrant Stock upon
exercise of this Warrant will be made without charge to the Registered Holder or
the Purchaser for
<PAGE>
-4-
any issuance tax in respect thereof or any other cost incurred by the Company in
connection with such exercise and the related issuance of shares of Warrant
Stock. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer, in whole or in part, of this Warrant
(including the issuance of new Warrants in connection therewith or the delivery
of stock certificates in a name other than that of the Registered Holder of this
Warrant presented for exercise, and any such tax shall be paid by such
Registered Holder at the time of presentation.
(e) The Company will not close its books for the transfer of this
Warrant or of any share of Warrant Stock issued or issuable upon the exercise on
this Warrant in any manner which interferes with the timely exercise of this
Warrant.
2.3 Exercise Agreement. The Exercise Agreement will be substantially
------------------
in the form set forth in Exhibit I hereto, except that if the shares of Warrant
Stock are not to be issued in the name of the Registered Holder of this
Warrant, the Exercise Agreement will also state the name of the Person to whom
the certificates for the shares of Warrant Stock are to be issued, and if the
number of shares of Warrant Stock to be issued does not include all the shares
of Warrant Stock purchasable hereunder, it will also state the name of the
Person to whom a new Warrant for the unexercised portion of the rights hereunder
is to be delivered.
2.4 Fractional Shares. If a fractional share of Warrant Stock
-----------------
would, but for the provisions of Subsection 2.1, be issuable upon exercise of
the rights represented by this Warrant, the Company will, within ten days after
the Exercise Date, delivery to the Purchaser a check payable to the Purchaser in
lieu of such fractional share, in an amount equal to the Market Price of such
fractional share as of the close of business on the Exercise Date.
3. Exercise Price.
--------------
3.1 General. The initial Exercise Price will be $1.50. In order to
-------
prevent dilution of the rights granted under this Warrant, the Exercise Price
will be subject to adjustment from time to time pursuant to this Section 3.
3.2 Subdivision or Combination of Common Stock and Stock Dividends.
--------------------------------------------------------------
In case the Company shall at any time after the date hereof (a) issue any shares
of Common Stock as a dividend upon Common Stock, or (b) issue any shares of
Common Stock by reclassification or otherwise, or (c) combine outstanding shares
of Common Stock, by reclassification or otherwise, the Exercise Price which
would apply if purchase rights hereunder were being exercised immediately prior
to such
<PAGE>
-5-
action by the Company shall be adjusted by multiplying it by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such dividend, subdivision or combination and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such dividend, subdivision or combination.
3.3 Certain Dividends. In case the Company shall declare a dividend
-----------------
upon the Common Stock payable otherwise than out of earnings or retained
earnings and otherwise than in Common Stock, the Exercise Price shall be
adjusted by multiplying the Exercise Price in effect immediately prior to the
declaration of such dividend by a fraction, the numerator of which shall be the
current Market Price per share of Common Stock, on such date, less the fair
market value, as determined by the Board of Directors of the Company, whose
determination shall be conclusive, of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights, options or
warrants applicable to one share of Common Stock, and of which the denominator
shall be such current Market Price per share of Common Stock. For the purposes
of the foregoing, a dividend other than in cash shall be considered payable out
of earnings or retained earnings only to the extent that such earnings or
retained earnings are charged an amount equal to the value of such dividend as
determined by the Board of Directors of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend, or, if a record is not taken, the date as of which the holders of
Common Stock or record entitled to such dividend are to be determined.
3.4 No Adjustments. No adjustment of the Exercise Price shall be
--------------
made if the amount of such adjustment shall be less than one cent per share, but
in such case any adjustment that would otherwise be required then to be made
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to not less than one cent per share.
4. Adjustment of Number of Shares Issuable upon Exercise. In the event of
-----------------------------------------------------
a stock dividend, stock split, combination or other event described in Sections
3.2 and 3.3 hereof, the Registered Holder of this Warrant shall thereafter
(until another such adjustment) be entitled to purchase the number of shares of
Warrant Stock, calculated to the nearest full share, determined by (a)
multiplying the number of shares of Warrant Stock purchasable hereunder
immediately prior to the adjustment of the Exercise Price by the Exercise Price
in effect immediately prior to such adjustment, and (b) dividing the product so
obtained by the adjusted Exercise Price in effect immediately after such
adjustment.
<PAGE>
-6-
5. Effect of Reorganization, Reclassification, Consolidation, Merger or
--------------------------------------------------------------------
Sale. If at any time while this Warrant is outstanding there shall be any
- ----
reorganization or reclassification of the capital stock of the Company (other
than a subdivision or combination of shares provided for in Subsection 3.3
hereof) or any consolidation or merger of the Company with another corporation
(other than a consolidation or merger in which the Company is the surviving
entity and which does not result in any change in the Common Stock), or any
sale or other disposition by the Company of all or substantially all of its
assets to any other corporation, the holder of this Warrant shall thereafter
upon exercise of this Warrant be entitled to receive the number of shares of
stock or other securities or property of the Company, or of the successor
corporation resulting from such consolidation or merger, as the case may be, to
which the Warrant Common Stock (and any other securities and property) of the
Company, deliverable upon the exercise of this Warrant, would have been entitled
upon such reorganization, reclassification of capital stock, consolidation,
merger, sale or other disposition if this Warrant had been exercised immediately
prior to such reorganization, reclassification of capital stock, consolidation,
merger, sale or other disposition. In any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant with respect to the
rights and interests thereafter of the holder of this Warrant to the end that
the provisions set forth in this Warrant (including those relating to
adjustments of the Exercise Price and the number of shares issuable upon the
exercise of this Warrant) shall thereafter be applicable, as near as reasonably
may be, in relation to any shares or other property thereafter deliverable upon
the exercise hereof as if this Warrant had been exercised immediately prior to
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition and the holder hereof had carried out the terms of the
exchange as provided for by such reorganization, reclassification of capital
stock, consolidation or merger. Notwithstanding any other provisions of this
Warrant, in the event of sale or other disposition of all or substantially all
of the assets of the Company as a part of a plan for liquidation of the Company,
all rights to exercise the Warrant shall terminate 30 days after the Company
gives written notice to the Registered Holder of this Warrant that such sale or
other disposition has been consummated.
6. Notice of Adjustments. Immediately upon any adjustment of the Exercise
---------------------
Price or increase or decrease in the number of shares of Common Stock
purchasable upon exercise of this Warrant, the Company will send written notice
thereof to all Registered Holders, stating the adjusted Exercise Price and the
increased or decreased number of shares purchasable upon
<PAGE>
-7-
exercise of this Warrant and setting forth in reasonable detail the method of
calculation for such adjustment and increase or decrease.
7. Reservation of Common Stock. The Company will at all times reserve and
---------------------------
keep available for issuance upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants, and upon such issuance such
shares of Common Stock will be validly issued, fully paid and nonassessable.
8. No Voting Rights; Limitations of Liability. This Warrant will not
------------------------------------------
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the Registered Holder to purchase Warrant Stock, and no enumeration in
this Warrant of the rights or privileges of the Registered Holder, will give
rise to any liability of such Holder for the Exercise Price of Warrant Stock
acquirable by exercise hereof or as a stockholder of the Company.
9. Warrant Transferable.
--------------------
(a) Subject to the transfer conditions referred to in paragraph (b),
below, this Warrant and all rights hereunder are transferable, in whole or in
part, without charge to the Registered Holder, upon surrender of this Warrant
with a properly executed Assignment (in the form of Exhibit II hereto) at the
principal office of the Company.
(b) Each Registered Holder of this Warrant acknowledges that this
Warrant has not been registered under the Securities Act of 1933, as amended
(the "Act"), and agrees not to sell, pledge, distribute, offer for sale,
transfer or otherwise dispose of this Warrant or any Warrant Stock issued upon
its exercise in the absence of (i) an effective registration statement as to
this Warrant or such Warrant Stock under the Act (or any similar statute then in
effect), or (ii) an opinion of counsel for the Company to the effect that such
registration is not, under the circumstances, required.
10. Warrant Exchangeable for Different Denominations. This Warrant is
------------------------------------------------
exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrants will
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" of this Warrant regardless
of the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant are issued.
<PAGE>
-8-
11. Representations, Warranties and Covenants of the Registered Holder.
------------------------------------------------------------------
(a) The Registered Holder represents and warrants to, and covenants with, the
Company that: (i) the Registered Holder, taking into account the personnel and
resources it can practically bring to bear on the purchase of the Warrant, is
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares presenting an investment
decision like that involved in the purchase of the Warrant, including
investments in securities issued by the Company, and has requested, received,
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Warrant; (ii) the Registered Holder is acquiring the
Warrant for investment and with no present intention of distributing the Warrant
(this representation and warranty not limiting the Registered Holder 's right to
transfer all or any part of the Warrant pursuant to Section 9); and (iii) the
Registered Holder will not, directly or indirectly, voluntarily offer, sell,
pledge, purchase or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) the Warrant except in compliance with
the Securities Act, and the rules and regulations promulgated thereunder, or an
exception thereto.
(b) The Registered Holder further represents and warrants to, and covenants
with, the Company that (i) the Registered Holder has full right, power,
authority and capacity to enter into this Warrant and to consummate the
transactions contemplated hereby, and (ii) upon the execution and delivery of
this Warrant (for the limited purpose of this Section 11), this Warrant shall
constitute a valid and binding obligation of the Registered Holder enforceable
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
12. Miscellaneous.
-------------
12.1 Amendment and Waiver. The provisions of the Warrants may be
--------------------
amended and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company has
obtained the written consent of the Registered Holders of Warrants representing
at least 50% of the shares of Warrant Stock obtainable upon the exercise of the
Warrants outstanding at the time of such consent.
12.2 Notices. Any notices required to be sent to a Registered Holder
-------
will be delivered to the address of such Registered Holder shown on the books of
the Company. All
<PAGE>
-9-
notices referred to herein will be delivered in person or sent by first class
mail, postage prepaid, and will be deemed to have been given when so delivered
or sent.
12.3 Descriptive Headings; Governing Law. The descriptive headings
-----------------------------------
of the paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The construction, validity and
interpretation of this Warrant will be governed by the laws of the Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the Company and the Registered Holder (for the limited
purpose of Section 11 hereof) have caused this Warrant to be signed and attested
by their duly authorized officers, and in the case of the Company, under its
corporate seal.
PHOTOELECTRON CORPORATION
By: /s/ Peter M. Nomikos
-------------------------------
Name:
Title:
[Corporate Seal]
Attest:
[SIGNATURE APPEARS HERE]
- -------------------------------
Secretary
Accepted and agreed to by the
Registered Holder for the limited
purpose of Section 11 hereof:
PHOTOELECTRON INVESTMENTS
CORPORATION OF LIBERIA
By: /s/ Peter M. Nomikos
-------------------------------
Name:
Title:
[131d]
<PAGE>
-10-
EXHIBIT I
---------
EXERCISE AGREEMENT
------------------
To: Photoelectron Corporation Date:
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to subscribe for and purchase ________ shares of the
Warrant Stock covered by such Warrant and makes payment herewith in full for
such Warrant Stock at the price per share provided by such Warrant.
Name
-------------------------------
-------------------------------
Signature
--------------------------
--------------------------
Address
--------------------------
--------------------------
This Exercise Agreement must be completed and sent with the items specified
in Section 2.2 of the Warrant Agreement to:
Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
Att'n: Sandra L. Lambert, Secretary
[131d]
<PAGE>
-11-
EXHIBIT II
----------
ASSIGNMENT
----------
FOR VALUE RECEIVED, ____________________ hereby sells, assigns and
transfers all of the rights of the undersigned under the within Warrant with
respect to the number of shares of the Warrant Stock covered thereby set forth
below, unto:
Names of Assignees Address No. of Shares
- ------------------ ------- -------------
Date: Signature______________________________
______________________________
Witness ______________________________
This Assignment must be completed and sent to:
Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
Attn: Sandra L. Lambert, Secretary
[131d]
<PAGE>
Schedule to Exhibit 10.6 of Substantially
Identical Documents Omitted From Exhibits
-----------------------------------------
<TABLE>
<CAPTION>
Date of Warrant No. of Duration of
Issuance No. Issued To Shares Exercise Period
- -------- ------- --------- ------ ---------------
<S> <C> <C> <C> <C>
3/28/92 2 Photoelectron Investments 240,000 Five years
Corporation of Liberia
6/27/92 3 Photoelectron Investments 280,000 Five years
Corporation of Liberia
9/26/92 4 Photoelectron Investments 280,000 Five years
Corporation of Liberia
12/28/92 5 Peter M. Nomikos 200,000 Seven years
9/29/93 6 Peter M. Nomikos 1,150,000 Seven years
1/27/95 7 Peter M. Nomikos 470,000 Seven years
</TABLE>
<PAGE>
EXHIBIT 10.7
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Peter E. Oettinger
-----------------------------------------------------------------
Optionee
<TABLE>
<S> <C>
3,000 $10.00
- ------------------------------------ ------------------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
</TABLE>
January 20,1989
-------------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination
Date (as defined herein). Attached is a copy of the Plan which is incorporated
in this Stock Option Agreement (the "Agreement")by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
-2-
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
-------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
Period Percentage of Option Exercisable
------ --------------------------------
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions and Company Repurchase Option.
---------------------------------------------------
(a) Shares of Common Stock subject to the Option ("Optioned
Shares") and purchased upon exercise of the Option may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution (the "Transfer Restrictions"), unless and until the
Transfer Restrictions with respect to such Optioned Shares shall have lapsed as
provided herein. The Transfer Restrictions
<PAGE>
-3-
shall lapse in their entirety ninety days after the initial public offering of
the Common Stock by the Company is declared effective by the Securities and
Exchange Commission, provided such date occurs prior to the Employment
Termination Date, and provided further you shall have remained continuously a
director or employee of the Company or a subsidiary of the Company since the
Grant Date. From and after the Employment Termination Date, no further lapsing
of the Transfer Restrictions shall occur, and thereupon the Company shall have
the right, exercisable in accordance with Section 3(b) hereof, to repurchase all
or any portion of the Optioned Shares purchased by you upon exercise of the
Option with respect to which the Transfer Restrictions shall not have lapsed, at
a price per share equal to the Exercise Price specified on the first page of
this Agreement (the "Exercise Price"). The right of the Company to repurchase
Optioned Shares at the Exercise Price as provided in this Section 3(a) is
hereinafter referred to as the "Company Repurchase Option".
(b) The Company may exercise the Company Repurchase Option by
mailing to you at your last address listed in the records of the Company or the
relevant subsidiary of the Company, or by delivering to you, a notice that it
has exercised the Company Repurchase Option and the number of Optioned Shares
with respect to which it has exercised the Company Repurchase Option, within six
(6) months after the date that the Company shall first have been entitled to
exercise the Company Repurchase Option (the "Repurchase Option Period"). Such
notice shall be accompanied by a check payable to you in the amount of the
Exercise Price times the number of Optioned Shares with respect to which the
Company has exercised the Company Repurchase Option. Upon exercise by the
Company of the Company Repurchase Option as provided herein, the certificate or
certificates representing the Optioned Shares, and representing shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, which have been
repurchased shall forthwith be released from the escrow arrangement provided for
in Section 5 hereof and transferred of record to the Company. The Company
Repurchase Option shall lapse and be of no further force or effect if it shall
not have been exercised prior to the expiration of the Repurchase Option Period.
4. No Assignment of Rights. Except for assignments or transfers
-----------------------
by will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including
<PAGE>
-4-
without limitation by way of execution, levy, garnishment, attachment, pledge or
bankruptcy, and no such rights or interests shall be subject to any of your
obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s).
----------------------------------------------------------
You (or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank-cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions and the Company
Repurchase Option to the same extent that such Tendered Shares surrendered upon
such exercise were so subject immediately prior to such surrender. Receipt by
the Company of the Exercise Notice and the Exercise Consideration shall
constitute the exercise of the Option or a part thereof. As soon as reasonably
practicable thereafter, the Company shall deliver or cause to be delivered to
you a certificate or certificates representing the number of Optioned Shares
purchased, registered in your name. If such certificate(s) represent(s) Optioned
Shares with respect to which the Transfer Restrictions shall not have lapsed,
such certificate(s) shall, immediately upon your receipt thereof, be deposited
by you, together with a stock power endorsed in blank, in escrow with the
Company. In addition, any certificate(s) representing shares of Common Stock, or
other property other than cash, distributed (including pursuant to any stock
split) in respect of Optioned Shares purchased by you (a "Non-Cash
Distribution") with respect to which the Transfer Restrictions shall not have
lapsed shall,
<PAGE>
-5-
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions, and the Company Repurchase Option
to the same extent as the Optioned Shares in respect of which such Non-Cash
Distribution was made. All such deposited certificate(s) may have set forth
thereon a legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions and,
to the extent applicable, to the Company Repurchase Option, as provided herein.
All shares of Common Stock delivered upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial
issuance to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares (or
other property), including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with respect to
which the Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions and the Company Repurchase Option, to the extent applicable, and to
the other restrictions and limitations imposed thereon pursuant to the Plan and
this Agreement and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions or the Company Repurchase Option.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge
<PAGE>
-6-
and agree that any routine sales of the Optioned Shares purchased by you upon
exercise of the Option made in reliance upon Rule 144 under the Act may be made
only in limited amounts in accordance with the terms and conditions of that
Rule. You also acknowledge and agree that the certificate(s) representing
Optioned Shares delivered to you pursuant to Section 5 hereof may have set forth
thereon a legend indicating that such shares may be transferred, sold or
otherwise disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and
your transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock
------------------------------
dividend payables in Common Stock or any split-up or contraction in the number
of shares of Common Stock occurring after the date of this Agreement and prior
to the exercise in full of the Option, the number of shares for which the Option
may thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any
--------
<PAGE>
-7-
recapitalization is to be effected through an increase in the par value of the
Common Stock without an increase in the number of authorized shares and such new
par value will exceed the Exercise Price hereunder, the Company shall notify you
of such proposed recapitalization, and you shall then have the right,
exercisable at any time prior to such recapitalization becoming effective, to
purchase all of the Optioned Shares not theretofore purchased by you (anything
in Section 1 hereof to the contrary notwithstanding), but if you fail to
exercise such right before such recapitalization becomes effective, the Exercise
Price hereunder shall be appropriately adjusted. Upon dissolution or liquidation
of the Company, the Option shall terminate, but you (if at the time you are a
director or employee of the Company or a subsidiary of the Company) shall have
the right, immediately prior to such dissolution or liquidation, to purchase all
or any portion of the Optioned Shares not theretofore purchased by you. No
adjustment provided for in this Section 9 shall apply to any Optioned Shares
purchased prior to the effective date of such adjustment. No fraction of a share
or fractional shares shall be purchasable or deliverable under this Agreement,
but in the event any adjustment hereunder of the number of Optioned Shares shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-8-
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
--------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Secretary of the Company, 580
Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
-------------------------------------
Name: PETER E. OETTINGER
Title : CHIEF OPERATING OFFICER
Accepted and agreed:
/s/ Peter E. Oettinger
- ----------------------
Optionee
4 Phlox Lane
Acton, MA 01720
- -----------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________ (the "Stock
Option Agreement") between the Company and me, I hereby exercise the Option
granted to me with respect to _______ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED.......................... $
----------
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS...
Number and denominations(s) of certificate(s)
for shares being exercised:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Send new certificate(s) to:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Optionee:
- ----------------------------- ---------------------------------------------
(print name) Signature
---------------------------------------------
Date
<PAGE>
Peter E. Oettinger
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
-----------------
Amendment to Stock Option Agreement
Dated January 20, 1989
-----------------------
The Stock Option Agreement referred to above (the "Agreement") between you
and Photoelectron Corporation (the "Company") is hereby amended, effective as of
the 11th day of July, 1991, as follows:
1. Section 3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of
Common Stock or other shares (or other property) received in any Non-
Cash Distribution (as defined herein) in respect of such Optioned
Shares, may not, without the prior written consent of the Company, be
sold, assigned, transferred, pledged, hypothecated or otherwise
disposed of, except by will or by applicable laws of descent and
distribution or pursuant to a qualified domestic relations order (the
"Transfer Restrictions"), unless and until the Transfer Restrictions
with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety
ninety days after the initial public offering of the Common Stock by
the Company is declared effective by the Securities and Exchange
Commission."
2. Section 5 is hereby amended by deleting from the third sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
third sentence shall read in its entirety as follows:
"As a condition to such consent, the Company may require that a
number of Optioned Shares acquired by you upon your exercise of the
Option equal to the number of Tendered Shares surrendered upon such
exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were
so subject immediately prior to such surrender."
<PAGE>
-2-
3. Section 5 is hereby amended by deleting from the seventh sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
seventh sentence shall read in its entirety as follows:
"In addition, any certificate(s) representing shares of Common Stock,
or other property other than cash, distributed (including pursuant to
any stock split) in respect of Optioned Shares purchased by you (a
"Non-Cash Distribution") with respect to which the Transfer
Restrictions shall not have lapsed shall, immediately upon your
receipt thereof, be deposited by you, together with a stock power
endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as
the Optioned Shares in respect of which such Non-Cash Distribution
was made."
4. Section 5 is hereby amended by deleting from the penultimate sentence
thereof the phrase "and, to the extent applicable, to the Company Repurchase
Option," so that as amended, the penultimate sentence shall read in its entirety
as follows:
"All such deposited certificate(s) may have set forth thereon a
legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other
property) represented by such certificate(s) are subject to the
Transfer Restrictions as provided herein."
5. Section 6 is hereby amended by deleting from the second sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
second sentence thereof shall read in its entirety as follows:
"Upon initial issuance to you of a certificate or certificates
representing Optioned Shares (or other property) received in any Non-
Cash Distribution in respect of Optioned Shares purchased by you, you
shall have ownership of such shares (or other property), including
the right to vote and receive dividends, subject, however, in the
case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions, and to the other restrictions and limitations imposed
thereon pursuant to the Plan and this Agreement and which may be now
or hereafter imposed by the Certificate of Incorporation or the By-
Laws of the Company, as amended from time to time."
<PAGE>
-3-
6. Section 7 is hereby amended by deleting from the first sentence
thereof the phrase "or the Company Repurchase Option", so that as amended, the
first sentence thereof shall read in its entirety as follows:
"As soon as reasonably practicable after the lapse of the Transfer
Restrictions with respect to any Optioned Shares purchased by you
upon exercise of the Option, the Company shall deliver to you, or
your legal representative in the case of your death, the certificate
or certificates representing such shares and any shares (or other
property) received in any Non-Cash Distribution in respect of such
shares, previously deposited in escrow with the Company pursuant to
Section 5 hereof, without any legend referring to the Transfer
Restrictions."
7. A new Section 15 is hereby added, to read in its entirety as follows:
"15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as defined in
---------------
Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the
Vested Shares shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any one
---------------------------------
of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine constitutes an effective change
in the control of the Company. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
<PAGE>
-4-
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to an Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the Company's Board of
Directors on the date of this Agreement) and any future director of the Company
who has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company or a subsidiary of the
Company."
8. In all other respects, the Agreement shall remain in full force and
effect.
PHOTOELECTRON CORPORATION
By: /s/ Peter M. Nomikos
---------------------
Name: Peter M. Nomikos
----------------
Title: President
---------
Accepted and Agreed to:
/s/ Peter E. Oettinger
- ---------------------
(Signature of optionee)
Name : PETER E. OETTINGER
-------------------
(please print)
Date: 2/2/92
-------------------
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
George N. Hatsopoulos
------------------------------------------------------------------------
Optionee
5,000 $1.00
- ----------------------------- -------------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
February 26, 1990
------------------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.01 per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
-2-
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions and Company Repurchase Option.
----------------------------------------------------
(a) Shares of Common Stock subject to the Option ("Optioned
Shares") and purchased upon exercise of the Option may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution (the "Transfer Restrictions"), unless and until the
Transfer Restrictions with respect to such Optioned Shares shall have lapsed as
provided herein. The Transfer Restrictions
<PAGE>
- 3 -
shall lapse in their entirety ninety days after the initial public offering of
the Common Stock by the Company is declared effective by the Securities and
Exchange Commission, provided such date occurs prior to the Employment
Termination Date, and provided further you shall have remained continuously a
director or employee of the Company or a subsidiary of the Company since the
Grant Date. From and after the Employment Termination Date, no further lapsing
of the Transfer Restrictions shall occur, and thereupon the Company shall have
the right, exercisable in accordance with Section 3(b) hereof, to repurchase all
or any portion of the Optioned Shares purchased by you upon exercise of the
Option with respect to which the Transfer Restrictions shall not have lapsed, at
a price per share equal to the Exercise Price specified on the first page of
this Agreement (the "Exercise Price"). The right of the Company to repurchase
Optioned Shares at the Exercise Price as provided in this Section 3(a) is
hereinafter referred to as the "Company Repurchase Option".
(b) The Company may exercise the Company Repurchase Option by mailing
to you at your last address listed in the records of the Company or the relevant
subsidiary of the Company, or by delivering to you, a notice that it has
exercised the Company Repurchase Option and the number of Optioned Shares with
respect to which it has exercised the Company Repurchase Option, within six (6)
months after the date that the Company shall first have been entitled to
exercise the Company Repurchase Option (the "Repurchase Option Period"). Such
notice shall be accompanied by a check payable to you in the amount of the
Exercise Price times the number of Optioned Shares with respect to which the
Company has exercised the Company Repurchase Option. Upon exercise by the
Company of the Company Repurchase Option as provided herein, the certificate or
certificates representing the Optioned Shares, and representing shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, which have been
repurchased shall forthwith be released from the escrow arrangement provided for
in Section 5 hereof and transferred of record to the Company. The Company
Repurchase Option shall lapse and be of no further force or effect if it shall
not have been exercised prior to the expiration of the Repurchase Option Period.
4. No Assignment of Rights. Except for assignments or transfers
-----------------------
by will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including
<PAGE>
- 4 -
without limitation by way of execution, levy, garnishment, attachment, pledge or
bankruptcy, and no such rights or interests shall be subject to any of your
obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank-cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions and the Company
Repurchase Option to the same extent that such Tendered Shares surrendered upon
such exercise were so subject immediately prior to such surrender. Receipt by
the Company of the Exercise Notice and the Exercise Consideration shall
constitute the exercise of the Option or a part thereof. As soon as reasonably
practicable thereafter, the Company shall deliver or cause to be delivered to
you a certificate or certificates representing the number of Optioned Shares
purchased, registered in your name. If such certificate(s) represent(s) Optioned
Shares with respect to which the Transfer Restrictions shall not have lapsed,
such certificate(s) shall, immediately upon your receipt thereof, be deposited
by you, together with a stock power endorsed in blank, in escrow with the
Company. In addition, any certificate(s) representing shares of Common Stock, or
other property other than cash, distributed (including pursuant to any stock
split) in respect of Optioned Shares purchased by you (a "Non-Cash
Distribution") with respect to which the Transfer Restrictions shall not have
lapsed shall,
<PAGE>
- 5 -
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions, and the Company Repurchase Option
to the same extent as the Optioned Shares in respect of which such Non-Cash
Distribution was made. All such deposited certificate(s) may have set forth
thereon a legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions and,
to the extent applicable, to the Company Repurchase Option, as provided herein.
All shares of Common Stock delivered upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial
issuance to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares (or
other property), including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with respect to
which the Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions and the Company Repurchase Option, to the extent applicable, and to
the other restrictions and limitations imposed thereon pursuant to the Plan and
this Agreement and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions or the Company Repurchase Option.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge
<PAGE>
- 6 -
and agree that any routine sales of the Optioned Shares purchased by you upon
exercise of the Option made in reliance upon Rule 144 under the Act may be made
only in limited amounts in accordance with the terms and conditions of that
Rule. You also acknowledge and agree that the certificate(s) representing
Optioned Shares delivered to you pursuant to Section 5 hereof may have set forth
thereon a legend indicating that such shares may be transferred, sold or
otherwise disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and
your transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of
shares of Common Stock occurring after the date of this Agreement and prior
to the exercise in full of the Option, the number of shares for which the
Option may thereafter be exercised and the Exercise Price shall be
proportionately adjusted. In the case of any reclassification or change of
outstanding shares of the Common Stock or in case of any consolidation or
merger of the Company with or into another company or in case of any sale or
conveyance to another company or entity of the property of the Company as a
whole or substantially as a whole, you shall, upon exercise of the Option be
entitled to receive shares of stock or other securities in its place
equivalent in kind and value to those shares which you would have received if
you had exercised the Option in full immediately prior to such
reclassification, change, consolidation, merger, sale or
conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any
--------
<PAGE>
- 7 -
recapitalization is to be effected through an increase in the par value of the
Common Stock without an increase in the number of authorized shares and such new
par value will exceed the Exercise Price hereunder, the Company shall notify you
of such proposed recapitalization, and you shall then have the right,
exercisable at any time prior to such recapitalization becoming effective, to
purchase all of the Optioned Shares not theretofore purchased by you (anything
in Section 1 hereof to the contrary notwithstanding), but if you fail to
exercise such right before such recapitalization becomes effective, the Exercise
Price hereunder shall be appropriately adjusted. Upon dissolution or liquidation
of the Company, the Option shall terminate, but you (if at the time you are a
director or employee of the Company or a subsidiary of the Company) shall have
the right, immediately prior to such dissolution or liquidation, to purchase all
or any portion of the Optioned Shares not theretofore purchased by you. No
adjustment provided for in this Section 9 shall apply to any Optioned Shares
purchased prior to the effective date of such adjustment. No fraction of a share
or fractional shares shall be purchasable or deliverable under this Agreement,
but in the event any adjustment hereunder of the number of Optioned Shares shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
--------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-8-
13. Taxes. If the Company, in its sole discretion, determines that
------
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
---------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Secretary of the Company, 580
Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
-------------------------
Name: PETER E. OETTINGER
Title: CHIEF OPERATING OFFICER
Accepted and agreed:
/s/ George N. Hatsopoulos
- -------------------------
Optionee
- -------------------------
Home Address
2822d
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________
(the "Stock Option Agreement") between the Company and me, I
hereby exercise the Option granted to me with respect to _________
Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the shares
being exercised
TOTAL AMOUNT ENCLOSED............................ $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of
certificate(s) for shares being
exercised:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Send new certificate(s) to:
-------------------------------
-------------------------------
-------------------------------
-------------------------------
Optionee:
- ---------------------- --------------------------------
(print name) Signature
-------------------------------
Date
2822d
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
-----------------
Amendment to Stock Option Agreement
Dated February 26, 1990
-------------------------
The Stock Option Agreement referred to above (the "Agreement") between you
and Photoelectron Corporation (the "Company") is hereby amended, effective as of
the 11th day of July, 1991, as follows:
1. Section 3 of the Agreement is hereby deleted in its entirety and replaced
with the following:
"3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of
Common Stock or other shares (or other property) received in any Non-
Cash Distribution (as defined herein) in respect of such Optioned
Shares, may not, without the prior written consent of the Company, be
sold, assigned, transferred, pledged, hypothecated or otherwise
disposed of, except by will or by applicable laws of descent and
distribution or pursuant to a qualified domestic relations order (the
"Transfer Restrictions"), unless and until the Transfer Restrictions
with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety
ninety days after the initial public offering of the Common Stock by
the Company is declared effective by the Securities and Exchange
Commission."
2. Section 5 is hereby amended by deleting from the third sentence
thereof the phrase "and the Company Repurchase Option", so that as
amended, the third sentence shall read in its entirety as follows:
"As a condition to such consent, the Company may require that a number
of Optioned Shares acquired by you upon your exercise of the Option
equal to the number of Tendered Shares surrendered upon such exercise
shall be subject to the Transfer Restrictions to the same extent that
such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender."
<PAGE>
-2-
3. Section 5 is hereby amended by deleting from the seventh sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
seventh sentence shall read in its entirety as follows:
"In addition, any certificate(s) representing shares of Common Stock,
or other property other than cash, distributed (including pursuant to
any stock split) in respect of Optioned Shares purchased by you (a
"Non-Cash Distribution") with respect to which the Transfer
Restrictions shall not have lapsed shall, immediately upon your
receipt thereof, be deposited by you, together with a stock power
endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as
the Optioned Shares in respect of which such Non-Cash Distribution was
made."
4. Section 5 is hereby amended by deleting from the penultimate sentence
thereof the phrase "and, to the extent applicable, to the Company Repurchase
Option," so that as amended, the penultimate sentence shall read in its entirety
as follows:
"All such deposited certificate(s) may have set forth thereon a legend
or legends (in addition to the legend referred to in Section 8 hereof)
indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer
Restrictions as provided herein,"
5. Section 6 is hereby amended by deleting from the second sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
second sentence thereof shall read in its entirety as follows:
"Upon initial issuance to you of a certificate or certificates
representing Optioned Shares (or other property) received in any Non-
Cash Distribution in respect of Optioned Shares purchased by you, you
shall have ownership of such shares (or other property), including the
right to vote and receive dividends, subject, however, in the case of
any such shares (or other property) with respect to which the Transfer
Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to
the Plan and this Agreement and which may be now or hereafter imposed
by the Certificate of Incorporation or the By-Laws of the Company, as
amended from time to time."
<PAGE>
-3-
6. Section 7 is hereby amended by deleting from the first sentence
thereof the phrase "or the Company Repurchase Option", so that as amended, the
first sentence thereof shall read in its entirety as follows:
"As soon as reasonably practicable after the lapse of the Transfer
Restrictions with respect to any Optioned Shares purchased by you upon
exercise of the Option, the Company shall deliver to you, or your
legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other
property) received in any Non-Cash Distribution in respect of such
shares, previously deposited in escrow with the Company pursuant to
Section 5 hereof, without any legend referring to the Transfer
Restrictions."
7. A new Section 15 is hereby added, to read in its entirety as follows:
"15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as defined
----------------
in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares shall
lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any
----------------------------------
one of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by controlling or under common control with either
of the Controlling Shareholders or to any person who is not, prior to giving
effect to such sale, a stockholder of the Company, or (iii) any other event that
the Prior Directors shall determine constitutes an effective change in the
control of the Company. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
<PAGE>
-4-
(1) "Person" shall include any natural person any entity, any "affiliate"
of any such natural person or entity as such term is defined in Rule 405 under
the Securities Act of 1933 and any "group" (within the meaning of such term
in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to an Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the Company's Board of
Directors on the date of this Agreement) and any future director of the Company
who has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company or a subsidiary of the
Company.
8. In all other respects, the Agreement shall remain in full force and
effect.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
------------------------
Name: Peter E. Oettinger
----------------------
Title: Vice President and
-----------------------
Chief Operating Officer
Accepted and Agreed to:
/s/ George N. Hatsopoulos
- -------------------------
(Signature of Optionee)
Name:
-------------------------
(Please Print)
Date:
-------------------------
438ld
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Peter M. Nomikos
------------------------------------------------------------------
Optionee
5,000 $1.00
----------------------------- ------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
February 26, 1990
--------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which
---------------------
is the earliest of (a) seven years after the Grant Date, (b) three months after
the date on which you cease to be a director or employee of the Company or a
subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
-2-
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions and Company Repurchase Option.
---------------------------------------------------
(a) Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable
laws of descent and distribution (the "Transfer Restrictions"), unless and
until the Transfer Restrictions with respect to such Optioned Shares shall
have lapsed as provided herein. The Transfer Restrictions
<PAGE>
-3-
shall lapse in their entirety ninety days after the initial public offering of
the Common Stock by the Company is declared effective by the Securities and
Exchange Commission provided such date occurs prior to the Employment
Termination Date, and provided further you shall have remained continuously a
director or employee of the Company or a subsidiary of the Company the Grant
Date. From and after the Employment Termination Date, no further lapsing of the
Transfer Restrictions shall occur, and thereupon the Company shall have the
right, exercisable in accordance with Section 3(b) hereof, to repurchase all or
any portion of the Optioned Shares purchased by you upon exercise of the Option
with respect to which the Transfer Restrictions shall not have lapsed, at a
price per share equal to the Exercise Price specified on the first page of this
Agreement (the "Exercise Price"). The right of the Company to repurchase
Optioned Shares at the Exercise Price as provided in this Section 3(a) is
hereinafter referred to as the "Company Repurchase Option".
(b) The Company may exercise the Company Repurchase Option by mailing
to you at your last address listed in the records of the Company or the relevant
subsidiary of the Company, or by delivering to you, a notice that it has
exercised the Company Repurchase Option and the number of Optioned Shares with
respect to which it has exercised the Company Repurchase Option, within six (6)
months after the date that the Company shall first have been entitled to
exercise the Company Repurchase Option (the "Repurchase Option Period"). Such
notice shall be accompanied by a check payable to you in the amount of the
Exercise Price times the number of Optioned Shares with respect to which the
Company has exercised the Company Repurchase Option. Upon exercise by the
Company of the Company Repurchase Option as provided herein, the certificate or
certificates representing the Optioned Shares, and representing shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, which have been
repurchased shall forthwith be released from the escrow arrangement provided for
in Section 5 hereof and transferred of record to the Company. The Company
Repurchase Option shall lapse and be of no further force or effect if it shall
not have been exercised prior to the expiration of the Repurchase Option Period.
4. No Assignment of Rights. Except for assignments or transfers by will
-----------------------
or the applicable laws of descent and distribution, your rights and interests
under this Agreement and the Plan may not be assigned or transferred in whole or
in part either directly or by operation of law or otherwise, including
<PAGE>
-4-
without limitation by way of execution, levy, garnishment, attachment, pledge or
bankruptcy, and no such rights or interests shall be subject to any of your
obligations or liabilities.
5. Exercise of Option: Delivery and Deposit of Certificate(s). You (or in
----------------------------------------------------------
the case of your death, your legal representative) may exercise the Option in
whole or in part by giving written notice to the Company on the form attached
hereto as Exhibit A (the "Exercise Notice") prior to the Option Termination
Date, accompanied by full payment for the Optioned Shares being purchased (a) in
cash or by certified or bank cashier's check payable to the order of the
Company, in an amount equal to the number of Optioned Shares being purchased
multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b) in shares
of the Company's Common Stock (the "Tendered Shares") with a market value equal
to the Aggregate Exercise Price or (c) any combination of cash, certified or
bank cashier's check or Tendered Shares having a total value equal to the
Aggregate Exercise Price (such cash, check or Tendered Shares with such value
being referred to as the "Exercise Consideration"). However, Tendered Shares may
be surrendered as all or part of the Exercise Consideration only if (1) the
Common Stock is publicly traded over-the-counter or on a national securities
exchange, (2) you shall have acquired such Tendered Shares more than six months
prior to the date of exercise and, (3) if such Tendered Shares are then subject
to Transfer Restrictions, only with the prior written consent of the Company as
provided in Section 3(a) hereof. As a condition to such consent, the Company may
require that a number of Optioned Shares acquired by you upon your exercise of
the Option equal to the number of Tendered Shares surrendered upon such exercise
shall be subject to the Transfer Restrictions and the Company Repurchase Option
to the same extent that such Tendered Shares surrendered upon such exercise were
so subject immediately prior to such surrender. Receipt by the Company of the
Exercise Notice and the Exercise Consideration shall constitute the exercise of
the Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such certificate(s)
shall, immediately upon your receipt thereof, be deposited by you, together with
a stock power endorsed in blank, in escrow with the Company. In addition, any
certificate(s) representing shares of Common Stock, or other property other than
cash, distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall,
<PAGE>
-5-
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions, and the Company Repurchase Option
to the same extent as the Optioned Shares in respect of which such Non-Cash
Distribution was made. All such deposited certificate(s) may have set forth
thereon a legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions and,
to the extent applicable, to the Company Repurchase Option, as provided herein.
All shares of Common Stock delivered upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial
issuance to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares (or
other property), including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with respect to
which the Transfer Restrictions shall not have lapsed, to the Transfer
Restrictions and the Company Repurchase Option, to the extent applicable, and to
the other restrictions and limitations imposed thereon pursuant to the Plan and
this Agreement and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions or the Company Repurchase Option.
8. Securities Laws. You hereby represent and warrant that you will not
---------------
transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge
<PAGE>
-6-
and agree that any routine sales of the Optioned Shares purchased by you upon
exercise of the Option made in reliance upon Rule 144 under the Act may be made
only in limited amounts in accordance with the terms and conditions of that
Rule. You also acknowledge and agree that the certificate(s) representing
Optioned Shares delivered to you pursuant to Section 5 hereof may have set forth
thereon a legend indicating that such shares may be transferred, sold or
otherwise disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and
your transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any
--------
<PAGE>
-7-
recapitalization is to be effected through an increase in the par value of the
Common Stock without an increase in the number of authorized shares and such new
par value will exceed the Exercise Price hereunder, the Company shall notify you
of such proposed recapitalization, and you shall then have the right,
exercisable at any time prior to such recapitalization becoming effective, to
purchase all of the Optioned Shares not theretofore purchased by you (anything
in Section 1 hereof to the contrary notwithstanding), but if you fail to
exercise such right before such recapitalization becomes effective, the Exercise
Price hereunder shall be appropriately adjusted. Upon dissolution or liquidation
of the Company, the Option shall terminate, but you (if at the time you are a
director or employee of the Company or a subsidiary of the Company) shall have
the right, immediately prior to such dissolution or liquidation, to purchase all
or any portion of the Optioned Shares not theretofore purchased by you. No
adjustment provided for in this Section 9 shall apply to any Optioned Shares
purchased prior to the effective date of such adjustment. No fraction of a share
or fractional shares shall be purchasable or deliverable under this Agreement,
but in the event any adjustment hereunder of the number of Optioned Shares shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself your personal representatives and beneficiaries, that as a condition of
the granting of the Option, any dispute or disagreement which may arise under or
as a result of or pursuant to the Plan or this Agreement shall be determined by
the Company's Board of Directors, in its sole discretion, and that any decision
made by it in good faith shall be conclusive on all parties. The interpretation
and construction by the Company's Board of Directors of any provision of, and
the determination of any question arising under, this Agreement, the Plan, or
any rule or regulation adopted pursuant to the Plan, shall be final and
conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-8-
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Secretary of the Company, 580
Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /S/ Peter E. Oettinger
----------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/S/ Peter M. Nomikos
- --------------------
Optionee
90 Eaton Square London U.K.
- ---------------------------
Home Address
<PAGE>
EXHIBIT A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________
(the "Stock Option Agreement") between the Company and me, I
hereby exercise the Option granted to me with respect to _________
Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED ......................... $______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of
certificate(s)for shares being
exercised:
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
Send new certificate(s) to:
------------------------------
------------------------------
------------------------------
------------------------------
Optionee:
- ---------------------------- ------------------------------
(print name) Signature
-----------------------------
Date
<PAGE>
Peter M. Nomikos
--
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
-----------------
Amendment to Stock Option Agreement
Dated February 26, 1990
-----------------
The Stock Option Agreement referred to above (the "Agreement") between you
and Photoelectron Corporation (the "Company") is hereby amended, effective as of
the 11th day of July, 1991, as follows:
1. Section 3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"3.Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of
Common Stock or other shares (or other property) received in any Non-
Cash Distribution (as defined herein) in respect of such Optioned
Shares, may not, without the prior written consent of the Company, be
sold, assigned, transferred, pledged, hypothecated or otherwise disposed
of, except by will or by applicable laws of descent and distribution or
pursuant to a qualified domestic relations order (the "Transfer
Restrictions"), unless and until the Transfer Restrictions with respect
to such Optioned Shares shall have lapsed as provided herein. The
Transfer Restrictions shall lapse in their entirety ninety days after
the initial public offering of the Common Stock by the Company is
declared effective by the Securities and Exchange Commission."
2. Section 5 is hereby amended by deleting from the third sentence thereof
the phrase "and the Company Repurchase Option", so that as amended, the third
sentence shall read in its entirety as follows:
"As a condition to such consent, the Company may require that a number
of Optioned Shares acquired by you upon your exercise of the Option
equal to the number of Tendered Shares surrendered upon such exercise
shall be subject to the Transfer Restrictions to the same extent that
such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender."
<PAGE>
-2-
3. Section 5 is hereby amended by deleting from the seventh sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
seventh sentence shall read in its entirety as follows:
"In addition, any certificate(s) representing shares of Common Stock, or
other property other than cash, distributed (including pursuant to any
stock split) in respect of Optioned Shares purchased by you (a "Non-Cash
Distribution") with respect to which the Transfer Restrictions shall not
have lapsed shall, immediately upon your receipt thereof, be deposited
by you, together with a stock power endorsed in blank (if applicable),
in escrow with the Company, and shall be subject to the Transfer
Restrictions to the same extent as the Optioned Shares in respect of
which such Non-Cash Distribution was made."
4. Section 5 is hereby amended by deleting from the penultimate sentence
thereof the phrase "and, to the extent applicable, to the Company
Repurchase Option," so that as amended, the penultimate sentence shall read
in its entirety as follows:
"All such deposited certificate(s) may have set forth thereon a legend
or legends (in addition to the legend referred to in Section 8 hereof)
indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer
Restrictions as provided herein."
5. Section 6 is hereby amended by deleting from the second sentence thereof
the phrase "and the Company Repurchase Option", so that as amended, the second
sentence thereof shall read in its entirety as follows:
"Upon initial issuance to you of a certificate or certificates
representing Optioned Shares (or other property) received in any Non-
Cash Distribution in respect of Optioned Shares purchased by you, you
shall have ownership of such shares (or other property), including the
right to vote and receive dividends, subject, however, in the case of
any such shares (or other property) with respect to which the Transfer
Restrictions shall not have lapsed, to the Transfer Restrictions, and to
the other restrictions and limitations imposed thereon pursuant to the
Plan and this Agreement and which may be now or hereafter imposed by the
Certificate of Incorporation or the By-Laws of the Company, as amended
from time to time."
<PAGE>
-3-
6. Section 7 is hereby amended by deleting from the first sentence
thereof the phrase "or the Company Repurchase Option", so that as amended,
the first sentence thereof shall read in its entirety as follows:
"As soon as reasonably practicable after the lapse of the Transfer
Restrictions with respect to any Optioned Shares purchased by you upon
exercise of the Option, the Company shall deliver to you, or your
legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other
property) received in any Non-Cash Distribution in respect of such
shares, previously deposited in escrow with the Company pursuant to
Section 5 hereof, without any legend referring to the Transfer
Restrictions."
7. A new Section 15 is hereby added, to read in its entirety as follows:
"15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as defined in
---------------
Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the
Vested Shares shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any one
---------------------------------
of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine constitutes an effective change
in the control of the Company. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
<PAGE>
-4-
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the Company's
Board of Directors immediately prior to an Electoral Event (or, if there has
been no Electoral Event, those persons sitting on the Company's Board of
Directors on the date of this Agreement) and any future director of the Company
who has been nominated or elected by a majority of the Prior Directors who are
then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of Directors,
or any tender or exchange offer for the Company's Common Stock, not approved by
the Prior Directors, by any Person other than the Company or a subsidiary of the
Company."
8. In all other respects, the Agreement shall remain in full force and effect.
PHOTOELECTRON CORPORATION
By:/s/ Peter E. Oettinger
-------------------------------
Name: Peter E. Oettinger
------------------------
Title: Vice President and
-----------------------
Chief Operating Officer
Accepted and Agreed to:
/s/ Peter M. Nomikos
- -----------------------
(Signature of Optionee)
Name: Peter M. Nomikos
----------------
(please print)
Date: February 20, 1992
-----------------
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Peter E. Oettinger
------------------------------------------------------------------
Optionee
10,000 $1.00
------------------------------- ------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
February 26, 1990
-------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.01 per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the
---------------------
date which is the earliest of (a) seven years after the Grant Date, (b) three
months after the date on which you cease to be a director or employee of the
Company or a subsidiary of the Company (the "Employment Termination Date"), or
six months after the Employment Termination Date if such cessation is a result
of
<PAGE>
-2-
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
Period Percentage of Option Exercisable
------ --------------------------------
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions and Company Repurchase Option.
----------------------------------------------------
(a) Shares of Common Stock subject to the Option ("Optioned
Shares") and purchased upon exercise of the Option may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution (the "Transfer Restrictions"), unless and until the
Transfer Restrictions with respect to such Optioned Shares shall have lapsed as
provided herein. The Transfer Restrictions
<PAGE>
-3-
shall lapse in their entirety ninety days after the initial public offering of
the Common Stock by the Company is declared effective by the Securities and
Exchange Commission, provided such date occurs prior to the Employment
Termination Date, and provided further you shall have remained continuously a
director or employee of the Company or a subsidiary of the Company since the
Grant Date. From and after the Employment Termination Date, no further lapsing
of the Transfer Restrictions shall occur, and thereupon the Company shall have
the right, exercisable in accordance with Section 3(b) hereof, to repurchase all
or any portion of the Optioned Shares purchased by you upon exercise of the
Option with respect to which the Transfer Restrictions shall not have lapsed, at
a price per share equal to the Exercise Price specified on the first page of
this Agreement (the "Exercise Price"). The right of the Company to repurchase
Optioned Shares at the Exercise Price as provided in this Section 3(a) is
hereinafter referred to as the "Company Repurchase Option".
(b) The Company may exercise the Company Repurchase Option by mailing
to you at your last address listed in the records of the Company or the relevant
subsidiary of the Company, or by delivering to you, a notice that it has
exercised the Company Repurchase Option and the number of Optioned Shares with
respect to which it has exercised the Company Repurchase Option, within six (6)
months after the date that the Company shall first have been entitled to
exercise the Company Repurchase Option (the "Repurchase Option Period"). Such
notice shall be accompanied by a check payable to you in the amount of the
Exercise Price times the number of Optioned Shares with respect to which the
Company has exercised the Company Repurchase Option. Upon exercise by the
Company of the Company Repurchase Option as provided herein, the certificate or
certificates representing the Optioned Shares, and representing shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, which have been
repurchased shall forthwith be released from the escrow arrangement provided for
in Section 5 hereof and transferred of record to the Company. The Company
Repurchase Option shall lapse and be of no further force or effect if it shall
not have been exercised prior to the expiration of the Repurchase Option Period.
4. No Assignment of Rights. Except for assignments or transfers by will
-----------------------
or the applicable laws of descent and distribution, your rights and interests
under this Agreement and the Plan may not be assigned or transferred in whole or
in part either directly or by operation of law or otherwise, including
<PAGE>
-4-
without limitation by way of execution, levy, garnishment, attachment, pledge or
bankruptcy, and no such rights or interests shall be subject to any of your
obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You (or in
----------------------------------------------------------
the case of your death, your legal representative) may exercise the Option in
whole or in part by giving written notice to the Company on the form attached
hereto as Exhibit A (the "Exercise Notice") prior to the Option Termination
Date, accompanied by full payment for the Optioned Shares being purchased (a) in
cash or by certified or bank cashier's check payable to the order of the
Company, in an amount equal to the number of Optioned Shares being purchased
multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b) in shares
of the Company's Common Stock (the "Tendered Shares") with a market value equal
to the Aggregate Exercise Price or (c) any combination of cash, certified or
bank-cashier's check or Tendered Shares having a total value equal to the
Aggregate Exercise Price (such cash, check or Tendered Shares with such value
being referred to as the "Exercise Consideration"). However, Tendered Shares may
be surrendered as all or part of the Exercise Consideration only if (1) the
Common Stock is publicly traded over-the-counter or on a national securities
exchange, (2) you shall have acquired such Tendered Shares more than six months
prior to the date of exercise and, (3) if such Tendered Shares are then subject
to Transfer Restrictions, only with the prior written consent of the Company as
provided in Section 3(a) hereof. As a condition to such consent, the Company may
require that a number of Optioned Shares acquired by you upon your exercise of
the Option equal to the number of Tendered Shares surrendered upon such exercise
shall be subject to the Transfer Restrictions and the Company Repurchase Option
to the same extent that such Tendered Shares surrendered upon such exercise were
so subject immediately prior to such surrender. Receipt by the Company of the
Exercise Notice and the Exercise Consideration shall constitute the exercise of
the Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such certificate(s)
shall, immediately upon your receipt thereof, be deposited by you, together with
a stock power endorsed in blank, in escrow with the Company. In addition, any
certificate(s) representing shares of Common Stock, or other property other than
cash, distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall,
<PAGE>
-5-
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions, and the Company Repurchase Option
to the same extent as the Optioned Shares in respect of which such Non-Cash
Distribution was made. All such deposited certificate(s) may have set forth
thereon a legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions and,
to the extent applicable, to the Company Repurchase Option, as provided herein.
All shares of Common Stock delivered upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the Option
--------------------------------------
is exercised, you shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the Optioned Shares. Upon initial issuance to you
of a certificate or certificates representing Optioned Shares or shares (or
other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions and
the Company Repurchase Option, to the extent applicable, and to the other
restrictions and limitations imposed thereon pursuant to the Plan and this
Agreement and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable after
--------------------------
the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions or the Company Repurchase Option.
8. Securities Laws. You hereby represent and warrant that you will not
---------------
transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge
<PAGE>
-6-
and agree that any routine sales of the Optioned Shares purchased by you upon
exercise of the Option made in reliance upon Rule 144 under the Act may be made
only in limited amounts in accordance with the terms and conditions of that
Rule. You also acknowledge and agree that the certificate(s) representing
Optioned Shares delivered to you pursuant to Section 5 hereof may have set forth
thereon a legend indicating that such shares may be transferred, sold or
otherwise disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon exercise
of this Option shall be issued and delivered prior to the admission of such
shares to listing on notice of issuance on any stock exchange on which shares of
that class are then listed, nor unless and until, in the opinion of counsel for
the Company, such securities may be issued and delivered without causing the
Company to be in violation of or incur any liability under any U.S. federal,
state, or other securities law, any requirement of any securities exchange
listing agreement to which the Company may be a party, or any other requirement
of law or of any regulatory body having jurisdiction over the Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any
--------
<PAGE>
-7-
recapitalization is to be effected through an increase in the par value of the
Common Stock without an increase in the number of authorized shares and such new
par value will exceed the Exercise Price hereunder, the Company shall notify you
of such proposed recapitalization, and you shall then have the right,
exercisable at any time prior to such recapitalization becoming effective, to
purchase all of the Optioned Shares not theretofore purchased by you (anything
in Section 1 hereof to the contrary notwithstanding), but if you fail to
exercise such right before such recapitalization becomes effective, the Exercise
Price hereunder shall be appropriately adjusted. Upon dissolution or liquidation
of the Company, the Option shall terminate but you (if at the time you are a
director or employee of the Company or a subsidiary of the Company) shall have
the right, immediately prior to such dissolution or liquidation, to purchase all
or any portion of the Optioned Shares not theretofore purchased by you. No
adjustment provided for in this Section 9 shall apply to any Optioned Shares
purchased prior to the effective date of such adjustment. No fraction of a share
or fractional shares shall be purchasable or deliverable under this Agreement,
but in the event any adjustment hereunder of the number of Optioned Shares shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the term
---------------------
of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The option confers upon you no right
-------------------------------
to continue in the employ or service of the Company and its subsidiaries or
interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-8-
13. Taxes. If the Company, in its sole discretion, determines that the
-----
Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted to
--------------
be given under this Agreement shall be in writing, and mailed by registered or
certified mail or delivered in hand, if to the Company to its Secretary at 580
Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party .
Please confirm your acceptance of the Option, your receipt of a copy of
the Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such copy
promptly under confidential cover to the Secretary of the Company, 580 Winter
Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /S/ Peter E. Oettinger
----------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ Peter E. Oettinger
- ----------------------
Optionee
4 Phlox Lane
Acton MA. 01722
- ---------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________
(the "Stock Option Agreement") between the Company and me, I
hereby exercise the Option granted to me with respect to _______
Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED......................... $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of
certificate(s) for shares being
exercised:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Send new certificate(s) to:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Optionee:
- ---------------------------------- -----------------------------------
(print name) Signature
-----------------------------------
Date
<PAGE>
Peter E. Oettinger
--
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
-----------------
Amendment to Stock Option Agreement
Dated February 26, 1990
-----------------
The Stock Option Agreement referred to above (the "Agreement") between you and
Photoelectron Corporation (the "Company") is hereby amended, effective as of the
11th day of July, 1991, as follows:
1. Section 3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"3. Transfer Restrictions
---------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of
Common Stock or other shares (or other property) received in any
Non-Cash Distribution (as defined herein) in respect of such
Optioned Shares, may not, without the prior written consent of the
Company, be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or by applicable laws of
descent and distribution or pursuant to a qualified domestic
relations order (the "Transfer Restrictions"), unless and until the
Transfer Restrictions with respect to such Optioned Shares shall
have lapsed as provided herein. The Transfer Restrictions shall
lapse in their entirety ninety days after the initial public
offering of the Common Stock by the Company is declared effective by
the Securities and Exchange Commission."
2. Section 5 is hereby amended by deleting from the third sentence
thereof the phrase "and the Company Repurchase Option", so that as
amended, the third sentence shall read in its entirety as follows:
"As a condition to such consent, the Company may require that a
number of Optioned Shares acquired by you upon your exercise of the
Option equal to the number of Tendered Shares surrendered upon such
exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were
so subject immediately prior to such surrender."
<PAGE>
-2-
3. Section 5 is hereby amended by deleting from the seventh sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
seventh sentence shall read in its entirety as follows:
"In addition, any certificate(s) representing shares of Common
Stock, or other property other than cash, distributed (including
pursuant to any stock split) in respect of Optioned Shares
purchased by you (a "Non-Cash Distribution") with respect to which
the Transfer Restrictions shall not have lapsed shall, immediately
upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the
Company, and shall be subject to the Transfer Restrictions to the
same extent as the Optioned Shares in respect of which such Non-
Cash Distribution was made."
4. Section 5 is hereby amended by deleting from the penultimate
sentence thereof the phrase "and, to the extent applicable, to the Company
Repurchase Option," so that as amended, the penultimate sentence shall read in
its entirety as follows:
"All such deposited certificate(s) may have set forth thereon a
legend or legends (in addition to the legend referred to in Section
8 hereof) indicating that the shares of Common Stock (or other
property) represented by such certificate(s) are subject to the
Transfer Restrictions as provided herein."
5. Section 6 is hereby amended by deleting from the second sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
second sentence thereof shall read in its entirety as follows:
"Upon initial issuance to you of a certificate or certificates
representing Optioned Shares (or other property) received in any
Non-Cash Distribution in respect of Optioned Shares purchased by
you, you shall have ownership of such shares (or other property),
including the right to vote and receive dividends, subject,
however, in the case of any such shares (or other property) with
respect to which the Transfer Restrictions shall not have lapsed,
to the Transfer Restrictions, and to the other restrictions and
limitations imposed thereon pursuant to the Plan and this Agreement
and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time
to time."
<PAGE>
-3-
6. Section 7 is hereby amended by deleting from the first sentence thereof the
phrase "or the Company Repurchase Option", so that as amended, the first
sentence thereof shall read in its entirety as follows:
"As soon as reasonably practicable after the lapse of the Transfer
Restrictions with respect to any Optioned Shares purchased by you
upon exercise of the Option, the Company shall deliver to you, or
your legal representative in the case of your death, the certificate
or certificates representing such shares and any shares (or other
property) received in any Non-Cash Distribution in respect of such
shares, previously deposited in escrow with the Company pursuant to
Section 5 hereof, without any legend referring to the Transfer
Restrictions."
7. A new Section 15 is hereby added, to read in its entirety as follows:
"15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as defined
---------------
in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the
Vested Shares shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any
--------------------------------
one of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine constitutes an effective change
in the control of the Company. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
<PAGE>
-4-
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company."
8. In all other respects, the Agreement shall remain in full force and
effect.
PHOTOELECTRON CORPORATION
By:/S/ Peter M. Nomikos
---------------------------------
Name: Peter M. Nomikos
----------------------------
Title: President
---------------------------
Accepted and Agreed to:
/S/ Peter E. Oettinger
- -------------------------------
(Signature of Optionee)
Name: Peter E Oettinger
--------------------------
(please print)
Date: 2/2/92
--------------------------
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Roger D. Wellington
-----------------------------------------------------------------------
Optionee
5,000 $1.00
---------------------------------- ---------------------------
Number of Shares of Exercise Price
Common Stock Subject to the Option Per Share
February 26, 1990
-------------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.01 per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which
---------------------
is the earliest of (a) seven years after the Grant Date, (b) three months after
the date on which you cease to be a director or employee of the Company or a
subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
-2-
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions and Company Repurchase Option.
---------------------------------------------------
(a) Shares of Common Stock subject to the Option ("Optioned
Shares") and purchased upon exercise of the Option may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution (the "Transfer Restrictions"), unless and until the
Transfer Restrictions with respect to such Optioned Shares shall have lapsed as
provided herein. The Transfer Restrictions
<PAGE>
-3-
shall lapse in their entirety ninety days after the initial public offering of
the Common Stock by the Company is declared effective by the Securities and
Exchange Commission, provided such date occurs prior to the Employment
Termination Date, and provided further you shall have remained continuously a
director or employee of the Company or a subsidiary of the Company since the
Grant Date. From and after the Employment Termination Date, no further lapsing
of the Transfer Restrictions shall occur, and thereupon the Company shall have
the right, exercisable in accordance with Section 3(b) hereof, to repurchase all
or any portion of the Optioned Shares purchased by you upon exercise of the
Option with respect to which the Transfer Restrictions shall not have lapsed, at
a price per share equal to the Exercise Price specified on the first page of
this Agreement (the "Exercise Price"). The right of the Company to repurchase
Optioned Shares at the Exercise Price as provided in this Section 3(a) is
hereinafter referred to as the "Company Repurchase Option".
(b) The Company may exercise the Company Repurchase Option by
mailing to you at your last address listed in the records of the Company or the
relevant subsidiary of the Company, or by delivering to you, a notice that it
has exercised the Company Repurchase Option and the number of Optioned Shares
with respect to which it has exercised the Company Repurchase Option, within six
(6) months after the date that the Company shall first have been entitled to
exercise the Company Repurchase Option (the "Repurchase Option Period"). Such
notice shall be accompanied by a check payable to you in the amount of the
Exercise Price times the number of Optioned Shares with respect to which the
Company has exercised the Company Repurchase Option. Upon exercise by the
Company of the Company Repurchase Option as provided herein, the certificate or
certificates representing the Optioned Shares, and representing shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, which have been
repurchased shall forthwith be released from the escrow arrangement provided for
in Section 5 hereof and transferred of record to the Company. The Company
Repurchase Option shall lapse and be of no further force or effect if it shall
not have been exercised prior to the expiration of the Repurchase Option Period.
4. No Assignment of Rights. Except for assignments or transfers by will
-----------------------
or the applicable laws of descent and distribution, your rights and interests
under this Agreement and the Plan may not be assigned or transferred in whole or
in part either directly or by operation of law or otherwise, including
<PAGE>
-4-
without limitation by way of execution, levy, garnishment, attachment, pledge or
bankruptcy, and no such rights or interests shall be subject to any of your
obligations or liabilities.
5. Exercise of Option Delivery and Deposit of Certificate(s). You (or
---------------------------------------------------------
in the case of your death, your legal representative) may exercise the Option in
whole or in part by giving written notice to the Company on the form attached
hereto as Exhibit A (the "Exercise Notice") prior to the Option Termination
Date, accompanied by full payment for the Optioned Shares being purchased (a) in
cash or by certified or bank cashier's check payable to the order of the
Company, in an amount equal to the number of Optioned Shares being purchased
multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b) in shares
of the Company's Common Stock (the "Tendered Shares") with a market value equal
to the Aggregate Exercise Price or (c) any combination of cash, certified or
bank cashier's check or Tendered Shares having a total value equal to the
Aggregate Exercise Price (such cash, check or Tendered Shares with such value
being referred to as the "Exercise Consideration"). However, Tendered Shares may
be surrendered as all or part of the Exercise Consideration only if (1) the
Common Stock is publicly traded over-the-counter or on a national securities
exchange, (2) you shall have acquired such Tendered Shares more than six months
prior to the date of exercise and, (3) if such Tendered Shares are then subject
to Transfer Restrictions, only with the prior written consent of the Company as
provided in Section 3(a) hereof. As a condition to such consent, the Company may
require that a number of Optioned Shares acquired by you upon your exercise of
the Option equal to the number of Tendered Shares surrendered upon such exercise
shall be subject to the Transfer Restrictions and the Company Repurchase Option
to the same extent that such Tendered Shares surrendered upon such exercise were
so subject immediately prior to such surrender. Receipt by the Company of the
Exercise Notice and the Exercise Consideration shall constitute the exercise of
the Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such certificate(s)
shall, immediately upon your receipt thereof, be deposited by you, together with
a stock power endorsed-in blank, in escrow with the Company. In addition, any
certificate(s) representing shares of Common Stock, or other property other than
cash, distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall,
<PAGE>
-5-
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions, and the Company Repurchase Option
to the same extent as the Optioned Shares in respect of which such Non-Cash
Distribution was made. All such deposited certificate(s) may have set forth
thereon a legend or legends (in addition to the legend referred to in Section 8
hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions and,
to the extent applicable, to the Company Repurchase Option, as provided herein.
All shares of Common Stock delivered upon the exercise of the Option as provided
herein shall be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the Option
--------------------------------------
is exercised, you shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the Optioned Shares. Upon initial issuance to you
of a certificate or certificates representing Optioned Shares or shares (or
other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions and
the Company Repurchase Option, to the extent applicable, and to the other
restrictions and limitations imposed thereon pursuant to the Plan and this
Agreement and which may be now or hereafter imposed by the Certificate of
Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable after
--------------------------
the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions or the Company Repurchase Option.
8. Securities Laws. You hereby represent and warrant that you will not
---------------
transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge
<PAGE>
-6-
and agree that any routine sales of the Optioned Shares purchased by you upon
exercise of the Option made in reliance upon Rule 144 under the Act may be made
only in limited amounts in accordance with the terms and conditions of that
Rule. You also acknowledge and agree that the certificate(s) representing
Optioned Shares delivered to you pursuant to Section 5 hereof may have set forth
thereon a legend indicating that such shares may be transferred, sold or
otherwise disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any
--------
<PAGE>
-7-
recapitalization is to be effected through an increase in the par value of the
Common Stock without an increase in the number of authorized shares and such new
par value will exceed the Exercise Price hereunder, the Company shall notify you
of such proposed recapitalization, and you shall then have the right,
exercisable at any time prior to such recapitalization becoming effective, to
purchase all of the Optioned Shares not theretofore purchased by you (anything
in Section 1 hereof to the contrary notwithstanding), but if you fail to
exercise such right before such recapitalization becomes effective, the Exercise
Price hereunder shall be appropriately adjusted. Upon dissolution or liquidation
of the Company, the Option shall terminate, but you (if at the time you are a
director or employee of the Company or a subsidiary of the Company) shall have
the right, immediately prior to such dissolution or liquidation, to purchase all
or any portion of the Optioned Shares not theretofore purchased by you. No
adjustment provided for in this Section 9 shall apply to any Optioned Shares
purchased prior to the effective date of such adjustment. No fraction of a share
or fractional shares shall be purchasable or deliverable under this Agreement,
but in the event any adjustment hereunder of the number of Optioned Shares shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this
Agreement and shall pay all fees and expenses necessarily incurred by the
Company in connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-8-
13. Taxes. If the Company, in its sole discretion, determines that the
-----
Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
Please confirm your acceptance of the Option, your receipt of a copy of
the Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such copy
promptly under confidential cover to the Secretary of the Company, 580 Winter
Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /S/ Peter E. Oettinger
----------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/S/ Roger D. Wellington
- -----------------------
Optionee
25 Hillside Rd., Cumberland R.I. 02864
- -------------------------------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________
(the "Stock Option Agreement") between the Company and me, I
hereby exercise the Option granted to me with respect to _______
Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED......................... $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of
certificate(s) for shares being
exercised:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Send new certificate(s) to:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Optionee:
- ---------------------------------- -----------------------------------
(print name) Signature
-----------------------------------
Date
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
-----------------
Amendment to Stock Option Agreement
Dated February 26, 1990
-------------------
The Stock Option Agreement referred to above (the "Agreement") between you
and Photoelectron Corporation (the "Company") is hereby amended, effective as of
the 11th day of July, 1991, as follows:
1. Section 3 of the Agreement is hereby deleted in its entirety and
replaced with the following:
"3. Transfer Restrictions.
---------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of
Common Stock or other shares (or other property) received in any Non-
Cash Distribution (as defined herein) in respect of such Optioned
Shares, may not, without the prior written consent of the Company, be
sold, assigned, transferred, pledged, hypothecated or otherwise
disposed of, except by will or by applicable laws of descent and
distribution or pursuant to a qualified domestic relations order (the
"Transfer Restrictions"), unless and until the Transfer Restrictions
with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety ninety
days after the initial public offering of the Common Stock by the
Company is declared effective by the Securities and Exchange
Commission."
2. Section 5 is hereby amended by deleting from the third sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
third sentence shall read in its entirety as follows:
"As a condition to such consent, the Company may require that a number
of Optioned Shares acquired by you upon your exercise of the Option
equal to the number of Tendered Shares surrendered upon such exercise
shall be subject to the Transfer Restrictions to the same extent that
such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender."
<PAGE>
-2-
3. Section 5 is hereby amended by deleting from the seventh sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
seventh sentence shall read in its entirety as follows:
"In addition, any certificate(s) representing shares of Common Stock,
or other property other than cash, distributed (including pursuant to
any stock split) in respect of Optioned Shares purchased by you (a
"Non-Cash Distribution") with respect to which the Transfer
Restrictions shall not have lapsed shall, immediately upon your
receipt thereof, be deposited by you, together with a stock power
endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as
the Optioned Shares in respect of which such Non-Cash Distribution was
made."
4. Section 5 is hereby amended by deleting from the penultimate sentence
thereof the phrase "and, to the extent applicable, to the Company Repurchase
Option," so that as amended, the penultimate sentence shall read in its entirety
as follows:
"All such deposited certificate(s) may have set forth thereon a legend
or legends (in addition to the legend referred to in Section 8 hereof)
indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer
Restrictions as provided herein."
5. Section 6 is hereby amended by deleting from the second sentence
thereof the phrase "and the Company Repurchase Option", so that as amended, the
second sentence thereof shall read in its entirety as follows:
"Upon initial issuance to you of a certificate or certificates
representing Optioned Shares (or other property) received in any Non-
Cash Distribution in respect of Optioned Shares purchased by you, you
shall have ownership of such shares (or other property), including the
right to vote and receive dividends, subject, however, in the case of
any such shares (or other property) with respect to which the Transfer
Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to
the Plan and this Agreement and which may be now or hereafter imposed
by the Certificate of Incorporation or the By-Laws of the Company, as
amended from time to time."
<PAGE>
-3-
6. Section 7 is hereby amended by deleting from the first sentence thereof the
phrase "or the Company Repurchase Option", so that as amended, the first
sentence thereof shall read in its entirety as follows:
"As soon as reasonably practicable after the lapse of the Transfer
Restrictions with respect to any Optioned Shares purchased by you upon
exercise of the Option, the Company shall deliver to you, or your
legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other
property) received in any Non-Cash Distribution in respect of such
shares, previously deposited in escrow with the Company pursuant to
Section 5 hereof, without any legend referring to the Transfer
Restrictions."
7. A new Section 15 is hereby added, to read in its entirety as follows:
"15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as defined in
---------------
Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares shall
lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any one
---------------------------------
of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine constitutes an effective change
in the control of the Company. As used in the preceding sentence, the following
capitalized terms shall have the respective meanings set forth below:
<PAGE>
-4-
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
8. In all other respects, the Agreement shall remain in full force and
effect.
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
-------------------------------
Name: Peter E. Oettinger
--------------------------
Title: Vice President and
-----------------------
Chief Operating Officer
Accepted and Agreed to:
/s/ Roger D. Wellington
- -----------------------
(Signature of Optionee)
Name: Roger D. Wellington
-------------------
(please print)
Date: February 10, 1992
-----------------
<PAGE>
[PC 7/91]
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
John J. Crowley
- --------------------------------------------------------------------------------
Optionee
<TABLE>
<S> <C>
3,000 $0.40
- ---------------------- ----------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
</TABLE>
July 11, 1991
----------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.01 per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
- 2 -
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, may not, without the
prior written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer
<PAGE>
- 3 -
Restrictions with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety ninety days
after the initial public offering of the Common Stock by the Company is declared
effective by the Securities and Exchange Commission.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such
<PAGE>
- 4 -
certificate(s) shall, immediately upon your receipt thereof, be deposited by
you, together with a stock power endorsed in blank, in escrow with the Company.
In addition, any certificate(s) representing shares of Common Stock, or other
property other than cash, distributed (including pursuant to any stock split) in
respect of Optioned Shares purchased by you (a "Non-Cash Distribution") with
respect to which the Transfer Restrictions shall not have lapsed shall,
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as the Optioned
Shares in respect of which such Non-Cash Distribution was made. All such
deposited certificate(s) may have set forth thereon a legend or legends (in
addition to the legend referred to in Section 8 hereof) indicating that the
shares of Common Stock (or other property) represented by such certificate(s)
are subject to the Transfer Restrictions as provided herein. All shares of
Common Stock delivered upon the exercise of the Option as provided herein shall
be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial issuance
to you of a certificate or certificates representing Optioned Shares or shares
(or other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to the Plan
and this Agreement and which may be now or hereafter imposed by the Certificate
of Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the
<PAGE>
- 5 -
Securities Act of 1933, as amended (the "Act"), the rules and regulations
thereunder and all applicable state securities laws and the rules and
regulations thereunder. You hereby acknowledge and agree that any routine sales
of the Optioned Shares purchased by you upon exercise of the Option made in
reliance upon Rule 144 under the Act may be made only in limited amounts in
accordance with the terms and conditions of that Rule. You also acknowledge and
agree that the certificate(s) representing Optioned Shares delivered to you
pursuant to Section 5 hereof may have set forth thereon a legend indicating that
such shares may be transferred, sold or otherwise disposed of only after receipt
by the Company of an opinion of counsel reasonably satisfactory to it that the
transfer, sale or other disposition will not violate the Act or the regulations
thereunder or any applicable state securities laws or the regulations
thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to
<PAGE>
- 6 -
hold the Optioned Shares (together with all other shares, stock and securities
thereafter issued in respect thereof) to the time of the exercise of the Option;
provided, that if any recapitalization is to be effected through an increase in
- --------
the par value of the Common Stock without an increase in the number of
authorized shares and such new par value will exceed the Exercise Price
hereunder, the Company shall notify you of such proposed recapitalization, and
you shall then have the right, exercisable at any time prior to such
recapitalization becoming effective, to purchase all of the Optioned Shares not
theretofore purchased by you (anything in Section 1 hereof to the contrary
notwithstanding), but if you fail to exercise such right before such
recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to
the Plan, shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
- 7 -
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or
--------------
permitted to be given under this Agreement shall be in writing, and mailed by
registered or certified mail or delivered in hand, if to the Company to its
Secretary at 580 Winter Street, Waltham, Massachusetts 02254, and if to the
Optionee to the address set forth below, or such other address, in each case, as
the addressee shall last have furnished to the communicating party.
15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means
---------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine
<PAGE>
- 8 -
constitutes an effective change in the control of the Company. As used in the
preceding sentence, the following capitalized terms shall have the respective
meanings set forth below:
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group"(within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy of the
Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such copy
promptly under confidential cover to the Secretary of the Company, 580 Winter
Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
----------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ John J. Crowley
- -------------------
Optionee
230 Lexington Avenue
Cambridge, Mass 02138
- ---------------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________ (the "Stock
Option Agreement") between the Company and me, I hereby exercise the Option
granted to me with respect to _______ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED.................................... $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denomination(s) of
certificate(s) for shares being
exercised:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Send new certificate(s) to:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Optionee:
- ------------------------------- ---------------------------------------------
(print name) Signature
---------------------------------------------
Date
<PAGE>
[PC 7/91]
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
John J. Crowley
- --------------------------------------------------------------------------------
Optionee
<TABLE>
<S> <C>
4,000 $1.50
- ---------------------------- ---------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
</TABLE>
May 13, 1992
--------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
- 2 -
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
---------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, may not, without the
prior written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer
<PAGE>
- 3 -
Restrictions with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety ninety days
after the initial public offering of the Common Stock by the Company is declared
effective by the Securities and Exchange Commission.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such
<PAGE>
- 4 -
certificate(s) shall, immediately upon your receipt thereof, be deposited by
you, together with a stock power endorsed in blank, in escrow with the Company.
In addition, any certificate(s) representing shares of Common Stock, or other
property other than cash, distributed (including pursuant to any stock split) in
respect of Optioned Shares purchased by you (a "Non-Cash Distribution") with
respect to which the Transfer Restrictions shall not have lapsed shall,
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as the Optioned
Shares in respect of which such Non-Cash Distribution was made. All such
deposited certificate(s) may have set forth thereon a legend or legends (in
addition to the legend referred to in Section 8 hereof) indicating that the
shares of Common Stock (or other property) represented by such certificate(s)
are subject to the Transfer Restrictions as provided herein. All shares of
Common Stock delivered upon the exercise of the Option as provided herein shall
be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial issuance
to you of a certificate or certificates representing Optioned Shares or shares
(or other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to the Plan
and this Agreement and which may be now or hereafter imposed by the Certificate
of Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the
<PAGE>
- 5 -
Securities Act of 1933, as amended (the "Act"), the rules and regulations
thereunder and all applicable state securities laws and the rules and
regulations thereunder. You hereby acknowledge and agree that any routine sales
of the Optioned Shares purchased by you upon exercise of the Option made in
reliance upon Rule 144 under the Act may be made only in limited amounts in
accordance With the terms and conditions of that Rule. You also acknowledge and
agree that the certificate(s) representing Optioned Shares delivered to you
pursuant to Section 5 hereof may have set forth thereon a legend indicating that
such shares may be transferred, sold or otherwise disposed of only after receipt
by the Company of an opinion of counsel reasonably satisfactory to it that the
transfer, sale or other disposition will not violate the Act or the regulations
thereunder or any applicable state securities laws or the regulations
thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to
<PAGE>
- 6 -
hold the Optioned Shares (together with all other shares, stock and securities
thereafter issued in respect thereof) to the time of the exercise of the Option;
provided, that if any recapitalization is to be effected through an increase in
- --------
the par value of the Common Stock without an increase in the number of
authorized shares and such new par value will exceed the Exercise Price
hereunder, the Company shall notify you of such proposed recapitalization, and
you shall then have the right, exercisable at any time prior to such
recapitalization becoming effective, to purchase all of the Optioned Shares not
theretofore purchased by you (anything in Section 1 hereof to the contrary
notwithstanding), but if you fail to exercise such right before such
recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
- 7 -
13. Taxes. If the Company, in its sole discretion, determines that the
-----
Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any
----------------------------------
one of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine
<PAGE>
- 8 -
constitutes an effective change in the control of the Company. As used in the
preceding sentence, the following capitalized terms shall have the respective
meanings set forth below:
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's
Board of Directors on the date of this Agreement) and any future director of
the Company who has been nominated or elected by a majority of the Prior
Directors who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy of the
Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Secretary of the Company, 580
Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
-------------------------
By /s/ Peter M. Nomikos
----------------------------------
Name: Peter M. Nomikos
Title: President
Accepted and agreed:
/s/ John J. Crowley
- -------------------------------
Optionee
230 Lexington Avenue
Cambridge, Mass 02138
- -------------------------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________ (the "Stock
Option Agreement") between the Company and me, I hereby exercise the Option
granted to me with respect to _______ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED........................... $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of certificate(s)
for shares being exercised:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
Send new certificate(s) to:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
Optionee:
- ------------------------------- ----------------------------------------------
(print name) Signature
----------------------------------------------
Date
<PAGE>
[PC 7/91]
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Peter E. Oettinger
- --------------------------------------------------------------------------------
Optionee
<TABLE>
<S> <C>
35,000 $1.50
- --------------------------- ----------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
</TABLE>
May 13, 1992
-----------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
- 2 -
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
Period Percentage of Option Exercisable
------ --------------------------------
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, may not, without the
prior written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer
<PAGE>
- 3 -
Restrictions with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety ninety days
after the initial public offering of the Common Stock by the Company is declared
effective by the Securities and Exchange Commission.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such
<PAGE>
- 4 -
certificate(s) shall, immediately upon your receipt thereof, be deposited by
you, together with a stock power endorsed in blank, in escrow with the Company.
In addition, any certificate(s) representing shares of Common Stock, or other
property other than cash, distributed (including pursuant to any stock split) in
respect of Optioned Shares purchased by you (a "Non-Cash Distribution") with
respect to which the Transfer Restrictions shall not have lapsed shall,
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as the Optioned
Shares in respect of which such Non-Cash Distribution was made. All such
deposited certificate(s) may have set forth thereon a legend or legends (in
addition to the legend referred to in Section 8 hereof) indicating that the
shares of Common Stock (or other property) represented by such certificate(s)
are subject to the Transfer Restrictions as provided herein. All shares of
Common Stock delivered upon the exercise of the Option as provided herein shall
be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial issuance
to you of a certificate or certificates representing Optioned Shares or shares
(or other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to the Plan
and this Agreement and which may be now or hereafter imposed by the Certificate
of Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the
<PAGE>
- 5 -
Securities Act of 1933, as amended (the "Act"), the rules and regulations
thereunder and all applicable state securities laws and the rules and
regulations thereunder. You hereby acknowledge and agree that any routine sales
of the Optioned Shares purchased by you upon exercise of the Option made in
reliance upon Rule 144 under the Act may be made only in limited amounts in
accordance with the terms and conditions of that Rule. You also acknowledge and
agree that the certificate(s) representing Optioned Shares delivered to you
pursuant to Section 5 hereof may have set forth thereon a legend indicating that
such shares may be transferred, sold or otherwise disposed of only after receipt
by the Company of an opinion of counsel reasonably satisfactory to it that the
transfer, sale or other disposition will not violate the Act or the regulations
thereunder or any applicable state securities laws or the regulations
thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to
<PAGE>
- 6 -
hold the Optioned Shares (together with all other shares, stock and securities
thereafter issued in respect thereof) to the time of the exercise of the Option;
provided, that if any recapitalization is to be effected through an increase in
- --------
the par value of the Common Stock without an increase in the number of
authorized shares and such new par value will exceed the Exercise Price
hereunder, the Company shall notify you of such proposed recapitalization, and
you shall then have the right, exercisable at any time prior to such
recapitalization becoming effective, to purchase all of the Optioned Shares not
theretofore purchased by you (anything in Section 1 hereof to the contrary
notwithstanding), but if you fail to exercise such right before such
recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
- 7 -
13. Taxes. If the Company, in its sole discretion, determines that the
-----
Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any
---------------------------------
one of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine
<PAGE>
- 8 -
constitutes an effective change in the control of the Company. As used in the
preceding sentence, the following capitalized terms shall have the respective
meanings set forth below:
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy of the
Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such copy
promptly under confidential cover to the Secretary of the Company, 580 Winter
Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter M. Nomikos
--------------------------
Name: Peter M. Nomikos
Title: President
Accepted and agreed:
/s/ Peter E. Oettinger
- --------------------------
Optionee
4 Phlox Lane
Acton, MA 01720
- --------------------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________ (the "Stock
Option Agreement") between the Company and me. I hereby exercise the Option
granted to me with respect to _______ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED........................... $________
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denomination(s) of
certificate(s) for shares being
exercised:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Send new certificate(s) to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Optionee:
- --------------------------------- ------------------------------------
(print name) Signature
------------------------------------
Date
<PAGE>
[PC 7/91]
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
John J. Crowley
- --------------------------------------------------------------------------------
Optionee
6,000 $1.50
- ------------------------ --------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
March 9, 1993
-------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
- 2 -
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
Period Percentage of Option Exercisable
------ --------------------------------
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
---------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, may not, without the
prior written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer
<PAGE>
- 3 -
Restrictions with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety ninety days
after the initial public offering of the Common Stock by the Company is declared
effective by the Securities and Exchange Commission.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such
<PAGE>
- 4 -
certificate(s) shall, immediately upon your receipt thereof, be deposited by
you, together with a stock power endorsed in blank, in escrow with the Company.
In addition, any certificate(s) representing shares of Common Stock, or other
property other than cash, distributed (including pursuant to any stock split) in
respect of Optioned Shares purchased by you (a "Non-Cash Distribution") with
respect to which the Transfer Restrictions shall not have lapsed shall,
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as the Optioned
Shares in respect of which such Non-Cash Distribution was made. All such
deposited certificate(s) may have set forth thereon a legend or legends (in
addition to the legend referred to in Section 8 hereof) indicating that the
shares of Common Stock (or other property) represented by such certificate(s)
are subject to the Transfer Restrictions as provided herein. All shares of
Common Stock delivered upon the exercise of the Option as provided herein shall
be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the Option
--------------------------------------
is exercised, you shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the Optioned Shares. Upon initial issuance
to you of a certificate or certificates representing Optioned Shares or
shares (or other property) received in any Non-Cash Distribution in respect
of Optioned Shares purchased by you, you shall have ownership of such shares
(or other property), including the right to vote and receive dividends,
subject, however, in the case of any such shares (or other property) with
respect to which the Transfer Restrictions shall not have lapsed, to the
Transfer Restrictions, and to the other restrictions and limitations imposed
thereon pursuant to the Plan and this Agreement and which may be now or
hereafter imposed by the Certificate of Incorporation or the By-Laws
of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable after
--------------------------
the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will not
---------------
transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the
<PAGE>
- 5 -
Securities Act of 1933, as amended (the "Act"), the rules and regulations
thereunder and all applicable state securities laws and the rules and
regulations thereunder. You hereby acknowledge and agree that any routine sales
of the Optioned Shares purchased by you upon exercise of the Option made in
reliance upon Rule 144 under the Act may be made only in limited amounts in
accordance with the terms and conditions of that Rule. You also acknowledge and
agree that the certificate(s) representing Optioned Shares delivered to you
pursuant to Section 5 hereof may have set forth thereon a legend indicating that
such shares may be transferred, sold or otherwise disposed of only after receipt
by the Company of an opinion of counsel reasonably satisfactory to it that the
transfer, sale or other disposition will not violate the Act or the regulations
thereunder or any applicable state securities laws or the regulations
thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend payable
------------------------------
in Common Stock or any split-up or contraction in the number of shares of Common
Stock occurring after the date of this Agreement and prior to the exercise in
full of the Option, the number of shares for which the Option may thereafter be
exercised and the Exercise Price shall be proportionately adjusted. In the case
of any reclassification or change of outstanding shares of the Common Stock or
in case of any consolidation or merger of the Company with or into another
company or in case of any sale or conveyance to another company or entity of the
property of the Company as a whole or substantially as a whole, you shall, upon
exercise of the Option, be entitled to receive shares of stock or other
securities in its place equivalent in kind and value to those shares which you
would have received if you had exercised the Option in full immediately prior to
such reclassification, change, consolidation, merger, sale or conveyance and had
continued to
<PAGE>
- 6 -
hold the Optioned Shares (together with all other shares, stock and securities
thereafter issued in respect thereof) to the time of the exercise of the Option;
provided, that if any recapitalization is to be effected through an increase in
- --------
the par value of the Common Stock without an increase in the number of
authorized shares and such new par value will exceed the Exercise Price
hereunder, the Company shall notify you of such proposed recapitalization, and
you shall then have the right, exercisable at any time prior to such
recapitalization becoming effective, to purchase all of the Optioned Shares not
theretofore purchased by you (anything in Section 1 hereof to the contrary
notwithstanding), but if you fail to exercise such right before such
recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the term
---------------------
of this Agreement reserve and keep available such number of shares of the Common
Stock as will be sufficient to satisfy the requirements of this Agreement and
shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no right
-------------------------------
to continue in the employ or service of the Company and its subsidiaries or
interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
- 7 -
13. Taxes. If the Company, in its sole discretion, determines that the
-----
Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted to
--------------
be given under this Agreement shall be in writing, and mailed by registered or
certified mail or delivered in hand, if to the Company to its Secretary at 580
Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as defined in
---------------
Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the
Vested Shares shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any one
---------------------------------
of the following events: (i) when, without the prior approval of the Prior
Directors of the Company, any Person is or becomes the beneficial owner (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules and regulations thereunder), together with all
Affiliates and Associates (as such terms are used in Rule 12b-2 of the General
Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company,
(ii) the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall determine
<PAGE>
- 8 -
constitutes an effective change in the control of the Company. As used in the
preceding sentence, the following capitalized terms shall have the respective
meanings set forth below:
(1) "Person" shall include any natural person, any entity,
any "affiliate" of any such natural person or entity as such term is defined
in Rule 405 under the Securities Act of 1933 and any "group" (within the
meaning of such term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting
on the Company's Board of Directors immediately prior to an Electoral Event (or,
if there has been no Electoral Event, those persons sitting on the Company's
Board of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company
or a subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Secretary of the Company, 580
Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
-----------------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ John J. Crowley
- -----------------------------
Optionee
230 Lexington Ave.
Cambridge, Mass 02138
- -----------------------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________
(the "Stock Option Agreement") between the Company and me, I
hereby exercise the Option granted to me with respect to _______
Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED................................ $_______
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denomination(s) of
certificate(s) for shares being
exercised:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Send new certificate(s) to:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Optionee:
- ----------------------------------- -----------------------------------
(print name) Signature
-----------------------------------
Date
<PAGE>
[PC 7/91]
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
PETER E. OETTINGER
- --------------------------------------------------------------------------------
Optionee
15,000 $1.50
- ------------------------------ ----------------------------------
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
March 9, 1993
--------------------
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.01 per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of
<PAGE>
-2-
your death, provided that immediately on the Employment Termination Date, the
Option shall terminate with respect to any Optioned Shares (as defined herein)
that are not Vested Shares (as defined herein) and as to which the Transfer
Restrictions (as defined herein) shall not have lapsed or (c) the date of the
dissolution or liquidation of the Company. The date on which the Option shall
terminate in whole or in part as provided in this Section 1 is hereinafter
referred to as the "Option Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, may not, without the
prior written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer
<PAGE>
-3-
Restrictions with respect to such Optioned Shares shall have lapsed as provided
herein. The Transfer Restrictions shall lapse in their entirety ninety days
after the initial public offering of the Common Stock by the Company is declared
effective by the Securities and Exchange Commission.
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option; Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only if
(1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such
<PAGE>
-4-
certificate(s) shall, immediately upon your receipt thereof, be deposited by
you, together with a stock power endorsed in blank, in escrow with the Company.
In addition, any certificate(s) representing shares of Common Stock, or other
property other than cash, distributed (including pursuant to any stock split) in
respect of Optioned Shares purchased by you (a "Non-Cash Distribution") with
respect to which the Transfer Restrictions shall not have lapsed shall,
immediately upon your receipt thereof, be deposited by you, together with a
stock power endorsed in blank (if applicable), in escrow with the Company, and
shall be subject to the Transfer Restrictions to the same extent as the Optioned
Shares in respect of which such Non-Cash Distribution was made. All such
deposited certificate(s) may have set forth thereon a legend or legends (in
addition to the legend referred to in Section 8 hereof) indicating that the
shares of Common Stock (or other property) represented by such certificate(s)
are subject to the Transfer Restrictions as provided herein. All shares of
Common Stock delivered upon the exercise of the Option as provided herein shall
be fully paid and non-assessable.
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial issuance
to you of a certificate or certificates representing Optioned Shares or shares
(or other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to the Plan
and this Agreement and which may be now or hereafter imposed by the Certificate
of Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the
<PAGE>
-5-
Securities Act of 1933, as amended (the "Act"), the rules and regulations
thereunder and all applicable state securities laws and the rules and
regulations thereunder. You hereby acknowledge and agree that any routine sales
of the Optioned Shares purchased by you upon exercise of the Option made in
reliance upon Rule 144 under the Act may be made only in limited amounts in
accordance with the terms and conditions of that Rule. You also acknowledge and
agree that the certificate(s) representing Optioned Shares delivered to you
pursuant to Section 5 hereof may have set forth thereon a legend indicating that
such shares may be transferred, sold or otherwise disposed of only after receipt
by the Company of an opinion of counsel reasonably satisfactory to it that the
transfer, sale or other disposition will not violate the Act or the regulations
thereunder or any applicable state securities laws or the regulations
thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other securities law, any requirement of any securities
exchange listing agreement to which the Company may be a party, or any other
requirement of law or of any regulatory body having jurisdiction over the
Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to
<PAGE>
-6-
hold the Optioned Shares (together with all other shares, stock and securities
thereafter issued in respect thereof) to the time of the exercise of the Option;
provided, that if any recapitalization is to be effected through an increase in
- --------
the par value of the Common Stock without an increase in the number of
authorized shares and such new par value will exceed the Exercise Price
hereunder, the Company shall notify you of such proposed recapitalization, and
you shall then have the right, exercisable at any time prior to such
recapitalization becoming effective, to purchase all of the Optioned Shares not
theretofore purchased by you (anything in Section 1 hereof to the contrary
notwithstanding), but if you fail to exercise such right before such
recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation and construction by the Company's Board of Directors of any
provision of, and the determination of any question arising under, this
Agreement, the Plan, or any rule or regulation adopted pursuant to the Plan,
shall be final and conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
<PAGE>
-7-
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means any
---------------------------------
one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial
owner (as defined in Section 13(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the rules and regulations thereunder),
together with all Affiliates and Associates (as such terms are used in Rule
12b-2 of the General Rules and Regulations of the Exchange Act) of such
Person, directly or indirectly, of 50% or more of the outstanding Common
Stock of the Company, (ii) the sale or other transfer by Thermo Electron
Corporation or Photoelectron Investments Corporation of Liberia (the
"Controlling Shareholders") of 50% or more of their collective
stockholdings in the Company to any Person, other than any Person that is
controlled by, controlling or under common control with either of the
Controlling Shareholders or to any person who is not, prior to giving
effect to such sale, a stockholder of the Company, or (iii) any other event
that the Prior Directors shall determine
<PAGE>
-8-
constitutes an effective change in the control of the Company. As used in
the preceding sentence, the following capitalized terms shall have the
respective meanings set forth below:
(1) "Person" shall include any natural person, any entity,
any "affiliate" of any such natural person or entity as such term is
defined in Rule 405 under the Securities Act of 1933 and any "group"
(within the meaning of such term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or,
if there has been no Electoral Event, those persons sitting on the
Company's Board of Directors on the date of this Agreement) and any future
director of the Company who has been nominated or elected by a majority of
the Prior Directors who are then members of the Board of Directors of the
Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock,
not approved by the Prior Directors, by any Person other than the Company
or a subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan
and this Agreement, by executing the enclosed copy of this letter and
returning such copy promptly under confidential cover to the Secretary of
the Company, 580 Winter Street, Waltham, Massachusetts 02254.
PHOTOELECTRON CORPORATION
By /s/ Peter M. Nomikos
--------------------------------
Name: Peter M. Nomikos
Title: President & CEO
Accepted and agreed:
/s/ Peter E. Oettinger
- -----------------------------------
Optionee
4 Phlox Lane
Acton, MA 01720
- -----------------------------------
Home Address
<PAGE>
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated _____________________ (the "Stock
Option Agreement") between the Company and me, I hereby exercise the Option
granted to me with respect to _______ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED.............................. $_________
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS ...
Number and denominations(s) of
certificate(s) for shares being
exercised:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Send new certificate(s) to:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Optionee:
- ------------------------------- -----------------------------------
(print name) Signature
-----------------------------------
Date
<PAGE>
[PC 7/91]
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
John J. Crowley
=====================
Optionee
12,000 $1.50
======================= ====================
Number of Shares of Exercise Price
Common Stock Subject to Per Share
the Option
December 1, 1993
=======================
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.01 per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which is
---------------------
the earliest of (a) seven years after the Grant Date, (b) three months after the
date on which you cease to be a director or employee of the Company or a
subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of your
death, provided that immediately on the Employment Termination Date, the Option
shall terminate with respect to any Optioned Shares (as defined herein) that are
not Vested Shares (as defined herein) and to which the Transfer Restrictions (as
defined
<PAGE>
2
herein) shall not have lapsed or (c) the date of the dissolution or liquidation
of the Company. The date on which the Option shall terminate in whole or in part
as provided in this Section 1 is hereinafter referred to as the "Option
Termination Date.
2. Exercise of Option. Subject to the terms of this Agreement, the Option
------------------
shall be exercisable in installments during the period beginning on the first
anniversary of the Grant Date and ending on the Option Termination Date as set
forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
- ------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing table
are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and all
fractional shares shall be rounded down to next lower whole number of shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of Common Stock
or other shares (or other property) received in any Non-Cash Distribution (as
defined herein) in respect of such Optioned Shares, may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer Restrictions with
respect to such Optioned Shares shall have lapsed as provided herein. The
Transfer Restrictions shall lapse in their entirety ninety days after the
initial public offering of the Common Stock by the Company is declared effective
by the Securities and Exchange Commission.
<PAGE>
3
4. No Assignment of Rights. Except for assignments or transfers by will
-----------------------
or the applicable laws of descent and distribution, your rights and interests
under Agreement and the Plan may not be assigned or transferred in whole or in
part either directly or by operation of law or otherwise, including without
limitation by way of execution, levy, garnishment, attachment, pledge or
bankruptcy, and no such rights or interests shall be subject to any of your
obligations or liabilities.
5. Exercise of Option: Delivery and Deposit of Certificate(s). You (or in
----------------------------------------------------------
the case of your death, your legal representative) may exercise the Option in
whole or in part by giving written notice to the Company on the form attached
hereto as Exhibit A (the "Exercise Notice") prior to the Option Termination
Date, accompanied by full payment for the Optioned Shares being purchased (a) in
cash or by certified or bank cashier's check payable to the order of the
Company, in an amount equal to the number of Optioned Shares being purchased
multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b) in shares
of the Company's Common Stock (the "Tendered Shares") with a market value equal
to the Aggregate Exercise Price or (c) any combination of cash, certified or
bank cashier's check or Tendered Shares having a total value equal to the
Aggregate Exercise Price (such cash, check or Tendered Shares with such value
being referred to as the "Exercise Consideration"). However, Tendered Shares may
be surrendered as all or part of the Exercise Consideration only if(1) the
Common Stock is publicly traded over-the-counter or on a national securities
exchange, (2) you shall have acquired such Tendered Shares more than six months
prior to the date of exercise and, (3) if such Tendered Shares are then subject
to Transfer Restrictions, only with the prior written consent of the Company as
provided in Section 3(a) hereof. As a condition to such consent, the Company may
require that a number of Optioned Shares acquired by you upon your exercise of
the Option equal to the number of Tendered Shares surrendered upon such exercise
shall be subject to the Transfer Restrictions to the same extent that such
Tendered Shares surrendered upon such exercise were so subject immediately prior
to such surrender. Receipt by the Company of the Exercise Notice and the
Exercise Consideration shall constitute the exercise of the Option or a part
thereof. As soon as reasonably practicable thereafter, the Company shall deliver
or cause to be delivered to you a certificate or certificates representing the
number of Optioned Shares purchased, registered in your name. If such
certificate(s) represent(s) Optioned Shares with respect to which the Transfer
Restrictions shall not have lapsed, such certificate(s) shall, immediately upon
your receipt thereof, be deposited by you, together with a stock power endorsed
in blank, in escrow with the Company. In addition, any certificate(s)
representing shares of Common Stock, or other property other than cash,
distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall, immediately upon your receipt
thereof, be deposited by you, together with a stock power endorsed in blank (if
applicable), in escrow with the Company, and shall be subject to the Transfer
Restrictions to the same extent as the Optioned Shares in respect of which such
Non-Cash Distribution was made. All such deposited certificate(s) may have set
forth thereon a legend or legends (in addition to the legend referred to in
Section 8 hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions as
provided herein. All shares of Common Stock delivered upon the exercise of the
Option as provided herein shall be fully paid and non-assessable.
<PAGE>
4
6. Rights With Respect to Optioned Shares. Prior to the date the Option
--------------------------------------
is exercised, you shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the Optioned Shares. Upon initial issuance to you
of a certificate or certificates representing Optioned Shares or shares
(or other property) received in any Non-Cash Distribution in respect of
Optioned Shares purchased by you, you shall have ownership of such shares
(or other property), including the right to vote and receive dividends,
subject, however, in the case of any such shares (or other property) with
respect to which the Transfer Restrictions shall not have lapsed, to the
Transfer Restrictions, and to the other restrictions and limitations imposed
thereon pursuant to the Plan and this Agreement and which may be now or
hereafter imposed by the Certificate of Incorporation or the By-Laws
of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable after
--------------------------
the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will not
---------------
transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge and agree that
any routine sales of the Optioned Shares purchased by you upon exercise of the
Option made in reliance upon Rule 144 under the Act may be made only in limited
amounts in accordance with the terms and conditions of that Rule. You also
acknowledge and agree that the certificate(s) representing Optioned Shares
delivered to you pursuant to Section 5 hereof may have set forth thereon a
legend indicating that such shares may be transferred, sold or otherwise
disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other
<PAGE>
5
securities law, any requirement of any securities exchange listing agreement to
which the Company may be a party, or any other requirement of law or of any
regulatory body having jurisdiction over the Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any recapitalization is to
be effected through an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par value will exceed
the Exercise Price hereunder, the Company shall notify you of such proposed
recapitalization, and you shall then have the right, exercisable at any time
prior to such recapitalization becoming effective, to purchase all of the
Optioned Shares not theretofore purchased by you (anything in Section 1 hereof
to the contrary notwithstanding), but if you fail to exercise such right before
such recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company,
the Option shall terminate, but you (if at the time you are a director or
employee of the Company or a subsidiary of the Company) shall have the right,
immediately prior to such dissolution or liquidation, to purchase all or any
portion of the Optioned Shares not theretofore purchased by you. No adjustment
provided for in this Section 9 shall apply to any Optioned Shares purchased
prior to the effective date of such adjustment. No fraction of a share or
fractional shares shall be purchasable or deliverable under this Agreement, but
in the event any adjustment hereunder of the number of Optioned Shares shall
cause such number to include a fraction of a share, such fraction shall be
adjusted to the nearest smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation
<PAGE>
6
and construction by the Company's Board of Directors of any provision of, and
the determination of any question arising under, this Agreement, the Plan, or
any rule or regulation adopted pursuant to the Plan, shall be final and
conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
13. Taxes. If the Company, in its sole discretion, determines that the
-----
Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested
Shares shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means
----------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall
<PAGE>
7
determine constitutes an effective change in the control of the Company. As used
in the preceding sentence, the following capitalized terms shall have the
respective meanings set forth below:
(1) "Person" shall include any natural person, any entity,
any "affiliate" of any such natural person or entity as such term is defined in
Rule 405 under the Securities Act of 1933 and any "group" (within the meaning of
such term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy of the
Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such copy
promptly under confidential cover to the Clerk of the Company, 400-1 Totten Pond
Road, Waltham, Massachusetts 02154.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
----------------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ John J. Crowley
- -----------------------------------------
Optionee
230 Lexington Ave Cambridge, Mass 02138
- -----------------------------------------
Home Address
<PAGE>
8
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated ____________ (the "Stock Option
Agreement") between the Company and me, I hereby exercise the Option granted to
me with respect to _____ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED............................. $_______________
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS
Number and denominations(s) of certificate(s) for shares being exercised:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
Send new certificate(s) to:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
Optionee:
- ----------------------------- ------------------------------
(print name) Signature
------------------------------
Date
<PAGE>
[PC 7/91]
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
George N. Hatsopoulos
============================
Optionee
5,000 $1.50
======================= =================
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
December 1, 1993
======================
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.01 per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of your
death, provided that immediately on the Employment Termination Date, the Option
shall terminate with respect to any Optioned Shares (as defined herein) that are
not Vested Shares (as defined herein) and as to which the Transfer Restrictions
(as defined
<PAGE>
2
herein) shall not have lapsed or (c) the date of the dissolution or liquidation
of the Company. The date on which the Option shall terminate in whole or in part
as provided in this Section 1 is hereinafter referred to as the "Option
Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
- ------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, may not, without the
prior written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer Restrictions with
respect to such Optioned Shares shall have lapsed as provided herein. The
Transfer Restrictions shall lapse in their entirety ninety days after the
initial public offering of the Common Stock by the Company is declared effective
by the Securities and Exchange Commission.
<PAGE>
3
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option: Delivery and Deposit of Certificate(s). You
----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only
if (1) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such certificate(s)
shall, immediately upon your receipt thereof, be deposited by you, together with
a stock power endorsed in blank, in escrow with the Company. In addition, any
certificate(s) representing shares of Common Stock, or other property other than
cash, distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall, immediately upon your receipt
thereof, be deposited by you, together with a stock power endorsed in blank (if
applicable), in escrow with the Company, and shall be subject to the Transfer
Restrictions to the same extent as the Optioned Shares in respect of which such
Non-Cash Distribution was made. All such deposited certificate(s) may have set
forth thereon a legend or legends (in addition to the legend referred to in
Section 8 hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions as
provided herein. All shares of Common Stock delivered upon the exercise of the
Option as provided herein shall be fully paid and non-assessable.
<PAGE>
4
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial issuance
to you of a certificate or certificates representing Optioned Shares or shares
(or other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to the Plan
and this Agreement and which may be now or hereafter imposed by the Certificate
of Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge and agree that
any routine sales of the Optioned Shares purchased by you upon exercise of the
Option made in reliance upon Rule 144 under the Act may be made only in limited
amounts in accordance with the terms and conditions of that Rule. You also
acknowledge and agree that the certificate(s) representing Optioned Shares
delivered to you pursuant to Section 5 hereof may have set forth thereon a
legend indicating that such shares may be transferred, sold or otherwise
disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and
your transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other
<PAGE>
5
securities law, any requirement of any securities exchange listing agreement to
which the Company may be a party, or any other requirement of law or of any
regulatory body having jurisdiction over the Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any recapitalization is to
be effected through an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par value will exceed
the Exercise Price hereunder, the Company shall notify you of such proposed
recapitalization, and you shall then have the right, exercisable at any time
prior to such recapitalization becoming effective, to purchase all of the
Optioned Shares not theretofore purchased by you (anything in Section 1 hereof
to the contrary notwithstanding), but if you fail to exercise such right before
such recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation
<PAGE>
6
and construction by the Company's Board of Directors of any provision of, and
the determination of any question arising under, this Agreement, the Plan, or
any rule or regulation adopted pursuant to the Plan, shall be final and
conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested
Shares shall lapse in their entirety.
(b) Definition of "Change of Control" "Change of Control" means
---------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall
<PAGE>
7
determine constitutes an effective change in the control of the Company. As used
in the preceding sentence, the following capitalized terms shall have the
respective meanings set forth below:
(1) "Person" shall include any natural person, any entity,
any "affiliate" of any such natural person or entity as such term is defined in
Rule 405 under the Securities Act of l933 and any "group" (within the meaning of
such term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Clerk of the Company, 400-1 Totten
Pond Road, Waltham, Massachusetts 02154.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
----------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ George Hatsopoulos
- --------------------------------
Optionee
233 Tower Rd Lincoln, MA 01773
- --------------------------------
Home Address
<PAGE>
8
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated ___________ (the "Stock Option
Agreement") between the Company and me, I hereby exercise the Option granted
to me with respect to Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED............................... $_______________
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS
Number and denominations(s) of certificate(s) for shares being exercised:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
Send new certificate(s) to:
_______________________________
_______________________________
_______________________________
_______________________________
Optionee:
_____________________________ __________________________
(print name) Signature
__________________________
Date
<PAGE>
[PC 7/91]
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Peter M. Nomikos
======================
Optionee
20,000 $1.50
==================== ==================
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
December 1 1993
===================
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination
Date (as defined herein). Attached is a copy of the Plan which is incorporated
in this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date
---------------------
which is the earliest of (a) seven years after the Grant Date, (b) three months
after the date on which you cease to be a director or employee of the Company or
a subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of your
death, provided that immediately on the Employment Termination Date, the Option
shall terminate with respect to any Optioned Shares (as defined herein) that are
not Vested Shares (as defined herein) and as to which the Transfer Restrictions
(as defined
<PAGE>
2
herein) shall not have lapsed or (c) the date of the dissolution or liquidation
of the Company. The date on which the Option shall terminate in whole or in part
as provided in this Section 1 is hereinafter referred to as the "Option
Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
- ------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, may not, without the
prior written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer Restrictions with
respect to such Optioned Shares shall have lapsed as provided herein. The
Transfer Restrictions shall lapse in their entirety ninety days after the
initial public offering of the Common Stock by the Company is declared effective
by the Securities and Exchange Commission.
<PAGE>
3
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option: Delivery and Deposit of Certificate(s). You
---------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only
if (l) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such certificate(s)
shall, immediately upon your receipt thereof, be deposited by you, together with
a stock power endorsed in blank, in escrow with the Company. In addition, any
certificate(s) representing shares of Common Stock, or other property other than
cash, distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall, immediately upon your receipt
thereof, be deposited by you, together with a stock power endorsed in blank (if
applicable), in escrow with the Company, and shall be subject to the Transfer
Restrictions to the same extent as the Optioned Shares in respect of which such
Non-Cash Distribution was made. All such deposited certificate(s) may have set
forth thereon a legend or legends (in addition to the legend referred to in
Section 8 hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions as
provided herein. All shares of Common Stock delivered upon the exercise of the
Option as provided herein shall be fully paid and non-assessable.
<PAGE>
4
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial issuance
to you of a certificate or certificates representing Optioned Shares or shares
(or other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to the Plan
and this Agreement and which may be now or hereafter imposed by the Certificate
of Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable
--------------------------
after the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will
---------------
not transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge and agree that
any routine sales of the Optioned Shares purchased by you upon exercise of the
Option made in reliance upon Rule 144 under the Act may be made only in limited
amounts in accordance with the terms and conditions of that Rule. You also
acknowledge and agree that the certificate(s) representing Optioned Shares
delivered to you pursuant to Section 5 hereof may have set forth thereon a
legend indicating that such shares may be transferred, sold or otherwise
disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and
your transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other
<PAGE>
5
securities law, any requirement of any securities exchange listing agreement to
which the Company may be a party, or any other requirement of law or of any
regulatory body having jurisdiction over the Company.
9. Dilution and Other Adjustments. In the event of any stock
------------------------------
dividend payable in Common stock or any split-up or contraction in the number of
shares of Common Stock occurring after the date of this Agreement and prior to
the exercise in full of the Option, the number of shares for which the Option
may thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any recapitalization is to
be effected through an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par value will exceed
the Exercise Price hereunder, the Company shall notify you of such proposed
recapitalization, and you shall then have the right, exercisable at any time
prior to such recapitalization becoming effective, to purchase all of the
Optioned Shares not theretofore purchased by you (anything in Section 1 hereof
to the contrary notwithstanding), but if you fail to exercise such right before
such recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
---------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
-----------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation
<PAGE>
6
and construction by the Company's Board of Directors of any provision of, and
the determination of any question arising under, this Agreement, the Plan, or
any rule or regulation adopted pursuant to the Plan, shall be final and
conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested
Shares shall lapse in their entirety.
(b) Definition of "Change of Control" "Change of Control" means
---------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall
<PAGE>
7
determine constitutes an effective change in the control of the Company. As used
in the preceding sentence, the following capitalized terms shall have the
respective meanings set forth below:
(1) "Person" shall include any natural person, any entity, any
"affiliate" of any such natural person or entity as such term is defined in Rule
405 under the Securities Act of 1933 and any "group" (within the meaning of such
term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy
of the Plan and your acceptance of and agreement to the terms of the Plan and
this Agreement, by executing the enclosed copy of this letter and returning such
copy promptly under confidential cover to the Clerk of the Company, 400-1 Totten
Pond Road, Waltham, Massachusetts 02154.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
-------------------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ Peter M. Nomikos
- ---------------------------------
Optionee
90 Eaton Square
London, Sw1W 94G
- ---------------------------------
Home Address
<PAGE>
8
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated ___________ (the "Stock Option
Agreement") between the Company and me, I hereby exercise the Option granted to
me with respect to _____ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED................................... $__________
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS
Number and denominations(s) of certificate(s) for shares being exercised:
________________________________
________________________________
________________________________
________________________________
________________________________
Send new certificate(s) to:
________________________________
________________________________
________________________________
________________________________
Optionee:
____________________________ ______________________________
(print name) Signature
______________________________
Date
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Peter E. Oettinger
==================
Optionee
20,000 $1.50
=========================== ==================
Number of Shares of Exercise Price
Common Stock Subject Per Share
to the Option
December 1, 1993
================
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which
----------------------
is the earliest of (a) seven years after the Grant Date, (b) three months after
the date on which you cease to be a director or employee of the Company or a
subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of your
death, provided that immediately on the Employment Termination Date, the Option
shall terminate with respect to any Optioned Shares (as defined herein) that are
not Vested Shares (as defined herein) and as to which the Transfer Restrictions
(as defined
<PAGE>
2
herein) shall not have lapsed or (c) the date of the dissolution or liquidation
of the Company. The date on which the Option shall terminate in whole or in part
as provided in this Section 1 is hereinafter referred to as the "Option
Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
- ------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing
table are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and
all fractional shares shall be rounded down to next lower whole number of
shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares")
and purchased upon exercise of the Option, and any additional shares of Common
Stock or other shares (or other property) received in any Non-Cash Distribution
(as defined herein) in respect of such Optioned Shares, may not, without the
prior written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer Restrictions with
respect to such Optioned Shares shall have lapsed as provided herein. The
Transfer Restrictions shall lapse in their entirety ninety days after the
initial public offering of the Common Stock by the Company is declared effective
by the Securities and Exchange Commission.
<PAGE>
3
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment,
attachment, pledge or bankruptcy, and no such rights or interests shall be
subject to any of your obligations or liabilities.
5. Exercise of Option: Delivery and Deposit of Certificate(s). You (or
-----------------------------------------------------------
in the case of your death, your legal representative) may exercise the Option in
whole or in part by giving written notice to the Company on the form attached
hereto as Exhibit A (the "Exercise Notice") prior to the Option Termination
Date, accompanied by full payment for the Optioned Shares being purchased (a) in
cash or by certified or bank cashier's check payable to the order of the
Company, in an amount equal to the number of Optioned Shares being purchased
multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b) in shares
of the Company's Common Stock (the "Tendered Shares") with a market value equal
to the Aggregate Exercise Price or (c) any combination of cash, certified or
bank cashier's check or Tendered Shares having a total value equal to the
Aggregate Exercise Price (such cash, check or Tendered Shares with such value
being referred to as the "Exercise Consideration"). However, Tendered Shares may
be surrendered as all or part of the Exercise Consideration only if (1) the
Common Stock is publicly traded over-the-counter or on a national securities
exchange, (2) you shall have acquired such Tendered Shares more than six months
prior to the date of exercise and, (3) if such Tendered Shares are then subject
to Transfer Restrictions, only with the prior written consent of the Company as
provided in Section 3(a) hereof. As a condition to such consent, the Company may
require that a number of Optioned Shares acquired by you upon your exercise of
the Option equal to the number of Tendered Shares surrendered upon such exercise
shall be subject to the Transfer Restrictions to the same extent that such
Tendered Shares surrendered upon such exercise were so subject immediately prior
to such surrender. Receipt by the Company of the Exercise Notice and the
Exercise Consideration shall constitute the exercise of the Option or a part
thereof. As soon as reasonably practicable thereafter, the Company shall deliver
or cause to be delivered to you a certificate or certificates representing the
number of Optioned Shares purchased, registered in your name. If such
certificate(s) represent(s) Optioned Shares with respect to which the Transfer
Restrictions shall not have lapsed, such certificate(s) shall, immediately upon
your receipt thereof, be deposited by you, together with a stock power endorsed
in blank, in escrow with the Company. In addition, any certificate(s)
representing shares of Common Stock, or other property other than cash,
distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall, immediately upon your receipt
thereof, be deposited by you, together with a stock power endorsed in blank (if
applicable), in escrow with the Company, and shall be subject to the Transfer
Restrictions to the same extent as the Optioned Shares in respect of which such
Non-Cash Distribution was made. All such deposited certificate(s) may have set
forth thereon a legend or legends (in addition to the legend referred to in
Section 8 hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions as
provided herein. All shares of Common Stock delivered upon the exercise of the
Option as provided herein shall be fully paid and non-assessable.
<PAGE>
4
6. Rights With Respect to Optioned Shares. Prior to the date the Option
---------------------------------------
is exercised, you shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the Optioned Shares. Upon initial issuance to you
of a certificate or certificates representing Optioned Shares or shares (or
other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to the Plan
and this Agreement and which may be now or hereafter imposed by the Certificate
of Incorporation or the By-Laws of the Company, as amended from time to time.
7. Release of Optioned Shares. As soon as reasonably practicable after
---------------------------
the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will not
----------------
transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge and agree that
any routine sales of the Optioned Shares purchased by you upon exercise of the
Option made in reliance upon Rule 144 under the Act may be made only in limited
amounts in accordance with the terms and conditions of that Rule. You also
acknowledge and agree that the certificate(s) representing Optioned Shares
delivered to you pursuant to Section 5 hereof may have set forth thereon a
legend indicating that such shares may be transferred, sold or otherwise
disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other
<PAGE>
5
securities law, any requirement of any securities exchange listing agreement to
which the Company may be a party, or any other requirement of law or of any
regulatory body having jurisdiction over the Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
-------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any recapitalization is to
be effected through an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par value will exceed
the Exercise Price hereunder, the Company shall notify you of such proposed
recapitalization, and you shall then have the right, exercisable at any time
prior to such recapitalization becoming effective, to purchase all of the
Optioned Shares not theretofore purchased by you (anything in Section 1 hereof
to the contrary notwithstanding), but if you fail to exercise such right before
such recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
----------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
------------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation
<PAGE>
6
and construction by the Company's Board of Directors of any provision of, and
the determination of any question arising under, this Agreement, the Plan, or
any rule or regulation adopted pursuant to the Plan, shall be final and
conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
13. Taxes. If the Company, in its sole discretion, determines that the
-----
Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
15. Change of Control.
-----------------
(a) Impact of Event. In the event of a "Change of Control" as
---------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means
---------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall
<PAGE>
7
determine constitutes an effective change in the control of the Company. As used
in the preceding sentence, the following capitalized terms shall have the
respective meanings set forth below:
(1) "Person" shall include any natural person, any entity,
any "affiliate" of any such natural person or entity as such term is defined in
Rule 405 under the Securities Act of 1933 and any "group" (within the meaning of
such term in Rule l3d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy of
the Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such copy
promptly under confidential cover to the Clerk of the Company, 400-1 Totten Pond
Road, Waltham, Massachusetts 02154.
PHOTOELECTRON CORPORATION
By /s/ Peter M. Nomikos
-----------------------------------------
Name: Peter M. Nomikos
Title: Chief Operating officer
Accepted and agreed:
/s/ Peter E. Oettinger
- --------------------------------
Optionee
4 Phlox Lane
Acton, MA 01720
- --------------------------------
Home Address
<PAGE>
8
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated ___________ (the "Stock Option
Agreement") between the Company and me, I hereby exercise the Option granted to
me with respect to _____ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED.................................. $_____________
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS
Number and denominations(s) of certificate(s) for shares being exercised:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Send new certificate(s) to:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Optionee:
- ------------------------------- ------------------------------
(print name) Signature
------------------------------
Date
<PAGE>
PHOTOELECTRON CORPORATION
STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Roger D. Wellington
============================
Optionee
5,000 $1.50
======================= =================
Number of Shares of Exercise Price
Common Stock Subject to Per Share
the Option
December 1, 1993
================
Grant Date
We are pleased to inform you that, pursuant to the Photoelectron
Corporation Stock Option Plan (the "Plan"), you have been granted the option to
acquire the number of shares of common stock, par value $.0l per share (the
"Common Stock"), of Photoelectron Corporation (the "Company") specified above,
subject to the provisions of the Plan and the terms, conditions and restrictions
hereinafter set forth (the "Option"), to be exercisable any time after the Grant
Date specified above (the "Grant Date") and prior to the Option Termination Date
(as defined herein). Attached is a copy of the Plan which is incorporated in
this Stock Option Agreement (the "Agreement") by reference and made a part
hereof. The Option granted hereunder is intended to be a non-statutory stock
option and not a "qualified", "incentive", or "employee stock purchase plan"
stock option as those terms are defined in Sections 422, 422A and 423,
respectively, of the Internal Revenue Code of 1986, as amended.
1. Termination of Option. The Option shall terminate on the date which
----------------------
is the earliest of (a) seven years after the Grant Date, (b) three months after
the date on which you cease to be a director or employee of the Company or a
subsidiary of the Company (the "Employment Termination Date"), or six months
after the Employment Termination Date if such cessation is a result of your
death, provided that immediately on the Employment Termination Date, the Option
shall terminate with respect to any Optioned Shares (as defined herein) that are
not Vested Shares (as defined herein) and as to which the Transfer Restrictions
(as defined
<PAGE>
2
herein) shall not have lapsed or (c) the date of the dissolution or liquidation
of the Company. The date on which the Option shall terminate in whole or in part
as provided in this Section 1 is hereinafter referred to as the "Option
Termination Date."
2. Exercise of Option. Subject to the terms of this Agreement, the
-------------------
Option shall be exercisable in installments during the period beginning on the
first anniversary of the Grant Date and ending on the Option Termination Date as
set forth in the following table:
<TABLE>
<CAPTION>
Period Percentage of Option Exercisable
- ------ --------------------------------
<S> <C>
From and after one year
from the Grant Date 20%
From and after two years
from the Grant Date 40%
From and after three years
from the Grant Date 60%
From and after four years
from the Grant Date 80%
From and after five years
from the Grant Date 100%
</TABLE>
Shares that have become exercisable in accordance with the foregoing table
are referred to herein as "Vested Shares".
No fractional shares shall be issued upon exercise of the Option; and all
fractional shares shall be rounded down to next lower whole number of shares.
3. Transfer Restrictions.
----------------------
Shares of Common Stock subject to the Option ("Optioned Shares") and
purchased upon exercise of the Option, and any additional shares of Common Stock
or other shares (or other property) received in any Non-Cash Distribution (as
defined herein) in respect of such Optioned Shares, may not, without the prior
written consent of the Company, be sold, assigned, transferred, pledged,
hypothecated or otherwise disposed of, except by will or by the applicable laws
of descent and distribution or pursuant to a qualified domestic relations order
(the "Transfer Restrictions"), unless and until the Transfer Restrictions with
respect to such Optioned Shares shall have lapsed as provided herein. The
Transfer Restrictions shall lapse in their entirety ninety days after the
initial public offering of the Common Stock by the Company is declared effective
by the Securities and Exchange Commission.
<PAGE>
3
4. No Assignment of Rights. Except for assignments or transfers by
-----------------------
will or the applicable laws of descent and distribution, your rights and
interests under this Agreement and the Plan may not be assigned or transferred
in whole or in part either directly or by operation of law or otherwise,
including without limitation by way of execution, levy, garnishment, attachment,
pledge or bankruptcy, and no such rights or interests shall be subject to any of
your obligations or liabilities.
5. Exercise of Option: Delivery and Deposit of Certificate(s). You
-----------------------------------------------------------
(or in the case of your death, your legal representative) may exercise the
Option in whole or in part by giving written notice to the Company on the form
attached hereto as Exhibit A (the "Exercise Notice") prior to the Option
Termination Date, accompanied by full payment for the Optioned Shares being
purchased (a) in cash or by certified or bank cashier's check payable to the
order of the Company, in an amount equal to the number of Optioned Shares being
purchased multiplied by the Exercise Price (the "Aggregate Exercise Price"), (b)
in shares of the Company's Common Stock (the "Tendered Shares") with a market
value equal to the Aggregate Exercise Price or (c) any combination of cash,
certified or bank cashier's check or Tendered Shares having a total value equal
to the Aggregate Exercise Price (such cash, check or Tendered Shares with such
value being referred to as the "Exercise Consideration"). However, Tendered
Shares may be surrendered as all or part of the Exercise Consideration only
if (l) the Common Stock is publicly traded over-the-counter or on a national
securities exchange, (2) you shall have acquired such Tendered Shares more than
six months prior to the date of exercise and, (3) if such Tendered Shares are
then subject to Transfer Restrictions, only with the prior written consent of
the Company as provided in Section 3(a) hereof. As a condition to such consent,
the Company may require that a number of Optioned Shares acquired by you upon
your exercise of the Option equal to the number of Tendered Shares surrendered
upon such exercise shall be subject to the Transfer Restrictions to the same
extent that such Tendered Shares surrendered upon such exercise were so subject
immediately prior to such surrender. Receipt by the Company of the Exercise
Notice and the Exercise Consideration shall constitute the exercise of the
Option or a part thereof. As soon as reasonably practicable thereafter, the
Company shall deliver or cause to be delivered to you a certificate or
certificates representing the number of Optioned Shares purchased, registered in
your name. If such certificate(s) represent(s) Optioned Shares with respect to
which the Transfer Restrictions shall not have lapsed, such certificate(s)
shall, immediately upon your receipt thereof, be deposited by you, together with
a stock power endorsed in blank, in escrow with the Company. In addition, any
certificate(s) representing shares of Common Stock, or other property other than
cash, distributed (including pursuant to any stock split) in respect of Optioned
Shares purchased by you (a "Non-Cash Distribution") with respect to which the
Transfer Restrictions shall not have lapsed shall, immediately upon your receipt
thereof, be deposited by you, together with a stock power endorsed in blank (if
applicable), in escrow with the Company, and shall be subject to the Transfer
Restrictions to the same extent as the Optioned Shares in respect of which such
Non-Cash Distribution was made. All such deposited certificate(s) may have set
forth thereon a legend or legends (in addition to the legend referred to in
Section 8 hereof) indicating that the shares of Common Stock (or other property)
represented by such certificate(s) are subject to the Transfer Restrictions as
provided herein. All shares of Common Stock delivered upon the exercise of the
Option as provided herein shall be fully paid and non-assessable.
<PAGE>
4
6. Rights With Respect to Optioned Shares. Prior to the date the
--------------------------------------
Option is exercised, you shall not be deemed for any purpose to be a stockholder
of the Company with respect to any of the Optioned Shares. Upon initial issuance
to you of a certificate or certificates representing Optioned Shares or shares
(or other property) received in any Non-Cash Distribution in respect of Optioned
Shares purchased by you, you shall have ownership of such shares (or other
property), including the right to vote and receive dividends, subject, however,
in the case of any such shares (or other property) with respect to which the
Transfer Restrictions shall not have lapsed, to the Transfer Restrictions, and
to the other restrictions and limitations imposed thereon pursuant to the Plan
and this Agreement and which may be now or hereafter imposed by the Certificate
of Incorporation or the By-Laws of the Company, as amended from time to time.
7 Release of Optioned Shares. As soon as reasonably practicable after
--------------------------
the lapse of the Transfer Restrictions with respect to any Optioned Shares
purchased by you upon exercise of the Option, the Company shall deliver to you,
or your legal representative in the case of your death, the certificate or
certificates representing such shares and any shares (or other property)
received in any Non-Cash Distribution in respect of such shares, previously
deposited in escrow with the Company pursuant to Section 5 hereof, without any
legend referring to the Transfer Restrictions.
8. Securities Laws. You hereby represent and warrant that you will not
---------------
transfer, sell or otherwise dispose of any Optioned Shares purchased by you
except in compliance with the Securities Act of 1933, as amended (the "Act"),
the rules and regulations thereunder and all applicable state securities laws
and the rules and regulations thereunder. You hereby acknowledge and agree that
any routine sales of the Optioned Shares purchased by you upon exercise of the
Option made in reliance upon Rule 144 under the Act may be made only in limited
amounts in accordance with the terms and conditions of that Rule. You also
acknowledge and agree that the certificate(s) representing Optioned Shares
delivered to you pursuant to Section 5 hereof may have set forth thereon a
legend indicating that such shares may be transferred, sold or otherwise
disposed of only after receipt by the Company of an opinion of counsel
reasonably satisfactory to it that the transfer, sale or other disposition will
not violate the Act or the regulations thereunder or any applicable state
securities laws or the regulations thereunder.
By accepting this Option, you represent and agree for yourself and your
transferees by will or the laws of descent and distribution that any shares
purchased upon any exercise of this Option shall be acquired for your personal
account and not with a view to or for sale in connection with any distribution.
No certificate or certificates for shares of stock purchased upon
exercise of this Option shall be issued and delivered prior to the admission of
such shares to listing on notice of issuance on any stock exchange on which
shares of that class are then listed, nor unless and until, in the opinion of
counsel for the Company, such securities may be issued and delivered without
causing the Company to be in violation of or incur any liability under any U.S.
federal, state, or other
<PAGE>
5
securities law, any requirement of any securities exchange listing agreement to
which the Company may be a party, or any other requirement of law or of any
regulatory body having jurisdiction over the Company.
9. Dilution and Other Adjustments. In the event of any stock dividend
-------------------------------
payable in Common Stock or any split-up or contraction in the number of shares
of Common Stock occurring after the date of this Agreement and prior to the
exercise in full of the Option, the number of shares for which the Option may
thereafter be exercised and the Exercise Price shall be proportionately
adjusted. In the case of any reclassification or change of outstanding shares of
the Common Stock or in case of any consolidation or merger of the Company with
or into another company or in case of any sale or conveyance to another company
or entity of the property of the Company as a whole or substantially as a whole,
you shall, upon exercise of the Option, be entitled to receive shares of stock
or other securities in its place equivalent in kind and value to those shares
which you would have received if you had exercised the Option in full
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance and had continued to hold the Optioned Shares (together with all
other shares, stock and securities thereafter issued in respect thereof) to the
time of the exercise of the Option; provided, that if any recapitalization is to
be effected through an increase in the par value of the Common Stock without an
increase in the number of authorized shares and such new par value will exceed
the Exercise Price hereunder, the Company shall notify you of such proposed
recapitalization, and you shall then have the right, exercisable at any time
prior to such recapitalization becoming effective, to purchase all of the
Optioned Shares not theretofore purchased by you (anything in Section 1 hereof
to the contrary notwithstanding), but if you fail to exercise such right before
such recapitalization becomes effective, the Exercise Price hereunder shall be
appropriately adjusted. Upon dissolution or liquidation of the Company, the
Option shall terminate, but you (if at the time you are a director or employee
of the Company or a subsidiary of the Company) shall have the right, immediately
prior to such dissolution or liquidation, to purchase all or any portion of the
Optioned Shares not theretofore purchased by you. No adjustment provided for in
this Section 9 shall apply to any Optioned Shares purchased prior to the
effective date of such adjustment. No fraction of a share or fractional shares
shall be purchasable or deliverable under this Agreement, but in the event any
adjustment hereunder of the number of Optioned Shares shall cause such number to
include a fraction of a share, such fraction shall be adjusted to the nearest
smaller whole number of shares.
10. Reservation of Shares. The Company shall at all times during the
----------------------
term of this Agreement reserve and keep available such number of shares of the
Common Stock as will be sufficient to satisfy the requirements of this Agreement
and shall pay all fees and expenses necessarily incurred by the Company in
connection with this Agreement and the issuance of Optioned Shares.
11. Determination of Rights. You hereby represent and warrant for
------------------------
yourself, your personal representatives and beneficiaries, that as a condition
of the granting of the Option, any dispute or disagreement which may arise under
or as a result of or pursuant to the Plan or this Agreement shall be determined
by the Company's Board of Directors, in its sole discretion, and that any
decision made by it in good faith shall be conclusive on all parties. The
interpretation
<PAGE>
6
and construction by the Company's Board of Directors of any provision of, and
the determination of any question arising under, this Agreement, the Plan, or
any rule or regulation adopted pursuant to the Plan, shall be final and
conclusive.
12. Limitation of Employment Rights. The Option confers upon you no
-------------------------------
right to continue in the employ or service of the Company and its subsidiaries
or interferes in any way with the right of the Company and its subsidiaries to
terminate your employment or services as a director at any time.
13. Taxes. If the Company, in its sole discretion, determines that
-----
the Company or any subsidiary of the Company or any other person has incurred or
will incur any liability to withhold any income or other taxes or governmental
charges by reason of the grant of the Option, or the issuance of Option Shares
to you upon the exercise thereof, you will, promptly upon demand therefor by the
Company or any such subsidiary of the Company, pay to the Company or such
subsidiary any amount requested by it for the purpose of satisfying such
liability. If the amount so requested is not paid promptly, the Company may
refuse to permit the issuance to you of Options Shares and may, without further
consent by you, cancel the Option Shares issued to you.
14. Communications. Any communication or notice required or permitted
--------------
to be given under this Agreement shall be in writing, and mailed by registered
or certified mail or delivered in hand, if to the Company to its Secretary at
580 Winter Street, Waltham, Massachusetts 02254, and if to the Optionee to the
address set forth below, or such other address, in each case, as the addressee
shall last have furnished to the communicating party.
15. Change of Control.
------------------
(a) Impact of Event. In the event of a "Change of Control" as
----------------
defined in Section 15(b), the following provision shall apply:
(i) The Transfer Restrictions applicable to the Vested Shares
shall lapse in their entirety.
(b) Definition of "Change of Control". "Change of Control" means
----------------------------------
any one of the following events: (i) when, without the prior approval of the
Prior Directors of the Company, any Person is or becomes the beneficial owner
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations thereunder), together with
all Affiliates and Associates (as such terms are used in Rule 12b-2 of the
General Rules and Regulations of the Exchange Act) of such Person, directly or
indirectly, of 50% or more of the outstanding Common Stock of the Company, (ii)
the sale or other transfer by Thermo Electron Corporation or Photoelectron
Investments Corporation of Liberia (the "Controlling Shareholders") of 50% or
more of their collective stockholdings in the Company to any Person, other than
any Person that is controlled by, controlling or under common control with
either of the Controlling Shareholders or to any person who is not, prior to
giving effect to such sale, a stockholder of the Company, or (iii) any other
event that the Prior Directors shall
<PAGE>
7
determine constitutes an effective change in the control of the Company. As used
in the preceding sentence, the following capitalized terms shall have the
respective meanings set forth below:
(1) "Person" shall include any natural person, any entity,
any "affiliate" of any such natural person or entity as such term is defined in
Rule 405 under the Securities Act of 1933 and any "group" (within the meaning of
such term in Rule 13d-5 under the Exchange Act);
(2) "Prior Directors" shall mean the persons sitting on the
Company's Board of Directors immediately prior to an Electoral Event (or, if
there has been no Electoral Event, those persons sitting on the Company's Board
of Directors on the date of this Agreement) and any future director of the
Company who has been nominated or elected by a majority of the Prior Directors
who are then members of the Board of Directors of the Company; and
(3) "Electoral Event" shall mean any contested election of
Directors, or any tender or exchange offer for the Company's Common Stock, not
approved by the Prior Directors, by any Person other than the Company or a
subsidiary of the Company.
Please confirm your acceptance of the Option, your receipt of a copy of
the Plan and your acceptance of and agreement to the terms of the Plan and this
Agreement, by executing the enclosed copy of this letter and returning such copy
promptly under confidential cover to the Clerk of the Company, 400-1 Totten Pond
Road, Waltham, Massachusetts 02154.
PHOTOELECTRON CORPORATION
By /s/ Peter E. Oettinger
-------------------------------------
Name: Peter E. Oettinger
Title: Chief Operating Officer
Accepted and agreed:
/s/ Roger D. Wellington
- ----------------------------------
Optionee
P.O. Box 7005 Cumberland, RI 02864
- ----------------------------------
Home Address
<PAGE>
8
Exhibit A
PHOTOELECTRON CORPORATION
STOCK OPTION
EXERCISE NOTICE
Pursuant to the Stock Option Agreement dated ____________ (the "Stock Option
Agreement") between the Company and me, I hereby exercise the Option granted to
me with respect to ____________ Option Shares.
Enclosed is the Exercise Consideration
covering the purchase price of the
shares being exercised
TOTAL AMOUNT ENCLOSED............................$_____________
(check payable to PHOTOELECTRON CORPORATION)
I represent and warrant that the shares covered by this exercise notice are
being acquired for my personal account and not with a view to or for sale in
connection with any distribution thereof.
CERTIFICATE DELIVERY INSTRUCTIONS
Number and denominations(s) of certificate(s) for shares being exercised:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
Send new certificate(s) to:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
Optionee:
- ---------------------------- ------------------------------
(print name) Signature
------------------------------
Date
<PAGE>
EXHIBIT 10.8
PHOTOELECTRON CORPORATION
DON NOBLE
-----------------------
Name of Purchaser
(please print)
SUBSCRIPTION AGREEMENT
----------------------
SERIES B CONVERTIBLE PREFERRED STOCK
Ladies and Gentlemen:
The undersigned (the "Purchaser") acknowledges that he or she has received and
reviewed the following documentation (collectively, the "Offering Documents") of
Photoelectron Corporation (the "Company"): 1) Confidential Private Placement
------------------------------
Memorandum dated April 4, 1994 ("Offering Memorandum"); 2) an Investor
- ----------- --------
Questionnaire. The questionnaire is annexed to this Subscription Agreement and
- -------------
is deemed to be incorporated herein. To subscribe for the securities offered
hereby, the Purchaser should complete, sign and return the below-listed
documents to Photoelectron Corporation, 400-1 Totten Pond Road, Waltham, MA
02154.
* Subscription Agreement
* Investor Questionnaire
* Check in full amount of purchase
1. Subscription: Subject to the terms and conditions hereof, the undersigned
-------------
hereby subscribes for $ 20,000.00 of the Company's Series B Convertible
------------
Preferred Stock (the "Series B Preferred"), as described in the Offering
Memorandum.
2. Acceptance of Subscription: The undersigned understands and agrees that
---------------------------
this subscription is made subject to the unconditional right of the Company
to reject any subscription, in whole or in part, for any reason whatsoever,
and that in such event, the Company will return to the undersigned the
amount so rejected. This subscription may be withdrawn by the undersigned
if it is not accepted by the Company on or before May 15, 1994.
3. Representations and Warranties of the Purchaser: The Purchaser hereby
------------------------------------------------
represents and warrants as follows:
3.1 Acknowledgments: The Purchaser acknowledges that: (a) the Series B
----------------
Preferred is being offered and sold under one or more of the
exemptions from registration provided for in Sections 3(b) and 4(2) of
the Securities Act of 1933, as amended (the "1933 Act"), including
Regulation D promulgated thereunder, and any applicable state
securities laws; (b) the Purchaser is purchasing the Series B
Preferred without being offered or furnished any offering literature
or prospectus other than the Offering Documents; (c) this transaction
has not been reviewed and approved by the United States Securities and
Exchange Commission or by any regulatory authority charged with the
administration of the securities laws of any state; (d) that all
documents, records and books pertaining to this investment have been
made available to the Purchaser and his or her representatives and
advisors, including his or her attorney, tax advisor, financial
advisor accountant and/or purchaser representative(s), if any; (e) the
Company has provided to the Purchaser, and his or her representatives
and advisors, if any, the opportunity to ask
<PAGE>
questions and receive answers concerning the terms and conditions of
this Offering and to obtain any additional information which the
Company possesses or could obtain without unreasonable effort or
expense that is necessary to verify the accuracy of the information
furnished to the Purchasers; and (f) that the books and records of the
Company will be available upon reasonable notice for inspection by the
Purchaser during reasonable business hours at the Company's principal
place of business set forth above.
3.2 Citizenship, Age and Residence: The Purchaser (i) is a citizen of
-------------------------------
United States, (ii) is at least 21 years of age, and (iii) is a bona
fide resident and domiciliary (not a temporary or transient resident)
of the state of Ohio (FILL IN STATE) and has no present intention of
------
becoming a resident of any other state or jurisdiction.
3.3 Investment Considerations: The Purchaser confirms that he or she
--------------------------
understands and has fully considered for purposes of this investment
the risks of this investment and understands that: (i) this investment
is suitable only for an investor who is able to bear the economic
consequences of losing his or her entire investment; (ii) the purchase
of the Series B Preferred is a speculative investment which involves a
high degree of risk of loss by the Purchaser, and the Purchaser has
carefully reviewed the Offering Documents and is aware of and has
considered all of the risk factors relating to an investment in the
Company, including those set forth under the caption "Investment
Considerations" in the Offering Memorandum; and (iii) there are
substantial restrictions on the transferability of, and there will be
no public market for the Series B Preferred or the shares of the
Company's voting common stock, $.01 par value, into which the Series B
Preferred is convertible ("Common Stock"), and, accordingly, it may
not be possible for the Purchaser to liquidate his or her investment
in the Series B Preferred or Common Stock in case of emergency.
3.4 Suitability: The Purchaser confirms that he or she is able (i) to
------------
bear the economic risk of this investment, (ii) to hold the Series B
Preferred or Common Stock for an indefinite period of time, and (iii)
presently to afford a complete loss of his or her investment; and
represents that he or she has sufficient liquid assets so that the
Illiquidity associated with this investment will not cause any undue
financial difficulties or affect the Purchaser's ability to provide
for his or her current needs and possible financial contingencies.
3.5 Knowledge and Experience: The Purchaser has such knowledge and
-------------------------
experience in financial and business matters that he or she is capable
of evaluating the merits and risks of an investment in the Series B
Preferred and of making an informed investment decision.
<PAGE>
3.6 Investment Intent: The Series B Preferred is being acquired by the
------------------
Purchaser solely for his or her own personal account, for investment
purposes only, and not with a view to, or in connection with, any
resale or distribution thereof. The Purchaser will not sell, transfer,
assign or otherwise dispose of the Series B Preferred or any Common
Stock acquired upon conversion thereof, and neither the Company nor
any transfer agent acting on its behalf shall be required to register
or otherwise recognize any transfer resulting from any such sale,
transfer, assignment or other disposition of any such Series B
Preferred or Common Stock, unless and until (i) the Series B Preferred
or Common Stock to be disposed of and the proposed disposition thereof
are made the subject of a currently-effective registration statement
under the Securities Act of 1933, as amended (the "1933 Act"), and
under any applicable state statutes, or (ii) the Company shall have
received an opinion of counsel, in form and substance satisfactory to
the Company, to the effect that the registration of the Series B
Preferred or the Common Stock is not required in connection with such
proposed disposition by virtue of an exemption from and registration
requirements contained in the 1933 Act, and the rules and regulations
promulgated thereunder, or in any applicable state statutes, rules and
regulations.
3.7 Restrictive Legend: The Purchaser hereby consents to the placement
-------------------
of a legend substantially similar to the following on each certificate
or other document evidencing the shares of Series B Preferred or other
securities issued to Purchaser upon conversion of the Series B
Preferred as provided in the Offering Memorandum and this Agreement,
and agrees to abide by the restrictions obtained therein and herein:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"), AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED UNLESS SUCH SHARES ARE REGISTERED UNDER THE
1933 ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS
OBTAINED TO THE EFFECT THAT SUCH SALE, TRANSFER OR ASSIGNMENT IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND ANY
APPLICABLE STATE SECURITIES LAWS."
3.8 Investment Commitment Not Disproportionate to Net Worth: The
--------------------------------------------------------
Purchaser's overall commitment to investments which are not readily
marketable is not disproportionate to the Purchaser's net worth, and
the Purchaser's investment in the Company will not cause such overall
commitment to become disproportionate to the Purchaser's net worth.
The foregoing representations and warranties are made by the Purchaser
with the intent that they may be relied upon in determining his or her
suitability as an investor in the Company, and the Purchaser hereby
agrees that such representations and warranties shall survive the sale
by the Company to the Purchaser of the Series B Preferred. By
initialing below, the Purchaser represents that he or she has read and
hereby acknowledges each of the representations contained herein.
/s/ DEN
----------
Initials
<PAGE>
If more than one person is signing this Agreement, each representation
and warranty and undertaking made herein shall be a joint and several
representation, warranty or undertaking of each person signing. If the
Purchaser is a partnership, corporation, trust or other entity, (i)
the Purchaser has enclosed with this Agreement appropriate evidence of
the authority of the individual executing this Agreement to act on its
behalf (e.g., if a trust, a copy of the trust agreement; if a
corporation, a certified corporate resolution authorizing the
signature and a copy of the corporation's charter documents, or if a
partnership, a copy of the partnership agreement), (ii) the Purchaser
represents and warrants that it was not organized or reorganized for
the specific purpose of acquiring the Series B Preferred and, upon
request, will provide documentation supporting this representation to
the Company, and (iii) the Purchaser has the full power and
authorization from the beneficiaries, partners or directors, whichever
is applicable, of such entity to execute this Agreement on behalf of
the entity and to make the representations and warranties made herein
on their behalf and that investment in the Company has been
affirmatively authorized by the governing board of such entity and is
not prohibited by the governing documents of the entity.
----------------------
Initials (if more than one person is signing
or if signature is on behalf of an above
entity)
4. Representation and Warranties of the Company
--------------------------------------------
4.1 Organization and Qualification: The Company is a corporation duly
-------------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and has all requisite corporate power
and authority to own its property, to carry on its business as now
conducted and as proposed to be conducted, and to carry out the
transactions contemplated hereby.
4.2 Capitalization: The Company presently has authorized 15,000,000 shares
---------------
of Common Stock $.0l par value, and 5,000,000 shares of "blank check"
Preferred Stock, $.01 par value. Of these, 1,936,667 shares of Common
Stock and 2,564,010 shares of Series A Convertible Preferred Stock
have been duly authorized and validly issued and are fully-
paid and non-assessable. The Company has authorized the issuance of
up to 1,250,000 shares of Series B Preferred. At present, no shares of
Preferred Stock are issued or outstanding.
4.3 Authorization of Transaction: The execution, delivery and performance
-----------------------------
of this Agreement and the Series B Preferred have been duly authorized
by all necessary corporate or other action of the Company, and this
Agreement, when executed and delivered, shall constitute valid and
legally binding obligations of the Company.
<PAGE>
4.4 Compliance with Other Instruments: The Company is not in default in
---------------------------------
the performance of any material obligation, agreement or condition
contained in any evidence of indebtedness of the Company which default
affords to any person the unconditional right to accelerate any
material indebtedness or terminate any material right or agreement of
the Company. Neither the execution and delivery of this Agreement,
nor the fulfillment of the terms herein set forth and the consummation
of transactions contemplated hereby, will (i) conflict with or
constitute a breach of, default under or a violation of the Articles
of Organization and by-laws of the Company or any agreement,
indenture, mortgage, deed of trust or other material instrument or
undertaking by which the Company is bound or to which it or any of its
properties are subject, or (ii) result in a violation of any court
decree binding upon the Company or any applicable laws or
regulations, or (iii) result in the creation or imposition of any
material lien, charge or encumbrance upon any property or assets of
the Company.
4.5 Litigation: There is no action, suit, proceeding or investigation
----------
pending, or, to the best of the Company's knowledge, any basis
therefor or threat thereof, against the Company or any of the officers
or directors of the Company, which questions the validity of this
Agreement or the right of the Company to enter into it, or which
might result, either individually or in the aggregate, in any
material adverse change in the assets, condition (financial or
otherwise), business or prospects of the Company.
5. Transferability. The Purchaser agrees not to transfer or assign this
---------------
Agreement, or any of his interest herein, and further agrees that the
assignment and transfer of the Series B Preferred acquired pursuant hereto
or the Common Stock into which it is convertible shall be made only in
accordance with all applicable laws.
6. Revocation: The Purchaser agrees that he may not cancel, terminate or
----------
revoke this Agreement or any agreement of the Purchaser made hereunder and
that his Agreement shall survives death or disability and shall be binding
upon the Purchaser's heirs, executors, administrators, successors and
assigns.
7. Miscellaneous:
-------------
7.1 Notices: All notices or other communications given or made hereunder
-------
shall be in writing and shall be delivered or mailed by first class
mail, postage prepaid, to the undersigned at the address set forth
below or to the Company at the address set forth above.
7.2 Governing Law: This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts.
7.3 Entire Agreement: This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter hereof and may
be amended or superseded only be a writing executed by the parties.
<PAGE>
8. Continuing Effecting of Representations, Warranties and Acknowledgments:
-----------------------------------------------------------------------
The representations and warranties contained in Section 3 hereof are true
and accurate as of the date of this Subscription Agreement, shall be true
and accurate as of the date of delivery to and acceptance by the Company of
the Purchaser's subscription for the purchase of Series B Preferred, and
shall survive such delivery and acceptance. If in any respect such
representations, warranties and acknowledgments shall not be true and
accurate prior to such delivery and acceptance, the Purchaser shall give
immediate written notice of such fact to the Company specifying which
representations and warranties and acknowledgments are not true and
accurate and the reasons therefore.
9. Indemnification: The Purchaser acknowledges that he or she understands the
---------------
meaning and legal consequences of the representations and warranties
contained in Section 3, and he or she hereby agrees to indemnify and hold
harmless the Company, its officers or any of its affiliates, associates,
agents or employees from and against any and all loss, damage or liability
(including costs and reasonable attorney's fees) due to or arising out
of a breach of any representation, warranty or acknowledgment of the
Purchaser contained in this Agreement or in the Investor Questionnaire
which is incorporated herein for all purposes.
IN WITNESS WHEREOF, the undersigned has hereby executed this Agreement
this 14th day of JULY , 1994.
---- -------
/s/ Donald E. Noble c/o Rubbermaid Inc.
------------------------ 1147 Akron Rd.
Signature of subscriber -------------------------
Street Address
(please print or type)
/s/ Donald E. Noble Wooster
----------------------- ------------------------
Name of Subscriber City or Town
(please print or type)
Ohio 44691
------------------------
State Zip Code
216-264-6464 Ext 2346
------------------------
Telephone Number
<PAGE>
CONFIDENTIAL OFFERING MEMORANDUM
PRIVATE PLACEMENT
OF UP TO 1,000,000 SHARES
OF SERIES B CONVERTIBLE PREFERRED STOCK
of
PHOTOELECTRON CORPORATION
April 5, 1994
MEMORANDUM NUMBER: 1
--------------------------
ISSUED TO: Commonwealth of Massachusetts
---------------------------------
<PAGE>
TERMS OF PROPOSED OFFERING
SERIES B CONVERTIBLE PREFERRED STOCK
FINANCIAL TERMS
Type of Securities............... Series B Convertible Preferred Stock,
$.01 par value
Number of Shares Offered......... up to 1,000,000
Price........................... $ 4.00 per share
Total Proceeds.................. maximum of $4,000,000 before offering
costs
Dividends....................... The Company does not intend to pay
dividends at this time.
Conversion Rights............... Convertible at the option of the holder
into one share of Common Stock for each
share of Series B Convertible Preferred
Stock. The conversion rate is subject to
adjustment if after the original
issuance date of the Series B
Convertible Preferred Stock, (a) any
shares of Common Stock are sold at a
price less than the conversion price in
effect (which such conversion price
shall initially be $4.00) immediately
prior to the sale of such Common Stock
or (b) the Company issues or sells any
options for the purchase of Common Stock
or any securities convertible into or
exchangeable for Common Stock at a price
less than the conversion price in effect
immediately prior to the time of such
issuance or sale or (c) the Company
engages in a stock split, recombination,
reorganization, or reclassification of
its capital stock. Mandatory conversion
in the event of an initial public
offering at a price of at least $5.00
per share of Common Stock and gross
proceeds to the Company of at least
$5,000,000.
Liquidation Value............... $4.00 per share of Series B
Convertible Preferred Stock.
1
<PAGE>
Preference Priority............. Prior to Common Stock but subordinated
to the Series A Convertible Preferred
Stock.
Use of Proceeds................. Funding of clinical trials, continuation
of Company's research and development
program and general working capital.
Voting Rights................... Except as provided by law, the shares of
Series B Convertible Preferred Stock
shall vote together with all other
classes and series of stock of the
Company as a single class on all actions
to be presented to the stockholders of
the Company. Each share of Series B
Convertible Preferred Stock shall
entitle to the holder to such number of
votes per share on each such action
equal to the number of shares of Common
Stock into which each share of Series B
Convertible Preferred Stock is
convertible, except as otherwise
required by law.
Participation Rights............ Non-transferable right to participate,
pro rata, in one additional round of
private placement of the Company's
securities at a 10% discount offering
price. This right can only be exercised
within 15 days of the purchaser's
notification by the Company of the
commencement of any such offering.
Company and Series A Preferred
Stockholder Rights of First
Refusal......................... First the Company, and then the Series A
Preferred Stockholders, will have the
right to purchase from the Series B
Preferred Stockholders any shares which
such Series B Preferred Stockholders
propose to sell to any third party, at
the purchase price proposed to be paid
by such third party.
2
<PAGE>
Plan of Distribution............ The Series B Convertible Preferred Stock
is being offered by the Company to a
limited number of accredited investors
through the Company's officers who will
receive no commission, renumeration or
other compensation for such services.
The Company reserves the right to retain
one or more placement agents in
connection with this offering. Such
placement agents would be compensated
for the successful placement of the
Series B Convertible Preferred Stock.
Registration Rights............. Unlimited "piggy-back" rights on any
Company public offering, expected to
result in proceeds of at least
$3,000,000 subject to pro rata cutbacks
at the underwriters' discretion.
Mandatory lock-up of 180 days following
an initial public offering, unless the
underwriters agree to a shorter period.
The Company will be responsible for all
of the selling stockholders' expenses,
other than underwriters' commissions and
discounts and the fees of legal counsel
for the selling stockholders, in
connection with the exercise of
registration rights.
Purchaser Requirements.......... Each purchaser must be an "Accredited
Investor" as defined in Rule 501
under the Securities Act of 1933.
Purchase Agreement.............. The purchase of shares of Series B
Convertible Preferred Stock by investors
shall be made pursuant to a subscription
agreement containing, among other
things, customary representations and
warranties of the Company and the
investors, appropriate conditions of
closing, and customary information
rights.
Completion...................... The Company expects to complete this
offering on or before May 15, 1994.
3
<PAGE>
Common Stock (or equivalent) 11,155,706 (if and when all options,
Outstanding After the Offering.. warrants, preferred stock and other
convertible securities are converted
into Common Stock).
The Company and the investors will
Expenses........................ each bear their own legal and other
expenses in connection with this
transaction.
4
<PAGE>
EXHIBIT 10.9
PHOTOELECTRON CORPORATION
SUBSCRIPTION AGREEMENT
----------------------
TO: Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
Ladies and Gentlemen:
You have advised the undersigned (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, $.01 par value (the "Series C Preferred Stock"),
at a price of $4.50 per share ($4.05 per share to qualified Series B Preferred
shareholders), 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
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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 delivery of a bank, certified or
cashiers check payable to the Company, or by wire transfer to such account as
may be designated by the Company, together with executed copies of this
Subscription Agreement and the Investor Questionnaire. The Company shall hold
the same for the benefit of the Investor until the acceptance thereof by the
Company. In the event that the Company's offering is withdrawn pursuant to
Section 3 hereof, the Funds, together with any interest accrued thereon, shall
be returned to the Investor. In the event that this Subscription is accepted,
the Funds, including all interest accrued thereon, shall be turned over to the
Company and the Shares subscribed for will be issued to the Investor.
c. The Company may accept subscriptions for less than all of the Series C
Preferred Stock offered pursuant to the Memorandum.
<PAGE>
2. Acceptance of Agreement
-----------------------
It is understood and agreed that this Subscription is made subject to the
following terms and conditions:
a. The Company shall have the right to accept or reject this Subscription,
in whole or in part, for any reason, including the inability of a subscriber to
meet the standards for the private offering of securities exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the ineligibility of a subscriber under applicable state or
foreign securities laws, for any other reason or for no reason. If this
Subscription is rejected, the Funds previously delivered to the Company will be
returned to the Investor together with interest accrued thereon.
b. Two complete copies of this Agreement will be executed by the Investor.
If this Subscription is accepted, one copy of this Subscription Agreement as
accepted by the Company shall be delivered to the Investor.
c. If this Subscription is accepted in part and rejected in part, the
Investor will be so notified, at which time the excess Funds previously
delivered to the Company will be returned to the Investor with interest accrued
thereon.
3. Amendment or Withdrawal of Offering
-----------------------------------
The Company reserves the right, in its sole and absolute discretion, to
amend or withdraw this offering at any time for any reason or for no reason. If
the offering is withdrawn, the Investor will receive a full refund of the Funds
previously delivered by it to the Company, together with interest thereon, and
the Company will have no further liability to the Investor.
4. Representations and Warranties of the Investor
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a. For offers to, or purchases by, an Investor within the United States
of America:
The Investor hereby represents and warrants to the Company that the
Investor is a person or entity which falls within one of the categories of
accredited investors set forth in Rule 501(a) of Regulation D ("Regulation D")
under the Securities Act, including without limitation either: (A) a natural
person whose net worth, or joint net worth with the Investor's spouse, exceeds
$1,000,000; (B) a natural person who had income in excess of $200,000, or joint
income with the Investor's spouse in excess of $300,000, in each of the two most
recent years and reasonably expects to have income at that level in the current
year; or (C) any other person or entity meeting the standards set forth in
Regulation D and as summarized under "Suitability Standards" in the Memorandum.
b. For offers to, or purchases by, an Investor outside of the United
States of America:
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<PAGE>
The Investor hereby represents and warrants to the Company that it is
not a U.S. Person (as defined in Rule 230.903 of Regulation S of the Securities
Act ("Regulation S")), 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.
c. The Investor hereby represents and warrants that it was not formed for
the specific purpose of investing in the Company.
d. 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."
e. The Investor is a sophisticated investor and has such knowledge and
experience in financial and business matters that the Investor is capable of
evaluating the information set forth in the Memorandum and the merits and risks
of the investment in the Shares.
f. 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.
g. The address set forth at the end of this Agreement is the Investor's
true and correct residence or principal place of business, and the Investor has
no present intention of changing such residence or principal place of business
to any other state or jurisdiction.
h. 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.
i. 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
3
<PAGE>
representations, warranties and agreements set forth herein. The Investor is
fully aware that it 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 144 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.
j. The Investor understands that the certificate(s) representing the
Shares will bear the following legend restricting its 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 are also subject to the
provisions of a certain Subscription Agreement dated ___________ and
may not be transferred except in accordance with the provisions of
that agreement."
Further, if the Investor is not a U.S. person (as defined in the Act),
the certificate representing the Shares will bear the following additional
legend restricting its transfer and the Investor understands that a notation
restricting such transfer will be made on the stock transfer books of the
Company:
"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.
k. 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.
4
<PAGE>
l. 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;
(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.
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 such
representations and warranties shall not be true and accurate prior to
acceptance of this Agreement pursuant to Section 2 hereof, the Investor shall
give written notice of such fact to the Company, specifying which
representations and warranties are not true and accurate and the reasons
therefor.
5. Indemnification The Investor acknowledges that it understands the
---------------
meaning and legal consequences of the representations and warranties contained
in Section 4 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, "trans-
5
<PAGE>
fer" 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) the Investor's bona fide intention to sell or transfer all
---------
or part of the Shares, (B) the number of Shares to be sold or transferred, (C)
the price for which the Investor proposes to sell or transfer the Shares, and
(D) the name of the proposed purchaser or transferee.
(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.
The provisions of this Section 6 shall not apply to a transfer of any
Shares, either during the Investor's lifetime or on death, by will or intestacy
to the Investor's ancestors, descendants or spouse, or any custodian or trustee
for the account of the Investor or the Investor's ancestors, descendants or
spouse, provided, in each such case, a transferee 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 transferee shall
receive the Shares and no Shares will be transferred of record to any such
transferee until such transferee becomes a party to this Agreement, and such
transferee shall be bound by this Agreement to the same extent that the original
Investor was so bound.
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.
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<PAGE>
The provisions of this Section 6 shall terminate upon the effective date of
an initial public offering of shares of the Common Stock, $.0l 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 this offering is withdrawn pursuant to
------------------------
Section 3 hereof, or if any representation or warranty of the Investor contained
in Section 4 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 Investor to the Company, then and in any such event this Agreement shall be
null and void and of no further force and effect, and no party shall have any
rights against any other party thereunder, 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).
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<PAGE>
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.
INVESTOR
By:
-------------------------------------
Title (if applicable):
------------------
Date:
-------------------
Name:
-------------------
Address:
-------------------
-------------------
-------------------
Aggregate Number of Shares:
-------------------
Total Amount Enclosed: $
-------------------
Accepted and Agreed to:
Photoelectron Corporation
By:
---------------------
Title:
Date:
-------------------
8
<PAGE>
EXHIBIT 10.10
THERMO ELECTRON CORPORATION
Name of Purchaser
(please print)
SUBSCRIPTION AGREEMENT
----------------------
(Institutional)
SERIES B CONVERTIBLE PREFERRED STOCK
Ladies and Gentlemen:
The undersigned (the "Purchaser") acknowledges that it has received and reviewed
the following documentation (collectively, the "Offering Documents") of
Photoelectron Corporation (the "Company"): 1) Confidential Private Placement
------------------------------
Memorandum dated April 4, 1994 ("Offering Memorandum"); 2) an Investor
- ---------- --------
Questionnaire. The questionnaire is annexed to this Subscription Agreement and
- -------------
is deemed to be incorporated herein. To subscribe for the securities offered
hereby, the Purchaser should complete, sign and return the below-listed
documents to Photoelectron Corporation, 400-1 Totten Pond Road, Waltham, MA
02154.
* Subscription Agreement
* Investor Questionnaire
* Check in full amount of purchase
1. Subscription: Subject to the terms and conditions hereof, the undersigned
------------
hereby subscribes for $350,000 of the Company's Series B Convertible
-------
Preferred Stock (the "Series B Preferred"), as described in the Offering
Memorandum.
2. Acceptance of Subscription: The undersigned understands and agrees that
--------------------------
this subscription is made subject to the unconditional right of the Company
to reject any subscription, in whole or in part, for any reason whatsoever,
and that in such event, the Company will return to the undersigned the
amount so rejected.
3. Representations and Warranties of the Purchaser: The Purchaser hereby
-----------------------------------------------
represents and warrants as follows:
3.1 Acknowledgments: The Purchaser acknowledges that: (a) the Series B
---------------
Preferred is being offered and sold under one or more of the exemptions
from registration provided for in Sections 3(b) and 4(2) of the Securities
Act of 1933, as amended (the "1933 Act"), including Regulation D
promulgated thereunder, and any applicable state securities laws; (b) the
Purchaser is purchasing the Series B Preferred without being offered or
furnished any offering literature or prospectus other than the Offering
Documents; (c) this transaction has not been reviewed and approved by the
United States Securities and Exchange Commission or by any regulatory
authority charged with the administration of the securities laws of any
state; (d) that all documents, records and books pertaining to this
investment have been made available to the Purchaser and its
representatives and advisors, including its attorney, tax advisor,
financial advisor accountant and/or purchaser representative(s), if any;
(e) the Company has provided to the Purchaser, and its representatives and
advisors, if any, the opportunity to ask questions and receive answers
concerning the terms and conditions of this Offering and to obtain any
additional information which the Company possesses or could obtain without
unreasonable effort or expense that is necessary to verify the accuracy of
the information furnished to the Purchasers; and (f) that the books and
<PAGE>
records of the Company will be available upon reasonable notice for
inspection by the Purchaser during reasonable business hours at the
Company's principal place of business set forth above.
3.2 Purchaser: The Purchaser is an entity which falls within one of the
---------
following categories of institutional accredited investors set forth in
Rule 501(a) of Regulation D ("Regulation D") under the 1933 Act (sign on
blank line following category of institutional accredited investor which
describes the Purchaser):
A. A bank as defined in Section 3(a)(2) of the 1933 Act, or any savings
and loan association or other institution as defined in Section
3(a)(5)(A) of the 1933 Act whether acting in its individual or
fiduciary capacity.
--------
Initials
B. A broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934.
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Initials
C. An insurance company as defined in Section 2(13) of the 1933 Act.
--------
Initials
D. An investment company registered under the Investment Company Act of
1940 (the "1940 Act") or a business development company as defined in
Section 2(a)(48) of the "1940 Act"
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Initials
E. A Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small
business Investment Act of 1958.
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Initials
F. Any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees.
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Initials
G. An employee benefit plan within the meaning of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a
plan fiduciary as defined in Section 3(21) of such act, which is
either a bank, savings and loan association, insurance company or
registered investment advisor or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed
<PAGE>
plan, with investment decisions made solely by persons that are
accredited investors.
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Initials
H. A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.
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Initials
I. An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000.
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Initials
J. A trust, with total assets in excess of $5,000,000 not formed for the
specific purpose of acquiring the securities offered, whose purchase
is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D.
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Initials
K. An entity in which all of the equity holders are accredited investors
as defined in Rule 501(a) under the Securities Act of
1933.
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Initials
3.3 Investment Considerations: The Purchaser confirms that it understands and
-------------------------
has fully considered for purposes of this investment the risks of this
investment and understands that: (i) this investment is suitable only for
an investor who is able to bear the economic consequences of losing its
entire investment; (ii) the purchase of the Series B Preferred is a
speculative investment which involves a high degree of risk of loss by the
Purchaser, and the Purchaser has carefully reviewed the Offering Documents
and is aware of and has considered all of the risk factors relating to an
investment in the Company, including those set forth under the caption
"Investment Considerations" in the Offering Memorandum; and (iii) there are
substantial restrictions on the transferability of, and there will be no
public market for the Series B Preferred or the shares of the Company's
voting common stock, $.01 par value, into which the Series B Preferred is
convertible ("Common Stock"), and, accordingly, it may not be possible for
the Purchaser to liquidate its investment in the Series B Preferred or
Common Stock in case of emergency.
3.4 Suitability. The Purchaser confirms that it is able (i) to bear the
-----------
economic risk of this investment, (ii) to hold the Series B Preferred or
Common Stock for an indefinite period of time, and (iii) presently to
afford a complete loss of its investment; and represents that it has
<PAGE>
sufficient liquid assets so that the Illiquidity associated with this
investment will not cause any undue financial difficulties or affect the
Purchaser's ability to provide for its current needs and possible
financial contingencies.
3.5 Knowledge and Experience. The individual making an investment decision on
------------------------
behalf of the Purchaser has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
an investment in the Series B Preferred and of making an informed
investment decision.
3.6 Investment Intent: The Series B Preferred is being acquired by the
-----------------
Purchaser solely for its own personal account, for investment purposes
only, and not with a view to, or in connection with, any resale or
distribution thereof. The Purchaser will not sell, transfer, assign or
otherwise dispose of the Series B Preferred or any Common Stock acquired
upon conversion thereof, and neither the Company nor any transfer agent
acting on its behalf shall be required to register or otherwise recognize
any transfer resulting from any such sale, transfer, assignment or other
disposition of any such Series B Preferred or Common Stock, unless and
until (i) the Series B Preferred or Common Stock to be disposed of and the
proposed disposition thereof are made the subject of a currently-effective
registration statement under the Securities Act of 1933, as amended (the
"1933 Act"), and under any applicable state statutes, or (ii) the Company
shall have received an opinion of counsel, in form and substance
satisfactory to the Company, to the effect that the registration of the
Series B Preferred or the Common Stock is not required in connection with
such proposed disposition by virtue of an exemption from and registration
requirements contained in the 1933 Act, and the rules and regulations
promulgated thereunder, or in any applicable state statutes, rules and
regulations.
3.7 Restrictive Legend: The Purchaser hereby consents to the placement of a
------------------
legend substantially similar to the following on each certificate or other
document evidencing the shares of Series B Preferred or other securities
issued to Purchaser upon conversion of the Series B Preferred as provided
in the Offering Memorandum and this Agreement, and agrees to abide by the
restrictions obtained therein and herein:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED UNLESS SUCH SHARES ARE REGISTERED UNDER THE 1933
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY IS OBTAINED TO
THE EFFECT THAT SUCH SALE, TRANSFER OR ASSIGNMENT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND ANY APPLICABLE STATE
SECURITIES LAWS
3.8 Investment Commitment Not Disproportionate to Net Worth: The Purchaser's
-------------------------------------------------------
overall commitment to investments which are not readily marketable is not
disproportionate to the Purchaser's net worth, and the Purchaser's
investment in the Company will not cause such overall commitment to become
disproportionate to the Purchaser's net worth. The foregoing
representations and warranties are made by the Purchaser with the intent
that they may be relied upon in determining its suitability as an investor
in the Company, and the Purchaser hereby agrees that such representations
and warranties shall survive the sale by the Company to the Purchaser of
<PAGE>
the Series B Preferred. By initialing below, the Purchaser represents that
it has read and hereby acknowledges each of the representations contained
herein.
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Initials
If more than one person is signing this Agreement, each representation and
warranty and undertaking made herein shall be a joint and several
representation, warranty or undertaking of each person signing. If the
Purchaser is a partnership, corporation, trust or other entity, (i) the
Purchaser has enclosed with this Agreement appropriate evidence of the
authority of the individual executing this Agreement to act on its behalf
(e.g., if a trust, a copy of the trust agreement; if a corporation, a
certified corporate resolution authorizing the signature and a copy of the
corporation's charter documents, or if a partnership, a copy of the
partnership agreement), (ii) the Purchaser represents and warrants that it
was not organized or reorganized for the specific purpose of acquiring the
Series B Preferred and, upon request, will provide documentation
supporting this representation to the Company, and (iii) the Purchaser has
the full power and authorization from the beneficiaries, partners or
directors, whichever is applicable, of such entity to execute this
Agreement on behalf of the entity and to make the representations and
warranties made herein on their behalf and that investment in the Company
has been affirmatively authorized by the governing board of such entity and
is not prohibited by the governing documents of the entity.
---------------------
Initials (if more than one person is
signing or if signature is on behalf of an
above entity)
4. Representation and Warranties of the Company
--------------------------------------------
4.1 Organization and Qualification: The Company is a corporation duly
-------------------------------
organized, validly existing and in good standing under the laws of
the Commonwealth of Massachusetts and has all requisite corporate
power and authority to own its property, to carry on its business as
now conducted and as proposed to be conducted, and to carry out the
transactions contemplated hereby.
4.2 Capitalization: The Company presently has authorized 15,000,000 shares
---------------
of Common Stock $.01 par value, and 5,000,000 shares of "blank check"
Preferred Stock, $.0l par value. Of these, 1,936,667 shares of Common
Stock and 2,564,010 shares of Series A Convertible Preferred Stock
have been duly authorized and validly issued and are fully-paid and
non-assessable. The Company has authorized the issuance of up to
1,250,000 shares of Series B Preferred. At present, no shares of
Preferred Stock are issued or outstanding.
4.3 Authorization of Transaction: The execution, delivery and performance
----------------------------
of this Agreement and the Series B Preferred have been duly authorized
by all necessary corporate or other action of the Company, and this
Agreement, when executed and delivered, shall constitute valid and
legally binding obligations of the Company.
<PAGE>
4.4 Compliance with Other Instruments: The Company is not in default in
---------------------------------
the performance of any material obligation, agreement or condition
contained in any evidence of indebtedness of the Company which default
affords to any person the unconditional right to accelerate any
material indebtedness or terminate any material right or agreement of
the Company. Neither the execution and delivery of this Agreement, nor
the fulfillment of the terms herein set forth and the consummation of
transactions contemplated hereby, will (i) conflict with or constitute
a breach of, default under or a violation of the Articles of
Organization and by-laws of the Company or any agreement, indenture,
mortgage, deed of trust or other material instrument or undertaking by
which the Company is bound or to which it or any of its properties are
subject, or (ii) result in a violation of any court decree binding
upon the Company or any applicable laws or regulations, or (iii)
result in the creation or imposition of any material lien, charge or
encumbrance upon any property or assets of the Company.
4.5 Litigation: There is no action, suit, proceeding or investigation
----------
pending, or, to the best of the Company's knowledge, any basis
therefor or threat thereof, against the Company or any of the officers
or directors of the Company, which questions the validity of this
Agreement or the right of the Company to enter into it, or which might
result, either individually or in the aggregate, in any material
adverse change in the assets, condition (financial or otherwise),
business or prospects of the Company.
5. Transferability. The Purchaser agrees not to transfer or assign this
---------------
Agreement, or any of his interest herein, and further agrees that the
assignment and transfer of the Series B Preferred acquired pursuant hereto
or the Common Stock into which it is convertible shall be made only in
accordance with all applicable laws.
6. Revocation: The Purchaser agrees that he may not cancel, terminate or
----------
revoke this Agreement or any agreement of the Purchaser made hereunder and
that his Agreement shall survive death or disability and shall be binding
upon the Purchaser's heirs, executors, administrators, successors and
assigns.
7. Miscellaneous:
--------------
7.1 Notices: All notices or other communications given or made hereunder
-------
shall be in writing and shall be delivered or mailed by first class
mail, postage prepaid, to the undersigned at the address set forth
below or to the Company at the address set forth above.
7.2 Governing Law: This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts.
7.3 Entire Agreement: This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter hereof and may
be amended or superseded only be a writing executed by the parties.
8. Continuing Effecting of Representations, Warranties and Acknowledgments:
-----------------------------------------------------------------------
The representations and warranties contained in Section 3 hereof are true
and accurate as of the date of this Subscription Agreement, shall be true
and accurate as of the date of delivery to and acceptance by the Company of
the Purchaser's subscription for the purchase of Series B Preferred, and
shall survive such delivery and acceptance. If in any respect such
representations, warranties and acknowledgments shall not be true and
accurate prior to such
<PAGE>
delivery and acceptance, the Purchaser shall give immediate written notice
of such fact to the Company specifying which representations and warranties
and acknowledgments are not true and accurate and the reasons therefore.
9. Indemnification: The Purchaser acknowledges that it understands the
---------------
meaning and legal consequences of the representations and warranties
contained in Section 3, and it hereby agrees to indemnify and hold harmless
the Company, its officers or any of its affiliates, associates, agents or
employees from and against any and all loss, damage or liability (including
costs and reasonable attorney's fees) due to or arising out of a breach
of any representation, warranty or acknowledgment of the Purchaser
contained in this Agreement or in the Investor Questionnaire which is
incorporated herein for all purposes.
IN WITNESS WHEREOF, the undersigned has hereby executed this Agreement
this _________________ day of ___________________, 1994.
/s/ [SIGNATURE APPEARS HERE] 81 Wyman St.
- --------------------------------- ---------------------------
Signature of Subscriber Street Address
Secretary, Thermo Electron (please print or type)
Thermo Electron Corporation Waltham
- --------------------------------- ---------------------------
Name of Subscriber City or Town
(please print or type)
MA 02254-9046
---------------------------
State Zip Code
617-622-1000
---------------------------
Telephone Number
<PAGE>
EXHIBIT 10.11
PHOTOELECTRON CORPORATION
SUBSCRIPTION AGREEMENT
----------------------
TO: Photoelectron Corporation
400-1 Totten Pond Road
Waltham, Massachusetts 02154
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.
<PAGE>
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
<PAGE>
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
<PAGE>
(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) Arthur Andersen 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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
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: 26-5,3 Chome, Hongo
Bunkyo-ku Tokyo, 1 1 3 Japan
Aggregate Number of Shares: 444,000
-------
Total Amount Enclosed: $l,998,000
----------
8
<PAGE>
Accepted and Agreed to:
PHOTOELECTRON CORPORATION
By: /s/ Peter M. Nomikos
------------------------------
Title: President & CEO
---------------------------
Date: Dec. 26, 1995
----------------------------
9
<PAGE>
EXHIBIT 10.12
PHOTOELECTRON CORPORATION
REGISTRATION RIGHTS AGREEMENT
-----------------------------
To the undersigned purchaser of Series C Convertible Preferred Stock, $.01
par value (the "Series C Preferred Stock"), of Photoelectron Corporation, a
Massachusetts corporation (the "Company").
Dear Sir or Madam:
This will confirm that in consideration of your agreement to purchase
11,111 shares (the "Preferred Shares") of the Series C Preferred Stock pursuant
- ------
to the Subscription Agreement dated March ___, 1996 between you and the Company
(the "Subscription Agreement"), and as an inducement to you to enter into the
Subscription Agreement, the Company covenants and agrees with you as follows:
1. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or any
----------
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.01 par value per share,
------------
of the Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
-----------------
conversion of the Preferred Shares.
" Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Registration Expenses" shall mean the expenses so described in
---------------------
Section 6.
"Restricted Stock" shall mean the Conversion Shares, excluding
----------------
Conversion Shares which have been (a) registered under the Securities Act
pursuant to an effective registration statement filed thereunder and disposed of
in accordance with the registration statement covering them, or (b) publicly
sold pursuant to Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
<PAGE>
"Selling Expenses" shall mean the expenses so described in Section 6.
----------------
2. Restrictive Legend. Each certificate representing Preferred
------------------
Shares or Conversion Shares shall, except as otherwise provided in this Section
2 or in Section 3, be stamped or otherwise imprinted with a legend substantially
in the following form:
"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 are also subject to the
provisions of a certain Subscription Agreement dated and may
-------
not be transferred except in accordance with the provisions of that
agreement."
A certificate shall not bear such legend if, in the opinion of counsel to the
Company, the securities being sold thereby may be publicly sold without
registration under the Securities Act.
3. Notice of Proposed Transfer. Prior to any proposed transfer of
---------------------------
any Preferred Shares or Conversion Shares (other than under the circumstances
described in Section 5), the holder thereof shall give written notice to the
Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel to the Company to the effect that
the proposed transfer may be effected without registration under the Securities
Act, whereupon the holder of such stock shall be entitled to transfer such stock
in accordance with the terms of its notice; provided, however, (a) that no such
opinion of counsel shall be required for a transfer to one or more partners of
the transfer or (in the case of a transferor that is a partnership) or to an
affiliated corporation (in the case of a transferor that is a corporation) and
(b) nothing in this Agreement shall supersede the restrictions on transfer and
other limitations set forth in the Subscription Agreement dated as of this date
between the Company and each of you. Each certificate for any Preferred Shares
or Conversion Shares transferred as above provided shall bear the legend set
forth in Section 2, except that such certificate shall not bear such legend if
(i) such transfer is in accordance with the provisions of Rule 144 (or any other
rule permitting public sale without registration under the Securities Act) or
(ii) the opinion of counsel to the Company is to the further effect that the
transferee and any subsequent transferee (other than an affiliate of the
Company) would be entitled to transfer such securities in a public sale without
registration under the Securities Act. The restrictions provided for in this
Section 3 shall not apply to securities which are not required to bear the
legend prescribed by Section 2 in accordance with the provisions of that
Section. The provisions of this Section 3 shall terminate upon the effective
date of an initial public offering of shares of the Common Stock.
2
<PAGE>
4. Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4, S-8 or any other
form not available for registering the Restricted Stock for sale to the public),
each such time it will give written notice to all holders of outstanding
Restricted Stock of its intention so to do. Upon the written request of any such
holder, received by the Company within 20 days after the giving of any such
notice by the Company, to register any of its Restricted Stock (which request
shall state the intended method of disposition thereof), the Company will use
its reasonable efforts to cause the Restricted Stock as to which registration
shall have been so requested to be included in the securities to be covered by
the registration statement proposed to be filed by the Company, all to the
extent necessary to permit the sale or other disposition by the holder (in
accordance with its written request) of such Restricted Stock so registered. In
the event that any registration pursuant to this Section 4 shall be, in whole or
part, an underwritten public offering of Common Stock, the number of shares of
Restricted Stock to be included in such an underwriting may be reduced (pro rata
among the requesting holders based upon the number of shares of Restricted Stock
owned by such holders) if and to the extent that the managing underwriter shall
be of the opinion that all or a portion of such Restricted Stock would adversely
affect the marketing of the securities to be sold therein. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 4 without thereby incurring any liability to the
holders of Restricted Stock.
5. Registration Procedures. If and whenever the Company is
------------------------
required by the provisions of Section 4 to use its reasonable efforts to effect
the registration of any shares of Restricted Stock under the Securities Act, the
Company will, as soon as reasonably possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use reasonable efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock such number of copies
of the registration statement and the prospectus included therein (including
each preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Restricted Stock covered
by such registration statement;
(d) use reasonable efforts to register or qualify the Restricted
Stock covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as the
3
<PAGE>
sellers of Restricted Stock shall request, provided, however, that the Company
shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction;
(e) use reasonable efforts to list the Restricted Stock covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed; and
(f) make available for inspection by each seller of Restricted
Stock, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
6. Expenses. All expenses incurred by the Company in complying
--------
with Sections 4 and 5, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, and costs of insurance,
but excluding any Selling Expenses, are called "Registration Expenses". All
underwriting discounts and selling commissions applicable
to the sale of Restricted Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement filed in compliance with Sections 4 and 5. All Selling
Expenses in connection with any registration under this Agreement shall be borne
by the participating sellers in proportion to the number of shares sold by each.
7. Indemnification and Contribution. (a) In the event of a
--------------------------------
registration of any of the Restricted Stock under the Securities Act pursuant to
this Agreement, the Company will indemnify and hold harmless each seller of
such Restricted Stock thereunder, each underwriter of such Restricted Stock
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
4
<PAGE>
under which such Restricted Stock was registered under the Securities Act
pursuant to this Agreement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each such seller, each such underwriter and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to this Agreement, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to this Agreement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering, price of the shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the proceeds received by such seller from the sale of Restricted Stock covered
by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be
5
<PAGE>
made against the indemnifying party hereunder, notify the indemnifying party in
writing thereof, but the omission so to notify the indemnifying party shall not
relieve it from any liability which it may have to such indemnified party other
than under this Section 7 and shall only relieve it from any liability which it
may have to such indemnified party under this Section 7 if and to the extent the
indemnifying party is prejudiced by such omission. In case any such action shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified party under this Section 7 for any legal
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation and of liaison with
counsel so selected, provided, however, that, if the defendants in any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 7 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
to the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
7; then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
ruled to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
6
<PAGE>
8. Changes in Common Stock or Preferred Stock. If, and as often
------------------------------------------
as, there is any change in the Common Stock or the Preferred Stock by way of a
stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock or the Preferred Stock as so changed.
9. Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Stock to the public without registration, at all
times after 90 days after any registration statement covering a public offering
of securities of the Company under the Securities Act shall have become
effective, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration.
10. Miscellaneous.
--------------
(a) All covenants and agreements contained in this Agreement by or
on behalf of each of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not, provided, however, that registration rights conferred herein
on any holder of Preferred Shares or Restricted Stock shall only inure to the
benefit of a transferee of Preferred Shares or Restricted Stock if (i) there is
transferred to such transferee at least 20% of the total shares of Restricted
Stock originally issued pursuant to the Subscription Agreement to the direct or
indirect transferor of such transferee or (ii) such transferee is a partner,
shareholder or affiliate of a party hereto.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or telexed, in the case of non-
U.S. residents, addressed as follows:
7
<PAGE>
if to the Company or any other party hereto, at the address of such
party set forth in the Subscription Agreement;
if to any subsequent holder of Preferred Shares or Restricted Stock,
to it at such address as may have been furnished to the Company in
writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares or
Restricted Stock) or to the undersigned purchaser of Preferred Shares or
Restricted Stock (in the case of the Company) in accordance with the provisions
of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of The Commonwealth of Massachusetts, without regard to conflicts
of law principles.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the
undersigned purchaser.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The obligations of the Company to register shares of Restricted
Stock under this Agreement shall terminate on the later to occur of (i) the
eighth anniversary of the date of this Agreement, or (ii) the second anniversary
of the effective date of the Company s initial public offering.
(g) If requested in writing by the underwriters for the initial
underwritten public offering of securities of the Company, the undersigned
purchaser shall agree not to sell publicly any shares of Restricted Stock or any
other shares of Common Stock (other than shares of Restricted Stock or other
shares of Common Stock being registered in such offering), without the consent
of such underwriters, for a period of not more than 180 days following the
effective date of the registration statement relating to such offering;
provided, however, that all persons entitled to registration rights with respect
to shares of Common Stock who are not parties to this Agreement, all other
persons selling shares of Common Stock in such offering and all executive
officers and directors of the Company shall also have agreed not to sell
publicly their Common Stock under the circumstances and pursuant to the terms
set forth in this Section 10(g).
(h) Notwithstanding the provisions of this Agreement, the Company's
obligation to file a registration statement, or to cause such registration
statement to become and remain effective, shall be suspended for a period not to
exceed 90 days in any 12-month period if there exists at the time material non-
public information relating to the Company which, in the reasonable opinion of
the Company, should not be disclosed.
8
<PAGE>
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
Please indicate your acceptance of the foregoing by signing and
returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between the Company and you.
Very truly yours,
PHOTOELECTRON CORPORATION
By: /s/ Peter E. Oettinger
---------------------------------------
Peter E. Oettinger
Vice President and Chief
Title: Operating Officer
------------------------------------
Date: March 14, 1996
-------------------------------------
Agreed to and accepted as of
the date set forth below
INVESTOR
BY: /s/ J. Klingenstein
-------------------------------
Title (if applicable):
----------------------------
Date: 3/12/96
------------------------------
9
<PAGE>
EXHIBIT 10.13
PHOTOELECTRON CORPORATION
REGISTRATION RIGHTS AGREEMENT
-----------------------------
To each of the Purchasers of the Series C Convertible Preferred Stock,
$.0l par value (the "Series C Preferred Stock"), of Photoelectron Corporation, a
Massachusetts corporation (the "Company"), listed on Schedule I hereto.
Dear Sir or Madam:
This will confirm that in consideration of your agreement dated Dec. 22,
-------
1995 to purchase such number of shares (the "Preferred Shares") of the Series C
Preferred Stock listed on Schedule I hereto, pursuant to the respective
Subscription Agreements between each of you and the Company for the purchase of
shares of the Series C Preferred Stock (collectively the "Purchase Agreement"),
and as an inducement to each of you to enter into the Purchase Agreement, the
Company covenants and agrees with each of you as follows:
1. Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or
----------
any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.01 par value per share,
------------
of the Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued upon
-----------------
conversion of the Preferred Shares.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Registration Expenses" shall mean the expenses so described in
---------------------
Section 6.
"Restricted Stock" shall mean the Conversion Shares, excluding
----------------
Conversion Shares which have been (a) registered under the Securities Act
pursuant to an effective registration statement filed thereunder and
disposed of in accordance with the registration statement covering them, or
(b) publicly sold pursuant to Rule 144 under the Securities Act.
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 6.
----------------
2. Restrictive Legend. Each certificate representing Preferred
------------------
Shares or Conversion Shares shall, except as otherwise provided in this
Section 2 or in Section 3, be stamped or otherwise imprinted with a legend
substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT HAS BEEN
REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE."
A certificate shall not bear such legend if, in the opinion of counsel to the
Company, the securities being sold thereby may be publicly sold without
registration under the Securities Act.
3. Notice of Proposed Transfer. Prior to any proposed transfer of
---------------------------
any Preferred Shares or Conversion Shares (other than under the circumstances
described in Section 5), the holder thereof shall give written notice to the
Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel to the Company to the effect that
the proposed transfer may be effected without registration under the Securities
Act, whereupon the holder of such stock shall be entitled to transfer such stock
in accordance with the terms of its notice; provided, however, (a) that no such
--------
opinion of counsel shall be required for a transfer to one or more partners of
the transferor (in the case of a transferor that is a partnership) or to an
affiliated corporation (in the case of a transferor that is a corporation) and
(b) nothing in this Agreement shall supersede the restrictions on transfer and
other limitations set forth in the Subscription Agreement dated as of this date
between the Company and each of you. Each certificate for any Preferred Shares
or Conversion Shares transferred as above provided shall bear the legend set
forth in Section 2, except that such certificate shall not bear such legend if
(i) such transfer is in accordance with the provisions of Rule 144 (or any other
rule permitting public sale without registration under the Securities Act) or
(ii) the opinion of counsel to the Company is to the further effect that the
transferee and any subsequent transferee (other than an affiliate of the
Company) would be entitled to transfer such securities in a public sale without
registration under the Securities Act. The restrictions provided for in this
Section 3 shall not apply to securities which are not required to bear the
legend prescribed by Section 2 in accordance with the provisions of that
Section. The provisions of this Section 3 shall terminate upon the effective
date of an initial public offering of shares of the Common Stock.
2
<PAGE>
4. Incidental Registration. If the Company at any time proposes to
-----------------------
register any of its securities under the Securities Act for sale to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4, S-8 or any other
form not available for registering the Restricted Stock for sale to the public),
each such time it will give written notice to all holders of outstanding
Restricted Stock of its intention so to do. Upon the written request of any such
holder, received by the Company within 20 days after the giving of any such
notice by the Company, to register any of its Restricted Stock (which request
shall state the intended method of disposition thereof), the Company will use
its reasonable efforts to cause the Restricted Stock as to which registration
shall have been so requested to be included in the securities to be covered by
the registration statement proposed to be filed by the Company, all to the
extent requisite to permit the sale or other disposition by the holder (in
accordance with its written request) of such Restricted Stock so registered. In
the event that any registration pursuant to this Section 4 shall be, in whole or
part, an underwritten public offering of Common Stock, the number of shares of
Restricted Stock to be included in such an underwriting may be reduced pro rata
among the requesting holders based upon the number of shares of Restricted Stock
owned by such holders) if and to the extent that the managing underwriter shall
be of the opinion that such all or a portion of such Restricted Stock would
adversely affect the marketing of the securities to be sold therein.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 4 without thereby incurring
any liability to the holders of Restricted Stock.
5. Registration Procedures. If and whenever the Company is
-----------------------
required by the provisions of Section 4 to use its reasonable efforts to effect
the registration of any shares of Restricted Stock under the Securities Act, the
Company will, as soon as reasonably possible:
(a) prepare and file with the Commission a registration statement
with respect to such securities and use reasonable efforts to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock such number of copies
of the registration statement and the prospectus included therein (including
each preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Restricted Stock covered
by such registration statement;
(d) use reasonable efforts to register or qualify the Restricted
Stock covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the
3
<PAGE>
sellers of Restricted Stock shall request, provided, however, that the Company
shall not for any such purpose be required to qualify generally to transact
business as a foreign corporation in any jurisdiction where it is not so
qualified or to consent to general service of process in any such jurisdiction;
(e) use reasonable efforts to list the Restricted Stock covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed; and
(f) make available for inspection by each seller of Restricted
Stock, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to assure compliance with federal and applicable state
securities laws.
6. Expenses. All expenses incurred by the Company in complying
--------
with Sections 4 and 5, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees and expenses (including
counsel fees) incurred in connection with complying with state securities or
"blue sky" laws, fees of the National Association of Securities Dealers, Inc.,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
fees and disbursements of one counsel for the sellers of Restricted Stock, but
excluding any Selling Expenses, are called "Registration Expenses". All
underwriting discounts and selling commissions applicable to the sale of
Restricted Stock are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with
each registration statement filed in compliance with Sections 4 and 5. All
Selling Expenses in connection with any registration under this Agreement shall
be borne by the participating sellers in proportion to the number of shares sold
by each.
7. Indemnification and Contribution. (a) In the event of a
--------------------------------
registration of any of the Restricted Stock under the Securities Act pursuant to
this Agreement, the Company will indemnify and hold harmless each seller of such
Restricted Stock thereunder, each underwriter of such Restricted Stock
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue
4
<PAGE>
statement or alleged untrue statement of any material fact contained in any
registration statement under which such Restricted Stock was registered under
the Securities Act pursuant to this Agreement, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereof, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each such seller, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by any such seller, any such
underwriter or any such controlling person in writing specifically for use in
such registration statement or prospectus.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to this Agreement, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to this Agreement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus, and
provided, further, however, that the liability of each seller hereunder shall be
limited to the proportion of any such loss, claim, damage, liability or expense
which is equal to the proportion that the public offering, price of the shares
sold by such seller under such registration statement bears to the total public
offering price of all securities sold thereunder, but not in any event to exceed
the proceeds received by such seller from the sale of Restricted Stock covered
by such registration statement.
5
<PAGE>
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 7 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 7 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 7 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 7 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
to the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 7 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this
Section 7; then, and in each such case, the Company and such holder will
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (after contribution from others) in such proportion so that such
holder is responsible for the portion represented by the percentage that the
public offering price of its Restricted Stock offered by the registration
statement bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder will be
ruled to contribute any amount in excess of the public offering price of all
such Restricted Stock offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section
6
<PAGE>
11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
8. Changes in Common Stock or Preferred Stock. If, and as often as,
------------------------------------------
there is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock or
the Preferred Stock as so changed.
9. Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Stock to the public without registration, at all
times after 90 days after any registration statement covering a public offering
of securities of the Company under the Securities Act shall have become
effective, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration.
10. Miscellaneous.
-------------
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not, provided, however, that registration rights conferred herein
on the holders of Preferred Shares or Restricted Stock shall only inure to the
benefit of a transferee of Preferred Shares or Restricted Stock if (i) there is
transferred to such transferee at least 20% of the total shares of Restricted
Stock originally issued pursuant to the Purchase Agreement to the direct or
indirect transferor of such transferee or (ii) such transferee is a partner,
shareholder or affiliate of a party hereto.
7
<PAGE>
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or telexed, in the case of non-
U.S. residents, addressed as follows:
if to the Company or any other party hereto, at the address of such
party set forth in the Purchase Agreement;
if to any subsequent holder of Preferred Shares or Restricted Stock,
to it at such address as may have been furnished to the Company in
writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares or
Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in
the case of the Company) in accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of The Commonwealth of Massachusetts, without regard to conflicts
of law principles.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the holders
of at least two-thirds of the outstanding shares of Restricted Stock.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The obligations of the Company to register shares of Restricted
Stock under this Agreement shall terminate on the later to occur of (i) the
eighth anniversary of the date of this Agreement, or (ii) the second anniversary
of the effective date of the Company's initial public offering.
(g) If requested in writing by the underwriters for the initial
underwritten public offering of securities of the Company, each holder of
Restricted Stock who is a party to this Agreement shall agree not to sell
publicly any shares of Restricted Stock or any other shares of Common Stock
(other than shares of Restricted Stock or other shares of Common Stock being
registered in such offering), without the consent of such underwriters, for a
period of not more than 180 days following the effective date of the
registration statement relating to such offering; provided, however, that all
persons entitled to registration rights with respect to shares of Common Stock
who are not parties to this Agreement, all other persons selling shares of
Common Stock in such offering and all executive officers and directors of the
Company shall also have agreed not to sell publicly their Common Stock under the
circumstances and pursuant to the terms set forth in this Section 10(g).
8
<PAGE>
(h) Notwithstanding the provisions of this Agreement, the Company's
obligation to file a registration statement, or to cause such registration
statement to become and remain effective, shall be suspended for a period not to
exceed 90 days in any 12-month period if there exists at the time material non-
public information relating to the Company which, in the reasonable opinion of
the Company, should not be disclosed.
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
(j) Each of you hereby authorizes the Company to complete Schedule I
after your execution hereof to reflect the purchasers and number of Preferred
Shares purchased by each such purchaser pursuant to the Purchase Agreement, and
further authorizes the Company to admit additional purchasers of shares of
Preferred Stock from time to time as parties to this Agreement and to amend
Schedule I to reflect such additions.
Please indicate your acceptance of the foregoing by signing and
returning the enclosed counterpart of this letter, whereupon this Agreement
shall be a binding agreement between the Company and you.
Very truly yours,
Photoelectron Corporation
By: /s/ Peter M. Nomikos
------------------------------
Title: President & CEO
---------------------------
Dec. 16, 1995
AGREED TO AND ACCEPTED as of
the date first above written.
Purchasers named in Schedule I
to the Purchase Agreement:
By:[Signature Appears Here]
-----------------------------
Title: President, Toshiba Medical Co.
--------------------------
Dec. 22, 1995
By:
-----------------------------
Title:
--------------------------
9
<PAGE>
By:
-----------------------------
Title:
--------------------------
By:
-----------------------------
Title:
--------------------------
By:
-----------------------------
Title:
--------------------------
By:
-----------------------------
Title:
--------------------------
By:
-----------------------------
Title:
--------------------------
10
<PAGE>
SCHEDULE I
----------
[To be completed]
11
<PAGE>
EXHIBIT 10.14
TECHNOLOGY CROSS LICENSE AGREEMENT
This Agreement is dated as of January 4, 1989 by and between PHOTOELECTRON
CORPORATION ("Photoelectron"), a Massachusetts corporation, and THERMO ELECTRON
CORPORATION ("Thermo"), a Delaware corporation.
WHEREAS, Thermo and Photoelectron Investments Corporation of Liberia
("PlC") have organized Photoelectron primarily to continue research and
development of photocathode and related technologies formerly conducted by
Thermo's "R&D Center" located in Waltham, Massachusetts for applications such as
electron beams and displays; and
WHEREAS, the parties desire to license certain patent rights and
intellectual property for the purpose of allowing Photoelectron to conduct
such work;
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth in this Agreement, Thermo and Photoelectron agree as follows:
1. License and Sublicense of Patent Rights and Photo-Cathode Technology.
--------------------------------------------------------------------
Subject to the reservation of rights set forth in Section 2 of this Agreement,
Thermo grants to Photoelectron a perpetual, worldwide, exclusive right and
license or sublicense, as the case may be, to make, have made, use and sell the
Thermo Photo-Cathode Technology (as defined below) and the inventions covered by
the patents owned by or licensed to Thermo as set forth on Schedule A to this
Agreement (the "Patent Rights") for experimentation, research, development,
testing, evaluation and production, marketing, lease and sale of products or
systems. With respect to those patents sublicensed under this Section 1, such
sublicense shall be coterminous with Thermo's license for such patent. At the
request of Thermo, Photoelectron shall cooperate with Thermo and execute all
necessary documents prepared by Thermo for recording or otherwise formally
licensing or sublicensing, as the case may be, the Patent Rights to
Photoelectron. For purposes of this Agreement, "Thermo Photo-Cathode Technology"
shall mean all proprietary information and rights (including, without
limitation, chemical, electrical and technical information, whether tangible or
intangible, any and all data, techniques, discoveries, inventions, processes,
know-how, patents (excluding the Patent Rights, but including any extension,
reissue or renewal patents), patent applications, proprietary computer software,
inventor's certificates, trade secrets and other information) that Thermo owns,
controls or is licensed to use, and that is used or was developed in Thermo's
R&D Center located in Waltham, Massachusetts in connection with Thermo's
research and development of photocathode and electron beam technologies.
<PAGE>
-2-
2. Reservation of Rights and Cross License.
----------------------------------------
(a) Notwithstanding any other provision of this Agreement, Thermo and
any of its subsidiaries or affiliates may use the Patent Rights and Thermo
Photo-Cathode Technology for any purpose; provided, however, that Thermo agrees
not to acquire any company or business primarily for the purpose of exploiting
such Patent Rights and technology. Thermo's use of the Patent Rights and
Thermo Photo-Cathode Technology may include the license or sale (other than in
connection with a sale, lease or license of a product or system) of such rights
and technology to non-affiliates of Thermo provided that Thermo receives
Photoelectron's prior written consent to any such license or sale, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, Thermo
agrees that it will not grant any such license to any non-affiliates of Thermo
for any application that Photoelectron is actively pursuing at the time of such
license or that Photoelectron has a reasonable plan to pursue.
(b) Photoelectron hereby grants to Thermo a perpetual, world-wide,
non-exclusive right and license to use any photocathode or electron beam
technologies and know-how, including the right to make and have made any
inventions covered by patents based on such technology and know-how, developed
by Photoelectron in the course of its work with the Thermo Photo-Cathode
Technology and Patent Rights (the "Photoelectron Technology"). Thermo hereby
grants to Photoelectron a perpetual, world-wide, non-exclusive right and license
to use any photocathode or electron-beam technologies or know-how, including the
right to make and have made any inventions covered by patents based on such
technology, developed by Thermo in the course of its use of the Photoelectron
Technology or Thermo Photo-Cathode Technology and Patent Rights. In the case of
either license granted in this Section 2(b), neither Thermo nor Photoelectron
shall use such technology for any application that the party that developed such
technology is pursuing or has a reasonable plan to pursue. This prohibition
shall continue for so long as the developing party reasonably pursues or has a
reasonable plan to pursue such application. Except for transfers or licenses in
connection with the sale of a product or system, the rights granted in this
Section 2(b) may only be sublicensed or otherwise transferred to third parties
upon the prior written consent of the party that developed such technology. In
addition, Thermo and Photoelectron agree to negotiate in good faith to determine
fair compensation to be paid to the developing party for the other party's use,
license or transfer of the developing party's technology licensed under this
Section 2(b) based on the cost saving to the licensed party or, in the case of a
transfer or sale to a third party, the relative value of such technology or
know-how. Notwithstanding any of the foregoing, neither party shall be
obligated by this Section 2(b) to disclose or transfer any technology in breach
of any law, rule or regulation of, or contract with, any U.S. Federal or state
governmental body or entity.
<PAGE>
-3-
3. Royalty. In consideration for the license and sublicense of the Patent
-------
Rights and Thermo Photo-Cathode Technology, Photoelectron shall pay to Thermo a
royalty of 1.5% of Photoelectron's gross revenues derived from the sale, lease
or any other disposition of any products or systems that utilize Thermo Photo-
Cathode Technology or the Patent Rights. In connection with any sale, lease,
sublease, license, sublicense or any other transfer of the Thermo Photo-Cathode
Technology or the Patent Rights other than in connection with the sale, lease or
any other disposition of a product or system, Photoelectron shall pay to Thermo
50% of any amounts received by Photoelectron for such sale, lease, sublease,
license, sublicense or transfer. This 50% payment shall not apply to any
amounts paid to Photoelectron as a reimbursement for its costs and expenses or
for payments made to Photoelectron by third parties for Photoelectron to conduct
true research and development for such parties; provided that such true research
and development does not involve any transfer of the Thermo Photo-Cathode
Technology to the party for which such work is performed.
4. Sublicensing. Except for licenses granted to end-users in connection
------------
with the sale or lease of a product or system, Photoelectron may license,
sublicense, sell or transfer the Patent Rights or Thermo Photo-Cathode
Technology only upon receiving the prior written consent of Thermo, which
consent shall not be unreasonable withheld. For purposes of this Agreement,
Thermo's withholding of its consent to any sale, license or sublicense shall not
be deemed to be unreasonably if, without limitation, Thermo determines that such
sale or license is to an actual or potential competitor of Thermo or of any
Thermo affiliate. In addition, except for a license or transfer to a
competitor, Thermo will not object to a license or transfer so long as Thermo's
share of the payments to be received from any third party transferee will be 50%
of the payments to be made by such transferee to Photoelectron, which are in no
event less than 1 1/2% of such transferee's gross revenues from sales of
products or systems that utilize the Thermo Photo-Cathode Technology and Patent
Rights. For purposes of this Section 4, any merger, consolidation or sale of
substantially all of the assets of Photoelectron shall be deemed to be a
transfer of the license granted hereunder.
5. Disclaimer of Warranty. Photoelectron does not warrant that the Thermo
----------------------
Photo-Cathode Technology, Patent Rights or any products produced within the
scope of the intellectual property licensed by Thermo under this Agreement will
perform as designed or that they are capable of commercial exploitation, or that
the practice by Photoelectron of the rights licensed hereunder will be free from
any infringement or charges of infringement of any patent or patents. Thermo
assumes no liability whatsoever that may result from the
<PAGE>
-4-
exercise of these rights. Thermo does not represent or warrant the validity of
any patent, nor does Thermo undertake to prosecute or defend any suit brought by
or against Photoelectron, or indemnify it for the infringement or enforcement of
any patent.
6. Defense of Patent Rights. Thermo shall have the right, but not the
------------------------
obligation, to defend any claims that the Patent Rights infringe upon any other
patents or intellectual property rights of third parties.
7. Termination. This license shall immediately and automatically
-----------
terminate and the rights granted to Photoelectron hereunder shall revert back to
Thermo upon any of the following events: (a) Photoelectron and Thermo and, so
long as PIC is a shareholder of Photoelectron, PIC agree in writing to terminate
this license or (b) Photoelectron liquidates, closes its business, files for
bankruptcy or an involuntary bankruptcy petition is filed against Photoelectron
that is not dismissed within 180 days.
8. Resolution of Disputes. If any dispute arises between the parties as
----------------------
to any matter covered by this Agreement, the parties agree to use their best
efforts to resolve such dispute in good faith according to the principles set
forth in this Agreement. If the parties are unable to resolve any such dispute
within a reasonable period of time, they will mutually agree on an independent
third party to resolve the dispute. If the parties cannot mutually agree on a
single arbitrator, each party shall select one person and the two so selected
shall jointly select a third. Each party shall be permitted to submit its
written position within a reasonable period of time after the selection of the
arbitrator or arbitrators, as the case may be, as to any matter being disputed
to the arbitrator or arbitrators. The arbitrator or arbitrators shall as
promptly as possible make a decision as to the dispute, which decision shall be
binding on the parties.
9. Transfer and Sales Tax. Notwithstanding any provisions of law imposing
----------------------
the burden of such taxes on the seller or buyer, as the case may be,
Photoelectron shall be responsible for and shall pay all governmental charges,
if any, upon the license or sublicense by Photoelectron of any of the Patent
Rights or Thermo Photo-Cathode Technology.
10. Governing Law; Assignment. This Agreement is governed by the laws of
-------------------------
the Commonwealth of Massachusetts, is to take effect as a sealed instrument, is
binding upon and inures to the benefit of the parties hereto and their
respective successors and assigns and may be cancelled, modified or amended only
by a written instrument executed by Photoelectron, Thermo and, so long as PIC is
a shareholder of Photoelectron, PIC. No party hereto may assign or otherwise
transfer its rights hereunder without the prior written consent of the other
party.
<PAGE>
-5-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date and year first above written.
THERMO ELECTRON CORPORATION
By: /s/ Robert C. Howard
------------------------------------
Its: Executive Vice President
-----------------------------------
PHOTOELECTRON CORPORATION
By: /s/ Peter M. Nomikos
------------------------------------
Its: President
-----------------------------------
<PAGE>
-6-
SCHEDULE A
Thermo Electron Corporation Patents and Patent Applications
<TABLE>
<CAPTION>
U.S. PATENTS
- ------------
Docket
No. Patent No. Title Issue Date
- ------- ---------- ----- ----------
<S> <C> <C> <C>
80-02 4,346,330 Laser Generated 8/24/82
High Electron
Density Source
80-44 4,460,831 Laser Stimulated 7/17/84
High Current
Density Photoelectron
Generator And Method
of Manufacture
<CAPTION>
FOREIGN PATENTS/PATENT APPLICATIONS
- -----------------------------------
Docket
No. Country Patent (Appln) No.
- ------ ------- ------------------
<S> <C> <C>
80-02 France 81.07145
Great Britain 2074369
West Germany (P3114644.9)
Japan (51904/81)
80-44 France (8219870)
Great Britain 2111299
Great Britain 2157884
West Germany P3241766.7
Japan (208747/82)
</TABLE>
<PAGE>
EXHIBIT 10.15
PHOTOELECTRON CORPORATION
INTERNATIONAL DISTRIBUTOR SALES AND SERVICE AGREEMENT
THIS AGREEMENT, effective this 13 day of December 1995, by and between
Photoelectron Corporation, a Massachusetts corporation having its principle
place of business at 400-1 Totten Pond Road, Waltham, Massachusetts 02154,
U.S.A. (hereinafter called the "Company"), and Toshiba Medical Systems Co.,
Ltd., a Japanese corporation having its principal place of business at 26-5, 3-
Chome, Hongo, Bunkyo-ku, Tokyo 113 Japan (hereinafter called the "Distributor").
WHEREAS, the Company has developed and desires to market its interstitial
radiosurgical equipment, the Photon Radiosurgery System (hereinafter called the
"PRS"), as defined in Section 1.04, all over the world.
WHEREAS, the Distributor desires to sell the PRS in Japan and the Company agrees
to appoint the Distributor as an authorized exclusive distributor for the PRS in
Japan.
NOW THEREFORE, The parties agree as follows:
ARTICLE I APPOINTMENT OF DISTRIBUTOR
1.01 Grant of Distributorship. The Company grants the Distributor an exclusive
right to identify itself as an authorized Company distributor in the territory
described in Schedule A (hereinafter called the "Territory") and to sell and
----------
service the PRS in the Territory during the term of this Agreement. During the
term of this Agreement and as long as the Distributor is not in material breach
of its obligations hereunder, the Company shall not itself, directly or
indirectly, sell the PRS to customers in the Territory nor appoint any other
distributor with the rights to sell the PRS to customers in the Territory. The
Company will consider adding additional country(s) to the Territory as may be
reasonably requested from time to time by the Distributor after six months from
the first commercial sale of the PRS in the Territory, any such additions to be
at the Company's sole discretion.
1.02 Sales Plan and Non-Competition
A. The Distributor agrees to prepare and submit to the Company sales plans
for the PRS no less frequently than every six months during the term of this
Agreement in accordance with the procedures specified in Schedule D.
----------
<PAGE>
B. The Distributor agrees that neither the Distributor nor any parent,
subsidiary or affiliate of the Distributor will sell, market or distribute in
the Territory any ionizing radiotherapeutic equipment such as interstitial x-ray
therapy equipment except linear accelerators and remote-controlled
automatically-driven gamma-ray afterloading equipment.
1.03 Agreement Rights. The Distributor has not paid any fee or other
consideration for rights established by this Agreement. Neither this Agreement
nor any right granted by this Agreement is a property right. Neither this
Agreement nor any right or responsibility under this Agreement may be
transferred, assigned, delegated or sold by the Distributor or by operation of
law.
1.04 Product Definition. As used in this Agreement, the term "PRS" shall mean
the products developed and manufactured by the Company which are identified in
Schedule B attached to and made a part of this Agreement and also such products
- ----------
hereafter developed and made by the Company as improved or successor models of
or to such products.
ARTICLE II SALES TO DISTRIBUTOR
2.01 Sales of the PRS
A. Processing of the Distributor's Orders: Each order for the PRS will be
submitted by the Distributor in a mutually acceptable form (see Schedule C
----------
Attachment 1) and processed by the Company in a timely fashion in accordance
with the procedures as agreed upon by the parties hereto. Each purchase order
shall specify the components of the PRS which the Distributor would like to
purchase. The express terms of this Agreement supersede any contrary provisions
in either party's purchase orders or sales orders. The Company will fax
acceptance of the terms and conditions of the purchase order to the Distributor
within ten (10) working days of the Company's receipt of the purchase order from
the Distributor. The Company will endeavor to distribute the PRS in a fair and
equitable manner.
B. The Company agrees not to unreasonably reject any order to the extent that
orders for the PRS submitted by the Distributor are needed to satisfy current
demand, provided that the Distributor is not then in default of this Agreement.
C. The Distributor's orders for the PRS are not binding on the Company until
accepted by the Company and may be canceled by the Distributor only until that
time. Orders shall be deemed accepted by the Company when the Distributor is so
notified in writing by the Company.
2.02 Prices and Other Terms of Sale. Prices and other terms of sale applicable
to the PRS shall be those set forth in the attached Schedule C. The purchase
----------
order form set forth as Attachment I to Schedule C, the acknowledgment form,
----------
invoice and other sales forms shall be determined through mutual agreement of
the parties hereto. The price applicable to the PRS or any component of the PRS
may be changed by the Company only after prior consultation with the
<PAGE>
Distributor and after reasonable notice. The terms of sale applicable to the PRS
or any component of the PRS may only be changed by agreement of the parties. Any
changes in the price or terms of sale will not apply to any orders from the
Distributor accepted in writing by the Company prior to the effective date of
such change.
2.03 PRS Production and Delivery. All sales of the PRS shall be "FOB" Boston
(as such term is defined by the International Chamber of Commerce, INCOTERMS
(3d.ed. 1990)). The Company shall use reasonable efforts to obtain, at its own
expense, any export or other official authorization and carry out or satisfy any
other formalities necessary for the transportation and exportation of the PRS
from the United States. The Distributor shall use reasonable efforts to obtain,
at its own expense, any authorization necessary for importation to and sale in
the Territory of the PRS.
The Company and the Distributor shall mutually cooperate to ensure that the PRS
complies with all local laws, standards and regulations applicable to sale or
use of the PRS in the Territory.
The Company shall use all reasonable efforts to fulfill each order for the PRS
submitted by the Distributor within three (3) months of the Company's acceptance
of the order from the Distributor.
The Company shall package the PRS in an appropriate manner for shipment to the
Distributor in the Territory and in accordance with such packaging requirements
as the Distributor may reasonably request in consideration of the laws and
shipping customs of the Territory.
2.04 Inspection
A. The Distributor shall promptly inspect and test the ordered PRS at all
reasonable times and places in accordance with the Incoming Inspection
Specifications to be mutually agreed upon between the parties hereto, and shall,
immediately after such inspection and test, notify the Company of the result
thereof in writing.
B. The Company shall provide the Distributor with all test data of the PRS
together with the PRS to be delivered.
C. If such inspection discloses any defects or non-conformity to the Incoming
Inspection Specifications in the PRS, the Distributor may, with a written notice
to the Company reject such PRS and return the PRS at the cost of the Company.
Promptly after receipt of such notice, the Company shall deliver to the
Distributor the replacements of such PRS, if it is not repairable at the site.
D. The approval or acceptance of the PRS provided for in this Section 2.04
shall not relieve the Company from responsibility for defects or failures to
meet the Specifications or other requirements of the PRS.
<PAGE>
2.05 Sale of Parts and Accessories to the Distributor
A. The Company is the sole authorized source for new or remanufactured parts
or accessories for the PRS listed in Schedule F, which is to be supplemented by
----------
the Company from time to time and hereinafter called "Parts and Accessories".
B. Orders for Parts and Accessories will be submitted by the Distributor in
accordance with the procedures to be mutually agreed upon.
C. Prices and others terms of sale applicable to Parts and Accessories
marketed by the Company shall be those set forth in Schedule C and the
attachments thereto. Prices and other terms of sale for Parts and Accessories
applicable to the Distributor may be changed by the Company only after
consultation with the Distributor and after reasonable notice. Any such change
will not apply to any order from the Distributor accepted in writing by the
Company prior to the effective date of such changes.
2.06 Warranties on Products. The Company warrants the PRS and Parts and
Accessories (hereinafter called "Products") to the Distributor and its customers
in accordance with the attached Schedule E (such warranty is hereinafter
----------
referred to as the "Company Limited Warranty"). The Company Limited Warranty is
the only warranty applicable to the Products.
2.07 Product Liability/Patent Indemnification
A. The Company agrees to indemnify and defend the Distributor, its parent
company, subsidiaries and affiliates, and their respective agents,
representatives, employees and customers (the "Distributor Group") from and
against any and all claims, proceedings, causes of action and suits
(hereinafter, collectively "Claims") (i) arising out of personal injury, death
and/or property damage in connection with the use of a Product (excluding any
uses of Products for purposes other than those approved), or (ii) which is based
on any claim that any part of the Products or the sale or use thereof by the
Distributor Group under this Agreement infringes any patent, any copyright,
trade secret, any trade name, any trademark or intellectual property of any
third party; subject to the Distributor giving the Company prompt written notice
upon discovery of each Claim and except to the extent such Claims occur as a
result of the negligent or willfull acts or omissions of any member of the
Distributor Group. The Company shall control the defense of any such Claim and
shall pay all costs of any such defense (including the attorney's fees required
to be incurred by the Distributor Group in such action) and all judgments,
awards and settlement amounts incurred as a result of such Claims. The
Distributor shall give the Company reasonable assistance in the defense or
settlement of the Claims. It is understood that the Company shall have the sole
discretion to determine the terms of settlement of any Claim.
Notwithstanding the foregoing, the Company shall have no liability under this
Section 2.06 for any claim by a third party that the manufacture, sale or use of
a Product caused personal injury, death or property damage or infringes any
patent, copyright, trade secret or other intellectual property right in any of
the following circumstances: (i) the Product was altered or modified by
<PAGE>
any member of the Distributor Group or any third party without prior
authorization of the Company and such alteration or modification resulted in or
is the basis for the third party claim; (ii) the Distributor or its customers
failed to use the most current version of the Product when and if available and
offered to the Distributor by the Company if the use of such current model would
have avoided such claim, except the case the Product has been already installed
at the customer's site; (iii) the Distributor or any third party used the
Product in combination with any component, apparatus or software not furnished
or authorized by the Company and such combination resulted in or is the basis
for the third party claim; (iv) the Product was used in a manner for which it
was not designed or specified; or (v) any member of the Distributor Group owns
an intellectual property right or has a license which precludes it from being
held responsible for the claim of infringement.
2.08 Force Majeure. Neither party shall be liable in any manner for failure or
delay to fulfill all or part of this Agreement directly or indirectly, owing to
an act of God, governmental orders or restriction, war, threat of war, warlike
conditions, hostilities, sanctions, mobilization, blockade, embargo, detention,
revolution, riot, looting, strike, lockout, labor action, accident, or any other
causes or circumstances beyond its reasonable control.
2.09 Limit on Liability. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN THIS
ARTICLE II, IN NO EVENT SHALL THE COMPANY BE LIABLE TO ANY MEMBER OF THE
DISTRIBUTOR GROUP FOR SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY KIND,
INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFIT, LOSS OF BUSINESS OPPORTUNITY,
LOSS OF REVENUE OR GOODWILL ARISING FROM ANY BREACH OR OTHER FAILURE BY THE
COMPANY UNDER THIS AGREEMENT.
2.10 Discontinuance of and Changes in Products. In the event it becomes
necessary to discontinue any line of Product, the Company shall notify the
Distributor in writing ninety (90) days in advance of such discontinuation. The
Company shall continue to supply service parts for the discontinued product line
for a period of seven (7) years from the date of discontinuation. The Company
can, at its discretion, supply a replacement for the discontinued product line,
such replacement being of equal or better quality and at the same price to the
Distributor as would have been the service part for the discontinued product
line.
<PAGE>
ARTICLE III DISTRIBUTORSHIP OPERATIONS
3.01 Sales Operations and Activities
A. The Distributor agrees to:
1. sell or lease Products to customers in the Territory; and
2. promote, through the Distributor's own advertising and sales
promotion activities, the purchase and use of Products by customers
located in the Territory.
B. In furtherance of the objectives of this Agreement, the Company agrees
during the term of this Agreement to:
1. provide at no charge reasonable technical training at its corporate
headquarters in Waltham, Massachusetts, U.S.A. (or such other location as
the Company shall designate) for such representatives of the Distributor
or its designee(s) as the Company and the Distributor shall agree, in
order for them to become proficient in the use, maintenance and repair of
the Products. The Distributor shall be responsible for all out of pocket
travel expenses (meals, airfare, hotel, local transportation, etc.)
incurred by the representatives of the Distributor.
2. exercise reasonable efforts to provide such technical training at
such time as may be reasonably requested by the Distributor with a minimum
of thirty (30) days prior written notice;
3. provide on-site installation supervision and training at no charge at
the first and second customer sites. If such support is required at any
additional site, the Distributor will reimburse the Company for all out of
pocket travel expenses incurred by its representatives (meals, airfare -
business class, hotel, local transportation, etc.) and agrees to pay to
the Company a reasonable per diem fee to be established from time to time
by the Company.
4. provide at no charge an agreed upon number of days of sales training
to the Distributor's sales staff and application training to the
Distributor's designated applications personnel in the Territory at such
times and places as may be reasonably requested by the Distributor.
C. If any additional technical or sales assistance by the Company's
representative is required in the Territory to assist the Distributor's
personnel, then both parties agree to discuss in good faith how to proceed with
such assistance.
<PAGE>
3.02 Additional Distributor Responsibilities
A. In furtherance of the objectives of this Agreement, the Distributor agrees
during the term of this Agreement to:
1. provide in-service training in the use of the Products to customers;
2. provide customers with reasonable applications training by the
Distributor's qualified technologists to teach the appropriate techniques
and procedures for use of the Products;
3. provide a list of prospects to the Company at the end of each six (6)
month period during the term of this Agreement.
3.03 Service Performance. The Distributor agrees to provide prompt, efficient,
courteous and quality service to owners and users of the Products within the
Territory, when requested by such owners or users. All service shall be
performed in a workmanlike manner.
3.04 Repairs. The Company shall provide a recommended spare parts list to the
Distributor, including the recommend quantities of each part for stocking prior
to commercial sale of the Products in the Territory. The Company shall deliver
to the Distributor the recommended quantities of each part of the PRS specified
in the recommended spare parts list. The recommended spare parts for one PRS
will be supplied on consignment. The Distributor shall perform to the extent
possible all required repairs except the repairs under the Company Limited
Warranty (including labor for installing replacement parts) on each Product
delivered to a location within the Territory at the time of predelivery services
and thereafter when requested by the owner or user. The Distributor agrees to
pay to the Company for the spare parts used for such repair. The Distributor
shall provide each owner or user for whom repairs or adjustments are performed
a copy of the repair order reflecting all services performed. A copy of all such
repair orders shall be sent to the Company on a monthly basis. In case of the
Distributor's inability to repair the Product the Company shall upon request of
the Distributor perform such repair on the site or at its facilities in the
U.S.A., for which the Distributor will pay the Company.
3.05 Operator and Service Manuals. The Company shall provide two sets of
operator and service manuals - in English - per customer site to the
Distributor. Translation into Japanese and or any other language as required
within Territory shall be the Distributor's responsibility and at its expense.
3.06 Field Service Problem Reports. The Distributor shall provide field
service problem reports to the Company and the Company shall respond to these
reports in writing and in a timely manner.
3.07 Mandatory Upgrades or Recalls. The Company shall provide to the
Distributor all required parts for mandatory upgrades, modifications or
recalls at no charge to the Distributor. The Company shall reimburse the
Distributor for the cost of labor for such installations.
<PAGE>
3.08 Sales and Service Records and Estimates. It is the responsibility of the
Distributor to maintain complete and up-to-date records covering sales and
service of the Products. Such records will be retained for at least five (5)
years. The Distributor shall provide to the Company, on a monthly basis, with
the estimated number of the PRS to be sold for the next 12 months, and the
Company shall respond to the Distributor as to possibility of its delivering the
projected number of the PRS.
3.09 Trademarks and Service Marks
A. The Company or its affiliated companies are the exclusive owners of the
various trademarks, service marks, names, and designs (hereinafter called
-----
"Marks") used in connection with the Products.
B. The Distributor is granted the non-exclusive right of displaying the Marks
in the Territory in connection with performing its obligations under this
Agreement. The Marks may be used as part of the name under which the
Distributor's business is conducted only with the prior written approval of the
Company. The Distributor will change or discontinue the use of any Mark upon the
written request of the Company. No member of the Distributor Group may use any
Mark or Product name without the Company's prior written permission.
C. Upon termination of this Agreement, the Distributor will immediately
discontinue or cause to be discontinued at its expense, all use of Marks.
Thereafter, the Distributor will not use, either directly or indirectly, any
Marks or any other confusingly similar marks in a manner likely to cause
confusion or mistake or to deceive the public.
3.10 Proprietary Information. During the term of this Agreement and four (4)
years thereafter, the Distributor shall receive and keep in confidence all
proprietary information concerning the Products and the Company's business
including, but not limited to, trade secrets, business and marketing plans and
other specialized information which might be disclosed to or learned by the
Distributor. After the termination of this Agreement, except as necessary to
provide maintenance or repair service to be provided pursuant to the last
sentence of Section 6.01 C hereunder, the Distributor shall return all property
belonging to the Company and shall keep all proprietary information in
confidence and shall not use or disclose any such information for its own
purposes or for the benefit of any third party without the prior written consent
of the Company.
During the term of this Agreement and four (4) years thereafter, the Company
shall receive and keep in confidence all proprietary information concerning the
Distributor's products and business including, but not limited to, trade
secrets, business and marketing plans and other specialized information which
might be disclosed to or learned by the Company. After termination of this
Agreement, the Company shall return all property belonging to the Distributor
and shall keep all proprietary information in confidence and shall not use or
disclose any such information for its own purposes or for the benefit of any
third party without the prior written consent of the Distributor.
<PAGE>
3.11 Marketing Literature/Promotional Material. The Company shall provide the
Distributor with a reasonable amount of sales brochures, catalogs, videotapes
and other sales and promotional material prepared from time to time by the
Company in regard to the PRS.
Any translation of these materials into Japanese shall be the responsibility of
the Distributor. It is agreed that the Distributor may affix its own name, logos
and trademarks on sales materials, identifying the Distributor as an authorized,
exclusive distributor of the Products in the Territory.
3.12 Regulatory/Government Approvals. The Company shall provide to the
Distributor all documentation and assistance which is reasonably necessary for
the Distributor to obtain the regulatory or other governmental approvals and
clearances necessary for marketing and distribution of the Products in the
Territory. The Distributor agrees to use its reasonable efforts to obtain such
regulatory or other governmental approvals and clearances in a timely manner in
the Territory.
It is contemplated that the Distributor files application(s) for such approvals
or clearances after the Company has secured the GMP, or is in the process of
securing the GMP, under the United States FDA regulations and has provided the
Distributor with all information prepared for obtaining such GMP status.
The Company further agrees to provide the Distributor with all current
information of the kind which is generally made available by manufacturers of
medical devices to their sales and service personnel concerning hardware and
software modifications or upgrades to the Products.
The Distributor also agrees to report to the Ministry of Health and Welfare of
Japan accumulated clinical results, including occurrence of side effects,
obtained by the customer sites through use of the PRSs. In case of any problem
which has to be dealt with as a manufacturer of the PRS, the Company shall
provide necessary technical assistance including remodeling of the PRSs without
charge to the Distributor and the customers.
The Company shall use its reasonable efforts to cause Radionics, Inc.
("Radionics") to obtain any regulatory or other governmental approvals and
clearances for marketing and distribution of its stereotactic frame so as to
help the sale and marketing of the PRS by the Distributor in the Territory. The
Company agrees to negotiate with Radionics to sell the frame to customers of the
PRS in the Territory at a discount price.
<PAGE>
ARTICLE IV TECHNICAL RIGHTS
4.01 No License Granted to Distributor. Nothing in this Agreement shall be
deemed or construed to create or grant to the Distributor any license or other
rights in or to the PRS, any other Product or any component thereof except as
expressly set forth in this Agreement.
4.02 Ownership of improvements; Fixtures. All improvements, upgrades or
modifications to the PRS, any other Product or any component thereof developed
by the Distributor by the use of proprietary information of the Company which is
made available to the Distributor under this Agreement or the clinical trial
agreement referred to in Section 5.01 of this Agreement, shall be solely owned
by the Company and the Distributor agrees to execute or to cause to be executed
such documents and to take or to cause to be taken such other actions as the
Company may deem necessary or desirable to confirm its ownership of such
improvements, upgrades or modifications. All improvements, upgrades or
modifications developed by the Distributor in a manner other than described in
the preceding sentence, including any interfacing fixture, between the PRS and
the frame or any other device for use with the PRS, shall be solely owned by the
Distributor. The Distributor will promptly notify the Company in the event the
Distributor or any of its affiliated companies develop any improvements,
upgrades or modifications to the PRS, any other Product or any component
thereof. The Distributor will grant to the Company a worldwide, non-exclusive
license to utilize any such improvements, upgrades or modifications developed by
the Distributor in connection with the PRS outside the Territory at a
commercially reasonable royalty.
ARTICLE V JAPANESE CLINICAL TRIAL PROGRAM
5.01 The Distributor agrees to conduct the clinical trials of the PRS using two
complete systems of the PRS which will be purchased by the Distributor from the
Company, the details of which will be specified in a clinical trial agreement to
be entered into between the parties hereto.
ARTICLE VI TERMINATION
6.01. Termination of Agreement
A. The initial term of this Agreement shall commence on the execution of this
Agreement and shall expire three (3) years after all necessary legal, regulatory
or administrative approvals to import, market, sell and use the PRS in the
Territory is first obtained. This Agreement will automatically renew for
continuous one (1) year terms each year thereafter unless either party gives
written notice to the other party of its intention not to renew this Agreement
at least one hundred eighty (180) days prior to the expiration of the initial or
any renewal term hereof. If the clinical trial agreement between the parties is
terminated for any reason other than as provided in Section 5.01 A(i) of that
agreement, then this Agreement shall terminate on the date of termination of the
clinical trial agreement. This Agreement may also be canceled at any time by
either party upon thirty (30) days prior written notice upon breach of any
material term or
<PAGE>
condition of this Agreement, and this Agreement shall be deemed terminated at
the end of such thirty (30) day period if such breach is not cured before such
date.
B. The parties expressly acknowledge that no franchise, partnership or joint
venture relationship exists or is intended to exist between the parties hereto
during the term of this Agreement.
C. Termination of this Agreement will not release the Distributor or the
Company from the obligation to pay any amounts owing the other, nor release the
Distributor from the obligation to pay for orders accepted by the Company prior
to the effective date of termination, nor Company's obligation to deliver the
Product whose order has been accepted prior to the date of such termination. In
addition, and without limiting the foregoing, both parties agree to discuss how
to maintain the Products delivered to locations in the Territory (or orders for
which have been accepted by the Company) prior to the date of such termination.
ARTICLE VII GENERAL PROVISIONS
7.01 No Agent or Legal Representative Status. This Agreement does not make
either party the agent or legal representative of the other for any purpose
whatsoever nor does it grant either party any authority to assume or to create
any obligation on behalf of or in the name of the other. Neither party owes the
other any fiduciary obligation.
7.02. Distributor's Responsibility for Its Operation. Except as provided
otherwise in this Agreement, the Company has no liability in connection with the
establishment or conduct of the Distributor's expenditures, liabilities and
obligations incurred or assumed by the Distributor in connection with the
Distributor's responsibilities under this Agreement.
7.03 Taxes. The Distributor will pay all Japanese taxes and will file required
tax returns related to its Distributorship operations and will hold the Company
harmless from any claims or demands made by any taxing authority with respect
thereto.
7.04 Notices. Any notice, demand or request required or permitted to be given
hereunder shall be in writing shall be in English, shall be sent to the address
or facsimile number set forth below, and shall be given by registered or
certified mail, internationally recognized courier service (e.g. Federal
Express, DHL), or by facsimile. Any such notice, demand or request shall be
deemed effective (i) five (5) days after having been deposited in the mail,
first class airmail postage prepaid for overseas notice, three (3) days for
domestic notices, (ii) three (3) days after deposit with an internationally
recognized courier service, or (iii) upon receipt if delivered by facsimile.
If to the Company:
Address: 400-1 Totten Pond Road
Waltham Massachusetts, U.S.A 02154
Attention: President
<PAGE>
Facsimile Number: 617-290-0595
If to the Distributor:
Address: 26-5, 3-Chome, Hongo, Bunkyo-ku
Tokyo 113 Japan
Attention: President
Facsimile Number: 03(3813)7625
7.05 No Implied Waivers. The failure either party to require performance by the
other party of any provisions hereof will in no way effect the right to require
such performance at any time thereafter, nor will the waiver by either party of
a breach of any provisions hereof.
7.06 Assignment of Rights or Delegation of Duties. Neither this Agreement,
nor the rights or obligation of either party hereunder, may be sold, assigned or
otherwise transferred without the prior written approval of the other party.
7.07 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts, U.S.A. applicable
to contracts made, accepted and performed wholly within The Commonwealth of
Massachusetts, without application of principles of conflicts of laws. The
parties agree to submit to the jurisdiction of the courts of The Commonwealth of
Massachusetts should any dispute arise with respect to the interpretation or
enforcement of this Agreement.
7.08 Official Language. The official language of this Agreement shall be in
English, provided, however, that a Japanese translation of this Agreement shall
be prepared for the Distributor's reference.
7.09 Sole Agreement of Parties. Except as otherwise provided or referred to
herein, neither party has made any promises to the other, and there are no
other agreements or understandings, either oral or in writing, between the
parties affecting this Agreement or relating to the subject matter covered by
this Agreement. This Agreement cancels and supersedes all previous agreements
between the parties that relate to any matters covered herein.
7.10 Amendments. No agreement between the Company and the Distributor which
relates to matters covered herein, and no change, addition to (except the
filling in of blank lines)
<PAGE>
or deletion of any printed portion of this Agreement, will be binding unless it
is approved in writing and signed by the duly authorized representatives of both
parties.
IN WITNESS WHEREOF, the parties hereto through their respective duly authorized
representatives have executed and delivered the Agreement as of the date first
above written.
TOSHIBA MEDICAL SYSTEMS CO., LTD. PHOTOELECTRON CORPORATION
By: /s/[SIGNATURE APPEARS HERE] By: /s/Peter M. Nomikos
---------------------------- ----------------------------
Title: President Title: President & CEO
Dec. 22, 1995 Dec. 26, 1995
- ------------------------------- -------------------------------
Date Date
<PAGE>
SCHEDULE A
TERRITORY
---------
Territory: Japan
<PAGE>
SCHEDULE B
THE PRODUCT
-----------
The PRS, as used in this Agreement, shall include the following items:
1. PRS probes(2) 8. Electrometer
2. PRS control box 9. Ionization chamber
3. Probe adjuster 10. Dosimetry computer
4. Photodiode array 11. Dosimetry tank control electronics
5. External radiation monitor 12. Dosimetry tank
6. Sterlization tray 13. Radiochromic film reader
7. Laptop computer 14. Phantom
The specifications for the foregoing items will be set forth in Attachment
1 to this Schedule B prior to commercial sales of the PRS in the Territory. It
is understood that any material change in the specifications of the PRS
necessitated by changes in the requirements of the Japanese government, customer
usage or service/warranty matters shall be timely advised by the Distributor to
the Company in writing. It is further understood that the Company will not
knowingly make any material changes to the PRS specifications without first
advising the Distributor of the nature of the changes so that the Distributor
can evaluate any potential impact on Japanese government approvals, customer
usage or service/warranty matters. The Company shall consider reasonable
requests of the Distributor in regard to the implementation of such
specification changes in view of legal requirements and marketing circumstances
in the Territory. The Company, as a manufacturer, shall be responsible for all
additional costs with respect to implementation of such changes, and the
Distributor shall be responsible for all additional costs with respect to
import, marketing and sale of the PRS implementing such changes.
Schedule B, Attachment 1 - Product Specifications
[To be supplied]
<PAGE>
SCHEDULE C
PRICES
------
The Company's price to the Distributor for the Products will be according to the
following schedule:
PRS/Parts/Accessories Price
- --------------------- -----
[To be negotiated at the proper time]
The discount rate and the terms of payment shall be negotiated at the proper
time.
Terms of Payments
- -----------------
The payment under Schedule C shall be made by wire transfer to the following
bank account within thirty (30) days after shipment of each Product
Wire transfer will be made to:
Account Number:
Bank:
Address:
[INITIALS APPEAR HERE]
[INITIALS APPEAR HERE]
Schedule C, Attachment I - Purchase Order Form
[To be discussed]
<PAGE>
SCHEDULE D
SALES PLAN
----------
Period Months Quantity
- ------ ------ --------
The Distributor shall establish the initial sales plan for the subsequent twelve
(12) months period no later than three (3) months after the Company receives
approval under PAL to import, market, sell and use the PRS in the Territory.
Subsequent sales plans shall cover each six (6) month period and shall be
supplied by the Distributor no later than thirty (30) days prior to the end of
the first and each subsequent six (6) month period during the term of this
Agreement.
[INITIALS APPEAR HERE]
[INITIALS APPEAR HERE]
<PAGE>
SCHEDULE E
COMPANY LIMITED WARRANTY
------------------------
The Company warrants to the Distributor that, except as otherwise provided
below, the PRS shall be free from defects in materials and workmanship for a
period of the shorter of either fourteen (14) months from the date the PRS
passes the Distributor's acceptance inspection or twelve (12) months from the
date the PRS passes the Customer's acceptance inspection. Parts and Accessories
are warranted to be free from defects in materials and workmanship for a period
of twelve (12) months from the date such Parts and Accessories pass the
Distributor's acceptance inspection.
During the time the Company Limited Warranty is in effect for any Product, the
Company shall, at its option, either repair the defective Product or provide
without charge to the Distributor all replacement Parts necessary to correct any
such Product which proves to be defective and shall pay all shipping and labor
expenses associated with such replacement.
The Company Shall repair or replace, at its option, any defective component of
the PRS, or any Parts and Accessories, respectively, in accordance with the
above warranty, provided that the defective item being replaced is returned to
the Company within sixty (60) days of receipt of the replacement parts, shipping
paid on delivery (by the Company).
The Company neither assumes nor authorizes anyone to assume for it any other
obligation or liability whatsoever in connection with the Products, and the
Company's sole responsibility in all cases is to repair or replace the defective
Product.
This Company Limited Warranty does not apply to any Product which has been
damaged as a result of accident, misuse, or abuse by the Distributor or its
customers, or as a result of service or any modification by anyone other than an
authorized Company dealer, distributor or service representative.
THIS LIMITED WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AND THE COMPANY EXPRESSLY DISCLAIMS ANY OTHER WARRANTIES.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER OR TO ANY THIRD PARTY, UNDER ANY
CIRCUMSTANCES, FOR ANY SPECIAL, PUNITIVE CONSEQUENTIAL OR INCIDENTAL DAMAGES
WHATSOEVER, INCLUDING ANY COSTS, EXPENSES, LOST PROFITS OR ANY OTHER CLAIMED
LOSSES HOWEVER DESIGNATED.
<PAGE>
SCHEDULE F
LIST OF PARTS AND ACCESSORIES FOR THE PRS
------------------------------------------
[To be provided]
[INITIALS APPEAR HERE]
[INITIALS APPEAR HERE]
<PAGE>
EXHIBIT 10.16
AGREEMENT
This agreement effective as of the 1st day of February, 1991, between
Photoelectron Corporation, a corporation of the Commonwealth of Massachusetts,
having a principal place of business at 580 Winter Street, Waltham,
Massachusetts 02254 (hereinafter "PHOTOELECTRON"), and [XXX XXXXXXX XXXXXXXX
XXXXXXXXXXX, XXXXX XXXXXXXX XX XXXXXXXXXXXXX XXXXXXX XXXXXXXX, XXXXX XXXXXX],
Boston, Massachusetts [XXXXX] (hereinafter "[XXXXXXX]").
WITNESSETH;
WHEREAS, PHOTOELECTRON has developed a miniaturized x-ray generator
("DEVICE") which has potential application in the treatment of tumors;
WHEREAS, [XXXXXXX], through Dr. [XXXXXXXX XXXXXX] and others, has developed
certain scientific and clinical information and expertise pertaining to the
treatment of tumors and the use of animal models for evaluation of instrument
efficacy;
WHEREAS, [XXXXXXX] wishes to perform certain tests with the DEVICE in
animal models and PHOTOELECTRON desires that it do so;
02/04/91 (eal) 1
<PAGE>
NOW THEREFORE, in consideration of the premises and of the faithful
performance of the covenants herein contained, the parties hereto agree as
follows:
1. DEFINITIONS
-----------
1.1 The term "PROJECT" shall mean the animal studies described in the
Protocol attached hereto as Appendix A.
1.2 The term "PRINCIPAL INVESTIGATOR" shall mean Dr. [XXXXXXXX XXXXXX].
1.3 The term "INVESTIGATOR" shall mean PRINCIPAL INVESTIGATOR and any
other member of [XXXXXXX]'s professional staff, graduate student, postdoctoral
fellow, undergraduate student, or employee of [XXXXXXX] who shall participate
under the direction of the PRINCIPAL INVESTIGATOR in the performance of PROJECT.
1.4 The term "RESULTS" shall mean any test results, data, and other
information produced in the performance of PROJECT.
2. OBLIGATIONS OF [XXXXXXX] AND PHOTOELECTRON
------------------------------------------
(a) During the term of this Agreement, [XXXXXXX] shall:
02/04/91 (eal) 2
<PAGE>
(i) through PRINCIPAL INVESTIGATOR and any other INVESTIGATOR
perform PROJECT;
(ii) promptly and systematically disclose to PHOTOELECTRON the
RESULTS, which PHOTOELECTRON shall be entitled to use to the
extent such use does not infringe any patent assigned or
licensed to [XXXXXXX] which is not assigned to PHOTOELECTRON.
(b) During the term of this Agreement, PHOTOELECTRON shall:
(i) provide [XXXXXXX] with DEVICE;
(ii) provide INVESTIGATORS with information and instruction
pertaining to DEVICE as needed to perform the PROJECT;
(iii) repair and maintain DEVICE as needed at [XXXXXXX] to assure its
proper functioning in the performance of the PROJECT.
02/04/91 (eal)
3
<PAGE>
(iv) to facilitate INVESTIGATORS' performance of the PROJECT,
PHOTOELECTRON shall, subject to the approval of the PRINCIPAL
INVESTIGATOR, have the right to be present at the animal studies
hereunder.
3. CONFIDENTIALITY AND PUBLICATION RIGHTS
--------------------------------------
[XXXXXX] cannot assure confidential treatment of any PHOTOELECTRON
proprietary information that might be disclosed to [XXXXXXX] or any
INVESTIGATOR, or of RESULTS. In the event that PHOTOELECTRON wishes to disclose
to an INVESTIGATOR any information which relates to PROJECT that PHOTOELECTRON
considers confidential, PHOTOELECTRON may enter into a separate Confidentiality
Agreement with the INVESTIGATOR. Such Confidentiality Agreement must be approved
as to form by the Director, Office of Technology Affairs at [XXXXXXX] and shall
provide a means for clearly identifying the information PHOTOELECTRON considers
to be proprietary and not abridge [XXXXXXX]'s or the INVESTIGATOR's traditional
rights to publish and communicate with academic colleagues regarding the results
of research conducted at [XXXXXXX]. Without limiting the generality of the
foregoing, it is understood and acknowledged that the PRINCIPAL INVESTIGATOR has
entered into a Confidentiality
4
<PAGE>
Agreement with PHOTOELECTRON, dated November 1, 1989 which is acceptable to
[*****].
PRINCIPAL INVESTIGATOR shall have the right to present or publish RESULTS
and shall provide an early draft of any such presentation or manuscript for
review by PHOTOELECTRON at least thirty (30) days prior to its presentation or
submission for publication. At the end of such thirty (30) days, PRINCIPAL
INVESTIGATOR shall have the right, in his/her discretion, to make such
presentation or to submit such manuscript for publication. PRINCIPAL
INVESTIGATOR and PHOTOELECTRON shall cooperate in identifying and removing any
previously identified information which is proprietary and confidential to
PHOTOELECTRON, as appropriate. It is understood, however, that [*****] shall not
be responsible for any INVESTIGATOR's failure to remove such PHOTOELECTRON
proprietary and confidential information. Proper reference will be given to
PHOTOELECTRON as the developer of the DEVICE.
4. INVENTIONS
----------
Any INVESTIGATOR who shall make an invention, solely or jointly, in the
performance of PROJECT (hereinafter referred to as INVENTION) shall promptly
report in writing such INVENTION to PHOTOELECTRON and [*****] and shall, upon
written request of PHOTOELECTRON given within ninety (90) days of
PHOTOELECTRON's
5
<PAGE>
receipt of such report, assign all of his or her rights, title and interest in
the INVENTION to PHOTOELECTRON.
5. LIABILITY
---------
[*****] and PHOTOELECTRON shall each be responsible and shall hold the
other harmless for any injury to persons or damage to property to the extent
that such injury or damage is caused by the negligence or willful misconduct of
their employees or staff in carrying out the PROJECT; provided, however, that
PHOTOELECTRON will defend, indemnify and hold harmless [*****] and its trustees,
employees and staff against any and all actions, suits, claims, demands or
prosecutions that may be brought or instituted against [*****] and/or its
trustees, employees and staff based on or arising out of the manufacture, use,
sale or other distribution of a commercially available device by PHOTOELECTRON,
its affiliates or licensees except to the extent any such action, suit, claim,
demand or prosecution is based on the negligence or willful misconduct of
[*****] and/or its trustees, employees or staff in the use of such device. In
the event that an assignment of an INVENTION is made pursuant to Paragraph 4
above, the provisions of this paragraph 5 shall be replaced by the provisions of
Appendix B attached hereto.
6
<PAGE>
6. TERM AND TERMINATION
--------------------
6.1 This Agreement shall have a term of one year beginning with the
EFFECTIVE DATE of this Agreement and may be extended thereafter by mutual
agreement.
6.2 If either party shall fail to faithfully perform any of its
obligations under this Agreement, the nondefaulting party may give written
notice of the default to the defaulting party. Unless such default is corrected
within thirty (30) days after such notice, the notifying party may terminate
this Agreement upon thirty (30) days prior written notice.
7. MISCELLANEOUS
-------------
7.1 Each party agrees that it will not use the name or logo of the other
party or of any employee, staff member or student of the other party in any
advertising, promotional material or sales literature, or any other publication
without the prior written approval of the party or person whose name or logo is
to be used.
7.2 This Agreement constitutes the entire understanding between the
parties with respect to the subject matter thereof, and supersedes and replaces
all prior agreements, understandings, writings and discussions between the
parties relating to said subject matter.
7
<PAGE>
7.3 This Agreement may be amended and any of its terms or conditions may
be waived only by a written instrument executed by the parties or, in the case
of a waiver, by the party waiving compliance.
7.4 The obligations of the parties under Sections 3, 4, 5 and 7.1 shall
survive the termination of this Agreement.
7.5 This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the Commonwealth of Massachusetts.
THE PARTIES have duly executed this Agreement to be effective as of the
date first above written.
PHOTOELECTRON CORPORATION [*****]
BY: /s/ Peter M. Nomikos BY: /s/ [*****]
--------------------------- ------------------------------------------
TITLE: C.E.O. TITLE: [XXXXXXXXXX]
------------------------ ---------------------------------------
DATE: Feb. 19, 1991 DATE: Feb. 8, 1991
------------------------- ----------------------------------------
I have read paragraph 3 of the foregoing Agreement and agree to comply
therewith.
By: /s/ [*****], M.D.
---------------------------
Name: [*****], M.D. Date: 2/12/91
------------------------- ----------------------------------------
8
<PAGE>
APPENDIX B
----------
9(a) PHOTOELECTRON shall indemnify, defend and hold harmless [*****] and
its trustees, officers, medical and professional staff, employees, and agents
and their respective successors, heirs and assigns (the "Indemnities"), against
any liability, damage, loss, or expense (including reasonable attorney's fees
and expenses of litigation) incurred by or imposed upon the Indemnities or any
one of them in connection with any claims, suits, actions, demands or judgments:
(i) arising out of any theory of product liability (including, but not limited
to, actions in the form of tort, warranty, or strict liability) concerning the
DEVICE or any modification thereof; (ii) arising out of any side effect or
adverse reaction, illness or injury resulting from Indemnities' performance of
the Study and occurring to any person involved in the Study; or (iii) arising
out of damage to any property resulting from and occurring during the
Indemnities' performance of the Study. [*****] agrees to notify PHOTOELECTRON
promptly of any such claim, suit, action, demand or judgment and [XXXXX] and
PRINCIPAL INVESTIGATOR agree to reasonably cooperate with PHOTOELECTRON in the
handling thereof.
(b) PHOTOELECTRON's indemnification under (a)(i) shall apply to any
liability, damage, loss or expense whether or not it is attributable to the
negligent activities of the indemnitees. PHOTOELECTRON's indemnification under
(a)(ii) and (a)(iii) shall
9
<PAGE>
not apply to any liability, damage, loss or expense to the extent that it is
attributable to the: (A) negligent activities, reckless misconduct or
intentional misconduct of the Indemnities, or (B) failure of the indemnitees to
adhere to the terms of the protocol for the Study.
(c) PHOTOELECTRON agrees, at its own expense, to provide attorneys
reasonably acceptable to the [*****] to defend against any actions brought or
filed against any party indemnified hereunder with respect to the subject of
indemnity contained herein, whether or not such actions are rightfully brought.
10. (a) At such time as DEVICE or any modification thereof is being
commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by PHOTOELECTRON or by a licensee, affiliate or agent of
PHOTOELECTRON, PHOTOELECTRON shall, at its sole cost and expense, procure and
maintain comprehensive general liability insurance in amounts not less than
$2,000,000 per incident and $2,000,000 annual aggregate, and naming the
Indemnitees as additional insureds. Such comprehensive general liability
insurance shall provide (i) product liability coverage and (ii) broad form
contractual liability coverage for PHOTOELECTRON's indemnification under
Paragraph 9 of this Agreement. If PHOTOELECTRON elects to self-insure all or
part of the limits described above (including deductibles or retentions which
are in excess of $250,000 annual aggregate) such self-
02/04/91 (eal)
10
<PAGE>
insurance program must be acceptable to the [*****] and the Risk Management
Foundation of the Harvard Medical Institutions, Inc. The minimum amounts of
insurance coverage required under this Paragraph 10 shall not be construed to
create a limit of PHOTOELECTRON's liability with respect to its indemnification
under Paragraph 9 of this Agreement.
(b) PHOTOELECTRON shall provide [*****] with written evidence of such
insurance upon request of [*****] PHOTOELECTRON shall provide [*****] with
written notice at least fifteen (15) days prior to the cancellation, non-renewal
or material change in such insurance.
(c) PHOTOELECTRON shall maintain such comprehensive general liability
insurance during (i) the period that the DEVICE or any modification thereof is
being commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by PHOTOELECTRON or by a licensee, affiliate or agent of
PHOTOELECTRON and (ii) a reasonable period after the period referred to in
(c)(i) above which in no event shall be less than fifteen (15) years.
02/04/91 (eal)
11
<PAGE>
Appendix A
What we are proposing to test in this pilot study is the effect on tumor
growth of a new device; a Free Electron X-Ray emitter.
The addition would be to Dr. [*****]'s existing protocol "Genetic
-------
Alteration of Nervous System Tumors". It would be an increase of 20 rats to
- -----------------------------------
Dr. [*****]'s current protocol. The additional rats would be used to determine
the effects of the irradiation, a dose response curve, and the associated
effects on adjacent tissues. Four groups of five would be used for initial dose
response estimates. Animals in each group would receive a set dose (X, 2X, 5X,
10X 50X).
Scheme: Day 1 (X-ray Irradiation). Immediate Sacrifice
Week 1 Group 2 Sacrifice
Week 2 Group 3 Sacrifice
Week 3 Group 4 Sacrifice
The X-ray source is effectively a point source at the tip of a probe
(approx 15 gauge needle). The new x-ray source is manufactured by Photoelectron
Corporation and has been reviewed by the research Patent Office.
Briefly, under anesthesia, the tumor site would be exposed as outlined in
Dr. [*****]'s protocol. The x-ray source would be positioned center mass of the
tumor, and activated for various periods of time. The animal would either be
sacrificed immediately, or surgically closed and allowed to recover for up to 3
weeks. The effects of the irradiation would be evaluated both grossly (visual
sub-renal capsule assays) and by histology for changes in tumor mass and
surrounding tissues. No pain or additional distress is expected. Animals will be
sacrificed with an anesthetic overdose as indicated.
Depending the initial results, a complete application would be submitted to
the SRAC to continue the studies.
<PAGE>
January 27, 1992
Mr. [*****]
[XXXXX]
[*****]
Re: Extension of Term of Agreement of February 1, 1991
Between Photoelectron Corporation and [*****]
--------------------------------------------------
Dear Mr. [*****]
Pursuant to the above-referenced Agreement Dr. [*****] and other
members of the staff of [*****] are performing animal studies in which an X-ray
source supplied by Photoelectron is being utilized to irradiate live animal
tissue. In order to complete ongoing studies, the parties desire to extend the
one year term currently specified in the Agreement. The Protocol should also be
amended to reflect the fact that [*****] has conducted animal studies in
addition to those set forth in Appendix A as initially written.
Accordingly, the parties agree to amend the Agreement of February 1, 1991 as
follows:
1. The single sentence of Paragraph 6.1 is amended to read "This Agreement
shall have a term of eighteen (18) months beginning with the EFFECTIVE DATE of
this Agreement and may be extended thereafter by mutual agreement."
2. Appendix A is amended by deleting the current Appendix A and
substituting for it the document titled "Appendix A (1/27/92)", attached to and
forming part of this letter agreement.
3. Except as amended pursuant to the above-noted paragraphs 1. and 2. of
this letter agreement, all provisions of the Agreement shall remain in effect as
written.
If you agree with these amendments, please have the appropriate official of
[XXXXX] sign and date both originals of this letter in the spaces below, keep
one for your records, and return the other original to me.
<PAGE>
Mr. [*****]
January 27, 1992
Page 2
Thanks for your efforts. We look forward to continued cooperation and
success in these studies.
Sincerely,
PHOTOELECTRON CORPORATION
/s/Peter M. Nomikos
Peter M. Nomikos
President and
Chief Executive Officer
Accepted and agreed:
[*****]
By:/s/[*****]
---------------------------------------
Typed/Printed
Name: [*****]
-----------------------------------
Title: [XXXXX]
----------------------------------
Date: 20 March 1992
-----------------------------------
60C
<PAGE>
Appendix A 1/27/92
-------------------
This pilot study is performed to provide data on the safety in use of, and the
radiative and thermal effects caused by, a new x-ray source. This source is
effectively a point source at the top of a thin probe. The device is
manufactured by Photoelectron Corporation and has been reviewed by the Research
Patent Office.
A series of on-going animal experiments has been, and is continuing to be,
conducted in rats and dogs. A total of 13 livers of rats were irradiated in
vivo. Surgery to expose the rat liver was performed in the neurosurgery animal
laboratory at the [*****] in Boston. Livers were selected for treatment because
this organ is known to be easily accessible, relatively large, and resistant to
radiation. The probe, held firmly in a stand, was inserted between the lobes of
the liver. Continual flow of a small quantity of saline solution along the
outside of the probe lubricated the tip to eliminate frictional damage to the
liver due to the relative motion, caused by breathing, between this organ and
the probe. To insure material biocompatibility, the probe was covered by a thin
latex finger cut from a surgical glove.
In the first set of experiments, nine livers were irradiated, three of which
were for 1, 2, and 3 hours with x-rays generated by a 10 uA electron beam
accelerated in the probe to the maximum voltage of 30 kV. Similarly, three more
exposures were performed for the same durations but with beam parameters of 20kV
and 15uA, and the last three at 15 kV and 23 Micro Amphs.
In the 30 kV and 20 kV tests, x-ray emission was sufficiently intense near the
probe surface to produce small lesions by the end of the treatment. All rats
were sutured after irradiation. Those irradiated by x-rays generated with the 30
kV, 10 Micro Amphs electron beams for 1, 2 and 3 hours were sacrificed,
respectively after 7, 10 and 13 days. Complete tissue necrosis was observed in a
region around the probe ranging in diameter from 5mm for the shortest radiation
time to 10 mm for the longest. A sharp demarcation was noted between the
necrotic and normal tissues with little inflammatory response in the periphery.
In one experiment (rat irradiated for 3 hours with x-rays generated by the 20
kV, 15 Mirco Amphs beam) a thermometer was placed in contact with the probe.
During the treatment, a stable maximum rise in temperature of 9.5C was measured
(from an initial value 31C). With a saline drip of 1 drop each 2 minutes along
the probe, this increase fell slightly to 8C.
Subsequently, 3 more livers of rats were irradiated, each for 3 hours with x-
rays generated by a beam with higher current of 25 Micro Amphs accelerated to
the maximum voltage of 30 kV. These rats were sutured, and two died within the
next 11 days. The last one was sacrificed after 13 days and a similar 6-7 mm
diameter lesion was observed to have formed. In comparison to the previously
studied animal the size of this lesion was smaller than expected. A final liver
was irradiated at the same conditions as the three previous animals were. This
animal died within 3 hours of irradiation, apparently due to complications
caused by the anesthesia. An 8-9 mm lesion was seen with incomplete necrosis.
Rat C6 glioma cells were seeded subcutaneously in order to provide a test
vehicle for studying the effects of probe irradiation of tumors. Although
several tumors did grow most spontaneously regressed and disappeared before any
x-ray treatment
<PAGE>
was performed. However, it was possible to place the probe tip in contact with
one such tumor and using a 25 Micro Amphs electron beam accelerated to 30 kV x-
rays were generated for 2 hours. However, the animal died from anesthesia
complications. Tissue necrosis was observed throughout the tumor, including
within areas not irradiated by the probe, suggesting that tumor cells were being
destroyed by the rat's immune system.
A total of 4 dog brains were irradiated by the x-ray probe. Three of these were
acute dogs, sacrificed right after treatment, which had primarily been used in
other experiments. The objective of irradiating these brains was to determine
the degree to which hyperthermia might be generated by heat dissipation from the
probe.
In 2 of the dogs the probe was intradural and placed in contact with the exposed
cortex. The source was operated for 1 hour with a 25 Micro Amphs electron beam
accelerated to 30 kV. Temperature rise, as measured by a thermistor
(manufactured by Yellow Springs) placed 1-2 mm from the probe, recorded an
increase of 7 and 8C, respectively, from a starting 32 C for the 2 dogs.
Pathological examination showed no changes. In the third dog the probe was
inserted 5 mm into the brain tissue. With the source operating at the same
conditions as for the other two dogs, the thermistor measured an increase of 6C
from an initial temperature of 32 C at 1-2 mm from the probe. Subsequent
pathology tests showed no formation of necrotic tissue. Accordingly, from the
results of these three dog experiments hyperthermia should not be a contributing
process to tissue necrosis during use of the x-ray source.
A chronic fourth dog was exposed to the x-ray source operating at the same
conditions with the probe tip inserted 1.5 cm into the right lobe
(mid-frontal). From air measurements and MCNP code predictions the dose at 1 cm
from the probe center was determined to be 850 rads. This dog was sutured after
treatment and sacrificed after 1 day because it had become comatose and
hypothermic and had experienced seizures on the contralateral side. Pathological
examination revealed that in all likelihood the hypothalmus and possibly the
thalmus had been affected by the proximity of the probe to these glands. The
area around the probe showed signs of hemorrhage.
A total of 5 dog livers were irradiated by the x-ray probe. The conditions at
which the probe was operated were 30 kV, 15 Micro Amphs, 1 hour (except one
which was irradiated for 45 minutes). Two dogs were acute, and one of these (the
one irradiated for 45 minutes) provided data on temperature rise in liver tissue
caused by thermal dissipation from the target in the probe. Thermistor
measurements 1 mm from the probe inserted 7 mm into the liver recorded a stable
increase of 2.5 C after 10 minutes, from an initial temperature of 34.5 C. After
the probe was turned off the temperature returned to its initial value.
Two other dogs were chronic, and the first of these, which had the probe
inserted 2 cm into its liver, was sacrificed after 3 days. Pathological
examination showed coagulation necrosis and hemorrhage around the probe hole,
but no radiation-induced necrosis. The other dog was irradiated on June 11, 1991
and sacrificed at the end of August. In this dog, the probe had been inserted at
one site 2 cm from a hepatic artery, and sequentially at a second site as well.
Each irradiation was for 1 hour. Blood samples were taken every two days to
monitor liver function. No abnormalities were observed. Pathological examination
showed well defined cell changes within a 7-9 mm diameter area of tissue. The
fifth dog
<PAGE>
irradiated in mid July was sacrificed after three months. Little necrosis was
observed.
Recent measurements have provided thermal profiles, along radii outward from the
probe tip, in three acute dog brains. One chronic dog liver was irradiated and
another will be done to determine if there are any long term damaging effects
due to the observed minor hyperthermia. A few additional tests, radiative and
thermal, may be performed in rats, rabbits, or dogs, as necessary.
Briefly, under anesthesia, the animal tissue is exposed according to accepted
protocols. The x-ray source is positioned with the tip either between lobes of
the liver or within liver or brain tissue and activated for various periods of
time (one to three hours). The animal is sacrificed either immediately, or
surgically closed and allowed to recover for up to three months. The effects of
irradiation are evaluated both grossly and histologically. No pain or
additional distress is expected to the animal. Animals are sacrificed with an
anesthetic overdose.
<PAGE>
EXHIBIT 10.17
CLINICAL TRIAL AGREEMENT
Agreement made as of the first day of August, 1992, between [*****] , a
not-for-profit corporation doing business as [*****], having a principal place
of business at [*****] ("[*****]"), [*****], M.D., Department of Neurosurgery,
[*****], [*****], [*****]("Principal Investigator") and Photoelectron
Corporation, a corporation having an office at 400-1 Totten Pond Road, Waltham,
Massachusetts 02254 ("Company").
1. Principal Investigator agrees to conduct a clinical study of
Miniaturized X-Ray Generator (hereinafter referred to as the "Study Device") in
accordance with the study protocol entitled "Investigational Plan for
Preliminary Trials of Model IXR-2 Photonic Radiosurgery Source", a copy of which
is attached hereto as Exhibit A (hereinafter referred to as the "Study"). In the
event of any conflict between Exhibit A and the provisions of this Agreement,
the provisions of this Agreement shall govern.
2. The Study will be conducted by Principal Investigator at [*****] with
the prior approval and ongoing review of all appropriate and necessary review
authorities and in accordance with all federal, state and local laws and
regulations. Principal Investigator shall provide Company with written evidence
of review and approval of this Study by [*****] Institutional Review Board prior
to the initiation of the Study and of the Board's continuing review and approval
of the Study whenever it is reviewed, but at least once per year. All volunteers
will meet the legal age requirements of the Commonwealth of Massachusetts, the
state in which the Study is to be conducted.
3. Principal Investigator will furnish Company with the data resulting
from the Study in signed case report forms within a reasonable time after
completion of each case and Company shall have the unrestricted right to use
such data. Study records shall be made available to Company representatives upon
request for comparison with case report forms. Such records will also be made
available upon request for review by representatives of the U.S. Food and Drug
Administration. Records of the study including either the original or a copy of
all volunteer consent forms shall be retained in conformance with applicable
federal regulations.
4. Principal Investigator will be free to publish the results of the Study
subject only to the provisions of Paragraph 5 regarding Company's confidential
information. Company will be furnished with a copy of any proposed publication
for review and comment prior to submission for publication, for manuscripts, at
least thirty (30) days prior to submission, and for abstracts, at least seven
(7) days prior to submission. At the expiration of
1
<PAGE>
such thirty (30) day or seven (7) day period, Principal Investigator may proceed
with submission for publication.
5. It is understood that [*****] cannot assure confidential treatment of
any information that may be disclosed to any [*****] staff member, employee or
student. In the event that Company wishes to disclose to any [*****] personnel
any information which relates to the Study that Company considers confidential,
Company may enter into a separate Confidentiality Agreement with such [*****]
personnel. Such Confidentiality Agreement must be approved as to form by the
Director, Office of Technology Affairs, [*****] and shall provide a means for
clearly identifying the information Company considers to be proprietary and not
abridge the traditional rights of [*****] or [*****] personnel to publish and
communicate with academic colleagues regarding the results of research conducted
at [XXXXX].
6. [*****] and Company agree that Company shall have an opportunity to
acquire by assignment all rights to each invention which constitutes a new use
or modification of the Study Device and is made by [*****] personnel, solely or
jointly, in the performance of the Study (hereinafter referred to as
"Invention"). Each Invention shall be promptly reported in writing to Company
and to [*****] and Company shall have ninety (90) days following receipt of
such report to submit a written request to [*****] to acquire rights to the
reported Invention. In the event Company so elects to acquire rights to an
Invention, [*****] shall promptly obtain from [*****] personnel appropriate
assignments of all rights in the Invention held by such personnel and thereafter
shall assign all its rights to Company.
7. The term of this Agreement shall be one (1) year from the date hereof.
Any party hereto shall have the right to terminate the Study and this Agreement
at any time upon thirty (30) days prior written notice thereof to the other
parties. In the event of termination, the amount of the reimbursement under
Paragraph 9(e) by Company to support the Study shall be appropriately prorated.
The obligations of the parties under Paragraphs 3,4,5,6,8,10,11 and 13 shall
survive the termination of this Agreement.
8. At the completion or early termination of the Study, an accounting will
be made of the clinical supplies provided for the Study by Company and any such
supplies remaining shall be returned to Company.
9. Company agrees to support this Study by: (a) providing a Study Device
to the Principal Investigator; (b) providing the Principal Investigator with
information and instruction pertaining to the Study Device and personnel to
operate the Study Device as needed to perform the Study; (c) repairing,
maintaining, and modifying the Study Device as needed during the Study; (d)
monitoring the Study; and (e) providing [XXXXX] with a research
7/22/92
2
<PAGE>
grant for one-half the salary of a nurse designated by [***] to assist
subjects participating in the Study for a period of one (1) year in the amount
of Thirty-Seven Thousand dollars ($37,000) which includes indirect costs in the
amount of Four Thousand Seven Hundred Seventy dollars ($4770), payable to
[XXXXX] as follows:
Eighteen Thousand Five Hundred Dollars ($18,500) upon execution of this
Agreement; and,
Eighteen Thousand Five Hundred Dollars ($18,500) on February 1, 1993.
Checks should be made payable to [***] and
sent, along with a letter indicating the name of the Principal Investigator and
the specific clinical trial agreement for which the funds are intended, to:
[***]
10. (a) Company shall indemnify, defend and hold harmless [***] and its
trustees, officers, medical and professional staff, employees, and agents and
their respective successors, heirs and assigns (the "Indemnitees"), against any
liability, damage, loss, or expense (including reasonable attorney's fees and
expenses of litigation) incurred by or imposed upon the Indemnitees or any one
of them in connection with any claims, suits, actions, demands or judgments: (i)
arising out of any theory of product liability (including, but not limited to,
actions in the form of tort, warranty, or strict liability) concerning the Study
Device or any modification thereof developed pursuant to this Agreement and made
by Company or a licensee, affiliate or agent of Company; (ii) arising out of any
side effect or adverse reaction, illness or injury resulting from Indemnitees'
performance of the Study and occurring to any person involved in the Study; or
(iii) arising out of damage to any property resulting from and occurring during
the Indemnitees' performance of the Study. [***] agrees to notify Company
promptly of any such claim, suit, action, demand or judgment and [XXXXX] and
Principal Investigator agree to permit Company to control the defense and
disposition thereof (including, without limitation, all decisions to litigate,
settle or appeal) and further agree to reasonably cooperate with Company in the
handling thereof. Company agrees to keep [***] informed of the progress in the
defense and disposition of such claims and to consult with [***] with regard
to any settlement thereof which Company proposes to enter into.
(b) Company's indemnification under (a) above shall not apply to any
liability, damage, loss or expense to the extent that it is
7/22/92
3
<PAGE>
attributable to the: (i) negligent activities, reckless misconduct or
intentional misconduct of the Indemnitees; or (ii) failure of the Indemnitees to
adhere to the terms of the protocol for the Study.
(c) Company agrees, at its own expense, to provide attorneys reasonably
acceptable to the [XXXXXXX] to defend against any actions brought or filed
against any party indemnified hereunder with respect to the subject of indemnity
contained herein, whether or not such actions are rightfully brought.
11. (a) At such time as the Study Device or any modification thereof is
being commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by Company or by a licensee, affiliate or agent of
Company, Company shall, at its sole cost and expense, procure and maintain
comprehensive general liability insurance in amounts not less than $2,000,000
per incident and $2,000,000 annual aggregate and naming the Indemnitees as
additional insureds, with respect to claims arising out of Indemnitees'
performance of, or involvement in, the Study, except those claims attributable
to (i) or (ii) of subparagraph 10(b) of this Agreement. Such comprehensive
general liability insurance shall provide (i) product liability coverage and
(ii) broad form contractual liability coverage for Company's indemnification
under Paragraph 10 of this Agreement. If Company elects to self-insure all or
part of the limits described above (including deductibles or retentions which
are in excess of $250,000 annual aggregate) such self-insurance program must be
acceptable to the [XXXXXXX] and the Risk Management Foundation of the Harvard
Medical Institutions, Inc. The minimum amounts of insurance coverage required
under this Paragraph 11 shall not be construed to create a limit of Company's
liability with respect to its indemnification under Paragraph 10 of this
Agreement.
(b) Company shall provide [XXXXXXX] with written evidence of such insurance
upon request of [XXXXXXX]. Company shall provide [XXXXXXX] with written notice
at least fifteen (15) days prior to the cancellation, non-renewal or material
change in such insurance.
(c) Company shall maintain such comprehensive general liability insurance
during (i) the period that the Study Device or any modification thereof is being
commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by Company or by a licensee, affiliate or agent of Company
and (ii) a reasonable period after the period referred to in (c)(i) above which
in no event shall be less than five (5) years.
12. The terms of this Agreement can be modified only by a writing which is
signed by [XXXXXXX], Principal Investigator and Company.
13. No party to this Agreement shall use the name of any
7/22/92
4
<PAGE>
other party or of any staff member, employee or student of any other party or
any adaptation thereof in any advertising, promotional, sales literature or
publicity or in any non-scientific publication without the prior written
approval of the party or individual whose name is to be used. For [XXXXXXX],
such approval shall be obtained from the Director of News and Public Affairs and
for Company, from its Chief Executive Officer.
14. The provisions of this Agreement shall be interpreted under the laws of
the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
<TABLE>
<CAPTION>
PHOTOELECTRON CORPORATION [XXX XXXXXXX XXXXXXXX XXXXXXXXXXX
XXXXXXXX XXX XX XXXX XXX XXX XXXX]
<S> <C>
BY: Peter M. Nomikos BY: [XXXXXXXXXXXXXXXXXXXXXX]
----------------------------- -----------------------------------
TITLE: President TITLE: Director,
-------------------------- -------------------------------
Office of Technology Affairs
-------------------------------
DATE: AUG __,1992 DATE: 7/31/92
-------------------------------- ---------------------------------
PRINCIPAL INVESTIGATOR
/s/ [XXXXXXXX XX XXXXXXX XXXX]
--------------------------------------
[XXXXXXXX XX XXXXXXX XXXX]
DATE: 9/10/92
---------------------------------
</TABLE>
7/22/92
5
<PAGE>
AMENDMENT TO CLINICAL TRIAL
AGREEMENT EFFECTIVE AUGUST 1, 1992
BETWEEN PHOTOELECTRON CORPORATION, [XXX XXXXXXX
XXXXXXXX XXXXXXXXXXX AND XXXXXXXX XX XXXXXX], M.D.
Effective August 1, 1993, [XXX XXXXXXX XXXXXXXX XXXXXXXXXXX], a not-for-
profit corporation doing business as [XXXXXXXXXXXXX XXXXXXX XXXXXXXX], having
its principal place of business at [XXXXX XXXXXX], Boston, MA [XXXXX
("XXXXXXX")], [XXXXXXXX XX XXXXXX], M.D., Department of Neurosurgery,
[XXXXXXXXXXXXX XXXXXXX XXXXXXXX], Boston, MA [XXXXX] ("Principal Investigator")
and Photoelectron Corporation, a corporation having an office at 400-1 Totten
Pond Road, Waltham, Massachusetts 02254 ("Company") agree, for good and valuable
consideration to amend the Clinical Trial Agreement effective August 1, 1992
("Agreement") as follows:
1. In Paragraph 1 of the Agreement, the words "Model IXR-2 and Model Mark
2 of the" shall be inserted after the words "clinical study of".
2. In paragraph 1 of the Agreement, the following words shall be added as
the last sentence: "The parties agree that the Study shall also include the use
of the Study Device by the Principal Investigator for the treatment and follow-
up of not more than ten (10) additional patients on a compassionate use basis."
3. In paragraph 7 of the Agreement, the words "one (1) year from the date
hereof" shall be replaced with the words "until the execution of a clinical
trial agreement between [XXXXXXX], Company and Principal Investigator for a
Phase II trial of the Study Device, or for two (2) years from the date hereof,
whichever shall first occur."
4. Beginning with the Effective Date of this Amendment, Company shall
provide [XXXXXXX] with a research grant for one-half the salary of a nurse
designated by [XXXXXXX] to assist subjects participating in the Study which
shall be payable as monthly payments of Three Thousand Eighty-Three Dollars and
Thirty-Three Cents ($3,083.33) per month for the term of the Agreement (as such
term is amended pursuant to the immediately foregoing paragraph 3 of this
Amendment).
8/20/93
1
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to the Agreement
to be duly executed.
<TABLE>
<CAPTION>
PHOTOELECTRON CORPORATION [XXX XXXXXXX XXXXXXXX XXXXXXXXXXX]
<S> <C>
BY: /s/ Peter M. Nomikos BY: [XXXXXXX XXXX XXX]
--------------------------------- --------------------------------
TITLE: President & CEO TITLE: Director, Office of
----------------------------- ---------------------------
Technology Affairs
DATE: Nov. 12, 1993 DATE: 11/8/93
------------------------------- ------------------------------
PRINCIPAL INVESTIGATOR
/s/ [XXXXXXXX XX XXXXXX], M.D.
-----------------------------------
[XXXXXXXX XX XXXXXX], M.D.
DATE: [DATE APPEARS HERE]
------------------------------
</TABLE>
8/20/93
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EXHIBIT 10.18
INVESTIGATIONAL TREATMENT AGREEMENT
Agreement made as of the first day of September, 1994 (the "Effective
Date") between [XXX XXXXXXX XXXXXXXX XXXXXXXXXXX], a not-for-profit corporation
doing business as [XXXXXXXXXXXXX XXXXXXX XXXXXXXX] having a principal place of
------------------------------
business at [XXXXX XXXXXX], Boston, Massachusetts [XXXXX ("XXXXXXX"), XXXX X.
XXXXXXXX], M.D., Department of Neurosurgery, [XXXXXXXXXXXXX XXXXXXX XXXXXXXX],
Boston, Massachusetts [XXXXX] ("Principal Investigator") and Photoelectron
Corporation, a corporation having an office at 400-1 Totten Pond Road, Waltham,
Massachusetts 02254 ("Company").
1. Principal Investigator agrees to participate as an investigator in an
investigational treatment study of Model 3 of the Photon Radiosurgery System
(hereinafter referred to as the "Study Device") in accordance with the multi-
institution study protocol entitled "A Study of the Safety and Efficacy of the
Photon Radiosurgery System in the Treatment of Brain Metastases", a copy of
which is attached hereto as Exhibit A (hereinafter referred to as the "Study").
In the event of any conflict between Exhibit A and the provisions of this
Agreement, the provisions of this Agreement shall govern. That portion of Study
that is carried out at [XXXXXXX] is hereinafter referred to as "Institutional
Study." The Principal Investigator also agrees to adhere to the Standard
Operating Procedures for the Study as mandated by the FDA and to operate and
maintain the Study Device according to the instructions provided by Company.
2. The Institutional Study will be conducted by Principal Investigator at
[XXXXXXX] with the prior approval and ongoing review of all appropriate and
necessary review authorities and in accordance with all federal, state and local
laws and regulations. Principal Investigator shall provide Company with written
evidence of review and approval of this Study by [XXXXXXX] Institutional Review
Board prior to the initiation of the Institutional Study and of the Board's
continuing review and approval of the Study whenever it is reviewed, but at
least once per year. All volunteers will meet the legal age requirements of the
Commonwealth of Massachusetts; the state in which the Study is to be conducted.
3. Principal Investigator will furnish Company or its designated Study
Monitor with the data resulting from the Institutional Study in signed case
report forms within a reasonable time after completion of each form and Company
shall have the unrestricted right to use such data including, but only to the
extent that subjects' consents have been obtained, the subjects' names, any
identifying information, and any audiotapes, photographs or other likenesses.
The case report forms to be used will be those supplied by Company. Patient
records shall be made available to Company representatives upon request for
comparison with case report forms. Such records will also be made available
upon request for review by representatives of the U.S. Food and Drug
1
<PAGE>
Administration. Records of the study including either the original or a copy of
all volunteer consent forms shall be retained in conformance with applicable
federal regulations.
4. It is understood that this Study is a multicentre investigation and
that a publication of results from all sites is expected to be made in
accordance with paragraph 5. After submission of the multicenter results for
publication, notification by Company that such a submission is no longer
planned, or twelve (12) months after termination of the Study at all sites,
whichever shall first occur, the Principal Investigator will be free to publish
the results of the Institutional Study subject only to the provisions of
Paragraph 7 regarding Company's confidential information. Company will be
furnished with a copy of any proposed publication for review and comment prior
to submission for publication, for manuscripts, at least thirty (30) days prior
to submission, and for abstracts, at least seven (7) days prior to submission.
At the expiration of such thirty (30) day or seven (7) day period, Principal
Investigator may proceed with submission for publication.
5. Since the Study is to be carried out at a number of institutions, a
minimum of one journal article describing the analyzed results from all
institutions will be submitted for publication at the conclusion of the Study.
Such manuscript(s) will bear as authors, among others, all Principal
Investigators of the Study. The order of authors will be as follows: Those who
design and implement the Study will be first; individuals from the institution
contributing the most patients will be listed next; the principal investigator
and other individuals at the institution contributing the second largest number
of patients will be next; and so on.
6. At the conclusion of the Study and after such time as a minimum of one
multi-authored, multi-institution journal article has been published, all
Principal Investigators from all institutions participating in the Study who
have treated with the Study Device the number of anticipated patients as
described in paragraph 15 will be given complete access to all of the patient
data accrued in the Study.
7. It is understood that [XXXXXXX] cannot assure confidential treatment of
any information that may be disclosed to any [XXXXXXX] staff member, employee or
student. However, the Principal Investigator agrees that, for a period of five
(5) years from the Effective Date of this Agreement, the Principal Investigator
will not disclose to any third party information which the Principal
Investigator receives from Company which is in writing and designated as
confidential or, if disclosed orally, is designated as confidential at the time
of disclosure and confirmed in writing as confidential within twenty-one (21)
days of such disclosure, or use such information for any purpose other than the
purpose of
2
<PAGE>
conducting the Study, obtaining any required review of the Study or its conduct,
or in the sound judgment of Principal Investigator, ensuring proper medical
treatment of any patient or subject. Such information shall not be considered
confidential nor subject to this Agreement if it: (i) was in Principal
Investigator's possession prior to receipt thereof from Company as shown by
written records; (ii) is already available or becomes available to the public
through no fault of Principal Investigator; (iii) was received by Principal
Investigator from a third party having a right to disclose it; (iv) is developed
by or on behalf of Principal Investigator; or (v) was ordered disclosed as a
matter of law.
8. [XXXXXXX] and Company agree that Company shall have an opportunity to
acquire by assignment all rights to each invention which constitutes a new use
or modification of the Study Device and is made by [XXXXXXX] personnel, solely
or jointly, in the performance of the Institutional Study (hereinafter referred
to as "Invention"). Each Invention shall be promptly reported in writing to
Company and to [XXXXXXX], and Company shall have ninety (90) days following
receipt of such report to submit a written request to [XXXXXXX] to acquire
rights to the reported Invention. In the event Company so elects to acquire
rights to an Invention, [XXXXXXX] shall promptly obtain from [XXXXXXX] personnel
appropriate assignments of all rights in the Invention held by such personnel
and thereafter shall assign all its rights to Company.
9. This Agreement shall have an initial term of two (2) years from the
Effective Date and thereafter the term of this Agreement shall automatically
renew for additional one (1) year periods until such time as one party notifies
the other parties in writing at least thirty (30) days prior to the anniversary
of the Effective Date that the Agreement should not be renewed. Any party hereto
shall have the right to terminate the Institutional Study and this Agreement at
any time upon thirty (30) days prior written notice thereof to the other
parties. The obligations of the parties under Paragraphs 3,4,5,6,7,8,
12,13,14,17,18 and 20 shall survive the termination of this Agreement.
10. Company will provide the following equipment and other supplies to
[XXXXXXX]: two Model 3 X-ray sources (each including internal radiation
monitor), a Control Box System, a 486DX Laptop Computer with applications
software, colour HP printer, photodiode array, probe straightener, external
radiation monitor and various clinical accessories, an ionization chamber, an
electrometer with computer interface, and an IBM-compatible computer and a
number of calibration accessories, a dosimetry water tank with control
electronics, applications software, a radiochromic film reader, dosimetry
phantoms and dosimetry accessories (collectively, the "Equipment"). The parties
acknowledge that at the time of execution of this Agreement the price of the
Equipment, with Warranty and Service Contract, is approximately $544,400.
3
9/22/94
<PAGE>
11. Company agrees to support this Institutional Study by: (a) providing a
Study Device including all Equipment listed in paragraph 10 above at no charge
to [XXXXXXX]; (b) providing the Principal Investigator with information and
instruction pertaining to the Study Device and its operation as needed to
perform the Study; (c) repairing, maintaining, and modifying the Study Device as
needed during the Institutional Study; (d) monitoring the Institutional Study;
and (e) providing [XXXXXXX] with a research grant for one-half the salary of a
nurse/coordinator designated by [XXXXXXX] for the term of this Agreement. The
responsibilities of the nurse/coordinator will include overseeing the collection
and assembly of data generated by the Institutional Study, frequent
correspondence with the Study Monitor, scheduling of patient visits, and
supervision of the follow-up of each patient by shepherding patients through
their visits with various physicians and to different diagnostic procedures.
Payment to [XXXXXXX] for one-half the salary of the nurse/coordinator in the
amount of $51,538.87 per year, which includes salary of $33,290.40, fringe
benefits (20.95%) in the amount of $6974.34 and indirect costs (28%) in the
amount of $11,274.13. Payment will be made in equal quarterly payments in the
amount of $12,884.72.
The checks should be made payable to "[XXX XXXXXXX XXXXXXXX XXXXXXXXXXX]"
and sent, along with a letter indicating the name of the Principal Investigator
and the specific agreement for which the funds are intended, to:
[XXXXXXXX]
[XXXXXX XX XXXXXXXXXX XXXXXXX]
[XXXXXXXXXXXXX XXXXXXX XXXXXXXX]
[XXXXXXXXXX XXXXXX, XXXXXXXX XXX, XXXXX XXXX]
[XXXXXXXXXXX, XX XXXXX]
12. At the completion of enrollment and treatment of twenty-five (25)
patients with the Study Device in the Institutional Study, all Equipment listed
in paragraph 10 above will become assets of [XXXXXXX].
13. In the event the Institutional Study is terminated early (prior to the
treatment of twenty-five (25) Institutional Study patients with the Study
Device), an accounting will be made of the Equipment provided for the
Institutional Study by Company and any such Equipment remaining shall be
returned to Company on a pro rata basis based upon the number of patients
treated with the Study Device as agreeable to both [XXXXXXX] and Company. In
addition, the amount of the research grant under Paragraph 11(e) by Company to
support the Institutional Study shall be appropriately prorated based upon the
duration of the Agreement.
14. It is understood that during the term of this Agreement, in the
interest of device integrity and patient safety, the Study Device will be used
for no purpose other than the Institutional
4
9/22/94
<PAGE>
Study without the written permission of the Director of Clinical Trials at
Company. After the term of this Agreement, any Equipment that remains at the
[*****] may be used for any purpose consistent with any applicable federal,
state or local laws or regulations.
15. It is anticipated that [*****] will treat a minimum of ten (10)
eligible patients with the Study Device, per year, following the Effective Date
of this Agreement. Failure to treat at least twenty (20) eligible patients with
the Study Device during the two years following the Effective Date of this
Agreement may result in termination of the Institutional Study at [*****] in
accordance with paragraph 9 and the pro rated return of Equipment as provided
for in paragraph 13.
16. The covers may not be removed from any of the Equipment listed in
paragraph 10 by non-Company personnel with the sole exception of the Control Box
System which may be opened for testing only in order to switch from manual to
computer control of the system. Adherence to this policy will both protect the
interests of the Company and ensure that all Study patients are treated with
equipment that has met the same standards.
17. (a) Company shall indemnify, defend and hold harmless [*****] and its
trustees, officers, medical and professional staff, employees, and agents and
their respective successors, heirs and assigns (the "Indemnitees"), against any
liability, damage, loss, or expense (including reasonable attorney's fees and
expenses of litigation) incurred by or imposed upon the Indemnitees or any one
of them in connection with any claims, suits, actions, demands or judgments:
(i) arising out of any theory of product liability (including, but not limited
to, actions in the form of tort, warranty, or strict liability) concerning the
Study Device or any modification thereof developed pursuant to this Agreement
and made by Company or a licensee, affiliate or agent of Company; (ii) arising
out of any side effect or adverse reaction, illness or injury resulting from
Indemnitees' performance of the Study and occurring to any person involved in
the Study; or (iii) arising out of damage to any property resulting from and
occurring during the Indemnitees' performance of the Study; or (iv) arising out
of the negligence of the Study Monitor designated by Company. [*****] agrees to
notify Company promptly of any such claim, suit, action, demand or judgment and
[*****] and Principal Investigator agree to permit Company to control the
defense and disposition thereof (including, without limitation, all decisions to
litigate, settle or appeal) and further agree to reasonably cooperate with
Company in the handling thereof. Company agrees to keep [*****] informed of the
progress in the defense and disposition of such claims and to consult with
[*****] with regard to any settlement thereof which Company proposes to enter
into.
(b) Company's indemnification under (a) above shall not apply to any
liability, damage, loss or expense to the extent that it is
5
<PAGE>
attributable to the: (i) negligent activities, reckless misconduct or
intentional misconduct of the Indemnitees; or (ii) failure of the Indemnitees to
adhere to the terms of the protocol for the Study.
(c) Company agrees, at its own expense, to provide attorneys reasonably
acceptable to the [*****] to defend against any actions brought or filed against
any party indemnified hereunder with respect to the subject of indemnity
contained herein, whether or not such actions are rightfully brought.
18. (a) At such time as the Study Device or any modification thereof is
being commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by Company or by a licensee, affiliate or agent of
Company, Company shall, at its sole cost and expense, procure and maintain
comprehensive general liability insurance in amounts not less than $2,000,000
per incident and $2,000,000 annual aggregate and naming the Indemnitees as
additional insureds, with respect to claims arising out of Indemnitees'
performance of, or involvement in, the Institutional Study, except those claims
attributable to (i) or (ii) of subparagraph 17(b) of this Agreement. Such
comprehensive general liability insurance shall provide (i) product liability
coverage and (ii) broad form contractual liability coverage for Company's
indemnification under Paragraph 17 of this Agreement. If Company elects to self-
insure all or part of the limits described above (including deductibles or
retentions which are in excess of $250,000 annual aggregate) such self-insurance
program must be acceptable to the [*****] and the Risk Management Foundation of
the Harvard Medical Institutions, Inc. The minimum amounts of insurance coverage
required under this Paragraph 18 shall not be construed to create a limit of
Company's liability with respect to its indemnification under Paragraph 17 of
this Agreement.
(b) Company shall provide [*****] with written evidence of such insurance
upon request of [*****]. Company shall provide [*****] with written notice at
least fifteen (15) days prior to the cancellation, non-renewal or material
change in such insurance.
(c) Company shall maintain such comprehensive general liability insurance
during (i) the period that the Study Device or any modification thereof is being
commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by Company or by a licensee, affiliate or agent of Company
and (ii) a reasonable period after the period referred to in (c) (i) above which
in no event shall be less than five (5) years.
19. The terms of this Agreement can be modified only by a writing which
is signed by [*****], Principal Investigator and Company.
20. No party to this Agreement shall use the name of any
6
<PAGE>
other party or of any staff member, employee or student of any other party or
any adaptation thereof in any advertising, promotional, sales literature or
publicity or in any non-scientific publication without the prior written
approval of the party or individual whose name is to be used. For [*****], such
approval shall be obtained from the Director of Public Affairs and for Company,
from its Chief Executive Officer.
21. Any notices to be delivered by either party to the others shall be
delivered as follows: if to General, to Director, Office of Technology Affairs,
[*****]; if to Principal Investigator, to [*****] [*****], [*****], and if to
Company to Jacquelyn C. Yanch, Photoelectron Corporation, 400-1 Totten Pond
Road, Waltham MA 02254.
22. The provisions of this Agreement shall be interpreted under the laws
of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
PHOTOELECTRON CORPORATION [*****]
BY: /s/Jacquelyn Yanch BY: /s/[*****]
-------------------------------- ------------------------------
Jacquelyn Yanch, Ph.D. [*****]
TITLE: Director of Clinical TITLE: Vice President for Patents
--------------------------- --------------------------
Trials Licensing and Industry
--------------------------- --------------------------
Sponsored Research
--------------------------
DATE: 12 October 1994 DATE: 10/24/94
---------------------------- ----------------------------
PRINCIPAL INVESTIGATOR
BY: /s/Peter Oettinger /s/[*****]
------------------------------- ----------------------------------
Peter Oettinger, Ph.D. [*****], M.D.
TITLE: Chief Operating Officer
---------------------------
DATE: 10/3/94
----------------------------------
DATE: October 12, 1994
-----------------------------
7
<PAGE>
EXHIBIT 10.19
PeC Photoelectron Corporation
- --------------------------------------------------------------------------------
400-1 Totten Pond Road, Waltham, MA 02154
(617) 290-5366 . FAX (617) 290-0595
CLINICAL RESEARCH AGREEMENT
---------------------------
Agreement made as of the first day of April, 1995, between [******], having a
principal place of business at [******] ("[******]"), [******], MD, Department
of Neurosurgery, [******], Boston Massachusetts [******] ("Principal
Investigator"), and Photoelectron Corporation, a corporation having an office at
400-1 Totten Pond Road, Waltham, Massachusetts, 02154 ("Company").
1. The Principal Investigator agrees to participate as an investigator in a
clinical study of the Model 3 Photon Radiosurgery System (hereinafter referred
to as the "Study Device") in accordance with the multi-institution study
protocol entitled "A Study of the Safety and Efficacy of the Photon Radiosurgery
System in the Treatment of Brain Metastases", a copy of which is attached hereto
as Exhibit A (hereinafter referred to as "Study"). That portion of Study that is
carried out at [******] is hereinafter referred to as "Institutional Study". The
Principal Investigator agrees to adhere to the Standard Operating Procedures for
the Study as mandated by the FDA and to operate and maintain the Study Device
according to the instructions provided by Company. In the event of any conflict
between Exhibit A and the provisions of this Agreement, the provisions of this
Agreement shall govern.
2. The Institutional Study will be conducted by the Principal Investigator at
[******] with the prior approval and ongoing review of all appropriate and
necessary review authorities and in accordance with all federal, state and local
laws and regulations. The Principal Investigator shall provide Company with
written evidence of review prior to the initiation of the Institutional Study
and of the Board's continuing review and approval of the Institutional Study
whenever it is reviewed, but at least once per year. All volunteers will meet
the legal age requirements of the Commonwealth of Massachusetts, the state in
which the Institutional Study is to be conducted.
3. Principal Investigator will furnish Company or its designated Study Monitor
with the data resulting from the Institutional Study in signed, completed case
report forms within one (1) month after the completion of each patient contact
and Company shall have the unrestricted right to use such data including, the
subjects' names, any identifying information, and any audiotapes, photographs or
other likenesses, but only to the extent that subjects' consent have been
obtained. The case report forms to be used will be those supplied by Company.
Patient records shall be made available to Company representatives upon request
for comparison with case report forms. Such records will also be made available
upon request for review by representatives of the US. Food and Drug
Administration. Records of the study including either the original or a copy of
all volunteer consent forms shall be retained in conformance with applicable
federal regulations.
<PAGE>
4. It is understood that the Study is a multi-center investigation and a
publication of results from all sites is expected. After submission of multi-
center results for publication, or notification by Company that such a
submission is no longer planned, or twelve (12) months after termination of the
Study at all sites, whichever shall occur first, the Principal Investigator
shall be free to publish the results of the Institutional Study, subject only to
the provisions of Paragraph 7 regarding Company's confidential information.
Company will be furnished with a copy of any proposed publication for review
and comment prior to submission for publication, for manuscripts, at least
thirty (30 ) days prior to submission, and for abstracts, at least seven (7)
days prior to submission. At the expiration of such thirty (30) or seven (7) day
period, Principal Investigator may proceed with submission for publication.
5. In addition, since the Study is to be carried out at a number of
institutions, a minimum of one journal article describing the analyzed results
from all institutions will be submitted for publication at the conclusion of the
Study. Such manuscript(s) will bear as authors, among others, all Principal
Investigators of the Study. The order of authors will be as follows: those who
design and implement the Study will be first; individuals from the institution
contributing the most patients will be listed next; the Principal Investigator
and other individuals at the institution contributing the second largest number
of patients will be next; and so on.
6. At the conclusion of Study and after such time as a minimum of one multi-
authored, multi-institution journal article has been published, all Principal
Investigators from all institutions participating in the Study will be given
complete access to all of the patient data accrued in the Study.
7. It is understood that [*********] cannot assure confidential treatment of any
information that may be disclosed to any [**********] staff member, employee or
student. However, the Principal Investigator agrees that, for a period of five
years from the date of this agreement, the Principal Investigator will not
disclose to any third party information which the Principal Investigator
receives from Sponsor which is in writing and designated as confidential or, if
disclosed orally, is designated as confidential at the time of disclosure and
confirmed in writing as confidential within twenty-one (21) days of such
disclosure, or use such information for any purpose other than the purpose of
conducting the Study, obtaining any required review of the Study or its conduct,
or in the sound judgment of Principal Investigator, ensuring proper medical
treatment of any patient or subject. Such information shall not be considered
confidential nor subject to this Agreement if it: (1) was in Principal
Investigator's possession prior to receipt thereof from Sponsor as shown by
written records; (ii) is already available or becomes available to the public
through no fault of Principal Investigator; (iii) was received by Principal
Investigator from a third party having a right to disclose it; (iv) is developed
by or on behalf of Principal Investigator independent of any disclosure
hereunder, or (v) was ordered disclosed as a matter of law.
<PAGE>
8. [******] shall promptly disclose to Company any discovery or invention
("Invention") made in the performance of the Study by [******] or its
investigators or its other personnel, solely or jointly with personnel of
Company. If either [******]or Company desires to obtain patent protection for
any such Invention, the parties will meet and confer to determine the
advisability thereof and the responsibility for the filing, prosecution and
costs thereof. [******] shall be the sole owner, either by reason of written
agreement, [******] policies, or otherwise by operation of law, of all such
Inventions made solely by its investigators or its other personnel. [******] and
Company shall jointly own all of such Inventions made jointly by personnel of
Company and investigators or other personnel of [******].
[******] hereby grants to Company a royalty-free, non-exclusive license to each
Invention solely owned by [******] which is made in the performance of the Study
and which results from the research contemplated by Exhibit A. For new
inventions not contemplated by the Study protocol, and for any invention for
which Company would like exclusivity, Company shall have one hundred eighty
(180) days following receipt by Company of a disclosure of an Invention, to
submit a written request to [******] to acquire an exclusive, royalty-bearing
license to all of [******] rights to the disclosed Invention. Following such
request, [******] and Company shall negotiate for an exclusive or non-exclusive
worldwide commercialization license to all rights that [******] may have in any
such Invention for the protectable life of the Invention, on reasonable terms
and conditions to be negotiated at such time. If the parties are unable to reach
agreement for any such license after six (6) months of good faith negotiations,
then for eighteen (18) months thereafter Company shall remain entitled to
exercise a right of first refusal with respect to [******] rights to any such
Invention as follows: Before accepting an offer from, or making an offer to, a
third party on terms more favorable than those last offered to Company to
acquire rights in such Invention, [******] shall inform Company of such offer
and shall allow Company a period of thirty (30) days in which to elect whether
to acquire [******] right to the invention under such terms as are offered to
or by [******].
9. This Agreement shall remain in force until the completion of Study, subject
to annual review at a minimum. Any party hereto shall have the right to
terminate the Study and this Agreement at any time upon thirty (30) days prior
written notice thereof to the other parties. In the event of termination, the
amount of the reimbursement under Paragraphs 10 and 11(e) by Company to support
the Study shall be appropriately prorated. The obligations of the parties under
Paragraphs 3,4,7,8,13,17,18,20 and 21 shall survive the termination of this
Agreement,
10. Equipment and other supplies provided by the Company include the following:
two Model 3 X-ray sources (each including internal radiation monitor), a Control
Box System, a 486DX Laptop Computer with applications software, colour HP
printer, photodiode array, probe straightener, external radiation monitor and
various clinical accessories, an ionization chamber, an electrometer with
computer interface, an IBM-compatible computer and a number of calibration
accessories, a dosimetry water tank with control electronics, applications
software, a radiochromic film reader, dosimetry phantoms and dosimetry
accessories.
<PAGE>
11. Company agrees to support this institutional Study by: (a) providing a Study
Device including all equipment and supplies listed in paragraph (10) above at no
charge to [******] (b) providing the Principal Investigator with information and
instruction pertaining to the Study Device and its operation as needed to
perform the Institutional Study; (c) repairing, maintaining, and modifying the
Study Device as needed during the Institutional Study; (d) monitoring the
Institutional Study; and (e) providing [******] with a research grant for one-
half the salary, plus fringe benefits, plus indirect costs, of a
nurse/coordinator designated by [******] during the Institutional Study. The
actual amount payable to [******] for the nurse/coordinator will be contingent
upon the salary of the individual hired for the position, but will not exceed a
maximum total amount in the first year of this Agreement of $57,513.18, which
includes maximum salary of $34,049.60, maximum fringe benefits at twenty-seven
per cent (27%) of salary in the amount of $9,193.39 and maximum indirect costs
at thirty-three per cent (33%) of salary plus fringe benefits in the amount of
$14,270.19. The maximum total amount in subsequent years may be increased by no
more than five per cent (5%).
Payments will be made quarterly by way of a check made out to [****************]
[**************]. Checks will be sent to: Research Administration
Attention: [***************]
[***************************]
[**************]
[*************]
The responsibilities of the nurse/coordinator will include overseeing the
collection and assembly of data generated by the Institutional Study, frequent
correspondence with the Study Monitor, scheduling of patient visits, and
supervision of the follow-up of each patient by shepherding patients through
their visits with various physicians and to different diagnostic procedures.
12. At the completion of enrollment and treatment of twenty-five (25) patients
with the Study Device, all supplies and equipment listed in paragraph (10) above
will become assets of [******]. Clinical use of the Study Device other than for
the Institutional Study or for any other study of which Company is the Sponsor
and [******] is a participating clinical site, shall become the responsibility
of [******]. These responsibilities include complying with all applicable
regulations of the United States Food and Drug Administration (FDA),
particularly those regulations pertaining to clinical use of investigational
devices.
13. If the Institutional Study is terminated early (prior to treatment of
twenty-five (25) patients with the Study Device), an accounting will be made of
the clinical equipment and supplies provided for the Institutional Study by
Company and any such supplies remaining shall be returned to Company on a pro
rata basis agreeable to both [******] and Company. In addition, the amount of
the research grant under Paragraph 11(e) by Company to support the Institutional
Study shall be appropriately prorated based on the duration of the Agreement.
14. It is understood that, in the interest of device integrity and patient
safety, the Study Device will be used for no purpose other than the
Institutional Study without the written permission of the Director of Clinical
Research and Regulatory Affairs at Company.
<PAGE>
15. It is agreed that [******] will treat a minimum of ten (10) eligible
patients per year with the Study Device, and is expected to treat a minimum of
twenty (20) patients in the two years following the date of this Agreement.
Failure to treat at least ten eligible patients per year with the Study Device
may result in termination of the Institutional Study at [******] in accordance
with paragraph 9 and the return of equipment as provided for in paragraph 13.
16. The covers may not be removed from any of the equipment listed in paragraph
(10) by non-Company personnel with the sole exception of the Control Box System
which may be opened for testing only in order to switch from manual to computer
control of the system. Adherence to this policy will both protect the interests
of the Company and ensure that all Study patients are treated with equipment
that has met the same standards.
17. (a) Company shall indemnify, defend and hold harmless [******] and its
trustees, officers, medical and professional staff, employees, and agents and
their respective successors, heirs and assigns (the "Indemnitees"), against any
liability, damage, loss, or expense (including reasonable attorney's fees and
expenses of litigation) incurred by or imposed upon the Indemnitees or any one
of them in connection with any claims, suits, actions, demands or judgments:
(i) arising out of any theory of product liability (including, but not limited
to, actions in the form of tort, warranty, or strict liability) concerning the
Study Device or any modification thereof developed pursuant to this Agreement
and made by Company or a licensee, affiliate or agent of Company; (ii) arising
out of any side effect or adverse reaction, illness or injury resulting from
Indemnitees' performance of the Institutional Study and occurring to any person
involved in the Institutional Study; or (iii) arising out of damage to any
property resulting from and occurring during the Indemnitees' performance of the
Institutional Study.
[******] agrees to notify Company promptly of any such claim, suit, action,
demand or judgment and [******] and Principal Investigator agree to permit
Company to control the defense and disposition thereof (including without
limitation, all decisions to litigate, settle or appeal) and further agree to
reasonably cooperate with Company in the handling thereof. Company agrees to
keep [******] informed of the progress in the defense and disposition of such
claims and to consult with [******] with regard to any settlement thereof which
Company proposes to enter into.
(b) Company's indemnification under (a) above shall not apply to any liability,
damage, loss or expense to the extent that it is attributable to the:
(i) negligent activities or misconduct of any of the Indemnitees, or
(ii) failure of any of the Indemnities to adhere to the terms of the protocol
for the Study or the Standard Operating Procedures or to operate the Study
Device according to instructions provided by Company.
(c) Company agrees, at its own expense, to provide attorneys reasonably
acceptable to [******] to defend against any actions brought or filed against
any party indemnified hereunder with respect to the subject of indemnity
contained herein, whether or not such actions are rightfully brought.
<PAGE>
18. (a) At such time as the Study Device or any modification thereof is being
commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by Company or by a licensee, affiliate or agent of
Company, Company shall, at its sole cost and expense, procure and maintain
comprehensive general liability insurance in amounts not less than $2,000,000
per incident and $2,000,000 annual aggregate and naming the Indemnitees as
additional insureds, with respect to claims arising out of Indemnitees'
performance of, or involvement in, the Institutional Study, except those claims
attributable to (i) or (ii) of subparagraph 17 (b) of this Agreement. Such
comprehensive general liability insurance shall provide (i) product liability
coverage and (ii) broad form contractual liability coverage for Company's
indemnification under Paragraph 17 of this Agreement. If Company elects to self-
insure all or part of the limits described above (including deductibles or
retentions which are in excess of $250,000 annual aggregate) such self-insurance
program must be acceptable to [******] and the Risk Management Foundation of the
Harvard Medical Institutions, Inc. The minimum amount of insurance coverage
required under this Paragraph 18 shall not be construed to create a limit of
Company's liability with respect to its indemnification under Paragraph 17 of
this Agreement.
(b) Company shall provide [******] with written evidence of such insurance upon
request of [******]. Company shall provide [******] with written notice at least
fifteen (15) days prior to the cancellation, non-renewal or material change in
such insurance.
(c) Company shall maintain such comprehensive general liability insurance during
(i) the period that the Study Device or any modification thereof is being
commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by Company or by a licensee, affiliate or agent of Company
and (ii) a reasonable period after the period referred to in (c)(i) above which
in no event shall be less than five (5) years.
19. The terms of this Agreement can be modified only by a writing which is
signed by [******], Principal Investigator and Company.
20. Except for disclosure of each party's support for this clinical study,
neither party to this Agreement shall use the name of the other party or of the
Principal Investigator, any staff member, employee or student of the other party
or any adaptation thereof in any publicity without the prior written approval of
the party or individual whose name is to be used.
21. Any notices to be delivered by either party to the others shall be delivered
as follows: if to [******] to Vice President, Office of Research Administration,
[**************************************************************],if to Principal
Investigator to [*********], MD, Neurosurgery Department, [********************]
[******************************************], if to Company to Thomas
Varricchione, Photoelectron Corporation, 400-1 Totten Pond Road, Waltham MA
02154.
22. The provisions of the Agreement shall be interpreted under the laws of the
Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year first written above.
PHOTOELECTRON CORPORATION [****************************]
BY: /s/Thomas R. Varricchione BY: /s/[*****************]
-------------------------- ----------------------------
THOMAS R. VARRICCHIONE [****************]
DIRECTOR, CLINICAL RESEARCH VICE PRESIDENT
AND REGULATORY AFFAIRS RESEARCH ADMINISTRATION
DATE: 14 April 1995 DATE: 4/24/95
------------------------ --------------------------
BY: /s/Peter Oettinger BY: /s/[****************]
-------------------------- ---------------------------
PETER OETTINGER, PH.D. [*********], M.D.
VICE PRESIDENT AND PRINCIPAL INVESTIGATOR
CHIEF OPERATING OFFICER
DATE: 14 April, 1995 DATE: April 21, 1995
------------------------ ---------------------
<PAGE>
EXHIBIT 10.20
CLINICAL TRIAL AGREEMENT
Agreement made as of the first day of Jan, 1995, between [******], having a
--- --------
principal place of business at [******], [******], ("[******]"), [******], MD,
Professor and Chairman, Department of Neurosurgery, Neurological Institute,
[******], 8-1, [******], [******], [******], ("Principal Investigator"), and
Photoelectron Corporation, a corporation having an office at 400-1 Totten Pond
Road, Waltham, Massachusetts, 02254 USA ("Company").
1. The Principal Investigator agrees to participate as an investigator in a
clinical study of Model 3 Miniature X-ray Source of the Photon Radiosurgery
System (hereinafter referred to as the "Study Device") in accordance with the
multi-institution study protocol entitled "A Study of the Safety and Efficacy
of the Photon Radiosurgery System in the Treatment of Brain Metastases", a copy
of which is attached hereto as Exhibit A (hereinafter referred to as "Study").
In the event of any conflict between Exhibit A and the provisions of this
Agreement, the provisions of this Agreement shall govern. That portion of Study
that is carried out at Medical College is hereinafter referred to as
"Institutional Study". The Principal Investigator also agrees to adhere to the
Standard Operating Procedures for the Study as mandated by the FDA and to
operate and maintain the Study Device according to the instructions provided by
Company.
2. The Institutional Study will be conducted by the Principal Investigator at
Medical College with the prior approval and ongoing review of all appropriate
and necessary review authorities at Medical College and in accordance with all
Japanese laws and regulations. The Principal Investigator shall provide Company
with written evidence of review of the Study by the Medical College Ethics
Committee prior to the initiation of the Institutional Study and of the Ethics
Committee's continuing review and approval of the Institutional Study whenever
it is reviewed, but at least once per year. All volunteers will meet the legal
age requirements of Japan, the country in which the Institutional Study is to be
conducted.
3. Principal Investigator will furnish Company or its designated Study Monitor
with the data resulting from the Institutional Study in signed case report forms
within fourteen working days after the completion of each form and Company shall
have the unrestricted right to use such data including, but only to the extent
that subjects' consent have been obtained to use the subjects' names, any
identifying information, and any audiotapes,
<PAGE>
photographs or other likenesses. The case report forms to be used will be those
supplied by Company. Patient records shall be made available to Company
representatives upon request for comparison with case report forms. Such records
will also be made available upon request for review by representatives of the
U.S. Food and Drug Administration. Records of the study including either the
original or a copy of all volunteer consent forms shall be retained both by
Company and by Medical College.
4. It is understood that this study is a multicentre investigation and a
publication of results from all sites is expected. After submission of
multicentre results for publication, or notification by Company that such a
submission is no longer planned, or twelve (12) months after termination of the
Study at all sites, whichever shall first occur the Principal Investigator shall
be free to publish the results of the Institutional Study subject only to the
provisions of Paragraph 7 regarding Company's confidential information. Company
will be furnished with a copy of any proposed publication for review and comment
prior to submission for publication, which for manuscripts, is at least thirty
(30) days prior to submission, and for abstracts, is at least seven (7) days
prior to submission. At the expiration of such a thirty (30) or seven (7) day
period, Principal Investigator may proceed with submission for publication.
5. In addition, since the Study is to be carried out at a number of
institutions, a minimum of one journal article describing the analyzed results
from all institutions will be submitted for publication at the conclusion of the
Study. Company will be responsible for coordinating the manuscript(s). Such
manuscript(s) will bear as authors, among others, all principal investigators of
the Study. The order of authors will be as follows: those who design and
implement the Study will be first; the principal investigator and other
individuals from the institution contributing the most patients will be listed
next; the principal investigator and other individuals at the institution
contributing the second largest number of patients will be next; and so on.
6. At the conclusion of Study and after such time as the multi-authored, multi-
institution journal article referred to in paragraph (5) has been published, all
principal investigators from all institutions participating in the Study who
have treated the number of anticipated patients with the Study Device as
described in paragraph 13, will be given complete access to all of the patient
data accrued in the Study, provided such access does not conflict with such laws
and practices as may be applicable. Access to data will not be provided in the
case of early termination of the Institutional Study.
7. In order to effectively complete the Institutional Study, it may be
necessary or desirable for the parties to disclose proprietary, trade secret
and/or other confidential information (herein "Confidential Information") to one
another. Each party agrees that any such Confidential Information disclosed to
it or to its employees shall be used only in connection with the legitimate
purposes of this Agreement; shall be safeguarded with the same care normally
afforded such Confidential Information in the possession, custody, or control of
the party receiving the Confidential Information provided, however, that the
disclosing party specifies in writing the nature and identity of the
Confidential Information and the manner and time of disclosure. The foregoing
shall not apply when,
<PAGE>
after and to the extent the Confidential Information disclosed; i) becomes
generally available to the public through no fault of the receiving party;
ii) was already known to the receiving party at the time of disclosure as
evidenced by written records in the possession of the receiving party prior to
such time or; (iii) is subsequently received by the receiving party in good
faith from a third party without breaching any confidential obligation between
the third party and the disclosing party.
8. Medical College and Company agree that Company shall have an option to
acquire by assignment, at nominal expense to Company, all rights to each,
invention which constitutes a new use, or modification of the Study Device and
is made by Medical College personnel, solely or jointly, in the performance of
the Study (hereinafter referred to as "Invention"). Each Invention shall be
promptly reported in writing to Company and to Medical College, and Company
shall have ninety (90) days following receipt of such report to submit a written
request to Medical College to acquire rights to the reported Invention. In the
event Company so elects to acquire rights to an Invention, Medical College shall
promptly obtain from Medical College personnel appropriate assignments of all
rights in the Invention held by such personnel and thereafter shall assign all
its rights to Company.
9. This Agreement shall remain in force until the completion of Institutional
Study. Any party hereto shall have the right to terminate the Study and this
Agreement at any time upon thirty (30) days prior written notice thereof to the
other parties. The obligations of the parties under Paragraphs 2,3,4,5,6,7,8,
12,14,15,17,18 and 19 shall survive the termination of this
Agreement.
10. Company will provide the following equipment and other supplies to Medical
College: two Model 3 X-ray sources (each including internal radiation monitor),
a Control Box System, a 486DX Laptop Computer with applications software, colour
HP printer, photodiode array, probe straightener, external radiation monitor and
various clinical accessories, an ionization chamber, an electrometer with
computer interface, an IBM-compatible computer and a number of calibration
accessories, a dosimetry water tank with control electronics, applications
software, a radiochromic film reader, dosimetry phantoms and dosimetry
accessories (collectively, the "Equipment"). All Equipment provided by Company
will remain assets of Company. It is understood that Company will have access to
the Equipment at any time.
11. Company agrees to support this Institutional Study by: (a) providing the
Equipment for the duration of the Institutional Study at no charge to Medical
College (b) providing the Principal Investigator with information and
instruction pertaining to the Study Device and its operation as needed to
perform the Institutional Study; (c) repairing, maintaining, and modifying the
Study Device as needed during the Institutional Study; and (d) monitoring the
Institutional Study.
12. At the completion of the Institutional Study, the Equipment will be
returned to Company.
<PAGE>
13. It is anticipated that Medical College will treat a minimum of ten
(10) eligible patients with the Study Device, per year, following the date of
this agreement. Failure to treat at least ten patients per year with the Study
Device may result in termination of the Institutional Study at Medical College
in accordance with paragraph 9.
14. It is understood that, in the interest of device integrity and patient
safety, the Study Device will be used for no purpose other than the
Institutional Study without the written permission of the Director of Clinical
Trials at Company. It is also understood that all maintenance of the equipment
listed in paragraph (10) must be carried out at Company, by Company personnel.
15. The covers and casings may not be removed from any of the Equipment by non-
Company personnel with the sole exception of the Control Box System which may be
opened for testing only in order to switch from manual to computer control of
the system. Adherence to this policy will both protect the interests of the
Company and ensure that all Study patients are treated with equipment that has
met the same standards.
16. The terms of this Agreement can be modified only by a writing which is
signed by Medical College, Principal Investigator and Company.
17. No party to this Agreement shall use the name of any other party or of any
staff member, employee or student of any other party or any adaptation thereof
in any advertising, promotional, sales literature, or publicity or in any non-
scientific publication without the prior written approval of the party or
individual whose name is to be used. For Medical College, such approval shall be
obtained from the Director of News and Public Affairs and for Company, from its
Chief Executive Officer.
18. Any notices to be delivered by either party to the others shall be
effective if delivered by registered mail, return receipt requested or by
facsimile transmission as follows: if to Medical College to __________________
_____________________________, if to Principal Investigator to [*************]
MD, Professor and Chairman, Department of Neurosurgery, Neurological Institute,
[******************************************************************************]
([xxx][***********]) if to Company to Jacquelyn C. Yanch, PhD, Photoelectron
Corporation, 400-1 Totten Pond Road, Waltham MA USA 02254 (fax 617-290-0595).
19. The provisions of the Agreement shall be interpreted under the laws of the
Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year first above written.
PHOTOELECTRON CORPORATION [***********************************]
BY: /s/ Peter Oettinger BY: /s/ [*************************]
------------------------------ --------------------------------
PETER OETTINGER, PH.D [*****************] M.D.
CHIEF OPERATING OFFICER [*****************************]
[*************]
DATE: November 28, 1994
---------------------------- DATE: December 2, 1994
------------------------------
PRINCIPAL INVESTIGATOR:
/s/ [*******************]
---------------------------------------
[******************] MD
DATE: December 1, 1994
------------------------------
<PAGE>
EXHIBIT 10.21
PHOTOELECTRON CORPORATION
CLINICAL TRIAL AGREEMENT
THIS AGREEMENT, effective this 13 day of December 1995, by and between
Photoelectron Corporation, a Massachusetts corporation having its principle
place of business at 400-1 Totten Pond Road, Waltham, Massachusetts 02154,
U.S.A. (hereinafter called the "Company"), and Toshiba Medical Systems Co.,
Ltd., a Japanese corporation having its principal place of business at 26-5, 3-
Chome, Hongo, Bunkyo-ku, Tokyo 113 Japan (hereinafter called the "Distributor").
WHEREAS, on this date the parties are entering into the International
Distributor Sales and Service Agreement (hereinafter called the "Distribution
Agreement"), pursuant to which the Company is appointing the Distributor as the
exclusive distributor for the Photon Radiosurgery System in Japan.
WHEREAS the Company and the Distributor shall jointly conduct clinical trials
(hereinafter called "Clinical Trials") of the Photon Radiosurgery System in
Japan with the objective of obtaining all necessary legal, regulatory, or
administrative approvals to import, market, sell, and use Photon Radiosurgery
System in Japan (hereinafter called "Approvals") under Section 14 (Approval to
Import) of the Japanese Pharmaceutical Affairs Law ("PAL").
NOW THEREFORE, The parties agree as follows:
ARTICLE I DEFINITIONS
1.01 All capitalized terms used in this Agreement shall have the meanings
assigned to them in the Distribution Agreement unless otherwise defined under
this Agreement.
ARTICLE II SALES TO DISTRIBUTOR
2.01 Purchase of PRS Units for Clinical Trials
A. The Distributor agrees to purchase from the Company two complete systems
of the Photon Radiosurgery System consisting of the following items (hereinafter
called the "PRS") for use in the Clinical Trials to be conducted in Japan with
regard to the treatment of metastatic brain tumors and other agreed upon tumor
types. The purchase price for each PRS shall be U.S.$ (together with applicable
taxes and other transfer fees imposed by Japanese or
<PAGE>
United States law), which represents a discount from the Company's current list
price. The Distributor shall pay for each system no later than thirty (30) days
after the Distributor has received and inspected each system.
1. PRS probes (2) 8. E1ectrometer
2. PRS control box 9. Ionization chamber
3. Probe adjuster 10. Dosimetry computer
4. Photodiode array 11. Dosimetry tank control electronics
5. External radiation monitor 12. Dosimetry tank
6. Sterilization tray 13. Radiochromic film reader
7. Laptop computer 14. Phantom
The Company agrees to negotiate with Radionics Inc. to sell to the Distributor
its stereotactic frame to be used with the PRSs in the Clinical Trials at a
discount price.
B. Both units of the PRS shall be sold "FOB" Boston (as such term is defined
by the International Chamber of Commerce, INCOTERMS (3d.ed. 1990)). The Company
shall use reasonable efforts to obtain, at its own expense, any export or other
official authorization and carry out or satisfy any other formalities necessary
for the transportation and exportation of the two PRS units from the United
States. The Distributor shall use reasonable efforts to obtain, at its own
expense, any authorization necessary for the importation of the two PRS units to
Japan and their use in the Clinical Trials.
C. The Company shall package the PRS in an appropriate manner for shipment to
the Distributor in Japan and in accordance with such packaging requirements as
the Distributor may reasonably request in consideration of the laws and shipping
customs of Japan.
D. The Company and the Distributor shall mutually cooperate to ensure that the
PRS complies with all local laws, standards, regulations applicable to use of
the PRS in the Clinical Trials.
E. When the Approvals have been obtained the Company shall refurbish and
upgrade the two units of the PRS to make them saleable and conform to the then
existing current models at no additional charge to the Distributor.
2.02 Warranties on Products. The Company warrants both units of the PRS and
Parts and Accessories (hereinafter called "Products") delivered to the
Distributor in accordance with the attached Schedule A (such warranty is
hereinafter referred to as the "Company Limited Warranty"). The Company Limited
Warranty is the only warranty applicable to the Products delivered in accordance
with this Agreement.
<PAGE>
2.03 Product Liability/Patent Indemnification
A. The Company agrees to indemnify and defend the Distributor, its parent
company, subsidiaries affiliates and Clinical Trials sites, and their respective
agents, representatives and employees (the "Distributor Group") from and
against any and all claims, proceedings, causes of action and suits
(hereinafter, collectively "Claims") (i) arising out of personal injury, death
and/or property damage in connection with the use of a Product (excluding any
uses of Products for purposes other than those approved), or (ii) which is based
on any claim that any part of the Products or the sale or use thereof by the
Distributor under this Agreement infringes any patent, any copyright, trade
secret, any trade name, any trademark or intellectual property of any third
party; subject to the Distributor giving the Company prompt written notice upon
discovery of each Claim and except to the extent such Claims occur as a result
of the negligent or willful acts or omissions of any member of the Distributor
Group. The Company shall control the defense of any such Claim and shall pay all
costs of any such defense (including the attorney's fees required to be incurred
by the Distributor Group in such action) and all judgments, awards and
settlement amounts incurred as a result of such Claims. The Distributor shall
give the Company reasonable assistance in the defense or settlement of the
Claims. It is understood that the Company shall have the sole discretion to
determine the terms of settlement of any Claim.
Notwithstanding the foregoing, the Company shall have no liability under this
Section 2.03 for any claim by a third party that the use of a Product caused
personal injury, death or property damage or infringes any patent, copyright,
trade secret or other intellectual property right in any of the following
circumstances: (i) the Product was altered or modified by any member of the
Distributor Group or any third party without prior authorization of the Company
and such alteration or modification resulted in or is the basis for the third
party claim; (ii) the Distributor or any third party used the Product in
combination with any component, apparatus or software not furnished or
authorized by the Company and such combination resulted in or is the basis for
the third party claim; (iii) the Product was used in a manner for which it was
not designed or specified or otherwise inconsistent with the clinical trial
protocol or procedures prepared by the supervisors of the Clinical Trials and
approved by the Company and the Japanese Government (hereinafter called the
"Protocols"); or (iv) any member of the Distributor Group owns an intellectual
property right or has a license which precludes it from being held responsible
for the claim of infringement.
2.04 Force Majeure. Neither party shall be liable in any manner for failure or
delay to fulfill all or part of this Agreement directly or indirectly, owing to
an act of God, governmental orders or restriction, war, threat of war, warlike
conditions, hostilities, sanctions, mobilization, blockade, embargo, detention,
revolution, riot, looting, strike, lockout, labor action, accident, or any other
causes or circumstances beyond its reasonable control.
2.05 Limit on Liability. EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN
THIS ARTICLE II, IN NO EVENT SHALL THE COMPANY BE LIABLE TO ANY
MEMBER OF THE DISTRIBUTOR GROUP FOR SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING, BUT NOT LIMITED
TO, LOSS OF PROFIT, LOSS OF BUSINESS OPPORTUNITY, LOSS OF REVENUE
<PAGE>
OR GOODWILL ARISING FROM ANY BREACH OR OTHER FAILURE BY THE COMPANY UNDER THIS
AGREEMENT.
ARTICLE III THE CLINICAL TRIAL PROGRAM
3.01 Site of Clinical Trials. The initial site for the Clinical Trials shall be
at The Tokyo Women's Medical College in Tokyo, Japan under the supervision of
Professor Kintomo Takakura, M.D. as Principal Investigator. The Distributor
shall select the second clinical trial site taking into consideration the future
marketing strategy for the PRS in Japan and give a written notification to the
Company.
3.02 Responsibilities of the Distributor in the Clinical Trials. The
Distributor shall have the following responsibilities in the Clinical Trials to
be conducted in Japan:
A. The Distributor shall be responsible for installing and maintaining the
PRS systems to be used in the Clinical Trials and exercise reasonable efforts to
obtain all necessary legal, regulatory or administrative approvals for
conducting the Clinical Trials.
B. The Distributor shall bear the full cost to be incurred for any legal
procedures for conducting the Clinical Trials in Japan and for obtaining all
Approvals.
C. The Distributor shall use its reasonable efforts to cause the Clinical
Trials to be conducted in accordance with the Protocols.
D. The Distributor shall advise the Company concerning the requirements for
obtaining approval to import, market, sell, use and obtain reimbursement for the
PRS in Japan in accordance with the PAL and any other applicable legal,
regulatory or administrative requirements.
E. The Distributor shall provide such assistance to the hospitals and
physicians conducting the Clinical Trials in Japan as they or the Company may
reasonably request from time to time. Such assistance shall include the
collection and analysis of clinical data in compliance with the PAL and U.S.
Food and Drug Administration requirements.
3.03 Responsibilities of the Company in the Clinical Trials. The Company shall
have the following responsibilities in the Clinical Trials to be conducted in
Japan:
A. Prior to commencement of and during the Clinical Trials the Company shall
provide at no charge reasonable training at the Company's headquarters to the
Distributor's personnel with respect to the installation, operation and
maintenance of the PRS. The Distributor shall be responsible for all out of
pocket travel expenses (meals, airfare, hotel, local transportation, etc.)
incurred by its representatives in connection with such training.
<PAGE>
B. The Company shall provide at no charge all technical information
including, but not limited to, the following, to the extent necessary to comply
with the requirements of PAL:
(1) technical information detailing the development of the PRS;
(2) technical information concerning shape (size), structure, and composition
materials of the PRS;
(3) technical information concerning the manufacture and testing of the PRS;
(4) technical information concerning the performance and effectiveness of the
PRS;
(5) technical information concerning the operation and use of the PRS;
(6) technical information concerning the stability and safety (as mechanically,
electronically, biologically, radioactivity wise) of the PRS;
(7) technical information concerning the status of clinical trials in the U.S.
or other countries;
(8) installation and operation manuals; and
(9) other documents required by the Japanese Ministry of Health and Welfare;
and other assistance as the Distributor may reasonably request, which shall
include sending appropriate engineering personnel to Japan if the Company deems
such action necessary. The Company shall be responsible for all out of pocket
travel expenses (meals, airfare, hotel, local transportation, etc.) incurred by
its representatives in providing such assistance.
C. The Company shall provide on-site installation supervision and training at
no charge at the first clinical trial site and the second clinical trial site,
if reasonably requested by the Distributor. The Company shall be responsible for
all out of pocket travel expenses (meals, airfare, hotel, local transportation,
etc.) incurred by its representatives in providing such assistance.
D. The Company will also provide the Distributor with all necessary spare
parts for the PRS during the Clinical Trials. For the Clinical Trials to be
conducted smoothly, the Company agrees to consign to the Distributor a
reasonable amount of accessories, supplies and spare parts. At the time when the
Clinical Trials are completed, both parties agree to discuss what to do with the
unused portion of the accessories, supplies and spare parts.
E. The Company shall be responsible for approving all Protocols to be
utilized in connection with the Clinical Trials.
F. The Company shall be responsible for and bear the full cost to be incurred
in any necessary modifications of the PRS for successfully concluding the
Clinical Trials and for obtaining the Approvals.
<PAGE>
3.04 Trademarks and Service Marks
A. The Company or its affiliated companies are the exclusive owners of the
various trademarks, service marks, names, and designs (herein called "Marks")
used in connection with the Products.
B. The Distributor is granted the non-exclusive right of displaying the Marks
in Japan in connection with performing its obligations under this Agreement. The
Marks may be used as part of the name under which the Distributor's business is
conducted only with the prior written approval of the Company. The Distributor
will change or discontinue the use of any Mark upon the written request of the
Company. No member of the Distributor Group may use any Mark or Product name
without the Company's prior written permission.
C. Upon termination of this Agreement, unless allowed by the Distribution
Agreement, the Distributor will immediately discontinue or cause to be
discontinued at its expense, all use of Marks. Thereafter, the Distributor will
not use, either directly or indirectly, any Marks or any other confusingly
similar marks in a manner likely to cause confusion or mistake or to deceive the
public.
3.05 Proprietary Information. Unless superseded or continued by terms of the
Distribution Agreement, during the term of this Agreement and four (4) years
thereafter, the Distributor shall receive and keep in confidence all proprietary
information concerning the Products and the Company's business including, but
not limited to, trade secrets, business and marketing plans and other
specialized information which might be disclosed to or learned by the
Distributor. After the termination of this Agreement, the Distributor shall
return all property belonging to the Company and shall keep all proprietary
information in confidence and shall not use or disclose any such information for
its own purposes or for the benefit of any third party without the prior
written consent of the Company.
Unless superseded or continued by terms of the Distribution Agreement, during
the term of this Agreement and four (4) years thereafter, the Company shall
receive and keep in confidence all proprietary information concerning the
Distributor's products and business including, but not limited to, trade
secrets, business and marketing plans and other specialized information which
might be disclosed to or learned by the Company. After termination of this
Agreement, the Company shall return all property belonging to the Distributor
and shall keep all proprietary information in confidence and shall not use or
disclose any such information for its own purposes or for the benefit of any
third party without the prior written consent of the Distributor.
ARTICLE IV TECHNICAL RIGHTS
4.01 No License Granted to Distributor. Nothing in this Agreement shall be
deemed or construed to create or grant to the Distributor any license or other
rights in or to the PRS, any other Product or any component thereof except as
expressly set forth in this Agreement.
<PAGE>
4.02 Ownership of Improvements; Fixtures. All improvements, upgrades or
modifications to the PRS, any other Product or any component thereof developed
by the Distributor by the use of proprietary information of the Company which is
made available to the Distributor under this Agreement or the Distribution
Agreement, shall be solely owned by the Company, and the Distributor agrees to
execute or to cause to be executed such documents and to take or to cause to be
taken such other actions as the Company may deem necessary or desirable to
confirm its ownership of such improvements, upgrades or modifications. All
improvements, upgrades or modifications developed by the Distributor in a manner
other than described in the preceding sentence, including any interfacing
fixture, between the PRS and the frame or any other device for use with the PRS,
shall be solely owned by the Distributor. The Distributor will promptly notify
the Company in the event the Distributor or any of its affiliated companies
develop any improvements, upgrades or modifications to the PRS, any other
Product or any component thereof. The Distributor will grant to the Company a
worldwide, non-exclusive license to utilize any such improvements, upgrades or
modifications developed by the Distributor in connection with the PRS outside
the Territory at a commercially reasonable royalty.
ARTICLE V TERMINATION
5.01. Termination of Agreement
A. The initial term of this Agreement shall commence on the execution of this
Agreement and shall expire on the date when (i) the Distributor has obtained all
necessary Approvals, (ii) it is decided after every reasonable effort has been
made by both parties that the Clinical Trials cannot be successfully completed,
or as otherwise agreed to by the parties. This Agreement may also be canceled at
any time by either party upon thirty (30) days prior written notice upon breach
of any material term or condition of this Agreement, and this Agreement shall be
deemed terminated at the end of such thirty (30) day period if such breach is
not cured before such date.
B. The parties expressly acknowledge that no franchise, partnership or joint
venture relationship exists or is intended to exist between the parties hereto
during the term of this Agreement.
C. Termination of this Agreement will not release the Distributor or the
Company from the obligation to pay any amounts owing the other.
D. In case of termination pursuant to Section 5.01 A (ii) above, the
Distributor may at its own discretion, request that the Company make a
reasonable effort to resell to another customer, for the US $______ paid by the
Distributor, the two (2) sets of the PRS used in the Clinical Trials.
ARTICLE VI GENERAL PROVISIONS
6.01 No Agent or Legal Representative Status. This Agreement does not make
either party the agent or legal representative of the other for any purpose
whatsoever, nor does it grant either
<PAGE>
party any authority to assume or to create any obligation on behalf of or in the
name of the other. Neither party owes the other any fiduciary obligation.
6.02 Distributor's Responsibility for Its Operation. Except as provided
otherwise in this Agreement, the Company has no liability in connection with the
establishment or conduct of the Distributor's expenditures, liabilities and
obligations incurred or assumed by the Distributor in connection with the
Distributor's responsibilities under this Agreement.
6.03 Taxes. The Distributor will pay all Japanese taxes and will file required
tax returns related to the purchase of the PRS under this Agreement and will
hold the Company harmless from any claims or demands made by any taxing
authority with respect thereto.
6.04 Notices. Any notice, demand or request required or permitted to be given
hereunder shall be in writing, shall be in English, shall be sent to the address
or facsimile number set forth below, and shall be given by registered or
certified mail, internationally recognized courier service (e.g. Federal
Express, DHL), or by facsimile. Any such notice, demand or request shall be
deemed effective (i) five (5) days after having been deposited in the mail,
first class airmail postage prepaid for overseas notice, three (3) days for
domestic notices, (ii) three (3) days after deposit with an internationally
recognized courier service, or (iii) upon receipt if delivered by facsimile.
If to the Company:
Address: 400-1 Totten Pond Road
Waltham, Massachusetts, U.S.A. 02154
Attention: President
Facsimile Number: 617-290-0595
If to the Distributor:
Address: 26-5, 3-Chome, Hongo, Bunkyo-ku
Tokyo 113 Japan
Attention: President
Facsimile Number: 03 (3813) 7625
6.05 No Implied Waivers. The failure of either party to require performance by
the other party of any provisions hereof will in no way effect the right to
require such performance at any time thereafter, nor will the waiver by either
party of a breach of any provisions hereof.
<PAGE>
6.06 Assignment of Rights or Delegation of Duties. Neither this Agreement, nor
the rights or obligation of either party hereunder, may be sold, assigned or
otherwise transferred without the prior written approval of the other party.
6.07 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts, U.S.A. applicable
to contracts made, accepted and performed wholly within The Commonwealth of
Massachusetts, without application of principles of conflicts of laws. The
parties agree to submit to the jurisdiction of the courts of The Commonwealth of
Massachusetts should any dispute arise with respect to the interpretation or
enforcement of this Agreement.
6.08 Official Language. The official language of this Agreement shall be in
English, provided, however, that a Japanese translation of this Agreement shall
be prepared for the Distributor's reference.
6.09 Sole Agreement of Parties. Except as otherwise provided or referred to
herein, neither party has made any promises to the other, and there are no other
agreements or understandings, either oral or in writing, between the parties
affecting this Agreement or relating to the subject matter covered by this
Agreement. This Agreement cancels and supersedes all previous agreements
between the parties that relate to any matters covered herein.
6.10 Amendments. No agreement between the Company and the Distributor which
relates to matters covered herein, and no change, addition to (except the
filling in of blank lines) or deletion of any printed portion of this Agreement,
will be binding unless it is approved in writing and signed by the duly
authorized representatives of both parties.
IN WITNESS WHEREOF, the parties hereto through their respective duly authorized
representatives have executed and delivered the Agreement as of the date first
above written.
TOSHIBA MEDICAL SYSTEMS PHOTOELECTRON CORPORATION
CO., LTD.
[SIGNATURE APPEARS HERE] [SIGNATURE APPEARS HERE]
By:-------------------- By:----------------------
Title: President Title: President & CEO
Dec 22, 1995 Dec 26, 1995
- ----------------------- -------------------------
Date Date
<PAGE>
SCHEDULE A
COMPANY'S LIMITED WARRANTY
--------------------------
The Company warrants to the Distributor that during the Clinical Trials, the
Company shall, at its option, either repair any defective Product or provide
without charge to the Distributor all replacement Parts necessary to correct any
such Product which proves to be defective and shall pay all shipping and labor
expenses associated with such replacement.
THIS LIMITED WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, AND THE COMPANY EXPRESSLY DISCLAIMS ANY OTHER WARRANTIES.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER OR TO ANY THIRD PARTY, UNDER ANY
CIRCUMSTANCES, FOR ANY SPECIAL, PUNITIVE, CONSEQUENTIAL OR INCIDENTAL DAMAGES
WHATSOEVER, INCLUDING ANY COSTS, EXPENSES, LOST PROFITS OR ANY OTHER CLAIMED
LOSSES HOWEVER DESIGNATED.
[SIGNATURE APPEARS HERE]
<PAGE>
[PEC PHOTOELECTRON CORPORATION LETTERHEAD APPEARS HERE]
December 13, 1995
Mr. Shigeyasu Kurihara
President
Toshiba Medical Systems Co., Ltd.
26-5, 3-Chome, Hongo, Bunyo-ku
Tokyo 113
JAPAN
Dear Mr. Kurihara:
Schedule C to The International Distributor Sales and Service Agreement between
Photoelectron Corporation and Toshiba Medical Systems Co., Ltd. provides that
the discount rate on the sale of Products by Photoelectron to Toshiba Medical
shall be negotiated "at the proper time".
We hereby confirm to you that the minimum discount rate to be provided to
Toshiba Medical with respect to its purchases of the PRS and other Products will
be below Photoelectron's US retail list price. The actual amount of the discount
will be _____________ established in future negotiations between us.
Sincerely,
/s/ Peter M. Nomikos
Peter M. Nomikos
President and Chief Executive Officer
Photoelectron Corporation
as confirmed by,
/s/ Shigeyasu Kurihara
Shigeyasu Kurihara
President
Toshiba Medical Systems Company, Ltd
<PAGE>
EXHIBIT 10.22
CLINICAL RESEARCH AGREEMENT
Agreement made as of 1st November 1995 between [*****] a not-for-profit
corporation having a principal place of business at [*****] London, England
("Trust"), [*****], M.D., Department of Radiotherapy and Oncology, [*****],
[*****], [*****], London, England ("Investigator"), and Photoelectron
Corporation, a corporation having an office at 400-1 Totten Pond Road, Waltham,
Massachusetts 02154, United States ("Sponsor").
1. Investigator agrees to act as Principal Investigator at Trust's [*****] for
clinical study of the Photon Radiosurgery System (Herinafter referred to as the
"Study Device"), including study in accordance with the multi-institution study
protocol entitled "A Study of the Safety and Efficacy of the Photon Radiosurgery
System in the Treatment of Brain Metastases" (as amended from time to time) and
other studies as mutually agreed to by the parties of this Agreement
(hereinafter referred to as "Studies"). In the event of any conflict between
protocols for the Studies and the provisions of this Agreement, the provisions
of this Agreement shall govern. That portion of multi-institution studies that
are carried out by Trust are hereinafter referred to as "Institutional Studies".
Investigator agrees to comply with all appropriate regulatory and ethical
requirements for the conduct of Studies by Trust, including those mandated by
regulatory authorities of the United Kingdom and the United States Food and Drug
Administration (where applicable), to adhere to Standard Operating Procedures
for the Studies, and to maintain the Study Device according to the instructions
provided by Sponsor.
2. The Institutional Studies will be conducted by Investigator at Trust with
the prior approval and ongoing review of all appropriate and necessary review
authorities and in accordance with all English laws and regulations.
Investigator shall provide Sponsor with written evidence of review of the
Studies by Trust's Ethics Committee prior to the start of Institutional Studies
and of the Ethics Committee's continuing review and approval of the
Institutional Studies whenever it is reviewed, but at least once per year. All
study subjects will meet the legal age requirements of England, the country in
which the Institutional Studies are conducted.
3. Investigator will furnish Sponsor or its designated Study Monitor with all
data resulting from Institutional Studies in signed case report forms and in
other mutually agreed upon forms within one month after completion of a study
event. Sponsor shall have the unrestricted right to use such data including, to
the extent that subjects' consent have been obtained, subjects' names, any
identifying information, and any visual recordings, audio recordings, electronic
recordings, or other likenesses. Case report forms to be used will be those
supplied by Sponsor. Patient records shall be made available to Sponsor's
representatives upon request for comparison with case report forms. Such records
will also be made available upon request for review by representatives of
English, European Union, and United States FDA regulatory authorities. Records
of the Studies, including either the original or a copy of all Informed Consent
Forms of subjects of the Studies, shall be retained in conformance with all
applicable regulations.
<PAGE>
4. It is understood that certain of the Studies are multi-center investigations
and publication of results from all participating sites is expected.
Investigator shall be free to publish results of Institutional Studies after
submission of multi-center results for publication, subject only to the
provisions of Paragraph 7 regarding Sponsor's confidential information, only
when notification is given by Sponsor to Trust that such a submission is no
longer planned or twelve (12) months after the termination of a multi-center
Study at all sites, whichever shall occur first. Sponsor will be furnished with
a copy of any proposed presentation of information from the Studies for review
and comment prior to submission for any form of public dissemination, in the
case of manuscripts and such for publication at least thirty (30) days prior to
submission and in the case of abstracts and such at least seven (7) days prior
to submission. At the expiration of either the thirty(30) or seven (7) day
period, whichever applies, Investigator may proceed with submission for
presentation.
5. A minimum of one journal article describing the analyzed results of each of
the Studies will be submitted for publication at the conclusion of each Study.
In addition, since any multi-center Study is to be carried out at a number of
institutions, a minimum of one journal article describing the analyzed results
from all institutions will be submitted for publication at the conclusion of
each such Study. Such manuscript(s) will bear as authors, among others, all
Investigators of the Study. The order of authors will be as follows: those who
design and implement the Study will be first; the Investigator and other,
individuals from the institution contributing the largest number of patients
will be listed next; the Investigator and other individuals from the institution
contributing the second largest number of patients will be next; and so on.
6. At the conclusion of any multi-center Study and after such time as a minimum
of one multi-authored, multi-institution journal article has been published, all
Investigators from all participating institutions will be given complete access
to all of the patient data accrued in the Study.
7. In order to effectively complete an Institutional Study, it may be necessary
or desirable for the parties to disclose proprietary, trade secret and/or other
confidential information (hereinafter referred to as "Confidential Information")
to one another. Each party agrees that any such Confidential Information
disclosed to it or to its employees shall be used only in connection with the
legitimate purposes of this Agreement, shall be safeguarded with same care
normally afforded such Confidential Information in the possession, custody, or
control of the party receiving the Confidential Information, provided, however,
that the disclosing party specifies in writing the nature and identity of the
Confidential Information and the manner and time of disclosure. The foregoing
shall not apply when, after and to the extent the Confidential Information
disclosed:
A) becomes generally available to the public through no fault of the receiving
party,
B) was already known to the receiving party at the time of disclosure as
evidenced by written records in the possession of the receiving party prior
to such time, or
C) is subsequently received by the receiving party in good faith from a third
party without breaching any confidential obligation between the third party
and the disclosing party.
<PAGE>
8. Trust and Sponsor agree that the Sponsor shall have the opportunity to
acquire by assignment all rights to each invention which constitutes a new use
or modification of the Study Device and is made by Trust personnel, solely or
jointly, in the performance of the Studies (hereinafter referred to as
"Invention"). Each Invention shall be promptly reported in writing to Sponsor
and to Trust, and Sponsor shall have ninety (90) days following receipt of such
report to submit a written request to Trust to acquire rights to the reported
Invention. In the event Sponsor so elects to acquire rights to an Invention,
Trust shall promptly obtain from Trust personnel appropriate assignments of all
rights in the Invention held by such personnel and thereafter shall assign all
its rights to Sponsor.
9. This Agreement shall remain in force until the completion of Studies. Any
party hereto shall have the right to terminate the Studies and this Agreement at
any time upon thirty (30) days prior written notice thereof to the other
parties. The obligations of the parties under Paragraphs 2, 3, 4, 7, 8, 14, 15,
16, 18, 19 and 20 shall survive the termination of this Agreement.
10. Equipment and other supplies provided by Sponsor include the following: two
Model 3 X-ray sources (each including internal radiation monitor), a Control Box
System, a 486DX Laptop Computer with applications software, color printer,
photodiode array, probe straightener, external radiation monitor and various
clinical accessories, an ionization chamber, an electrometer with computer
interface, an IBM-compatible computer and a number of calibration accessories, a
dosimetry water tank with control electronics, applications software, a
radiochromic film reader, dosimetry phantoms and dosimetry accessories. All
equipment provided by Sponsor will remain assets of Sponsor. It is understood
that Sponsor will have access to the equipment at any time.
11. Sponsor agrees to support the Institutional Studies by:
A) providing a Study Device including all equipment and supplies listed in
Paragraph 10 above at no charge to Trust for the duration of the treatment
phase of the Studies;
B) providing Investigator with information and instruction pertaining to the
Study Device and its operation as needed to perform the Institutional
Studies;
C) repairing, maintaining and modifying the Study Device as needed during the
Institutional Studies;
D) monitoring the Institutional Studies; and
E) providing Trust with a research grant in the amount of (Pounds)10,500 to
be used to support the salary, fringe benefits and indirect costs of a
Data Coordinator designated by Trust for the one-year period of November
1, 1995 to October 31, 1996, and, with prior consent of Sponsor, to pay
for reasonable expenses of travel and other activity by Trust personnel to
further the legitimate purposes of this Agreement. The responsibilities of
the Data Coordinator will include overseeing the collection and assembly
of data generated by the Institutional Studies, frequent correspondence
with the Study(ies) Monitor, scheduling of patient visits, and supervision
of the follow-up of each patient by shepherding patients through their
visits with various physicians and to different diagnostic procedures.
Payment to Trust of this research grant of (Pounds)l0,500 will be made by
Sponsor in quarterly payments of (Pounds)2,625 on or about October 1,
1995, January 1, 1996, April 1, 1996, and July 1, 1996.
<PAGE>
12. All equipment and supplies listed in Paragraph 10 remain assets of Sponsor.
At the completion of the treatment phase of the Studies, all equipment and
supplies listed in Paragraph 10 above will be returned to Sponsor.
13. It is agreed that Trust will treat a minimum of twenty (20) eligible
patients with the Study Device by the end of the period of this Agreement, which
number includes those patients treated in the period of the prior Agreement
between the parties to this Agreement. Failure to treat at least twenty (20)
eligible patients with the Study Device by the end of the term of this Agreement
may result in termination of the Institutional Studies at Trust and return of
all Study Device equipment and supplies to Sponsor.
14. It is agreed, in the interest of patient safety, regulatory compliance, and
device integrity, that the Study Device will be used for no purpose other than
the Institutional Studies without the written permission of the Director of
Clinical Research and Regulatory Affairs at Sponsor.
15. It is agreed that all maintenance, repair or modification of the Study
Device equipment and supplies listed in Paragraph 10 will be carried out by
Sponsor personnel. The covers may not be removed from any of the equipment
listed in Paragraph 10 by non-Sponsor personnel. The only exceptions to this
restriction may be the removal of cover(s) for the performance of procedures
under the direct supervision of Sponsor personnel, such as testing or switching
from manual to automated control. Adherence to this policy will ensure that all
patients treated with the Study Device are treated with equipment that has met
the same standards and will protect the interests of Sponsor and Trust.
16. Terms and conditions regarding indemnification issues are found in Addendum
A and have been agreed to by all parties.
17. The terms of this Agreement can only be modified in writing in a document
signed by Trust, Investigator and Sponsor.
18. No party to this Agreement shall use the name of any other party or of any
staff member, employee or student of any other party or any adaptation thereof
in any advertising, promotional, sales literature, or publicity or in any non-
scientific publication without the prior written approval of the party or
individual whose name is to be used. For Trust, such approval shall be obtained
from the Director of News and Public Affairs, and for Sponsor, from its Chief
Executive Officer.
19. Any notices to be delivered by either party to the others shall be delivered
as follows: if to Trust to ------------------------------------------------; if
to Investigator to [*****], MD, Department of Radiotherapy and Oncology,
[*****], [*****], [*****], London, England; and if to Sponsor to Thomas R.
Varricchione, MBA, RRT, Photoelectron Corporation, 400-1 Totten Pond Road,
Waltham, Massachusetts 02154, USA.
<PAGE>
20. The provisions of this Agreement shall be interpreted under the laws of the
United Kingdom.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day, month and year first written above.
Photoelectron Corporation [*****]
BY: /s/Thomas R. Varricchione BY:
--------------------------- ---------------------------
Thomas R. Varricchione, MBA, RRT (Name)
Director, Clinical Research and (Title)
Regulatory Affairs
DATE: 2 October 1995 DATE:
------------------------- -------------------------
BY: BY:
--------------------------- ---------------------------
Peter E. Oettinger, Ph.D. [*****]
Chief Operating Officer [*****]
[*****]
DATE: DATE:
------------------------- -------------------------
<PAGE>
Addendum A to Agreement between [*****], [*****], M.D. and Photoelectron
Corporation, November 1, 1995 - October 31, 1996
1. [*****] ("Trust"), [*****], MD ("Investigator") and Photoelectron Corporation
("Sponsor") have entered into an Agreement ("Agreement") that Trust and
Investigator will conduct sponsored Institutional Studies involving patients of
the Trust, in the manner defined in the Agreement between the parties and in
protocols for the Studies, as amended from time to time with the written
agreement of Investigator and Sponsor. Sponsor confirms that it is a term of its
Agreement with Trust and Investigator that Investigator shall obtain all
necessary approvals of the appropriate Human Research Ethics Committee and shall
resolve with Trust any issues of a revenue nature.
2. Trust agrees to participate by allowing the Studies to be undertaken on its
premises, utilizing such facilities, personnel and equipment as Investigator may
reasonably need for the purposes of the Studies.
3. In consideration of such participation by Trust, and subject to Paragraph 4
below, Sponsor indemnifies and holds harmless Trust and its employees and agents
against all claims and proceedings (to include any settlements or ex gratia
payments made with the consent of the parties hereto and reasonable legal and
expert costs and expenses) made or brought (whether successfully or otherwise):
A) by or on behalf of Subjects taking part in the Studies (or their
dependents) against Trust or any of its employees or agents for personal
injury (including death) to Subjects arising out of or relating to the
administration of the product(s) under investigation or any clinical
intervention or procedure provided for or required by the Study Protocol to
which the Subjects would not have been exposed except for their
participation in the Studies;
B) by Trust, its employees or agents or by or on behalf of a Subject for a
declaration concerning the treatment of a Subject who has suffered such
personal injury.
4. The above indemnity by Sponsor shall not apply to any such claim or
proceeding:
4.1 to the extent that such personal injury (including death) is caused by the
negligent or wrongful acts or omissions or breach of statutory duty of
Trust, its employees or agents;
4.2 to the extent that such personal injury (including death) is caused by the
failure of Trust, its employees or agents to conduct the Studies in
accordance with agreed upon Protocols;
4.3 unless as soon as reasonably practicable following the receipt of notice of
such claim or proceeding, Trust shall have notified Sponsor in writing of it
and shall, upon Sponsor's request, and at Sponsor's cost, have permitted
Sponsor to have full care and control of the claim or proceeding using legal
representation of its own choosing.
4.4 If Trust, its employees, or agents shall have made any admission in respect
of such claim or proceeding or taken any action relating to such claim or
proceeding prejudicial to the defence of it without the written consent of
Sponsor such consent not to be unreasonably withheld provided that this
condition shall not be treated as breached by any statement properly made by
Trust, it employees, or agents in connection with the operation of Trust's
internal complaint procedures, accident reporting procedures or disciplinary
procedures or where such statement is required by law.
<PAGE>
Addendum A to Agreement between [*****], [*****], M.D. and Photoelectron
Corporation, November 1, 1995 - October 31, 1996
5. Sponsor shall keep Trust and its legal advisors fully informed of the
progress of any such claim or proceeding, will consult fully with Trust on the
nature of any defence to be advanced and will not settle any such claim or
proceeding without prior consultation with Trust.
6. Without prejudice to the provisions of Paragraph 4.3 above, Trust will use
its reasonable endeavors to inform Sponsor promptly of any circumstance
reasonably thought likely to give rise to any such claim or proceeding of which
it is directly aware and shall keep Sponsor reasonably informed of developments
in relation to any such claim or proceeding even where Trust decides not to make
a claim under this indemnity. Likewise, Sponsor shall use its reasonable
endeavors to inform Trust of any such circumstance and shall keep Trust
reasonably informed of developments in relation to any such claim or proceeding
made or brought against Sponsor alone.
7. Trust and Sponsor will each give to the other such help as may reasonably be
required for the efficient conduct and prompt handling of any claim or
proceeding by or on behalf of Subjects (or their dependents) or concerning such
a declaration as is referred to in Paragraph 3(B) above.
8. Without prejudice to the foregoing if injury is suffered by a Subject while
participating in the Studies, Sponsor agrees to operate in good faith the
Guidelines published in 1991 by The Association of the British Pharmaceutical
Industry and entitled "Clinical Trial Compensation Guidelines" (where the
Subject is a patient) and the Guidelines published in 1988 by the same
Association and entitled "Guidelines for Medical Experiments in non-patient
Human Volunteers" (where the Subject is not a patient) and shall request
Investigator to make clear to the Subjects that the Studies are being conducted
subject to the applicable Association Guidelines.
9. For the purpose of this indemnity, the expression "agents" shall be deemed
to include without limitation any nurse or other health professional providing
services to Trust under a contract for services or otherwise and any person
carrying out work for Trust under such a contract connected with such of Trust's
facilities and equipment as are made available for the Studies under Paragraph 2
above.
10. This indemnity shall be governed by and construed in accordance with English
law.
Signed on behalf of:
Photoelectron Corporation [*****]
BY: BY:
--------------------------- ---------------------------
Peter E. Oettinger, Ph.D. (Name)
Chief Operating Officer (Title)
DATE: DATE:
------------------------- -------------------------
<PAGE>
EXHIBIT 10.23
PHOTOELECTRON CORPORATION
LOCK-UP LETTER
--------------
Needham & Company, Inc.
Dain Bosworth Incorporated
c/o Needham & Company, Inc.
445 Park Avenue, 3rd Floor
New York, NY 10022
Dear Sirs:
The undersigned understands that you and certain other firms propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") providing
for the purchase by you and such other firms (the "Underwriters") of shares (the
"Shares") of Common Stock (the "Common Stock"), of Photoelectron Corporation
(the "Company") and that the Underwriters propose to reoffer the Shares to the
public.
In consideration of the execution of the Underwriting Agreement by the
Underwriters, and for other good and valuable consideration, the undersigned
hereby irrevocably agrees that without the prior written consent of Needham &
Company, Inc., the undersigned will not (and will not announce or disclose any
intention to) sell, offer to sell, solicit an offer to buy, contract to sell,
grant any option to purchase, or otherwise transfer or dispose of, any shares of
Common Stock, or any securities convertible into or exercisable or exchangable
for Common Stock, for a period of 180 days after the date of the final
Prospectus relating to the offering of the Shares to the public by the
Underwriters. Prior to the expiration of such period, the undersigned will not
announce or disclose any intention to do anything after the expiration of such
period which the undersigned is prohibited, as provided in the preceding
sentence from doing during such period.
The undersigned also agrees not to enter into any hedging or similar
transaction or device which is designed to, or could be expected to, result in
the disposition by any person of any shares of Common Stock within such period.
In furtherance of the foregoing, the Company and its transfer agent are
hereby authorized to decline to make any transfer of securities if such transfer
would constitute a violation or breach of this agreement.
The undersigned agrees that the provisions of this agreement shall be
binding also upon the successors, assigns, heirs and personal representatives of
the undersigned.
It is understood that if the Underwriting Agreement does not become
effective, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for
and delivery of the Shares, you will release us from our obligations under this
agreement.
Dated: Very truly yours,
------------------------------------------------
Print Name of Signatory:------------------------
<PAGE>
EXHIBIT 10.24
PHOTOELECTRON CORPORATION
Medical Advisory Board Agreement
This Medical Advisory Board Agreement is made as of the ____ day of
_____________, 1996, by and among ________________________ (the "Advisor") and
Photoelectron Corporation, a Massachusetts corporation with a mailing address at
5 Forbes Road, Lexington, MA 02173 (the "Company").
WITNESSETH
WHEREAS, the Company has established a Medical Advisory Board (the
"Advisory Board") to advise and consult with the Company's Board of Directors
and senior management on issues concerning the Company, and the Company wishes
to appoint the Advisor as a member and the Chairman of the Advisory Board, and
the Advisor wishes so to serve, all on the terms and conditions herein set
forth;
NOW THEREFORE, in consideration of $1.00, the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Advisory Board. The Company hereby appoints the Advisor to the
--------------
Advisory Board for a period of 1 year beginning August 1, 1996, and the Advisor
hereby accepts such appointment, provided that: (i) such term shall
automatically renew for successive one-year terms, unless either of the Company
or the Advisor notifies the other prior to the expiration of the then-current
term that the term shall not be so renewed upon such expiration; and (ii) in any
case, the Company shall be entitled to remove the Advisor from the Advisory
Board, and the Advisor shall be entitled to resign from the Advisory Board, in
either case at any time and for any reason or no reason. In connection with and
during the time of such appointment, the Advisor agrees (i) to meet with the
Company's Board of Directors or senior management as called upon from time to
time and to advise the person(s) calling such meeting on the research,
development, operation, and commercialization of the Company's technologies or
products, or on any other matters concerning the Company, and (ii) to attend
regular meetings of the Advisory Board, as may be scheduled or called by the
Company's Board of Directors or Chief Executive Officer.
2. Compensation. In consideration of the services to be provided by
------------
the Advisor hereunder, the Company shall:
-1-
<PAGE>
(i) pay the Advisor $10,000 for each full year that the Advisor
serves on the Advisory Board, with such amount to be pro-rated accordingly in
the event that the Advisor serves on the Advisory Board for any partial year;
(ii) pay the Advisor $1,000 for each meeting of the Advisory Board
which the Advisor attends in person, and $500 for each telephone meeting of the
Advisory Board in which the Advisor participates;
(iii) reimburse the Advisor for all expenses previously authorized by
the Company in performing services hereunder; and
(iv) reimburse the Advisor for reasonable travel expenses incurred by
the Advisor in connection with the Advisor's attendance at the meetings
described in Section 1. The Company and the Advisor agree that in no event
shall the Advisor be required to spend more than five (5) full days (exclusive
of travel time) of aggregate time in fulfillment of the Advisor's duties
hereunder, unless otherwise mutually agreed upon by the Company and the Advisor.
3. Confidentiality.
---------------
(a) The Advisor agrees that he or she shall not at any time (whether
during or after any period in which the Advisor serves on the Advisory Board)
reveal to any person or entity any Confidential Information (as defined below)
or Development (as defined in Section 4 hereof) and shall not use or attempt to
use any Confidential Information or Development for his or her own benefit, or
for the benefit of any third party or in any manner which may injure or cause
loss or may be calculated to injure or cause loss whether directly or indirectly
to the Company. Without limiting the generality of the foregoing, the Advisor
agrees not to publish any Confidential Information or any information derived
therefrom or concerning any Development, without the prior written permission of
the Company, and that upon request of the Company, the Advisor shall immediately
deliver all notes, memoranda, drawings, specifications, programs, data or other
materials in his or her possession constituting Confidential Information and all
copies of any of the foregoing to the Company.
(b) As used above, the term "Confidential Information" shall mean all
information evidencing or relating to any of the following whether or not
furnished or made available to the Advisor by the Company or developed or
acquired in whole or in part by the Advisor alone or jointly with the Company or
others on behalf of or for the Company, and whether or not published or
unpublished, in writing or otherwise reduced to tangible form, confidential or
protected or susceptible to protection by patent, trademark, copyright or any
other form of legal protection and whether or not any attempt has been made to
secure such protection: (1) all Developments; and (2) all Company client or
customer lists, trade secrets, technical or scientific information and all
information pertaining to the financial condition, business affairs, methods,
technology,
-2-
<PAGE>
designs, products, processes, services, employees, developments or prospects of
the Company;
provided, however, that the foregoing definition shall not include any
information which is (i) known to the general public or available to the general
public, provided that such information became known or available to the general
public other than through a breach of this Agreement, or (ii) ordered disclosed
by a court of competent jurisdiction, pursuant to an order from which no further
right of appeal exists or cannot be stayed pending any such appeal (provided
such disclosure is strictly in accordance with such order, and provided further
that the Company shall have been given prompt prior notice of such order and of
any request therefor and a reasonable opportunity, at the Company's expense, to
object to or appeal from, or to require the Advisor subject to such order or
request to object to or appeal from, any such order or request and/or to obtain
a protective order with respect thereto).
4. Assignment of Inventions.
------------------------
(a) If at any time or times while serving on the Advisory Board, the
Advisor shall (either alone or with others) make, conceive of, discover, or
reduce to practice any invention, discovery, or other intellectual property
right that relates to the Company's business or is developed along with
employees or consultants to the Company or on or using the Company's facilities
or property (individually a "Development" and, collectively, "Developments"),
each such Development and the benefits thereof shall immediately become the
property of the Company. The Advisor hereby assigns any right, title and
interest the Advisor may have or acquire in such Development and all benefits
and/or rights, title and interest resulting therefrom to the Company.
(b) In furtherance of the foregoing, the Advisor shall, at any time
upon the request of the Company and at the Company's expense, sign, execute,
make and do all such deeds, documents, acts and things as the Company and its
duly authorized agents may reasonably require (1) to apply for, obtain and vest
in the name of the Company alone (or its nominee) letters patent, copyrights or
other analogous protection with respect to any Development in any country
throughout the world and when so obtained or vested to renew and restore the
same, and (2) to defend any opposition proceeding in respect of such
applications and any opposition proceedings or petitions or applications for
revocation of such letters patent, copyright or other analogous protection. The
Advisor hereby irrevocably designates and appoints the Company and its duly
authorized officers and agents as his or her agent and attorney-in-fact, to act
for and in his or her behalf and stead to execute and file any such application
or applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent, copyright or other analogous
protection with the same legal force and effect as if executed by the Advisor.
5. Remedies Upon Breach. It is acknowledged that any breach of this
--------------------
Agreement by the Advisor could cause the Company irreparable damage and that in
the event of such breach the Company shall have, in addition to any and all
remedies at law,
-3-
<PAGE>
the right to an injunction, specific performance or other equitable relief to
prevent the violation of any obligations of the Advisor hereunder.
6. General Provisions. This Agreement shall terminate upon the
------------------
expiration of the Advisor's term of appointment to the Advisory Board as
described in Section 1, or upon such earlier time as the Advisor is removed, or
resigns, from the Advisory Board pursuant to said Section 1, but the Advisor's
obligations under Section 3 and Section 4 of this Agreement shall survive any
such termination or expiration. Each provision hereof shall be treated as a
separate and independent provision, and the unenforceability of any one
provision shall in no way impair the enforceability of any other provision
hereof. Moreover, if one or more of the provisions contained in this Agreement
shall for any reason be held to be excessively broad as to scope, activity or
subject so as to be unenforceable, such provision or provisions shall be
construed by the appropriate judicial body by limiting or reducing it or them,
so as to be enforceable to the maximum extent permitted by applicable law. Any
waiver of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any other provision of this Agreement or any subsequent
breach hereof. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts without regard to conflicts
of law principles. The Company shall have the right to assign this Agreement to
its successors and assigns, and all covenants and agreements hereunder shall
inure to the benefit of and be enforceable by said successors or assigns.
Neither this Agreement nor the respective obligations hereunder may be assigned
by the Advisor to any other person or entity. This Agreement supersedes and
replaces any other agreement between the Advisor and the Company related to the
same subject matter. This Agreement may be executed in any number of
counterpart copies, each of which shall be an original and legally binding upon
all parties.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the date first set forth above.
Advisor:
_____________________________
Name: _______________________
PHOTOELECTRON CORPORATION
_____________________________
By:
Its:
GS1-77985-1
-5-
<PAGE>
PHOTOELECTRON CORPORATION
Medical Advisory Board Agreement
This Medical Advisory Board Agreement is made as of the ____ day of
_____________, 1996, by and among ________________________ (the "Advisor") and
Photoelectron Corporation, a Massachusetts corporation with a mailing address at
5 Forbes Road, Lexington, MA 02173 (the "Company").
WITNESSETH
WHEREAS, the Company has established a Medical Advisory Board (the
"Advisory Board") to advise and consult with the Company's Board of Directors
and senior management on issues concerning the Company, and the Company wishes
to appoint the Advisor to the Advisory Board, and the Advisor wishes so to
serve, all on the terms and conditions herein set forth;
NOW THEREFORE, in consideration of $1.00, the mutual covenants herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. Advisory Board. The Company hereby appoints the Advisor to the
--------------
Advisory Board for a period of 1 year beginning August 1, 1996, and the Advisor
hereby accepts such appointment, provided that: (i) such term shall
automatically renew for successive one-year terms, unless either of the Company
or the Advisor notifies the other prior to the expiration of the then-current
term that the term shall not be so renewed upon such expiration; and (ii) in any
case, the Company shall be entitled to remove the Advisor from the Advisory
Board, and the Advisor shall be entitled to resign from the Advisory Board, in
either case at any time and for any reason or no reason. In connection with and
during the time of such appointment, the Advisor agrees (i) to meet with the
Company's Board of Directors or senior management as called upon from time to
time and to advise the person(s) calling such meeting on the research,
development, operation, and commercialization of the Company's technologies or
products, or on any other matters concerning the Company, and (ii) to attend
regular meetings of the Advisory Board, as may be scheduled or called by the
Company's Board of Directors or Chief Executive Officer.
2. Compensation. In consideration of the services to be provided by
------------
the Advisor hereunder, the Company shall:
(i) grant the Advisor options to purchase 2,000 shares of the
Company's Common Stock for each full year that the Advisor serves on the
Advisory Board hereunder, with
-6-
<PAGE>
such stock options to be issued pursuant to the Company's 1996 Equity Incentive
Plan (or under such other Company stock option plan as may be utilized for
issuances of stock options to the Company's Directors and senior management) and
the form of stock option agreement used thereunder. The exercise price per share
for the options issued with respect to the Advisor's first year of service on
the Advisory Board shall be equal to the initial public offering price
established for the Company's Common Stock in the anticipated initial public
offering of the Company's Common Stock (or, if such initial public offering does
not occur by December 31, 1996, then $6.00 per share), and the exercise price
per share for the options issued with respect to any subsequent year of service
on the Advisory Board shall be the fair market value of such share (as
determined by the Company's Board of Directors) on the first day of such year of
service. The foregoing shall be subject in all respects to the execution by the
Advisor and the Company of a definitive stock option agreement, and the
foregoing shall not itself constitute the grant of stock options. In no event
shall the Company be obligated to issue any stock options to the Advisor from
and after the time that the Advisor is no longer serving on the Advisory Board,
whether because of resignation or removal from the Advisory Board, expiration of
the Advisor's term or otherwise. The number of options to be granted to the
Advisor as described in this subsection 2(i) shall be adjusted to take into
account any stock splits or other similar recapitalization events occurring
after the date hereof.
(ii) pay the Advisor $1,000 for each meeting of the Advisory Board
which the Advisor attends in person, and $500 for each telephone meeting of the
Advisory Board in which the Advisor participates.
(iii) reimburse the Advisor for all expenses previously authorized by
the Company in performing services hereunder.
(iv) reimburse the Advisor for reasonable travel expenses incurred by
the Advisor in connection with the Advisor's attendance at the meetings
described in Section 1. The Company and the Advisor agree that in no event shall
the Advisor be required to spend more than five (5) full days (exclusive of
travel time) of aggregate time in fulfillment of the Advisor's duties hereunder,
unless otherwise mutually agreed upon by the Company and the Advisor.
3. Confidentiality.
---------------
(a) The Advisor agrees that he or she shall not at any time (whether
during or after any period in which the Advisor serves on the Advisory Board)
reveal to any person or entity any Confidential Information (as defined below)
or Development (as defined in Section 4 hereof) and shall not use or attempt to
use any Confidential Information or Development for his or her own benefit, or
for the benefit of any third party or in any manner which may injure or cause
loss or may be calculated to injure or cause loss whether directly or indirectly
to the Company. Without limiting the generality of the foregoing, the Advisor
agrees not to publish any Confidential Information or any
-2-
<PAGE>
information derived therefrom or concerning any Development, without the prior
written permission of the Company, and that upon request of the Company, the
Advisor shall immediately deliver all notes, memoranda, drawings,
specifications, programs, data or other materials in his or her possession
constituting Confidential Information and all copies of any of the foregoing to
the Company.
(b) As used above, the term "Confidential Information" shall mean all
information evidencing or relating to any of the following whether or not
furnished or made available to the Advisor by the Company or developed or
acquired in whole or in part by the Advisor alone or jointly with the Company or
others on behalf of or for the Company, and whether or not published or
unpublished, in writing or otherwise reduced to tangible form, confidential or
protected or susceptible to protection by patent, trademark, copyright or any
other form of legal protection and whether or not any attempt has been made to
secure such protection: (1) all Developments; and (2) all Company client or
customer lists, trade secrets, technical or scientific information and all
information pertaining to the financial condition, business affairs, methods,
technology, designs, products, processes, services, employees, developments or
prospects of the Company;
provided, however, that the foregoing definition shall not include any
information which is (i) known to the general public or available to the general
public, provided that such information became known or available to the general
public other than through a breach of this Agreement, or (ii) ordered disclosed
by a court of competent jurisdiction, pursuant to an order from which no further
right of appeal exists or cannot be stayed pending any such appeal (provided
such disclosure is strictly in accordance with such order, and provided further
that the Company shall have been given prompt prior notice of such order and of
any request therefor and a reasonable opportunity, at the Company's expense, to
object to or appeal from, or to require the Advisor subject to such order or
request to object to or appeal from, any such order or request and/or to obtain
a protective order with respect thereto).
4. Assignment of Inventions.
------------------------
(a) If at any time or times while serving on the Advisory Board, the
Advisor shall (either alone or with others) make, conceive of, discover, or
reduce to practice any invention, discovery, or other intellectual property
right that relates to the Company's business or is developed along with
employees or consultants to the Company or on or using the Company's facilities
or property (individually a "Development" and, collectively, "Developments"),
each such Development and the benefits thereof shall immediately become the
property of the Company. The Advisor hereby assigns any right, title and
interest the Advisor may have or acquire in such Development and all benefits
and/or rights, title and interest resulting therefrom to the Company.
(b) In furtherance of the foregoing, the Advisor shall, at any time
upon the request of the Company and at the Company's expense, sign, execute,
make and do all
-3-
<PAGE>
such deeds, documents, acts and things as the Company and its duly authorized
agents may reasonably require (1) to apply for, obtain and vest in the name of
the Company alone (or its nominee) letters patent, copyrights or other analogous
protection with respect to any Development in any country throughout the world
and when so obtained or vested to renew and restore the same, and (2) to defend
any opposition proceeding in respect of such applications and any opposition
proceedings or petitions or applications for revocation of such letters patent,
copyright or other analogous protection. The Advisor hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents
as his or her agent and attorney-in-fact, to act for and in his or her behalf
and stead to execute and file any such application or applications and to do all
other lawfully permitted acts to further the prosecution and issuance of letters
patent, copyright or other analogous protection with the same legal force and
effect as if executed by the Advisor.
5. Remedies Upon Breach. It is acknowledged that any breach of this
--------------------
Agreement by the Advisor could cause the Company irreparable damage and that in
the event of such breach the Company shall have, in addition to any and all
remedies at law, the right to an injunction, specific performance or other
equitable relief to prevent the violation of any obligations of the Advisor
hereunder.
6. General Provisions. This Agreement shall terminate upon the
------------------
expiration of the Advisor's term of appointment to the Advisory Board as
described in Section 1, or upon such earlier time as the Advisor is removed, or
resigns, from the Advisory Board pursuant to said Section 1, but the Advisor's
obligations under Section 3 and Section 4 of this Agreement shall survive any
such termination or expiration. Each provision hereof shall be treated as a
separate and independent provision, and the unenforceability of any one
provision shall in no way impair the enforceability of any other provision
hereof. Moreover, if one or more of the provisions contained in this Agreement
shall for any reason be held to be excessively broad as to scope, activity or
subject so as to be unenforceable, such provision or provisions shall be
construed by the appropriate judicial body by limiting or reducing it or them,
so as to be enforceable to the maximum extent permitted by applicable law. Any
waiver of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any other provision of this Agreement or any subsequent
breach hereof. This Agreement shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Massachusetts without regard to conflicts
of law principles. The Company shall have the right to assign this Agreement to
its successors and assigns, and all covenants and agreements hereunder shall
inure to the benefit of and be enforceable by said successors or assigns.
Neither this Agreement nor the respective obligations hereunder may be assigned
by the Advisor to any other person or entity. This Agreement supersedes and
replaces any other agreement between the Advisor and the Company related to the
same subject matter. This Agreement may be executed in any number of counterpart
copies, each of which shall be an original and legally binding upon all parties.
-4-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the date first set forth above.
Advisor:
-----------------------------
Name: -----------------------
PHOTOELECTRON CORPORATION
-----------------------------
By:
Its:
-5-
<PAGE>
EXHIBIT 11.1
PHOTOELECTRON CORPORATION AND SUBSIDIARY
(A Development Stage Company)
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------------------------------
1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C>
Computation of Primary Loss Per Share
Net loss ($973,773) ($1,586,239) ($2,267,460) ($2,671,648) ($4,117,158)
Shares
Weighted average shares outstanding 747,500 926,146 1,126,500 1,328,992 1,107,310
Add: Shares issuable from assumed exercise
of stock options and warrants and conversion
of other common stock equivalents issued
within one year prior to the filing of this
registration statement 339,823 339,823 339,823 339,823 339,823
Add: Shares issuable from assumed conversion
of the preferred stock upon closing of
the offering
----------- ------------- ------------- ------------- -------------
Weighted average common and common
equivalents shares outstanding 1,087,323 1,265,969 1,466,323 1,668,815 1,447,133
----------- ------------- ------------- ------------- -------------
Loss per share:
Net loss ($.90) ($1.25) ($1.55) ($1.60) ($2.85)
----------- ------------- ------------- ------------- -------------
Computation of Fully Diluted Loss Per Share
Net loss ($973,773) ($1,586,239) ($2,267,460) ($2,671,648) ($4,117,158)
Shares:
Weighted average shares outstanding 747,500 926,146 1,126,500 1,328,992 1,102,310
Add: Shares issuable from assumed exercise
of stock options and warrants and
conversion of other common stock
equivalents 339,823 339,823 339,823 339,823 339,823
Add: Shares issuable from assumed conversion
of the preferred stock upon closing of
the offering
----------- ------------- ------------- ------------- -------------
Weighted average common and common
equivalents shares outstanding 1,087,323 1,265,969 1,466,323 1,668,815 1,447,133
----------- ------------- ------------- ------------- -------------
Loss per share:
Net loss ($.90) ($1.25) ($1.55) ($1.60) ($2.85)
----------- ------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
Six Months
Ended
June 29, 1996
Six Months Ended Pro Forma
---------------------------------- -----------------
July 1, 1995 June 29, 1996
<S> <C> <C> <C>
Computation of Primary Loss Per Share
Net loss ($1,503,647) ($1,996,866) ($1,996,866)
Shares
Weighted average shares outstanding 1,104,691 1,579,229 1,579,229
Add: Shares issuable from assumed exercise
of stock options and warrants and conversion
of other common stock equivalents issued
within one year prior to the filing of this
registration statement 339,823 339,823 339,823
Add: Shares issuable from assumed conversion
of the preferred stock upon closing of
the offering 2,583,296
-------------- -------------- --------------
Weighted average common and common
equivalents shares outstanding 1,444,514 1,919,052 4,502,348
-------------- -------------- --------------
Loss per share:
Net loss ($1.04) ($1.04) ($.44)
-------------- -------------- --------------
Computation of Fully Diluted Loss Per Share
Net loss ($1,503,647) ($1,996,866) ($1,996,866)
Shares:
Weighted average shares outstanding 1,104,691 1,579,229 1,579,229
Add: Shares issuable from assumed exercise
of stock options and warrants and
conversion of other common stock
equivalents 339,823 339,823 339,823
Add: Shares issuable from assumed conversion
of the preferred stock upon closing of the
offering 2,583,296
-------------- -------------- --------------
Weighted average common and common
equivalents shares outstanding 1,444,514 1,919,052 4,502,348
-------------- -------------- --------------
Loss per share:
Net loss ($1.04) ($1.04) ($.44)
-------------- -------------- --------------
$0.00 $0.00 $0.00
</TABLE>
<PAGE>
EXHIBIT 21.1
Photoelectron (Europe) Limited, an English private limited liability company.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and all references to our Firm included in or made a part of
Photoelectron Corporation's Registration Statement on Form S-1.
/s/ Arthur Andersen LLP
-----------------------------
Arthur Andersen LLP
Boston, Massachusetts
October 17, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PHOTOELECTRON'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-30-1995 DEC-28-1996
<PERIOD-START> JAN-01-1995 DEC-31-1995
<PERIOD-END> DEC-30-1995 JUN-29-1996
<CASH> 7,191,268 5,455,614
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 495,590 437,478
<CURRENT-ASSETS> 7,879,068 6,269,829
<PP&E> 1,395,621 1,703,523
<DEPRECIATION> 572,188 623,133
<TOTAL-ASSETS> 8,702,501 7,350,219
<CURRENT-LIABILITIES> 269,632 551,386
<BONDS> 1,940,230 1,700,467
0 0
57,624 57,846
<COMMON> 15,837 15,912
<OTHER-SE> 6,419,178 5,024,608
<TOTAL-LIABILITY-AND-EQUITY> 8,702,501 7,350,219
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 3,225,530 1,406,169
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 110,645 60,237
<INCOME-PRETAX> (4,117,158) (1,996,866)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,117,158) (1,996,866)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,117,158) (1,996,866)
<EPS-PRIMARY> (2.85) (1.04)
<EPS-DILUTED> (2.85) (1.04)
</TABLE>
